MP&M.qxd Page 1 5:10 PM 3/27/2003


# Economic, Environmental, and Benefits Analysis of the Final Metal Products & Machinery Rule

2 Printed on p aper cont aining at least 30% postconsumer recovered fiber
.

# U.S. Environmental Protection Agency Office of Water (4303T) 1200 Pennsylvania Avenue, NW Washington, DC 20460

EPA-821-B-03-002

# Economic and Environm ental Benefits Analysis Docum ent For The Final Ef fluent Limit ations Guidelin es and St andards For The Metal P roducts& Machi nery Point Source Category

EPA-8 2 1-B-03-0 0 2 Christine Todd Whitman Administrator G. T rac y Meh an, III Assistant Administrator, Office of Water Geoffrey H. Grubbs Direct or, Of fice of Scien ce and T echno logy Sheila E. Frace Director, Engineering a nd Analysis Division Nicolaas Bouwes Chief, Economic and Environmental Assessment Branch William Anderson Technical Coordinator Ly nne Tudor Economist Ja mes C. Co vi ngt on, III Economist February 2003 U.S. Environmental Protection Agency Office of Water Washington, DC 20460

# ACKNOWLEDGMEN TS AND DISCLA IMER The Agenc y would like to acknowl e d ge the contributions of William Anderson, James C. Co vi ngt on, III, Ly nne Tudor, Ly nn Zipf, and Nicolass Bouwes to development of this Economic and Envir onme n tal Bene fits Anal ysi s documen t. In a ddition, EPA acknowledgesthe contribution of Abt Associates, Westat, Eastern ResearchGroup, and Science Application Interna tional Corporation. Neither the Unite d St ate s gover nment nor any of its empl oye es, contr actors, subcontr actors,or other employe es makes any warranty , expressed or implied, or assumes any legal liability or responsi bility for any third par ty’ s use of, or the re sults of such use of, any informat ion, appa ratus, pr oduct, or process discusse d in this re port, or r eprese nts that its use by such a third par ty would not infringe on privately owne d rights . Refere nces to pr op ri et ar y te ch no lo gi es ar e n ot in te nd ed to be an en do rs em en t b y th e A ge nc y. Questions or comments regarding this economic doc ument should be addressed to: Mr. Ja mes C. Co vi ngt on, III. Economist Engineering and Analy sis Division (4303T) U.S. Environmental Protection Agency 1200 P ennsyl vani a Ave nue, N.W. Washington, DC 20460 (202) 566 - 1034 covington.james@epa.govMP&M EEBA Table o f Cont ents 

# Table of Contents E XECUTIVE 

## S UMMARY ES .1 O vervie w of F acilities E valuate d for R egulatio n und er the M P & M Po int Sou rce C atego ry and Its Effluen t Discharg es ................. ................. ................. ................. ............... E S
- 1 ES .2 D escrip tion of the Final R ule
................. ................. ................. ................. E S
- 3 ES .3 E con omic Imp acts an d So cial Co sts of the F inal Ru le
................. ................. .............. E S
- 3 ES .3.1 E con omic Imp acts ................. ................. ................. ................. ... E S
- 4 ES .3.2 S ocial C osts ................. ................. ................. ................. ........ E S
- 7 ES .4 N ationa l Ben efits of the F inal Ru le
................. ................. ................. ............ E S
- 8 ES.4 .1 Red uced H uman H ealth Risk
................. ................. ................. .......... ES-10 ES .4.2 E colo gical, R ecrea tional, an d N onus er B enefits
................. ................. ............. ES-14 ES .4.3 P O T W Imp acts ................. ................. ................. ................. .... ES-15 ES .4.4 T otal E stimated Be nefits of the Final M P & M Rule
................. ................. .......... ES-16 ES.5 Nati onal Benefi ts- Costs Compari son ................. ................. ................. .......... ES-16 ES.6 Ohio Case St udy
................. ................. ................. ................. ........ ES-18 ES .6.1 B enefits
................. ................. ................. ................. .......... ES-18 ES .6.2 S ocial C osts ................. ................. ................. ................. ....... ES-20 ES .6.3 C omp aring M one tized B enefits an d C osts ................. ................. ................. ES-20 

## P ART 

## I: I NTRODUCTION AND 

## B ACKGROUND 

## I NFORMA TION 

## Chapter 1 : Introduction 1.1 P urpose ................. ................. ................. ................. ................. . 1
- 1 1.2 Introdu cti on ................. ................. ................. ................. ............... 1
- 1 1.3 Reade rs’ Aids
................. ................. ................. ................. .............. 1
- 3 

## Chapter 2 : The MP&M Industr y and the Need for Regulation 2.1 Overview of Faciliti es Evaluated for Regulation under the MP&M Point Source Category
.............. . . . ..... 2
- 1 2.2 MP&M Disch arges and the Need f or Regul ati on ................. ................. ................. .... 2
- 3 2.2.1 Baseline MP& M D ischarges f or Regulat ed Facilities
................. ................. ............ 2
- 4 2.2. 2 Disch arges under the MP& M Regulat ion
................. ................. ................. .... 2
- 4 2.3 Addressing M arket Imperfections
................. ................. ................. ............... 2
- 5 2.4 Overlap wi th Other Effluent Guidel ines
................. ................. ................. ........... 2
- 6 2.5 M eeting Legislative and L itigation-Based R equirem ents ................. ................. .............. 2
- 9 Glossary
................. ................. ................. ................. ................. ... 2-11 Acronyms ................. ................. ................. ................. ................. .. 2-13 

## Chapter 3 : Profil e of the MP &M Industries 3.1 Data Sources
................. ................. ................. ................. .............. 3
- 2 3.2 Over viewof t he MP&M Indus try and In dust ry Tre nds
................. ................. ............... 3
- 3 3.2.1 Aerospace
................. ................. ................. ................. ........... 3
- 7 3.2.2 Aircra ft
................. ................. ................. ................. ............. 3
- 7 3.2.3 Electronic Equipment
................. ................. ................. ................. .. 3
- 7 3.2.4 Hardware
................. ................. ................. ................. ............ 3
- 8 3.2.5 Household E quipment
................. ................. ................. ................. .. 3
- 8 3.2.6 Instrum ents ................. ................. ................. ................. .......... 3
- 9 3.2.7 Ir on and Steel
................. ................. ................. ................. ........ 3
- 9 3.2. 8 Job Shops
................. ................. ................. ................. ........... 3
- 9 3.2.9 Mo bile Industri al Equipment
................. ................. ................. ............. 3
- 9 3.2.10 Motor Vehicle and Bus & Truck
................. ................. ................. ........ 3-10 3.2.11 Office Machine
................. ................. ................. ................. ..... 3-10 3.2.12 Ordnance
................. ................. ................. ................. .......... 3-10 3.2.13 Precious M e tals and Jewelry
................. ................. ................. ............ 3-11 Table of Con tents-1MP&M EEBA Table o f Cont ents 3.2. 14 Printed Wiring Boards
................. ................. ................. ................ 3-11 3.2.15 Railroad
................. ................. ................. ................. ........... 3-11 3.2.1 6 Sh ips and Bo ats ................. ................. ................. ................. ..... 3-11 3.2.17 Stationary Industrial Equipment
................. ................. ................. ......... 3-12 3.3 Characteristi cs of MP &M Manufacturing Sectors
................. ................. ................. . 3-12 3.3. 1 Domesti c Production
................. ................. ................. ................. .. 3-13 3.3.2 Industry/Market Structure
................. ................. ................. ............... 3-18 3.3.3 Fin ancial Conditi on and Performance
................. ................. ................. ...... 3-24 3.4 Characteristi cs of MP &M Non-M anufacturing Sectors
................. ................. .............. 3-25 3.4. 1 Domesti c Production
................. ................. ................. ................. .. 3-25 3.4.2 Ind ustry Structure and C omp etitiveness
................. ................. ................. .... 3-28 3.5 Characteristi cs of All MP& M S e ctors ................. ................. ................. ........... 3-30 3.5.1
. Eight-firm Co ncen tration R atio
................. ................. ................. .......... 3-30 3.5.2 Risk N orm alized Retur n on A ssets ................. ................. ................. ........ 3-31 3.6 Charact eris tics of MP& M Facilit ies
................. ................. ................. ............ 3-32 Glossary
................. ................. ................. ................. ................. ... 3-38 Acronyms ................. ................. ................. ................. ................. .. 3-40 References
................. ................. ................. ................. ................. . 3-41 

## Chapter 4: Regulatory Options 4.1 Subc ateg oriz ati on ................. ................. ................. ................. .......... 4
- 1 4.2 Techno logy Options
................. ................. ................. ................. ........ 4
- 3 4.3 BP T/BA T O ptions for Direct Dischargers
................. ................. ................. ........ 4
- 3 4.4 PSE S Options for Indirect Dischargers
................. ................. ................. ........... 4
- 3 4.5 NSPS and PSN S Options f or New Sources
................. ................. ................. ........ 4
- 4 4.6 Summary of the Fi nal Rul e and Regulatory Alt ernatives ................. ................. .............. 4
- 4 Glossary
................. ................. ................. ................. ................. .... 4
- 5 Acronyms ................. ................. ................. ................. ................. ... 4
- 6 

## P ART 

## II: C OSTS AND 

## E CONOMIC 

## I MPACTS 

## Chapter 5: Facility Impact Analysis 5.1 Data Sources
................. ................. ................. ................. .............. 5
- 2 5.2 Me thodology
................. ................. ................. ................. .............. 5
- 2 5.2.1 Converting Engi neerin g Compliance Cost s and Survey Financi al Data t o Current Year Doll ar Values
........ 5
- 3 5.2.2 M arket-lev el Imp acts an d C ost P ass-thro ugh A nalysis
................. ................. ........... 5
- 4 5.2.3 Impact Measures for Privat e Facil iti es ................. ................. ................. ...... 5
- 5 5.2.4 Impact Measures for Railr oad Line Mainten ance Facil iti es ................. ................. ...... 5-12 5.2.5 Impact Measures for Government-own ed Facilities
................. ................. ............ 5-12 5.3 R esults
................. ................. ................. ................. ................. . 5-14 5.3.1 B aseline Closures
................. ................. ................. ................. ... 5-14 5.3.2 Pric e Increas es ................. ................. ................. ................. ...... 5-15 5.3.3 Ove rview o f Impa cts ................. ................. ................. ................. .. 5-16 5.3.4 Results for I ndirect Dischargers
................. ................. ................. .......... 5-18 5.3.5 Results for Direct Dischargers
................. ................. ................. ........... 5-19 5.3.6 R esults for Private Fac iliti es ................. ................. ................. ............ 5-20 5.3.7 Results f or Government- Owned Facili ties
................. ................. ................. .. 5-21 Glossary
................. ................. ................. ................. ................. ... 5-25 A c r o ny m s ................. ................. ................. ................. ................. .. 5-26 References
................. ................. ................. ................. ................. . 5-27 

## Chapter 6: Employment Effects 6.1 Job Losses Due t o Closures
................. ................. ................. ................. ... 6
- 2 6.2 J ob G ains D ue to C omp liance R equ ireme nts ................. ................. ................. ...... 6
- 3 6
. 3 Net Effects on Employment
................. ................. ................. ................. .. 6
- 5 Glossary
................. ................. ................. ................. ................. .... 6
- 7 Table of Con tents-2MP&M EEBA Table o f Cont ents Acro nym ................. ................. ................. ................. ................. ... 6
- 8 References
................. ................. ................. ................. ................. .. 6
- 9 

## Chapter 7: Government and Community Impact Analysis 7.1 Im pac ts on G ove rnme nts ................. ................. ................. ................. ..... 7
- 1 7.1.1 Impact s on Governments that Operate MP& M Facilit ies
................. ................. ......... 7
- 1 7.1.2 PO TW Adm inistrative C osts ................. ................. ................. .............. 7
- 2 7.2 Community Impacts of Facil ity Closures
................. ................. ................. ......... 7
- 6 Glossary
................. ................. ................. ................. ................. .... 7
- 7 Acronyms ................. ................. ................. ................. ................. ... 7
- 8 

## Chapter 8: Foreign Trade Impacts 8
. 1 Data sources
................. ................. ................. ................. .............. 8
- 1 8.2 Me thodology
................. ................. ................. ................. .............. 8
- 2 8.3 R esults
................. ................. ................. ................. ................. .. 8
- 3 References
................. ................. ................. ................. ................. .. 8
- 5 

## Chapter 9: Firm Level, New Source and Industry Impacts 9.1 F irm Le vel Im pac ts ................. ................. ................. ................. ......... 9
- 1 9.1.1 Sources
................. ................. ................. ................. ............. 9
- 1 9.1.2 Method ology
................. ................. ................. ................. ......... 9
- 2 9.1.3 Resu lts
................. ................. ................. ................. .............. 9
- 2 9.2 N ew So urce I mpa cts ................. ................. ................. ................. ........ 9
- 3 9.2.1 Me thodology
................. ................. ................. ................. ......... 9
- 4 9.2.2 Resu lts
................. ................. ................. ................. .............. 9
- 5 9.3 In dustry L evel Im pac ts ................. ................. ................. ................. ...... 9
- 7 Glossary
................. ................. ................. ................. ................. .... 9
- 9 Acronyms ................. ................. ................. ................. ................. .. 9-10 References
................. ................. ................. ................. ................. . 9-11 

## Chapter 10: Small Entity Impact A nalysis 10.1 Defining Small Entities
................. ................. ................. ................. .... 10-2 10.2 M ethodology
................. ................. ................. ................. ............ 10-4 10.3 Resu lts
................. ................. ................. ................. ................. 10-4 10.3.1 Number of Aff ected SmallEntities
................. ................. ................. ....... 10-4 10.3.2 Impact s on Facil iti es Owned by SmallEntities
................. ................. ............... 10-5 10.3 .3 I mpact s onSmal l Firms ................. ................. ................. ............... 10-6 10.4 Con sidera tion of S mall E ntity Imp acts in D evelo ping the Final R ule
................. ................. ... 10-7 Glossary
................. ................. ................. ................. ................. ... 10-8 Acronyms ................. ................. ................. ................. ................. .. 10-9 References
................. ................. ................. ................. ................. 10-10 

## Chapter 1 1: Socia l Costs 11.1 Com pon ents of S ocial C osts ................. ................. ................. ................. 11-1 11.2 Resource Cost s of Compli ance ................. ................. ................. ............... 11-2 11.3 PO TW Adm inistration Co sts ................. ................. ................. ................ 11-4 11.4 Social Costs of Unemployment
................. ................. ................. ............... 11-5 11.4. 1 Socia l Cost of Worker Disl ocati on ................. ................. ................. ....... 11-5 11.4 .2 Co st of Admin is terin g Unemp loyment Benef it s Pro grams ................. ................. ...... 11-6 11.4.3 To tal Cost of Unemployment
................. ................. ................. ........... 11-6 11.5 To tal Soc ial Co sts ................. ................. ................. ................. ........ 11-7 Glossary
................. ................. ................. ................. ................. ... 11-8 References
................. ................. ................. ................. ................. . 11-9

Table of Con tents-3MP&M EEBA Table o f Cont ents 

## P ART 

## III: B ENEFITS 

## Chapter 1 2: Benef it Overview 12.1 M P & M Po llutants
................. ................. ................. ................. ........ 12-2 12.1 .1 Ch aracte ristics of M P & M Po llutants
................. ................. ................. ..... 12-2 12.1 .2 Effe cts of M P & M Po llutants on Hum an H ealth
................. ................. .............. 12-3 12.1.3 Environm ental Effects of M P & M Pollutants
................. ................. ................ 12-7 12.1 .4 Effe cts of M P & M Po llutants on Eco nom ic Pro duc tivity
................. ................. ....... 12-8 12.2 Linking the Regu lati on to Benefi cial Outcomes
................. ................. ................. .. 12-9 12.3 Qualitative and Quantitat ive Benefits Assess ment ................. ................. ................ 12-11 12.3.1 Overvi ew of Benefi t Categor ies
................. ................. ................. ........ 12-11 12.3 .2 H uma n He alth B enefits
................. ................. ................. ............... 12-13 12.3.3 Ecolo gical Bene fits
................. ................. ................. ................. 12-13 12.3 .4 Ec ono mic P rod uctivity B enefits
................. ................. ................. ........ 12-14 12.3 .5 M ethod s for V aluing B enefit E vents ................. ................. ................. ..... 12-14 Glossary
................. ................. ................. ................. ................. .. 12-16 Acronyms ................. ................. ................. ................. ................. . 12-19 References
................. ................. ................. ................. ................. 12-20 

## Chapter 13: Human Health Benefits 13.1 Methodology & Data Sources
................. ................. ................. ................ 13-2 13.1. 1 Cancer fr om Fis h Consumpti on ................. ................. ................. .......... 13-3 13.1. 2 Cancer fr om Drink ing Water Cons umpti on ................. ................. ................. 13-8 13.1.3 Expo sures abo ve No n-cancer H ealth Thre sholds
................. ................. ............ 13-10 13.1 .4 Hu man Hea lt h AWQC
................. ................. ................. ............... 13-14 13.2 Resu lts
................. ................. ................. ................. ................ 13-17 13.2 .1 Fish C onsu mptio n Ca ncer R esults
................. ................. ................. ....... 13-17 13.2 .2 D rinking W ater C onsu mptio n Ca ncer R esults
................. ................. ............... 13-19 13.2 .3 N on-ca ncer H ealth T hresho ld Re sults
................. ................. ................. .... 13-19 13.2 .4 H uma n He alth AW QC Resu lts
................. ................. ................. ......... 13-21 13.3 Limit ations and Uncertai nti es ................. ................. ................. ............... 13-22 13.3.1 Sample Desi gn & Analys is of Benefit s by Locat ion of Occurr ence ................. ............... 13-22 13.3 .2 In-W aterwa y Co ncen trations o f MP &M Po llutants
................. ................. .......... 13-23 13.3 .3 Jo int Effec ts of Po llutants
................. ................. ................. ............. 13-23 13.3 .4 B ackg roun d C onc entratio ns of M P & M Po llutants
................. ................. ........... 13-23 13.3 .5 D own stream Effects
................. ................. ................. ................. 13-24 13.3. 6 Exposed Fi shi ng Popul ati on ................. ................. ................. ........... 13-24 13.3.7 Treatment of Cancer Lat ency ................. ................. ................. .......... 13-25 13.3.8 Treatment of Cessation Lag
................. ................. ................. ........... 13-25 13.3.9 Use of M e an Individual Exposure Parameters
................. ................. .............. 13-26 13.3.10 Cancer P otency Factors
................. ................. ................. .............. 13-26 Glossary
................. ................. ................. ................. ................. .. 13-27 Acronyms ................. ................. ................. ................. ................. . 13-28 References
................. ................. ................. ................. ................. 13-29 

## Chapter 14: Lead-Related Benefits 14.1 Ove rview o f Lead -Relate d H ealth E ffects
................. ................. ................. ....... 14-2 14.1.1 Children Under A g e One
................. ................. ................. ............... 14-3 14.1.2 Chil dren Between t he Ages of One and Sev en ................. ................. ............... 14-3 14.1 .3 Ad ults
................. ................. ................. ................. ............ 14-4 14.2 Health Benef its to Chil dren
................. ................. ................. ................. . 14-4 14.2.1 PbB Distri bution of Exposed Children
................. ................. ................. .... 14-5 14.2.2 Relationship Between PbB Levels and IQ
................. ................. ................. 14-12 14.2.3 Value of Childre n's Intel lig ence ................. ................. ................. ........ 14-12 14.2.4 Value of Additiona l Educati onal Resourc es ................. ................. ................ 14-14 14.2 .5 Ch ange s in Ne ona tal M ortality
................. ................. ................. ......... 14-17 Table of Con tents-4MP&M EEBA Table o f Cont ents 14.3 Adu lt Hea lth Be nefits
................. ................. ................. ................. .... 14-17 14.3 .1 Es timating C hang es in Ad ult Pb B D istribution Leve ls
................. ................. ........ 14-20 14.3 .2 M ale H ealth B enefits
................. ................. ................. ................ 14-22 14.3 .3 Fe male He alth B enefits
................. ................. ................. ............... 14-26 14.4 Lead -Relate d B enefit R esults
................. ................. ................. ............... 14-28 14.4 .1 Pr escho ol Ag e Ch ildren L ead -Relate d B enefit R esults
................. ................. ........ 14-28 14.4 .2 Ad ult Lead -Relate d B enefit R esults
................. ................. ................. ..... 14-29 14.5 Limit ations and Uncertai nti es ................. ................. ................. ............... 14-31 14.5.1 Excluding Older Chil dren
................. ................. ................. ............. 14-31 14.5 .2 Co mpe nsato ry Ed ucatio n Co sts ................. ................. ................. ........ 14-32 14.5. 3 Dose-Re spons e Relati onships ................. ................. ................. .......... 14-32 14.5.4 Absorp tion Function f or Ingested Lead in Fish Tissue
................. ................. ........ 14-32 14.5. 5 Economic Valuation
................. ................. ................. ................. 14-33 Glossary
................. ................. ................. ................. ................. .. 14-35 Acronyms ................. ................. ................. ................. ................. . 14-38 References
................. ................. ................. ................. ................. 14-39 

## Chapter 15: Recreational Benefits 15.1 Ecol ogica l Impr ovement s f rom th e MP&M Regul ati on ................. ................. ............. 15-3 15.1 .1 O vervie w of E colo gical Im pro vem ents ................. ................. ................. .... 15-3 15.1 .2 Q uantificatio n of E colo gical Im pro vem ents ................. ................. ................. 15-3 15.1.3 Benefi tin g Reaches
................. ................. ................. ................. .. 15-4 15.1.4 Geographic Char acteri sti cs of MP&M Reaches
................. ................. .............. 15-6 15.2 Valu ing Ec ono mic R ecrea tional B enefits
................. ................. ................. ....... 15-6 15.2.1 Transf errin g Values f rom Surface W ater Valu ation Studies
................. ................. ..... 15-6 15.2.2 Recreational Fishing
................. ................. ................. ................. . 15-9 15.2.3 W ildli fe Viewing
................. ................. ................. ................. .. 15-13 15.2.4 Recreational Boating
................. ................. ................. ................. 15-17 15.2 .5 N onus e B enefits
................. ................. ................. ................. ... 15-20 15.3 Sum mary o f Recr eation al Be nefits
................. ................. ................. ........... 15-20 15.4 Limitatio ns and Unc ertainties A ssocia ted with Estim ating R ecrea tional B enefits
.............. . . . ......... 15-22 Glossary
................. ................. ................. ................. ................. .. 15-26 Acronyms ................. ................. ................. ................. ................. . 15-28 References
................. ................. ................. ................. ................. 15-29 

## Chapter 16: POTW Benefits 16.1 Reduce d Interference wit h POT W Operations
................. ................. ................. ... 16-2 16.2 Ass essing Benef it s f rom Reduce d Sludg e Contamination
................. ................. ............ 16-2 16.2.1 Data Sources
................. ................. ................. ................. ....... 16-2 16.2.2 Sludge Generati on, Treatment , and Disposa l Pract ices
................. ................. ........ 16-4 16.2 .3 O vervie w of Im pro ved Slud ge Q uality B enefits
................. ................. .............. 16-7 16.2.4 Sludge Use/DisposalCosts and Practices
................. ................. ................. .. 16-8 16.2 .5 Q uantifying S ludge Be nefits
................. ................. ................. ........... 16-10 16.3 Estima ted S avings in Slud ge U se/D ispos al Co sts ................. ................. ................. 16-15 16.4 M ethodology Limitati ons ................. ................. ................. ................. . 16-16 Glossary
................. ................. ................. ................. ................. .. 16-18 Acronyms ................. ................. ................. ................. ................. . 16-19 References
................. ................. ................. ................. ................. 16-20 

## Chapter 1 7: Envi ronmental Justice & Protect ion of Chil dren 17.1 Demographic Charact eris tics of Populat ions Li ving in the Count ies Near MP&M Facil iti es .............. . . . . 17-1 17.2 Protection of Children from Environmental Health and Safety Risks
................. ................. ... 17-3 Glossary
................. ................. ................. ................. ................. ... 17-4 Reference
................. ................. ................. ................. ................. .. 17-5

Table of Con tents-5MP&M EEBA Table o f Cont ents 

## P ART 

## IV: C OMPARISON OF 

## C OSTS AND 

## B ENEFITS 

## Chapter 1 8: MP&M Benefi t/Cost Comparison 18.1 Estima ting N ationa l Leve l Ben efits and Co sts ................. ................. ................. ... 18-1 18.2 Soc ial Co sts ................. ................. ................. ................. ............. 18-2 18.3 Be nefits
................. ................. ................. ................. ................ 18-2 18.4 Com parin g M one tized B enefits an d C osts ................. ................. ................. ...... 18-2 

## Chapter 1 9: Socia l Costs and Benefit s of Regul atory Al ternative s 19.1 Estim ated S ocial C osts ................. ................. ................. ................. ..... 19-1 19.1.1 Compliance Costs f or MP& M Facilit ies
................. ................. ................. ... 19-1 19.1 .2 G ove rnme nt Ad ministrativ e Co sts ................. ................. ................. ........ 19-2 19.1.3 Cost of Unem ployment
................. ................. ................. ................ 19-2 19.1 .4 T otal So cial Co sts ................. ................. ................. ................. ... 19-3 19.2 Estim ated B enefits
................. ................. ................. ................. ........ 19-4 19.2 .1 H uma n He alth B enefits
................. ................. ................. ................ 19-4 19.2 .2 Re creatio nal B enefits
................. ................. ................. ................. . 19-5 19.2 .3 Av oide d Se wage Slud ge D ispos al or U se Co sts ................. ................. ............... 19-6 19.2 .4 T otal M one tized B enefits
................. ................. ................. ............... 19-7 19.3 Co mpa rison o f Estima ted B enefits an d C osts ................. ................. ................. ..... 19-7 Glossary
................. ................. ................. ................. ................. .. 19-10 Acro nym ................. ................. ................. ................. ................. .. 19-11 

## P ART 

## V: O HIO 

## C ASE 

## S TUDY 

## Chapter 20: Baseline Conditions in Ohio 20.1 Overvi ew of Ohio ’s Geogr aphy , Popu lation , a nd Econ omy ................. ................. .......... 20-2 20.2 Pro file of M P & M Facilities in O hio
................. ................. ................. ........... 20-3 20.3 Ohio’s Water Resources ................. ................. ................. ................. ... 20-6 20.3.1 Aquatic Life U s e ................. ................. ................. ................. .... 20-8 20.3 .2 W ater R ecrea tion in O hio
................. ................. ................. ............. 20-11 20.3 .3 Co mm ercial F ishing in O hio
................. ................. ................. ........... 20-12 20.3 .4 Sur face W ater W ithdraw als
................. ................. ................. ........... 20-12 20.4 Surfac e W ater Q uality in O hio
................. ................. ................. .............. 20-12 20.4 .1 U se Attain men t in Strea ms an d R ivers in O hio
................. ................. .............. 20-13 20.4.2 Lake Erie and O ther Lakes Use Attainment
................. ................. ................ 20-13 20.4 .3 Ca uses an d So urces of U se N on-A ttainme nt in Oh io
................. ................. ......... 20-14 20.5 Effect s of Water Quali ty I mpairments on Water Resource Servi ces ................. ................. ... 20-15 20.5 .1 Effe ct of W ater Q uality Imp airme nt on L ife Sup por t for An imals an d P lants
.............. . . . ....... 20-15 20.5.2 Eff ect of Water Quality Impair ment on Recreational Services
................. ................. .. 20-17 20.6 Pres ence and D istribution of En dan gered and T hreate ned Spe cies in O hio
................. .............. 20-18 20.6.1 E& T F ish
................. ................. ................. ................. ......... 20-19 20.6.2 E& T M ollusks
................. ................. ................. ................. ..... 20-19 20.6.3 Other Aquatic E&T Species
................. ................. ................. ........... 20-20 Glossary
................. ................. ................. ................. ................. .. 20-24 Acronyms ................. ................. ................. ................. ................. . 20-27 References
................. ................. ................. ................. ................. 20-28 

## Chapter 21: Modeling Recreational Benefits in Ohio with a RUM M odel RUM Analysis 21.1 M ethod olog y ................. ................. ................. ................. ........... 21-2 21.1.1 Overvi ew ................. ................. ................. ................. .......... 21-2 21.1. 2 Modelin g th e Sit e Choic e Decis ion
................. ................. ................. ....... 21-3 21.1. 3 Modelin g Trip Par ti cipation
................. ................. ................. ............ 21-6 21.1 .4 Ca lculating W elfare C hang es from W ater Q uality Imp rove men ts ................. ................. 21-9 21.1.5 Extra polati ng Result s to t he Stat e Level
................. ................. ................. .. 21-10 Table of Con tents-6MP&M EEBA Table o f Cont ents 21.2 Data
................. ................. ................. ................. ................. . 21-10 21.2.1 The Ohio Data
................. ................. ................. ................. .... 21-11 21.2.2 Estimatingthe Pri ce of Visits t o Sites
................. ................. ................. .... 21-14 21.2.3 Site Characteristics
................. ................. ................. ................. 21-14 21.3 Site Choice Model Estimat es ................. ................. ................. ............... 21-17 21.3 .1 Fishin g M ode l
................. ................. ................. ................. .... 21-18 21.3.2 BoatingModel
................. ................. ................. ................. .... 21-19 21.3.3 Swimmi ng Model
................. ................. ................. ................. .. 21-20 21.3.4 Viewi ng (Near-water Act ivi ty) Model
................. ................. ................. ... 21-20 21.4 Trip Parti cipati on Model
................. ................. ................. ................. .. 21-20 2 1 .5 E s tim a tin g B e n e f its f r o m R e d u c e d M P & M Disc harge s in Oh io
................. ................. ..... 21-23 21.5 .1 B enefiting R each es in O hio
................. ................. ................. ........... 21-23 21.5 .2 Es timating R ecrea tional B enefits in O hio
................. ................. ................. 21-24 21.6 Limitatio ns and Unc ertainty
................. ................. ................. ................ 21-25 21.6.1 One-St ate Approach
................. ................. ................. ................. 21-25 21.6 .2 Inclu ding O ne-D ay T rips O nly
................. ................. ................. ......... 21-26 21.6 .3 N onus e B enefits
................. ................. ................. ................. ... 21-26 21.6.4 Potent ial Sources of Survey Bias
................. ................. ................. ....... 21-26 Glossary
................. ................. ................. ................. ................. .. 21-28 Acronyms ................. ................. ................. ................. ................. . 21-30 References
................. ................. ................. ................. ................. 21-31 

## Chapter 22: MP&M Benefit-Cost Analysis in Ohio 22.1 Benef it s of the Fina l Regu lat ion
................. ................. ................. ............... 22-1 22.1. 1 Human Heal th Bene fi ts (Othe r th an Lead)
................. ................. ................. .. 22-2 22.1 .2 Le ad-R elated Be nefits
................. ................. ................. ................. 22-3 22.1 .3 E con omic Pro duc tivity Ben efits
................. ................. ................. ......... 22-4 22.1 .4 T otal M one tized B enefits
................. ................. ................. ............... 22-4 22.2 Soci al Cos ts of t he Fi nal Regul ati on ................. ................. ................. ........... 22-5 22.2.1 Baseline and Post- Compliance Clos ures ................. ................. ................. ... 22-5 22.2.2 Compliance Costs f or MP& M Facilit ies
................. ................. ................. ... 22-6 22.2 .3 T otal So cial Co sts ................. ................. ................. ................. ... 22-7 22.3 Co mpa rison o f Mo netized Be nefits and Co sts in Oh io
................. ................. .............. 22-7 Glossary
................. ................. ................. ................. ................. ... 22-8 Acronyms ................. ................. ................. ................. ................. .. 22-9 

## A PPENDICE S 

## Appendix A: Detailed Economic Impact A nalysis Information A.1 MP& M SIC and N AICS Codes
................. ................. ................. ................A
- 1 A.1.1 SIC Codes by Sect or ................. ................. ................. ................. ... A
- 1 A.1.2 Bridge Betwe en NAICS and SIC codes
................. ................. ................. ..... A
- 7 A.2 Annual Establis hment “Bir ths” and “Deaths” in MP&M Indust ries
................. ................. .... A-26 A.3 D escrip tion of M P & M Surve ys ................. ................. ................. ............... A-28 A.3.1 Scre ener S urveys ................. ................. ................. ................. .... A-28 A.3.2 Ohio Scre ener S urveys ................. ................. ................. ................. A-28 A.3.3 Deta iled M P & M Indu stry Surv eys ................. ................. ................. ........ A-28 A.3.4 Iron and SteelSurvey
................. ................. ................. ................. . A-29 A.3.5 Municipal ity Survey
................. ................. ................. ................. . . A-29 A.3.6 FederalFacil ity Survey
................. ................. ................. ................ A-29 A.3.7 POTW Survey
................. ................. ................. ................. ...... A-29 References
................. ................. ................. ................. ................. . A-31 

## Appendix B: Cost Pass-Through Analysis B.1 Th e Ch oice o f Secto r-Spe cific CP T C oefficien ts ................. ................. ................. ... B
- 1 B.2 Eco nom etric A nalysis
................. ................. ................. ................. ....... B
- 2 Table of Con tents-7MP&M EEBA Table o f Cont ents B.2.1 Framewo r k
................. ................. ................. ................. .......... B
- 3 B.2.2 Dat a Used t o Estimate t he Regr essi on Equat ion
................. ................. ................ B
- 4 B.2 .3 Re gressio n Re sults
................. ................. ................. ................. ....B
- 6 B.3 M arket S tructure Ana lysis
................. ................. ................. ................. ...B
- 9 B.3.1 M easures Descriptions
................. ................. ................. ................. . B
- 9 B.3 .2 Re sults
................. ................. ................. ................. ............ B-13 B.4 Valid ation o f Eco nom etrically-E stimated CP T C oefficien ts ................. ................. .......... B-16 B.4 .1 O ther M etal P rod ucts ................. ................. ................. ................. . B-17 B.4.2 J ob Shops
................. ................. ................. ................. .......... B-17 B..3 M otor Ve hicle
................. ................. ................. ................. ....... B-18 B.4 .4 Airc raft
................. ................. ................. ................. ........... B-18 B.4 .5 M obile Indu strial Eq uipm ent ................. ................. ................. ........... B-18 B.4.6 Aerospace
................. ................. ................. ................. .......... B-18 B.5 Adjusti ng Esti mates of Compliance CPT Potential
................. ................. ................. B-18 Attachment B.A: Selected Review of CPT Literatur e ................. ................. ................. . . B-20 B.A .1 Ash enfelter e t al. (19 98) , “Iden tifying the Firm -Spe cific Co st Pass -Th roug h Ra te.”
................ . ... B-20 B.A.2 Exchange R ate Pass-Through
................. ................. ................. ........... B-20 B.A.3 T a x Pass-Through
................. ................. ................. ................. ... B-20 B.A.4 Studie s Cite d
................. ................. ................. ................. ....... B-20 Acronyms ................. ................. ................. ................. ................. . . B-22 

## Append ix C: Su mmary of Mod erate Impact Thresholds by Sector C.1 Dev elo pin g Thre sho ld Val ues for Pre- Tax Ret urnon As set s ( PTRA)
................. ................. .... C
- 1 C.2 Dev elo pin g Thre sho ld Val ues for Int ere st Cover age Rat io ( ICR)
................. ................. ........C
- 2 C.3 Sum mary o f Resu lts
................. ................. ................. ................. .........C
- 4 References
................. ................. ................. ................. ................. . . C
- 5 

## Append ix D: Estimating Capital Outlays fo r MP&M Discoun ted Cash Flow Analy ses D.1 Analytic Co ncep ts Und erlying A nalysis of C apital O utlays
................. ................. ........... D
- 2 D.2 Spe cifying V ariab les for the Ana lysis
................. ................. ................. .......... D
- 4 D.3 Select ing t he Regress ion Analy sis Dataset
................. ................. ................. ....... D
- 7 D.4 Specifi cati on of Models to be Teste d
................. ................. ................. ........... D
- 8 D.4.1 Linear Model Speci fi cati on ................. ................. ................. ............. D
- 9 D.4.2 Log -Li near Model Speci fi cati on ................. ................. ................. ........ D-10 D.4 .3 Se nsitivity Ana lysis
................. ................. ................. ................. . D-12 D.5 Model Vali dati on ................. ................. ................. ................. ........ D-12 Attach men t D.A : Bib liograp hy of Lite rature R eview ed fo r this Ana lysis
................. ................. ... D-17 Attachment D.B: Histori cal Varia bles Conta ined i n the Valu e Line I nvestment Surve y Dataset
.............. . . . .. D-18 

## Appendix E: Calculation of Capital Cost Components E.1 Calc ulation o f One -Tim e Ca pital C ost C omp one nts ................. ................. ................. . E
- 1 

## Append ix F: Admi nistrative Costs F.1 E ffluent G uideline s Per mitting R equ ireme nts ................. ................. ................. ...... F
- 1 F.1.1 NPDES B asic I ndustr ial Permit Program ................. ................. ................. .... F
- 1 F.1.2 Pret reatment Program
................. ................. ................. ................. .. F
- 2 F.2 PO TW Administrati ve Cost Me thodology
................. ................. ................. ........ F
- 2 F.2.1 Data Sour ces ................. ................. ................. ................. ......... F
- 2 F.2.2 Overview of Method ology
................. ................. ................. ............... F
- 3 F.3 Unit Cost s of Permi tting Acti vit ies
................. ................. ................. .............. F
- 4 F.3.1 Permit Applicat ion and Is suance ................. ................. ................. ........... F
- 4 F.3. 2 Ins pecti on ................. ................. ................. ................. ........... F
- 7 F.3.3 Mo nitoring
................. ................. ................. ................. .......... F
- 7 F.3.4 Enforcement
................. ................. ................. ................. ......... F
- 9 F.3.5 Repermitting
................. ................. ................. ................. ........ F-10 F.4 POTW Admini str ati ve Cost s by Option
................. ................. ................. ......... F-10 Ap pen dix F Exh ibits
................. ................. ................. ................. ........... F-12 Table of Con tents-8MP&M EEBA Table o f Cont ents References
................. ................. ................. ................. ................. . F-25 

## Append ix G: E xtrapolat ion Method s G.1 Using Rak ing to A djust M P & M Facility Sa mple W eights
................. ................. .............G
- 2 G.1.1 Data Sources
................. ................. ................. ................. ........ G
- 2 G.1.2 Raking Adjustment
................. ................. ................. ................. .... G
- 3 G.2 M ethod olog y for D evelo ping S amp le-W eighted Estim ates for Sites with M ore T han O ne M P & M Facility
........ G
- 7 G.3 Methodology for Ext rapolat ion of Ohi o Case Study Res ult s to t he NationalLevel
............... . . .......... G-13 G.3.1 Ch ange in Pollutant Loads
................. ................. ................. .............. G-14 G.3.2 Level of Recreat ional Activities on Reaches Aff ected by MP&M Discharge s .............. . . . ........ G-14 G.3. 3 Dif fe ren ces inHouse hol d In come ................. ................. ................. ........ G-14 G.4 Resu lts
................. ................. ................. ................. ................. G-15 Glossary
................. ................. ................. ................. ................. ... G-17 

## Append ix H: Fate and Transp ort Model for DW andOhio Anal yses H.1 M odel Equations
................. ................. ................. ................. .......... H
- 1 H.2 M odel Assumptions
................. ................. ................. ................. ........ H
- 3 H.2.1 Steady Flow Cond itions Exis t Within the Stream or River Reach
................. ................. . H
- 3 H.2 .2 Lo ngitud inal D ispersio n of the P ollutant Is Ne gligible
................. ................. .......... H
- 3 H.2.3 Flow Geometry , Suspens ion of Sol ids, and Reacti on Rates Are Constant Withi n a River Reach ............H
- 4 H.3 Hydrologic Linkages
................. ................. ................. ................. ....... H
- 4 H.4 Associating Risk wit h Exposed P opulations
................. ................. ................. ...... H
- 4 H.5 Data Sources
................. ................. ................. ................. .............H
- 4 H.5 .1 Po llutant Lo ading Da ta Us ed in the Drin king W ater R isk Ana lysis
................. ................. . H
- 4 H.5 .2 Po llutant Lo ading Da ta Us ed in the Ohio Case Stud y Ana lysis
................. ................. .... H
- 4 Glossary
................. ................. ................. ................. ................. .... H
- 8 Acronyms ................. ................. ................. ................. ................. ... H
- 9 References
................. ................. ................. ................. ................. . H-10 

## Appendix I: Environmental Assessment I.1 MP& M Pollut ant Charac ter ization
................. ................. ................. .............. I
- 4 I.1.1 Id entifying M P & M Po llutants
................. ................. ................. ............. I
- 4 I.1.2 P hysical-C hem ical Ch aracte ristics and To xicity D ata of M P & M Po llutants
.............. . . . ............ I
- 9 I.1.3 Grouping M P&M Pollutants Based on Risk to Aquatic Receptors
................. ................. . I-21 I.1.4 Assumptions and Limitat ions
................. ................. ................. ............ I-23 I.2. Methodology
................. ................. ................. ................. ............. I-23 I.2. 1 Sample Set Dat a Anal ysi s and National Extr apolation
................. ................. .......... I-23 I.2.2 Water Quality Mod eling
................. ................. ................. ................ I-23 I.2.3 Impact of Indirect Discharging Facili ties on POTW Operations
................. ................. ... I-25 I.2.4 Assumptions and Limitat ions
................. ................. ................. ............ I-27 I.3 Data Sour ces ................. ................. ................. ................. ............. I-28 I.3.1 F acility-Sp ecific D ata ................. ................. ................. ................. . I-28 I.3.2 W ater B ody-S pec ific Da ta ................. ................. ................. ............... I-28 I.3.3 Informati on Used to E v aluate POT W Operations
................. ................. .............. I-29 I.4 R esults
................. ................. ................. ................. ................. . I-33 I.4.1 H uma n He alth Imp acts ................. ................. ................. ................. I-34 I.4.2 A qua tic Life E ffects
................. ................. ................. ................. ... I-37 I.4.3 P O T W Effects
................. ................. ................. ................. ....... I-41 Glossary
................. ................. ................. ................. ................. ... I-44 Acronyms ................. ................. ................. ................. ................. .. I-48 References
................. ................. ................. ................. ................. . I-49 

## Append ix J: Spacial Distributio n of MP&M Facili ties and Recreational User Populations Ta ble J.1 Distrib ution o f MP &M Facilities a nd P articipa nts of W ater B ased Rec reatio n by S tate ................ . .. J
- 2 Figure J.1 C umula tive D istribution of Fac ilities and P articipa nts ................. ................. ................. J
- 4 Table of Con tents-9MP&M EEBA Table o f Cont ents 

## Append ix K: Se lectin g WPT Val ues for Benefits Trans fer K.1 Des vous ges et al., 1 987
. Op tion P rice E stimates fo r W ater Q uality Imp rove men ts: A Co ntingen t Valu ation S tudy for the Monongahela River
................. ................. ................. ................. K
- 2 K.2 Farb er and Grin er, 20 00. V aluing W atershe d Q uality Imp rove men ts Using Co njoin t Analysis
................. K
- 3 K.3 Jakus et al., 1997. Do Sportfis h Consumption Advisori es Aff ect Reser voir Angl ers’ Site Choice?
.............. K
- 5 K.4 Lant and Ro berts, 1990. Greenbelts in the Cornbelt: Riparian Wetlands, Intrinsi c Values, and Market Failure
.... K
- 6 K.5 Audrey Lyke , 1993. Discr ete Choice Models to Value Changes in Envi ronmentalQualit y: A Great Lakes Case Study
................. ................. ................. ................. ................. . K
- 7 K.6 M ontgom ery and N eedelm an, 199 7. The W elfare Effects of To xic Contam ination in Freshwater F ish
........... K
- 8 K.7 Phaneuf et al., 1998. Valuing Water Qua lity Improvements Using Revealed P r eference Methods W hen Corner Solutions are Present
................. ................. ................. ................. ...... K
- 8 Glossary
................. ................. ................. ................. ................. .. K-10 Acronyms ................. ................. ................. ................. ................. . K-11 References
................. ................. ................. ................. ................. K-12 

## Append ix L: Pa rameters Use d in the I EUBK Mode l Table B-1: Descri ption of Parameters Used in th e IEUBK Lead Model
................. ................. ..... L
- 1 

## Appendix M: Sensitivity Analy sis of Lead-Related Benefits M .1 V alues fo r Qu antified L ead -Relate d H ealth E ffects
................. ................. ................. M
- 1 M .2 Lea d-Re lated B enefit R esults
................. ................. ................. ................. M
- 2 M .2.1 P resch ool A ge C hildren Lead -Relate d B enefits
................. ................. .............. M
- 2 M .2.2 A dult Le ad-R elated Be nefits
................. ................. ................. ............ M
- 3 

## Append ix N: A nalysis of the Natio nal Demand for Water -Based Recreation Su rvey N.1 Backgr ound In formati on ................. ................. ................. ................. .... N
- 1 N.2 Data Ana lysis
................. ................. ................. ................. ............ N
- 2 N.3 Part icipati on inWater- Based Recr eati on by Activi tyType
................. ................. ........... N
- 2 N.4 All ocati on of Trips by Water Body Type
................. ................. ................. ....... N-11 N.5 One-Way Travel Distan ce ................. ................. ................. ................. . N-16 N.6 Individu al Expe ndit ures per Tri p ................. ................. ................. ............. N-19 N.7 Dist ributi on of Di rect Costs for Sing le- day Trips ................. ................. ................. . N-22 N.8 Prof il e of Boat ing Trips
................. ................. ................. ................. ... N-27 N.9 Prof il e of Fi shi ng Tri ps ................. ................. ................. ................. ... N-30

Table of Content s-10MP&M EEBA Executive Summary 

# E xecutive 

# S ummary
I NTRODU CTION EPA is promulgating ef fluent limit ations guidelines and s t an da r d s f o r t h e Me t a l Pr oduc t s an d Ma ch i n e r y ( MP& M) industry. This document presents EPA ’s economic and environmental analys es supporting the f inal rul e. The Executive Summary provides an overview of the costs and benefits of the regulat ion. Ov erall, E P A finds that the final rule ha s mo dest ec ono mic impacts and benefi ts. The esti mated soci al cost of th e fi nal rule i s $13.8 mil lion annually (2001$). The tot al benef its that can b e value d in do llar term s in the ca tegor ies trad itionally analyz ed fo r effluent gu ideline s range from a roun d $1 .0 to $1.5 million annuall y (2001$), based on alternative extrap olation metho ds. EPA recognizes that es timates of both cost s and benefits are unce rtain. T o sup plem ent the n ationa l level ana lysis perf ormed f or th e final MP& M regulati on, EPA condu cted a mor e deta iled ca se stud y of the ex pec ted S tate-leve l costs and benefits of t he MP &M rule in Ohio. In contrast to t h e nation al-level an alysis, the m ore d etailed case stu dy ana lysis finds that the final regu lation w ould achiev e ben efits substanti ally exceeding estimated social costs. Compa ring the midpoint estimate of social costs ($62,232) with the midpoint 

## E XECUTIVE 

## S UMMARY 

## C ONTENTS ES.1 Overview of Facilitie s Evalua ted for Regulation under the MP&M P oint Source Category and Its Effluent Discharges
...... ES-1 ES.2 Description of the Fina l Rule
............... ES-3 ES.3 Economic Impacts and Social Costs of the Final Rule
........................... ES-3 ES.3.1 Economic Impact s ................. ES-4 ES.3.2 Social Cost s ...................... ES-7 ES.4 National Be nefits of the Final Rul e .......... ES-8 ES.4.1 Reduced Human Health Risk
........ ES-10 ES.4.2 Ecologica l, Recreational, and Nonuser Be nefits
.................... ES-14 ES.4.3 Reduced POT W Impa cts ........... ES-15 ES.4.4 Total Estimated Benefits of the Final MP&M Rule
................... ES-16 ES.5 National Be nefit-Cos ts Compa rison
......... ES-16 ES.6 Ohio Case Study
........................ ES-18 ES.6.1 Benefit s ......................... ES-18 ES.6.2 Social Cost s ..................... ES-20 ES.6.3 Comparing Monetized Benefits and Costs
.......................... ES-20

estima te of mo netizab le ben efits ($9 30,4 08) for O hio, E P A estimate s a net b enefit of the final M P & M rule for O hio is $868,17 8 (2001 $). EP A no tes that efflue nt limitation s guide lines for the M P & M industry a re tech nolo gy-base d. EP A is neith er req uired to dem onstra te enviro nme ntal be nefits of its tech nolo gy-base d rules , nor is it req uired to co nside r rece iving wa ter qua lity in setti ng technology-based eff luent limitations gui delines and standards. EPA considers benefits as one of the factors that the Agenc y evaluates. De tailed d escrip tions o f the ana lytic metho dolo gies and results are prese nted in the Ec ono mic, E nviro nme ntal, and Be nefits Assessment for the Fi nal Metal Products and M a chinery Rule (EEBA ). In additi on, the EEBA presents costs, benefits, and econ omic impa cts for al ter nat iv es to th e f i n a l rul e that wer e con si dere d by EPA. 

## ES.1 O VERVIEW OF 

## F ACILIT IES 

## E VALUATED FOR 

## R EGULATI ON UNDER THE 

## MP&M P OINT 

## S OURCE 

## C ATEGORY AND 

## I TS 

## E FFLUENT 

## D ISCHARGES The MP& M Point Sour ce Cat egory regu lat es oi lyoperations proces s was tewater dis charg es t o sur face wate rs f rom exi sting or new ind ustrial facilities (in cludin g facilities o wned and o pera ted b y feder al, state, or local g ove rnme nts) eng aged in manufacturing, reb uilding, or maintenan ce of metal pa rts, products, or m achines for use in the sixtee n M etal P rod uct & Machiner y (MP&M) indust ria l s ector s. Pleas e not e th e underli ned l angua ge i n th e prev ious sent ence a s a f acil ity maybe subje ct to the M P & M effluent gu ideline s even if it is not in one of the MP &M industri al sectors. For example, EPA considers a faci lit y perf orming machining par t of t he “Bus & Truck” MP& M industri al sec tor i f it

manufact ures met al part s for t ruck trailers. P roce ss wastew ater m eans w astewa ter as d efined at 40 CFR parts 1 22 a nd 4 01, a nd inc ludes wastew ater fro m air pollu tion co ntrol d evice s (see 4 0 C F R 438 .2(g)) . Oily op eratio ns are liste d at 4 0 C F R 438 .2(g) a nd d efined in Ap pen dix B to Part 438 (see also Section 4 of the TDD ).

ES-1MP&M EEBA Executive Summary Acc ord ing to S tatistics of U .S. B usiness, 1 996 , app roxim ately 63 8,69 6 estab lishmen ts ope rate in the M P & M industry se ctors. Bas ed o n i n f o r matio n i n t h e MP&M su rv eydataba se , a ppr oximat el y 4 4 , 000 f a c i l i ti e s m e e t t h e def in itio n o f an MP&M faci li ty . Thes e 44,000 f acil it ies inc lude approxi mately 41, 000 indirect dis charg ers (i. e., fac il it ies dis charg ing eff luent t o a pub licly-owne d sew age tre atme nt wor ks or P O T W s) and 3,00 0 dire ct disch arger s (i.e., facilities disc hargin g effluent d irectly to a wa terway u nde r a N P D E S perm it). Table ES. 1 report s the es ti mated n umber of MP& M facil it ies and t otaldis charg e fl ow (bef ore f inal rul e impl ement ati on) by type of f acil ity. The largest number of s i t es, approximately 22, 000, per form “ rebui ldi ng/maintenanc e onl y” an d account f o r appro ximately 6 perc ent of the total estimated discha rge flow for the industry. “M anufacturing only” co ntains the next largest number of facili ties (15,400) and accounts, by far, for the l argest percentage of t h e total estimated discharge fl ow for the industry ( 82 percent). Table ES.1: Number of MP&M Facilities and Total Discharge Flow by Type of Facility Type of Facility Number of Facilities Total Estimated Discharge Flow (million gal/yr) Percent of Facilities Percent of Total Discharge Flow Manufactu ring & Rebuilding/Maintenance 6,600 9,400 15.0% 12.0% Manufact uring only 15,400 64,100 35.0% 82.0% Rebuilding/Maintenance only 22,000 4,700 50.0% 6.0% Total 44,000 78,200 100.0% 100.0% Source: U.S. EPA analysis. See Section 4 of the Techni cal Development Document for the final rule.
Of th e 43 ,8 58 w a t e rdi sc ha rg in g f a c i l i t i e s , 3, 593 ar e pr edi ct ed to cl os e i n t h e bas el in e, le av in g 4 0 , 265 ex is ting MP&M faci li ti es t hat EPA esti mates coul d be reg ulated. 1 Af te r a cco untin g f or s ubc at ego ryanddi sc harger cl as s e xclus io ns , EPA esti mates t hat t he fi nal ru le wi ll r egulat e 2,382 of th ese fa cilities , all of whi ch are di rect di scharger s. These r egulat ed facilities rep resen t 5.9 p ercen t of the 4 0,26 5 facilities tha t could be p otentia lly regulate d. Table ES.2 summarizes inf ormation on the t otal number of MP&M faci lities t hat wer e evaluated for the f inal rule, the number ope rating in the base line, and the num ber a nd p ercen t of facilities that w ill be reg ulated unde r the final ru le. As re por ted i n Table ES .2, no indirect dischargers are subject to the finalregulati on. The rule will r egulate 2,382 direct dischargers in the Oily W astes sub categ ory. Table ES.2: Nu mber of MP&M Facilit ies Evaluated for the Final Rule and Regulat ed under the Final Rule Discharge Stat us MP&M Facilities Opera ting in the Baseline Regulated under the Final Rule Percent of Facilities Operating in the Bas eline that are Regulated Direct discharger s 2,739 2,641 2,382 90% Indirect dis charger s 41,162 37,652 0 0 % All disc hargers 43,858 40,265 2,382 6% Source: U.S. EPA analysis.

1 These are fa cilities that are pr edicted to close due to w e ak f inancial pe rform ance under baseline conditions, i.e., in the abs e nce of the final rule. EPA doe s not attribut e the cost s or the reduced discha rges re sulting f rom thes e baseline closures to the fina l rule, and therefor e exclude s these f acilities from its analy ses of t he rule’s i mpacts . Baseli ne closures account f or diffe rences be tweent he univers e of facilities discussed in this report and the universe discussed in the Technical D e velopme nt Document. ES-2MP&M EEBA Executive Summary Seve ral asp ects of the M P & M industrie s as a wh ole an d pa rt of thos e indu stries eva luated for reg ulation u nde r the final ru le are important in underst anding the need for the regul ation, t h e likely distribution and occurrence of benefits, and the framework of the economic analysis for the regul ation. Facilities in t he rel evant MP&M indust ries are located in ever y st ate, with a parti cular concentr ation in t he heavy indust rial regions along the Gulf Coast, both East and W est Coasts and the Great Lakes Region. Moreover, M P&M facilities are frequently located in highly po pulated reg ions. Based on an ana lysis of in-scope sample facilities, around 3 5 % of these faci lities di scharge to reache s locat ed adjacent to count ies with populations of at l east 500 t housand people. 2 Disch arges of t hese poll utants to s urf ace waters and POTW s hav e a numbe r of adver se ef fect s, incl udin g degr adati on of aquatic habitats , reduced survivabili ty and diversi ty of nat ive aquatic li fe, and increased human health risk through the consumption of contaminated fish and water
. M any M P & M facilities eva luated for the fina l regulatio n pro duc e goo ds an d serv ices that se rve m ultiple m arket se ctors. It is not possible to as sociat e regul atory costs and benefi ts t o parti cular sectors , because EPA is not abl e to link regul ated processes to speci fic sectors for f acil iti es operating in multipl e sect ors. As a result, EPA’s c ost and economi c impact analys e s are disaggregated by ty pe of facili ty but not by s ector. 

## ES.2 D ESCRIPTI ON OF THE 

## F INAL 

## R ULE In order to address variations bet ween products, raw materials processed, and other factors that result in distinctly dif ferent eff luent ch aracteri sti cs, EPA proposed ei ghtgroupings c all ed “s ubcat egori es” f or th e Janu ary2001 proposa l an d June 2002 Notice of Dat a Avail abili ty (NOD A). EPA retai ned thi s subcat egory s truct ure for evaluating opti ons for t he fi nal ru le. Regulation of a category us ing subcategories al lows each subcategory to have a unif orm set of effl uent limi tations t hat take int o account t echnol ogica l ac hiev abil ity and economi c impac ts uni que t o that s ubcat egory (se e Sect ion 6 of the TDD). For the fi nal rule, EPA is est a blishing l imitati ons and standards only for direct dischargers in t he Oily Wastes subcategory. The other seve n subc ateg orie s (Gene ral Metals , MetalFini shi ng Job Sh ops, Non Chromium Anodizing, Prin ted Wiring Board, Railroad Line Maintenance , Shipbui lding Dry Docks, and St eel Formin g & Finis hing) were consi dered for r egulation at proposal and f or some of t he alt ernative regul atory options, but are not fu rther regul ated under the f inalrule. EPA is est ablishing BPT pH limit ations and daily maximum limitati ons for two pollutant s, oil and grease as hexane extractable materi al (O&G (as HEM )) and total sus pended solids (TSS ), for direct dischargers in t h e Oily Wastes subcategory based on the pro posed technology o ption (O ption 6). T he technolo gy requireme nts include the following treatme nt measures: (1) in-process f low control and pollution preventi on; and (2) oil-water separation by chemical emulsi on breaking and skimm ing (see Sectio n 9 o f the T D D ). Th is techno logy is av ailable techno logy rea dily ap plicab le to all fac ilities in the O ily Wastes s ubcat egory . Approx imat ely 42% of th e dir ect disc harg ing fac il it ies in t he Oil y Waste s su bcate gorycurr ently empl oy this techn olog y alread y. EP A is prom ulgating BC T eq uivalent to BP T for facilities in the Oily W astes subcatego ry and has de cided no t to establish BAT lim it ati ons . EPA i s pr omul gat in g NSPS f or n ew di rec t di sch arg ers inth e Oily Wast es s ubca teg oryatth e BPT and BCT levels. 

## ES.3 E CONOMIC 

## I MPACTS AND 

## S OCIAL 

## C OSTS OF THE 

## F INAL 

## R ULE EPA assessed the economic impacts and social costs of the final rule using detailed financial and technicaldata from the MP &M surveys (s ee Section 3 of the TDD ). Engineering analyses of t h ese facil ities identif ied the polluti on prevention and treat ment sy stems n eeded to comply with t he fi nal ru le and other regu lator y alternatives. The estimat ed capital and annual operating and maintenance costs of t hese syst ems, incremental to the costs of sy stems already i n place, represent t h e

2 EPA is not able to characterize the location characteristics of all potentially-regulated MP&M facilities at the national lev el precisely, because the MP&M survey design w as not intended to provide national results b ylocation characteristics. ES-3MP&M EEBA Executive Summary compliance c osts of the ru le. 3 EPA analyzed th e fi nancial performance of th e faci lities ev aluat ed for regulat ion under pr eregula tion co ndition s (the b aseline ) and as sub ject to r egulato ry requ ireme nts. Th e Ag ency us ed a v ariety of m easur es to assess the economic impacts resulting f rom the final rule, both f or the regulated MP& M faciliti es and for the firms and governments that own the f a cilities. The economic impact analysis al so considered impacts for small entities in particul ar, and impacts on employment, foreign trade and communities. The results of t he analyses f or sample facili ties were extrapolated using survey samp le weights for each facility, to provide na tional-level results. 

## ES.3.1 Economic Impacts Overall, EPA found the econom ic impact of the f inal rul e to be modest. The following are EPA’s findings f or different categories o f impacts.


### a. Facility impacts Th e facility imp act ana lysis assesse s how facilities will be affected financia lly by the final ru le. Ke y outp uts of the fa cili ty impact an alys is i nclude expected faci lit y clos ures i n the MP&M indust ries , ass ociated l osses in employment , and t he number of fac ilities experien cing f inanci al st ress s hort of closur e (“moderat e impacts ”). EPA performed economi c impact analys es for t hree cat egories of fa cilities , using dif ferent methodologi es to eva luat e each of t he groups. The three groups are:

� Private MP &M Facilit ies. This group includes privately- owned facilit ies that do not perform railroad line maintenanc e and ar e notowned bygover nment s. This ma jor categor y i nclu des pr ivate business es i n a wi de ran ge of secto rs or ind ustries, inclu ding fac ilities that man ufacture and r ebu ild railro ad eq uipm ent. O nly facilities that re pair rai lroa d tra ck and e quipment al ong the ra il road l ine are n ot i nclu ded.

� Railroad line maintenance facilities maintain and re pair railroad trac k, equipm ent and veh icles.

� Go vernm ent-ow ned facilities includ e M P & M facilities op erated by mu nicipa lities, State ag encie s and other p ublic sector entities such as State universities. M any of these facilities repair, rebuild, and m aintain buses, trucks, cars, utility vehicles (e.g., sno w plo ws and street clea ners), a nd light m achine ry. The sp ec if ic met hod ol ogy us ed to as se ss impac ts di ff er ed f o rea ch of th e t h r e e ty pes of MP&M fa ci liti es . For pr iv at e MP&M facilities, EPA establis hed thresholds for measures of f inancial perf ormance and co mpared the facilities’ perf ormance before and after compliance with each regul atory option wit h these thres holds. Impacts were measured at the operati ng company levelfor ra ilr oad line mainten ance fac ilities , si nce fi rms are un lik ely to keep track of financial performance at t he faci lit y lev el for these sites. For governments, EPA compa red compliance costs with f acilities’ basel ine costs of s ervice, and assessed t h e impa ct of the c omp liance c osts on the go vernm ent’s taxp ayers a nd o n its ability to fina nce c omp liance c osts by issu ing de bt. EPA identif ied fa cilities that are financial ly weak and might be expected t o close under baseline condit ions. Of the es timat ed 43,858 discharg ing f acil iti es, 8. 2 percent or 3,593 faci lities wer e asses sed as base lin e closur es. The 3,593 basel ine cl osures incl ude 3,511 indi rect di scharger s, or 8. 5 percent of indir ect dis chargers , and 98 dire ct dis chargers , or 3.6 per cent of direct dischargers. T hese facilities were excluded from the po st-compliance analysis of regulatory impac ts. Table ES .3 summarizes the faci lity -level economic impact of t h e final rule. EPA estimates that the fi nal rule wi ll cause no facilities t o close or to incur moderate financi al stres s short of cl osure. The final rul e excludes all indirect dischargi ng facilities and two percen t of the direct discharging facilities from requ irements.

3 The annual equivalent of capital and other one-time costs is calculated by annualizing costs at a sev en percent discount rate over an estima ted 15 year equipm ent life
. Annual compliance costs ar e annualizedcapital costs plus annua l operating and mai ntenance (O&M) costs.
ES-4MP&M EEBA Executive Summary Table ES.3: Re gulatory Impacts fo r All Facilities, Final Rule, Nat ional Esti mates Total a Direct Indirect Number of facilities operating in the baseline: total 40,265 2,641 37,652 private MP&M and railroad line maintenance 36,480 2,183 34,325 government-owned 3,785 458 3,327 Number of facili ties wi th subcateg ory ex clusions 37,883 259 37,652 Percent of facilit ies operat ing in the ba seline ex cluded or below cutoffs 94.1% 9.8% 100.0% Number of facili ties opera ting subjec t to regula tory requireme nts 2,382 2,382 0 Number of regulatory closures 0 0 0 Percent of facilit ies operat ing in the ba seline tha t are regulatory closures 0.0% 0.0% 0.0% Number of facili ties ex periencing modera te impa cts 0 0 0 Percent of facilities operating in the baseline that experience moderat e impac ts 0.0% 0.0% 0.0%

a The total number of facilities does not sum to the number of facilities by subcategory because some facilities hav e an i ndi rect and dir ect d isc har gin g op erat ion with in t he s ame fac ili ty. Source: U.S. EPA analysis.
Table ES .4 summarizes impacts for government-owned faci liti es in parti cular. Under the fi nal rule, 88 percent of the government -owned fa cilities are excluded from requirements by subcat egory excl usions
. The complian ce costs of th e fi nal rule do no t result in signif icant budge tary impacts for any of the go vernmen ts that operate M P & M facilities. Table ES.4: Re gulatory Impacts fo r Government-Ow ned Facilities, Final Rule, Nat ional Esti mates Number of governm ent-owned facilit ies operat ing in the ba seline 3,785 Number of facili ties wi th subcateg ory ex clusions 3,327 Percent of facilities operating in the baseline excluded 8 8 % Number of facili ties opera ting subjec t to regula tory requireme nts 458 Number of facili ties ex periencing significant budget ary im pacts a 0 Percent of facilities operating in the baseline that experience significant budget ary im pacts 0%

a A gove rnment is judged to ex perience major budg etary impact s if (1) any of its MP&M facilities incur compliance costs exceeding 1% of baseline cost of se rvice and (2) the government fails both the taxpayer im pact and debt impact tests. Source: U.S. EPA analysis. 

### b. Firm-level impacts EPA examined the impacts of the f inal rul e on firms that own M P&M facilities, as well as on t h e financialcondition of the faci lities t hemselve s. A f irm that owns multiple MP& M facili ties could experi ence advers e fi nancial impacts at t he fi rm level if its facilities are am ong th ose tha t incur sign ificant imp acts at the facility level. T he firm-le vel ana lysis is also use d to assess im pac ts on sm all firms, as re quire d by the Reg ulatory F lexibility A ct. EPA co mpar ed c ompl iance cos ts wi thre venue at t he f i r

m l eve l a s amea su re of th e r e l a t i v e burde n of comp li anc e co st s. EPA appli ed th is anal ysi s only t o MP& M facil it ies owned bypriv ate entiti es. EPA estimated f irm- leve l compl ianc e cost s by summi ng cos ts for allfac il it ies owned bythe same f irm t hat respon ded to t he survey plus est imat ed compli ance c osts for ES-5MP&M EEBA Executive Summary additi onal f acil iti es for which r espondents submitted voluntary inf ormation. The Agency was n ot able to esti mate th e nati onal numbers of firms t hat own MP &M facilities precis ely, because the sample weights based on the survey design represent numbe rs of facilities rather than firms. Most M P & M facilities (26,472 o f 36,480 , or 73 p ercent) are single-facility firms, howeve r. These f irms can be analyzed us ing the survey w eights. In additi on, f rom survey res ponses , EPA identi fi ed 389 sample f acil iti es that are owne d by 276 multi -fa cility f irms. It i s not kn own how many mul ti- faci lit y firms exi st at the natio nal level, so EP A inclu ded these 2 76 firm s in the firm-le vel ana lysis withou t extrap olation to the na tional lev el. Table ES .5 shows the resul ts of t h e firm-l evel analysi s. The results r epresent a total of 26,748 M P&M firms (26,472 + 276), owning 26,861 faciliti es (26,472 owned by single- facility firms + 389 o w ned by multi-f acilit y fir ms). Table ES.5: Fi rm Level B efore-Tax Annual Co mpliance C osts as a Percent o f Annual Re venues Num ber of Firms in the

Analysis a Number and Percent with Before-Tax Annual Compliance Costs /Annual Revenues Equal to: 0% >0% and <1% Over 1% Number % Number % Number % 26,748 25,722 96.2% 1,027 3.8% 0 0 %

a Firms whose only MP&M facilities close in the ba seline ar e excluded. Sou rce: U.S . EPA ana lysis.
None of th e f i rms i n the a nal ys is in cur af ter -t ax c ost s of gre ate r than1 per cent of t hei r annua l r even ues . Of th e 1, 027 f i rm s that incur any cost s at al l, n one own faci lities t hat cl ose or experi ence moderate impacts as a results of the f inal rule. This analysis is likely to overst ate costs at the fi rm level because it does not consider the actions a multi-f acilit y fir m mig ht take t o reduce it s complian ce costs under th e fi nal ru le, s uch as t ransf errin g functions among f acil iti es to cons olidat e wet pro cesse s and to take adva ntage o f scale ec ono mies in w astewa ter treatm ent. 

### c. Employment effects Potential changes in employment from the rule include: (1) job losses that occur when facilities close and (2) job gains resulting from facilities’ compliance activit ies. EPA estimates t h at the f inal rul e will caus e no facili ties t o close and ther efore the fi nal rule wi ll cause no job losses. EPA estimates t hat the regul ation will increase employment, wit h the manufacture and inst allation of compliance equipment c ausin g a short -ter m gain i n direct employment of 20 FTEs. In addition, EPA estimates that operation and maintenance of compliance equipment will cause a continuing dir ect requirement for 2 FTEs per year. The net effect on direct employment of the regul ation is an es timated increase in 47 FT E-years, a measure that reflect s both the number and duration of jobs gained. Over the 15 year analysis period, the employment gain averages 3 FTEs per year. 

### d. Community impacts EPA a l s o co ns id er ed t h e pot en ti al impac ts of ch an ge s in e mpl oy ment du e to th e r e g u l a t i o n o n t h e com mun itie s w h e r e MP&M facilities are l ocated. Given that no closures are predict ed due to the final rule, EPA does not expect the rule to have significan t impa cts at the c omm unity level. 

### e. Foreign trade impacts Th e fore ign trad e imp acts an alysis alloc ates the v alue o f chang es in ou tput for e ach fac ility that is proj ected to clos e to exp orts, imp orts, or dom estic sales , base d on the do minan t sourc e of co mpe tition in eac h mar ket as re por ted in the surveys. EPA does not expect any fore igntra de impac ts as a r esult of the fi nal rul e becau se no f acil ity cl osure s ar e expec ted. 

### f. Impacts on new facilities The new faci lit y anal ysi s asse ssed whet her revi sed or new di scharge limi ts f or newly constr ucted sour ces would cr eate a barri er t o entry by new bus ines ses and newfac il it ies
. To ass ess the potentialfor barri er t o entry, EPA compared, by subcategory and discharger stat us, the estimated annual incrementalcosts of meeting r evised new source limit s with t h e estimated annual revenue of new facilities. EPA based the estimates of annual revenue and incremental cost s of meeting revised new so urce lim its on info rmatio n from the existing facility datab ase. E P A used the findin gs from this analysis, in
ES-6MP&M EEBA Executive Summary
terms of the est imat ed perce ntag es of new f acil it ies that wou ld i ncur cost s exc eedin g spec if ied r evenu e thresh olds, to dec ide whether to issue revised new source limits for the various industry subcatego ries and discha rger classes. From this analysis, EP A co nclud ed tha t the pro mulga tion of re vised new so urce lim its for the O ily W astes d irect disc harge r subc atego ry wou ld not cre ate a b arrier to entry and this inform ation, in p art, und erlies E P A ’s decisio n to pr omu lgate ne w sou rce limits fo r this subcategory as part of t h e final regulation. 

### g. Impacts on small entities Ta ble E S.6 sh ows the total num ber o f facilities op erating in the ba seline an d the n umb er ow ned by sma ll entities. O verall, approximately 73 percent of all MP &M faci lities ar e owned by smal l ent iti es. However, subcate gory excl usions in t he fi nal rule will exclude app roximately 95 percent o f the faciliti es owned by small entities. Table ES.6: Nu mber and Percent o f MP&M Facilities Owned by Small Entities Type of Facility Number of Facilities of all Sizes Opera ting in the Baseline Number of Facilities Owned by Sma ll Entities Percent of Facilities Owned by Sma ll Entities Private MP&M a 36,480 27,418 75% Government-owned 3,785 1,962 52% Total a 40,265 29,380 73%

a Excludes baseline closures Source: U.S. EPA analysis.
EPA assessed impacts on small entiti es by comparing compliance costs to revenues for t he small enti ties at the fi rm level and by anal yzingthe f acil ity impact an alys is r esult s for f acil iti es owned by s mall f irms. These analy ses i ndicat e that no faci lities wil l i ncur cost s exc eedin g 1% of re venue s, and onl y 1, 019 fac il it ies owned bysmal l f irms wil l i ncur any cost s at all
. None of these faci lities incur moderat e impacts or close as a res ult of th e fi nal ru le. EPA estimates t hat 1,962 facilities are owned by small governments (t hose with populations l ess than 50,000). The subcateg ory exclusions in t he fi nal ru le exclude 1,682 of th ese smal l government-owne d MP &M faci lities. Thus, t he fi nal rule c overs 280 small government -owned fa cilities
. Of t hese f acil iti es, only 140 incur costs , and t he average annual cost per faci lit y is less than $30,000. All of the 140 fa cilities have cost s les s than 3 percent of baseline cost of servi ce. EPA esti mated no significant impacts for any o f these faciliti es or the gove rnments that own them, based on the analysis of change in site co st of serv ice, imp act on taxpa yers, and impa ct on g ove rnme nt deb t levels. T he tota l com plianc e cos t for all the sm all gove rnme nt-own ed fac ilities incurring costs un der the final rule is $ 3.5 m illion. 

## ES.3.2 Social Costs The s oci al cos ts of th e f i n a l ru le re pre se ntth e va lu e of soc ie ty ’s re sourc es us ed t o compl y w i t h an d adm in is te r t he r u l e . EPA estima ted thre e cate gorie s of soc ial cost fo r the final re gulation :

� the co st of soc iety’s eco nom ic reso urces used to co mply w ith the final reg ulation,

� the cost to gov ernments of adminis ter ing the fi nal regu lat ion, and

� the social cost s of unemployment resulting from the regul ation. Resour ce cos ts of compl ianc e are the valu e of s ociet y’ s produ ctive re sourc es i nclu ding labor , equ ipment , an d material s expended to achieve the reductions in eff luent discharges required by the final rule. The social costs of thes e resources are generally hi gher than the cost burden to facili ties because faci liti es are able to deduct the costs from their t a xable income a nd may offset s ome of the costs through i ncreased prices to customers. The costs t o society, however, ar e the ful l value of t h e resources used, wh ether they are paid f or by th e regul ated f acil iti es, by all taxpay ers i n the f orm of los t tax revenues , or pass ed on to custom ers through increa sed prices.

ES-7MP&M EEBA Executive Summary The main cost to government from admini ster ing t he regul ation is t he cost to POT W s for writ ing permi ts, and for compli ance monitoring an d enforce ment activities. POT W s could incur co sts in writing new permits for previo usly unpermitted facilities, and writing re vised per mits for some f acil iti es earl ier t han would ot herwis e be requir ed. Because t he fi nal re gulat ion exclude s all indire ct disch arger s from cove rage, E P A expe cts that the fina l rule will no t increa se PO TW adm inistrative c osts. The l oss of job s f rom fa ci li ty cl osure s w oul d re pre se nta s oci al cos t o f t he r egu la ti on. Fr om i t s fa ci li ty im pac t analys is , EP A estimates t hat no facil ities will close as a result of the regulation. Accordingly, EPA estimates a zero cost of unemployment for the final rule. EPA d id not reco gnize po ssible savings in unemp loyment-related co sts from jobs cre ated by the rule as a negative cost (benefit) of the regulation. Fro m this an alysis EP A estim ated a total ann ual soc ial cost o f $13 .8 millio n annu ally (20 01$ ) for the fina l rule (see Ta ble ES .7). All o f this cost re sults from the estim ated r esou rce co st of co mplia nce. Table ES.7: T otal Socia l Cost: Fin al Rule (million s, 2001$) Social Cost Categories Final Ru le Resource cost of compliance expenditures $13.8 Costs to POT Ws of a dministe ring the rule $0.0 Social cos ts of unem ploym ent $0.0 Total Social Cost $13.8 Source: U.S. EPA analysis. 

## ES.4 N ATIONA L 

## B ENEFITS OF THE 

## F INAL 

## R ULE The fi nal regu lation w i l l re duce MP&M indu str y pol lut ant disc harg es t o the nat ion’ s surfa ce wat ers wit h a number of consequent benefits t o society, in cluding:

� impr ove d qu ality of freshw ater, estu arine, a nd m arine e cosyste ms;

� increased survivabil ity and divers ity of aquatic and terrest rial wi ldlif e; and

� reduced risks to human hea lth through consum ption of fish or water taken fro m affected wa terways. Table ES.8 shows EPA esti mates f or reducti on in pollutant discharges to U.S. waters under th e fi nal ru le. Loadi ngs are shown both in pounds of pollutant and in toxic-weighted pound equivalents. The latter measure refl ects the rel ative toxi city of the various toxic p ollutants. The regu lation would resu lt in a 80 perce nt reduction in total toxic-weighted pollutant lbs. equiv alent per year . The es ti mated toxic weig hted poll utant re ducti ons r ange f rom 87 perc ent for priority met al pol lut ants to 1 per ce nt f o rar se ni c. Reduc ti onsin pounds of pol lutant s ( not to xi c- we ig ht ed) rang e f r o m 93 perce nt f o roi l an d g r e a s e (O&G) to 5 percent for ar senic. As shown in Table ES.8, t he fi nal ru le achi eves modest reducti ons for arseni c, organi cs, bi ological oxygen d emand (BO D), and chemical o xygen dem and (C OD ), and significant reductions for tox ic metals, other inorgan ics, bulk pollutant s, and oi l and gre ase.

ES-8MP&M EEBA Executive Summary Table ES.8: Su mmary o f Discharges by Pollut ant Typ e for Regu lated MP&M Facilities a Pollutant Category Current Releases Releas es und er the Final R ule Percent Reduction Due to the Final Ru le Pounds Pounds Eq. Pounds Pounds Eq. Pounds Pounds Eq. Priority Pol lutants Metals 794 2,756 153 351 80.7% 87.3% Organics 336 58 268 45 20.2% 22.4% Arse nic 2 2 7 5 2 1 7 4 4.5% 1.3% Cyanide (CN) 0 0
- - Nonconventi onal Pollutants Metals 25,863 417 16,428 158 36.5% 62.1% Organics 2,159 45 1,038 39 51.9% 13.3% Other in organics 2,334 0
. 2 1,301 0
. 1 44.3% 50.0% Bulk pollutant s 335,679 167,295 50.2% Conventional P ollutants BOD 263,419 165,567 37.1% C O D 523,440 488,697 6.6% O&G 428,137 28,955 93.2% TSS 160,695 73,769 54.1% Total 3,351 667 80.1% 0 0

a Includes only direct discharging facilities in the Oily Wa stes subcategory that continue to operate in the baseline and that are subject to the final rule. Source: U.S. EPA analysis.
EPA assessed the benefi ts fr om the expected pollutant reductions in three broad classes: human healt h, ecological, and prod uctivity benefits. 4 EPA was able to assess benefits wit hin these t hree classes wi th varyi ng degrees of completeness and rigor. W here p ossib le, EP A qu antified th e exp ected effects an d estim ated m one tary value s. Som e ben efit catego ries co uld not b e mo netized beca use o f data lim itations an d a limite d und erstand ing of ho w soc iety value s certain water q uality cha nges. EPA used sample facili ty data to estimate national benefits f rom the regulation. The Agency extrapolated findings from the sampl e fa cil ity ana ly ses to t he national lev el u sin g tw o extrapol ati on methods: (1) t radi ti onal extr apolation and (2) post-stratifi cation extrapolati on. EPA traditi onally uses a standard linear wei ghting t e chnique (i.e., traditi onal extrapolatio n) to estim ate natio nal co mplia nce c osts, cha nges in p ollutant re mov als, and nation al-level b enefits o f enviro nme ntal regu lations. However, using sample weights t h at are based only on facil ity- specific (e. g., engineering) characteristics wit hout including non-f acil ity fact ors can l ead to a conditional bias i n the es timation of n ationa l-l evel benef its
. In par ticu lar, thi s approach omits consideration of important non-facil ity f a ctors that influence the occurrence and size of benefits. Non-facilit y factors that are likely to aff ect t he occurren ce and si ze of benef its from reduce d sample f acil ity discharges and t hat ar e not ref lect ed in t he standard str ati fi cati on and s ample- weig hting appr oach i nclu de th e rece iving wat er bodytype and s ize and the si ze of populati on resi ding i n the vi cini ty of a sample f acil ity . To address omis sion of these important non-f acil ity fact ors (i .e., wa ter body type an d size, aff ected population, an d co-occurre nce MP& M discharges) in desi gning t he MP& M facili ties sample, EPA adjust ed sampl ing weig hts thr ough pos t- str ati fi cati on using two var iabl es: (1) r ecei vin g wat er bodytype and s ize and (2) the size of the pop ulation r esiding in the vicin ity of the sam ple fac ility. The A genc y used a com mon ly used p ost4 EPA eva luated tw o productivity meas ures: (1) the reduction in pollutant interf erence a tPOTWs, and (2) pass -through of pollutants into the sludge, which limits options for POT W disposal of sew age sludg e. Beca use the f inal rule only regulate s direct di scharge s and thus does not af fect POT W operations, productivi ty bene fits w ere eva luated for alternat ive options onl y. ES-9MP&M EEBA Executive Summary
str ati fi cati on method cal led “ raki ng” t o adjus t ori gin al s ample w eights to re fl ect thes e benef it s charact eri sti cs. AppendixG of this report prov ides detail on extrap olation metho ds used in this analysis. To supplem ent the national-level analysis performe d for the final M P & M regulation, EP A also co nducted a detailed case study o f the exp ected state-leve l costs an d be nefits of the M P & M rule in O hio. Fo r sever al reaso ns, EP A jud ges that th e O hio case stu dy is mo re rob ust than the nation al ben efit analyse s that EP A und ertake s in supp ort of e ffluent guid eline d evelo pme nt. These reasons include: (1) use of more detailed data on MP& M faciliti es than is possible at the national level; (2) use of more detai led and accurat e wat er qua li tydatathan are usua ll y ava il able; (3) mor e accurat e accounting f or th e pres ence and ef fect o f multiple dis charges to the same reach; (4) in clusi on of data on non-MP&M discharges in the base lin e and post compli ance; (5) use of a fi rst- order decay model to est imate in-st ream concent rati ons in downs tream wat er bodies; and (6) i nclus ion of an addit ional recr eati onal benef it

cat egory (swimming) in t he ana ly sis . The Ohi o case study an aly sis is pres ente d in Ch apter s 20, 21, a nd 2 2 of this re por t. 

## ES.4.1 Reduced Human Healt h Risk EPA esti mates that t he f inal rul e wil l pre vent dis charg e of 18 pounds per year of carci nogens and 119 poun ds per year of l ead. Also, the final rule will prevent discharge of an add itional 6,900 pound s of 76 po llutants of concern that are kno wn to cause adverse h uman he alth effects. These red uced p ollutant discharges from MP &M facilities are expected to result in redu ced risk of illness from consumption of contaminated fi sh, shell fish, and water. EPA analyzed the fol lowing measures of healt h-relat ed benefits: r e duced cancer risk from fish and water consumption; reduced risk of non-cancer to xic effects from fish and water co nsumption ; lead-related health effects to children an d adults; and re duced occ urre nce of in- wate rwaypoll utant con cent rat ions in e xces s of lev els of con cern. The lev els of con cern incl ude human heal th- based ambient water qua lit y cri teri a (AWQ C) or documented t oxic ef fect level s for t hose chemic als not covered by wa ter qua lity criteria. Alth ough som e hea lth effects are relatively w ell und erstoo d and can b e qua ntified an d mo netized in a ben efits analysis (e .g., canc er), oth ers are less well un dersto od, a nd m ay not b e asses sed w ith the sam e rigor or at all (e .g ., sys temi c health e f f ects ). The Agency the ref ore mone ti zed onl y two of t hese heal th be nef it s: (1) ch anges in t he i ncide nce of cancer f rom fis h and water consumpti on, and (2) changes in adverse h ealth eff ects in chil dren and adul ts f rom reduced lead exp osure . The national-level analysis of human he alth benefits finds negligible mone tized bene fits from the final rule. However, b ecause of si gnif icant simpli fications in t he nati onal l evel ana lys is, thi s finding s hould be recogn ized as pot enti ally havingsubst ant ia l error and s hould th erefore be int erprete d with cauti on. In par ticu lar, the national- levelanaly sis : (1) i s based onl y on limit ed inf ormat ion onMP& M facil it ies at t he national lev el; (2) a ccount s i n onl y a v eryli mit ed wayfor the pres ence and ef fect of joint di scharges on th e same reach ; (3) omit s dat a on non -MP&M dis charg es i n th e base li ne and pos t compl ianc e; and (4) omits c onsid eratio n of the d own stream effects of p ollutant d ischarg es. In co ntrast to the nation al-level an alysis, the m ethod s and data u sed fo r the O hio ca se stud y add ress a nu mbe r of these analyti c weakness es. This more rigor ous anal ysi s finds that the f inal regul ation would achi eve $0.5 mil lion ( 2001$) in heal th- relat ed benef it s i n th e st ate of Ohi o alon e. EPA es ti mates that t his anal ysi s prov ides a more a ccurate, albe it lower -boun d, es ti mate of health-re lated b enefits than indica ted b y the simp ler natio nal-leve l analysis. M oreo ver, give n (1) th at Oh io rep resen ts only about 6 percent of the tot al MP&M fac il ity popul ati on and ( 2) th at asubs tantialshar e of t he t otalMP& M facil ity popul ati on is located in other states with similar water body and population characteristics (e.g. , the st ates of Il linois, Indiana, Michi gan, Pennsylvania), it is r easonable to expect that additi onal human health benefit s would be estimated for the r emainder of the country if EPA were able to apply thi s more ri gorous approach at the national level . According ly, EPA judges that the f inal rule's human health ben efits are higher than its social costs. 

### a. Benefits from reduced incidence of cancer cases EPA assessed changes in t h e incidence of cancer cases f rom consumption of M P&M pollutants in fi sh tis sue and drinking water. T he me thod olog y for asse ssing hum an hea lth ben efits from redu ced canc er incid ence is prese nted in Cha pter 1 3 of this report . The Age ncy v alue d chang es i n in ciden ce of cance r cas es us ing a wi ll ing ness -t o-pay (WTP ) of $6.5 mi ll ion ( 2001$) for avoiding pre matur e mort ali ty . Thi s es ti mate of the val ue of a st ati sti cal li fe s aved i s re commended in EPA's Guidel ines for Preparing Econo mic Analysis. This estimate does not include estimates of WTP to avoid morbidity prior to death. EPA esti mated a ggre gate cance r ri sk f rom cont aminated dr ink ing wate r f or popul ati ons s erved by drinki ng wat er i ntak es on water bodies to which MP& M faciliti es discharge. EPA based this analysi s on six carcinogenic pollutants f or which drinking

ES-10MP&M EEBA Executive Summary
wate r criter ia h ave not been publ ish ed. 5 This anal ysi s excl udes seven carcin ogens f or which drinking water crit eria h ave been publis hed. EPA assumed that publi c drinking water treat ment sy stems w illremove thes e pollutants f rom the publ ic wat er supply. To the extent th at treatment for t hese sev en pollutant s may caus e inci dental removals of th e chemical s wit hout criteri a , the analysis may overstate ca ncer-related be nefits. Calculated in- stre am concentrations provide t he basis for es timating changes i n cancer r isk f or populati ons serv ed by aff ected drink ing wate r intakes . EP A estim ates that b aseline M P & M discha rges fro m in-sco pe fac ilities are asso ciated with virtua lly zero ann ual cancer ca ses. The na tional-level analysis finds that the final regulation wou ld lead to a m arginal reduction in the se cance r cas es r esulti ng f rom cons umpti on of c ontaminate d drinkin g wat er; corre spondi ngl y, monet arybenef it s es ti mated f rom reduce d consumpti on of c ontaminate d drinkin g wat er ar e ess enti ally zer o. EP A also estimate d can cer risk from th e con sump tion of c ontam inated fish for rec reatio nal and subsiste nce a nglers a nd the ir famil ies. EPA based this an alys is on t hirt een carci nogenic pol lut ants f ound in MP&M eff luent discharges. Estimated contaminant concentrati ons in fi sh tis sue are a functi on of predicted in-st ream pollutant concentrati ons and pollutant bioconc entr ati on fa ctor s. EPA used dat a on numbers of li cens ed fi sher men by s tat e and county , pre senc e of f ish consumpti on advis orie s, number of f ish ingtri ps per pers on per y ear, and ave rage house hold s ize to es ti mate t he af fected popul ati on of recreational and subsis tence anglers and their famili es. The analysis uses diff erent fi sh consumption rates for r e creational an d subsistence anglers to e stimate the change in ca ncer risk amo ng these po pulations. EPA estimated that baseline MP& M d ischarges f rom in-scope facilities are as sociated with 0.03 annual cancer cases. The national-l evel analysi s shows that t h e final option would lead to a marginal reduction i n cancer cases among recreational and subsistence angler p opulations. T he mon etary benefits estimated from consum ption of less contam inated fish by these populati ons are es senti ally negli gible. The findings from the national ana lysis of changes in cancer risk for the final rule differ from the O hio case study results. Based on the Ohio cas e study , th e fi nal opti on is expected to el iminate 0.01 cancer c ases ann uall y in the St ate of Ohio alone. This r educt ion t rans lat es i nto $14, 500 (2001$) in annu al be nef it s due to reduc ed canc er ri sk f rom cons umpti on of contaminated fish tissue and drinking water (see Chapter 22 of this r e port for detail)
. The dif fer ence in th e findin gs of the nat ional and Ohi o anal yse s re sul ts primarily f rom more c omprehen siv e in formati on on M P & M and n on-M P& M facility disch arges used in the O hio ca se stud y analysis. T he natio nal-leve l analysis ac cou nts only for t he pollutant exposures from MP&M sample f acil iti es. I n contra st, the Ohio cas e study approach account s for a broader baseline of po llutant exposure, including m ore thoro ugh and d etailed cove rage of discha rges from M P & M facilities and also estimated exposures from non-MP& M sources. As a result, t h e Ohio case study analysi s more accurately ref lects baseline health risk cond itions. 

### b. Reductions in systemic health effects The final rule can potenti ally achi eve a wide range of non-cancer human health benefi ts (e.g. , systemic effects , reproductive toxi cit y, and deve lopmental t oxicity ) f rom redu ced cont aminati on of f ish ti ssu e and dr ink ing wate r sources . The common approach for assessing the ri sk of non-cancer healt h effects from the ingestion of a pollutant is to calcul ate a hazard quotien t by di viding an indi vidu al' s ora l exposure to t he pol lut ant, expre ssed as a pol lut ant dose i n mil li grams per ki logr am body weigh t per d ay (mg /kg-da y), by the p ollutant's or al refere nce d ose (R fD). A n RfD is defined as an e stimate (w ith unce rtainty spanning p erhaps an order o f magnitude) o f a daily oral expo sure that likely would not result in the occurre nce of adv erse health eff ects in humans, including sens itive individuals, during a lif etime. A hazard quotient les s than one means that t h e pollutant dose to which an individu al is exposed is less than the RfD, and, therefo re, presume d to be w ithout apprec iable risk of adverse human health eff ects. EPA guidance for assessing exposures t o mixtures of pollut ants recommends calculating a hazard in dex (HI) by s umming th e indi vidual hazard quoti ents f or those pollut ants in the mi xture that aff ect t he same t arget organ or sy stem (e .g., the ki dneys, the re spiratory sy stem). HI values are interpreted simi larly to haz ard quoti ents; values belo w one are ge nerally c onsid ered to sugg est that ex pos ures ar e not like ly to result in a ppr eciab le risk of a dve rse hea lth eff ects duri ng a l i f eti me, an d val ues a bove one are ge neral lycaus e for concer n, a l though an HI gr eate r th an one doe s not necessarily suggest a l ikelihood of adverse eff ects. Chapter 13 of this report provides a detailed discussi on of the methodology f or asses sing changes in sys temic h ealth eff ects a ssociated wit h thi s rul e.

5 EPA included n-nitrosodimethylamine (NDMA) in its assessment of the baseline incidence of cancer cases. Howeve r, the Agency did not consider NDMA poll utant reduct ions in its be nefits a nalysi s due to lim ited wastewa ter sam pling for t hat pollutant. ES-11MP&M EEBA Executive Summary To evalua te the p otentia l bene fits of redu cing the in-stream conc entratio ns of 7 6 po llutants that c ause n on-ca ncer h ealth effects , EPA estimated target organ-specif ic HIs for drinking wat er and fish i ngestion exposures in both t he baseline and pos t- compl ianc e s c e n a r i o s . S pec if ic al ly , E PA c a l c u l at e d t a r g e t - o r g a n s pec if ic HIs f o rpol lutant s p r e d i c t ed in e a c h MP&M discharge reach; as a res ult, a separate HI was calculated for each t a rget organ/exposure pathway (fi sh consumption and drinking water)/ reach combination. EPA then com bined estimates of t h e numbers of individuals in the exposed populations withthe HIs f or the popul ations to deter mine how manyindiv iduals might be expected t o reali ze reduced ri sk of non- cancer heal th e f f ects in t he post -compl ianc e sce nari o. The result s of EPA's analy sis sugges t th at hazar d indices for i ndivi duals in the exposed populati ons may decre ase af ter faci li ti es comply wi th today' s ru le. Incr eases in t he per cent age of expose d populati ons t hat would be expos ed to n o ris k of non-cancer adverse human health eff ects due to the MP& M d ischarges occur in both t h e fish and drinking water analys es. The shif t to l ower hazard i ndices s hould be consi dered in conj uncti on with the f indin g that the haz ard indi ces for incre mental exposures to pollutants discharged by MP &M facilities (f or which reference doses are avail able) are less t han one in the baseli ne analy sis for t he entire populat ion ass ociated with sampl e faci lities. Whether the incrementa l shi fts in hazard indi ces are signif icant in r educing absolute risks of non-cancer adverse human health eff e cts is uncer tain and will depend on the magnitude of contam inant exposu res for a given po pulation from risk so urces not acc ounted for in this analysis. 

### c . Benefits from reduced exposure to l ead EPA performed a se parat e analysi s of benef it s f rom redu ced expos ure t o lea d. Thi s ana ly sis dif fer s f rom th e analysi s of non-cance r adverse hu man hea lth effects from exposure to other M P & M pollutants beca use it is based on d ose-respo nse functions tied to specifi c health endpoints t o which monetary values can be applied. Chapter 14 of this report presents the methodol ogy f or as sess ing benef it s f rom redu ced expos ure t o lea d. Many le ad-r elated adver se he alt h ef fect s ar e rel ati vely common and are ch roni c innature. These ef fect s i nclu de, but ar e not limited to, hypertension, co ronary heart d isease, and imp aired cog nitive function. Lead is harm ful to individuals of all ages, but the eff ects of lead on chil dren are of particular concern. Children's rapid rate of development makes them more susceptible t o neurobehavioral effects f rom lead exposure. The neuro behavioral effect s on children from lead exposure includ e hype ractivity, be havio ral and attention difficulties, d elayed menta l deve lopm ent, and moto r and perc eptua l skill deficits. This analysis assessed benefit s of reduced lead exposure from consumption of contaminated fish t issue to t hree sensit ive populati ons: ( 1) preschool age chi ldren; (2) pregnant women; and (3) adult men and women. This analy sis uses bl ood-lead level s as a bi omarker of l ead exposure. EPA estimated bas elin e and post- compliance bl ood lead level s in t he exposed pop ulations and th en use d cha nges in th ese lev els to estim ate be nefits in the fo rm o f avoid ed he alth da mag es. EPA assessed neur obehavioraleff ects on c hil dren based on a dose r esponse rel ations hip for IQ decrements . Avoided neuro logica l and c ognitive dam ages a re exp ressed as cha nges in o verall IQ levels, inclu ding re duc ed inc idenc e of ex treme ly low I Q scores (<70, or two s tandard devi ati ons bel ow th e mean) and re duced i ncide nce of blood- lead leve ls above 20 mg/dL. The analys is us es the value of compensatory educati on that an indi vidualwould other wise n eed and the impact of an additional IQ point on individuals ' f uture earnings to value the avoided neurological and cognitive damages. The nation al-level an alyses sho ws that im plem entatio n of the fina l optio n wou ld no t result in any c hang es in IQ loss ac ross all exposed chil dren. The final opti on does not re duce occurren ces of ex tremel y low I Q scores (<70) or i ncidences of blood-l ead levels ab ove 20 m g/dL
. Pre natal ex pos ure to le ad is an impo rtant ro ute of ex pos ure. Fe tal exp osure to lead in utero due to mater nal blo od-le ad lev els may result in several adverse healt h effects , includi ng decreased gestational age, reduced birth weight, late f e tal death, neurobehavi oral def icit s in infant s, and increased infant mortality. To assess benef its to pregnant women, EPA estimated changes in the r isk of inf ant mort alit y due to c hanges in materna l blood-l ead level s duri ng pregnancy . The nati onal-l evel analysis sh ows tha t the final op tion do es no t result in cha nges in m aterna l bloo d lead levels d uring p regna ncy and as a resu lt doe s not re duc e neo natal m ortality. The national-level analysis finds no benefits to children from reduced exposu re to lead. H oweve r, as for the cancer risk analysis previously dis cussed, these f indings dif fer from the more comprehensive analysi s used in the Ohio case st udy. Using the more ri gorous case study approach, EPA estimates that t he f inal regu lat ion w i l l y iel d annua l l ead-r elated benef it s f o r chil dren in Ohi o of $422,113 (2001$). This benef it v alue i ncludes three components. First , reduced l ead exposure i s est imated to reduce n eonatalmortality by 0.024 cases annually wit h an annual value of $162,094 (2001$). Second, reduced l ead exp osure will avoid the loss o f an estim ated 2 6.96 IQ p oints am ong p resch ool c hildren in Oh io, whic h transla tes into

ES-12MP&M EEBA Executive Summary $253,93 4 (2001 $) per year in benefit s. Third, the annual ly avoided costs of compensatory education from incidence of IQ belo w 70 and b lood -lead le vels ab ove 20 g /dL a mon g child ren am ounts to app roxim ately $5 ,345 (20 01$ ). Lead expo sure ha s bee n show n to ha ve ad verse effects on the hea lth of ad ults as we ll as childr en. T he hea lth effects in ad ults that EPA quanti fi ed al l der ive from l ead' s ef fect s on bl ood pres sure . Quantif ied h ealt h ef fect s i nclu de in creas ed in ciden ce of hypertension (estimated for males only), init ial coronary heart disease (CHD ), str okes (init ial cerebrovascular accidents and atherot hrombotic bra in i nfarctions), and prematur e mortal ity . This an alys is does n ot inc lude oth er heal th ef fect s associ ated with elev ated b lood pressu re and other a dult he alth effects o f lead, inc luding nervo us system disor ders, a nem ia, and poss ible cance r ef fect s. EPA used cos t of il lnes s es ti mates (i. e., medica l cos ts and l ost work time) to es ti mate mon etar y val ue of reduced incidence of hypertension, initial CHD , and strokes. EPA then used the value of a s t atis tical l ife saved to value chan ges in risk of pre matur e mo rtality. Th e natio nal-leve l analysis find s that the fina l rule will ach ieve no lead-re lated h eal th benefits amon g adults. Again, the national analy sis resul ts di ffe r fr om the Ohio case study resul ts. Using t he case s tudy approach , EPA estimat es that the f inal regul ation will achieve total lead- relat ed benefi ts among Ohi o adults of $117,393 (2001$). This va lue i ncludes benef it s f rom redu ced hy pert ensi on among a dult males : a r educt ion of an es ti mated 9. 4 case s annually, wit h benef it s of approximately $10,670 (20 01$). In addition, reducing the in cidence of initial CHD, strokes, and premature mortality among adult males and f emales in Ohio would res ult in es timat ed benefi ts of $963, $2,115, and $103,645, res pectiv ely ( see Chapter 22 of this report f or detail). Based on the national- levelbenefi ts ana lys is, EPA found that total bene fit s fr om reduced exposure to lead, f or both chi ldren and adults, are negl igible under the f inal rul e. However, based on the Ohio case study findings, benefits f or children and adult s f rom redu ced l ead-r elated health e f f ects of t he f inal rul e are est imat ed to totalapproximately $0. 5 mil li on (2001$) annually in the state of Ohio alone ( see Sect ion H of today 's fin al rul e for det ail) . As i n the cancer ri sk anal ysi s, t he dif fe renc e in

th e n a t i o n a l an d Ohi o- bas ed f i n d i n g s s t e m s pr im ar ily f r o m mo re compr eh en si ve in fo rm at io n o n MP&M an d n on- MP&M facility disch arges used in Oh io. 

### d. Exceedan ces of human heal th-bas ed AWQC EPA also esti mated the eff ect of MP &M faci lit y dis charges on the occur rence of pollut ant concentrat ions i n aff ected waterw ays that ex ceed huma n health -base d AW QC s. In a co ncep tual sense , this analysis a nd its find ings are not ad ditive to the preceding analyses of change in cancer or lead-rel ated health ri sks but are another way of quantitat ively charact erizing t h e same possible benefit cat e gories. This analys is compares the esti mated baseline and post-compliance in-st ream pollutant concentr ations in af fect ed waterway s to ambie nt wat er cri teri a for prot ecti on of human he alth . The comparison included AW QC for protection of human health through consumption of organisms and consumption of water and organisms. Pollutant concentrations in excess of these values indicate potenti al risks to human health. EP A estim ates that in-stre am c onc entratio ns of 4 polluta nts (i.e., arse nic, iron , mang anese , and n -nitroso dime thylamin e) will excee d human h ealt h cri ter ia f or cons umpti on of w ater and org anis ms in 78 rece iving re aches nat ionwi de as t he re sul t of basel ine MP& M pollut ant disc harg es. EPA estimates that 23% of human he alt h AWQC excee dances are c ause d by n-ni trosodi methyl amine (NDMA ). EPA did not cons ider NDMA pollut ant re ductionsin i ts benef its analy ses due t o limi ted wast ewat er s ampli ng dat a for that pol lut ant. EPA estimates that t he f inal rul e wil l not eli minate th e occur rence of conc ent ration s i n ex ces s of human he alt h cr it eri a f or co nsumpti on of wat er and or gan is ms an d fo r con sump ti on of org ani sms on any of the reac hes on which baseline discharg es are estimated to cause con centrations in excess o f AW QC values.

ES-13MP&M EEBA Executive Summary 

## ES.4.2 Ecological, Recreational, and Nonuser Benefits EPA expects the MP&M rule to improve aquat ic speci es habitats by reducin g concentr ations of toxi c contami nants such as aluminum, cadmium, copper, lead, mercury, si lver, and zinc in water. These improvements should enhance the quality and value of water- based recreation, such as f ishing, swimming, wil dlife vi ewing, camping, waterf owl hunting, and boating. The bene fi ts fr om improv ed wa ter -ba sed rec rea ti on wou ld be see n as in cre ase s i n the i ncr eas ed va lu e par ti cip ant s de ri ve f rom a day of r ecreati on and the increased number of days that consumers of wate r-base d recreat ion choose to visi t th e cleaner waterway s. This analy sis measures the economi c benefi t to s ociety from wat er quality improvements bas ed on the i ncreased mon etary va lue of re creatio nal op por tunities resu lting from those im pro vem ents 

### a. Reduced aquatic life impacts EPA quanti fi ed th e ecol ogica l i mprovements of t he f inal regu lat ion by compari ng es ti mates of i n-water way c oncent rat ions of pollu tants disc harge d by M P & M facilites with A W QC values fo r pro tection of aq uatic sp ecies. P ollutant c onc entratio ns in exce ss of acu te and /or chr onic A W QC limits for p rotec tion of a qua tic life indica te po tential ad verse impa cts to aq uatic speci es. EPA estimates that bas eli ne i n-s tre am conce ntr ati ons of 9 pollutants (i. e., aluminum, cadmium, coppe r, l ead, manganese, mercury, nickel , si lver, and zinc) will exceed the acute an d chronic c rit erion f or aquati c li fe i n 353 reaches nation wide . Th e final rule e liminates conc entratio ns in exc ess of aq uatic life A W QC s on nin e of thes e reac hes. E P A ’ s analysis shows that none of t he receiving reaches exceeding chronic or acut e aquatic lif e AW QC at the baseline discharge lev el wil l e xper ien ce part ial wat er qu ality impr oveme nt s f rom r educ ed occ urr ence of AWQC exc eeda nces for some pollutants. 

### b. Recreational benefits EPA asses sed t he re creational benef it s f rom redu ced occurren ce of poll utant con cent rat ions excee ding aquat ic l i f e and/ or human heal th AWQ C values. Combining i ts f indin gs fr om both the aquatic lif e and human health AWQ C exceedance analy ses, EPA found that 394 st ream reaches exceed chroni c or acut e aquati c li fe AWQ C and/or human he alth AW QC values at baseline dis charge levels. The Agency estimates that t he final rule wil l elimi nate exceedances on nine of these discharge reach es, leavin g 384 rea ches wit h conce ntr ati ons of one or mor e pollutants excee ding AWQ C li mit s. None of t hese 384 reach es will exp erienc e par tial water q uality imp rove men ts from r edu ced occu rrenc e of so me p ollutant c onc entratio ns in excess of AW QC limits. EPA attached a monetary value to reduc ed exceedances bas ed on incre ased values f or thre e water-based recreation a ctiv iti es (fi shing , wil dlif e viewing, and boat ing) and on nonuser values
. EPA applied a benef its trans fer approachto estimate t he tot al W TP, includi ng both us e and nonuse v alues, for i mprovements in surf ace water quali ty. This approach bui lds upon a r eview and analy sis of th e surf ace water valuation literat ure. EP A first estim ated th e bas eline va lue of w ater-ba sed re creatio n for b enefiting re ache s, base d on per-re ach e stimates o f :

� annua l per son- days of water -bas ed recr eati on, an d

� per-day values of wat er-based recreation. Th e bas eline p er-da y values o f water-b ased recre ation a re ba sed o n studie s by W alsh et. al (1 992 ) and Be rgstrom and C ord ell (1991). T he studies provide values per recreation day for a wide range of water-based activiti es, including fishing, boating, wildlife vie wing, wa terfow l hunting, c amp ing, and picnic king. T he me an valu es pe r recre ationa l fishing, bo ating, an d wild life viewing day used in t his analy sis are $42.12, $48.30 and $ 26.28 (200 1$), respectively . Applying faci lity weights and summing over all benefi tin g reaches provides a totalbaseline valu e for a g iven r ecreati onal act ivi ty f or MP& M reaches expected to benefit from the elimination o f pollutant concen trations in excess of AW QC limits. EPA then a ppli ed th e perce ntag e chan ge i n th e recr eati onal valu e of w ater res ources impl ied by sur face wate r valuati on stu dies to es ti mate c hange s i n values f or al l MP&M reach es i n whi ch the re gul ati on el imi nate s AWQC exceedances by one or more MP&M poll utants. The Agency sel ecte d eig ht of the most comparabl e st udies and cal culated t he changes in r ecreati on values from wat er quality improvements ( as percent age of t he basel ine) implied by t hose st udies. Sources of estimates includ ed L yke (1 993 ), Jaku s et al. (19 97) , M ontgo mery a nd N eed lema n (19 97) , Pan euf et al. (1 998 ), De svou sges et a l
. (1987), Lant and Robert s (1990) , Far ber an d Grine r (2000) , an d Tudor et al. (2002). EPA's reas onin g for sel ecting eac h st udy is discus sed in d etail in Ch apter 15 o f this repo rt. EP A too k a simp le mea n of po int estima tes from all app licable studies to derive a ce ntral tendency value for p ercentage ch ange in the water reso urce values d ue to water qu ality improveme nts. These st

udi es yi el dedes timat es of in cr ea se d r e c r e a t i o n a l v a l u e f r o m wate r q u a l it y impr ove ments ex pec te d f r o m r edu ce d MP&M
ES-14MP&M EEBA Executive Summary disch arges of 12 , 9, and 18 p ercen t for fishing, b oating , and w ildlife view ing resp ectively. U sing all po ssible ap plicab le valuation st udies in developin g a benefits t ransf er approach t o valui ng changes in t he recreational value of water r esources from reduced MP&M discharges, make s uni t values more l ikel y to be national ly r epresent ativ e, and avoi ds the pot enti al bias inhere nt in using a single stud y to ma ke estim ates at the nation al level. Table ES. 9 pres ents the est imat ed nat ional recr eati onal benef it s of the fi nal rul e (2001$). The est imat ed in creas ed value of recreational act iviti es to users of wat er-based recreation is $537,19 7, $202,69 1, and $259 ,949 annually for f ishing, boating, andwi ld li fe vi ewing, re spe ct iv el y. The r ecr eatio nal activ itie s c ons id er ed i n th i s a nalys is ar e s t o cha st ic al ly in depe nde nt ; EPA calc ulated th e tot al u ser valu e of e nhanc ed wat er- based r ecreati on opport uni ti es bysummi ng over the thr ee rec reat ion categ ories. T he estim ated in creas e in the to tal user va lue is $9 99,8 38 a nnua lly. EPA also e stimated n on-mar ket nonus er ben efi ts. These non -market nonus er ben efi ts are n ot as soci ated wit h cur rent use of the aff ecte d ecosy ste m or habi tat ; i nst ead, t hey aris e fr om the val ue soc iet y pl aces on impr oved wat er qua li tyinde pendent of planned uses or based on expected future use. Past st udies have shown that nonuser values are a sizable component of the totaleconomic value of wat er resour ces. EPA estimated averag e changes in nonus er val ue to equalone-hal f of t he recreational use benefits based on study by A. Fisher and R. Raucher (1984). The estimated increas e in nonuse value is $499,91 9 (2001 $). A recent l iter ature review fin ds that nonuse benef its are, on average, 1.9 to 2.5 times al l use values , rat her th an 0.5 times recr eati onal benef it s al one as EPA has tradi ti onally as sumed f or it s nonu se ben efi t es ti mates (T. Brown , 1993). EPA's method for estim ating no nuse b enefits fro m wa ter qua lity impro vem ents resu lting from redu ced M P & M discha rges is the refore likely to understate the true va lue of nonuse b enefits. Table ES.9: Est imated Recreation al Benefit s from Reduced MP&M D ischarges (thousands, 20 01$) Recrea tional Activit y Traditional Extrapolati on Post-Strati fication Extrapolat ion Recrea tional fis hing $537 $350 Recrea tional boating $203 $132 Wildlif e view ing and nea r-wate r recrea tion $260 $169 Total recreat ional u se benefits (fi shing + bo ating + wildl ife viewing) $1,000 $651 Nonuser benefits (1⁄2 of total recreational use) $500 $326 Total R ecrea tional Benefits (2001$) $1,500 $977 Source: U.S. EPA analysis.
The r ecr eatio nal tr ip s c orr es pond in g t o t he t h r ee a c t i v i ti e s c ons id er ed i n th i s a nalys is ar e s t o cha st ic al ly in depe nde nt ; EPA calculated the total value of enhanced water- based recreation opportunities by summing t h e three recreati on categories and nonu ser valu e. Th e resulting increa se in the v alue o f water re sourc es to co nsum ers of w ater-ba sed re creatio n and nonu sers is $1,500 thousand (20 01$) annually under the tradi tional ext r apolation method and $97 7 thousand (2001 $) annually under the post- str ati fi cati on ext rapol ati on method. 

## ES.4.3 POTW Impacts The final rule only regulates dir ect dischargers. Therefore, the selected option does not aff ect POT W operation. For the alte rnative policy options that consider both dir ect and i ndirect dischargers, EPA evaluated t wo productiv ity measures associated with MP&M pollutants. The first measure i s the reduction in pollutant interference at publicly- owned treatment works (POTW s). The s econd measure i s pass- throughof pollutant s into the sl udge, whi ch li mits options for POTW disposal of sewa ge slud ge. T hese a nalyses a re pre sented in Cha pter 1 6 of this re por t.

ES-15MP&M EEBA Executive Summary 

## ES.4.4 Total Estimated Benefits of the Final MP&M Rule Usin g the trad itional ex trapo lation m ethod , EP A estim ates tota l bene fits for the five m one tized c atego ries of ap pro ximate ly $1,5 00,0 00 ( 200 1$) annua lly. This v alue un dersta tes the to tal ben efits of the ru le bec ause the bene fits analysis om its signi fica nt sour ces of bene fit s to s ociety . Examples of benefi t cat egories not ref lect ed in t his es timat e include non-canc er healt h benefi ts ot her th an benefits f rom reduced exposure to lea d; other water- dependent recr eati onal benef its , such as swimming and waterskii ng benefits to recreational users from reduced concentration of conventional pollut ants and nonconventi onal pollutant s such a s TKN ; and reduc ed cost of drinking water treat ment f or the pol lut ants w ithdrinking water criteria. In add ition, as no ted in the prior discus sion, altho ugh the nation al-level b enefits an alysis finds ne gligible b enefit s from reduced h ealth ris k, the more ri gorous analyti c approach used f or the Ohio c ase st udy foun d materi al health- relat ed benefi ts approximately $0.5 mill ion in the s tate of Ohio al one. 

## ES.5 N ATIONA L 

## B ENEFITS 

## -C OSTS 

## C OMPARI SON Th e com pariso n of be nefits and for the fina l rule is inevita bly inco mple te bec ause E P A canno t value a ll of the be nefits resulting from the fi nal rule i n dollar terms. A comparison of benefit s and costs is t hus limited by the lack of a comprehensiv e benefits valuation and also by uncertainties in the esti mates. Bearing these l imitati ons in mind, EPA presents a summary compari son of benef it s and c ostsfor the fi nal rul e inTable ES. 10. The es ti mated s ocial cost of t he f inal rul e is $13.8 mi ll ion annually (2001$). The total benefit s that can be valued in dollar terms in the categories t r aditionally analyzed for ef fluent guide lines ran ge from $97 7,00 0 to $ 1,50 0,00 0 ann ually (20 01$ ), base d on the altern ative ex trapo lation m ethod s. As previous ly not ed, EPA used more detai led in formati on and a more comprehensive analy tic method to es timat e expected benefits of the fi nal rule f or the stat e of Ohio. This more rigorous analysis was undertaken to address certain i ssues in t h e nati onal- leve l an aly sis and t o suppl ement the nat ional -l evel anal ysi s per forme d for the fi nal rul e. The f oll owingsection prese nts thi s ana ly sis . The Ohi o case study s howed t hat the more ri gorous anal yt ic approach leads to a di ff erent conclusi on from th at f ound in t he simpl er, national- levelanaly sis approach in par ticu lar, that the es timat ed stat e-le vel benef its exceed th e e s t i m a t ed s t at e - l e v e l cos t. As pr ev io us ly di sc us se d, gi ve n ( 1 ) th at Ohi o ac count s f o ron ly abo ut 6 pe rc en t o f to ta l MP&M faci li ti es, and (2) that ot her s tat es wi th s ubst anti al numbers of MP&M fac il it ies have s imi lar populati on and water body chara cteristics to Ohi o, EPA estimat es t hat use of the more ri gorous approach nat ional lywoul d yi eld ahig her e stimate of nati onal benef its . On thi s basi s, t he Agency es timat es that nat ional benefi ts f rom the f inal rule may be comparable t o its socia l costs.

ES-16MP&M EEBA Executive Summary Table ES.10: Comparison of National Annual Monetizable Benefits to Social Costs (thousands, 2001$) Benefit and Cost Ca tegories Traditional Ex trapolation Post-Strati fication Extrapolati on Benefit Categories Reduced Ca ncer Risk from Fish Consum ption $0 $0 Reduced Ca ncer Risk from Water C onsumption $0 $0 Reduced Risk from Exposure to Lead $ 0 $ 0 Enhanced W ater-Based Recr eation $1,000 $651 Nonuse Benefits $500 $326 Total Monetized Benefits $1,500 $977 Cost Categories Resource Costs of Compliance $13,825 $13,825 Costs of Admini stering t he Final Regulation $0 $0 Social Cost s of Unem ploym ent $ 0 $ 0 Total Monetized Costs $13,825 $13,825 Net Monetized Benefits (Benefits Minus Co sts) ($12,325) ($12,847) Sou rce: U.S . EPA ana lysis.

ES-17MP&M EEBA Executive Summary 

## ES.6 O HIO 

## C ASE 

## S TUDY Part V of thi s re port pr esen ts a det ail ed cas e st udy of the expect ed st ate- leve l cos ts and bene fi ts of t he MP&M rul e inOhio. The case study assesses t he costs and benefits of the final rule f or facili ties and water bodies l o cated in Ohio. Ohio is among the ten st ates wit h the largest numbers of MP &M facilities. The state has a diverse water resource base and a more extensive water qual ity ecologic al data base than many oth er st ates. EPA gathered data on MP&M faci lities an d on Ohio's baseline water quality conditions and water-based recreati on activit ies to support the case s tudy analys is. These data characteri ze current water qual ity conditi ons, wat er quality ch anges expected from th e regul ation, and the expected wel fare ch anges f rom water quality improveme nts at wat er bodies affected by MP& M d ischarges. The case study al so estimates t he social costs of the fin al rul e for f acil iti es in Ohio and compares estimated s ocial c osts and benefi ts f or the s tate . The case study analysis supplements the nati onal-level analysis performed for the finalMP &M regulati on in two important wa ys . F i r s t , t h e an al ys is us ed impr ove d da ta an d me th ods to determi ne MP&M pol lutant di sc ha rg es f r o m bo thMP&M facilities and other sources. In particular , EPA ad ministered 1,600 screener questionnair es to augment inf ormation on the Ohio's MP& M faciliti es. The Agency also used information fr om the sampled M P&M facilities t o estimate discharge charact eris tics of non- sampled MP&M faci lities, as descr ibed in Appendi x H of the EEBA report. The Agency assi gned disch arge c harac teristics to a ll non-M P& M industria l direct d ischarg es ba sed o n the info rmatio n pro vided in the E P A ’ s Permit Compli ance System (PCS) database. Second, th e analy sis used an ori ginaltrave l cost study to val ue four recreat ional uses o f water re sourc es affecte d by the regula tion: swim ming, fishin g, bo ating, an d nea r-water a ctivities. T he ad ded detail provides a more complete an d reli able analysi s of wat er quality ch anges f rom reduced MP& M discharges. The study pr ovides more c omp lete estimates of changes in hum an welfare resulting from red uced he alth risk, enhanced rec reational op portunities, and impro ved econ omic pro duc tivity. EPA esti mated h uman he alt h benef it s f rom redu ced MP&M dis charg ers in Ohi o usi ng simil ar met hodolog ies to t hose u sed f o r the natio nal-leve l analysis. T hese m ethod olog ies are p resen ted in C hap ter 13 and 1 4 of the EE BA repo rt. Th e case study an alysis of rec reatio nal be nefits co mbin es wate r qua lity mod eling with a rand om u tility mode l (RU M ) to as se ss ho w c h a n g e s in wa te r q u a l it y f r o m th e re gu lati on wi ll af fe ct con sumer s'va lu at io n o f wa te r r e s our ce s. The RUM analysis addresses a w ide range o f pollutant types and effects, including water q uality measures not often ad dressed in p ast recr eati onal benef it s st udies . In part icul ar, the model s upport s a mor e comple te analy sis of r ecreati onal benef it s f rom redu ctions in nutrients a nd to xic po llutants (i.e., p riority po llutants and nonc onve ntiona l polluta nts with tox ic effects). EPA subjected thi s st udy to a f ormal peer r eview byexperts in t he natural r esource val uati on fie ld. The peer r eview concl uded that EPA had done a competent job, e special ly given the avail able data. As request ed by the Agency, peer revi ewers provi ded sugge stions fo r further im pro vem ents in the analysis. S ince the pro pos ed ru le analysis, the Age ncy ma de ch ange s to the O hio mod el and co nducted additional sensitivity analyses suggested by the rev iewers. The peer review report and EP A's response to peer re viewers ' comment s, al ong wit h the r evised model , are in the docket for t he rul e. 

## ES.6.1 Benefits Th e use o f an orig inal RU M in this case study allo ws the A genc y to ad dress limitations inhere nt in ben efits transfer u sed in the analysi s of recreati onal benefits at the nationallevel. The use of benefi ts trans fer often re quires additional ass umptions because water quality changes evaluated in t he available recreati on demand studies are only roughly comparable with the water q uality me asure s evalua ted for a par ticular rule . Th e RU M mod el estima tes the effec ts of the sp ecific wa ter qua lity characteristics analyzed f or the final MP &M regulati on, such as presence of AWQ C exceedances and co ncentrations of the nonc onve ntiona l polluta nt To tal Kj eldah l Nitro gen (T KN ). EP A estim ates that this d irect link b etwee n the wa ter qua lity chara cteristics a nalyze d for th e rule a nd the chara cteristics va lued in the RU M analysis re duc es unc ertainty in b enefit estima tes and make s the ana lysis of recr eation al ben efits mo re rob ust. The fi nal MP& M regulati on af fect s a br oad ran ge of poll utants, some of whi ch ar e tox ic t o human and aquatic l i f e butare n o t direc tly obse rvab le (i.e., prio rity and n onc onve ntiona l polluta nts). T hese u nob serva ble to xic po llutants de grad e aqu atic habitats, decrease t he siz e and abundance of fis h and other aquati c species , in crease f ish def ormiti es, an d change wat ershed species compositi on. Changes in t oxic pollutant concentr ations may the refore aff ect rec reati onist s' valuation of water resources, eve n if consumers are unaware o f changes in amb ient pollutant conce ntrations. The study used data from the National Demand Survey for W a ter-Based Recreation (NDS ), conducted by U.S. EPA and the
ES-18MP&M EEBA Executive Summary Na tional F orest S ervice , to exa mine th e effects o f in-stream polluta nt con centra tions o n con sume rs' decisio ns to visit a part icul ar water body . The an aly sis est imat ed base li ne and pos t- compli ance w ater qual ity at recr eati on si tes actually vi sited b y the su rveyed cons umers and at all other s ites with in t he consumers ' ch oice set , vi sit ed or not. The RUM analy sis of consumer behavi or th en es ti mated t he ef fect of ambi ent wate r qual ity and other si te c harac ter istics on th e tot al number of tri ps t aken f o r di ff er en t w a t e r - b a s ed r e c r e a t i o n a c t i v i ti e s an d t h e a l l ocati on of th es e t r ip s amo ng par ti cu lar r e c r e a t i o n a l s i te s . Th e RUM analysis is a tra vel co st mod el, in which the co st to trave l to a pa rticular re creatio nal site rep resen ts the "p rice" of a visi t. EPA modeled two consume r decisions: ( 1) how many water-based recreational t rips to take duri ng the recreati onal season (the tri

p part icipati on model ); and (2) whi ch re creation s i t e to c hoose ( the site choi ce model ). Combinin g th e tr ip par ti cipation model's prediction of t rips under the baseli ne and post-compliance scenarios and the site choice model's per-trip welfare measur e provi des a me asur e of totalwelf are. EPA calcu lat ed eachindividu al' s se asona l wel far e gai n for each r ecreati on activity from post-c omp liance w ater q uality cha nges, a nd the n used Cen sus da ta to ag grega te the estim ated w elfare c hang e to the State l evel. The sum of estimated welf are changes over the four recreat ion activi ties y i elded estimates of total wel fare gain. EP A estimated o ther comp onents of be nefits in Ohio using similar metho dologies to those used for the n ational-level analysis. In addition to the RUM study of recreational benefit s, other analy tical improveme nts included the following: (1) use of more detaile d da ta on M P & M facilities, ob tained from th e 1,6 00 a dditio nal surv eys; (2) u se of d ata on non-M P& M discha rges to estimate current baseline conditions in the stat e , and (3) use of a first-order decay model to esti mate in-st ream concentration s in t he Ohio water bodies i n the bas elin e and post- compliance. Ap pen dix H of this rep ort de scribe s the wa ter qua lity mod el used in this analysis a nd the app roac h and data so urces used to esti mate tot al pollutant loading s fr om all industr ial and municipal sourc es to Ohio' s water bodies. The Agency has concluded that the added level of detail results in more rob ust benefit estimates. Summing the monetary values over allbenefit cat egories yiel ds total monetized benefit s of $930,408 (2 001$) annually for the final rule, as show n in T able E S.11 . Althou gh mo re co mpr ehen sive than the natio nal be nefits ana lysis, the case study b enefit estima tes still omit im por tant me chan isms b y which so ciety is likely to b enefit from the final rule . Exa mple s of be nefit categories not ref l ected in t h e monetized benefits i n clude non-cancer health benefi ts (other t han lead-relat ed benefits) and redu ced costs o f drinking water tre atme nt. Table ES.11: Annual Benefits from Reduced MP&M Discharges in Ohio (thousands, 2001$) Benefit Category Mean Annual Benefits 1. d cancer ris k: Fish consum ption Water consumption $15 $0 2. isk fr om expos ure to lead: Children Adults $422 $117 3. ishing $153 4. wimm ing $10 5. Enhanced boa ting $0 4. ildlife v iewing $88 5. Nonuse benefits (1⁄2 recreational use benefits) $125 Total Monetized Benefits $930 Reduce
Reduced r
Enhanced f Enhanced s Enhanced w
Source: U.S. EPA analysis.

ES-19MP&M EEBA Executive Summary 

## ES.6.2 Social Costs EPA also e stimated t he soc ialcost s of the fi nal rul e for MP& M facil it ies in Ohi o. EPA devel oped engineering es ti mates of com plianc e cos ts for eac h Oh io facility, and annua lized c osts using a seve n per cent d iscou nt rate o ver a 1 5-year perio d. Estimating t he frequency of baseli ne closures is necessary to asses s the costs of regulati on. Facilities assess ed as baseline closu res are not ex pec ted to incur co mplia nce c osts und er the fina l M P & M regula tion. T he scre ener d ata co llected for O hio faci lities di d not provi de fin ancialdata t o perform an af ter- tax cas h fl ow or net pre sent v alue t est, as done in the national analysis
. EPA therefore used data from the national analysis to estimate the percentage of facilities ass e ssed as baseline closu res. EP A assu med that the freq uenc y of ba seline clo sures a mon g Oh io facilities w ould be the same as that estim ated in the national analysis for facil ities with t he same discharge status , subcategory, and f low category. For example, two percent of dire ct Oily W astes fac ilities discha rging less than o ne millio n gallo ns pe r year clo se in the b aseline in the natio nal da ta set; thi s same perce ntage i s assumed for Ohio scr eener i ndirect dischargers i n that flow and size c ategory . EPA reduced the total estimated co sts for screener facilities, by analysis category, based o n the fraction of facilities assessed as baseline closur e s. EPA used the same methods as used in the nat ional social cost analysi s to esti mate other components of social costs f or the Ohio c ase study. Tab le ES.12 shows the total estimated so cial costs of the final rule for Ohio facilities.
Table ES.12: A nnual Soci al Costs fo r Ohio Facili ties: Final Option (thousands, 2001$, cost s annualized at 7%) Com ponent of So cial Co sts Final Ru le Resource value of complia nce costs $62 Governm ent admi nistrativ e costs $0 Social cos tof unem ploym ent $0 Total Social Cost $62 Sou rce: U.S . EPA ana lysis. 

## ES.6.3 Comparing Monetized Benefits and Costs The Ohio case st udy shows subst anti al net positive benefi ts as sociat ed withthe MP&M regul ation. EPA estimates the s ocial cost i n Ohio of t he fi nal re gulat ion to be $62 thousand annua lly ($2001). The sum tot al of ben efit s that can be val ued in doll a r terms is $930 thousand annually ($2001). Comparing the midpoint estimate of s ocial costs ($62 thousand) with the midpoint esti mate of monetizable benefi ts ( $930 thousand) r esult s in a net s ocial ben efit of $868 thousan d. This r epresent s a part ial cost-b enefit co mpa rison b ecau se no t all of the b enefits res ulting from the regu lation ca n be v alued in dolla r terms ( e.g., chan ges in syste mic he alth risk). For the re asons previ ousl y di scus sed, EPA judges that t he ana ly ti c approac h and detail ed dat a use d for the Ohio cas e st udy provid e a more robust and accurate b enefits estimate than the data and appro ach used for the national-level analysis.

ES-20MP&M EEBA Part I: Introduction and Background Information Chapter 1: Introd uction 

# C hapter 

# 1 : 

# I ntroduction

I NTRODU CTION Th e U .S. En viron men tal Pro tection Age ncy (E PA ) is promul gating ef fl uent li mit ati ons gu idel ines and standards for the Metal Product s and Machinery (MP& M) Point Source Category, under Sections 301, 304, 306, 307 and 501 o f the Clea n W ater A ct. EP A ha s deter mined that the final ru le is 

## C HAPTER 

## C ONTENTS 1
. 1 Purpose
................................... 1
- 1 1.2 Organiza tion
............................... 1
- 1 1.3 Readers’ Aids
.............................. 1
- 3

not likel y to result in aggregate costs to the economy that exceed $100 million annually
. The Agency therefore found that t h e final regu lation is no t a “significan t regulato ry action ” as d efined by E xecu tive O rder 128 66 ( 58 F R 5 173 5, O ctob er 4, 1 993 ). 

## 1.1 P URPOSE This Econo mic, Environmental, and Benefits Analysis r e port (EEB A) presents EPA’s econom ic and benefits analyses for t h e fi nal MP& M regulati on. Thes e analyse s su pporte d EPA in deve lopi ng the f inal regu lat ion and inmeeting the re quir ement s of the following statutes and exe cutive orde rs:

� Exe cutive O rder 128 66 “R egulato ry Plan ning an d R eview ”, which requ ires ana lysis of co sts, bene fits, and ec ono mic impacts of the final rule and re gulatory alternatives;

� Unfunded Mandates Reform Act (UMR A), whi ch requi res evaluati on of impact s on government s, among ot her requirem ents;

� Regul ator y Fl exibi li tyAct as amended by the SmallBusin ess Regul ator y Enf orcement Fairnes s Act of 1996 (RFA /SBR EFA ), which requires co nsideration of the rule’s impa ct on small firms and go vernmen ts;

� Executiv e Order 12898 “Federal Act ions t o Address Envir onmental Justi ce in Minori ty Populations and LowIncome Po pulations”; and

� Executiv e Order 13084 “ Protecti on of Chil dren fr om Environmental Health Ri sks and Saf ety Ri sks”. 

## 1.2 O RGANIZATION Th is repo rt is orga nized in five ma jor p arts, 22 chap ters, and 14 a ppe ndice s, as follow s: Part I “Int roduct ion and Background Infor mation” (Chapte rs 1 t hough 4) describes the ne ed for the regulation , provides a profil e of th e MP& M industry , and describes re gulat ory opti ons eval uated and s elect ed by the Agency f or the f inalrule. Part I I

“Cost s and Economic I mpacts” (Chapt ers 5 through 11) present s EPA’s anal ysi s of t he economic i mpacts and s ocial costs of the f inal rul e. Chapter 5 presents the anal ysis of costs and impacts at t h e facility level
. Chapters 6 through 9 pre sent analyse s of othe r types o f econ omic impa cts that d erive fro m the fa cility-level ana lysis, includin g imp acts on emp loyme nt, government s (f or EPA’s analy ses under UM RA), communit ies, forei gn tra de, firms, an d new faci lities. Chapter 10 provi des an analy sis of impact s on smal l firms and governments, as requi red by RFA/SBREFA. Finall y, Chapt er 11 present s the social costs o f the final rule. Part I II “Bene fit s” (Chapt ers 12 through 17) provides EPA’s analys is of the env ironment al i mpacts and benef its of th e fi nal rule. Ch apter 12 p rovid es an o vervie w of the bene fits expe cted fro m the ru le. Cha pters 1 3 thro ugh 1 6 pr esent E P A ’ s anal yse s of dif fer ent component s of the benef it s ana ly sis
. Thes e in clude human h ealt h benef it s (e xcept for lea d-re lat ed) (Cha pter 1 3), lead -related bene fits (Chap ter 14 ), recre ationa l bene fits (Chap ter 15 ), and bene fits to PO TW s (Cha pter 1 6). Chapte r 17 pre sent s an analy sis of t he env ironmenta l ju sti ce ef fect s of the fi nal rul e, as required byExecutive Order 12898.
1-1MP&M EEBA Part I: Introduction and Background Information Chapter 1: Introd uction Part I V “Comparison of Cos ts and Benefi ts” (Chapte rs 18 and 19) com pare s the soc ial costs a nd b enefits for the final rule (Cha pter 1 8) an d for o ther reg ulatory a lternative s evalua ted b y the Ag ency fo r the final ru le (Ch apter 19)
. Part V “ Ohio Case St udy” (Chapt ers 20 through 22) provi des a de tai led c ase s tudy of t he f inal rul e’s cost s and be nef it s f o r the Sta te of O hio. T his case study inc ludes a mo re de tailed a nd co mple te analysis o f bene fits, based on m ore c omp lete inf ormat ion onthe number and l ocati on of MP&M facil it ies and the cha ract eri sti cs of aff ecte d wate rs t han wa s ava il able for the national analy ses. The case st udy als o incl udes an ori ginaltrave l cost study to val ue recreational uses af fect ed by the fi na l rule. EPA believes that t he case study provides more robust result s because it avoids t h e uncertainti es that res ult f rom the need to extra pola te sam ple fac ility results to the n ationa l level. T he resu lts of the ca se stud y gener ally con firm the o verall results o f the natio nal ana lysis. Appendices to this report provide additional materialin support of the analyses described in t he chapters, including the following:

� AppendixA: s upport ing materialfor the prof il e of t he MP&M indu stries in Ch apter 3;

� Ap pen dix B : descr iption o f the cos t pass-thro ugh an alysis;

� App endix C: d escription of the mo derate imp act analysis;

� App endix D : description of the m ethodo logy used to estima te capital outlays as part of the facility impact analysis;

� App endix E : description of the calcu lation of capital cost com pone nts;

� App endix F: de scription of the metho dology use d to estimate P O T W administrative costs;

� Ap pen dix G : summ ary of the metho d use d to e xtrap olate sa mple facility results to th e natio nal leve l;

� App endix H : description of fate and transport mo del for drinking wa ter and O hio analyses;

� App endix I: discussion o f methodo logies and results of the enviro nmental assessm ent analysis;

� Append ix J: analy ses of spati al distribution of MP& M facility l o cation and benefiting populati on;

� Appendix K: description of the s urface water v aluat ion st udies an d specif ic values sel ected f or asses sing recreat ional benefits f rom the final regulation;

� Ap pen dix L: d escrip tion of p aram eters in the IEU BK lead m ode l;

� Append ix M: sensiti vity analysis of lead related benefit s; and

� Append ix N: analysi s of the nat ional demand for water-based recreation survey (NDS ). Th e do cket fo r the final ru le, loca ted at U .S. EP A H ead qua rters, pr ovid es ad ditiona l supp orting d ocu men tation, inc luding :

� cop ies of the liter ature c ited in the repo rt; � docu mentation o f the financial and econo mic po rtions of the M P & M Section 30 8 surveys; � memorand ums documenting supplementary analyses undert aken in support of regulation development, but that are not inclu ded inthe EEBA; and � datasets, spread sheets, and pro grams used to perform the analyses.

1-2MP&M EEBA Part I: Introduction and Background Information Chapter 1: Introd uction 

## 1.3 R EADERS 

## ’ A IDS Each chapter includes a chapter-specif ic table of content s. A li st of ref erences is provided at the end of each chapter. Glossaries and list s of acronyms are also provided at the end of t he chapters, and the f irst us age of items l isted in t hem are deno ted in the text with the following formats:

� Glo ssary indicates t hat a term is defined in the chapter glossary, and

� Acronym indicates that the acronym is included in the chap ter list of acronyms.

1-3MP&M EEBA Part I: Introduction and Background Information Chapter 1: Introd uction



## T HIS 

## P AGE 

## I NTENTIONALLY 

## L EFT 

## B LANK

1-4MP&M EEBA Part I: Introduction and Background Information Chapter 2: The MP&M Ind ustry and the Need f or Regulation 

# C hapter 

# 2 : 

# T he 

# MP&M I ndustry and the 

# N eed for 

# R egulation

I NTRODU CTION Th e M etal P rod ucts and M achine ry ( M P &M) effluent guidel ines e stabl ish l imit ations and stan dards only for di rect disc harg ers in t he Oil y Waste s su bcate gory(40 CFR 438, Subpart A). EPA establi shes industr ial subcateg ories bas ed on a number of considerations (see Chapter 4 and Section 6 of t he TDD). EPA evaluate d seve n oth er s ubcat egori es f o r the fi nal rul e: g enera l met als , met al f ini shi ng job s hops, non chromium anodizing, printed wiri ng board, railroad line maintenance, shipbuil ding dry docks, and steel f orming and fin ishing. EPA evaluated a number of opt ions f or thes e seven subca tegories
. Base d on th ese analy ses, EPA did not estab lish or re vise limitatio ns or sta nda rds for facilities in these seven sub categories. 

## C HAPTER 

## C ONTENTS 2
. 1 Overview of Facilities Ev aluated for Regulation under the MP&M Point Source Categor y .............. 2
- 1 2.2 MP&M Dischar ges and the Need For R egulation
. . 2-3 2.2.1 Baseline MP&M Discharges for Regulated Facilities
.......................... 2
- 4 2.2.2 Discharg es under the MP&M Regula tion
. 2-4 2.3 Addressing Marke t Imper fections
.............. 2
- 5 2
. 4 Overlap with Other Effluent Guidelines
.......... 2
- 6 2.5 Meeting L e gislat ive and L itigation-B ased Requirem ents ................. ............. 2
- 9 Glossar y ..................................... 2-11 A c r o n ym s .................................... 2-13

The facilities regulated under this rule prod uce, manu facture, rebuild, or m aintain metal parts, prod ucts, or machine s for use in sixteen differen t industria l sector s. Th ese ind ustrial sec tors inclu de: ha rdwa re, aircr aft, aero spac e, ord nanc e, electro nic equ ipme nt, stationa ry indus trial equ ipme nt, mo bile ind ustrial eq uipm ent, bu ses and trucks, m otor vehicle s, house hold equipment, inst ruments , off ice machi nes, r ailr oads, shi ps and boats, precious metals and jewel ry, and miscel laneous metal products. Most of the subcate gories above serve multipl e markets . EPA evaluat ed options that would have cove red faci lities in t hree addit ional indu strialsect ors: printed wirin g boards , met al f ini shi ng job s hops, and i ron an d st eel. The final regu lat i on does no t cover facilities in these sectors. This chapte r provides an overvi ew of th e MP& M ind ustry evaluated for t he fi nal ru le and pres ents t he pollutant discharges fr om MP&M facil iti

es subject to the f inal regul ation. The chapter also reviews the reasons why EPA is regulating the indu str y’ s ef fl uent dis charg es i nclu ding the need t o reduc e pollutant di scharges fr om the MP& M indust ry, the is sue of addressing market imperfecti ons, other eff luent guidel ines that may overlap in coverage of the MP& M industry sectors evaluat ed for t he fi nal ru le, and requir ements t hat stem from th e Clean Water Act (CW A) and liti gation. 

## 2.1 O VERVIEW OF 

## F ACILIT IES 

## E VALUATED FOR 

## R EGULATI ON UNDER THE 

## MP&M P OINT 

## S OURCE 

## C ATEGORY The MP& M Point Sour ce Cat egory regu lat es oi lyoperations proces s was tewater dis charg es t o sur face wate rs f rom exi sting or new ind ustrial facilities (in cludin g facilities o wned and o pera ted b y Fed eral, Sta te, or lo cal go vernm ents) en gage d in manufacturing, reb uilding, or maintenan ce of metal pa rts, products, or m achines for use in the sixtee n M etal P rod uct & M achine ry (M P& M ) indus trial secto rs listed ab ove . Pleas e note the und erlined langua ge in the prev ious se ntence as a facility may b e sub ject to th e M P & M effluent gu ideline s even if it is not in one of th e MP&M indus tr y s ectors . F or e xampl e, EPA consi ders a fa cil ity per forming mach ining part of the “Bus & Truc k” MP&M indu str y se ctor if

it

manuf actures metal part s f o r tru ck trai ler s. Process wast ewat er mean s was tewater as def ined at 40 CFR par ts 122 and 401, and i nclu des wa ste wate r f rom air polluti on control devices (see 40 CFR 43 8.2(g)). Oily operati ons are list ed at 40 CFR 438.2(g) and defined in Append ix B to Part 438 (see also Section 4 of the TDD ). As def ined for thi s docume nt, MP& M facil it ies : (1) produce metal part s, product s, or mach ines for use in one of the 19 industry s ectors evaluated for coverage in the MP &M point source category; ( 2) use operations in one of the ei ght regulat ory subcateg ories e valuat ed for cover age in t he MP& M point source category; and (3) dis charge proces s wast ewater, either
2-1MP&M EEBA Part I: Introduction and Background Information Chapter 2: The MP&M Ind ustry and the Need f or Regulation direc tly or indire ctly, to surfac e wate rs. M P & M facilities freq uently p rod uce p rod ucts for m ultiple sec tors an d sub categ ories. As r e f err ed t o inth is docum ent , MP&M faci li ti es r epre sen t on lya porti on of al l f aci li ti es in the i ndus try s ect ors , s i n ce s ome facilities may perform operations t h at are not covered by one of the subcategories ( i.e., part assembly or plast ic molding), an d some may not generate or discharge process wastewater. Accordi ng t o Statistics of U.S. Bu siness , 199 6, ap pro ximate ly 638 ,696 establish men ts ope rate in the M P & M industry se ctors. Bas ed o n i n f o r matio n i n t h e MP&M su rv eydataba se , a ppr oximat el y 4 4 , 000 f a c i l i ti e s m e e t t h e def in itio n o f an MP&M faci li ty . Thes e 44,000 f acil it ies inc lude approxi mately 41, 000 indirect dis charg ers (i. e., fac il it ies dis charg ing eff luent t o a publicl y-owned sewag e treat ment wo rks or POTW s) that wo uld b e sub ject to Pre tr eat ment St andar ds f o r Existi ng Sources (PSES)
. The remain ing 3, 000 direct di scharger s (i .e., theydischarge eff luent direct ly to a waterway unde r a Na ti onalPollut ant Dis charge El imi nat ionSys tem (NPDES) permi t) and woul d thu s be s ubject to Be st A vaila ble Te ch no log y Ec on om ically Ac hiev ab le (BAT ) and Be st P ract icab le C o n trol T ech no log y C urre ntly Av ailab le (BP T ) requireme nts. Table 2. 1 report s the es ti mated n umber of MP& M facil it ies and t otaldis charg e fl ow (bef ore f inal rul e impl ement ati on) by type of f acil ity. The largest number of s i t es, approximately 22, 000, per form “ rebui ldi ng/maintenanc e onl y” an d account f o r appro ximately 6 perc ent of the total estimated discha rge flow for the industry. “M anufacturing only” co ntains the next largest number of facili ties (15,400) and accounts, by far, for the l a rgest percentage of t he total estimated discharge fl ow for the industry ( 82 percent). Table 2.1: Number of MP&M Facilities and Total Discharge Flow by Type of Facility Type of Facility Number of Facilities Total Estimated Discharge Flow (million gal/yr) Percent of Facilities Percent of Total Discharge Flow Manufactu ring & Rebuilding/Maintenance 6,600 9,400 15.0% 12.0% Manufact uring Only 15,400 64,100 35.0% 82.0% Rebuilding/Maintenance Only 22,000 4,700 50.0% 6.0% Total 44,000 78,200 100.0% 100.0% Source: U.S. EPA analys is. See Se ction 4 of the T e chnical De velopment D ocument for t he final rule.
Of th e 43 ,8 58 w a t e rdi sc ha rg in g f a c i l i t i e s , 3, 593 ar e pr edi ct ed to cl os e i n t h e bas el in e, le av in g 4 0 , 265 ex is ting MP&M faci li ti es t hat EPA esti mates coul d be reg ulated. 1 Af te r a cco untin g f or s ubc at ego ryanddi sc harger cl as s e xclus io ns , EPA esti mates t hat t he fi nal ru le wi ll r egulat e 2,382 of th ese fa cilities , all of whi ch are di rect di scharger s. These r egulat ed facilities rep resen t 5.9 p ercen t of the 4 0,26 5 facilities tha t could be p otentia lly regulate d. Table 2.2 summ arizes inf ormation on the total number of MP& M faciliti es that were evaluated for the f inal rul e, and the number that will be regul ated under the f inalrule. As report ed in Table 2.2, no indi rect di scharger s are s ubject to the f inal regulation. The rule wi ll r egulat e 2,382 direct dischargers i n the Oily Wastes su bcategory
. The rul e excludes direct dischar gers i n the Genera l Metals , Metal Fi nishing Job Shops, Non -Chromi um Anodizing, Printe d W iri ng Board, Rail road Line M aintena nce, S hipb uilding D ry Do cks, an d Ste el Fo rming and F inishing su bca tegor ies (21 4 facilities, 1 2 facilities, 0 facilities, 8 fac ilities, 6 facilities, 6 facilities, and 13 fa cilities, resp ectively) 2

.

1 These are fa cilities that are pr edicted to close due to w e ak f inancial pe rform ance under baseline conditions, i.e., in the abs e nce of the final rule. EPA doe s not attribut e the cost s or the reduced discha rges re sulting f rom thes e baseline closures to the fina l rule, and therefor e exclude s these f acilities from its analy ses of t he rule’s i mpacts . Baseli ne closures account f or diffe rences be tweent he univers e of facilities discussed in this report and the universe discussed in the Technical D e velopme nt Document.
2 EPA excluded 3,511 indirect and 98 direct dischargers predicted to close in th e baseline. 2-2MP&M EEBA Part I: Introduction and Background Information Chapter 2: The MP&M Ind ustry and the Need f or Regulation Table 2.2: MP&M Facilities by Subcategory and Discharger Class, and Facilities Reg ulated Under the Fin al Rule a

Subcategory Indirect Discha rgers Direct Dischargers Evaluated for

Regulation (# of facilities) Regulated under Final Ru le (# of facilities) Evaluated for Regulation (# of facilities) Regulated under Final Ru le (# of facilities) Genera l Metals 10,244 0 214 0 Metal Finis hing Job Shop 1,479 0 1 2 0 Non-Chromi um Anodiz ing 93 0 0 0 Printed Wiring Board 600 0 8 0 Steel Form ing & Finis hing 12 0 1 3 0 Oily W aste 24,394 0 2,382 2,382 Railroad Line Maintenance 8 2 0 0 6 0 Shipbuilding Dry Dock 9 0 6 0

All Categories 37,652 0 2,641 2,382

a Excludes facilities that close in the baseline. Source: U.S. EPA analysis. 

## 2 . 2 MP&M D ISCHARGESAND THE 

## N EED 

## F OR 

## R EGUL ATION EP A is reg ulating the M P & M industry b ecau se the ind ustry relea ses sub stantial qu antities of p ollutants, in cludin g toxic poll utant compounds ( priority and nonconv enti onal metal s and organi cs) and conv entiona l pollutants such as total suspe nded sol ids (TSS) and oil and grease (O &G)
. Thes e MP&M indu str y pol lut ants are g enera ll y cont roll ed by straightfo rward and w idely-use d trea tment syste m tech nolo gies suc h as ch emic al pre cipitatio n and clarificatio n (freq uently referred to as t he “lime and settle” process). 3 Disch arges of t hese poll utants to s urf ace waters and POTW s hav e a numbe r of adver se ef fect s, incl udin g degr adati on of aquatic habitats , reduced survivabili ty and diversi ty of nat ive aquatic li fe, and increased human health risk through the consumpti on of contaminated f ish an d water. In addition, many of th ese pollutant s volatili ze int o the ai r, di srupt biologi cal wastewater t reatment systems, and cont aminate sewage s ludge. M etal co nstituents a re of p articular conc ern b ecau se of the large a mou nts pre sent in M P & M effluents. U nlike so me o rganic compo unds and other wastes that are metabolized in activat ed sludge systems t o relatively innocuous constit uents, metal s are chemicalelement s and cannot be eli minated. Moreover, in s oluti on, some meta ls hav e a highaff ini ty f or biologi cal upt ake. Depend ing on sit e-specifi c conditions, metal s form insoluble inorganic and organic complexes that partition to sewage sludge at POTW s or underlyingsediment in aquatic ecosy stems. The accumulat ed metal c onsti tuent s can ret urn to a bio ava ilable form u pon land appl ication of sewa ge sludge; dredging and resu spens ion of sedi ment; or as a res ult of s eason al, natural , or induc ed alte ration o f sedim ent che mistry. Benefit s of re ducing met al and other pollutant loads t o the environment f rom MP &M faci lities include r educed ris k of cance r and sys temic h uman healt h ris ks, improved recreat ion opportunities (e.g. , fi shing, swimming, boat ing, and other near-w ater recreat ional acti vit ies) , improved aquatic and benthi c habit ats, and less costl y sewag e sludge disposaland incr eased benef icia l use of t he slu dge. 4

3 See C hap ter 12 a nd Ap pen dix I for more det ail ed i nfo rmat ion on t he p oll uta nts of co nce rn i n th e MP &M i ndu str y.
4 Sewage sludge is also called biosolids. 2-3MP&M EEBA Part I: Introduction and Background Information Chapter 2: The MP&M Ind ustry and the Need f or Regulation The goal of the MP &M regulati on is to reduce pollutant discharges and to eli minate or reduce the level of risk and harm caused by t hem. These pollutant discharges and t heir h armfulconsequences are th e external iti

es that t he MP&M regu lat ion addres ses, as di scus sed i n Sect ion 2. 3. 

## 2.2.1 Baseline MP&M Dis charges for Regulate d Facilit ies Table 2.3 pro vides an overview of the dis charges from MP &M facilities t hat are regulat ed under the final rule. Loadings are defined as toxic- weightedloadings. This measure weight s quantiti es of diff erent pollutant s by a measure of their relati ve toxicity. T oxic-w eighted load ings me asure s the rela tive toxic effects of d ischarg es co ntaining d ifferent m ixtures o f polluta nt s. M P & M discharges also c ontain conv entional pollutants with little or no toxic effects but that can have substantial adverse enviro nme ntal imp acts, suc h as O & G and so me c omp one nts of T SS.
Table 2.3: To xic-Weight ed Discharg es for Dir ect Dischar ging Facilities in the O ily Wastes Subcategory a # of Regulated Facilities 2,382 Baseline Discharges 3,351 Avera ge Baseline Loadi ngs per Fa cility 1.41 Remai ning Discha rges Unde r Final Rule 668 Avera ge Disc harges U nder Final Rule per Facility 0.28 Discharg e Reductions Achiev ed by Fina l Rule 2,683 (Pounds Equivalent)

a Dischar ges disc ussed in this table are total disc harges f r o m the faci lity, a nd do not reflect POTW pollutant removals. EPA believ es it is appropria te to analyze was tewater discharges disregarding POTW re movals because indirectdischarges present environmental risks that are not fully a ddressed by POTW treatment. The MP&M industry release s 89 pollutants that cause inhibition problem s at POTW s and an addi tional 35 polluta nts tha t volatilize to form hazardous air pollutants (HAPs) that may present a threat to human health or the envir onment. Other MP&M pollutants are found in POTW sl udge. Only eight of these polluta nts have land applicat ion pollutant criteria that limit the uses of sludge. b Excludes discharges from facilit ies that a r e projected t o close in the baseline (327 lbs-equiv ., or an av erage of 4.4 lbs-equiv. per closing facili ty). Source: U.S. EPA analysis. As reported in Table 2.3, di rect di scharger s in t he OilyWastes subcat egory cur rently rel ease a t otal of 3,351 toxic weight ed pounds per year , an aver age of 1. 41 toxic wei ghted pounds per faci lit y. Af ter i mplementation of t he fi nal ru le, EPA est imates that Oily Wastes direct dischargers wi ll r elease only 668 t oxic wei ghted pounds per year, an averag e of 0.28 t oxic pounds per faci lit y. EPA estimates t hat t he fi nal ru le wi ll r educe pollutant discharges by approximately 2,683 toxic weight ed pounds per year. 

## 2.2.2 D ischarges under the MP&M Regulation Reductions in toxic l o adings result f rom treatment of eff luents and pollut ion prevention at f a cilities that are subject to the regulation. Table 2.4 shows baseline and post-regulati on loadings by type of pollutant, both as unweight ed pounds and on a toxic-weight ed basis, for f acilities that are regulated under the f inal rul e. The final rul e eliminates 80.1 percent of the ba seline toxic- weight ed loadings from th e faci lities t hat ar e regul ated, includi ng 83.7 percent of th e priority pollutants (87.3 percent of metal s, 22.4 per cent of organic s, and 1. 3 percent of arseni c) and 57.4 percent of t h e non conv entiona l pollutants (62 .1 percent of metals , 13.3 percent of or ganics , and 50.0 perce nt of “other inorgan ics”)
. The fi nal ru le al so eli minates subst anti al fra cti ons of the basel ine disc harg es of conventi onal poll utants from t he re gul ated faci li ti es, inc luding 6. 6 percent of

2-4MP&M EEBA Part I: Introduction and Background Information Chapter 2: The MP&M Ind ustry and the Need f or Regulation chemi cal oxyge n demand (COD) , 37.1 perc ent of biol ogic al oxyge n demand (BOD) , 93.2 pe rcent of oil and gre ase (O&G ), and 54.1 percent of total s uspended solids (TSS). 5
Table 2.4: Summary of Discharges b y Pollutan t Type f or Faciliti es Regulated under the Final Rulea Pollutant Category Current Releases R eleas es und er the Final R ule Final Rule Reductions Pounds Pounds Eq. Pounds Pounds Eq. Pounds Pounds Eq. Priority Pol lutants Metals 794 2,756 153 351 641 2,405 Organics 3 3 6 5 8 2 6 8 4 5 6 8 1 3 Arsenic 22 75 21 74 1 1 Cyanide (CN) 0 0 0 0 0 0 Nonconventi onal Pollutants Metals 25,863 417 16,428 158 9,435 259 Organics 2,159 45 1,038 39 1,121 6 Other Inorganics 2,334 0.2 1,301 0.1 1,033 0.1 Bulk Pollutants 335,679 167,295 168,384 Conventional P ollutants B O D 263,419 165,567 97,852 C O D 523,440 488,697 34,743 O & G 428,137 28,955 399,182 TSS 160,695 73,769 86,926

a Discharg es discus sed in this t able are facili ty disc harges a nd do not account f or POTW re movals . EPA belie ves it is appropriate to analyz e was tewate r discharg es disreg arding POTW remov als beca use indirec t discharg es prese nt environm ental risk s that are not f ully addressed by POTW treatment. T he MP&M industry releases 89 pollutants that cause inhibitio n problems at POTWs and an additiona l 35 pollutants tha t volatiliz e to form hazardous a ir pollutants (HAPs) tha t may present a threat to hum an health or the environm ent. Other MP&M pollut ants released by the industry are found in POTW sl udge. Only eight of these pollut ants have land applica tion pollutant criteria that limit the uses of sludge. Source: U.S. EPA analysis. 

## 2.3 A DDRESSING 

## M ARKET 

## I MPERF ECTI ONS Environ mental legislation in general, and the CW A and the M P & M regulation in particular, seek to co rrect imperfections – uncom pensated environmental external ities – in the functioning of the market economy. In manufacturing, rebuilding, and repa iring me tal pro duc ts and m achine ry, M P & M facilities relea se po llutants that inc rease risks to hu man health a nd aq uatic lif

e and cause ot her environmentalharm wit hout accounting f or the cons equences of these acti ons on other parti es (somet imes referred to as thir d parties ) who do not directly participate in the business transa ctions of the business entities.

5 It is not possible to provide an over all estim ate of t otal pollutant pounds remov ed, becaus e overla p among some of the pollut ant categor ies would result in double-counting if the categories w ere sum med. For exam ple, TSS m ay include some of the priority po llut ant and nonconventional metals discharges. Use of the toxic-weighted loadings avoids this double-counting, but does not include co nventional pollutants. 2-5MP&M EEBA Part I: Introduction and Background Information Chapter 2: The MP&M Ind ustry and the Need f or Regulation These costs are not borne by th e responsible ent iti es and are t herefor e exte rnal to the production and pricing decisi ons of the respo nsible e ntity. A pr ofit-max imizing firm or a cost-m inimizing gove rnme nt-own ed fac ility will ignore th ese co sts when decid ing ho w mu ch to prod uce and how to p roduc e it. In addition, the externality is uncompe nsated be cause no party is comp ensated for the ad verse conseq uences o f the pollution releases. W hen the se exte rnal co sts are no t acco unted for in the p rod uction and p ricing d ecision s of the re spo nsible e ntities, their dec isions will yield a mix a nd q uantity of g ood s and service s in the ec ono my, and an allo cation of eco nom ic reso urces to production acti vit ies, that are le ss t han opti mal. I n parti cular, the quantity of polluti on and related envi ronmentalharm caus ed by the activi ti es of the res ponsi ble e nti ti es wi ll , i n gene ral , ex ceed so cially op tim al lev els
. As a res ult , s ociet y wi ll not max imize to tal soc ial we lfare
. In addit ion, adve rse distributiona l effects may accompany the uncomp ensated environmental external ities . If t h e distribution of polluti on and environmental harm is not random among the U.S. population, but inst ead is concentrated among certain populati on subgroups bas ed on socio- economic or oth er demographic charact eris tics , th en the uncompensated environmental extern alities may produce undesi rable t ransf ers of economic wel fare among subgroups of the population. See Chapter 17: Environmental Jus ticeand Protecti on of Children for more information. Th e goa l of enviro nme ntal legislatio n and imple men ting regu lations, inc luding the final M P & M rule that is the subje ct of this EE BA , is to cor rect the se env ironm ental ex ternalities b y requ iring bu sinesses and o ther po lluting entities to redu ce their pollution and environmental harm. Congress, in enacting the authorizing legisl ation, and EPA, in promulgating the implementing regulations, act on behalf of society to achieve a mix of goods and services and a level of pollution t h at more nearly approximates socially optimal level s. As a resul t, t he mix and quantity of goods and services provided by the economy , the al location of economi c res ources to t hose a cti vities , an d the qua ntity of pollution a nd en vironm ental ha rm accompanying those activi tieswill yield high er eco nom ic welfare to soc iety. Requirin g polluting entiti es to r educe level s of poll uti on and envir onmental harm is one approach to addres sing the probl em of envi ronmentalexter nali ties
. This approac h imposes cos ts on t he pollutin g enti ties in t he form of compliance costs incurr ed to red uce p ollution to allow ed lev els. A p olluting e ntity will either inc ur the co sts of me eting the r egulato ry limits or w ill determin e that compliance is not in i ts bes t financial int erest and wil l ceas e the pol lut ion-g enerat ing activi ties . This approa ch to address ing t he problem of e nvironmental ext ernalities will general ly r esult in i mproved economic eff icie ncy and net welf are g ains for soci ety if

the cost of r educi ng the pol lution and environmental h arm activi ti es i s l ess than the val ue of bene fi ts to s oci ety fr om th e re duce d pol lu ti on an d env ir onmental harm. It i s theoretical lypossible t o corre ct t he market imper fection by means othe r th an di rect regu lat ion. For example, negot iat ion and/or liti gation could achieve an optimal all ocation of economic resources and mix of production activit ies wit hin the economy . Howeve r, t he trans acti on cost s of ass embli ng the af fected parties and i nvol vin g th em inthe negot iat ion/li ti gati on process, as wel l as t he publi c goods charact er of t he improvement sought by negoti ation or li tig ation, make thi s approach impr actical. 

## 2.4 O VERLAP WITH 

## O THER 

## E FFLUENT 

## G UIDELI NES EP A has pre viously prom ulgated effluent guidelines regulations for 1 3 metals-related ind ustries. In some instances, these indust ries may perf orm operati ons that are foun d in MP&M faci lities. These eff luent guidel ines are:

� Electroplating (40 CFR Part 413 ),

� Iron & Steel Manufacturing (40 CFR Part 420),

� Nonferrous M etals Manufacturing ( 40 CFR Part 421),

� Ferroalloy Manufacturing (40 CFR P art 424),

� Metal Finishing (40 CFR Part 433 ),

� Battery Manufacturing (40 CFR P art 461),
2-6MP&M EEBA Part I: Introduction and Background Information Chapter 2: The MP&M Ind ustry and the Need f or Regulation

� Metal M olding & Casting (40 CFR P art 464),

� Coil Coating (40 CFR Part 465),

� Porcelain Enameling (40 CFR Part 466),

� Aluminum Forming (40 C FR Part 467 ),

� Copp er Forming (40 CFR Part 468),

� Electrical & Electronic Components (40 CFR Part 469), and

� Nonferrous M e tals Forming & Metal Powd e rs (40 CFR P art 471). In 1986, the Agency rev iewed covera ge of t hese reg ulat ions and i dentif ied a si gnif icant number of met als proces sing faci lities disc harg ing wast ewat er that thes e 13 reg ulations did not cover . Fr om thi s re view , EPA perf ormed a mor e det ail ed analysi s of these unregulat ed sites and identi fied the dis charge of signi ficant amounts of pollutants. This analysis resulted i n the formati on of th e “Machinery Manufacturing and Rebuil ding” (MM&R) point source category. In 1992, EP A changed the name of the categ ory to “ Metal Products and Machinery” ( M P &M) to clarif y coverage of the category ( 57 FR 1 9748). On ly direct d ischarg ers in the O ily W astes sub categ ory will b e regu lated u nde r the final re gulation s for 40 CFR Par t 38. Table 2. 5 shows the MP& M subcate gori es an d the cover ages that apply t o each. EPA does not int end this tabl e to be exhaustive, but rat her to provi de a generalovervie w of th e applicabi lit y of t he Electroplating, Metal Finis hing, and Metal Prod ucts & M achinery effluent guidelines.

2-7MP&M EEBA Part I: Introduction andBackgroundInformationChapter 2: The MP&M Industry and the Need for RegulationTable 2.5: Coverage by MP&M SubcategorySubcategoryContinue Coverage under40 CFR Part 413(Electroplating)Continue Coverage under40 CFR Part 433(Metal Finishing)Coverage under 40 CFR Part 438(Metal Products& Machinery)General Metals (includingContinuous Electroplaters)Existing indirect dischargers currently coveredby Part 413.New andexistingdirect andindirect dischargerscurrentlycoveredby Part 433.NoneMetal Finishing Job ShopsExisting indirect dischargers currently coveredby Part 413.New andexistingdirect andindirect dischargerscurrentlycoveredby Part 433.NoneNon-Chromium AnodizersaExistingindirect dischargers that arecurrentlycovered by413.New andexistingdirect andindirect dischargerscurrentlycoveredby Part 433.NonePrinted WiringBoard(Printed Circuit Board)Existingindirect dischargers that arecurrentlycovered by413.New andexistingdirect andindirect dischargerscurrentlycoveredby Part 433.NoneSteel Forming & FinishingWire DrawingaN/AN/ANoneOily WastebN/AN/AAll newand existing directdischargers under thissubcategory.(See 438.20)Railroad Line MaintenancebN/AN/ANoneShipbuilding Dry DocksbN/AN/ANoneaThese facilitieswill continue to be subject to Part 420.bThere are no national categorical pretreatment standards for these facilities.Source:U.S.EPA analysis.2-8MP&M EEBA Part I: Introduction and Background Information Chapter 2: The MP&M Ind ustry and the Need f or Regulation Figure 2.1 illustrates the relati onship am ong the vario us metals industries effluent guidelines. Figure 2.1: Me tals Indust ries Effluen t Guidelin es Cover ed Under 4 0CFR

Source: U.S. EPA analysis. 

## 2.5 M EETING 

## L EGISLATI VE AND 

## L ITIG ATION 

## -B ASED 

## R EQUIREMENTS EPA’s ef fl uent li mit ati ons gu idel ines and standards for the MP& M indust ry are un der author ity of the CWA , Sec ti ons 301, 304, 306, 307, an d 501. Thes e CWA secti ons r equir e th e EPA Admini str ator to publ ish li mit ati ons an d gui deli nes f o r con trolling ind ustrial effluen t discha rges co nsistent with the ov erall C W A ob jective to “resto re and mainta in the ch emic al, physical, and bio logical integrity of the Nation’s waters.” EP A’s M P & M industry regulation respo nds to these req uirements. In addi ti on, t he MP&M regu lat ion r esponds to t he re quir ement s of a cons ent decree ent ered by the Agency as a r esult of litigation. S ection 304 (m) o f the CW A (3 3 U .S.C. 1 314 (m)), a dde d by the W ater Q uality Ac t of 19 87, re quire d E P A to establish schedules for (i ) reviewing and revis ing existing eff luent limitations gui delines and standards, and (i i) promulgating new eff luent guidel ines. On January 2, 1990, EPA published an Eff luent Guideli nes Plan ( 55 FR 80), in whi ch schedul es were e sta bli shed f or deve lopi ng newand re vis ed ef fl uent gui deli nes f or se veral indu str y categori es. One of t he i ndust rie s f o r which the Agency establi shed a schedule was the Machinery Manufacturing and Rebuilding Category (MM &R). 6

6 The name w as changed to Metal Products and Machinery (MP&M) in 1992 to avoid confusion over what was covered by the rule. 2-9MP&M EEBA Part I: Introduction and Background Information Chapter 2: The MP&M Ind ustry and the Need f or Regulation Th e N atural R esou rces D efense Co uncil, Inc
. (NRDC) and Public Citizen, Inc. challenged the Effl uent Guidelines Plan in a suit fil ed in U.S. Distri ct Court for t he District of Columbia ( NRD C et al v
. Reil ly, Civ. No. 89- 2980). The plaintiff s charge d that EPA’s plan did not meet the requirements of Section 304(m). A Consent Dec r ee in thi s litigation was ent ered by the Cou rt on Ja nu ary 3 1 , 199 2. Thi s p l an r equ ir ed, amo ng othe r t h i n g s , th at EPA p r o pos e e f f l u e n t gu i del in es f o rth e MP&M category by Novembe r, 1994 and take final acti on on these effluent guideli nes by May, 1996
. EPA filed a motion with t h e Court on September 28, 1994, requesting an e xtens ion unt il March 31, 1995, f or the EPA Administ rator to sign t he proposed regu lat ion and a su bseque nt f our mont h ext ensi on for si gnat ure of the fi nal regu lat ion in Sept ember 1996. EPA publi shed a proposal entitl ed, “Eff luent Limit ations Guideli nes, Pret reatment Standards, and New Source Performance Standards: Metal Product s and Machinery ” (60 FR 28210) on May 30, 1995. EPA init ially divided the industr y into t wo phases based on industry sector, as the Agency believed that would make the regula tion m ore m anag eab le. Th e Ph ase I p rop osal inc luded the follo wing ind ustry secto rs: Aero spac e; Airc raft; Elec tronic Equipment; Har dwa re ; Mobi le In dus tr ia l Equi pment; Ordn anc e; andSt at io nar y I ndu st ri al Equipment. Atth attime, EPA plann ed to pro pos e a rule for the P hase II sector s app roxim ately three years afte r the M P & M Pha se I pro pos al. EPA received over 4,000 pages of publi c comment on th e Phase I proposal
. One area wh ere commenter s fr om all s takehol der gr oup s ( i
. e . , indu st ry , e n v i r onm en ta l g r o ups , an d r e g u l at o r s ) w e r e i n a g r e e ment w a s th at EPA s hou ldno t d i v i d e t h e MP&M industry in to two sepa rate reg ulations
. Com men ters raise d co ncern s regar ding the regula tion of sim ilar facilities with diff erent compliance s chedules and potent ially dif ferent limi tati ons for s imil ar process es based sol ely on whether the f acil iti e s were in a Phase I or Phas e II se ctor. Furthe rmore, a l arge number of faci lities per formed work i n mult iple s ectors. In suc h cases , perm it writers an d co ntrol au thorities (e .g., PO TW s) wou ld nee d to d ecide which M P & M rule (P hase I o r 2) ap plied to a facility. Based on t hese comment s, EPA decided t o combin e th e two phase s of the regu lat ion into on e propos al. EPA publi shed a proposal entitled, “ Effluent Li mitations Guideli nes, Pretreatment Standards, and New S ource Performance Standards for the Metal Prod ucts and Machinery Point Source Category” (66 FR 424) on January 3, 200 1. The prop osal published in January 200 1 co mple tely repla ced the 19 95 p rop osal. On June 5, 2002, EPA publ ish ed a Noti ce of Data Ava il abil ity (NODA) (67 FR 38752) . In the NODA, EPA discus sed maj or issues ra ised in c omm ents on the 20 01 p rop osal; sug gested revision s to the tec hnical a nd ec ono mic m ethod olog ies used to estimate com pliance co sts, pollutant loadings, and ec onom ic and enviro nmental imp acts; presented the re sults of these sugg est ed meth odology chang es an d inc orporation of new ( or rev ise d) dat a; and summariz ed th e Agenc y’ s thinkin g on how these re sults cou ld affect the Age ncy’s final d ecision s. This r eport addres ses the 304(m) dec ree as amended, requirin g th e MP&M rul es t o be promul gate d by Febr uary 14, 2003.

2-10MP&M EEBA Part I: Introduction and Background Information Chapter 2: The MP&M Ind ustry and the Need f or Regulation 

## G LOSSARY Best Avail able Technology Economically Achievable: Effluent lim itations fo r direc t discha rgers, a ddr essing p riority and nonconventional pollutants. BAT is based on the best exis ting economically achievable performance of plants i n the industri al subcategory or category. Factors considered in assessing BAT include the cost of achieving BAT effluent reductions , the age of equ ipment and f acil it ies inv olved, the proces ses employ ed, en gin eeri ng as pects of t he cont rol techno logy, po tential pr oce ss chan ges, no n-water quality en viron men tal impa cts (includ ing ene rgy req uirem ents), ec ono mic achievabilit y, and such fact ors as the Administr ator deems approp riate. The Agency ma y base BAT limit ations upon effluent redu ctions a ttainab le throu gh cha nges in a facility's proce sses and ope rations
. W here e xisting pe rform ance is uniform ly inadequat e, EPA may base BAT upon technology trans ferr ed from a dif ferent subcate gory wi thi n an indus tryor from anot her industria l catego ry. Best Practi cable Control Technology Currentl y Avail able: Effluent limitations for direct discharging facilities, addressing conventional, toxic, and nonconventional pollutant s. In specif ying BPT , EPA co nsiders the cost of achieving effluent reductions in rel ation to the ef fluent reduction benefits
. The Agency also considers the age of the equipment and facilities, the processes employed and any required process changes, engineering aspects of the controltechnologies, non- wat er qu alityenv ir onmental impa cts (i ncludi ng e ner gy requ ir emen ts ), and s uch oth er f act ors as t he Ag ency deems appropri ate. Limi tat ions are t radi ti onally bas ed on the ave rage of t he bes t per formances of f acil it ies wit hinthe indu str y of vario us age s, si zes , p roc es se s, or o t h e rcomm on c har act er is ti cs . Whe re exi st in g pe rf orm anc e i s u n i fo rmly i nad equ at e, EPA may require higher l evels of control t han currently in place in an industrial c ategory if the Agency determines that the technolog y can be prac ti cally appl ied. bioava ilable: Degr ee of abi li tyto b e abs orbe d and rea dy t o inter act inorg ani sm me tab oli sm. ( http://www.epa.gov /OCE PAterm s) biologica l oxygen dem and: A measure of the amount of oxyge n consumed in the bi ological processes that break down organic matter in wat er. The greater the BOD , the great er the degree of polluti on. ( http://ww w.ep a.gov /OC EP Aterm s/bterm s.html) chemi cal oxyge n demand: A me asure of the o xygen requ ired to oxid ize all co mpo unds , both o rganic and in orga nic, in water. ( h ttp://www .epa.g ov/O CE PA terms/c terms.h tml) Clean Wate r Act: Act passe d by the U.S. Congress to control water pol lut ion. For merly refer red to as the Federal Water Pollut ionControl Actof 1 972 orFederal WaterPollut ionControl ActAmendm ent s of 1972 ( Publ ic Law 92 -500 ), 33 U.S. C. 1251 et. seq. , as amended by : Publ ic Law 96-483; Publi c Law 97- 117; Publ ic Laws 95- 217, 97- 117, 97- 440, an d 100-04. conv entiona l pollutants: Statuto rily listed po llutants und erstoo d we ll by scien tists. The se ma y be in the form o f organ ic waste, sedimen t, acid, bacteria, viruses, nutrients, oil and grease, or he at. ( http://www.epa.gov/O CEP Aterms) distributiona l effects: Occurs when t he di stribution of poll uti on and envir onment al h arm i s not random among the U.S. pop ulation, b ut instead is conc entrate d am ong c ertain p opu lation su bgro ups b ased on so cio-ec ono mic o r other dem ogra phic characteristics, t hen the uncompensated environmental externali ties may produce undesirable trans fers of economic welfare among subgroups of the population. externalities: Costs or benefits of market transacti ons that are not ref l ected in t he prices buyers and sell ers use to make their deci sion s. An ext ernal ity i s a by -produ ct of the production or consumpti on of a good or s ervi ce that aff ects someone not immediately invol ved in the trans action. ( http://ww w.enm u.edu /users/b iced/h ome /glossar y.html) A type of ma rket failure that cau ses inefficie ncy. ( http://www.amoswe b.com /cgi-bin/gls_dsp.pl? term=ex ternalities) MP&M facil iti

es: MP &M facilities are defined on the ba sis of three considera tions: (1) they prod uce metal p arts, produc ts, or mac hines for use in one o f the 19 industry sectors ev aluated for co verage in the M P & M point source category; (2) they use operat ions in on e of t he ei ghtregu lat ory s ubcat egori es ev alua ted f or cove rage in t he MP&M point sour ce cat egory ; an d (3) th eydi sc ha rg e proce ss wa st ew at er , e i t h e r d i r e c t ly o r i ndire ct ly , to s u r fa c e wa te rs . I nth is doc ume nt , t h e te rm “MP&M facilities” re fers to all fac ilities meetin g the ab ove definition , regard less of wh ether a facility’s industria l sector , subca t egor y, or discharg er category is cov ered b y the final regulation. If the MP& M facilities are referred to as “regul ated” fac il it ies or facilities “subj ect to t he final r egulation” , the use of the qualif ier “regul ated” or “subj ect to t he final r egulation” restricts 2-11MP&M EEBA Part I: Introduction and Background Information Chapter 2: The MP&M Ind ustry and the Need f or Regulation the def ini tion to incl ude only t hose fac ilities in t he indus trysector s, s ubcategory , and dis charger c ategory covered by t he fi nal regulation. MP&M industry: The facilities and markets comprising t h e 19 industry sectors evaluated for coverage in t he MP &M point source cat egory. In th is document , th e term “ M P & M indust ry” re fers to th e ful l 19 indus trysector s, re gardles s of whet her an indust ry se ctor i s covered by the f inalregul ation. If t he MP& M industry is r eferr ed to as t h e regulated MP &M industry, the use of the quali fier “r egulated” restri cts the definition t o only the indust ry sectors, subcategory, and discharger cat egory covered by the final r egulation. non conv entiona l pollutants: Any p ollutant n ot statuto rily listed or which is p oor ly unde rstoo d by the scientific com munity. ( http://www.epa.gov /OCE PAterm s) oil and gre ase (O &G ): Th ese o rganic substa nces m ay includ e hydr oca rbo ns, fats, oils, wa xes an d high -mole cular fatty aci ds. Oiland g rea se may pr oduce sludge sol ids th at are dif fi cul t t o proc ess . ( h t tp: // www. epa. gov/owmi tn et/ reg .h tm) Pre trea tm en t Sta nd ard s fo r Ex istin g S o u rces (PS ES): Categori cal pret reatment standar ds for ex ist ing i ndirect disch arger s, design ed to prev ent the d ischarg e of p ollutants th at pass throug h, interfere with, or a re othe rwise inc omp atible with the operation of PO TW s. Standards a re technolo gy-based an d analog ous to B A T effluent limitati ons guidelines. priority pollutants: 126 individual chemicals that EPA routinely analyzes when assess ing contaminated surf ace water, sediment, gro undwater o r soil samples. pub licly-owne d treatm ent w orks: A trea tment w orks fo r mun icipal se wage or liqu id indu strial waste s that is ow ned by a State o r mun icipality. socially optim al level: Situation in which it is impossible to ma ke any individual b etter off without making som eone else wors e off. Also referre d to a s Par eto o ptima l. social w elfare: The sum of the welfare of all participants in the societ y; measured by the sum of consumer surplus --t he value consu mers der ive from goo ds and serv ices less the price they have to p ay for the good s and services -- and p roduc ers' surplu s -- the reve nue re ceive d by p rod ucers of goo ds an d serv ices less the ir costs o f prod ucing th e goo ds an d serv ices. third parties: Those af fected by a by- product of t he produ cti on or con sumpt ion of a good or serv ice that are n o t immediately invol ved in the trans action. total suspended solids: A me asure of the sus pen ded solids in w astewa ter, effluent, o r water bod ies, dete rmine d by te sts for "to tal suspe nde d no n-filterable solids." ( http://ww w.ep a.gov /OC EP Aterm s/tterms.h tm l). toxic-we ighted p ollutants: Th is mea sure we ights qu antities of d ifferent po llutants in efflue nts by a m easur e of their rel ati ve t oxicity . Toxi c-we igh ted l oading s meas ures the rel ati ve t oxic eff ects of di scharges cont aining di ff erent mixt ures of pollutants. unco mp ensate d: Where parties damaged by exte rnali ties receiv e no compensati on for accepting t he damage.

2-12MP&M EEBA Part I: Introduction and Background Information Chapter 2: The MP&M Ind ustry and the Need f or Regulation 

## A CRONYM S BA T : Be st Ava ilable T echn olog y Eco nom ically Ac hievab le BPT: Be st Pra cticab le Co ntrol T echn olog y Curr ently Av ailable BOD: biological oxygen demand COD: chemical oxygen demand CW A: Clean Water Act MM &R: Machinery M a nufacturing and Rebuilding MP &M: Metal Produc ts and Machinery NPDES: NationalPollut ant Disc harge Eliminati on Syst em NRDC: Natu ral Re sourc es D efense Co uncil O&G: oil and grease PO TW: publicly- owned treatment works PSES: Pretreat ment Stan dards for Exist ing Source s TSS: tot al s uspen ded sol ids

2-13MP&M EEBA Part I: Introduction and Background Information Chapter 2: The MP&M Ind ustry and the Need f or Regulation



## T HIS 

## P AGE 

## I NTENTIONALLY 

## L EFT 

## B LANK

2-14MP&M EEBA Part I: Introduction and Background Information Chapter 3: Profil e of the MP&M Industry S ectors 

# C hapter 

# 3 : 

# P rofile of the 

# MP&M I ndustry 

# S ectors
I NTRODU CTION The finalMP &M rule w illapply t o faci lities t hat manuf acture, rebui ld, or mai ntain met al parts , produ cts or mac hines to be use d in a lar ge num ber o f industria l sector s. Manuf act uri ng is the series of unit op eratio ns nec essary to produce metal products, and is generally performed in a pro duc tion en viron men t. Rebuilding/ maintenance is the seri es of un it oper ations necessary t o disass emble used met al product s i nto c omponent s, repl ace t he compone nts or subassemblies or restore t hem to original f unction, and reasse mble the metal product
. These operat ions ar e int ended to ke ep meta l produ cts in ope rat ing condi ti on and can be perf ormed i n ei ther a produc ti on or a n on-pr oducti on environment. Manufa cturing and rebui lding /maintenance activities o ften oc cur at the same facilities. The MP& M indust ry e ncompass es a l arge number of industries that manufacture interm ediate and final goods, supp ort tran spo rtation a nd o ther ve hicle ser vices, an d rep air and maintain products and equipment. The health of the M P & M industry is g enera lly tied to the over all eco nom ic performance of the economy. The MP&M indust ry i ncludes man ufacturin g and non-m anufac turing ind ustries d efined by 224 4-digit Sta ndar d In dust ri

al

Cla ssi ficat ion ( S I C ) code s, which are group ed into nineteen ind ustry sectors. 1 O f the 224 SIC cod es, 174 are manufacturing (SICs 20 through 39) and 50 are non-manufacturing. All ninet een sectors include manufacturi ng industri es, and eleven include nonman ufacturin g indu stries as we ll. Although EPA evaluated regulat ory options that would have covered facilities operating i n any of the nineteen sectors, the fi nal regu lat ion c overs fac il it ies operating only in s ixt een of those sectors. 

## C HAPTER 

## C ONTENTS 3
. 1 Data Sources
.............................. 3
- 2 3
. 2 Over view of th e MP &M I ndu str y and Ind ust ry Trends
................................ 3
- 3 3.2.1 Aerospace
......................... 3
- 7 3.2.2 Aircraft
........................... 3
- 7 3.2.3 Electronic Equipment
................ 3
- 7 3.2.4 Hardwa r e ......................... 3
- 8 3.2.5 Household Equipm ent ............... 3
- 8 3.2.6 Instrume nts ........................ 3
- 9 3.2.7 Iron and Steel
...................... 3
- 9 3.2.8 Job Shops
......................... 3
- 9 3.2.9 Mobile Industrial Equipme nt .......... 3
- 9 3.2.10 Motor Vehicle and Bus & Truck
...... 3-10 3.2.11 Office Machine
.................... 3-10 3.2.12 Ordnance
........................ 3-10 3.2.13 Precious Meta ls and Jew elry
.......... 3-11 3.2.14 Printed Wiring Boards
.............. 3-11 3.2.15 Railroad
......................... 3-11 3.2.16 Ships and Boat s ................... 3-11 3.2.17 Stationary Industrial Equipment
....... 3-12 3.3 Characte ristics of MP&M Manufac turing Sec tors 3-12 3.3.1 Domest ic Production
............... 3-13 3.3.2 Industry/ Market St ructure ............ 3-18 3.3.3 Financial Condition and P erformance
. . 3-24 3
. 4 Characteri stics of MP &M Non-M anufactur ing Sectors
.............................. 3-25 3.4.1 Domest ic Production
............... 3-25 3.4.2 Industry Structure and Competitiveness
. 3-28 3.5 Characte ristics of All MP&M Sectors ......... 3-30 3.5.1 Eight-fi rm Conce ntration Rat io
....... 3-30 3.5.2 Risk Norm alized Re turn on Ass ets ..... 3-31 3
. 6 Characteristics of MP&M Facilities
........... 3-32 Glossar y ..................................... 3-38 Acron yms .................................... 3-40 References
................................... 3-41

Th is chap ter pro vides a pro file of the ind ustry secto rs that we re eva luated for co verag e by the M P & M rule. T he pr ofile focuse s on the econ omic chara cteristics o f the secto rs and the facilities with in the sec tors, wh ich ma y affect the ru le’s fin ancialand economic i mpacts. It pre sents and int erprets a wide var iety of data associ ated wi th product ion, mar ket st ructur e , and com petitiven ess, for e ach se ctor a nd fo r the M P & M industry a s a who le.

1 Appendix A lists the ninetee n sectors and their as sociated 4- digit SIC codes. 3-1MP&M EEBA Part I: Introduction and Background Information Chapter 3: Profil e of the MP&M Industry S ectors 

## 3.1 D ATA 

## S OURCES This profi le pres ents data from t h e Eco nom ic Censu ses, Statistics of U.S. Bu sinesses (SU SB ), Annual Surv ey of Ma nufac turers ( ASM ) , U.S. I ndustr y and Trade Outlook , EPA’s Sector No tebooks, and other sources, to characteri ze the M P & M sector s, includ ing bo th disch arger s and non-d ischarg ers. The years 198 8 and 1 996 were cho sen as the years for which d ata are prese nted bec ause these are the b ase analysis years, respe cti vely , f or th e MP&M Phase 1 sectors s urve y and the Phase 2 s urve y. In t he cas es wh en dat a for thos e years we re not availab le, data from o ther yea rs were used
. This profile reli es on industri es defined by SICs, both because data collecti on for the MP& M sectors was defined by SICs and to all ow use of h ist oricaldata. The Census Bureau sw itch ed to use of the new Nort h American I ndust ry Cla ssi ficat ion System (NAICS) codes starting with the 1997 Econo mic Censuses. Data classi fied by NAICS co de were converted to SIC format before bei ng incl uded in t he profi le. The conversion used a bri dge contai ning t he percent age of each NAICS code that need ed t o be as si gne d to eachSIC c ode. For a det ail ed di scu ss ionof t he br idg e, see Appen dixA. Th e Ag ency us ed su rvey d ata to c harac terize the facilities within the M P & M sector s that are pote ntially subj ect to the rule bec ause the y discha rge p roce ss wastew ater fro m M P & M ope rations
. The survey p rovid es da ta such a s disch arge typ e, sma ll busines s st atus, sources of reven ues, and fin ancialperformance
. The survey requested information on the sect ors from which each facil ity deri ves its revenues. Many facili ties derive revenues from more than one sector. It is theref ore diffi cult to l ink facil ity charact e risti cs to a specifi c sector. Data on the potentially-regulated facilities are therefore summ arized by the reg ulatory subcatego ries rather than by sectors. All monet ary val ues are s hown in r eal 2001 dollar s. EPA used th e Producer Pri ce Index ( P P I ) for i ndustr ial commodities as a c onver sion tool
. A PPI i s an index t hat measur es pr ice chang es, fr om the pers pective of the sel ler , of a col lection of good s a nd s e r v i ces th atar e i mpor tantinput s f or aspe ci fi c i ndu st ryor f or t he e con omy as a wh ol e. Thi s c hap te r u s e s t he P P I for i ndustr ial commodities to in flate nom inal values to real values
. Later c hap ters includ e PP I’s that are sector spec ific. Th ese P PI’s ar e der ived fro m the a verag e of the P PI’s fo r each com pon ent ind ustry SIC cod e, weigh ted b y industry o utput. Table 3-1 shows t he PPI values for t he rel evant y ears f or which prices were defl ated. The PPI for indust rialcommodities increa sed sl ight ly ev ery y ear betwee n 1988 and 1996. Total inf lati on for i ndustr ial commodities from 1988 to 1996 was 19
. 8%.

3-2MP&M EEBA Part I: Introduction and Background Information Chapter 3: Profil e of the MP&M Industry S ectors Table 3.1: Pro ducer Price Index fo r Industr ial Comm odities Year Producer Price Index (PPI) P e r c e n t C h a ng e 1988 100.0 n/a 1989 105.0 5.0% 1990 108.9 3.8% 1991 109.6 0.6% 1992 110.4 0.8% 1993 111.9 1.4% 1994 113.5 1.4% 1995 118.1 4.0% 1996 119.8 1.4% 1997 120.1 0.3% 1998 117.4 -2.3% 1999 119.0 1.4% 2000 126.8 6.6% 2001 127.7 0.7% Source: Bureau of Labor Stati stics, Producer Price Index. 

## 3.2 O VERVIEW OF TH E 

## MP&M I NDUSTRY AND 

## I NDUSTRY 

## T RENDS This section p rovides a ge neral overview of the M P & M industry. It describes the individual M P & M industry sectors, provid es basic eco nomic inform ation abo ut MP &M manufacturers, and summarize s recent industry trends. Figure 3-1 shows that MP&M facilities are l ocated in every stat e . A few MP& M sectors such as shipbuilding are con ce ntra te d g eog raphi ca lly. Trans portati on- re late d MP&M f a c i l i ti e s ar e f oun d th r oug hout t h e cou ntry . Ove ra ll , MP&M

3-3MP&M EEBA Part I: Introduction and Background Information Chapter 3: Profil e of the MP&M Industry S ectors facilities are most concentrate d in the heavy i ndustrial regions along the Gulf Coast, both the East and We st Coasts, and t h e Gre at Lak es Re gion (N ew Y ork, P ennsylv ania, O hio, Ind iana, Illino is, and M ichigan ). Figure 3.1: Number of M P&M Facilities by Stat e in 1992

Source: Department of Commerc e, Bureau of t he Census, Census of M anufacturers , Census of T ransportation, Ce nsus of Whole sale Trade, Census of Retail Tr ade, Census of Service Industries , 1992.
Ta ble 3 .2 lists the M P & M sector s and pro vides a brief d escrip tion of the pro duc ts and se rvices p rod uced by eac h. Ap pen dix A pr ovid es a m ore d etailed list of the 4-d igit SIC cod es in eac h secto r.

3-4MP&M EEBA Part I: Introduction and Background Information Chapter 3: Profil e of the MP&M Industry S ectors Table 3.2: MP&M Sector Definitions Sector Sector Descripti on Aerospace Metal part s or products such as m issiles, space v ehicles, satellit es and as sociated launching equipment. Aircraft Metal parts or products including all types of aircraft for public, private or commercial use. aircraft parts and equipment as well as a ircraft maintenance activities. Bus and Truck Metal parts or products including freight trucks and trailers as well as public, private and commercial buses. ludes all a ssociated equipment including equi pment specific t o truck and bus term inals. Includes bus and truck maintenance activities. Electronic Equipment Metal part s or products including ge neral electronic com ponents such a s tubes, ca pacitors, a n d transformers, as well as finished electronic equipment such as televisions, radios, and telephones. Hardwa re Metal part s or products such as tools , cutlery , valve s and tubing, dies, springs, sheet m e tal, drum s, and heat trea ting equipm ent. Household Equipm ent Metal part s or products including appl iances s u ch as ref rigerat ors, laundry equipment, lighting equipment, cooking equipment, a nd vacuum cleaner s. munication type ra dios and televisions are included in this s ector. Iron and Steel Sites engaged in iron or steel manufact uring, fo rming and fin ishing. Instrume nts Metal parts or products such as laboratory and medical equipment, measuring devices, environmental and process controls, optical equipment, surgical and dental equipment, and pen s. Metal Finis hing Job Shop Facilitie s with m ore than 50 per cent of t heir reve nues com ing from work on pr oducts not ow ned by the site. While the re are SIC codes as sociated w ith some Metal Finis hing Job Shops, t h ey sell to a variety of m arkets and are not a market in and of them selves. Mobile Industrial Equipme nt Metal part s or products including tra ctors and othe r farm equipment, construction machine ry and equipment, mining m a chinery and equipm ent, industria l cranes and hoists, a nd tracked milita ry vehicles. Motor Vehicle Metal parts or products including private passenger vehicles and associated parts and accessories such as automobiles, motorcycles, utility trailers a nd recreational vehicles, and mobile homes. Office Machines Metal part s or products including of fice computer equipment, s torage de vices, pr inters, photoc opiers and associated parts and acce ssories. Ordnance Metal part s or products including all small arms , artiller y, and a mmunit ion with the exception of missiles (aerospace). anufacture of explosives. Other Meta l Products Metal part s or products including produc ts and m a chinery not categ orized into the other sec tors (e.g ., sporting goods , music al instrum ents). Precious Meta ls and Jew elry Metal parts or products including jewelry, silverware, trophies, and clocks as well as all associate d parts and accessories. Printed Wiring Boards Metal parts or products including print ed wiring boards and printed circuit boards. Railroad Metal parts or products including railcars, locomotives and associated parts and accessories as well as track, s witching and term inal stations. Ships and Boat s Metal parts or products including ships and b oats for military, f reight, and private recreation. submarine s, ferr ies, tug boa ts, barge s, yac hts, and other recrea tional boats as well as all parts and access ories. lso includes rebuilding a nd mainte nance ac tivities perform ed at m arinas, dry docks, and other on shore activities specifically related to ships and boats. Stationary Industrial Equipment Met al p art s or pro duc ts i ncl udi ng al l in dus tri al mac hin ery, suc h as tur bin es, oil fiel d mac hin ery, elevators and moving stairway s, conveying equipment, chemical process industry equipment, pumps, compres sors, blow ers, industr ial ovens , vending m achines, comme rcial la undry equipm ent, commercial ref rigeration and heating equipment, welding apparatus, motors, and generators. Includes
Inc

Non-com

Does not include the chemical processing or the m

Includes A

Source: U.S. EPA analysis.
Table 3. 3 shows output bysect or f or manu fact urer s, non- manuf acturers , an d allMP& M firms
. Out put i s a good indi cator of the overall si ze of a market. In 1997, MP &M firms accounted for more than $2.8 tri llion i n output. Motor vehicles were the

3-5MP&M EEBA Part I: Introduction and Background Information Chapter 3: Profil e of the MP&M Industry S ectors largest sin gle M P & M sector , acco unting fo r 43 perc ent of all M P & M outp ut. Ord nanc e is the sm allest secto r, with 0.2 perc ent of M P & M outp ut. The MP& M manufact uri ng and non- manuf acturin g sec tors dif fer in s evera l i mportant w ays . The manufa cturing sect or accounted f or $1.6 tri lli on in out put, equa l to 57 perce nt of the t otal MP&M output. The non-manuf acturing sect or accounte d for $1.2 tril li on, or 43 perce nt of MP& M output. Alt hough MP& M non-manu fact urer s’ reven ues w ere n earl y $400 bi ll ion sm al le r t h a n manu fa ct ur er s’ re ve nu es , t h e MP&M non -m an uf ac ture rs ha d th r e e times as many f a c i l i ti e s a s t h e MP&M manuf acturers . Al so, alt hough manuf acturin g out put w as r elatively eve nly divi ded among t he di ff erent sect ors, more t han 86 perc ent of no n-man ufacturin g outp ut cam e from the mo tor veh icle and bus an d truck sector s. Table 3.3: MP &M Output and Share in 1997 a (million s, 2001$) Sector Manufacturers Non-Manufacturer s Sector Total Outpu t b Share Outpu t b Share Outpu t b Share Aerospace 20,115.1 1.2% 20,115.1 0.7% Aircraft 105,163.8 6.4% 9,935.9 0.8% 115,099.7 4.0% Bus & Truck 15,118.4 0.9% 209,316.1 16.7% 224,434.5 7.8% Electronic Equipment 145,886.9 8.9% 145,886.9 5.1% Hardwa re 189,145.5 11.6% 189,145.5 6.6% Household Equipm ent 102,242.3 6.3% 2,847.7 0.2% 105,090.0 3.6% Instrume nts 141,548.0 8.7% 7,401.9 0.6% 148,949.9 5.2% Iron and Steel 20,403.0 1.2% 20,403.0 0.7% Job Shop c 15,360.2 0.9% 15,360.2 0.5% Mobile Industrial Equipme nt 54,704.7 3.3% 54,704.7 1.9% Motor Vehicle 366,448.7 22.4% 870,450.5 69.6% 1,236,899.2 42.8% Office Machine 119,783.0 7.3% 30,929.9 2.5% 150,712.9 5.2% Ordnance 5,778.8 0.4% 5,778.8 0.2% Other Meta l Products 60,249.6 3.7% 22,040.7 1.8% 82,290.3 2.9% Precious Meta ls and Jew elry 9,760.7 0.6% 367.4 0.0% 10,128.1 0.4% Printed Wiring Boards 10,400.7 0.6% 10,400.7 0.4% Railroad d 8,412.6 0.5% 30,727.9 2.5% 39,140.5 1.4% Ships and Boat s 18,081.1 1.1% 37,383.0 3.0% 55,464.1 1.9% Stationary Industrial Equipment 227,053.7 13.9% 29,747.1 2.4% 256,800.8 8.9% Total MP&M 1,635,656.8 100.0% 1,251,148.1 100.0% 2,886,804.9 100.0% Percent of total 56.7% 43.3% 100.0%

a Data f or 1996 were not availa ble, so ec onomic ce nsus data f rom 1997 w ere used. b Value of shipments for manufacturing industries; total sales for retail a nd wholesale trade; total receipts for service indus tries; total revenue f or transporta tion. c Includes f a cilities in two SIC s that are defined s pecific ally a s job shops (SICs 3471 and 3479.) F a cilities reporting i noth er sec tors may also operate as job shops, so these data are likely to understate the true output of MP&M job shop s. d Non-manufacturing railroad data are estimated based on 1992 data. Source: D epartment of Commerc e, Bureau of t h e Census, Census of M anufacturers , Census of T ransportation, Ce nsus of Whole sale Trade, Census of Retail Tr ade, Census of Service Industries , 1997.
Th e follow ing sectio ns de scribe the M P & M sector s and briefly disc uss rec ent ind ustry trend s in each sector . Th e discu ssion is based on 2001 Value Line Indus tryReport s, U.S. I ndustr y and Trade Outlook 2000 (DRI-McGraw Hi ll ), EPA’ s Sector No teboo ks, and other so urces.
3-6MP&M EEBA Part I: Introduction and Background Information Chapter 3: Profil e of the MP&M Industry S ectors 

## 3.2.1 Aerospace The aerospace indus tryincludes orig inalequipment manufact urers (OEM ) and fac ilities that rebuil d and repair aerospace equipme nt. The in dust ry s erves both mi li tar y and commerci al e nd-u ses suchas s pace ve hicl es f or commer cial communi cati on satel lit es, although mi litary appl icat ions dominate. Its products include gu ided miss iles , space v ehicl es, an d associated prop ulsion units and parts. T he assemb ly of aerospac e prod ucts draws on numero us other industries, including plastics, rubber, f abricat ed metals , metal casin g, gl ass, text ile, and elect ronic component s. Aeros pace products are ty pically produced by a p rime c ontra ctor a nd se veral tier s of sub con tracto rs. Final a ssemb ly is perfo rmed by relativ ely few fac ilities, only a small nu mbe r com pare d with the nume rous su basse mbly a nd p arts ma nufactu rers. A erosp ace m anufac turing is ex treme ly capital int ensiv e. The U.S. aerospace industr y has c onsoli dated substanti ally in rec ent y ears, due to decl ines in defens e spending . The number of f acil it ies and f irms as we ll as s ector val ue of shipments and employ ment decr eased from 1 988 to 19 96 in the U S
. Gro wth in the in dustry is e xpe cted to com e from lower cost air-to -air missiles, w ith strong focus o n incre asing efficie ncy in production by reducing costs. Consumer demand has also grown for direct-t o-home television, voice and data transmissi on, and other s atellite serv ices, wh ich hav e incre ased the co mm ercial d ema nd fo r spac e vehic les nee ded to launc h satellites. The aerospac e industry exports a substanti al share of i ts output. Many N orth American and Europe an governments with l a rge defense budgets have been seek ing t o reduce th eir mi litary budget s, whi le gover nments in South Ameri ca (wit h small er budgets) have been mai ntai ning or increa sing thei r defens e spending
. Subst anti al consol idati on has occurr ed in t he European aerospace industry, whi ch has become mo re competitive wit h U.S. companies (U.S. EP A 1997 ; DRI/M cGraw H ill 2000). 

## 3.2.2 A ircraft Tr end s in the airc raft secto r are he avily influen ced by cha nges in in dustry stru cture a nd in the internatio nal po litical-eco nom ic arena . Al thou gh newair craf t produ cti on in creas ed subs tantial lyin 1998 and 1999, pr oducti on weak ened i n 2001 becau se of the economi c sl owdown an d the n plummeted f oll owingthe Septe mber 11 th terrorist attacks. Airlines have reacted to fall ing ticket sale s by cutting sched uled fligh ts, redu cing p erson nel, and delayin g or c ance lling investm ent in ne w aircr aft. During the 1990's, there was substanti al restr ucturing t hrough mergers and consolidation in the aircraft manufact uring industry, including producers of both aircraf t and aircraft parts nati onally and int ernationall y. Firms f o cused on improving efficiency th roug h cos t cutting effo rts such a s redu ced staffing. In ad dition, the re is a gro wing tren d for U .S. pro duc ers to outso urce m any airc raft par ts to firms in o ther na tions, in o rder to brin g do wn co sts and com pete in ternatio nally. In addit ion to aircraf t manuf acturi ng, t his s ector i ncludes rebuil ding and re pair of aircr aft at manuf acture rs’ faci lities or at airports. 2 Th e aircra ft mainten ance and r epa ir industry h as slow ed w ith the po st 9/11 declin e in pa ssenge r travel. 

## 3.2.3 Electronic E quipment The electronic equipment sector can be divided into two general groups of industries: microelectronics manufact urers and telecomm unications equip ment man ufacturers. M icroe lectro nics ind ustries m anufac ture a w ide ra nge o f prod ucts, from electro nic co nnec tors to in tegrate d circ uit pan els. These prod ucts are used as materi al inputs in many industri es such as automotive, telecommunications, aerospace, computer, and me dical equip ment. Although the microelectro nics industry covers a d iverse array of pro ducts, prod ucers, and en d-uses, some generaltrends have been evi dent i n the industr y. A s trong increase in the us e of micr oelectronic product s in industr ies throughout the economy has led to rapid growth i n microelectronics manufact uring over the past t w o decades. Although the US is amajor pr oducer of con sumer ele ctr onics , Japan is the worl d’s leading produ cer of consumer el ectr onics , an d U.S. firms face strong internatio nal co mpe tition for c utting ed ge tech nolo gical ad vanc es in their p rod ucts. D ue to the high skill level ne cessa ry in the d evelo pme nt of pr odu cts, there is consid erab le com petition for skilled labo r. Th e rece nt eco nom ic slowdown has led to l owered demand for en d-products that incorporat e microel ectroni cs. I n response , th e microel ectroni cs

2 The rule regulates wastew ater generated from w ashing vehicles only when it occurs as a preparatory step prior to performing an MP&M unit operation (e.g., prior to disass embly to perform engine m aintenance or rebuilding ). The rule does not c over the w ash ing of cars, aircraft, or other vehicles when it is perform ed only for aesthetic/cosmetic purposes.
3-7MP&M EEBA Part I: Introduction and Background Information Chapter 3: Profil e of the MP&M Industry S ectors indust ry has reduced capaci ty an d laid of f worker s to re duce costs
. Despit e thi s decline, mic roelect ronics conti nue to be an increa singly nec essary c omp one nt of the g loba l econ omy. Telecommun ication indust rie s f ocus onthe production of network e quipment, fiber opt ics , an d wir eles s commun ication equipment. Much of the growth in the i ndustr y has c ome from the increa sing use of f iber opti cs and wi reles s end-u ser devices. The telecommuni cati ons indus tri es experi enced rapid gr owth in the nineti es; howev er, i ndustr y act ivi ty s lowed considerably with t he collapse of the t elecommunications bubble. Telecom firms have reacted by cutti ng employees, reducing costs, and selling off portions o f their firms. Most have co ntinued their R& D efforts. 

## 3.2.4 Hardware The hardware sector consists of many dif ferent i ndustries, which can be generally cl assifi ed into three groups: buil ding hard ware , conv ention al hard ware , and to oling ha rdwa re. Buildinghardware cons ist s of a g roup of i ndustr ies t hat manuf acture metal bui lding products, including f abricat ed stru ctural metal, sheet metalwork, and architect ural metalwork. This group of indust ries grew rapidly throughout the 1990's. The building products indust ry as a whole saw record sales in 1998 and again in 1999
. Much of this growth i s attri buted to large hig hwayprojec ts fun ded by t he Trans portati on Eff ici encyAct f or th e 21 stCen tury. Co nven tional ha rdwa re includ es pro duc ts such a s screw s, industria l fasteners , and v alves a nd ho se fittings. T he pr odu cts pro duc ed in this in dustry a re used in the pr odu ction o f manu facture d go ods
. Tre nds in this in dustry, the refore , gener ally reflect tren ds in o ther m anufac turing ind ustries. O ne of the mos t impo rtant ind ustries influe ncing c onve ntiona l hardw are is the auto indust ry. Hardware producers have experienced pressures from end users such as auto makers to reduce costs. The industry fa ces a c ontinu ed tre nd o f conso lidation of firms an d incre asing glo bal p ressure from c ountr ies with low labo r costs. Domesti c produc ers of s crews and i ndust ria l f ast eners saw g rowth inthe realval ue of shipments due t o the strong U. S. econo my in the late nineties. The tooling hardware sector also contains a vari ety of dif ferent i ndustries t h at produce various types of t ools for diff erent uses. Because the se indus tri es als o face cont inued gl obalization, many of th em are impact ed by changes in t he global economy. The d e cline in Asi an markets in 1998 and 199 9 resulted in a s h arp decline in the value of shipments f or the machi ne t ooli ng i ndust rie s. Prior to t he 1998 f inan cial cri sis , va lue of s hipments were increa sin g annu ally. The marke t f o r the powe r-driven segme nt of hand too ls has increased, ho wever, desp ite troubled ov erseas mark ets. 

## 3.2.5 Household Equipment Th ere ar e three gener al grou ps of ind ustries inc luded in the ho useho ld eq uipm ent sec tor: ho useho ld furnitur e, hou seho ld appliance s, and plumbing equipment. Genera lly speakin g, f actors that aff ect t his s ector ar e consis tent across t hese three grou ps. Lo w une mplo ymen t and inc rease d disp osab le inco me stim ulated grow th in eac h of thes e indu stries in the n ineties. However, because purchases of household equipm ent are relat ively expensi ve and discretionary, consumers cut back spending in the recent recession. Allthree household equipment industri es face int ernational competiti on, as imports account for a substanti al share of domestic consumption. Metal fur nit ure account s for 20 perc ent of the hous ehold furnit ure in dustry
. Metal component s are i ncreasinglybeing added to non-metal fur niture. For example, there is a t r end to increase the f unctionalit y of non-metal f urniture by equipping recliners wi th heat and massage. This coul d increas e the industr y’s reli ance on metalparts. The indust ry has int egrate d vertically, as large manufacturers hav e begun to open their o wn retail stores in an effort to differentiate their produc ts. There are two groups of household app liance manufacturer s. Major appliances such as washing machines and refrigerators are p rod uced by relativ ely few firm s. Sma ller app liances are ch aracte rized by little pro duc t differentia tion bu t consid erab le price com petition and are manufactured by a larger num ber of co mpan ies. Finally, a sig nificant ch aracte ristic of the p lumb ing eq uipm ent ma rket is the e xtent o f U.S . dep end ence on for eign im por ts. W hile the U.S. const ruction market has grown at a record pace in the past few years , increasing demand for plumbing equ ipme nt, muc h of the d ema nd ha s bee n serve d by im por ts and th is industry h as a trad e defic it.

3-8MP&M EEBA Part I: Introduction and Background Information Chapter 3: Profil e of the MP&M Industry S ectors 

## 3.2.6 Instruments The instruments sector is ch aracterized by a diverse ar ray of technol ogical ly advanced products and int ense gl obal competition among many firms of varying sizes. The sector can be generally divided into i ndustrial measuring and testing instruments, and me dical instruments. In the indust rialmeasuri ng indus try , producers of laboratory instr uments are ty pically integrate d fir ms who have cons olidat ed and reduced costs in response to pressures from med ical and pharmaceutical cust omers. Producers of measuring devices are also f acing pr essure s to cons olidat e. These f irms have been hurt by low commodit y pric es duri ng the pas t fe w years , whi ch have led to reduced inv estment in measuring e quipment by fueland grai n producers. Sales s hould rebound, however, if Asian eco nom ies and fuel pric es co ntinue to grow . Sma ll com pan ies still dom inate the electro nic test eq uipm ent ind ustry, whic h is characterized by a high degre e of prod uct differentiation. Mo st of these firms are not large eno ugh to exp ort prod ucts. Sales for medical devices i ncreased steadily throughout the 1990's, whi le employment remained relatively constant. The indust ry has historical ly beencharact erized by many smal l to mi d-si ze fi rms and intense competit ion for technol ogical innovat ion. Ef fort s to bring down healt h care cost s is one of the primary chall enges f acing t his industr y. Pres sure t o reduce cost s has reduc ed in surance companies ’ wi ll ing ness -t o-pay for new equ ipment . As t he popul ati on ages , howe ver, demand f o r med ical serv ices an d de vices is ex pec ted to grow . The industry w ill likely continu e to gro w in the ne xt few yea rs, but at a slowe r pac e than it ha s grow n historic ally.. 

## 3.2.7 I ron and S teel The basic iron and steel industr y is regul ated under 40 CF R 420 , and primary iron and steelworks, blast f urnaces and rolling mills are n ot affecte d by the M P & M rule. T he M P & M rule will reg ulate fac ilities that per form M P & M ope rations or co ld forming op erations on steel wire, rod , bar, pipe, or tub e. This subc ategory do es not include facilities that perform those operations on base materials other t han steel, nor does it include wast e water from cold forming, el ectroplating or continuous hot d ip co ating o f steel shee t, strip, or p lates or wastew ater fro m pe rform ing any h ot steel fo rming ope rations
. Eve nts in the glo bal stee l industry in th e pas t few years have h ad sign ificant and poss ibly far rea ching im pac ts on d ome stic prod ucers. In 199 8, the industry experien ced a glo bal steel crisis. This crisis was caused in p art by the Asian financial cri sis, which t rigger ed a sharp decl ine in imports of st eel by maj or stee l importing count ries of Asia
. This l ed to a f lood of st eel impo rts into U .S., and U.S . steel imp orts ro se 33 perc ent in 19 98. T he situatio n was m ade worse by glob al ove rcap acity largely d erived from p rod ucers in Russ ia and Latin A meric a. This fl ood of steel int o the U.S. and Europe led to r apidly declin ing s teel prices in bothregions
. Excess inventories t hat accrued during the surge of i mports hurt domestic producers. The “unfair” t rading prices resul ted in over 20 nations taking formal trade prot ecti on acti ons such a s import dutie s and pri ce fl oors. The US Congress det ermined t hat f oreign s teel was being sol d in the US at unf air pri ces, an d reacted by enacting anti -dumping tarif fs. The slowdown in the US economy has also negatively affect ed the steel industry. Mo st st eel fir ms are being forced to focus on rati onalizing capacity and cutting costs. 

## 3.2.8 Job Sho ps MP& M metal f ini shi ng job s hops ar e def ined as t hose f acil it ies wit h more t han 50 percent of t heir reve nues comin g fr om pro duc ts not ow ned by the site. W hile there are sp ecific SI C co des a ssocia ted with som e M etal Finish ing Jo b Sh ops , they sell to a variety of marke ts and are no t a market in and o f themselves. 

## 3.2.9 Mobile Industrial Equipment M obile industrial equip ment includes a numbe r of different industries that produc e machine ry for different purpose s, includ ing co nstructio n, farmin g, and mining
. Gro wth in the c onstru ction e quip men t industry is typ ically tied to econ omic factors such a s hous ing starts, em ploym ent, and cons ume r con fidenc e. Ship men ts of co nstructio n equ ipme nt rose steadily duri ng muchof t he 1990' s. The 1998 Transpor tat ion EquityAct f or th e 21 stCentury was expect ed to st imulate furt her spending by federal, s tate, and l ocal governments. However, the current recess ion has forced many industry buyers to cut bac k or c ance l orde rs.

3-9MP&M EEBA Part I: Introduction and Background Information Chapter 3: Profil e of the MP&M Industry S ectors The farm and mining machine ry i ndustr ies bot h have been s uff ering from low commodit y pric es. Both industr ies experienced growth in shi pments t hroughout much of t he 1990's, but were hit in 1999 by l ow prices. Farm equipment was hi t hardes t as the real value of shipments f e ll by 38 percent in 1999. Output is expected to continue to decrease until grai n surpluses decline and agricu ltural pric es rise. H owe ver, the c onso lidation of farm s has also had a significant in im pac t on this ind ustry. W ith th e i ncr eas e i n f arm s ize , t her e i s gr owi ng de pende nce upon mech ani zat ionto f arm m ore a cre s pe r f arm. 

## 3.2.10 Motor Vehicle and Bus & Truck The major trend in the mot or vehic le and bus and truc k indus tri es is the continualconsoli dation of fir ms int o highly capital int ensiv e globali zed manufact urers. Motor vehicl e manufact urers are no long er const rained withi n nati onal boundari es, as mergers and joint ventures include some of the largest firms f rom different countries. Many foreign owned manufacturers have facili ties l ocated in the U.S., and relative production costs and exchange rates play a greater role i n determining the location of pro duction facilities than the national identity of parent co mpan ies. M anufac turers ha ve incr easing ly standa rdize d the d esign o f moto r vehic les and their pa rts. Th ese ch ange s have resulted in muc h less pr odu ct differe ntiation a mon g man ufacture rs, but also in greate r pro duc t quality. H owe ver, gre ater p rod uct qu ality has res ulted in a cons istently sharp increa se in pr ice ov er the p ast three deca des. T his price increa se ma y have r each ed its pinnacle in t he mid-nineti es, since pri ces declined in 1998 and 19 99. Industry output f or automobiles increased 1.3 percent between 1996 and 2000
. Although the curr ent recession has hur t car prices, manufacturers have used incentives such as zero percent f inancing to mai ntai n sale s volume. 

## 3.2.11 Office Machine Th e office m achine sector expe rience d rap id gro wth in the n ineties tha t revers ed itself with the do wnturn in the eco nom y. The industry exper ienced 7. 8 percent g rowth i n the r eal value of sh ipments between 1996 and 2000. While t his g rowth was accomplished with only a 1.3 percent i ncrease in totalemployment, production employment increased by 5.4 percent. The relative difference betwe en total and p roduc tion emplo yment can b e attributed to increasing re liance on the Internet for sales, thereby reducing the need for non- production sales staf f. Despite t his increas e in production employment, the indust ry rema ined e xtrem ely cap ital intensive
. The recen t weakn ess of the US econ omy h it the office m achine sector hard with busine ss purc hases o f com puter s and com puter acce ssories falling significa ntly. Fir ms i n the of fi ce ma chi ne s ect or h ave unde rgon e mer ger s an d acqu is it ion s t o bri ng do wn c ost s i n or der to compe te. Fir ms often rely on joint venturing agreements, and sometimes form all iances with past competitors to produce complementary comp onents of new technologies. C onsolidation a lso allows firms to diversify, providing a ra nge of pro ducts such as P Cs, software, and inf ormation technology to protect agai nst the s trong competition in t h e market for any one product. Firms have also increasi ngly outsourced production to electr onics manufacturers more equipped to increase production and take advantage of economies of si ze, whi le the original f irms utili ze their resour ces for resear ch and development of new technol ogies to stay competit ive. Globalization is an i mportant trend in thi s industry as machine components are produced in diff erent countries. Despite the trend towar d a glo balize d ma rket, the U .S. has h eld a n egative trade balan ce for over a dec ade
. 

## 3.2.12 Ordnance The ordnan ce sector includ es firms that manufacture sm all arms, including grenad e launchers and heavy field mach ine guns; artillery, including nava l, aircraft, anti- aircraft, tank, coast, and field artillery; and ammu nition, including bullets, bomb s , mines , t orpedoes , gr enades , dept h charges, and che mical warf are pr oject il es. It does not inc lude the chemi cal proces sin g or manufacture o f explosives. Ov erall, the industry has a high ratio of value ad ded to to tal sales. The ordna nce sector has contracted si gnifi cantly s ince the end of the Cold War. Decreases in US go vernment milit ary spen ding h ave c aused significant d eclines in ord nanc e pro duc tion, lead ing to lo wer ind ustry ship men ts and c utbac ks in employment. Foreign customers, i ncluding foreign governments, buy over 80 percent of the ordnance manufactured in the US. Althoughshipment s of mi litary weaponr y have decl ined, s ales of smallarms have increased in the US over t he past f e w years. R ecen t military actio ns by the US will likely result in g ove rnme nt weap ons p urcha ses that w ill benefit the industry.

3-10MP&M EEBA Part I: Introduction and Background Information Chapter 3: Profil e of the MP&M Industry S ectors 

## 3.2.13 Precious Metals and Jewelry Do mestic pro duc tion in the prec ious m etals and jewelr y industry is d omin ated b y many s mall firm s with low capita l intensity, mostly concentr ated in the nort heast US. It i s inf luenced by trends in cons umer behavi or, the ret ail market, and global competition. Devaluation i n the price of gold due to declining world prices has benefit ted the indust ry because it r e duces the cost of m aki ng j ewelry . I ncr eas ed di spos abl e i ncome fu ele d st rongcons umer spe ndi ng onprec iou s metals and c ost ume jewelry in the nineti es, but thi s trend has weakened with t h e recent economic downturn. Increases in spending have not always transl ated into gains for domestic producers. The lowering of tari ffs has resulted i n a stead y increa se in imp orts o f costum e jewe lry, as labo r-intensive pro duc tion is often less exp ensive in dev elop ing co untries. Domestic producer s have al so been hurt by the strongU.S. doll ar, whi ch makes U.S. exports more expensi ve. Anoth er challen ge co mes fro m the re tail mark et, which has pu t strong p ressure on p rod ucers to brin g do wn pr ices in o rder to co mpe te. These ch all enges inc lude consol idat ion of ret ail ers, giv ingthe m grea ter purch asi ng power , i ncrea sed I nter net and t elev isi on home shopp ing, and a de crease in the num ber of who lesalers. 

## 3.2.14 Printe d Wiring Boards Printe d wiring boa rds (a lso refe rred to as p rinted c ircuit bo ards) are the physica l structure s on w hich ele ctron ic com pon ents such as semiconductor and capacitors are mounted. Computers and comm unications are t h e largest us es for printed wiring board s. In addition, printed wiring b oards are used in a wide a rray of other pro ducts, including toys, radios, television sets , electronic wiring in cars, guided-missil e and airborne electronic equipment, biotechnology, medical devices, digital imaging equipm ent, and industrial contro l equipme nt. While so me pro ducers o f PW Bs pro duce them for their own use, mo st man ufacture rs are ind epe nde nt firms tha t sell PW Bs to the op en ma rket. T he ma jority o f PW B m anufac turers a re sma ll firms. The do mestic PW B industry experienced considerable growth throughout t h e 1990's. Real industry output grew nine percent from 1996 to 2000. Growthwas s purre d by con ti nualgrowt h inend- use market s. In additi on to t he i ncrea sed i n value of shipments, U.S. f irms saw a 5.6 percent increase in average hourly earnings and a 16.3 percent increase in capital expendituresover the same peri od. However, demand i n the PC, t elecommunications , and el ectroni cs sect ors has weaken ed rece ntly. In parall el, the re i s gr owingint ernational competiti ve pre ssure f or PWB maker s t o reduc e produc ti on costs. Consequently, many of th e larg er PWB fir ms are l ooking t o relocat e offs hore. 

## 3.2.15 Railroad Railroad service consist s of both frei ght and passenger service. In the past f e w years, rai lroad companies have been focusing on impr ovin g th e ef fi cien cy of the ir l ines and se rvi ces. There ha s beena cont inu ed tr end t oward con soli dati on of ma jor freight railro ads. C onse que ntly, com pan ies have redu ced the num ber o f lines and focuse d atten tion on increa sing the c apa city of fewe r lines. Ra ilroad s have also b egun to focu s on gu arante eing d eliveries at spec ific times, wh ich will allow them to com pete w ith the truck ing indu stry. Since t he 1980's r ailr oad traf fic increa sed by 50 percent , whi le the li ne networ k decreased by 39 percent. This was accompl ish ed by i ncrea sin g capi talexpenditur es f or equipment suchas ne w locomotives wit h gre ater hors epower, ins tal lat ion of double tracks, and increases in the capacity of non-rail road owned freight cars. Consequently, freight service in t h e nineties sa w the first incr ease in ope rating re venu e since 198 4, altho ugh this w as co upled with shar p de creas es in employment. Passenger service has undergone simil ar changes to increase ef ficiency by adding new locomotives and beg inning a transition to high sp eed train serv ice. T otal ind ustry ou tput incr eased 7.6 p ercen t per yea r from 198 8 to 1 996
. Altho ugh tran spo rtation v olum e is sensitive to the ge nerally p oor mac roec ono mic situa tion, railw ays hav e succ eed ed in cutting costs to maintain earnings. 

## 3.2.16 Ships and Boats Ship manu facturing expe rience d co ntinual d eclines throug hout the 199 0's. Des pite effo rts by the F ede ral G ove rnme nt to stimulat e investment in converting the industry f rom production of military ships to merchant ships, the U.S. Navy remains the primary cust omer of shipbuilders. The U.S. Navy dramatically reduced it s orders for new vessels since the end of t h e Co ld W ar, and has de com mission ed m any ship s and subm arines. T he N avy de creas ed its fleet b y 208 ships fro m 19 85 to 199 8. Altho ugh the Na vy plan s to ad d 66 new sh ips thro ugh co nstructio n and conv ersion from 2 000 throug h 20 04, this represent s a decline of over 60 percent i n the procurement of new ships sin ce the 1980' s. The shi p buildi ng indus trywas
3-11MP&M EEBA Part I: Introduction and Background Information Chapter 3: Profil e of the MP&M Industry S ectors helped by t he Oil Polluti on Act of 1990, wh ich re quired al l oiltanker s ente ring U.S. ports t o have double hul ls. General eco nom ic woe s and instability in the M iddle East a re exp ected to hurt the ships an d bo ats indu stry. This s ector als o manuf actures recr eati onal boats , wi th s ales that re fl ect overal l t rends in r ecreati onal expendi tur es. The U.S. boat bu il ding busi ness is the worl d’s leading su ppli er of recr eati onal craf t. Despite th is, rapi d growt h inthe marke t f o r smaller perso nal water craft (e.g., jet skis) has led to an increase in imp orts of boa ts. 

## 3.2.17 Stationary Industrial Equipment The stationary indust rial equipment sect or includes firms that manufactur e machinery and machinery parts used f or oil, paper, and f ood production, printi ng and packag ing , as well as he ater s and a ir c onditioner s, elec tri c gene rat ing equi pment, and mot or generators. T hese industries also pro duce large metal-working m achines used in making parts for o ther industries. The industries supply ing oi l and gas producti on, paper product ion, an d print ing machinery wer e aff ected by s imil ar global fact ors, an d consequent ly f ollowed similar trends
. Low petr oleum pric es aff ected oil producti on in 1998. Natur al gas pro duc tion wa s influenc ed b y the low oil pric es, whic h put p ressure on the gas ind ustry to re duc e cos ts in ord er to co mpe te. These factors led to a decline of 38 percent in r e al value of shipments for oil production equipment manufacturers in 1998 and 1999. T he price of petroleum increased in 1999 and 2000 and machinery shipments rebounded by 9.2 percent. However, natura l gas pr ices fell in 2 001 , hurting the industry. Paper manufa cturing equi pment has s uff ered f rom eve nts overs eas. Alt hough the U.S. h as s een a de cli ne i n th e produc ti on of paper throughout the latt er half of t he 1990's, the U.S. remains t h e largest producer of paper manufacturing machinery
. The industry t herefore relies heavily on exports to sustain growth. W ith st ruggling economies overseas, t he industry s a w a decline in value of s hipments from 1996 to 200 0. Printing machinery manufacturers real i zed strong growth during t h e first half of t h e 1990's due t o inc reas ed demand f or newdigi talpres ses, but adecl ine in e xport s re sul ted in sl ower g rowth for the lat er ha lf of the decade. Global events did not have such an impact on manufacturers of packaging machinery, as t he U.S. is not only t h e leading producer of this equipment but al so its l e ading end-user. A va riety of ind ustries m anufac ture eq uipm ent used to pro duc e ene rgy or to pow er eq uipm ent. Re frigeratio n, air con ditionin g, and heating equip men t sales tend to follow grow th in hou sing starts a nd co nstructio n of ne w office buildin gs. A number of factors contribut ed to strong growth in t his indust ry throughout t h e 1990's including record housing starts, r e cord heat i n the s ummer of 1999, repl acement of chlorof luorocarbon ( CFC) air conditionin g unit s, and a large percentag e of new homes being built wit h central ai r conditioning. W ith 66 percent of the exi sting air conditioners containing CFC technology sti ll in operati on, repl acement of these machines provides an opportunit y for growth in thi s indus tryin t he fut ure. Manufacture rs of t urbines , tr ansfor mers, an d swit chboards, al l of wh ich ar e used f or the production of el ectri city , saw con sidera ble gro wth in the la te 19 90s as the d ome stic eco nom y grew. T his streng th has b een lim ited b y the rec ent rec ession
. A number of advance d technol ogies have been devel oped to meet t he demands of a deregulated in dustry
. These new technolog ies are capa ble of pro ducing electricity from sma ller facilities at comp etitive costs. Implementation o f these technologies is not expected to take place for a f e w years, however, unt il t h e effects of deregulation become clearer. 

## 3.3 C HARACTERISTICS OF 

## MP&M M ANUFACTURING 

## S ECTORS The data in t hese analyses come primari ly f rom the Ann ual Su rvey of M anu facturers and the Small Business Administration, although some data from the 1997 Census were used for important economic indicators that were not available in 1996. T h e multi-year analyses presented in this section cover a nine year p eriod from 198 8 to 19 96, the ba se years for the original Ph ase 1 an dPh as e 2 s u r v e y da t a . Alt h o u g h i d e a l l y da t a w o u l d h a v e b e e n pr es ent e d f o r t h e t e n y e ar pe r i od f r om 19 87 t o 1 9 9 6 , OMB reclass ified a nu mbe r of 4-d igit SIC industrie s in 19 87. T his mad e it difficult to c omp are S IC co des b efore and a fter this reclas sif icat ion and res ult ed in i ncomplete dat a in t h e Ann ual Su rvey of M anu facturers for many SIC codes in 1 987
. Becau se the data were incomplete in 1987, 1988 was chosen as the first year of the time series. W ith the exception of data for nonmanufacturing sect ors, singl e-year data f o cus on the year 1996, the base analysis year for the overall MP& M regulatory analy sis
. Because t h e Ann ual Su rvey of M anu facturers doe s not inc lude d ata for n on-m anufac turing sec tors, single -year d ata for t hese sec tors ar e for 1997, t he most re cent y ear of t h e Economic Cens us .

3-12MP&M EEBA Part I: Introduction and Background Information Chapter 3: Profil e of the MP&M Industry S ectors 

## 3.3.1 Domestic Pr oduction a. Output The two most common measure s of manuf acturing output are value of sh ipme nts (VOS) and value added (VA)
. Historical t rends in these measures provide i nsight into the overall economic healt h of an industry
. Value of shipments i s the sum of the receipts a manufacturer earns f rom the sale of it s outputs. I t is an indicator of the overallsize of a market or t he size of a firm in relati on to its market or competit ors. Value added is the diff erence between the value of shipments and the value of purchased non-labor inputs us ed to make the products sold. It i s used to measure the value of production activit y in a particular industry. The ratio of VA to V O S is an indicator of the importance of the industry ’s contribution to the t otal value of t he produ ct. A rat io cl ose t o zero indicates that t he val ue of the input mat eri als is much mor e important than th e value of industry p roce ssing. A r atio clo se to o ne ind icates tha t industry p roce ssing is the p rimary so urce o f value in the pro duc t. Table 3. 4 pres ents Department of Commer ce dat a on VOS and VA for the MP& M manufact uri ng se ctor s dur ing the peri od from 1988 to 1996. VOS for t he ent ire MP& M manufact uri ng se ctor grewfr om 1.27 t ril li on doll ars in 1988 to 1.51 t ril li on doll ars in 1996, for an ave rage annua l gr owth rat e of 2. 1 percent. VA for t he entire indu str y gr ew at a sl ower annualrat e of 1.5 percent, from 638 billion dollars to 720 b illi on dollars. In comparison, US GD P grew at 2.6 percent per year over the same pe riod. Va lue ad ded as a pe rcent o f value o f shipm ents for th e M P & M manu facturing industrie s as a wh ole wa s 48 p ercen t in 199 6. This indicates that 48 per cent of t he val ue of the ir output was t he re sul t of MP& M processing and 52 percent was the cost of purchase d inputs. In general, M P & M proce ssing is important to the value o f MP &M output pro ducts. Growth in the indivi dual sectors was generally consistent with t he overall trend i n MP &M manufacturing of s low positive growth. Fourteen of the ninet een sect ors had posi tiv e growth in VOS, and thirteen had posit ive gr owth in VA. Railroad equipment manufacturers enjoyed the largest average annual growth of 7.6 percent in VOS. Electronic equipment experienced the next largest average growth, wit h annual growth in VOS averaging 5.1 percent. Only the aerospace and ordnance in dustri es experi enced a large decli ne in VOS and VA over this period. Aer ospace VOS declined 7.6 perce nt per year and o rdnance VO S declined 7.3 perc ent per year. B oth decre ases were attributab le to cutbacks in go vernmen t defense spending at the end of the Cold War. VA as a percent of VO S for the indivi dual sectors varied subst antially from the manufacturing average of 48 percent. The ordna nce sector ha d the highest ratio of V A to V OS, at 6 7.6 pe rcent, and the instrumen t and printed w iring board sectors also had high ratios. In these sectors, industr y processing is the most important part of the value of t he fini shed product. Secto rs wit h lowrat ios of VA to VOS in clude d the iron and steel sect or, r ailroad s ector , bus and truck sect or and e speci ally the mot or vehicle sector, for which V A as a pe rcent of VO S was eq ual to only 33.7 percent. T he value of inpu t materials was the most importan t contributor to the value of prod ucts in these sectors. 

### b. Number of facilities and firms The number of f aci li ti es and f i rms i n anin dus try i s anin dic ato r of in dus try s ize and s t r uct ure . Ch ang es in the number of f i rm s and faci lities can indi cate whet her or not the i ndustr y is experien cing gr owth, and changes in the r atio of faci lities to fir ms can indica te wheth er an ind ustry is be com ing mo re integr ated. Th is pro file uses S U S B d ata to a ssess the n umb er of firm s and facilities in the M P & M manu facturing sector . The SU SB did not begi n it s surv ey unt il 1989, and it did not i nclude f irms in it s surv ey unt il a year l ater. Thus, f acil iti es data are pres ented in 1989 and firm dat a are prese nted in 1990. Ta ble 3 .5 sho ws the nu mbe r of M P & M manu facturing facilities in 19 89 a nd 1 996 and th e num ber o f firms in 19 90 a nd 1 996
. Ov erall, the n umb er of firm s grew 2 .1 pe rcent a nnua lly and the numb er of fac ilities grew 1 .4 pe rcent a nnua lly over th is period. By 1996 , there were 144,603 manufacturing fi rms and 153,35 4 facili ties. The average numb er of facil ities per firm was relati vely constant , with only a minor decrease from 1.07 in 1990 to 1.06 in 19 96. Mo st MP& M m anufacturers ar e single-facility firms. Trends in t he indi vidualmanufact uringsector s were ge nerall y consi stent with overalltrends in manuf acturing. The aeros pace industry was the only MP& M m a nufacturing sector to experience signi ficant downsizing during this period, with f irms and facilities decreasing annually by 4.1 a nd 4.2 p ercent, respec tively. The iron and steel industry experienced a more m odest decrease in number of firms and faci liti es. The number of firms and facil ities in the printed wiring board sector grew the fastest, by a little over five perc ent ann ually.
3-13MP&M EEBA Part I: Introduction and Background Information Chapter 3: Profil e of the MP&M Industry S ectors Table 3.4: Rea l Value of Sh ipments and Value Added: MP&M M anufactur ing Secto rs (millions, 2001$)

Sector Valu e of Industr y Shipm ents Value Added by Manufacture
1988 1996 Average Annual Growth

Rate 1988 1996 Averag e Annual Growth

Rate Value Added as a % of Value of

Shipm ents in 1996 Aerospace 35,991 19,111 -7.6% 24,167 10,645 -9.7% 55.7% Aircraft 101,554 88,897 -1.7% 51,692 48,204 -0.9% 54.2% Bus & Truck 9,843 14,362 4.8% 3,622 5,513 5.4% 38.4% Electronic Equipment 85,498 127,347 5.1% 48,862 67,071 4.0% 52.7% Hardwa re 152,597 180,756 2.1% 82,644 98,674 2.2% 54.6% Household Equipm ent 87,764 98,763 1.5% 42,595 45,551 0.8% 46.1% Instrume nts 118,322 136,377 1.8% 78,160 89,052 1.6% 65.3% Iron and Steel 19,396 19,963 0.4% 7,228 7,103 -0.2% 35.6% Job Shops 11,733 14,927 3.1% 6,967 8,307 2.2% 55.7% Mobile Industrial Equipme nt 45,150 56,159 2.8% 21,356 24,302 1.6% 43.3% Motor Vehicle 315,641 387,547 2.6% 107,025 130,627 2.5% 33.7% Office Machine 86,352 110,084 3.1% 43,008 43,849 0.2% 39.8% Ordnance 10,241 5,567 -7.3% 6,631 3,761 -6.8% 67.6% Other Meta l Products 58,809 63,995 1.1% 36,039 37,431 0.5% 58.5% Precious Meta ls and Jew elry 10,790 9,242 -1.9% 5,018 4,403 -1.6% 47.6% Printed Wiring Boards 10,162 11,408 1.5% 5,927 6,997 2.1% 61.3% Railroad 4,195 7,533 7.6% 1,893 2,761 4.8% 36.7% Ships and Boat s 18,802 16,666 -1.5% 10,086 8,424 -2.2% 50.5% Stationary Industrial Equipment 176,961 236,213 3.7% 97,388 125,443 3.2% 53.1% Total 1,359,801 1,604,916 2.1% 680,309 768,118 1.5% 47.9% U S G D P 7,189,924 8,821,069 2.6% n/a n/a n/a n/a Source: D epartment of Commerc e, Bureau of t he Census, Annual Survey of Manufacture rs; Economagi c Horizontal integrati on varied substantial ly across sect ors. The railroad sector, wi th 1.41 facilities per f irm in 1996, was th e most horizontally integrat ed, but the iron and st eel and aerospace sectors also had high numbers of faci liti es per firm. The preci ous met als and je welr y se ctor had nearly a one t o one rati o betwe en f acil it ies and f irms , i ndicati ng a v erylow l evel of horizontal int egration.

3-14MP&M EEBA Part I: Introduction and Background Information Chapter 3: Profil e of the MP&M Industry S ectors Table 3.5: Number of Firms and Facilities: MP&M Manufacturing Sectors

Sector Numbe r of Fir ms Number of Facilities Facilities per Firm
1990 1996 Averag e Annual Growth

Rate 1989 1996 Averag e Annual Growth

Rate 1990 a 1996 Aerospace 109 85 -4.1% 143 106 -4.2% 1.33 1.25 Aircraft 1,428 1,486 0.7% 1,633 1,691 0.5% 1.16 1.14 Bus & Truck 889 953 1.2% 1,016 1,040 0.3% 1.11 1.09 Electronic Equipment 5,649 6,180 1.5% 6,396 6,693 0.7% 1.08 1.08 Hardwa re 34,984 37,832 1.3% 37,861 40,044 0.8% 1.06 1.06 Household Equipm ent 6,787 7,563 1.8% 7,914 8,303 0.7% 1.11 1.10 Instrume nts 7,963 9,730 3.4% 8,959 10,552 2.4% 1.10 1.08 Iron and Steel 597 583 -0.4% 784 770 -0.3% 1.30 1.32 Job Shop 4,798 5,280 1.6% 5,104 5,549 1.2% 1.04 1.05 Mobile Industrial Equipment 3,318 3,341 0.1% 3,606 3,591 -0.1% 1.07 1.07 Motor Vehicle 4,991 6,044 3.2% 5,977 7,024 2.3% 1.17 1.16 Office Machine 1,828 2,002 1.5% 2,050 2,087 0.3% 1.07 1.04 Ordnance 340 421 3.6% 385 442 2.0% 1.09 1.05 Other Meta l Products 11,517 13,819 3.1% 12,069 14,198 2.3% 1.03 1.03 Precious Meta ls and Jewel ry 3,719 3,867 0.7% 3,870 3,892 0.1% 1.01 1.01 Printed Wiring Boards 1,034 1,452 5.8% 1,046 1,530 5.6% 1.06 1.05 Railroad 147 152 0.6% 180 215 2.6% 1.27 1.41 Ships and Boat s 2,511 3,195 4.1% 2,708 3,310 2.9% 1.05 1.04 Stationary Industrial Equipment 35,231 40,618 2.4% 37,261 42,317 1.8% 1.04 1.04 Total 127,840 144,603 2.1% 138,962 153,354 1.4% 1.07 1.06

a Calculated using data from 1990 for facilities and firm s. Source: Small Business Administration, Statistics of U.S. Businesses.



### c. Employment Em ploym ent is a m easur e of the le vel and trend o f activity in an ind ustry. W hile em ploym ent gro wth gen erally signa ls economi c st reng th in an i ndust ry, strong pr oductivit y gr owth and sc ale economi es can yi eld g rowth inreve nues that ex ceeds growth in employment. Changing patt erns of labor uti lizati on relative t o output are particularly important in understanding how regula tory req uirem ents ma y translate in to job losses b oth in ag grega te and at the co mm unity level. T his pro file prese nts DOC data on empl oyment for 1988 and 1996. Table 3.6 shows that employment in the MP& M m anufacturing sectors as a whole decreased modestly between 1988 and 1997. O v er those years, total employment dropped from 7.98 m illi on to 7.55 million, an average decli ne of 0.7 percent annually. To put this in perspective, VO S for the enti re MP &M manufacturing sector grew about 2.1% annually over t h e same pe riod of ti me, s ign ali ng that growt h inoutput ha s beendriv en by incr eases in c apit al e xpendi tur es an d labor pro duc tivity, not by inc rease s in emp loyme nt. Although total MP&M industry employment declined over the analysi s period, not all sectors experienced employment declin es. Employment grewor stayed const ant i n ten of the nineteen s ectors. However, whi le a number of sect ors evi denced 3-15MP&M EEBA Part I: Introduction and Background Information Chapter 3: Profil e of the MP&M Industry S ectors large percentage and absolute losses in employment, no sectors s howed large percentage gains and only two showed large absolute gains i n employment . Employment shrank by 11.6 percent annually i n the aerospace sector, 9.1 percent in the ordnance sector, and 5.6 percent in the air craft sect or, due to cutbacks in defense s p ending following t he Cold W a r. The greate st abso lute de cline o ccurr ed in the aircraft se ctor, w hich lo st almo st 220 ,000 job s. Th e large st perc entage increa se in employment was in the rai lroad sector, which gai ned just 2.1 percent annually
. The largest absolute in crease in employment over the nine years w as in the stationary industrial equipme nt sector, which gained 127 ,100 jo bs. Table 3.6: Employmen t: MP&M M anufactur ing Secto rs
Sector Number of Employees 1988 1996 Average Annual Growth Ra te Aerospace 223,700 81,000 -11.9% Aircraft 596,600 376,800 -5.6% Bus & Truck 63,900 67,700 0.7% Electronic Equipment 602,500 604,800 0.0% Hardwa re 1,246,200 1,307,600 0.6% Household Equipm ent 584,900 570,600 -0.3% Instrume nts 886,500 753,800 -2.0% Iron and Steel 65,500 67,900 0.5% Job Shops 123,300 129,200 0.6% Mobile Industrial Equipme nt 232,400 232,600 0.0% Motor Vehicle 928,000 974,000 0.6% Office Machine 329,800 259,100 -3.0% Ordnance 86,500 40,200 -9.1% Other Meta l Products 368,100 361,400 -0.2% Precious Meta ls and Jew elry 87,100 65,800 -3.4% Printed Wiring Boards 80,900 88,300 1.1% Railroad 25,900 30,600 2.1% Ships and Boat s 182,900 141,300 -3.2% Stationary Industrial Equipment 1,269,800 1,396,900 1.2% Total 7,984,500 7,549,600 -0.7% Source: Department of Commerce, Bureau of the Census, Annual S urvey of Manufacturers.

3-16MP&M EEBA Part I: Introduction and Background Information Chapter 3: Profil e of the MP&M Industry S ectors 

### d. Capital expenditures Capital expenditures are an i ndicator of production characteris tics and market st ructure. Capitalexpenditures are the amount of mone y spe nt annual lyon capi tal , whi ch i nclu des equ ipment , mach iner y, vehi cles , s oftware, buil ding s, int ell ectu al r igh ts, or any ot her pe rmanent addi ti on to afi rm. Capit al doe s not ref er t o input mat eri als that ar e cons umed i n th e cour se of pro duc tion. N ew ca pital exp end itures are need ed to mod ernize , expa nd, an d rep lace a firm’s existing pro duc tion ca pac ity to mee t grow ing de man d or to stay cu rrent with new re gulation s or ch anging techno logy. An indust ry wi th hi gh capit al stock compared to it s employee payrollis cons idered capi tal int ensiv e: i ts production rel ies mor e hea vily on m achine ry, softwar e, and other fo rms o f capita l than on labo r. An ind ustry with hig h cap ital requ ireme nts can have s igni ficant barr iers to ent ry f or new firms, making the mar ket l ess competitiv e. Ta ble 3 .7 pre sents D O C data o n new capita l expe nditure s by M P & M manu facturing sector . Table 3.7: New Capital Expenditures: MP&M Manufacturing Sectors

Sector Capital Expenditures (mill ions, 2001$) Capita l Expend itures per Facility (2001$) 1988 1996 Average Annual Growth Ra te 1988/89 1996 Change from 1988/89 to 1996 Aerospace 1,310 522 -10.9% 9,160,839 4,924,528 -4,236,311 Aircraft 3,015 2,156 -4.1% 1,846,295 1,274,985 -571,310 Bus & Truck 161 213 3.6% 158,465 204,808 46,343 Electronic Equipment 3,118 4,482 4.6% 487,492 669,655 182,163 Hardwa re 3,517 5,624 6.0% 92,892 140,446 47,553 Household Equipm ent 2,150 2,616 2.5% 271,670 315,067 43,396 Instrume nts 4,002 4,832 2.4% 446,702 457,923 11,221 Iron and Steel 420 623 5.0% 535,714 809,091 273,377 Job Shops 353 772 10.3% 69,161 139,124 69,963 Mobile Industrial Equipme nt 1,121 1,121 0.0% 310,871 312,169 1,299 Motor Vehicle 5,697 12,840 10.7% 953,154 1,828,018 874,864 Office Machine 3,044 3,109 0.3% 1,484,878 1,489,698 4,820 Ordnance 196 91 -9.2% 509,091 205,882 -303,209 Other Meta l Products 1,768 1,999 1.5% 146,491 140,794 -5,697 Precious Meta ls and Jew elry 93 156 6.7% 24,031 40,082 16,051 Printed Wiring Boards 430 624 4.8% 411,090 407,843 -3,247 Railroad 78 103 3.6% 433,333 479,070 45,736 Ships and Boat s 483 374 -3.1% 178,360 112,991 -65,369 Stationary Industrial Equipment 4,333 7,222 6.6% 116,288 170,664 54,376 Total 35,288 49,480 4.3% 253,940 322,652 68,712 Source: Department of Commerce, Bureau of the Census, Annual S urvey of Manufacturers. In general, t he MP &M manufacturing sector is relatively capit al intens ive. In 1988, manufacturing capital expenditures were 38.3 billion dollars. They increased by 4.3 percent annually to reach a total yearly invest ment in capitalof 49.5 billion dol lars in 19 96. A verag e yearly c apital e xpe nditure s per firm increa sed fro m $2 54,0 00 in 198 8 to $ 353 ,000 in 199 6. For the most part, changes i n capital i nvestment from 1988 to 1996 in the i ndividual manufacturing sectors foll owed the trend for t he MP& M manufacturing sect ors as a whole. Capitalexpendit ures i n the j ob shop and motor vehi cle se ctors g rew at ove r
3-17MP&M EEBA Part I: Introduction and Background Information Chapter 3: Profil e of the MP&M Industry S ectors 10% annually. The only sectors for which s p ending on new capital declined were aerospace, aircraf t, ordnance, and ships and boa ts. Th ere wa s large v ariation in cap ital expe nditure s acro ss the M P & M sector s. A few ind ustries sto od o ut as be ing extre mely capital inten siv e. Aer ospace fi rms s pent an ave rage of 4. 8 mil li on doll ars on capi talper f irm in 1996, and th e ai rcra ft , mot or vehicle, and off ice machine sectors each spent more than one mil lion dollars per f irm in 1996. The precious metal and jewelry s ector had the l owest lev els of ca pit al inves tment , wi th on ly$40,000 s pent per f irm in 1996. 

## 3.3.2 Industry/Market Structure A numb er of fa cto rs play an impo rt ant rol e i n det ermini ng marke t s t r uct ure for an i ndus try, in clu din g the barri ers th at fi rms face in entering and exiting t h e market, the degree to which f irms in t h e market are vertical ly and horizontally integr ated, an d the extent to which ma rkets have be en globa lized. The following sections discuss these facto rs. 

### a. Fac ility size Facility s ize i s an i ndicat or of economies of scal e. The presen ce of manylarge faci lities can indi cate t hat t here are a dvanta ges to bu ilding o n a large r scale, su ch as d ividing la bor mor e efficiently, utilizing equip men t more effectively, o r getting b ulk discounts. Table 3.8 shows 19 97 Census data on the distributi on of manufacturing f a cilities and VOS by employment size category and M P & M sector . The M P & M industry is c harac terized by a larg e num ber o f small facilities. T he C ensus d ata ind icate tha t, in 1997, 98 .6 percent of allfacilities in the MP& M industry employed less than 500 employees. Those facilit ies, however, accounted f or only 59 percent of the t otal v alue of shipment s fr om the manuf acturing indus tri es. The 1.4 per cent of faci lities with500 or more employees g enerat ed 41 percent of the t otal VOS from th e manufact uringindust ries
. These l arge f acil iti es are like ly to enjo y substa ntial eco nom ies of sca le.

3-18MP&M EEBA Part I: Introduction and Background Information Chapter 3: Profil e of the MP&M Industry S ectors Table 3.8: Number of Faci lities and Va lue of Shi pments b y Employ ment Siz e Categor y: MP&M Man ufacturin g Sectors i n 1997
Sector Number of Facilities Valu e of Shipments (m illions , 2001$) 1 to 19 20 to 99 100 to 499 500 to 2,499 2,500 or more 1 to 19 20 to 99 100 to 499 500 to 2,499 2,500 or more Aerospace 33 23 20 13 10 42 991 15,993 185 2,916 Aircraft 8 9 8 4 4 1 2 7 0 7 2 3 2 7 1 6 10,087 74,417 2,744 17,913 Bus & Truck 658 335 154 18 1 675 8,013 573 2,366 3,357 Electronic Equipment 3,450 2,086 1,019 205 21 2,945 37,794 37,178 14,258 54,660 Hardwa re 26,065 11,854 2,686 189 0 20,669 79,456 3 69,005 25,619 Household Equipment 4,958 2,274 1,110 191 11 3,745 40,843 7,314 13,747 37,067 Instrume nts 6,741 2,667 1,103 253 20 5,592 44,850 21,168 17,124 52,680 Iron and Steel 278 292 205 13 0 528 11,072 0 4,530 4,254 Job Shop 3,701 1,654 199 6 0 2,103 5,610 0 7,273 343 Mobile Industrial Equipment 2,116 990 383 90 9 1,937 17,351 8,913 7,219 26,684 Motor Vehicle 4,004 1,874 1,206 324 79 3,495 54,221 231,896 13,404 119,088 Office Machine 1,408 485 218 73 21 1,553 16,551 59,499 4,842 35,440 Ordnance 298 77 40 17 2 168 1,472 935 522 2,686 Other Metal Products 11,265 2,375 611 68 3 5,382 21,579 7,473 12,511 16,812 Precious Meta ls and Jew elry 3,250 480 100 12 0 1,777 3,436 0 2,864 1,666 Printed Wiring Boards 801 412 156 20 0 526 4,322 0 2,022 3,334 Railroad 81 71 54 13 1 9 9 2,659 1,222 678 3,714 Ships and Boat s 3,755 469 179 25 6 1,314 5,714 6,414 2,036 2,404 Stationary Industrial Equipment 30,513 8,555 2,344 343 12 18,793 86,348 10,837 50,039 69,921
Total 104,274 37,413 12,056 1,947 227 72,061 452,366 483,834 227,368 480,558 Source: De partment of Commerc e, Bureau of t he Census, Census of M anufacturers , 1997. Althoughthe majority of MP &M indust ry f acil iti es are s mall, the di stri bution of faci lities by employment size c ategory varie s substa ntially amo ng the 1 9 M P & M sector s. Th e aero spac e, aircra ft, moto r vehic le, and railroa d sec tors all ha d pr opo rtionally high nu mbe rs of larg e facilities. T he ae rosp ace se ctor, in p articular , had la rge ec ono mies o f scale, with 2 3 pe rcent o f its facilities employing 500 or more employees. The hardware, job shop , other metal products, precious metal, and ships and boats sec tors h ad proportional ly l arge numbers of smal l fa cilities
. At l east 93 perc ent of faci lities in each of t hese sec tors ha d less than 100 emplo yees. 

### b. Firm size This profi le use s firm employment size a s an i ndicat or of market power and barri ers t o entry . If the l argest fir ms in an industry own disproportionately many facil ities or control a large portion of industry output, then they may have s ignif icant market power. These firms can use thei r large production capacities to control and exploit markets
. The presence of many lar ge f irms in an in dust ry c an al so i ndicate t hat ther e are barri ers to en try into that i ndust ry, suchas ca pit al r equir ement s or
3-19MP&M EEBA Part I: Introduction and Background Information Chapter 3: Profil e of the MP&M Industry S ectors economies of scale, that give existing fi rms in the i ndustry a competiti ve advantage. EPA used 1 996 SU SB da ta to assess the comp etitiveness of the MP &M manufacturing ind ustries. Ta ble 3 .9 pre sents the d istribution of ma nufactu ring firms, fa cilities, and VO S by firm emp loyme nt size an d M P & M sector . Overall, most MP&M manufact uringfir ms were smal l, but the f irms t hat wer e big owned many faci lities an d had dispr oporti onate lyhig h rec eipt s. In 1996, 138,492 f irms , equ al t o 96 perce nt of manuf acturers , ha d few er than 500 emp loyees
. The se sma ll busine sses ow ned 92 p ercen t of all facilities b ut had total sales of only 4 18.3 billion d ollars, eq ual to 28 percent of tot al e stimated r ecei pts. In 1996, 6,111 f irms had 500 or more empl oyees . Thes e firms own ed ei ghtpercent of all facilities bu t had e stimated receip ts of 1.0 8 trillion d ollars, eq ual to 7 2 pe rcent o f the total fo r man ufacture rs. It is likely that there are significant econo mies of scale in the M P & M manufacturing ind ustries. Although MP &M manufacturing f irms tend to be small, firm si ze varies si gnifi cantly among indivi dual sectors. The aerospace, iron and j ob shops, and r ailr oad sectors had proporti onally high numbers of l arge f acil iti es. I n the ae rospace sector, 50 percent of faci liti es were owned by firms with 500 or m ore employees, and 38 percent of firms had 500 or mo re emp loyees
. In con trast, ove r 98 perc ent of firm s in the jo b sho p, othe r meta l prod ucts, pr eciou s meta ls, and sh ips and boa ts secto rs had less than 5 00 e mplo yees.

3-20MP&M EEBA Part I: Introduction and Background Information Chapter 3: Profil e of the MP&M Industry S ectors Table 3.9: Number of Firms, Facilities, and Estimat ed Receipt s by Firm Employme nt Size C ategory , 1996: MP&M Manufacturing Sectors
Sector F i r m s Facilities Estimated Receipts (mill ions, 2001$) 1 to 99 100 to 499 500 or more 1 to 99 100 to 499 500 or more 1 to 99 100 to 499 500 or more Aerospace 51 2 3 2 5 1 2 53 n/a n/a 19,029 Aircraft 1,209 135 142 1,212 158 321 2,453 2,840 93,860 Bus & Truck 805 92 56 810 107 123 2,269 2,638 6,702 Electronic Equipment 4,936 681 563 4,977 786 930 12,156 17,353 81,615 Hardwa re 34,162 2,345 1,325 34,398 2,968 2,678 66,557 42,561 61,295 Household Equipment 6,408 665 490 6,455 791 1,057 12,799 17,412 66,409 Instrume nts 8,273 727 730 8,320 842 1,390 17,248 16,243 96,894 Iron and Steel 362 108 113 368 153 249 2,015 4,426 12,737 Job Shops 4,945 240 95 5,001 338 210 7,157 3,487 3,097 Mobile Industrial Equipment 2,875 263 203 2,898 319 374 6,668 6,321 32,129 Motor Vehicle 4,950 614 480 4,987 724 1,313 11,314 21,376 366,635 Office Machine 1,662 167 173 1,668 180 239 5,373 7,535 64,424 Ordnance 358 25 38 358 28 56 329 453 4,213 Other Metal Products 13,097 492 230 13,152 602 444 13,568 10,738 30,677 Precious Meta ls and Jewel ry 3,747 86 34 3,753 89 50 3,559 2,019 2,148 Printed Wiring Boards 1,250 137 65 1,258 150 122 2,231 2,402 5,769 Railroad 99 24 29 101 30 84 326 496 6,271 Ships and Boat s 3,003 137 55 3,012 165 133 2,699 2,954 11,501 Stationary Industrial Equipment 37,669 1,691 1,258 37,835 2,002 2,480 52,700 35,623 119,210 Total 129,861 8,631 6,111 130,614 10,434 12,306 221,420 196,877 1,084,612 Source: Sm all Busines s Administr ation, Statistic s of U.S. Busi nesses, 1996.



### c. Foreign trade Th is pro file uses two mea sures o f foreign com petitiven ess: export dependence and impor t pe netr ati on . Export dependence is the s hare of v alue of shipment s that is exported. I mport penetr ation is t he share of domesti c consumpti on met by imp orts. Fo r bo th mea sures, a h igh valu e indic ates a re latively high ope nness to foreign mark ets and glob al com petition
. This openness has benef its , in cludin g providi ng domesti c consumers with a wider s elect ion of pr oducts and s ervice s at l ower price s, and a llowing dom estic pr odu cers to make pro fits in foreign mark ets. It can h ave c osts, too , if impo rts to do mestic con sume rs are u nreliab le or if fore ign co mpe tition driv es do wn pr ices for dom estic pr odu cers. T his pro file uses 1 996 data from th e Department of Commerce to il lust rate t rends i n forei gn tra de. Table 3.10 shows that overall , the U.S. is an importer of MP& M m a nufactured goods, with net imports of 75.7 billi on dollars in 1996. In general, MP& M industry sectors face gl obal competition, as il lustrat e d by the number of sectors that had both a

3-21MP&M EEBA Part I: Introduction and Background Information Chapter 3: Profil e of the MP&M Industry S ectors hig h export depe ndence and i mport pe netr ati on. For exampl e, i n th e preci ous met als sect or, r oughl y 77 per cent of U.S. con sump tion wa s met b y impo rts, while alm ost 23 perc ent of U .S. pro duc tion wa s sold a s exp orts. Altho ugh o verall the US has a lar ge trad e defic it in M P & M manu facture d go ods and se rvices, the US was a n et exp orter in six of t he ei ght een s ector s f or whi ch bal ance of tra de dat a was avai labl e. Ei ghty one percent of production in th e ordnance s ector and 67 percent of producti on in t he air craft sector was consumed over seas. The aircraf t sector had the highes t absol ute net exports, valued at 27.26 billi on dollars. A few sectors , especiall y aerospace, ships and boats, i ron and steel, and bus and tru ck, were relatively closed to global competiti on, with l ow levels of i mports and exports. Foreign imports had the highest relati ve importance in the precious metal s, offi ce machine, and household equipment sectors. The motor vehicle sector had the highest absolute net imp orts, valued at 63 .12 billion do llars.

3-22MP&M EEBA Part I: Introduction and Background Information Chapter 3: Profil e of the MP&M Industry S ectors Table 3.10: Trade Statistics, 1996: MP&M Manufacturing Sectors
Sector Value of Imp orts (millions,

2001$) Value of Exports (millions,

2001$) Value of Shipm ents (mill ions, 2001$) Implied Domestic Consumption a Import Penetration b Export Dependence c (a) (b) ( c ) (d) ( e ) ( f ) ( g ) Aerospace 143 143 19,111 19,112 0.7% 0.7% Aircraft 14,015 41,278 88,896 61,633 22.7% 67.0% Bus & Truck 410 436 14,362 14,335 2.9% 3.0% Electronic Equipment 31,478 30,615 127,347 128,211 24.6% 23.9% Hardwa re 26,753 20,560 180,756 186,949 14.3% 11.0% Household Equipment 40,697 16,809 98,762 122,650 33.2% 13.7% Instrume nts 18,990 31,462 136,376 123,904 15.3% 25.4% Iron and Steel 937 263 19,963 20,637 4.5% 1.3% Job Shop d n/a n/a 14,927 n/a n/a n/a Mobile Industrial Equipment 10,775 16,634 56,159 50,300 21.4% 33.1% Motor Vehicle 124,203 61,015 387,546 450,735 27.6% 13.5% Office Machine 67,082 47,783 110,084 129,384 51.8% 36.9% Ordnance 647 2,792 5,566 3,421 18.9% 81.6% Other Metal Products 25,282 11,243 63,996 78,035 32.4% 14.4% Precious Meta ls and Jewel ry 15,839 4,607 9,243 20,474 77.4% 22.5% Printed Circuit Boards 2,667 1,947 11,408 12,127 22.0% 16.1% Railroad 1,208 773 7,533 7,969 15.2% 9.7% Ships and Boat s 1,081 1,080 16,666 16,666 6.5% 6.5% Stationary Industrial Equipment 38,809 55,835 236,213 219,187 17.7% 25.5% Total e 421,015 345,274 1,604,915 1,680,656 25.1% 20.5%

a Im plied dom est

ic c onsu mpt ion b ased on v alue of s hipm ents , im ports, a nd ex ports [c olum n d + col umn b - c olum n c]. b Im port pene tra

tion bas ed on im plied dom est

ic c onsu mpt ion a nd im ports [c olum n b / colum n e]. Exp ort d epe nden ce b ased on v alue of s hipm ents and exp orts [col umn c / colum n d]. d As ex plained in the text, job s hops include only two SICs specif ic to job shops,and not fa cilities in other SICs that ma y be oper ating as job shops. e Componen ts may not sum to to tals due to round ing. Source: Department of Commerce, Bureau of the Census. 

### d. Establishme nt births and d eaths The numb er of fir ms starting up and closing each year refl ects the competitiveness of an indust ry. Indust ries wit h high numb ers of the se “birth s” and “dea ths” rela tive to the total num ber o f firms in the ind ustry are likely to ha ve low barrie rs to entry or exit. T hese ind ustries are likely to be com petitive. In dustrie s with low numb er of b irths and death s are m ore like ly to have significant barriers to entry and exit, such as capital requirem ents or econ omies of scale, that ma ke the industries less comp etitive. As discussed in previo us sections, firms in less compe titive industries can manipulate p rices to generate p rofits , while firm s in mo re co mpe titive indu stries hav e little con trol ov er pric es. T his pro file prese nts SU SB data fro m 19 89 to
3-23

cMP&M EEBA Part I: Introduction and Background Information Chapter 3: Profil e of the MP&M Industry S ectors 199 7 on establish men t births an d de aths. T hese d ata are only av ailable by three digit SIC cod e, mak ing it imp ossib le to calc ulate sec tor s pecif ic birthand deat hs r ates . Howeve r, data f or th e MP&M indu str y as a whol e are prese nted. The M P&M manufacturing sector has an annual birth r ate of 8.1 percent and an annual death rate of 7.8 percent, indicatin g that in general the MP& M m anufacturing sector is rel atively competitive. Three digit SIC industry birt h and death rates are muc h mo re var iable, ra nging fro m 4 p ercen t to up to 15 p ercen t. For a mor e com plete d iscussio n, alon g with the th ree d igit SIC birth an d deat h rates , s ee Appe ndi x A. 

## 3.3.3 Financial Condition and Performance Op erat ing m arg in is a mea sure o f industry fina ncial p erform ance . Op erating marg in is define d as V O S less ann ual pa yroll and cost of materials , as a percent of VOS, and thus measures pre-tax operating profitability before capital
- and financingrel ated charg es. Fir ms wi th h igh er oper ati ng mar gin s hav e more c ushi on against operating los ses as a c onsequ ence of flu ctuat ing i nput pri ces, an d thus are li kely to be more st able. Table 3.11 present s DOC data on operatin g margin s for e ach MP& M manufacturing indus try for t he years 1988 and 1996, as well as t he change in operating margin between the t w o years. In 1996, the average operating margin f or the MP &M sectors was 29.6 percent. This was a sli ght increase f rom 198 8, when the average operating margin f or the MP &M manufacturers was 28.0 perc ent . TenMP&M manu fa ctu ri ng s ect ors expe ri ence d in cre ase s i n thei r ope ratin g mar gi ns during t h i s t ime perio d, while nine ind ustries ex perie nced decr eases . Instruments, other metal products, and ordnance were the most profit able sectors, according t o this measure, wi th operating margins around 40 percent. The iron and steel, motor vehicle, railroad, and ships and boats sect ors had the lowest operating margins , all near 22 percent
. The great est increases in operating marg in occur red in t he air craft , ordnance, and bus & truc k indust ries , whi ch allgained bet ween fi ve and si x percent . The great est decr ease occurr ed in t he aerospace industr y, whi ch lost 3.5 perc ent.

3-24MP&M EEBA Part I: Introduction and Background Information Chapter 3: Profil e of the MP&M Industry S ectors Table 3.11: Operating Margin a : MP&M Man ufacturin g Sectors i n 1988 and 199 6 Sector 1988 1996 Change in Operating Margin Aerospace 32.4% 28.9% -3.5% Aircraft 20.6% 26.7% 6.1% Bus & Truck 18.5% 24.4% 5.9% Electronic Equipment 32.0% 33.8% 1.8% Hardwa re 27.5% 29.7% 2.2% Household Equipm ent 29.7% 29.5% -0.2% Instrume nts 37.1% 41.1% 4.0% Iron and Steel 23.2% 22.9% -0.3% Job Shops 31.8% 30.8% -1.0% Mobile Industrial Equipme nt 27.9% 28.2% 0.3% Motor Vehicle 20.9% 22.4% 1.5% Office Machine 31.7% 30.2% -1.5% Ordnance 34.3% 39.6% 5.3% Other Meta l Products 41.9% 40.4% -1.5% Precious Meta ls and Jew elry 27.9% 28.2% 0.3% Printed Wiring Boards 37.2% 36.8% -0.4% Railroad 22.4% 22.1% -0.3% Ships and Boat s 23.2% 22.5% -0.7% Stationary Industrial Equipment 29.4% 31.5% 2.1% All MP&M Manufacturers b 28.0% 29.6% 1.6%

a Operating Margin is calculated as (value of shipments - cost of materials - pay roll)/value of shipments. b Weight ed avera ge by VOS. Source: Department of Commerce, Bureau of the Census, Annual S urvey of Manufacturers. 

## 3.4 C HARACTERISTICS OF 

## MP&M N ON 

## -M ANUFACTURING 

## S ECTORS Eleve n of t he 18 MP&M sect ors inclu de non- manuf acturin g in dust rie s. The non- manuf acturin g act ivi ti es ar e def ined by 50 four -di git SIC codes : 26 t rans portati on SIC code s, 18 service SIC codes , f ive ret ailtra de SIC codes , an d one whol esal e tr ade SIC cod e. M P & M facilities ma y perfo rm b oth m anufac turing an d no n-man ufacturin g activities. The analyses presented in thi s section cover 1997 only, because the Census does not collect dat a annually for nonmanuf acturin g SICs as i t does for manuf acturers in t he Annu al Survey of Manuf acturers . The pr ofi le i s bas ed on dat a fr om the 1997 Censuses of Transport ation, Communicati ons, and Uti lities; Service Indust ries ; Retai l Trade; and Wholesal e Trade. 

## 3.4.1 Domestic Pr oduction a. Output Th is pro file uses sale s and receip ts as a me asure of outp ut. Th e sum of the re ceipts a manu facture r earn s from the sale o f its outputs is an indic ator of the over all size of a market or the s ize of a fi rm in re lati on to it s market or competitors. EPA us ed Dep artment of Co mmerc e data to assess sales an d receipts for the M P & M non-manu facturing sectors. Table 3. 12 shows sal es an d recei pts by se ctor for MP& M non-manu fact urer s. The MP&M nonmanu fact uri ng se ctor gener ated 1.25 tril li on doll ars in s ales and re ceipt s i n 1997. Motor vehi cle repai r and ma int enanc e, with s ales and re ceipt s of 870 bil li on doll ars, accounted f or al most 70 percent of tot al s ales and re ceipt s. Bus and t ruck , wi th s ales and re ceipt s of 209

3-25MP&M EEBA Part I: Introduction and Background Information Chapter 3: Profil e of the MP&M Industry S ectors billion d ollars, ac cou nted fo r ano ther 17 perc ent. T hese tw o veh icle sec tors m ade up 8 7 % of total no n-man ufacturin g outp ut. The smallest sector was pre cious metals and jewelry, which acco unted for on ly 367 m illion dollars in sales and receip ts. Table 3.12: Sales/Receipt s: MP&M Non -Manufactu ring Sectors in 1997

(million s, 2001$) Sector Outpu t a Share Aircraft 9,935.9 0.8% Bus & Truck 209,316.1 16.7% Household Equipm ent 2,848 0.2% Instrume nts 7,402 0.6% Motor Vehicle 870,451 69.6% Office Machine 30,930 2.5% Other Meta l Products 22,041 1.8% Precious Meta ls and Jew elry 367 0.029% Railroadb 30,728 2.5% Ships and Boat s 37,383 3.0% Stationary Industrial Equipment 29,747 2.4% Total 1,251,148 100.0%

a Total s ales f or retail a nd wholesa le trade, total rec eipts for servic e industries , total rev enue for transportat ion. b Railroad sales/receipts is estimated f rom 1992 data. Source: Department of Commerc e, Bureau of t he Census, Census of Tr ansportation, Ce nsus of Wholesale Trade, Census of Retail Tr ade, Census of Service Industries , 1997. 

### b. Number of facilities and firms The numb er of facil ities and firms in an industry is an indicator of t h e size and struct ure of an industry
. Increases and decreases in the number of firms and facili ties can i ndicate whether an indust ry is gr owing or shrinking, and changes in the rati o of faci lities an d fir ms can in dicate whether an indus tryis becomi ng more integrate d and concentr ated. This profi le use s SBA data to asses s the number of f acil iti es and f irms in the non- manufact uringsector from 1989 to 1996. The SBA changed it s survey to i nclu de firms i n 1990, but dat a on the numbe r of fi rms are notavai labl e fr om thi s source in 1989. Ta ble 3 .13 sh ows the numb er of fac ilities and firm s in the M P & M non-m anufac turing sec tors in 1 989 /199 0 and 199 6, with average annual growth rates. The numb er of fir ms and facilities grew fr om 198 9 to 1996 in all of the sect ors. The average numbe r of fa cil it ies per fi rm s hrank s l i ght lyover th is ti me period, fr om 1. 13 to 1.11 , du e t o th e f act th at th e nu mber of f i rm s in the no n-man ufacturin g secto r grew at 4.5 p ercen t per yea r while the numb er of fac ilities grew a t only 3.6 perc ent pe r year. In general, mo st MP &M non-manu facturers are single facility firms. Although the number of facil ities and firms increas ed for all of t h e sectors over thi s time period, not al l industries grew at th e same r ate. The number of f acil it ies in t he other me talproduct s se ctor grewat on ly0.6 per cent annua ll y, and the numbe r of faci lities in the s tati onary i ndustr ial equipment and inst ruments sector s grew at 1.3 percent annual ly. In cont rast , th e numbe r of f acil it ies in t he of fi ce mach ine sect or gr ew by 20. 2 percent annual lyand the numbe r of fi rms i n th e off ice machi ne se ctor grew b y 23.7 perc ent ann ually. Concent rat ion v ari ed acros s the se ctor s. Stationar y i ndust ria l equ ipment was t he most concentrated s ector , wi th an aver age of 1.45 facilities per firm in 199 6. The other metal pro ducts, househ old equ ipment, and office machine sec tors were the least con centra ted sec tors, with o nly 1.04 , 1.06 , and 1 .07 fa cilities per firm, resp ectively.

3-26MP&M EEBA Part I: Introduction and Background Information Chapter 3: Profil e of the MP&M Industry S ectors Table 3.13: Number of Firms and Facilities: MP&M Non-Manufacturing Sectors

Sector Numbe r of Fir ms Number of Facilities Facilities per Firm
1990 1996 Averag e Annual Growth Ra te 1989 1996 Averag e Annual Growth

Rate 1989/90 1996 Aircraft 2,024 3,281 8.4% 2,463 4,062 7.4% 1.22 1.24 Bus & Truck 74,719 113,840 7.3% 88,128 127,675 5.4% 1.18 1.12 Household Equipm ent 3,234 3,706 2.3% 3,367 3,935 2.3% 1.04 1.06 Instrume nts 7,214 7,444 0.5% 8,365 9,185 1.3% 1.16 1.23 Motor Vehicle 183,986 213,355 2.5% 203,592 234,542 2.0% 1.11 1.10 Office Machine 9,206 32,916 23.7% 9,714 35,150 20.2% 1.06 1.07 Other Meta l Products 32,865 36,290 1.7% 34,683 37,902 1.3% 1.06 1.04 Precious Meta ls and Jew elry 1,379 1,625 2.8% 1,535 1,838 2.6% 1.11 1.13 Railroad a n/a n/a n/a n/a n/a n/a n/a n/a Ships and Boat s 5,739 8,290 6.3% 6,561 9,262 5.0% 1.14 1.12 Stationary Industrial Equipment 14,672 15,075 0.5% 20,880 21,791 0.6% 1.42 1.45 Total 335,038 435,822 4.5% 379,288 485,342 3.6% 1.13 1.11

a The rai lroad sect or has only two non-m anufact uring SIC c odes, both of which w e re excluded from the 1997 Census
. Thus no dat aon railroads is available. Source: Small Business Administration, Statistics of U.S. Businesses.

3-27MP&M EEBA Part I: Introduction and Background Information Chapter 3: Profil e of the MP&M Industry S ectors 

### c. Employment Employment i s a measur e of th e leveland tren d of activity in an indus try . Payrol l is a measure of the s kil l le vel of employee s and of th eir va lue t o the product ion process
. While employment growt h is of ten corr elat ed witheconomic st rength in an indu str y, strong pr oductivit y gr owth and sc ale economi es can res ult in g rowth inreve nues that cou ld not be predi cted from employment trends alone. Trends in labor uti lizati on relative t o output are important in underst anding how regulatory requ ireme nts may tra nslate into job losses b oth in ag grega te and at the co mm unity level. Table 3.14 shows DOC data on employment and payrol l for the non- manufact uringMP &M sector s in 1997. Total emp loyme nt for the n on-m anufac turing sec tor wa s 5.99 million, a nd to tal payro ll was $2 01 b illion. Av erage yearly pay/ employ ee was $33,610. Th e ma jority o f total em ploym ent cam e from the mo tor veh icle and bus an d truck sector s. Th e mo tor veh icle sec tor had 2.6 mil li on empl oyees , an d the bus an d tru ck se ctor had 2. 1 mil li on empl oyees . Toget her t hese two s ector s acc ount ed for over 78 percent o f total employme nt in the non-manufac turing sector. The precious m etals and jewelry secto r had the lowe st emp loyme nt, with on ly 5,59 9 em ploye es. Wo rkers in a f ew indus tri es were h ighl y compensat ed. The railroad sector paid it s workers $58,851 per year, and the of fice mac hine sec tor pa id $5 6,09 2 pe r year. O n the o ther ex treme , work ers in the p recio us me tals and jewelr y sector earne d on ly $20,121 per year. Table 3.14: Employment and Payroll, 1997: MP&M Non-Manufacturing Sectors Sector Employment Share Payroll (thou sands, 2001$) Share Pay/Employee Aircraft 121,210 2.0% 3,286,985 1.6% 27,118 Bus & Truck 2,106,432 35.1% 65,643,990 32.6% 31,164 Household Equipm ent 25,455 0.4% 935,661 0.5% 36,757 Instrume nts 76,970 1.3% 2,530,404 1.3% 32,875 Motor Vehicle 2,622,049 43.7% 83,223,310 41.3% 31,740 Office Machine 235,332 3.9% 13,200,240 6.6% 56,092 Other Meta l Products 226,069 3.8% 6,981,264 3.5% 30,881 Precious Meta ls and Jew elry 5,599 0.1% 112,659 0.1% 20,121 Railroad 197,421 3.3% 11,618,460 5.8% 58,851 Ships and Boat s 178,560 3.0% 7,221,006 3.6% 40,440 Stationary Industrial Equipment 198,735 3.3% 6,701,350 3.3% 33,720 Total 5,993,832 100.0% 201,455,328.90 100.0% 33,610.44 Source: D epartment of Commerc e, Census of Transportation, Census of W holesale Trade , Census of Retail Trade, Census of Service Industries , 1997. 

## 3.4.2 I ndustry Structu re and Competitivene ss A numb er of fa cto rs play an impo rt ant rol e i n det ermini ng marke t s t r uct ure for an i ndus try, in clu din g the barri ers th at fi rms face in entering and exiting t he market, the degree to which f irms in t he market are vertical ly and horizontally integr ated, an d the extent to which markets have been globalized. This profil e shows facility si ze and firm size as measures of industry structure and comp etitiveness in the MP &M non-manufacturing s e ctor. 

### a. Fac ility size Facilit y size i s an indicator of economies of scal e. The presence of many large facil ities in an indust ry can indicat e that th er e are adv anta ges to buil ding on a l arger scal e, s uch as divi ding labor more ef fi cientl y, uti li zingequi pment more ef fectively, or getting bulk discoun ts. EPA u sed data from the 199 7 Cen sus to assess facility size for manufacturing facilities.
3-28MP&M EEBA Part I: Introduction and Background Information Chapter 3: Profil e of the MP&M Industry S ectors Non-manufact uringfaci lities t end to be smal l. There were 255,602 non-manuf acturing faci lities, or 52.9 percent , th at employed 4 emp loyees or less. These facilities accounted for 7 percent of sal es and receipts in t h e non-manufacturing MP &M sectors. Facil ities with l ess than 20 employees accounted for 88 percent of all non-manufact uring faci liti es but generated only 24 percent of non-manufacturi ng revenues. Facilities wi th more than 100 employees emp loyed less t h an one perc ent of to tal emp loyees , but gen erated 17 p ercen t of total re venu es. No n-man ufacturin g M P & M facilities ap pea r to experien ce sig nif icant economies of scale
. Although the indivi dual non-manufacturing s ectors tended to have small f a cilities, t h ere was some variation between sectors in facil ity s i ze. The aircraft sector and the ships and boats sect or had relatively large faci liti es, probably because these s ectors are involved with l a rge-scale t ransportation. For both sectors, 6.3 percent of faci liti es had more than 100 em ployees. In contr ast , the other me talproduct s and pr eciou s met als and je welr y se ctor s had mos tl y sma ll fac il it ies
. Nin ety four percent of faci lities in the ot her metal products s ector and 96 perce nt of faci lities in the pre cious met als an d jewelr y sect or had les s t han 20 em ployees. Ta ble 3 .15 p resen ts the num ber o f facilities and total sales by facility em ploym ent size c atego ry for ea ch ca tegor y. Table 3.15: Nu mber of Facilities an d Sales/Recei pts by Faci lity Emp loyment Size Cat egory: MP&M Non -Manufactu ring Sectors in 1997
Sector Number of Facilities Sales/Receipts (mil lions, $2001) 0 t o 4 5 t o 9 10 to 19 20 to 99 100 or more 0 t o 4 5 t o 9 10 to 19 20 to 99 100 or more Aircraft 1,936 936 720 870 299 381 482 879 2,767 5,433 Bus & Truck 67,959 24,548 19,355 21,294 3,573 15,924 16,044 24,189 75,663 81,036 Household Equipm ent 1,886 735 456 305 37 358 411 551 1,072 457 Instrume nts 5,535 1,737 988 711 131 1,017 936 1,064 2,473 1,917 Motor Vehicle 126,505 58,372 28,184 23,021 2,548 41,209 45,438 62,030 388,395 180,200 Office Machine 16,849 3,619 2,186 1,935 408 3,598 2,592 3,327 9,285 12,146 Other Meta l Products 21,564 7,585 3,813 2,136 138 3,810 3,856 4,444 7,178 2,118 Precious Meta ls and Jewel ry 790 215 88 41 2 109 81 70 88 19 Railroad a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a Ships and Boat s 2,605 930 848 1,046 366 2,578 1,580 2,161 9,535 19,380 Stationary Industrial Equipment 9,974 7,601 3,601 2,084 134 3,183 5,487 6,000 9,321 3,189 Total 255,602 106,277 60,238 53,443 7,635 72,168 76,907 104,714 505,778 305,894

a The non-manufacturing railroad sector is comprised of two SIC codes, both of which w ere excluded from the 1997 Census. Source: Department of Commerc e, Bureau of t he Census, Census of Tr ansportation, Ce nsus of Whole sale Trade, Census of Re tail Trade, Census of Servic e Industrie s, 1997. 

### b. Firm size This profile uses f irm employment size as an i ndicator of market power and barriers to entry
. The distributi on of facilities a nd outp ut by firm siz e can indica te that the firm s in an ind ustry hav e ma rket po wer. If the la rgest firm s own dispr opo rtionate ly many f acil it ies , i n whi ch cas e th ey ar e cons ider ed hori zonta ll y i nteg rat ed, or if

the lar gest fi rms control a large por ti on of industry out put, then t hey may have signi ficant market power. These firms can use their large capaciti es to control and exploit markets
. The presenc e of many large fir ms in anindust ry can a lso i ndicat e that there are barri ers t o entry int o that indust ry, such as capita l requirements or economies of scale , th at gi ve exis tin g fi rms in the i ndustr y a competi tiv e advantag e. Table 3.16 presents SUSB d ata on numbers of firms and faci liti es with estimated receipts by f irm employment size category in 1996 for M P&M non-manufacturers. In general, although the majority of MP &M non-manufacturing f irms were small, the larger firms owned many facilit ies and had disproportionately l a rge market shares. The vast majorit y of non-manufacturing 3-29MP&M EEBA Part I: Introduction and Background Information Chapter 3: Profil e of the MP&M Industry S ectors fi rms – 427, 173 f i rms or about 98 per cent of n on- manu fa ctu rer s – e mplo yedfe werth an 100 empl oye es. Howeve r, th ese fi rms own ed o nly 90 perc ent of all fac ilities and e arned 610 billion d ollars, o nly 58 perc ent of all re venu es. T he 2,3 38 firm s with 500 or more employ ees, equalto 0. 54 percent of allnon- manuf acturers , owne d 6.5 per cent of al l f acil it ies and gen erat ed 207 bill ion doll ars, equal t o 19.8 percent of tot al rev enue. Firm size in t he individual MP& M no n-manufacturi ng sectors is relati vely si milar to the t rends in the non-manufact uring sector as a whol e. At l east 94 perc ent of the f irms in everysector had less than 100 employ ees. Al though f irm si ze vari es little by sector, there were larger vari ations in r e ceipts by firm size. The aircraft , inst ruments, and ships and boats sect o r s each had a small percentage of fi rms that controll ed a large share of the market
. In the aircraft s e ctor, the l a rgest 2.35 per cent of firms g enera ted 6 0.4 p ercen t of total re venu es. In the in strume nts secto r, the large st 1.2 p ercen t of firms ge nerate d 50 .2 percent of total revenues . In t he shi ps and boats s ector, the l argest 2.6 percent of firms gener ated 57.4 percent of total revenues. Table 3.16: Nu mber of Firms, Facilit ies, and Esti mated Rece ipts by Fi rm Emplo yment S ize Cate gory, 1996: MP&M Non-Manufacturing Sectors
Sector F i r m s Facilities Estimated Receipts (m illions, 2001$) 1 to 99 100 to 499 500 or more 1 to 99 100 to 499 500 or more 1 to 99 100 to 499 500 or more Aircraft 3,124 80 77 3,189 139 734 2,717 1,264 6,071 Bus & Truck 111,038 2,001 801 112,751 4,334 10,590 79,331 23,943 66,113 Household Equipm ent 3,669 19 18 3,700 23 212 2,032 275 873 Instrume nts 7,277 76 91 7,536 206 1,443 3,119 562 3,715 Motor Vehicle 209,814 3,010 531 216,707 7,119 10,716 465,989 186,083 87,113 Office Machine 32,428 290 198 32,745 759 1,646 14,787 4,800 10,565 Other Meta l Products 35,788 284 218 36,205 567 1,130 16,749 2,308 4,610 Precious Meta ls and Jew elry 1,615 6 4 1,661 105 72 269 0 0 Railroad n/ a n/ a n/ a n/ a n/ a n/ a n/ a n/ a n/ a Ships and Boat s 7,833 243 214 8,000 519 743 9,087 6,122 20,493 Stationary Industrial Equipment 14,587 302 186 16,331 1,359 4,101 15,422 4,606 7,739 Total 427,173 6,311 2,338 438,825 15,130 31,387 609,502 229,963 207,294

a The non-manufacturing railroad sector is comprised of two SIC codes, both of which w ere excluded from the 1997 Census. Source: Small Business Administration, Statistics of U.S. Businesses. 

## 3.5 C HARACTERISTICS OF 

## A LL 

## MP&M S ECTORS This s ecti on pres ents additional marke t s tru ctur e dat a for the MP& M indust ry a s a wh ole. It inc ludes eig ht- fi rm conc entr ati on data and ri sk- normal ized return on assets (ROA) data as me asures of industry com petitiveness. 

## 3.5.1 Eight-firm Concentration Ratio The ei ght -f irm co nc en tratio n ra tio (8-fir m CR) is a measure of the degree to which the l a rgest firms in an indust ry have mark et power . I t i s de fi ned a s the pe rce nt age of t he v alu e of tot al in dus try s h i pment s that is produ ced by th e t op ei ght fi rms of a g iven indu str y. In g enera l, an i ndust ry w i th a hi gh 8- fi rm CR are li kely to have l arger entry and exi t bar rie rs and to be less co mpe titive. Firm s in this kind of indu stry have less incen tive to co mpe te and mor e ability to m anipu late pric es to increa se their p rofits. It is mo re difficult fo r firms in a c omp etitive, less co ncen trated industry to manip ulate p rices. T h i s profile presents 8 -firm CR da ta from the 19 92 C ensus.

3-30MP&M EEBA Part I: Introduction and Background Information Chapter 3: Profil e of the MP&M Industry S ectors Table 3. 17 shows the 8-f irm CR f or each sect or in 1992. The a erospa ce and a irc raf t s ector s wer e particul arl y conc entr ated, wit h th e larges t ei ghtfi rms i n eachsect or produ cing92 perce nt and 85 perc ent of i ndust ry s hipments, res pectively
. The mot or vehicle, ordna nce, and railroa d sectors we re also relatively concen trated. The job sho p and h ardware industries were the least concen trated, with only 19 p ercent and 25 pe rcent of outpu t, respectively, being prod uced b y the eight largest firms. Table 3.17: ght-firm Concent ration R atio, 1992 Sector 8-firm Concentrati on Rat io Value Rank a Aerospace 92.29 19 Aircraft 85.3 18 Bus & Truck 42.51 7 Electronic Equipment 47.27 9 Hardwa re 24.52 2 Household Equipm ent 54.22 10 Instrume nts 44.2 8 Iron and Steel 41.87 6 Job Shop 19.26 1 Mobile Industrial Equipme nt 58.56 13 Motor Vehicle 77.30 17 Office Machine 61.38 14 Ordnance 76.90 16 Other Meta l Products 54.27 11 Precious Meta ls and Jew elry 35.0 4 Printed Circuit Boards 35.0 3 Railroad 71.00 15 Ships and Boat s 58.20 12 Stationary Industrial Equipment 41.16 5 Ei

a Rank is a compari son withi n the MP &M manufacturi ng sectors o nly. A rank of 1 indicates the lowe st level of conce ntration. Source: Department of Commerce, Bureau of the Census. 

## 3.5.2 Risk Normalized Return on Assets Firms’ abilities t o enter and exit markets deter mine, in part, the competitiveness of an industry
. If s ignif icant barriers to entry exist, potential ent rants may be dissuaded and existi ng firms may enjoy market power. I f few barrier s to entry exist, existing firms are more li kely to f a ce competition for market share vi a price and other competitive tactics. Some important entry barriers for t he MP &M industry are large capitalrequirements, economies of scal e , and brand name recognition. Although data on b arriers to entry are limited, the available d ata show that ma rket powe r exists in some sectors. EP A use d the risk norm alized return o n assets a s an ind icator of the ex istence of entry o r exit ba rriers for each industry 3

. A firm’s return on assets is the profit the f irm earns from investing in ass e ts. Normally, firms i n riskier industri es tend to h ave higher RO A’s. H owe ver, b arriers to entry or exit can allow firm s to ach ieve hig her R O A ’s than wo uld b e pre dicted from th eir

3 The risk normalized ROA only assi gns MP &M industry sectors relative rankings and does not imply t h at they f a ce high or low barrie rs to co mpe tition in ab solute te rms. 3-31MP&M EEBA Part I: Introduction and Background Information Chapter 3: Profil e of the MP&M Industry S ectors risk leve l. The risk nor malize d retur n on a ssets me asure s the ad ditiona l profit tha t firms ear n abo ve and beyo nd wh at their risk level predicts. EP A used d ata from M arketguide.co m to calculate a risk no rmalized R O A
. The age ncy calculated risk normal ized ROA by divi ding each f irm’ s ROA by i t s asse t bet a (a me asur e of t he re lat ive ris kin ess of t he f irm’ s common stoc k) an d aver agin g over the fi ve- year peri od fr om 1996 to 2000. The electronic equ ipment, printed circuit board, an d office mach ine industries had the low est risk normalized RO A’s, indica ting relative ly weake r barr iers to en try or ex it for these industrie s. Th e instrum ent, othe r meta l prod ucts, mo bile industri al equipment, and motor vehicle indust ries had the hi ghest ROA’s. These industries are l ikely to have signifi cant barr iers to en try and e xit. Table 3. 18 pres ents the aver age r isk normal ized ret urn onass ets for the peri od fr om 1996 to 2001, based ondatafr om Marketgui de. com. Table 3.18: Av erage Risk No rmalized R eturn on Assets, 1996 to 2001 Sector Ris k-N orma li zed ROA (%) Value Rank Aerospace 13.19 8 Aircraft 16.15 13 Bus & Truck 12.31 7 Electronic Equipment 7.21 1 Hardwa re 17.18 15 Household Equipm ent 12.02 5 Instrume nts 19.64 18 Iron and Steel 11.38 4 Job Shop 13.44 9 Mobile Industrial Equipme nt 18.13 17 Motor Vehicle 18.10 16 Office Machine 9.58 3 Ordnance 12.30 6 Other Meta l Products 26.60 19 Precious Meta ls and Jew elry 14.43 10 Printed Circuit Boards 7.50 2 Railroad 14.62 11 Ships and Boat s 16.11 12 Stationary Industrial Equipment 16.78 14 Source: www.marke tguide.com 

## 3.6 C HARACTERISTICS OF 

## MP&M F ACILIT IES This section uses survey data t o charact erize MP&M faci lities. It includes data on f acil ity revenue s ources, discharge ty pe, smal l bus ines s st atus , market type, an d fi nanci al pe rfor mance. These data are organ ized according t o MP& M regulati on subc atego ries ba sed o n unit op eratio ns pe rform ed an d the n ature o f the waste gener ated. E P A deter mined that a ba sis exists for div iding the MP&M category int o the f ollowi ng subcat egories : General Metals, Non-Chromium Anodizi ng, Metal Finishing Job Shop s, Printed Wiring Boards, Steel Forming and Finishing, Oily Wastes, Railroad Line Maintenance, and Shipbuil ding Dry Dock. EPA did not general ly def ine su bcategori es in terms of indust rialsector s because many fac ilities perfo rm o pera tions co vered by mu ltiple sec tors an d, as a r esult, the ind ustrial sec tors are too b road for sub categ oriza tion.
3-32MP&M EEBA Part I: Introduction and Background Information Chapter 3: Profil e of the MP&M Industry S ectors Ta ble 3 .19 sh ows the nation al num ber o f MP &M facilities that sell p rod ucts to d ifferent co mbin ations o f sector s. Th e table shows that many MP&M fac il it ies operat e inmultipl e mark et s ector s. Almost every combi nati on of s ector s sh ows ove rla p, and som e M P & M facilities report revenues from three or mo re sectors.

3-33MP&M EEBA Part I: Introduction andBackgroundInformationChapter 3: Profile of the MP&M Industry SectorsTable 3.19: Overlap of SectorsSector Aero sp ace

Airc r a ft B u s a nd Tr u c k Electr onic E quip m en t Ha rdwa re H ous e hol d E qu i pm e n t In s trum e n t M o bi le I ndus tr i a l E qu i pm e nt Mot o r V e h i c le Office M ach i n e O r dna n c e O the r M e t a l P r od u c t s Preciou s N on -Pre c i o u s Meta ls Prin t e d C irc u it Bo a r d s Rai l r o ad Shi p s a nd B o at s St at i ona ry I ndus tr i a l E qu i pm e nt Unkno wnAerospace1,828Aircraft02,350Bus and Truck1291695,574ElectronicEquipment1,3271,3188244,073Hardware3453999141,1297,075HouseholdEquipment2893174778981,6002,635Instrument1,0461,1263981,6806786104,965Mobile IndustrialEquipment471161,5117047384174042,467Motor Vehicle1572201,7906198236785241,08913,853Office Machine2653491986225154773561592231,088Ordnance1321195220486772028015389481Other MetalProducts2893214578501,4501,393475438695329365,359Precious and NonPrecious Metals47470364724471236360921,651Printed CircuitBoards1601640164160160400375016001,229Railroad16619586143676912415491588112261,132Ship and Boat10202371461911561041382451382578120481,366StationaryIndustrialEquipment1,1691,2557141,8181,1516871,293688530486130469391641093244,907Unknown583Source:U.S. EPA analysis.3-34MP&M EEBA Part I: Introduction and Background Information Chapter 3: Profil e of the MP&M Industry S ectors The remai nder of thi s prof il e foc uses on MP&M indu str y f acil it ies that di scharge e f f luent. Out of a tot al popu lat ion of 638,696 M P&M indust ry es tabli shments reported in the Statistics of U.S. Bu sinesses for 19 96, a ppr oxim ately seve n per cent, or 43 ,858 facilities, are effluent dischargers as iden tified by the MP &M surveys. Figure 3.2 shows the breakdown of MP &M facilities by dis charge type. Of the ef fluent dischargers, 41,119 (94 percent) are indir ect dis chargers , meani ng that theydischarge int o a sewer or a POT W , and 2,699 (6 perc ent) are direc t dis chargers that discharge d irectly into a surface water bod y. The rem aining 40 facilities are both d irect and indirect disch argers. Figure 3.2: Facilities by Discharge Type

Source: U.S. EPA analysis. Figure 3.3 shows facil ities by revenue source. Local governments or municipali ties operate 3,785 facil ities (9 percent). The remaini ng 40,073 faci lities ar e privat ely owne d. Of th ese, 17, 428 facil iti es (40 percent ) are re buildi ng and maintenance facilities and 20,1 72 fa cilities (46 perc ent) are manu facturing facilities. Figure 3.3: Facilities by R evenue So urce

Source: U.S. EPA analysis. Figure 3.4 shows facil ities by small entity st atus. Small Business Administrati on (SBA ) thresholds were used t o estimate the numb er of fac ilities that are like ly to be o wned by sma ll busine sses, as d efined by the S B A
. Using the me thod olog y detaile d in 3- 35MP&M EEBA Part I: Introduction and Background Information Chapter 3: Profil e of the MP&M Industry S ectors the SmallEnti tyImpact Analy sis (se e Chapt er 10), EPA determined that 32,179 f acil it ies (73 per cent ) are owned bysmal l or potentially small entities. Figure 3.4: Facilities by Small Entity Status

Source: U.S. EPA analysis. Figure 3. 5 indi cate s that MP& M facil it ies deri ve appr oximately 22 perce nt of the ir r evenu es f rom expor t s ales
. Al most 78 perc ent of M P & M reven ues co me fro m do mestic non-g ove rnme nt sour ces. G ove rnme nt purc hases a cco unt for a very sm all share of M P & M reven ues o verall. Figure 3.5: 1996 Fa cility Rev enues by Market Ty pe (billions, 2001$)

Export data were not availa ble for Ir on and Steel s urveys . Source: U.S. EPA analysis.
To charac ter ize basel ine fi nanci al pe rfor mance a cross regu lat ion s ubcat egori es, EPA used Pre-Tax Return on A ssets (PT RA) as a measure of industr y profitabil ity. PTR A measures the return, before tax, to t otal capitalthat company mana geme ntach iev es f rom i t s depl oye d capital ass ets . Unl ik e the ROA me asure n ote d abov e i n se cti on 3. 5.2, th e PTRA reported in this discussion is not adjusted for ris k.

3-36MP&M EEBA Part I: Introduction and Background Information Chapter 3: Profil e of the MP&M Industry S ectors Table 3.20 shows that t he printed wiring board subcategory has the highest median PT RA (13.4 p ercent ) of all the subca tegories
. The s hipbu il ding drydoc k subc ateg ory h as t he l owest median PTRA (2.5 perc ent)
. The medi an PTRA for al l of the M P & M facilities is 11 .1 pe rcent. Table 3.20: Fin ancial Perfo rmance Subcategory Median Pre-Tax Return on Assets (PTRA) Shipbuilding Drydock 2.5% Genera l Metals 11.5% Steel Form ing & Finis hing 9.1% Metal Finis hing Job Shops 9.2% Non-Chromium Anodizer 9.0% Oily Wastes 9.6% Printed Wiring Boards 13.4% Railroad Line Maintenance a n/a

a PTRA data was not available f or railroad line maintenance because these facilities we re treated as cost-centers in the survey analy sis. Source: U.S. EPA analysis.

3- 37MP&M EEBA Part I: Introduction and Background Information Chapter 3: Profil e of the MP&M Industry S ectors 

## G LOSSARY capital expenditures: expendit ures f or permanent additi ons and major alterations t o faci lities an d equipment, as wel l as repl acement s and a ddit ions to capacit y, whi ch ar e ordi nari lydepreci ated. Report ed capi talexpenditur es i nclu de work done on contr act and expe ndit ures for ass ets lea sed f rom oth er con cerns thr ough ca pit al l eases . Expen dit ures for lan d and cos t of mainten ance and repai rs char ged as curr ent operating expen ses ar e excluded conce ntr ati on ra tio: the pe rcenta ge of o utput fro m a giv en ind ustry that is p rod uced by the lar gest firms in that indu stry. For exam ple, the eight firm c onc entratio n ratio m easur es the p ercen tage o f outpu t that is pro duc ed b y the eigh t largest firm s i n an industry. The concen tration ratio is a measure o f industry compe titiveness. em ploym ent: total number o f full- time equivalent em ployees, including p roduc tion workers an d non-p roduc tion workers. export dependence: the shar e of s hipments by domes ti c produc ers that is export ed; c alcu lat ed by di viding the val ue of exp orts b y the valu e of d ome stic shipm ents. impor t pe netr ati on: the shar e of a l l consumpti on inthe U.S. t hat is provi ded by i mports ; ca lcul ated by di viding i mports by repo rted o r app arent d ome stic con sump tion (the latter calc ulated as do mestic value o f shipm ents min us exp orts p lus imp orts). manufac tur ing: ser ies of un it operations neces sary to pr oduce met al pr oducts ; ge neral lyperf ormed i n a produ cti on enviro nme nt. Nor t h A mer i c a n I n d u s tr y C l as si f i ca t i on Sy st

em: classif ication sy stem adopted beginning in 1997 to replace SIC codes. NAICS codes wil l be used t hroughout North Americanand all ow for gre ater comparabi lit y wit h the I nternational Standard In dustri al Clas sif icat ion Sys tem (ISI C), whi ch is developed and maintained by t he United Nati ons. The new s yst em also better reflects the structure of toda y’s econom y, including the growth of the service sectors and n ew techno logies. nom inal values: dollar values exp ressed in curren t dollars. oper ati ng margi n: measure of the re lati onship bet ween input costs and the v alue of producti on, as an indic ator of fin ancial performance and cond ition. Everything el se being equal, indust ries and fi rms with l o wer operating margins will generally have less f l exibil ity to absorb the costs associated wit h a regulati on than those with higher operating margins. Operating margins were calculated in t his profil e by subtracting the cost of materi als and total payroll fr om the value of shipments. Operating marg in is only an app roxim ate me asure of pro fitability, since it d oes n ot co nside r cap ital costs a nd o ther co sts. It is used t o examine trends in revenues compared with production costs wi thin an i ndustry; it should not be used for cross- industry comparisons of financial performance
. pre -tax retu rn o n as sets (PT RA ): the rat io of cashoperating inc ome (ne t i ncome pl us depr eciati on) t o the book value of total asse ts. This ra tio is a me asure of facility pro fitability. pro du cer p rice in de x (P PI): a famil y of inde xes t hat measur es t he ave rage chang e over ti me insel li ng pri ces r ecei ved by domestic pr oducers of goods and servi ces (Bureau of Labor Stat ist ics, PPI Overview). Used in t his pr ofil e to convert nominal values into rea l dollar values. real values: nom inal value s norm alized using a p rice ind ex to e xpre ss value s in a single year’s d ollars. R emo ves the e ffects of price inflation when ev aluating trends in dollar m easures. rebuil ding/maintenance: unit operati ons necessary to disas semble used metal products into components, replace the compo nents or subassemblies or res tore them to originalfuncti on, and reassemble the metal product. These operations are int ended t o keep metal pr oducts in ope rat ing condi ti on and can be per forme d in e i ther aproduction or a non- production enviro nme nt. retur n on assets: the profit the fi rm earns from investing in assets
. Generally f irms in ri skier indust ries have higher returns on asset s. A ri sk normal ized ret urn on ass ets ( RNRO A) measures the addi tional profit that fir ms earn above an d beyond what their risk lev el pre dicts. The RN RO A is a measur e of industry com petitiveness.

3-38MP&M EEBA Part I: Introduction and Background Information Chapter 3: Profil e of the MP&M Industry S ectors Sta ndar d In dust ri

al

Cla ssi ficat ion: class ifi cati on system used for all establ ishment -based Federal economic st atis tics classified by industry. Each estab lishment is assigned a 4-digit SIC code b ased on its principal prod uct, or service. Last revi sed i n 1987 and c urre ntly bei ng re place d by the NAICS. val ue adde d: measure o f manufacturing activity, derived b y subtracting the cost of purc hased inpu ts (materials, supplies, contai ners, fuel , purchas ed elect rici ty, contract work, an d contract labor) f rom the value of sh ipments (products manufact ured plus receipts f or services rendered), and adjusted by the addit ion of value added by merchandising operations (i. e., the difference between t he sales value and t he cost of merchandise sold wit hout further manufacture, processing, or assembly) plus the net chang e infi nis hed goods and work-in-pr ocess betwe en the beginni ng- and end- of- year inv entories
. Val ue added avoids th e dupl icati on i n va lu e of shi pment s as a mea sur e of econ omic act iv it y t hat res ul ts fr om th e us e of produ cts of s ome establishments as materials by others. Value added is considered to be the best value measure avai lable for comparing the relative econo mic impo rtance of man ufacturing amo ng industries and ge ograp hic areas. value of shi pments: net sel li ng val ues of allproduct s sh ipped a s wel l as misc ell aneous recei pts. Incl udes a l l it ems made by or f or an e sta bli shmen t f rom mat eri als owned byit , whe ther sol d, trans fer red t o othe r plants of t he same company , or shi pped on cons ignment. Value of s hipments is a meas ure of the doll ar va lue of pr oducti on, and is oft en us ed as aproxyfor revenues. This profil e uses value of shi pments to indicate t he size of a market and how the si ze differs from year to year, an d to calculate op erating margins.

3- 39MP&M EEBA Part I: Introduction and Background Information Chapter 3: Profil e of the MP&M Industry S ectors 

## A CRONYM S NAICS: North American Indust ry Clas sif icat ion Sys tem PP I: producer pri ce index PTRA: pre-tax return o n assets ROA: return o n assets SI C: Stan dard In dust ria l Cl assi fi cati on VA: value added VOS: value o f shipm ents

3-40MP&M EEBA Part I: Introduction and Background Information Chapter 3: Profil e of the MP&M Industry S ectors 

## R EFERENCES DR I/M cG raw-H ill and U .S. D epa rtmen t of Co mm erce, In ternatio nal T rade Adm inistration . 200 0. U.S. I ndustr y and Trade Outlook. M arketg uide.c om. 1 992
. Risk No rma lized Return on A ssets. http: // www. mark etgui de. com. U.S . Bur eau o f Labo r Statistics. 2 000
. Producer Price I ndex
. U.S . Dep artme nt of Co mm erce. 1 992
. Bur eau o f the Ce nsus. Census of Manufacturers, Census of Transport ati on, Cens us of Wholesale Trade, Census of Retai l Trade, Census of Service Industr ies . U.S . Dep artme nt of Co mm erce. 1 996 . Bur eau o f the Ce nsus. Ann ual Su rvey of M anu facturers
. U.S . Dep artme nt of Co mm erce. 2 000 . Bur eau o f the Ce nsus. Fo reign Trad e D ata . U.S . Env ironm ental P rotec tion A genc y. 199 5a. Profil e of the Electroni cs and Computer Industry. EPA O ffi ce of Complian ce Sector Notebook Proj ect. EPA 310-R-95- 002. ht tp: // es. epa. gov/oeca/s ect or/ in dex. ht ml U.S . Env ironm ental P rotec tion A genc y. 199 5b. Profil e of the Fabri cated Metal Products Industry
. EPA Offi ce of Compliance Sec tor Not ebook Proje ct. EPA 310-R-95- 007. ht tp: // es. epa. gov/oeca/s ect or/ in dex. ht ml U.S . Env ironm ental P rotec tion A genc y. 199 5c. Profil e of the I ron and Steel I ndustry. EPA Offi ce of Compli ance Se ctor Noteb ook Pr ojec t. EPA 310- R-95- 005. http: // es. epa. gov/oeca/s ect or/ in dex. ht ml U.S . Env ironm ental P rotec tion A genc y. 199 5d. Profil e of the Motor Vehi cle Asse mbly Industry. EPA O ffi ce of Complian ce Sect or Not ebookProj ect . EPA 31 0-R- 95-0 09. ht t p:/ /es .ep a.g ov/ oeca/s ect or/ in dex. ht ml U.S . Env ironm ental P rotec tion A genc y. 199 5e. Prin ted W iring B oar d In dus try an d Use Clu ster Pr ofile. Design for the Environment Printe d W iri ng Board Project. EPA 744 -R-95-005. htt p:// www.epa.g ov/opptintr/ dfe/pwb/ techre ports/ useclu ster U.S . Env ironm ental P rotec tion A genc y. 199 7. Profil e of the Shi pbuilding and Repair Indust ry. EPA O ffi ce of Complian ce Sect or Not ebookProj ect . EPA 31 0-R- 97-0 08. ht t p:/ /es .ep a.g ov/ oeca/s ect or/ in dex. ht ml U.S . Env ironm ental P rotec tion A genc y. 199 8. Profil e of the Aerospace Industr y. EPA Offi ce of Compli ance Se ctor Noteb ook Pr ojec t. EPA 310- R-98- 001. http: // es. epa. gov/oeca/s ect or/ in dex. ht ml U.S . Sma ll Busin ess Ad ministratio n. Stati sti cs of U.S. Businesses
. h t t p:/ /www.s ba. gov/ advo/ st ats /i nt_dat a.html Va lue Line Investm ent Su rvey. Ind ustry R epo rts . Val ue Li ne Publ ish ing , In c: Dece mber 2001.

3- 41MP&M EEBA Part I: Introduction and Background Information Chapter 3: Profil e of the MP&M Industry S ectors



## T HIS 

## P AGE 

## I NTENTIONALLY 

## L EFT 

## B LANK

3-42MP&M EEBA Part I: Introduction and Background Information Chapter 4: Regulato ry Options 

# C hapter 

# 4 : 

# R egulatory 

# O ptions
I NTRODU CTION The pream ble for the f inal rul e describes the regulatory options considered by EPA for the f inal MP& M effluent guidelines. This chapter provides a brief summary of t h e subcatego ries and the regulato ry options. 

## 4.1 S UBCA TEGOR IZATI ON EPA may divide a point source category i nto subcategories to addre ss variations in prod ucts, raw materials, proc esses, 

## C HAPTER 

## C ONTENTS 4.1 orization
.......................... 4
- 1 4.2 y Options
........................ 4
- 3 4.3 T Options f or Direct Discharg ers ........ 4
- 3 4.4 or Indirect Discharg ers .......... 4
- 3 4.5 NS Options for New Sources
....... 4
- 4 4.6 Summa ry of t he F ina l Ru le an d Re gul ato ry Alternatives
.............................. 4
- 4 Glossar y ..................................... 4
- 5 Acron yms .................................... 4
- 6 Subcateg Technolog BPT/BA PSES Options f NSPS and PS

and other fa ctors tha t result in distin ctly differen t effluent cha racter istics. De fining sub categ ories m akes it p ossib le to establ ish ef flu ent l imit ations that take into account technol ogical achieva bili ty an d economic impact s uni que to each subc atego ry. EP A co nside red the followin g facto rs in de fining M P & M subc atego ries:

� unit operation, � natu re of the wast e gene rat ed, � activity, � econo mic impa cts, � raw materials, � treatment costs, � prod ucts, � total energy requirem ents, � size of sit e, � air pollution con trol method s, � location, � solid waste generat ion and disposal, and � age, � publicly- owned treatment work ( POT W) burd en. In a way simil ar to the proposed rule, EPA established subcategories for t he final MP &M rule based on unit operations performed. The subcategories are defined in part based on the type of wastewater that f a cilities discharge, including: faci lities t hat di scharge wastewaters with high met als content, with or wit hout oil and grease (O &G) ; an d � facilities that d ischarg e waste waters conta ining m ainly O & G , with limited metals a nd o ther asso ciated orga nic constituents. The subcategori es identifi ed by EPA in each group ar e: Metal-bearing (w ith or without O&G ):

� Gene ral Me tals,

� M etal Finishing Job S hops,

� Non-Chrom ium Anodizing,

� Printed Wirin g Board,

� Steel Forming & Finishing; and

4-1MP&M EEBA Part I: Introduction and Background Information Chapter 4: Regulato ry Options Oil-beari ng only:

� Oily W astes,

� Railroad Line Maintenance, and

� Shipbu ilding Dry D ocks.
For the final rule , EP A is esta blishing limitations and sta nda rds o nly for d irect disc harge rs in the O ily W astes sub categ ory. The other subcategories were consi dered at proposaland for s ome of the a lter nati ve regul atory options but are not furt her regulated und er the final rule. Section VI.B of the pream ble acco mpan ying the final rule describes the basis for d efining thes e subc atego ries. T he follo wing ar e brie f summ aries o f each su bca tegor y: Gen eral M etals: The G eneral Metals subcategory includes facili ties t hat perform operations that generate metal-beari ng wastewater. 1 At a minimum, wastewater at these sites requires metals removal and may also require the preli minary treat ment steps of oil/water separa tion, chromium reduction, and cyanide de struction. For exam ple, wastewater gen erated from most manufact uringoperati ons and heavy rebuil ding operat ions ( e.g. , aircraft /aerospac e, bus/ truck, railroad, shi p, indus tri al equipment) would be regulated under the General Metals subcategory as well as sites performing surface f inishing operations at a capt ive sh op (i.e. , not a metal f ini shingjob shop) in cludin g conti nuous el ectropl atin g as def ined i n today’ s rul e. M etal Finishing Job Shop s: These faci lities mus t perf orm one or more of t he sixoperati ons regul ated by t he exis tin g Metal Finis hing ( 40 CFR 433 ) and Elect roplating (40 CFR 413) effluent gu idelines, and must meet the def ini tion of a job shop
. The six metal fini shing operations are el ectroplating, electroless plating, anodizing, coating, chemical etching and mil ling, an d printed circuit board manufacture. A job shop is a facili ty that owns no more than 50 percent of the materials undergoing meta l finishing. EP A pr opo ses to re gulate P rinted W iring B oard facilities that ar e job shop s unde r this subc atego ry, but is seekin g com men t on this p rop osal. Non C hrom ium A nodizing: Th is subc atego ry includ es facilities tha t perfo rm alu minum anod izing witho ut the use of chro mic acid or dic hromat e sea lant s. The wast ewat er ge nerated atthe se f acil it ies cont ains very low l evel s of metal s (e xcept for aluminum) a nd toxic org anic pollutants. Print ed Wiri ng Board: These f acil it ies manuf acture, main tai n, and repa ir print ed wiring boards (i. e., cir cuit boards ), n o t includ ing job shop s. Th ey per form som e uniq ue op eratio ns, includ ing ap plying, d evelo ping, a nd strip ping o f pho toresist; lead/tin soldering; and wave soldering. Steel Forming & Finis hing: This subcategory applies to f a cilities that perform M P&M operations or cold forming operations on stee l wire, rod , bar, p ipe, o r tube. O ther op eratio ns on ste el, includ ing any h ot form ing op eratio ns for stee l, or co ld forming, elect roplating, or continuous hot dip coating of other steel products, wil l be regulated under the revi sions to the existi ng Iron and Steel Manufacturing eff luent guidel ines (40 CFR 42 0). Oily W astes: Th e O ily W astes sub categ ory is a “c atch-all” for sites tha t discha rge wa stewate r exclu sively from oily ope rations and a re no t otherw ise cov ered by the R ailroa d Line M aintena nce o r Ship build ing D ry Do ck sub categ ory. O ily operations for the t his subcategory are defined in today’s f inal rul e as: alkal ine cleaning f or oil removal, aqueous or solvent degrea sin g, c orros ion pr event ati ve coating (as speci fi ed in§ 438.21( b)); fl oor cl eani ng; gri ndin g; h eat tre ati ng; defor mati on by imp act or pressu re; ma chining ; painting (spra y or br ush); stea m clea ning; an d testing (such a s hydro static, dye pene trant, ultrasoni c, magnetic f lux); iron phosphate conver sion coating; abrasi ve blasting, alkal ine t reatment with out cyanide; assembly/disass embly; tumbling/ barrel fini shing/mass f inishing/vibratory f inishing; burnishi ng; electrical discharge machining; po lishing, thermal cutting; washing of final products; welding ; wet air pollution contro l for organic co nstituents; adhesive bonding; and calibration. Railroad Line Maintenance: This is one of two specif ic subcategori es that dis charge only oil -beari ng wast ewaters (as define d above for t he OilyWastes subcat egory). The Railroad Li ne Maintenance subcate gory i ncludes faci lities t hat disch arge fro m pe rform ing rou tine clea ning an d light m aintena nce o n railro ad en gines, ca rs, car-wh eel truc ks, or sim ilar par ts or machines
. Faci lities en gaged in t he manufac ture, overhaulor heavy mainten ance of r ailr oad engines , cars , car- wheel

1 These sites m ay al so perform operations t hat gener ate oil-be aring w astew a ter. 4-2MP&M EEBA Part I: Introduction and Background Information Chapter 4: Regulato ry Options
tru cks, or simil ar parts or mach ines are n ot cov ered by thi s su bcate goryand depen ding on th e operations perf ormed may be cov ered by eithe r the G enera l M etals or Oily W astes sub categ ory. Shipb uilding D ry Do cks: This is the s econd of two s pecifi c subcat egories that discharge onlyoil- bearing wastewaters (as defined ab ove for the O ily Wastes sub category). T he Shipb uilding Dry D ock sub category ap plies to discharges o f process wastew ater ge nerate d in or on d ry do cks an d simila r structure s, such a s gravin g do cks, bu ilding wa ys, marin e railwa ys and lift barg es at ship build ing facilities (o r shipya rds). W hen ge nerate d by o pera tions fro m within a dry d ock or simila r structure , th is subcateg ory covers process was tewat er generated in side and out side t he vess el (includi ng bil ge water) and wast ewater generat ed from barnacl e removal conduc ted as pre parati on for sh ip maint enance, rebuil ding or r epair. Wastewaters generat ed from other o pera tions at sh ipyard s are no t include d in this sub categ ory. 

## 4.2 T ECHNOLOGY 

## O PTIONS EPA defined specifi c effluent limit ations guidelines and standards for considerati on in developing the regulation based on a statistical ana lysis of the p erform ance of seve ral waste water tre atme nt techn olog y optio ns. T his analysis is d escrib ed in Section 9 of the Tec hnic al D evelo pm ent D ocu me nt and the Statistica l Sup por t Do cum ent. EPA is est ablishing BPT pH limit ations and daily maximum limitati ons for two pollutant s, oil and grease as hexane extractable materi al (O&G (as HEM )) and total sus pended solids (TSS ), for direct dischargers in t he Oily Wastes subcategory based on the pro posed technology o ption (O ption 6). T he technolo gy requireme nts include the following treatme nt measures: (1) in-process f low control and pollution preventi on; and (2) oil-water separation by chemical emulsi on breaking and skimm ing (see Sectio n 9 o f the T D D ). Th is techno logy is av ailable techno logy rea dily ap plicab le to all fac ilities in the O ily Wastes s ubcat egory . Approx imat ely 42% of th e dir ect disc harg ing fac il it ies in t he Oil y Waste s su bcate gorycurr ently empl oy this techn olog y alread y. 

## 4 . 3 BPT/ BAT O PTIONS FOR 

## D IRECT 

## D ISCHARGERS EPA selected t h e Be st P ract icab le C o n trol T ech no log y C urre ntly Av ailab le (BPT) for di rect di scharger s in e ach subcatego ry based o n the average of the best perform ances within the industry from o perations o f various ages, sizes, processes, and other characteris tics. The Agency considered the cost of these treat ment technologies rel a tive to t h e effluent reducti ons achi eved to ass ess t he cost- reasonabl eness of these limitati ons. EPA then cons idered appli cati on of th e Best Av ailab le Te ch no log y Ec on om ically Ac hiev ab le (BAT) for priority and nonconv enti onal poll utants and Best Convent iona l P oll utan t Cont rol Technol ogy (BCT) for conventional pollutants. EPA is promulgating BCT eq uivalent to BP T for facilities in the Oily W astes subcatego ry and has de cided no t to establish BA T limitations. Ta ble 4 .1 sho ws the tec hnolo gy bas is for the se lected optio n for B P T , BC T a nd B A T for the O ily W astes sub categ ory. Table 4.1: Selected Options For Di rect Dischargers: BPT, B CT and BAT Subcategory B P T Option BCT/BAT For oil-bearing wastes Oily Wastes 6 BCT = 6 BAT not promulgated Source: U.S. EPA analysis. 

## 4.4 PSES O PTIONS FOR 

## I NDIRECT 

## D ISCHARGERS EPA consi dered Pretr eatment Standards for Existi ng Sources (PSES) options for regulat ing exi sti ng indi rect dischar gers un der today’ s final ru le. EPA has select ed no furt her regu lati on for i ndirect dischargers i n allof th e defi ned subcatego ries.

4-3MP&M EEBA Part I: Introduction and Background Information Chapter 4: Regulato ry Options W astewater disc harges to POT W s fr om facil iti es in all subcateg ories w illconti nue to be r egulat ed by locallimi ts, general pretreatment s tandards, and 40 CFR 413 or 433, as appropriate
. 

## 4 . 5 NSPS AND 

## PSNS O PTIONS FOR 

## N EW 

## S OURCES EPA is promulgating New Sourc e Per for mance St andar ds (NSPS) for new direct di scharger s in t he OilyWastes subcateg ory at the BPT and BC T levels. New facil iti es have t he opportuni ty to incorporat e the bes t avai lable demons trat ed technolog ies , i nclu ding proces s changes , i n-pl ant controls, and end- of- pipe t reat ment technolog ies , wi thout t he cos t of retrof itting. EPA considered the same technologies discus sed previ ously for BPT/BAT and PSES as the basi s for n ew source technology. In addit ion, because new sites may be able to instal l polluti on prevention and pollution control t e chnologies more cost -ef fectively then ex isting sour ces, the Agency strongly cons ider ed more a dvance d tre atment opt ions
. EPA is not promulgating Pretr eatment Standards for New Sou rces (PSNS) for new indirect discha rgers. Tab le 4.2 lists the technology op tions and exc lusions for new direc t and indirect discha rgers. Table 4.2: Options For New Direct Dischargers (NSPS) and Indirect Discharger s (PSNS) Subcategory NSPS Technology

Option PSNS Technology Option For oil-bearing wastes Oily Wastes 6 No furt her r egul ati on Source: U.S. EPA analysis. 

## 4.6 S UMMARY OF THE 

## F INAL 

## R ULE AND 

## R EGULATORY 

## A LTERNATIV ES The f oll owi ng de scr ibe s the f i n a l rul e an d th e thre e al ter nat iv e re gul ato ryopti ons cons ide red b y EPA:

� Final Rule: techno logy O ption 6 ap plied only to d irect disc harge rs in the O ily W astes sub categ ory;

� NODA /Propos al Opti on: applies limi tati ons and st andards f or direct dischargers i n alleight MP &M subcate gories and pretre atment standar ds for al l in direct dischargers i n thre e subcat egories (i. e., MetalFinis hing Job Shops, Printe d Wiring Board, and Ste el For ming & Fini shi ng); pretreat ment standards for fac il it ies above a c ert ain wast ewat er f low volume intwo s ubcat egori es ( i
. e., General Metals and Oily Waste s); and no n ati onal pretreat ment standards for facilities in three subcategories ( i.e., Non-Chrom ium Anodizing, Railroad Line Maintenance, and Shipbuilding Dry Docks);

� Direc t Dis charger s + 413 t o 433 Upgrade Opti on: applies the same technology r equirements for direct dischargers as t he f inal rul e and i nclu des ne w requ ire ments for indirect dis charg ers in t he Gener al Meta ls, Prin ted Wiring Board, and M e tal Fini shing Job Shops subcategories currently regulated under the Electroplating regulat ions (40 CFR 4 13); and

� Direc t Dis charger s + 413 pl us 50% Local Limit s Upgrade Opt ion: appli es t he same tec hnol ogy r equir ement s f o r direct discharge rs as the final rule and includes new requireme nts for indirect dischargers in the G eneral M etals, Printed W iring Board, and Me tal Fini shing Job Shops subcategories currently regulated under the Electroplating regula tions (4 0 C F R 413 ) and also inc ludes new re quire men ts for ind irect disc harge rs in the G enera l M etals subcatego ry that are currently regulated by loc al limits or general pretreatm ent standards.

4-4MP&M EEBA Part I: Introduction and Background Information Chapter 4: Regulato ry Options 

## G LOSSARY Be st P ract icab le C o n trol T ech no log y C urre ntly Av ailab le (B PT ): effluent limi tations f or direct dischargi ng faci li ti es, addres sin g conve nti onal, toxi c, an d nonconv enti onal poll utants. In s pecif yi ng BPT, EPA consi ders the cost of achieving eff luent reducti ons in relat ion to the eff luent reducti on benefits. The Agency also considers the age of the equipme nt and fa cil it ies , the proc esse s empl oyed an d any requi red proc ess chang es, engi neering as pects of t he cont rol technol ogies, non-wat er quality environment al i mpacts (includi ng energy requir ements) , and su ch other fact ors as t he Agency deems appro priate. Li mitations ar e traditi onally based on the average of the best performances of facilities wi thin t h e indust ry of

vario us age s, si zes , p roc es se s, or o t h e rcomm on c har acter is ti cs . Whe re exi st in g pe rf orm anc e i s u n i fo rmly i nad equ at e, EPA may require higher l evels of control t han currently in place in an industrial category if the Agency determines that the technolog y can be prac ti cally appl ied. Be st A vaila ble T ech no log y Ec on om ically Ac hiev ab le (B AT ): effluent limi tations f or direct dischargers, addressing prio rity and n onc onve ntiona l polluta nts. BA T is b ased on the best ex isting eco nom ically ach ievab le per form ance of plan ts in the industrial subcategory or cat egory. Factors considered in ass essing BAT include the cost of achieving BAT effluent reductions , the age of equ ipment and f acil it ies inv olved, the proces ses employ ed, en gin eeri ng as pects of t he cont rol techno logy, po tential pr oce ss chan ges, no n-water quality en viron men tal impa cts (includ ing ene rgy req uirem ents), ec ono mic achievabilit y, and such fact ors as the Administr ator deems approp riate. The Agency ma y base BAT limit ations upon effluent redu ctions a ttainab le throu gh cha nges in a facility's proce sses and ope rations
. W here e xisting pe rform ance is uniform ly inadequat e, EPA may base BAT upon technology trans ferr ed from a dif ferent subcate gory wi thi n an indus tryor from anot her industria l catego ry. Be st C o n ven tion al Po lluta nt C o n trol T ech no log y (B CT ): effluent limitati ons for direct d ischarging facilities, addre ss in g c onv en ti ona l p o l l ut an t s . Con ve nt io na l p o l l ut an t s in c l u de b i o c h emi ca l o x y g e n d emand (BOD 5 ), t otal s uspended soli ds (TSS), fec al c oli form, pH, and O&G. BCT is t he equivale nt of Best Av ail able Technol ogy ( BAT) for con trol of con ventio nal po llutants. EP A ev aluates the rea sona blene ss of B C T cand idate te chno logies b y app lying a two -part co st test: (1) t he POTW tes t, and (2) the indu str y cos t- eff ectivenes s t est . I n th e POTW tes t, EPA calcu lat es t he cos t per pound of conventi onal pollutant removed by in dustri al dis chargers to upgrade f rom BPT to a BCT candidate te chnology, and then compares thi s cos t t o the POTW cost per poun d for si mil ar pol lut ant load r educt ions
. The upg rade cos t t o indu str y mus t be less than t he POT W benchmark of $0.25 p er pound (in 1976 d ollars). In the indust ry cost-ef fectiveness test, the rati o of the incr ement al BPT to BCT cost divided by the BPT cost f or th e in dust ry mu st be le ss t han 1. 29 (i. e., the cost inc reas e must be less than 29 percent). Job S hop : Fac ilities with mo re than 50 p ercen t of their re venu es co ming fro m wo rk on pro duc ts not ow ned by the site. W hile there are S IC co des a ssocia ted with som e M etal Finish ing Jo b Sh ops , they sell to a variety o f marke ts and a re no t a market in and of themselves. Ne w S o u rce P erfo rm an ce S tan da rds (NS PS): effluent limitati ons for new d irect dischargers b ased on the best available demonstrated control t e chnology. NSPS rep resents t h e greatest degree of ef fluent reduction attai n able through the application of the best available demonstrated control technology for all pollutants (i .e., conventi onal, nonconventional, and priori ty pol lut ants)
. In e stabl ishing NSPS, EPA considers th e cost of achieving the e ffl uent r educti on and any non- water quality environme ntal impacts and energy requirem ents. Pre trea tm en t Sta nd ard s fo r Ex istin g S o u rces (PS ES): categoricalpretreatment s tandards for exi sti ng indi rect disch arger s, design ed to prev ent the d ischarg e of p ollutants th at pass throug h, interfere with, or a re othe rwise inc omp atible with the operation of PO TW s. Standards a re technolo gy-based an d analog ous to B A T effluent limitati ons guidelines. Pre trea tm en t Sta nd ard s fo r Ne w S o u rces (PS NS ): pretre atme nt stand ards fo r new in direc t discha rgers, d esigne d to prev ent disc harge s of po llutants that p ass thro ugh, inter fere with, o r are o therwise incom patib le with the o pera tion of P O T W s. Addresses all pollutant s (i.e. , conventional, nonconventional, and priorit y pollutant s). Based on the same factors as are consi dered i n promul gating NSPS.

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## A CRONYM S BAT: Be st Ava ilable T echn olog y Eco nom ically Ac hievab le BCT: Best Conventional Pollutant Control Technology BPT: Be st Pra cticab le Co ntrol T echn olog y Curr ently Av ailable NSPS: New Source Perf ormance Stan dards O&G: oil and grease POT W: publicly- owned treatment works PSES: Pretreat ment Stan dards for Exist ing Source s PSNS: Pretreat ment Stan dards for New Sources

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