1

U.S. Environmental Protection Agency
Office of Air Quality Planning and Standards

June 2015
Economic Impact and Small Business Analysis –Minera l Wool and Wool Fiberglass RTRs and Wool Fiberglass Area Source NESHAP

1. Introduction

This report is the economic impact analysis for the final Mineral Wool Production and Wool Fiberglass Manufacturing Risk and Technology R eview (RTR) standards and also the final Wool Fiberglass Area Source NESHAP. Promulgation o f these standards is scheduled to occur under court-order on June 18, 2015. The report pre sents impacts to firms affected by the requirements in the rules and their consumers. Res ults are presented individually for each final rule, and a discussion of cumulative impacts from a ll 3 rules is presented at the end of the report. Impacts to small firms are accounted for in adherence to the Regulatory Flexibility Act as amended by the Small Business Regulatory Enforce ment Fairness Act (SBREFA). The industries affected by this rulemaking are found in NAICS 327993.

This final action is the culmination of three pro posals. On November 25, 2011 (76 FR 72770)
, the EPA proposed revisions to the Mineral Wool Production and Wool Fiberglass Manufacturing NESHAP based on the risk and technology review whic h was conducted under Clean Air Act (CAA) sections 112(f)(2) and (d)(6). The EPA proposed to discontinue using formaldehyde as a surrogate for phenol and methanol in both source categories, and discontinue using carbon monoxide (CO) as a surroga te for carbonyl sulfide (COS) in the Mineral Wool Production source category. The EPA also propo sed MACT standards under CAA sections 112(d)(2) and (3) for hazardous air pollutants (HAP ) that were previously unregulated or that had previously been regulated by a surrogate. The l imits in those proposed amendments would apply only to major sources, that is, sources emitt ing at least 10 tons per year of a single HAP or 25 tons per year of any combination of HAP; area so urces emit less than this amount.

On April 15, 2013 (78 FR 22370), the EPA issued a s upplemental proposal that was based
on comments and new information we received after t he November 2011 proposal. In that action EPA proposed first-time standards for area s ources in the Wool Fiberglass Manufacturing source category.

On November 13, 2014 (79 FR 68012), the EPA issued a second supplemental proposal to explain changes to previously proposed emissions limits for sources in these source2

categories, proposed work practice standards under CAA section 112(h) in lieu of certain emission limits, and clarified the EPA’s use of the upper predictive limit (UPL) in setting Maximum Achievable Control Technology (MACT) floors

.

This final action includes chromium emission limits for gas-fired glass-melting furnaces used to make wool fiberglass that are located at ar ea sources (to be subject to subpart NN) and amends the existing major source rules for Mineral Wool Production (subject to subpart DDD) and Wool Fiberglass Manufacturing (subject to NNN). It also adds these sources to the source category list for the Urban Air Toxics Strategy of the Clean Air Act.

1.A. Summary of November 2011 revisions

On November 25, 2011 (76 FR 72770) the EPA proposed revisions to the Mineral Wool and the Wool Fiberglass Manufacturing NESHAP, 40 CF R part 63, subparts DDD and NNN, respectively, to address the results of the residua l risk and technology review (RTR) that the EPA is required to conduct under sections 112(d)(6) and 112(f)(2)(at 76 FR 72812). In the November 25, 2011 notice, we proposed several amend ments to both NESHAP and announced our intention to list and regulate area sources in the wool fiberglass area source category pending the collection of new test data.

The agency also noted that since promulgation of th e 1999 NESHAP, at least 20 of the existing 30 wool fiberglass facilities are now exem pt from the rule due to elimination of phenolformaldehyde binders and are also area sources. As noted previously, a facility that no longer uses phenol-formaldehyde binders does not meet the definition of “wool fiberglass facility” under Subpart NNN. However, the glass-melting furna ces at these sources continue to emit chromium and other HAP metal compounds, and are com pletely separate and independent from emissions from the bonding portion of the proc ess. Further, while replacement of phenolformaldehyde binders with non-HAP binders is an env ironmentally responsible, or ‘green’ choice within the wool fiberglass manufacturing ind ustry, recent data from industry show that gas-fired glass-melting furnaces specifically conti nue to emit chromium and other HAP metal compounds, and for furnaces located at area sources these emissions are not currently regulated pursuant to CAA section 112. We are now including regulation of wool fiberglass area sources in this final rule as a new subpart, N N.3

1.B. Summary of the April 15, 2013 supplemental pro posal.

On April 15, 2013 (78 FR 22370), the EPA published a supplemental proposal to the RTR. The supplemental proposal made corrections to the N ovember 2011 proposal for both source categories, responded to comments, and proposed fir st time standards for gas-fired glassmelting furnaces at area sources in the wool fiberg lass source category under EPA’s urban air toxics strategy (Strategy) as required by CAA Secti ons 112(c)(3) and 112(k)(3)(B)(ii).

1.C. Summary of the November 13, 2014 supplemental proposal.

On November 13, 2014 (79 FR 68012), the EPA issued a second supplemental proposal to explain changes to previously proposed emissions limits for sources in these source categories, proposed work practice standards under CAA section 112(h) in lieu of certain emission limits, clarified our use of the upper pre dictive limit (UPL) in setting Maximum Achievable Control Technology (MACT) floors, revise d startup and shutdown standards for both source categories

1.D. What is the purpose of this final rule?

Mineral Wool Production

For the Mineral Wool Production source category, r egulated under subpart DDD, the EPA is finalizing the emissions limits as proposed in the November 2014 supplemental proposal. The EPA is removing the surrogacy of CO for COS and finalizing COS emission limits for two subcategories of cupolas according to design (open- top or closed –top). The EPA is finalizing emission limits for HF an HCl for two subcategories of cupolas according to raw material use (those processing slag and those not processing sla g). The EPA is also removing the surrogacy of formaldehyde for phenol and methanol and finalizing emission limits for formaldehyde, methanol and phenol from three subcategories of bo nded lines according to design (horizontal, vertical, or drum). The EPA is not ame nding the PM emission limit for the Mineral Wool Production source category.

Wool Fiberglass Manufacturing Major Sources (NNN)

For the Wool Fiberglass Manufacturing source categ ory, the EPA is finalizing emission limits for chromium compounds from gas-fired glass- melting furnaces at major sources4

(regulated under subpart NNN). The final chromium emission limits are slightly higher than previously proposed.

The EPA is amending the PM limit for all furnaces at major sources subject to NNN to 0.33 lb/ton (down from 0.5 lb/ton).

The EPA is also removing the surrogacy of formalde hyde for phenol and methanol, and finalizing emission limits for phenol, formaldehyde and methanol emissions from existing and new FA lines subject to NNN. The applicability of the rule as it applies to FA lines is being amended by the final rule. In this final rule, all FA lines are subject to the FA line emission limits regardless of the product manufactured.

The EPA is deferring amending emission limits for RS lines pending new information to be collected under section 114 authority.

Wool Fiberglass Manufacturing Area Sources (NN)

For the Wool Fiberglass Manufacturing source categ ory, the EPA is finalizing emission limits for chromium compounds from gas-fired glass- melting furnaces at area sources (regulated under a new subpart NN). The emission li mits for area sources are slightly higher than previously proposed, and are the same as those for major sources.

We estimate the economic impacts of these standards in this report for all of the different rules covered in this final rulemaking.

2. The Mineral Wool Industry
2.A. Background on Mineral Wool Industry

Mineral wool often is defined as any fibrous glass y substance made from minerals or mineral products such as slag and glass. The chemic al composition of mineral wool can vary widely. The basic materials for glass wool manufa cture include sand, soda ash, dolomite, limestone, sodium sulfate, sodium nitrate, and mine rals containing boron and alumina. Traditional stone wool production involves melting a combination of alumino-silicate rock (usually basalt), blast furnace slag, and limestone or dolomite. In addition, for both glass and stone wool the batch may contain recycled process o r product waste. For glass wool, other forms of waste glass (cullet) are also used as feed stock.5

These materials are processed into insulation and other fibrous building materials that are used for structural strength and fire resistanc e. Generally, these products take one of four forms: “blowing” wool or “pouring” wool, which is put into the structural spaces of buildings; batts, which may be covered with a vapor barrier of paper or foil and are shaped to fit between the structural members of buildings; industrial and commercial products such as high-density fiber felts and blankets, which are used for insula ting boilers, ovens, pipes, refrigerators, and other process equipment; and bulk fiber, which is u sed as a raw material in manufacturing other products, such as ceiling tile, wall board, s pray-on insulation, cement, and mortar.

Glass wool and stone wool production make use of d ifferent proprietary technologies, including melting, fiberizing and curing. Product ion of mineral wool is a high temperature, energy intensive process. Mineral wool plants use a mix of technologies and fuels: a total of 11 proprietary fiberizing technologies are employed wo rldwide. Glass wool furnaces are predominantly gas fired, but there are a substantia l number of furnaces that are electrically
heated.

In the production of mineral wool products that do not require high rigidity, oil is typically applied to suppress dust and add some str ength to the fiber; the fiber is then sized and bagged or baled. This is known as a “nonbonded” pro duct which is manufactured on a “nonbonded” production line.

For mineral wool products requiring a higher struct ural rigidity, a HAP-based (phenol/formaldehyde) binder may be applied to the fiber. This is known as a “bonded” product made on a bonded production line. The binde r-laden fiber mat is then thermoset in a curing oven and cooled. The major differences betwe en the “nonbonded” and bonded production lines are the application of binder duri ng the collection process followed by the curing oven. Four facilities only manufacture nonbo nded products, while the other 3 facilities operate both bonded and nonbonded production lines. A total of 11 cupolas and 3 curing ovens are operated by the facilities in this source categ ory.
2.B. Economic Impact Estimates

As mentioned previously, mineral wool manufacturing facilities are included in NAICS 327993. The industry’s revenue for 2012 was rep orted at $5.6 billion, and the estimated gross profit was 32.07%. Exports from US mineral w ool firms exceeded imports by about $6006

million in 2012. 1 The year 2012 is the most recent year for which w e are able to obtain economic data for NAICS 327993. According to the s ize definition applied to this industry by the U.S. Small Business Administration (SBA) (750 company employees or less) 2 , five of the seven parent firms in this industry affected by thi s final rule are classified as small businesses. Of the five small firms, their average number of em ployees is 108. All of these firms are U.S. owned except for Roxul USA. Roxul USA is a subsidi ary of a Danish company, Rockwool International, which is the world’s largest produce r of mineral wool insulation. Roxul USA’s facility is located in Byhalia, Mississippi. Roxul USA broke ground in 2012 and completed construction on the new facility in 2014. Roxul USA uses a different cupola design (similar to others used in Europe) to produce mineral wool and bonded products. This facility will be subject to the amended emission limits for new sour ces in the Mineral Wool Production MACT rule. The company is not a small business. We have included this new production facility as part of the estimated cost impacts. Based on the emissi ons test data provided by the industry, none of the existing facilities will have to install add itional control equipment to comply with the proposed rule requirements.

We estimate that all 8 of the mineral wool producti on facilities will incur additional testing costs to demonstrate compliance with the ne w carbonyl sulfide (COS), hydrochloric acid (HCl), and hydrofluoric acid (HF) emission limits f or cupolas. We also estimate that the 3 existing facilities with bonded product lines will incur additional testing costs to demonstrate compliance with the revised formaldehyde and new ph enol and methanol emission limits that will apply to collection and curing operations comb ined. We only have general information on the planned new facility but to estimate costs cons ervatively, we assume in the cost estimation that it would operate two cupolas and two bonded pr oduct lines that would be subject to the limits in the rule. All of the new testing associat ed with the final rule requirements is based on a 5-year frequency. Therefore, the initial (first ye ar) testing costs were divided by 5 to come up with “annualized” testing costs.

This economic analysis identified the businesses th at will be affected by this rule and provides an analysis at a screening level to assist in determining whether this rule is likely to

1 Mineral Wool Manufacturing Industry in the U.S. an d its International Trade (2014 Edition). LLC Supp lier Relations US. Available on February 17, 2014. Can be found at http://www.marketresearch.com/SupplierRelations-US-LLC-v3418/Mineral-Wool-Manufacturing-I nternational-Trade-8033092/

. 2 Found at the web site for the U.S. Small Business Administration ( http://www.sba.gov/size ), with small business size standards updated as of July 14, 2014.7

impose a significant economic impact on affected bu sinesses. The analysis employed here is a “sales test” that computes the annualized complianc e costs as a share of sales for each company. The annualized cost per sales for a compan y represents the maximum price increase in affected product needed for the company to compl etely recover the annualized costs imposed by the regulation. A partial equilibrium a nalysis, a type of economic impact analysis that estimates changes in prices and output for the regulated sector resulting from a rule’s implementation, is deemed more than necessary for t his final rule given the expected size of the impacts.

The “sales test” is the impact methodology EPA empl oys in economic impact analysis such as this one as opposed to a “profits test”, in which annualized compliance costs are calculated as a share of profits. 3 This is because revenues or sales data are common ly available data for entities normally impacted by EPA regulati ons and profits data normally made available are often not the true profits earned by firms due to accounting and tax considerations. Firms and entities often have ways legally available in the tax code to minimize their reported profits; thus, using reported profit s may lead to a less than accurate estimate of the economic impact of a regulation to an affected firm or entity and their consumers. While screening level analyses are often employed to esti mate impacts to small business or entities as part an analysis in compliance with the Regulatory Flexibility Act (RFA) as amended by the Small Business Regulatory Enforcement Fairness Act (SBREF A), a screening level analysis can also be employed in an economic impact analysis such as thi s one whose focus is on the regulated companies. The costs used as input to the economic impact and small business analysis include
the cost of emissions control and the costs of moni toring, recordkeeping, reporting and testing. The compliance costs by mineral wool facility are s hown below in Table 1, and all compliance costs are in 2013$. More details on the compliance costs can be found in the mineral wool RTR cost memo prepared for this rulemaking. 4

3 More information on sales and profit tests as used in analyses done by U.S. EPA can be found at http://www.epa.gov/sbrefa/documents/rfaguidance11-0 0-06.pdf , pp. 32-33.

4 Memo from David Reeves, RTI, to Susan Fairchild, US EPA. Estimated Cost Impact for Mineral Wool Production Industry to Comply with Proposed Residual Risk and Technology Review (RTR) Amendments. August 29, 201 4.8Table 1. Mineral Wool Production Facilities Coststo Comply with RTR Amendments - SummaryCupolasaCombinedCollection/Curing#CupolasAnnualized(New) COSTesting Costb#BondedLinesAnnualized(New)TestingCostcFacility LocationAnnualized(New) HCl/HFTesting CostbTotal Facility IncrementalAnnualized (New) CostsIndustrialInsulationGroup (IIG)Phenix City,AL1$2,800$8001 $800 $4,400ThermafiberWabash IN2 5,200 1,600 1 800 7,600USG InteriorsRed Wing,MN2 5,200 1,600 0 0 6,800USG InteriorsWalworth, WI1 2,800 800 0 0 3,600AmerrockProductsNolanville, TX2 5,200 1,600 0 0 6,800Isolatek Int’lHuntington,IN2 5,200 1,600 0 0 6,800Rock WoolMfgLeeds, AL1 2,800 800 1 800 4,400Roxul USAByhalia, MS2 5,200 1,600 2 1,600 8,400SubTotal13 $34,400 $10,400 5 $4,000$48,800a – 8 of the 13 cupolas currently have (or will have) incineration/afterburner controls. None of the facilitiesare expected to have any additional equipment or material cost impacts to meet the proposed emissionlimits.b – Cupola testing costs reflect incremental (new)costs for COS, HF, and HCl testing; current test requirementsfor PM not included.c – Collection/curing costs reflect incremental costs for phenol and methanol testing; current test requirementsfor formaldehyde not included.9

For these mineral wool firms, the impacts of the fi nal rule range from 0.006 percent to 0.1 percent, expressed as annual compliance costs a s a percent of sales. 5 The price elasticity of
demand for mineral wool is estimated at -0.8 6 , and the price elasticity of supply for mineral
wool is estimated at -0.7. 7 With the responsiveness of mineral wool demand an d supply being less in percentage terms than the change in product price as approximated by the cost to revenue ratio, since this ratio is the maximum pric e change that producers may face, and with this ratio at or below 1 percent for the majority o f production from this industry, it is expected that mineral wool price and output changes in respo nse to this final rule will be less than 1 percent. 8 The total annual compliance costs (TAC) of the fi nal rule for this industry are $48,800 (2013 dollars) as shown in Table 1. 9 Since confidential business information (CBI), pa rticularly revenue data, received from the subject firms has b een used to estimate these impacts, we will not provide economic impact estimates by firm.

3. The Wool Fiberglass Industry

3.A. Background

Wool fiberglass is a thick, fluffy material made fr om discontinuous fibers, is used for thermal insulation and sound absorption. It is comm only found in ship and submarine bulkheads and hulls; automobile engine compartments and body panel liners; in furnaces and air conditioning units; acoustical wall and ceiling panels; and architectural partitions. Fiberglass can be tailored for specific applications such as T ype E (electrical), used as electrical insulation

5 Use of this metric for economic impacts when small businesses are prevalent in an industry affected b y a regulation is consistent with the EPA guidance on S BREFA compliance ( http://www.epa.gov/sbrefa/documents/Guidance-RegFle xAct.pdf ), chapters 2 and 3.

6 Ho, M. S, R. Morgenstern, and J. S. Shih. 2008. “I mpact of Carbon Price Policies on US Industry.” RFF Discussion Paper 08-37. Http://Www.Rff.Org/Publications/Pages/ Publicationdetails.Aspx?. Publicationid=20680 Accessed August 2009. Table 8.A.6.

7 Broda, C., N. Limao, and D. Weinstein. 2008b. “Expo rt Supply Elasticities.” <http://faculty. chicagobooth.edu/christian.broda/website/research/u nrestricted/TradeElasticities/ TradeElasticities.html .

8 This conclusion is consistent with the existence o f perfect competition for this industry. This conc lusion may change somewhat to the extent that this industry is imperfectly competitive.

9 For more information on the costs of the rule, plea se refer to the cost memo prepared for this industr y as part of this rule, which is a memo from Dave Reeves, RTI, to Susan Fairchild, US EPA. Estimated Cost Impact for Mineral Wool Production Industry to Comply with Residual Ri sk and Technology Review (RTR) Amendments. August 29, 2014.10

tape, textiles and reinforcement; Type C (chemical) , which has superior acid resistance, and Type T, for thermal insulation.

The basic raw materials for fiberglass products ar e a variety of natural minerals and manufactured chemicals. The major ingredients are s ilica sand, limestone, and soda ash. Other ingredients may include calcined alumina, borax, fe ldspar, nepheline syenite, magnesite, and kaolin clay, among others. Silica sand is used as t he glass former, and soda ash and limestone help primarily to lower the melting temperature. Ot her ingredients are used to improve certain properties, such as borides for chemical resistance and ductability. Waste glass, also called cullet, is also used as a raw material and may be ‘ internal’ from the production of fiberglass or may be ‘external’ from glass recycling. The raw mat erials must be carefully weighed in exact quantities, their chemical compositions evaluated, and thoroughly mixed together (called batching) before being melted into glass for the ma nufacture of fiberglass.

3.B. Economic Impacts for Wool Fiberglass RTR Final Rule

Based on the information provided by the wool fiber glass manufacturing industry and their primary trade association, North American Ins ulation Manufacturers Association (NAIMA), there are currently 30 facilities in the U.S. produ cing wool fiberglass. A letter from NAIMA dated June 8, 2011, stated “non-formaldehyde binder produ cts represent the vast majority of the industry” and “all major sources have already conve rted or have announced plans to convert to non-phenol formaldehyde binders.” Based on a revie w of the current permit status of all sources and recent information provided by industry , 10 facilities are major sources (subject to the existing MACT rule, subpart NNN) and 20 facilit ies are area source facilities. The 10 facilities operate 8 gas-fired glass-melting furnaces and 13 f lame attenuation (FA) manufacturing lines that will have to comply with the RTR amendments to the NESHAP (subpart NNN) requirements. Based on our current emissions data, two of the major source facilities, operating a total of two gas-fired glass-melting fu rnaces will be required by the final rule to reduce chromium compound emissions.

We estimate that there are currently eight gas-fire d furnaces located at five facilities designated as major sources. We also estimate that there are currently three gas-fired furnaces located at two facilities that emit chromium compou nds above the final chromium emission limit. We have estimated the cost impact for those facilities based on the assumption that those furnaces will have a shortened operational li fe cycle and be rebuilt (or replaced) earlier than they might have been otherwise. The associated costing of this scenario is referred to as11

the replacement cost approach which is described in the EPA Air Pollution Control Cost Manual (EPA/452/B-02-001), January 2002. Based on commen ts received in response to the November 13, 2014 supplemental proposal, we changed from usi ng the net present value (NPV) approach to using this replacement cost method for estimatin g the annualized cost of rebuilding a furnace. An explanation of why EPA changed its ap proach can be found in the cost memorandum for this final wool fiberglass RTR. 10

The furnace age and chromium emissions data show th at furnaces may operate into
their 10 th year and still emit chromium at levels below the c hromium emission limit. The data also show that all furnaces older than 10 years emi tted chromium at levels exceeding the proposed emission limit. We considered basing the c ost estimate on an expected 12-year furnace life and an early rebuild at 10 years. Whil e supported by the available data and resulting in a lower cost estimate, we decided to u se a more conservative (i.e., more likely to overstate than understate cost estimates) approach and based our costs on an expected 10- year furnace life and an early rebuild at 7 years. This approach is supported by industry comments. The associated costing of this scenario is referred to as the replacement cost approach which is described in the EPA Air Pollutio n Control Cost Manual (EPA/452/B-02-001), January 2002. More information on the furnace lif e cycle cost estimation approach can be found in the cost memo for the wool fiberglass RTR. 11 Using this more conservative approach, the total annualized cost per affected furnace is e stimated at $426,000.

Industry comments on the proposed major source rule amendments (76 FR 72770) stated that some of the major source facilities hav e already switched some or most of their RS lines to non-HAP binders and thus would no longer b e subject to subpart NNN. With the phaseout of phenol-formaldehyde binders on RS lines, tho se sources will also be redesignated as area sources. While industry sources also predicted befo re proposal of the RTR amendments that no major sources would exist by the end of 2012, we no w believe this to be inaccurate. According to the most current industry information, at least one RS bonded line that uses a phenolformaldehyde binder is still operated by each wool fiberglass company. The following cost impacts are based on the estimated 10 facilities th at were identified as major sources (i.e.,

10 Susan Fairchild, US EPA. Costs and Emission Reductions for the Final Wool Fi berglass Manufacturing NESHAP – Residual Risk and Technology Review (RTR) Amendment s. June 24, 2015.

11 Susan Fairchild, US EPA. Control Cost Evaluation for Evaluation for Glass-Me lting Furnaces and Manufacturing Lines – Final Wool Fiberglass Manufacturing NESHAP Residual Risk and Technology Review Amendments. Jun e 18, 2015.12

those operating a bonded line using a phenol-formal dehyde binder) in the most recent industry information provided in December 2012.

As noted previously, several facilities have alread y switched all or most of their rotary spin (RS) manufacturing lines to non-PF binders. B ased on the most recent information provided by industry, two of those facilities also have 13 bonded flame attenuation (FA) lines, all of the FA lines continue to us a phenol/formald ehyde binder, and all of the FA lines are in compliance with the emission limits in the final ru le. Therefore, additional controls are not needed for existing FA lines. However, the two faci lities will incur additional testing costs to demonstrate compliance with the new emission limits for FA lines.

In sum, the total annualized costs to the industry for this rule are $1.014 million (2013 dollars).

This economic impact analysis identified the busine sses that will be affected by this rule and provides an analysis at a screening level to as sist in determining whether this rule is likely to impose a significant economic impact on affected businesses. The analysis employed here is a “sales test” that computes the annualized complia nce costs as a share of sales for each company. The annualized cost per sales for a compan y represents the maximum price increase in affected product needed for the company to compl etely recover the annualized costs imposed by the regulation. This is the same method ology employed for the economic impact analysis for the mineral wool RTR, shown earlier in this report.

The “sales test” is the impact methodology EPA empl oys in economic impact analysis such as this one as opposed to a “profits test”, in which annualized compliance costs are calculated as a share of profits. 12 This is because revenues or sales data are common ly available data for entities normally impacted by EPA regulati ons and profits data normally made available are often not the true profits earned by firms due to accounting and tax considerations. Firms and entities often have ways legally available in the tax code to minimize their reported profits; thus, using reported profit s may lead to a less than accurate estimate of the economic impact of a regulation to an affected firm or entity and their consumers. While screening level analyses are often employed to esti mate impacts to small business or entities as part an analysis in compliance with the Regulatory Flexibility Act (RFA) as amended by the Small Business Regulatory Enforcement Fairness Act (SBREF A), a screening level analysis can also be

12 More information on sales and profit tests as used in analyses done by U.S. EPA can be found at http://www.epa.gov/sbrefa/documents/rfaguidance11-0 0-06.pdf , pp. 32-33.13

employed in an economic impact analysis such as thi s one whose focus is on the regulated companies.

As mentioned earlier, wool fiberglass facilities ar e also included in NAICS (North American Industrial Classification System) 327993 a long with mineral wool facilities. There are five parent firms owning these facilities with HAP sources affected by the major source RTR proposal, and these firms are shown in Table 2. No ne of these firms is a small business as defined by the SBA (750 employees or less for an ul timate parent company, as mentioned earlier for the relevant NAICS code). Each of t hese firms has revenues in excess of $3 billion in 2013, as shown in Table 2. All of the firms are o wned by parent companies based in the U.S. except for CertainTeed, which is owned by Saint-Gob ain, a French conglomerate, and Knauf, Inc., which is owned by the Knauf Group, Inc.) , a German conglomerate. Table 2 provides the annualized costs and economic impacts to the affect ed firms from this major source rule. With Guardian, Inc. and Knauf, Inc. not incurring any co sts from this rule, the impacts to these firms
from this rule are zero. All estimates of annualiz ed costs are taken from the cost memo for the wool fiberglass RTR. EPA used no CBI in generating economic impacts for this industry.14

Table 2: Wool Fiberglass Firms that Are Affected b y the Major Source RTR, their Revenues and Costs Incurred from the Major Source RTR, and E conomic Impacts from this Major Source RTR

Wool Fiberglass Firm Annual Revenues in 2013 (billions) Total Annualized

Costs (2013 dollars) f Annualized Costs as a

Percentage of Annual Revenues in 2013

Owens Corning $5.30 a $492,000 0.0093

Johns Manville (owned by Berkshire-Hathaway) $182.15 b 40,400 0.000022 Certain Teed (owned by Saint-Gobain) $31.64 c 482,000 0.0015 Guardian, Inc. $5.60 d 0 0 Knauf, Inc. (owned by the Knauf Group) $4.72 e 0 0

a Taken from http://investor.owenscorning.com/financial-news/fin ancial-news-details/2014/OwensCorning-Reports-Fourth-Quarter-and-Full-Year-2013-R esults/default.aspx

.

b Taken from the 2013 Berkshire-Hathaway annual repo rt at http://www.berkshirehathaway.com/2013ar/2013ar.pdf , p. 26.

c Taken from the 2013 annual report for Saint-Gobain , Inc. http://www.saintgobain.com/files/DDR_2013_GB.pdf , p. 6. Conversion from euros uses euro to U.S. dollar value as an average for 2013 using estimates from the U.S. Fede ral Reserve found at http://www.federalreserve.gov/releases/G5a/current/ default.htm . The value is 1.3281.

d Revenues available at http://www.forbes.com/companies/guardian-industries /

.

e Taken from https://www.linkedin.com/company/knauf . Conversion from euros uses euro to U.S. dollar value as an average for 2013 using estimates from t he U.S. Federal Reserve found at http://www.federalreserve.gov/releases/G5a/current/ default.htm . The value is 1.3281.

The economic impact on these wool fiberglass firms as result of the major source RTR rule, measured in annual compliance costs as a perc ent of sales or revenues, is less than 0.005 percent for each of the affected parent firms based on using available revenue data for 2013 to be consistent with the year for the cost estimates. The price elasticity of demand for wool15

fiberglass is estimated at -0.8 13 , and the price elasticity of supply for wool fiber glass is
estimated at -0.7. 14 With the responsiveness of wool fiberglass demand and supply at less than 1:1 compared to a price change of 1 percent, and wi th the change in product price as approximated by the cost to revenue ratio at less t han 0.1 percent, for this ratio is the maximum price change that producers may face, it is expected that wool fiberglass price and output changes will be clearly less than 0.1 percen t. 15 Hence, the overall economic impact of this rule should be low on the affected industry an d its consumers.

Wool Fiberglass Area Source Rule
4.A. Background

Based on the information provided by the wool fiber glass manufacturing industry and their primary trade association, North American Ins ulation Manufacturers Association (NAIMA), there are currently 30 facilities in the U.S. produ cing wool fiberglass. A letter from NAIMA dated June 8, 2011, stated “non-formaldehyde binder produ cts represent the vast majority of the industry” and “all major sources have already conve rted or have announced plans to convert to non-phenol formaldehyde binders.” Based on a revie w of the current permit status of all sources and recent information provided by industry , 10 facilities are major sources (subject to the existing MACT rule, subpart NNN) and 20 facilit ies are area source facilities. These 30 facilities operate a total of 54 glass-melting furn aces. Five of the area source facilities operate eight furnaces which meet the applicability require ments in the proposed area source NESHAP (subpart NN). Based on our current emissions data, none of these furnaces will be required by the rule to reduce chromium compound emissions.

Industry comments on the proposed major source rule amendments (76 FR 72770) stated that some of the major source facilities hav e already switched some or most of their lines to non-HAP binders and would no longer be sub ject to subpart NNN. With the phase-out of phenol-formaldehyde binders, these sources will also be redesignated as area sources. While

13 Ho, M. S, R. Morgenstern, and J. S. Shih. 2008. “I mpact of Carbon Price Policies on US Industry.” RFF Discussion Paper 08-37. http://www.rff.org/Publications/Pages/Pulbicationde tails.aspx publicationid=20680

. Accessed August 2009. Table 8.A.6.

14 Broda, C., N. Limao, and D. Weinstein. 2008b. “Expo rt Supply Elasticities.” http://faculty. chicagobooth.edu/christian.broda/website/research/u nrestricted/TradeElasticities/ TradeElasticities.html.

15 This conclusion is consistent with the existence o f perfect competition for this industry. This conc lusion may change somewhat to the extent that this industry is imperfectly competitive.16

industry sources also predicted before proposal of the RTR amendments to NNN that no major sources would exist by the end of 2012, we now beli eve this to be inaccurate. Table 2 of the wool fiberglass area source cost memo provides furt her information on wool fiberglass furnaces by furnace type and whether furnaces would currently be subject to the area source rule under subpart NN. The following cost impacts a re based on the estimated five facilities and eight gas-fired glass-melting furnaces that would b e subject to the area source rule requirements.17

4.B. Economic Impact Estimates

We estimate that there are currently eight gas-fire d furnaces located at five facilities designated as area sources. We also estimate that n one of the gas-fired furnaces located at area source facilities emit chromium compounds abov e the final chromium emission limit (2.5E04 lb/ton of glass pulled). Therefore, none of the gas-fired glass-melting furnaces at area sources must be rebuilt to comply with subpart NN. However, the facilities must conduct annual compliance testing for each furnace (annuali zed cost of $10,000 per furnace for a total annualized cost of $80,000).

Thus, the total annualized cost of the final area s ource rule is $80,000 (2013 dollars).

We prepared a similar economic impact analysis for the wool fiberglass area source final
rule as that for the final RTR shown earlier in thi s report. As mentioned earlier, wool fiberglass facilities are also included in NAICS (North Americ an Industrial Classification System) 327993 along with mineral wool facilities. There are thr ee parent firms owning these facilities with HAP sources affected by the area source rule, and t hese firms are shown in Table 3. None of these firms is a small business as defined by the S BA (750 employees or less for an ultimate parent company, as mentioned earlier for the releva nt NAICS code). Each of these firms has revenues in excess of $3 billion in 2013, as shown in Table 3. These firms are owned by parent companies based in the U.S. except for CertainTeed, which is owned by Saint-Gobain, a French conglomerate, and Knauf, Inc., which is owned by th e Knauf Group, a German conglomerate. Table 3 provides the annualized costs and economic impacts to the affected firms from this
area source rule. All estimates of annualized cost s are taken from the cost memo for the wool fiberglass area source final rule. EPA used no CBI in generating economic impacts for this industry. It should be noted that Guardian, Inc. an d Johns Manville do not have area sources that are subject to this rule. Thus, the cost to e ach of these firms as a result of this area source
NESHAP is zero.18

Table 3: Wool Fiberglass Firms that Are Affected b y the Area Source Rule, their Revenues and Costs Incurred from the Area Source Rule, and Econo mic Impacts from this Area Source Rule

Wool Fiberglass Firm Annual Revenues in 2013 (billions) Total Annualized

Costs (2013 dollars) Annualized Costs as a

Percentage of Annual Revenues in 2013

Owens Corning $5.30 a $40,000 0.0007

Certain Teed (owned by Saint-Gobain) $31.64 b $20,000 0.00006
Knauf, Inc. (owned by The Knauf Group) $4.72 c $20,000 0.0094

a Taken from http://investor.owenscorning.com/financial-news/fin ancial-news-details/2014/OwensCorning-Reports-Fourth-Quarter-and-Full-Year-2013-R esults/default.aspx

.

b Taken from 2013 annual report for Saint-Gobain, In c. http://www.saintgobain.com/files/DDR_2013_GB.pdf , p. 6. Conversion from euros uses euro to U.S. dollar value as an average for 2013 using estimates from the U.S. Fede ral Reserve found at http://www.federalreserve.gov/releases/G5a/current/ default.htm . The value is 1.3281.

c Taken from https://www.linkedin.com/company/knauf . Conversion from euros uses euro to U.S. dollar value as an average for 2013 using estimates from t he U.S. Federal Reserve found at http://www.federalreserve.gov/releases/G5a/current/ default.htm . The value is 1.3281.

The economic impact on these wool fiberglass firms as result of the area source rule, measured in annual compliance costs as a percent of sales or revenues, is less than 0.01 percent for each of the affected parent firms based on using available revenue data for 2013 to be consistent with the year for the cost estimates. The price elasticity of demand for wool fiberglass is estimated at -0.8 16 , and the price elasticity of supply for wool fiber glass is

16 Ho, M. S, R. Morgenstern, and J. S. Shih. 2008. “I mpact of Carbon Price Policies on US Industry.” RFF Discussion Paper 08-37. http://www.rff.org/Publications/Pages/Pulbicationde tails.aspx publicationid=20680

. Accessed August 2009. Table 8.A.6.19

estimated at -0.7. 17 With the responsiveness of wool fiberglass demand and supply at less than 1:1 compared to a price change of 1 percent, and wi th the change in product price as approximated by the cost to revenue ratio at less t han 0.1 percent, for this ratio is the maximum price change that producers may face, it is expected that wool fiberglass price and output changes will be less than 0.1 percent. 18 Hence, the overall economic impact of this rule should be low on the affected industry and its cons umers.

4. Conclusion – Summary of Cumulative Impacts Across R ules

The total annualized costs of the RTR and area sou rce rules for the mineral wool and wool fiberglass manufacturing categories combined a re $1,143,200 (2013 dollars), with $1,094,400 incurred by the wool fiberglass industry . For more information on the annualized compliance costs (i.e., the costs of control + the costs of monitoring, testing, and other administrative costs), please refer to the cost mem os for this rule for these industries. We also see that no firm is expected to experience an impac t of more than 0.010 percent of annualized costs as a percent of sales from the cumulative cos ts of these rules. Guardian, Inc. is not expected to incur costs from either the wool fiberg lass RTR or the wool fiberglass area source
rule.

For the rules, we find individually that we can ce rtify that there is not a significant impact on a substantial number of small entities (o r SISNOSE). This is based on no small firm being significantly impacted by this rule as shown in the impact results presented in this economic impact and small business impact analysis. We include all small firms affected by this
rule in the determination of this conclusion. Of t he eleven firms affected by these three rules, five mineral wool companies are small firms, and no ne of the small firms is affected significantly. All of these small firms are minera l wool manufacturers; no wool fiberglass manufacturer is a small business. Since the major and area source rules for wool fiberglass manufacturing do not impact small businesses, the A gency can provide a certification of no SISNOSE for the entire rulemaking in today’s action

.

17 Broda, C., N. Limao, and D. Weinstein. 2008b. “Expo rt Supply Elasticities.” http://faculty. chicagobooth.edu/christian.broda/website/research/u nrestricted/TradeElasticities/ TradeElasticities.html.

18 This conclusion is consistent with the existence o f perfect competition for this industry. This conc lusion may change somewhat to the extent that this industry is imperfectly competitive.20

Although these rules would not have a significant e conomic impact on a substantial number of small entities, the EPA nonetheless has t ried to reduce the impact that these rules
would have on small entities. The actions we are ta king to reduce impacts on small businesses include less frequent compliance testing for the en tire mineral wool industry and subcategorizing the Mineral Wool Production Source Category in developing the COS, HF and
HCl emissions limits.

Finally, the small changes in price and output expe cted as a rule of any one or all three of these rules, and the minimal additional labor th at will be required as a result of the compliance requirements, both from controls and mon itoring, recordkeeping, reporting, and testing, suggests that net employment impacts (that is, all employment impacts of any kind) resulting from this final rulemaking will be neglig ible.