Economic Impact Analysis (EIA) for the 

Manganese Ferroalloys RTR Supplemental 

Proposal

Final Report
September 2014

Economic Impact Analysis (EIA) for the Manganese Ferroalloys RTR Supplemental Proposal

By:

Larry Sorrels

U.S. Environmental Protection Agency

Office of Air Quality Planning and Standards (OAQPS)

Air Economics Group (AEG)

Research Triangle Park, NC 27711

U.S. Environmental Protection Agency

Office of Air Quality Planning and Standards

Health and Environmental Impacts Division

Research Triangle Park, North Carolina
iii

CONTENTS

Section Page

Section 1 Executive summary................................................................................................ 1-1

1.1 Analysis Summary............................................................................................... 1-1

1.2 Organization of this Report.................................................................................. 1-2

Section 2 Introduction............................................................................................................ 2-1

2.1 Background for Rule............................................................................................ 2-1

2.1.1 What is this source category and how did the MACT regulate its 

HAP emissions? ....................................................................................... 2-1

2.1.2 What data collection activities were conducted to support this 

action?...........................................................................................2-7

 2.1.3 Technology Review ................................................................................. 2-9

2.2 Options for Current Rule ................................................................................... 2-11

Section 3 Industry Profile ...................................................................................................... 3-1

3.1 Background.......................................................................................................... 3-1

3.2 Manufacturing Process...............................................................3-3

3.3 Substitute Products and Related Issues............................................3-8

3.3.1 Substitutability Issues............................................................... 3-8

3.4 Elasticity Estimates..................................................................3-18

3.4.1 U.S. Supply Elasticity....................................................... 3-8

3.4.2 U.S. Demand Elasticity....................................................... 3-9

3.4.3 Substitution Elasticity....................................................... 3-9

3.5 Raw Material Costs..................................................................3-9

3.6 Current Operations at U.S. Ferroalloy Producers ...............................3-10
iv

Section 4 Baseline Emissions, Emission Reductions, And Costs.......................................... 4-1

4.1 Introduction.......................................................................................................... 4-1

 4.2 Summary of Cost Estimates and Emissions Reductions For The Regulatory 

 Options Considered For Proposal......................................................4-1 

4.3 Regulatory Options Considered for the Supplemental 

Proposal...........................................................................4-1

4.3.1 Furnace Stack Emissions – Metal HAP.......................................4-1

4.3.2 Furnace Stack Emissions Control Options....................................4-1

 4.4 Methodology for Estimating Control Costs...........................................4-6

 4.4.1 Option 1 - Enhanced Fugitive Capture................................................4-6

 4.4.2 Option 2 - Building Ventilation ........................................................4-9

4.5 Mercury Control Options................................................................................... 4-10

4.5.1 Background........................................................................4-10

4.5.2 Methodology for Estimating Costs of Mercury Reductions at Ferroalloy 

 Facilities............................................................................4-10

 4.6 Summary of Total Cost by Facility................................................4-15

Section 5 Economic Impact Analysis and Statutory and Executive Order Analyses............ 5-1

5.1 Background.......................................................................................................... 5-1

5.2 Regulatory Flexibility Act ................................................................................... 5-1

5.3 Economic Impacts................................................................................................ 5-2

5.4 Energy Impacts .................................................................................................... 5-8

5.5 Unfunded Mandates Reform Act......................................................................... 5-9

5.5.1 Future and Disproportionate Costs ............................................................ 5-9

5.5.2 Effects on the National Economy ............................................................ 5-9

5.6 Executive Order 13045: Protection of Children from Environmental 

Health Risks and Safety Risks........................................................................... 5-10
v

5.7 Executive Order 12898: Federal Actions to Address Environmental Justice 

in Minority Populations and Low-Income Populations..................................... 5-11

 5.8 Employment Impact Analysis.........................................................5-11

5.8.1 Employment Impacts Within the Regulated Sector.........................5-13

Section 6 References For EIA................................................................................................ 6-1
1-1

SECTION 1

EXECUTIVE SUMMARY

The U.S. Environmental Protection Agency (EPA) has prepared a supplemental proposal 

to the national emissions standards for hazardous air pollutants (NESHAP) for Ferroalloys 

Production to address the results of the residual risk and technology review that EPA is required 

to conduct by the Clean Air Act. This supplemental proposal is to be signed under a court-order 

on September 4, 2014. These amendments include revisions to existing particulate matter 

standards for electric arc furnaces, metal oxygen refining process, and crushing and screening 

operations. The amendments add hydrochloric acid, mercury, polycyclic aromatic hydrocarbons, 

and formaldehyde emission limits to electric arc furnaces. The amendments also expand and 

revise the requirements to control process fugitive emissions from furnace operations and 

casting. Other requirements related to testing, monitoring, notification, recordkeeping, and 

reporting requirements are included. 

This is not an economically significant rule as defined by Executive Order 12866 and 

13563 since the annual effects, either benefits or costs, are not estimated to potentially exceed 

$100 million. Therefore, EPA is not required to develop a regulatory impact analysis (RIA) as 

part of the regulatory process. EPA has prepared an economic impact analysis (EIA) for this 

proposal, however, and includes documentation for the methods and results.

1.1 Analysis Summary

The key results of the EIA are as follows:

Engineering Cost Analysis: EPA estimates the supplemental proposal 

NESHAP’s total annualized costs will be $7.1 million ($2012). This estimate 

includes all of the compliance costs for expected controls on all affected 

hazardous air pollutants (HAP), with both control and administrative (monitoring, 

testing) costs and costs of additional ductwork and fans included. These costs 

primarily reflect the costs to install and operate controls to reduce process fugitive 

emissions of HAP metals (e.g., manganese, nickel, cadmium) that are necessary to 

reduce risks, and reflect the MACT floor level of control for HAP emissions from 

the furnace stacks. EPA estimates the total capital cost of the supplemental 

proposal to be about $37 million. 

Economic Impact Analysis: The economic impacts for the firms affected by this 

proposed rule include annual compliance costs of approximately 1.8 percent of 

sales, and a potential 9.5 percent reduction in output. Thus, consumers will 

experience moderate increases in the price of affected ferroalloy output. 
1-2

Social Cost Analysis: The estimated social cost of this supplemental proposed 

rule will be $7.1 million, which is also the total annualized cost of compliance

($2012).

Small Entity Analyses: Neither of the two affected firms are small businesses 

according to the Small Business Administration’s (SBA’s) small business size 

standard for this industry. The small business size standard for the ferroalloy 

manufacturing industry is 1,000 employees for an ultimate parent company. 

Thus, there are no small business or entity impacts associated with this rule. 

1.2 Organization of this Report

The remainder of this report supports and details the methodology and the results of the 

EIA:

 Section 2 describes the supplemental proposal.

 Section 3 presents the profile of the affected industry.

 Section 4 describes the baseline emissions and emission reductions for options 

considered in the supplemental proposal.

 Section 5 describes the economic impacts and analyses to comply with Executive 

Orders.

 Section 6 contains the references for the EIA. 
2-1

SECTION 2

INTRODUCTION

2.1 Background for Rule

This action supplements our proposed amendments to the national emission 

standards for hazardous air pollutants for the ferroalloys production source category 

published in the Federal Register on November 23, 2011 (76 FR 72508). In that action, 

the EPA proposed amendments under section 112(d)(6) and (f)(2) of the Clean Air Act. 

Specifically, this action presents a new technology review and a new residual risk 

analysis for the ferroalloys production source category and proposes revisions to the 

standards based on those reviews. This action also proposes new compliance 

requirements to meet the revised standards.

2.1.1 What is this source category and how did the MACT regulate its HAP 

emissions?

The NESHAP (or MACT rule) for Ferroalloys Production: Ferromanganese and 

Silicomanganese was promulgated on May 20, 1999 (64 FR 27450) and codified at 40 

CFR part 63, subpart XXX.1 The 1999 NESHAP (40 CFR 63.1650(a)) applies to all new 

and existing ferroalloys production facilities that manufacture ferromanganese or 

silicomanganese and are major sources or are co-located at major sources of HAP 

emissions. The rule’s product-specific applicability reflected the only known major 

source at the time of promulgation. Since then, one other producer of silicomanganese 

has started production.

Today, there are two ferroalloys production facilities that are subject to the 

MACT rule. The ferroalloys products that are the focus of the NESHAP are 

ferromanganese (FeMn) and silicomanganese (SiMn), which are produced by two 

facilities in the United States. One facility (Eramet) is located in Ohio and produces both 

FeMn and SiMn. The other plant (Felman) is located in West Virginia and produces only 

SiMn.

 

1 The emission limits were revised on March 22, 2001 (66 FR 16024) in response to a petition for 

reconsideration submitted to EPA following promulgation of the final rule, and a petition for review 

filed in the U.S. Court of Appeals for the District of Columbia Circuit.
No new ferroalloys production facilities have been built in over 20 years, and we 

anticipate no new ferroalloys production facilities in the foreseeable future, although one 

facility is currently exploring expanding operations. 

Ferroalloys are alloys of iron in which one or more chemical elements (such as 

chromium, manganese, and silicon) are added into molten metal. Ferroalloys are 

consumed primarily in iron and steel making and are used to produce steel and cast iron 

products with enhanced or special properties. 

Ferroalloys within the scope of this source category are produced using 

submerged electric arc furnaces, which are furnaces in which the electrodes are 

submerged into the charge. The submerged arc process is a reduction smelting operation. 

The reactants consist of metallic ores (ferrous oxides, silicon oxides, manganese oxides, 

etc.) and a carbon-source reducing agent, usually in the form of coke, charcoal, high- and 

low-volatility coal, or wood chips. Raw materials are crushed and sized and then 

conveyed to a mix house for weighing and blending. Conveyors, buckets, skip hoists, or 

cars transport the processed material to hoppers above the furnace. The mix is gravity-fed 

through a feed chute either continuously or intermittently, as needed. At high 

temperatures in the reaction zone, the carbon source reacts with metal oxides to form 

carbon monoxide and to reduce the ores to base metal.2 The molten material (product and 

slag) is tapped from the furnace, sometimes subject to post-furnace refining, and poured 

into casting beds on the furnace room floor. Once the material hardens, it is transported to 

product crushing and sizing systems and packaged for transport to the customer.

HAP generating processes include electrometallurgical (furnace) operations 

(primary and tapping), other furnace room operations (ladle treatment and casting), 

building fugitives, raw material handling and product handling. HAP are emitted from 

ferroalloys production as process emissions, process fugitive emissions, and outdoor 

fugitive dust emissions. 

Process emissions are the exhaust gases from the control devices, primarily the 

furnace control device, metal oxygen refining control device and crushing operations 

control device. The HAP in process emissions are primarily composed of metals (mostly 

manganese, arsenic, nickel, lead and chromium) and also may include organic 

 

2 U.S. Environmental Protection Agency. AP-42, 12.4. Ferroalloy Production. October 1986. 
compounds that result from incomplete combustion of coal or coke that is charged to the 

furnaces as a reducing agent. There is also evidence of mercury emissions. There are 

process metal HAP emissions from the product crushing control devices. Process fugitive 

emissions occur at various points during the smelting process (such as during charging 

and tapping of furnaces and casting) and are assumed to be similar in composition to the 

process emissions. Outdoor fugitive dust emissions result from the entrainment of HAP 

in ambient air due to material handling, vehicle traffic, wind erosion from storage piles, 

and other various activities. Outdoor fugitive dust emissions are composed of metal HAP 

only.

The MACT rule applies to process emissions and process fugitive emissions from 

the submerged arc furnaces, the metal oxygen refining process, and the product crushing 

equipment and outdoor fugitive dust emissions sources such as roadways, yard areas, and 

outdoor material storage and transfer operations. For process sources, the NESHAP 

specifies numerical emissions limits for particulate matter (as a surrogate for metal HAP) 

from the electric (submerged) arc furnaces (including primary and tapping emissions), 

depending on furnace type, size, and product being made. Particulate matter emission 

limits (again as a surrogate for metal HAP) are also in place for the metal oxygen refining 

process and product crushing and screening equipment. Table 2-1 contains a summary of 

the applicable limits.
2-1

Table 2-1. Emission Limits in Subpart XXX

New or Reconstructed 

or Existing Source

Affected Source Applicable PM Emission 

Standards

Subpart XXX 

Reference

New or reconstructed Submerged arc furnace 0.23 kilograms per hour per 

megawatt (kb/hr/MW) (0.51 

pounds per hour per 

megawatt (lb/hr/MW) or 35 

milligrams per dry standard 

cubic meter (mg/dscm) (0.015 

grains per dry standard cubic 

foot (gr/dscf)

40 CFR 

63.1652(a)(1) and 

(a)(2)

Existing Open submerged arc furnace producing 

ferromanganese and operating at a furnace 

power input of 22 MW or less

9.8 kg/hr (21.7 lb/hr) 40 CFR 

63.1652(b)(1)

Existing Open submerged arc furnace producing 

ferromanganese and operating at a furnace 

power input greater than 22 MW

13.5 kg/hr (29.8 lb/hr) 40 CFR 

63.1652(b)(2)
New or Reconstructed 

or Existing Source

Affected Source Applicable PM Emission 

Standards

Subpart XXX 

Reference

Existing Open submerged arc furnace producing 

silicomanganese and operating at a furnace 

power input greater than 25 MW

16.3 kg/hr (35.9 lb/hr) 40 CFR 

63.1652(b)(3)

Existing Open submerged arc furnace producing 

silicomanganese and operating at a furnace 

power input of 25 MW or less

12.3 kg/hr (27.2 lb/hr) 40 CFR 

63.1652(b)(4)

Existing Semi-sealed submerged arc furnace 

(primary, tapping, and vent stacks) 

producing ferromanganese

11.2 kg/hr (24.7 lb/hr) 40 CFR 63.1652(c)

New, reconstructed, or 

existing

Metal oxygen refining process 69 mg/dscm (0.03 gr/dscf) 40 CFR 63.1652(d)

New or reconstructed Individual equipment associated with the 

product crushing and screening operation

50 mg/dscm (0.022 gr/dscf) 40 CFR 

63.1652(e)(1)

Existing Individual equipment associated with the 

product crushing and screening operation

69 mg/dscm (0.03 gr/dscf) 40 CFR 

63.1652(e)(2)
The 1999 NESHAP established a building opacity limit of 20 percent that is measured 

during the required furnace control device performance test. The rule provides an excursion limit 

of 60 percent opacity for one 6-munute period during the performance test. The opacity 

observation is focused only on emissions exiting the shop due solely to operations of any 

affected submerged arc furnace. In addition, blowing taps, poling and oxygen lancing of the tap 

hole; burndowns associated with electrode measurements; and maintenance activities associated 

with submerged arc furnaces and casting operations are exempt from the opacity standards 

specified in §63.1653.

For outdoor fugitive dust sources, as defined in §63.1651, the 1999 NESHAP requires 

that plants prepare and operate according to an outdoor fugitive dust control plan that describes 

in detail the measures that will be put in place to control outdoor fugitive dust emissions from the 

individual outdoor fugitive dust sources at the facility. The owner or operator must submit a copy 

of the outdoor fugitive dust control plan to the designated permitting authority on or before the 

applicable compliance date. 

2.1.1.1 History of RTR Development Up to the Present

Pursuant to section 112(f)(2) of the Clean Air Act, we evaluated the residual risk 

associated with the Ferroalloys Production NESHAP in 2011. We also conducted a technology 

review, as required by section 112(d)(6) of the Clean Air Act. We also reviewed the 1999 MACT 

rule to determine if other amendments were appropriate. Based on the results of that previous 

residual risk and technology review, and the MACT rule review, we proposed amendments to 

subpart XXX on November 23, 2011 (76 FR 72508) (referred to herein out as the 2011 

proposal). The proposed amendments in the 2011 proposal which we are revisiting in today’s 

supplemental proposal included the following:

 proposed revisions to particulate matter standards for electric arc furnaces and local 

ventilation control devices; 

 emission limits for hydrochloric acid (HCl), mercury, and polycyclic aromatic 

hydrocarbons (PAHs);

 proposed requirements to control process fugitive emissions based on full-building 

enclosure with negative pressure, or fenceline monitoring as an alternative; and

 a provision for emissions averaging. 
In today’s Notice of Supplemental Proposed Rulemaking we present revised analyses, 

and based on those analyses we are proposing revised amendments for the items listed above to 

allow the public an opportunity to review and comment on these revised analyses and revised 

proposed amendments.

We also proposed other requirements in the 2011 proposal (listed below) for which we 

have made no revisions to the analyses, we are not proposing any changes, and are not reopening 

for public comment. The other requirements that we proposed in the 2011 Proposal, for which 

we are not re-opening for comment, are the following:

 particulate matter standards for metal oxygen refining processes and crushing and 

screening operations

 emissions limits for formaldehyde

 elimination of SSM exemptions

 electronic reporting, and 

 amendments to the monitoring, notification, recordkeeping and testing 

requirements. 

The comment period for the November 2011 proposal opened on November 23, 2011 and 

ended on January 31, 2012. We will address the comments we received during the public 

comment period for the 2011 proposal at the time we take final action.

2.1.2 What data collection activities were conducted to support this action?

Commenters on the 2011 proposal expressed concern that the data set used in the risk 

assessment did not adequately reflect current operations at the plants. In response to these 

comments, we worked with the facilities to address these concerns, and we have obtained a much 

more robust data set than the one available to us at proposal. Specifically, the plants provided 

data collected during their ongoing compliance tests in fall 2012. Then, in response to an 

Information Collection Request (ICR) from the EPA in December 2012, they conducted more 

tests in the spring of 2013. This combined testing effort provided the following data:

Additional stack test data for arsenic, cadmium, chromium, lead, manganese, mercury, 
nickel, HCl, formaldehyde, PAH, polychlorinated biphenyls (PCB), and dioxins/furans;

 Test data collected using updated, state-of-the-art test methods and procedures;

 Hazardous air pollutant (HAP) test data for all operational furnaces;

 Test data obtained during different seasonal conditions (i.e., spring and fall);

 Test data for both products (ferromanganese and silicomanganese) for both furnaces at 

Eramet (Felman only produces silicomanganese).

We believe that the current data set is significantly better than the data set we relied on in 

the 2011 proposal. With the new data, we do not have to extrapolate HAP emissions from a ratio 

of particulate matter to HAP emissions from just one or two tested furnaces. We are also using 

test data collected using test methods that we believe, in some cases, are more appropriate and 

provide better QA/QC of the test results. For mercury, test data was collected for the 

supplemental proposal using EPA Method 30B, which requires paired samples collected for each 

test run, in addition to a spiked sample during the 3-run test. Test data for PAH were collected 

using CARB 429, which uses higher resolution and greater sensitivity analytical procedures to 

determine concentration of the PAH compounds. We also received PCB and dioxin/furan test 

data that was collected using CARB 428, which also uses higher resolution and greater 

sensitivity analytical procedures to determine the concentration of the organic compounds. 

Commenters also expressed concern that the estimated cost and operational impacts of 

the proposed process fugitive standards based on use of a total building enclosure requirement 

were significantly underestimated. In their comments both companies submitted substantial 

additional information and estimates regarding the elements, costs and impacts involved with 

constructing and operating a full building enclosure for their facilities. Furthermore, in their 

comments, and in subsequent meetings and other communications, the companies also provided 

design and cost information for an alternative approach to substantially reduce fugitive emissions 

based on enhanced local capture and control of these emissions at each plant. In the summer of 

2012 and fall of 2013, both plants submitted updated enhanced capture plans and cost estimates 

to implement those plans. We also consulted with outside ventilation experts and control 

equipment vendors to re-evaluate the costs of process fugitive capture as well as other control 

device costs such as activated carbon injection. We also gathered a substantial amount of opacity 

data from both facilities, and collected additional information regarding the processes, control 

technologies, and modeling input parameters (such as stack release heights and fugitive 

emissions release characteristics). We reviewed and evaluated all the data and information 
provided by the facilities, the ventilation experts and venders, and revised our analyses 

accordingly. 

2.1.3 Technology Review

Our technology review focused on the identification and evaluation of developments in 

practices, processes and control technologies that have occurred since the MACT standards were 

promulgated. Where we identified such developments, in order to inform our decision of whether 

it is “necessary” to revise the emissions standards, we analyzed the technical feasibility of 

applying these developments, and the estimated costs, energy implications, non-air 

environmental impacts, as well as considering the emission reductions. We also considered the 

appropriateness of applying controls to new sources versus retrofitting existing sources.

Based on our analyses of the available data and information, we identified potential 

developments in practices, processes and control technologies. For this exercise, we considered 

any of the following to be a “development”:

 Any add-on control technology or other equipment that was not identified and considered 

during development of the original MACT standards.

 Any improvements in add-on control technology or other equipment (that were identified 

and considered during development of the original MACT standards) that could result in 

additional emissions reduction.

 Any work practice or operational procedure that was not identified or considered during 

development of the original MACT standards.

 Any process change or pollution prevention alternative that could be broadly applied to 

the industry and that was not identified or considered during development of the original 

MACT standards.

 Any significant changes in the cost (including cost effectiveness) of applying controls 

(including controls the EPA considered during the development of the original MACT 

standards).

We reviewed a variety of data sources in our investigation of potential practices, 

processes or controls to consider. Among the sources we reviewed were the NESHAP for 

various industries that were promulgated since the MACT standards being reviewed in this 

action. We reviewed the regulatory requirements and/or technical analyses associated with these 

regulatory actions to identify any practices, processes and control technologies considered in 

these efforts that could be applied to emission sources in the Ferroalloys production source 

category, as well as the costs, non-air impacts and energy implications associated with the use of 

these technologies. Additionally, we requested information from facilities regarding 
developments in practices, processes or control technology. Finally, we reviewed information 

from other sources, such as state and/or local permitting agency databases and industrysupported databases.

For the 2011 proposal, our technology review focused on the identification and 

evaluation of developments in practices, processes, and control technologies that have occurred 

since the 1999 NESHAP was promulgated. In cases where the technology review identified 

such developments, we conducted an analysis of the technical feasibility of applying these 

developments, along with the estimated impacts (costs, emissions reductions, risk reductions, 

etc.) of applying these developments. We then made decisions on whether it is necessary to 

propose amendments to the 1999 NESHAP to require any of the identified developments. Based 

on our analyses of the data and information collected by the 2010 ICR and our general 

understanding of the industry and other available information on potential controls for this 

industry, we identified several potential developments in practices, processes, and control 

technologies. 

Based on our technology review for the 2011 proposed rule, we determined that there 

had been advances in emissions control measures since the Ferroalloys Production NESHAP 

was originally promulgated in 1999. Based on that review, we proposed lower PM emissions 

limits for the process vents because we determined that the existing add-on control devices 

(baghouses and wet venture scrubbers) were achieving better control than that reflected by the 

older emissions limits in the 1999 MACT rule. Furthermore, based on that previous technology 

review, to reduce fugitive process emissions, in 2011 we decided to propose a requirement for 

sources to enclose the furnace building, collect the fugitive emissions such that the furnace 

building is maintained under negative pressure, and duct those emissions to a control device. 

We proposed that approach in 2011, because at that time, we believed it represented a 

technically-feasible advance in emissions control since the Ferroalloys Production NESHAP 

was originally promulgated in 1999. Additional details regarding the previously-conducted 

technology review can be found in the docket for this action: Memorandum: Technology 

Review for Ferroalloys Production Source Category (10/27/2011) (See Docket No. EPA-HQOAR-2010-0895-0044), and are discussed in the preamble to the November 2011 proposal. 

However, we received significant adverse public comments regarding the proposed requirement 

for full-enclosure with negative pressure. After reviewing and considering the comments and 

other information regarding the costs and feasibility of full-enclosure, we determined that fullenclosure with negative pressure may not be feasible for these facilities and would be much 

more costly than what we had estimated for the 2011 proposal. Therefore we decided to 
evaluate other potential approaches to reduce fugitive process emissions, such an option based 

on enhanced local capture and control of the fugitive emissions, which is described in more 

detail below. 

We also gathered additional emissions data for the process vents. Therefore, we have updated and revised our technology review for the process vent emissions and fugitive emissions 

control options. For further information on the technology review, and the risk review, please 

refer to the preamble for the supplemental proposal. 

2.2 Options for Current Rule

The first option (Option 1) evaluated for fugitive metal HAP emissions in this document 

is based on enhanced local capture and control, including primary and secondary hooding. The 

second option (Option 2) is full building enclosure. The two options evaluated for mercury 

emissions in this document are: 

Option 1 – Propose mercury limits based on the calculated UPL (i.e., MACT Floor) for 

each of the product types (silicomanganese (SiMn), ferromanganese (FeMn)).

Option 2 – Propose beyond the floor mercury limit for FeMn production and the UPL 

(i.e., MACT Floor) mercury limit for SiMn production.

The proposal options that are selected in this supplemental proposed rulemaking are 

Option 1 for the fugitive metal HAP emissions and Option 1 for the mercury emissions. 

It should be noted that new language on how the UPL method is addressed and explained 

can be found in the preamble for this proposal. 

As part of the regulatory process of preparing these standards, EPA has prepared an 

economic impact analysis (EIA). This analysis includes consideration impacts to small entities as 

part of compliance with the Small Business Regulatory Enforcement Fairness Act (SBREFA) 

and analyses to comply with other Executive Orders.
3-1

SECTION 3

INDUSTRY PROFILE

3.1 Background

EPA has developed this industry profile to provide the reader with an understanding of 

the technical and economic aspects of the industry that would be directly affected by this 

proposal.

Ferroalloys are alloys of iron in which one or more chemical elements (such as 

chromium, manganese, and silicon) are added into molten metal. Ferroalloys are consumed 

primarily in iron and steel making and are used to produce steel and cast iron products with 

enhanced or special properties. Ferroalloy manufacturing is found in NAICS 331110 (Iron and 

Steel Mills and Ferroalloy Manufacturing). 

Ferroalloys within the scope of this source category are produced using submerged 

electric arc furnaces, which are furnaces in which the electrodes are submerged into the charge. 

The submerged arc process is a reduction smelting operation. The reactants consist of metallic 

ores (ferrous oxides, silicon oxides, manganese oxides, etc.) and a carbon-source reducing agent, 

usually in the form of coke, charcoal, high- and low-volatility coal, or wood chips. Raw 

materials are crushed and sized and then conveyed to a mix house for weighing and blending. 

Conveyors, buckets, skip hoists, or cars transport the processed material to hoppers above the 

furnace. The mix is gravity-fed through a feed chute either continuously or intermittently, as 

needed. At high temperatures in the reaction zone, the carbon source reacts with metal oxides to 

form carbon monoxide and to reduce the ores to base metal. The molten material (product and 

slag) is tapped from the furnace, sometimes subject to post-furnace refining, and poured into 

casting beds on the furnace room floor. Once the material hardens, it is transported to product 

crushing and sizing systems and packaged for transport to the customer.

Silicomanganese, a metallic silvery ferroalloy, is composed principally of manganese, 

silicon, and iron. It is produced in a number of grades and sizes. Most, but not all,

silicomanganese is manufactured and sold to ASTM International specification A 483, which 

covers three grades, designated “A,” “B,” and “C” and differentiated by their silicon and carbon 

contents. Most silicomanganese produced and sold in the United States conforms to the
3-2

specification for grade B. Silicomanganese is sold in small pieces of fairly uniform sizes. A 

typical piece of silicomanganese is 3 inches by 1⁄4 inch.1 

Silicomanganese is consumed in bulk form primarily by the steel industry as a source of

both silicon and manganese, although some silicomanganese is used as an alloying agent in the

production of iron castings. Manganese, intentionally present in nearly all steels, is used as a

steel desulfurizer and deoxidizer. By removing sulfur from steel, manganese prevents the steel

from becoming brittle during the hot rolling process. In addition, manganese increases the

strength and hardness of steel. Silicon is used as a deoxidizer, aiding in making steels of uniform 

chemistry and mechanical properties. As such, it is not retained in the steel, but forms silicon 

oxide, which separates from the steel as a component of the slag. As an alloying agent, silicon 

increases the hardness and strength of hot‐rolled steel mill products, and enhances the toughness, 

corrosion resistance, and magnetic and electrical properties of certain steel mill products.

Use depends upon the steelmaking practices of a given producer. Silicomanganese may

be introduced directly into the steelmaking furnace or added as a chemistry addition/deoxidizer

to molten steel at a separate ladle metallurgy station. As a furnace addition, it is typically used in 

lump sizes and melted along with other steelmaking raw materials; as a ladle addition,

silicomanganese is used in smaller sizes. Silicomanganese is mostly consumed by electric

furnace steelmakers in the production of long products, including bars and structural shapes. This 

use in long products may be due to less restrictive specifications for silicon for these products 

than for flat‐rolled carbon steel mill products, such as sheet and strip.

Silicomanganese is believed to account for only a small share of the total cost of end‐use 

steel mill products. A low‐carbon grade of silicomanganese containing around 60 percent of 

manganese with around 30 percent of silicon and less than 0.10 percent carbon is also available 

and is used primarily in the production of stainless steel, not in the applications of the more 

common standard grade silicomanganese. Low‐carbon silicomanganese is not a subject product 

in these reviews. Low‐carbon silicomanganese is produced by upgrading standard grade material

by the addition of silicon wastes from the ferrosilicon industry. It is produced primarily in

Norway by a firm related to the Eramet Group, one of the firms affected by this supplemental 

proposal.

 

1 U.S. International Trade Commission. Silicomanganese from India, Kazakhstan and Venezuela. Investigation 

Nos. 731-TA-929-931 (Second Review). Publication No. 4424. September 2013. Available on the Internet at 

http://www.usitc.gov/publications/701_731/4424.pdf. 
3-3

3.2 Manufacturing Process

Silicomanganese is produced by smelting together in a submerged arc furnace sources of 

silicon, manganese, iron, and a carbonaceous reducing agent, usually coke. The reducing agent 

and the other items are combined in a “charge” (which may include wood chips, dolomite, and a 

fluxing agent) and electrically heated. Impurities from the ore or other manganese sources are 

released and form slag, which rises to the top of the furnace and floats on top of the molten 

silicomanganese. Following smelting, molten metal and slag are removed or “tapped” from the 

furnace. The molten silicomanganese is poured into large molds (called “chills”), where it cools 

and hardens. Once the alloy has hardened, the chills are emptied and the alloy is crushed into 

small pieces and screened to fairly uniform sizes.

Eramet Marietta, Inc. is located in Marietta, OH and is wholly‐owned by Eramet Holding

Manganese of France. Prior to July 1999, the Marietta, OH, facility was operated by Elkem

Metals Co. In July 1999, Eramet SA of France purchased the production facility in Marietta, OH, 

which included all of Elkem Metals Co.’s silicomanganese assets, from Elkem S/A, and created 

the U.S. company Eramet Marietta, Inc. From 2002 to 2005, Highlander Alloys, LLC

(“Highlander”), attempted to produce silicomanganese at a silicon and silicon alloy facility in

New Haven, WV, but was beset by a number of problems ranging from financial woes, service

cutoffs, strikes by unpaid workers, and production difficulties resulting in only sporadic

production of silicomanganese. Domestic producer Eramet produces silicomanganese at a plant 

in Marietta, OH, that it purchased in July 1999 from Elkem. Eramet also produces other 

manganese ferroalloys as well as other alloying agents at that plant. Silicomanganese is 

manufactured in the same or similar facilities as those used to produce high carbon 

ferromanganese, although switching from one grade or type of manganese ferroalloy to another 

involves costs in terms of lost production, reduced productivity, or possible contamination of the 

higher grade product.
3-4

Organization Structure

Currently, the Eramet Marietta site is one of 11 subsidiaries of Eramet Group’s 

Manganese division, with other facilities in this division distributed across the U.S., Canada, 

China, Gabon, and Europe (Eramet, 2012).

Inputs and Outputs

According to the website of Eramet Marietta (2012), the Marietta facility acquired 

manganese ore via barge from sister company Eramet Comilog, which operates a mine in Gabon, 

Africa. This ore is refined into either ferromanganese or silicomanganese. The finished product 

is shipped to the company’s customers, which “are primarily steel companies – most of which 

are located within a 500-mile radius of the facility” (Eramet Marietta, 2012).

Revenue and Employment

Revenue data for Eramet Marietta is available in Hoover’s, but it is proprietary.2 Yahoo 

Finance (2008) estimates the company’s 2008 employment at 365, while Dun and Bradstreet 

(2011a) list 2009 employment as 240. The only official data comes from the website of Eramet 

Marietta (2012), where it is specified that the company is “currently employing over 200 

people”.

Felman Production, LLC

Felman Production, LLC has been operating on the West Virginia side of the Ohio River 

since 2006 in a facility built in 1952 (Felman Trading, 2012). Felman Production, Inc. became a 

limited liability corporation (LLC) in 2012. This plant has 256 employees when operating at full 

production. The union representing the Felman employees is the United Steelworkers Union and 

at full production the plant operates 24 hours per day and 7 days per week.

Organization Structure

Felman Production, LLC is a foreign-owned and privately-held company. The company 

is a wholly owned subsidiary of Georgian American Alloys Corp. Also, according to the U.S. 

Geological Survey (2010), Georgian American Alloys Corp. is owned by Ukraine’s Privat 

 

2 Based on download of data from Hoover’s, http://www.hoovers.com, on March 14, 2014. 
3-5

Group. A document from the U.S. District Court for the Southern District of West Virginia 

sheds more light on the ownership of the company. In a 2011 memorandum regarding an 

insurance claim made by Felman Production, the court reported that “Felman is 100% owned by 

Haftseek Investments Limited, which is 100% owned by Divot Enterprises, Ltd., the stock of 

which is 100% owned by Igor Kolomoiskiy” who is described as “one of three shareholders of 

Privat Bank” (U.S. District Court for the Southern District of West Virginia [USDC SDWV], 

2011). The memorandum also specifies that the Privat entity “is intimately related to Felman 

and its operations” (USDC SDWV, 2011).

Felman Production, LLC also has close ties with Felman Trading, Inc., which is “an 

exclusive distributor of ferroalloys produced by its relative company Felman Production, Inc.” 

This entity is the trading arm for Felman Production and is responsible for selling and delivering 

ferroalloy products produced by the company.

Inputs and Outputs

While it is unclear where the mined ore comes from, sale and delivery of finished 

products is entirely done by Felman Trading, Inc. The goods are sold to “metallurgical 

consumers in North, Central, and South Americas” (Felman Trading, 2012). Felman sells their 

product through its sister company, Felman Trading, Inc. (which is based in Miami, FL) to 

various steelmakers such as AK Steel, Nucor, Gerdau Ameristeel, and Timken to name a few. In 

addition to the plant near New Haven, West Virginia, Felman Trading also handles the output of 

U.S.-based CC Metals and Alloys and five plants in the Black Sea region, including three plants 

in Ukraine, one plant in Romania, and one plant in Georgia.

Revenue, Employment and Other Economic Data

According to Manta, Inc. in 2012, Felman Production, Inc. parent company had $27.7

million in sales. Other measures of revenue were either largely inaccurate or undisclosed.

In an EPA inspection report dated March 19, 2012, the company describes its profit 

margins as “extremely tight and dependent on, among other factors, the price of manganese ore 

and the market price for silicomanganese, which varies considerably (e.g., between October 2011 

and March 2012, the market price for silicomanganese fluctuated between $900 and $1200 per 

ton).”3 The same inspection report also indicated that at this time, Felman is considering shutting 

 

3

 Memorandum from U.S. EPA, Region III. Report for Inspection of Felman Production, Inc. plant in Letart, West 

Virginia. March 19, 2012. Redacted version. 
3-6

down the facility in the next 2-3 years if the capital and operating costs associated with new and 

proposed air emissions control requirements make silicomanganese production in West Virginia 

uneconomical. However, if the facility is able to obtain the required air permits, the plant 

manager did say that there was the possibility of Felman installing an additional 1-2 furnace(s) in 

the plant (which may be accompanied by a shutdown of 1-2 of the existing furnaces). This would 

be a 30 million dollar (per furnace) investment in the facility. The plant’s Title V permit was 

revised on March 12, 2012 in order for the Company to install and operate a pelletizer, extruder 

and crusher for material handling purposes.4

More recently, Felman’s chief financial officer, Barry Nuss, testified before the West 

Virginia Public Services Commission that Felman Production, LLC incurred losses in 2011 and 

2012, and that “it is not logical to assume that the shareholder of Felman Production will 

continue to operate a high cost, unprofitable operation if it has an alternative to do otherwise.” 5

Within the United States, the electrometallurgical ferroalloy manufacturing industry is 

composed of two facilities located about 80 miles apart in the Ohio River Valley. Eramet 

Marietta, the larger of the two, is located in the town of Marietta, within Washington County, 

Ohio; the other manufacturer, Felman Production LLC, is located near New Haven, within 

Mason County, West Virginia. 

Today, there are two ferroalloys production facilities that are subject to the supplemental 

proposal. No new ferroalloys production facilities have been built in over 20 years, and we 

anticipate no new ferroalloys production facilities in the foreseeable future, although one facility 

is currently exploring expanding operations.

In general, little difference appears to exist between the production processes in the

domestic industry and those used abroad to produce silicomanganese. This fact reflects the

maturity of the industry, and may be attributed to the diffusion of process technology,

techniques, and equipment on a world‐wide basis; the similarity of steelmaking techniques; and

the commonality of steel recipes. 

Most silicomanganese is sold directly to the end user, steel producers, for use as a

deoxidizer in the production of steel. It is mostly used in production of long products (rods, bars, 

 

4 Memorandum from U.S. EPA, Region III. Report for Inspection of Felman Production, Inc. plant in Letart, West 

Virginia. March 19, 2012. Redacted version.

5 Public Service Commission of West Virginia. Redacted Rebutal testimony of Barry Nuss on behalf of Felman 

Production, LLC. Case No. 13-1325-E-PC. November 26, 2013, p. 6.
3-7

and sections) in electric arc furnace mini‐mills, which have increased their share of raw steel 

production in the United States. Silicomanganese is also used, although to a lesser extent, in steel 

plate production. Demand for silicomanganese follows the trends of the steel industries as well 

as overall economic conditions. Purchasers of silicomanganese reported that their main

customers are foundries and steel mills.

Based on available information, U.S. silicomanganese producers have the ability to

respond to changes in demand with moderate changes in the quantity of shipments of U.S.

produced silicomanganese to the U.S. market. The main contributing factors to the moderate

degree of responsiveness of supply are the availability of unused capacity, some ability to use

inventories to increase shipments, and the ability to produce alternate products.

Based on available information, overall U.S. demand for silicomanganese is likely to

experience small changes in response to changes in price. Silicomanganese accounts for a very

small share of the total cost of its end uses. Apparent U.S. consumption of silicomanganese, by 

quantity, decreased during 2007‐09 and increased during 2010‐12. 

Purchasers in the U.S. reported that silicomanganese accounted for 1 percent of the total 

cost of steel produced in integrated mills and less than 3 percent of costs for steel produced with 

electric arc furnaces.

Most firms reported that U.S. demand for silicomanganese since 2007 decreased or

fluctuated considerably. Most firms attributed the decreases or fluctuations in demand to the

overall condition of the economy and the decline in steel production. Several firms specifically

cited the recession in 2009 as causing a decrease in demand for silicomanganese due to the

decrease in construction activity and associated decline in demand for steel.

Firms’ responses to a US ITC survey regarding future demand for silicomanganese were 

mixed. One‐half of responding importers expect U.S. demand for silicomanganese to fluctuate, 

while others anticipate that demand will increase or not change. Purchasers who expect demand 

for silicomanganese to change reported that it will fluctuate, and most foreign producers 

anticipate U.S demand for silicomanganese to increase. Most firms attributed these changes to 

economic recovery and changing demand for steel.

Both responding U.S. producers reported that the silicomanganese market subject to 

business cycles or conditions of competition distinctive to silicomanganese, and most responding 

importers (8 of 12) reported that silicomanganese is subject to business cycles or conditions of 

competition distinctive to silicomanganese. Firms reported that demand for silicomanganese 
3-8

tracks certain industry demand, such as construction, which heavily impacts the demand for 

steel.

3.3 Substitute Products and Related Issues 

Both domestic producers, 9 of 12 importers, 6 of 13 purchasers, and 2 of 5 foreign

producers reported to the U.S. ITC that high‐carbon ferromanganese and ferrosilicon could be 

substituted for silicomanganese in steel production. Almost all responding firms reported that the 

substitutes for silicomanganese have not changed since 2007, and that they do not anticipate 

changes in the future.

Six of nine importers and four of seven purchasers reported that the price of identified 

substitutes affected the price of silicomanganese and reported that firms will switch to substitute 

products if the price for silicomanganese is too high.

It should be noted that the two domestic producers also import substantial amounts of the 

ferroalloys that they also produce. This interesting facet of domestic ferroalloy operations 

should be noted in examination of the industry.6

3.3.1 Substitutability Issues

The degree of substitution between domestic and imported silicomanganese depends

upon such factors as relative prices, quality (e.g., levels of silicon and manganese, levels of other 

chemicals, consistency, and lump size), and conditions of sale (e.g., discounts, lead times,

payment terms, etc.). Based on available data, US International Trade Commission (ITC) staff 

indicate in a report that there is a moderate‐to‐high degree of substitutability between 

domestically produced silicomanganese and silicomanganese produced outside of the U.S.

3.4 Elasticity Estimates 

3.4.1 U.S. Supply Elasticity

The domestic supply elasticity for silicomanganese measures the sensitivity of the

quantity supplied by U.S. producers to changes in the U.S. market price of silicomanganese. The

 

6 U.S. International Trade Commission. Silicomanganese from Brazil, China, and Ukraine. Investigation No. 731-

TA-671-673 (Third Review). September 5, 2012. Washington, D.C. p. 159. 
3-9

elasticity of domestic supply depends on several factors including the level of excess capacity,

the ease with which producers can alter capacity, producers’ ability to shift to production of other 

products, the existence of inventories, and the availability of alternate markets for U.S. produced 

silicomanganese. Earlier analysis of these factors indicates that the U.S. industry has a moderate 

ability to increase or decrease shipments to the U.S. market given a price change. The US ITC 

estimates that the supply elasticity is between 5 to 7.

3.4.2 U.S. Demand Elasticity

The U.S. demand elasticity for silicomanganese measures the sensitivity of the overall

quantity demanded to a change in the U.S. market price of silicomanganese. This estimate

depends on factors discussed earlier such as the existence, availability, and commercial viability

of substitute products, as well as the component share of the silicomanganese in the production 

of any downstream products. Based on the available information, the US ITC estimates the 

demand elasticity for silicomanganese is likely to be in the range of ‐0.4 to ‐0.7.

3.4.3 Substitution Elasticity

The elasticity of substitution depends upon the extent of product differentiation between 

the domestic and imported products. Product differentiation, in turn, depends upon such factors 

as quality (e.g., chemistry, appearance) and conditions of sale (e.g., availability, sales terms, 

discounts). Based on available information, the US ITC estimates the elasticity of substitution 

between U.S.‐produced silicomanganese and subject imported silicomanganese is likely to be in 

the range of 3 to 6.7

3.5 Raw Material Costs

Silicomanganese prices are related to the costs of raw materials and tend to follow similar 

trends. Raw materials used in the production of silicomanganese include manganese ore, silica, 

coke, and electricity. U.S. producers reported that raw materials costs as a share of cost of goods 

sold increased from 2007 to 2012. Raw materials as a share of cost of goods sold were slightly 

higher in January‐March 2013 than in January‐March 2012. The primary raw materials used to 

produce silicomanganese are manganese ore and/or high‐carbon ferromanganese slag. Felman 

reported that it imports manganese ore from Australia, South Africa, and Gabon, and Eramet 

 

7 The substitution elasticity measures the responsiveness of the relative U.S. consumption levels of

the subject imports and the domestic like products to changes in their relative prices. This reflects how

easily purchasers switch from the U.S. product to the subject products (or vice versa) when prices

change.
3-10

reported sourcing manganese ore from Gabon and South Africa. Prices for manganese ore 

increased from January 2007 to July 2008, then declined through 2008 and mid‐2009, and then 

fluctuated through March 2013 At a hearing before the ITC, representatives from Georgian 

American Alloys and Eramet stated that electricity costs are also a significant cost in producing 

silicomanganese. A representative from Georgian American Alloys added that electricity 

accounts for approximately 25 percent of their total cost of production and is their second most 

costly input in producing silicomanganese.

3.6 Current operations at U.S. Ferroalloy Producers 

On June 28, 2013, Felman announced that it had ceased operations at its New Haven,

West Virginia facility for three months. In the next “two months,” Felman intended to reevaluate

market conditions to determine whether operations will resume earlier or if the plant will remain 

closed for additional time. At a hearing for the US ITC, a representative from Felman explained 

that both the current silicomanganese market conditions and planned maintenance at the facility

were factors in deciding to shutdown for three months. In its posthearing brief, Felman further 

explained that it is committed to producing silicomanganese in the United States as evidenced by 

its significant investment in maintenance for its facility and its retention of all employees during 

the shutdown.8

In the summer of 2013, Felman officials asked the West Virginia Public Services 

Commission (PSC) for a special power rate on the electricity it uses for production in order to 

reduce its cost of production and remain competitive with other ferroalloy producers worldwide. 

The PSC decided to grant Felman’s request in early April, 2014. On June 30, 2014, Felman 

Production signed a contract with their power provider, Appalachian Power Co. (a subsidiary of 

American Electric Power, AEP) that includes a special power rate. In a press release issued that 

day, Felman officials indicated the facility will be restarted for production by the end of July, 

2014. On July 1, 2014, Felman officials, through their parent company (Georgian-American 

Alloys, Inc.) indicated two of the three furnaces onsite will be restarted by the end of July.9

 

8 U.S. International Trade Commission. Silicomanganese from India, Kazakhstan and Venezuela. Investigation Nos. 

731-TA-929-931 (Second Review). Publication No. 4424. September 2013. Available on the Internet at 

http://www.usitc.gov/publications/701_731/4424.pdf. P. III-2. 

9 Press release from Georgian-American Alloys, Inc., July 1, 2014. Available on the Internet at 

http://www.gaalloys.com/index.php/news/press-releases/34-news/press-releases/225-felman-production-torestart-one-furnace-effective-immediately. 
3-11

The Eramet facility in Marietta, OH will continue to produce silicomanganese and 

ferromanganese in 2014, according to a spokesperson for the facility interviewed on January 17, 

2014. 10

Below is additional economic and financial background information on the Eramet 

Marietta plant. 

Eramet Marietta

In February 2010, the plant completed the first two phases of a plant security and 

rerouting project aimed at making the plant and its facilities more secure and changing traffic 

routes to improve production efficiencies and employee safety.

"This project was the first real infrastructure overhaul the plant saw in several decades 

and it was desperately needed to improve our efficiencies and to further secure our plant in the 

wake of our indefinite idling of our North Side facilities due to the economic downturn," said 

Willoughby.

In May 2010, Eramet Marietta performed the "first tap" on its rebuilt Furnace 12, the 

capstone of a $12 million renovation project aimed at improving and adding flexibility to the 

furnace's production capabilities while improving its environmental performance and safety. 

The project received the 2011 Initiative Award from the plant's corporate parent, The Eramet 

Group, a prestigious recognition presented to the top projects completed in the organization, 

which employs over 17,000 people worldwide, Willoughby said.

In early 2011, Eramet Marietta connected a $10 million baghouse emissions abatement 

system to Furnace 1, completing the project started in 2008.

"These investments made in our plant by our parent company indicate their belief that 

Eramet Marietta is an important operation in their portfolio," Willoughby said. "Each project is 

a testament to the hard work and dedication of our employees, and our commitment to continue 

to remain competitive in our field and a good corporate citizen here in the Mid-Ohio Valley."11

 

10 “Eramet continues making silicomanganese/ferromanganese in Ohio.” Published by Platts News. Downloaded 

from the Internet on January 22, 2014 at http://www.platts.com/latest-news/metals/louisville-kentucky/erametcontinues-making-silicomanganes/ferromanganese.

11 It should be noted that Eramet Marietta indicated that its plant was not subsidized by its parent company, Eramet 

Group, in a comment on the proposed rule (“NERA, Final Report, Prepared on behalf of Eramet Marietta, 
3-12

Willoughby said 2012 is ushering in more progress at the Eramet Marietta plant. Last 

year, the company received final approvals from its parent company for an estimated $10.2 

million overhaul of its outdated mixhouse/raw material handling department. The mixhouse 

project should be completed sometime in 2013.

Additionally, early in 2012 Eramet learned that it received financing for a water service 

project that will provide water from the Ohio River to Eramet Marietta as well as several other 

companies along Ohio Highway 7. The company, which uses river water as part of a closed 

loop process that cools its furnaces, took the lead on the project when AMP-Ohio, which used 

to provide the service water to several facilities in the area, announced its closure

 

Incorporated. “Technical Comments on the Regulatory Impact Analysis Supporting EPA’s Proposed Rule for 

Hazardous Air Pollutants from Ferroalloys Production (76 FR 72508).” January 31, 2012. pp. 6-7). The 

relevant quote is “In the case of EMI, EMI has advised us that EMI’s parent does not subsidize EMI, and 

therefore, any investment would need to be self-financed on the basis of EMI’s ability to operate profitably in the 

future while absorbing the higher compliance costs imposed by the Proposed Rule.” 
4-1

SECTION 4

BASELINE EMISSIONS, EMISSION REDUCTIONS, AND COSTS

4.1 Introduction

This section presents the baseline emissions for the pollutants emitted by affected units and also 

the resulting emissions after imposition of the supplemental proposal. We present the baseline emissions 

and emission reductions for HAP including mercury and for other emissions affected such as PM2.5. 

Emission reductions were calculated from the baseline emissions based on the proposed emissions 

limits.

4.2 Summary Of Cost Estimates And Emissions Reductions For The Regulatory Options 

Considered For Proposal

Regulatory options were considered for control of emissions of particulate matter (PM) metal 

HAP (e.g., Mn, Ni, Cd), Mercury (Hg), organic HAP, and Polycyclic Aromatic Hydrocarbons (PAH)

from furnace stacks, and metal HAP from product sizing stacks and fugitive sources. 

Emissions of each pollutant vary considerably among facilities, and multiple control options are 

available for different groups of pollutants. Because of this, and the limited number of facilities in the 

source category (two), specific regulatory options were assessed for each facility based on both 

technology review and modeled risk. Because of differences in modeled risk and existing controls, some 

options were not considered for all process lines at all facilities. Emissions reductions were estimated 

for each facility based on emissions data received in an information collection request (ICR) sent to the 

industry and based on interactions with officials from each facility. 

A brief description of the options selected for the proposed revisions to the NESHAP and the 

associated costs and emissions reductions for each facility in the source category are summarized in 

Table 4-1. All the options considered in this analysis are summarized in Table 4-2, along with the total 

estimated cost for implementing each option. A more detailed description of all the regulatory options 

considered for proposal and their associated cost and emissions reductions estimates are presented in 

section 2.0 of the cost memorandum for this supplemental proposal. 

The emissions reductions associated with the control options are calculated as the difference 

between baseline emissions and the estimated emissions for each control scenario. Details of the 

methodology employed to calculate these emissions are included in a separate memorandum. All costs 

are estimated in 2012 dollars. The impacts for Option 1, the option to apply enhanced fugitive 

emissions capture, is shown by plant and in total, and the same is true for Option 2, the option to apply 
4-2

full building enclosure. The HAP emission reductions estimated for this supplemental proposal are 77

tons of metal HAP. PM emissions in this chapter refer to total PM. Of the 229 tons of total PM 

reduced, 48 tons are PM2.5 since approximately 21 percent of the total PM is in the fine PM fraction.
4-3

Table 4-1: Summary of the Estimated Costs and Emissions Reductions of Fugitive HAP Regulatory Options Considered for the 

Supplemental Proposal

Table 4-2: Summary of the Estimated Costs and Reductions for Mercury Control Options 

*Proposed Option.

Eramet $25,147,000 $5,343,095 146 31 61 $36,660 $174,573 $43

Felman $12,432,974 $1,733,065 83 17 16 $20,807 $99,080 $54

Total $37,579,974 $7,076,160 229 48 77 $30,895 $147,119 $46

Eramet4 $33,154,302 $13,670,228 156 33 64 $87,816 $418,174 $107 $839,243 $3,996,395 $1,648

Felman5 $28,228,603 $5,042,545 97 20 19 $52,214 $248,637 $134 $249,177 $1,186,559 $583

Total $61,382,905 $18,712,773 252 53 83 $74,185 $353,264 $113 $501,495 $2,388,074 $1,084

1

 Annual cost calculated using 7% interest and a 20-year equipment life.

3

 HAP reduction estimates assume Eramet Furnaces #1 and #12 both producing silicomanganese 50% of the time, FeMn 50% of the time.

4

 Eramet Building Ventilation costs provided by Eramet Marietta Inc, in their comments on the proposed rule: "Engineering Review of Proposed Ferroalloy NESHAP Requirements for Eramet Marietta Inc.", EPA-HQ-OAR-2010-0895-0106

5

 Felman building ventilation cost estimate provided by Felman Production Inc, in their comments on the proposed rule: "Building Ventilation Costs January 30, 2012", EPA-HQ-OAR-2010-0895-0073

Total Annual 

Cost1 ($/yr)

Emission Reductions Cost Effectiveness

Option 1: Enhanced 

Fugitive Capture

Option 2: Building 

Ventilation

Compliance Option

2

 PM2.5 estimated to be approximately 21% of total PM, based on analysis performed by EPA's National Environmental Investigation Center of TSP data collected in the Marietta area by Ohio EPA and ATSDR during 2007-8.

Incremental Cost Effectiveness

Incremental 

Cost 

Effectiveness 

($/Ton PM)

Incremental 

Cost 

Effectiveness 

($/Ton PM2.5)

Incremental 

Cost 

Effectiveness 

($/lb HAP)

Costs

Facility

Cost 

Effectiveness 

($/Ton PM2.5)

Cost 

Effectiveness 

($/Ton PM)

PM2.5 

Reduction2 

(Tons)

PM 

Reduction 

(Tons)

Total Capital 

Cost ($)

Cost 

Effectiveness 

($/lb HAP)

HAP 

Reduction 

(Tons)3

Mercury Control Option Hg Emission 

Reductions (lb/yr)

Total Capital Cost 

($2012)

Total Annual Cost 

($/year)

Cost Effectiveness 

($/lb)

Option 1 – MACT Floor for 

FeMn and SiMn Production 0 $0 $0 -----

Option 2 – Beyond the Floor for 

FeMn Production and MACT 

Floor for SiMn Production*

197 $30,195,970 $3,357,000 $17,579

Option 3 – Beyond the Floor for 

FeMn and SiMn Production

257 $33,579,996 $5,212,778 $20,323
4-4

4.3 Regulatory Options Considered For the Supplemental Proposal

This section provides a detailed description of all regulatory options that were considered 

for the supplemental proposal Ferroalloys NESHAP and their associated costs and emissions 

reductions.

4.3.1 Furnace Stack Emissions – Metal HAP

This section provides a detailed description of regulatory options for fugitive emissions 

for the supplemental proposal of the Ferroalloys NESHAP and their associated costs and 

emissions reductions.

4.3.2 Furnace Stack Emissions Control Options

The first option (Option 1) evaluated for fugitive metal HAP emissions in this document 

is based on enhanced local capture and control, including primary and secondary hooding. This 

control option is based on consideration of the estimated risk reductions and feasibility and costs 

of controls. The option is mainly based on the assumption that facilities will achieve about 95% 

capture of the total fugitive emissions with a combination of primary and secondary controls and 

vent those emissions to a PM control device (either a fabric filter (FF) or wet scrubber). This 

control option (i.e., about 95% capture of fugitives) was also used to estimate post control risks 

under this option. The precise form of the standard under this option (which would eventually be 

presented in the regulatory text) has not yet been determined, but will likely include a tight

opacity limit which facilities are expected to comply with via enhanced fugitive capture and 

control systems and could also include other requirements. Design of these enhanced systems 

would be preceded by a rigorous, systematic examination of the ventilation requirements. The 

enhanced capture and control systems that would be used by the facilities to comply with this 

type of standard would likely include primary and secondary hoods collecting emissions from 

tapping and casting operations and directing them to control devices (assumed to be fabric 

filters) and capture of fugitive emissions at roof vents over some process areas, directed to 

control systems (assumed to be fabric filters).

The first control option for the supplemental proposal represents a scenario of reducing 

PM emissions from the facilities by 229 tons per year (and HAP emissions by 77 tons per year) 

by installing enhanced local capture and control of fugitive emissions and roofline ventilation for 

capture and control of fugitive emissions. The total estimated capital cost for fugitive controls is 
4-5

about $38 million. Annualized capital cost and operational and maintenance costs are estimated 

at $7.1 million. 

The second option (Option 2) is full building enclosure. The EPA proposed this option in 

the November 2011 proposal. However, EPA received significant comments saying that EPA 

had substantially underestimated the costs and noted several other issues, such as the need to 

account for more air exchanges to protect workers, and need for additional control capacity, fans, 

duct work, and structural support. Therefore, we are presenting that option again in this 

document with updated estimates of the costs and effectiveness of that option. 

Option 2 represents a scenario of reducing PM emissions from the facilities by 252 tons 

per year (and HAP emissions by 83 tons per year) by installing full building enclosure. The total 

estimated capital cost for fugitive controls is $61 million. Annualized capital cost and operational 

and maintenance costs are estimated at $19 million. 

4.3.2.1 Option 1: Enhanced Local Capture

Table 4-3 contains details of the estimated costs, emission reductions, and cost 

effectiveness of our best estimate of the systems the facilities are likely to install to comply with 

option 1, based on modeled risk and currently existing local emission capture systems. 

As previously mentioned, design of a local ventilation system begins with a detailed 

analysis of specific localized parameters (e.g., building volume, process locations, and airflow) 

leading to development of a site-specific local ventilation plan and installation of custom hoods 

and ventilation equipment. Such a system might rely on a variety of specific ventilation systems. 

Installed systems may include the following:

 Curtains or doors surrounding furnace tops to contain fugitive emissions,

 Improvements to hoods collecting tapping emissions,

 Upgraded fans to improve the airflow of fabric filters controlling fugitive 

emissions,

 Addition of “Secondary Capture”, or additional hoods to capture emissions from 

tapping platforms or crucibles,

 Addition of fugitive capture for casting operations,

 Addition of additional fabric filters where necessary, and
4-6

 Addition of rooftop ventilation, in which fugitive emissions escaping local control 

are collected in the roof canopy over process areas through addition of partitions, 

then directed through roof vents and ducts to control systems.

For the purposes of this analysis, it has been assumed that enhanced fugitive capture and 

control systems and roofline ventilation will be installed for all operational furnaces at both 

facilities, and for MOR operations at Eramet Marietta. The specific elements of the capture and 

control systems selected for each facility are based directly on information supplied by the 

facilities incorporating their best estimates of the improvements to fugitive emission capture and 

control they would implement to achieve the standards to be included in the supplemental 

proposal. Attachments 1 and 2 contain copies of the cost estimates provided by the facilities. 

4.3.2.2 Option 2: Full Building Enclosure

Details of Option 2 (building ventilation) remain the same as in EPA’s November 2011 

proposal. This control option involves installation of full building ventilation at negative pressure 

for furnace buildings instead of installing fugitive controls on individual tapping and casting 

operations. This option would require installation of ductwork from the roof vents of furnace 

buildings, structural repairs to buildings, and a new fabric filter for each building. For emissions 

modeling and cost estimation purposes we assumed that building ventilation would be required 

for buildings containing furnaces, (i.e., Eramet buildings #1 and #12, and the melt shop building 

at Felman).

4.4 Methodology For Estimating Control Costs

The following sections present the methodologies used to estimate the costs associated 

with the regulatory options considered for proposal in the revised NESHAP for the Ferroalloys 

Production source category.

4.4.1 Option 1 – Enhanced Fugitive Capture

Fugitive emissions of metal HAP at Ferroalloys Production facilities result from several 

areas of the process. Process fugitive emissions primarily result from furnace leaks and 

incomplete capture of emissions during tapping and casting of product. Furnace upsets can result 

in release of emissions that would normally be contained by negative pressure occurring inside 
4-7

furnace hood. Process fugitive emissions can also result from incomplete capture of emissions by 

tapping hoods, or from casting operations, some of which are uncontrolled. 

Both facilities employ negative-pressure hoods to collect emissions from tapping 

operations and direct them to a control device. Some casting operations at both facilities capture 

emissions and direct them to a fabric filter, while some casting operations are currently 

uncontrolled.

As previously mentioned, design of a local ventilation system begins with a detailed 

analysis of specific localized parameters (e.g., building volume, process locations, and airflow) 

leading to development of a site-specific local ventilation plan and installation of custom hoods 

and ventilation equipment. Both facilities which will be subject to the NESHAP have performed 

preliminary analyses to assess the measures that they are likely to need to take to comply with 

EPA’s potential requirements, and have submitted cost estimates to EPA based on their 

analyses.Error! Bookmark not defined. Attachments 1 and 2 of the fugitive emissions cost 

memo contain copies of the cost estimates provided by the facilities.

Costs were estimated for enhanced process fugitive control including roofline ventilation,

as described in the fugitive emissions cost memo. Details of the methodology employed to 

estimate these costs follow.

4.4.1.1 General Considerations

A variety of potential enhancements to local ventilation and control of fugitive emissions 

may be used by the facilities depending on their individual situation. Specific enhancements for 

each facility were selected for cost estimation based on estimates directly provided by the 

facilities based on their own engineering analyses and discussions with EPA. Analyses and cost 

estimates provided by the facilities were given precedence where they were available. In 

addition, the following general considerations apply to all estimated costs for process fugitives:

 Annualized costs assume a 20-year life expectancy for the installed control devices 

and other equipment and, to be consistent with OMB Guidance in Circular A-4, a 7-

percent cost of capital as an estimate of the annualized capital cost. 
4-8

 Costs provided by the facility were assumed to be in current dollars. All other costs 

for this estimate were adjusted to 2012 dollars using Chemical Engineering Plant Cost 

Indices (CEPCI1) where necessary. 

 Downtime associated with installation was not directly included in in cost estimates.2

 Costs were not included for items noted by the facilities as currently being in place.

4.4.1.2 Facility-Specific Considerations

The following facility-specific considerations also apply:

 Felman Production provided two general cost estimate scenarios: 

o The first assumes a scenario in which one of their three furnaces is not in 

operation and its fabric filter are used to provide roofline ventilation for the 

other two furnaces, and

o The second assumes all three furnaces are operational with the addition of a 

new fabric filter for roofline ventilation. 

Estimated costs for Felman represent the second scenario. This scenario was 

selected to be in line with modeled emissions, which are based on the assumption 

that all three furnaces are operational. 

 Because Felman Production did not provide detailed estimated costs for the additional 

fabric filter included in the second scenario, total installed capital cost and annual 

costs for the fabric filter were estimated using EPA’s Integrated Planning Model 

(IPM) for Particulate Control Cost Development3, with additional costs for ductwork 

estimated using EPA’s Air Pollution Control Cost Manual.4 The estimated cost for 

this fabric filter is significantly higher than Felman Production’s brief estimate of the 

difference between the two cost scenarios, but the higher estimate has been retained 

to be conservative. Details of these cost estimates are included in Attachment 3 of the 

fugitive emissions cost memo.

 

1 CEPCI values employed: 584.6 for 2012, 521.9 for 2009, and 359.2 for 1993. For more information, see 

http://www.chengonline.com. 

2 Eramet Marietta provided costs for downtime associated with installation, while Felman did not. These costs were 

significant, but because these costs were declared to be confidential by Eramet, they were considered by EPA, 

but not directly included in these analyses.

3 Sargent & Lundy, IPM Model - Revisions to Cost and Performance for APC Technologies, Particulate Control 

Cost Development Methodology Final, March 2011.

4 http://epa.gov/ttn/catc/products.html#cccinfo
4-9

 Eramet’s cost estimate assumed capital costs of about $7.3 million for addition of 

“Scrubber upgrades OR dust collector” for Furnace #12. Adding proportional 

amounts of the associated installation and engineering costs results in total capital 

costs of approximately $12.5 million for upgrades to the control device for Furnace 

#12. Furnace #12 currently is equipped with 2 venturi scrubbers used to control 

fugitive emissions from the furnace and tapping. The scrubbers are designed to 

handle approximately 127,000 acfm each and the average flow rate from the current 

capture configuration is 171,000 acfm, or roughly 67% of the estimated capacity of

the scrubbers. Assuming that the enhanced capture system which Eramet has 

proposed for Furnace 12 (increased tapping capture and roof line ventilation) would 

increase the required airflow over current levels by 50 to 100% (i.e., to a total of 

256,000 to 342,000 acfm), the low end of the estimated range would put them very 

near the maximum capacity of the current controls in place. Accordingly, it seems 

reasonable to assume that additional control capacity will be required, whether in the 

form of upgrades to the scrubber(s) or their replacement with a fabric filter.

4.4.2 Option 2 – Building Ventilation

As described in Sections 2 and 3, EPA proposed the full building enclosure option in the 

November 2011 proposal. However, EPA received significant comments saying that EPA had 

substantially underestimated the cost. Both Eramet and Felman provided extensive comments 

regarding implementation of building ventilation, including cost estimates based on their own 

engineering analyses. Analyses and cost estimates provided by the facilities have been given 

precedence in developing new cost estimates. In addition, the following facility-specific

considerations apply to estimated costs for building ventilation:

 Felman’s cost estimate applied overhead and contingency adjustments to ductwork costs 

twice (once in the ductwork cost calculations by Chu & Gassman, and again in the costs 

prepared by Lan Associates). Our cost estimate corrects this. For consistency with the 

overhead adjustments used in preparation of the two sections of Felman's overall cost 

estimate, we have calculated the Total Capital Investment (TCI) for the fabric filter as

2.17*Purchased Equipment Cost (PEC), and for ductwork as TCI=1.41*PEC. Details of 

the revised cost estimate for Felman are included in Attachment 4 of the cost memo.

 Eramet’s cost estimate included costs for installation of building ventilation for building 

#18. For consistency with the option contained in the 2011 proposal, and with modeled 

emissions, our cost estimate only assumes building ventilation is installed for buildings 

#1 and #12. Only the “Building 1” and “Building 12” costs from Eramet’s cost estimate 

are included.
4-10

4.5 Mercury Control Options

4.5.1 Background

The raw materials used to produce ferroalloys contain trace amounts of mercury, which is 

emitted during the smelting process. These mercury emissions are derived primarily from the 

manganese ore, although there may be trace amounts in the coke or coal used in the smelting 

process. The mercury emissions can exist in three forms: elemental, oxidized, and as a 

particulate. While some of the mercury in particulate and oxidized forms is captured by the 

particulate control devices, the more volatile elemental mercury is largely emitted to the 

atmosphere. Control technologies used to reduce mercury emissions from combustion sources 

have been used with success on other sources. The most highly advanced technology, activated 

carbon injection (ACI) has been used on facilities that burn municipal solid waste for the past 

decade. This technology uses particles of activated carbon to capture the mercury in the exhaust 

gas stream. This is achieved by injecting the activated carbon into the exit gas flow, downstream 

from the combustion source. The mercury attaches to the activated carbon particles, and it is 

removed in a particulate control device. This control technology is expected to achieve up to 

90% removal of mercury from the exhaust stream, and it was selected as the control technology 

that would be used to reduce mercury emissions from the furnace smelting process at ferroalloy 

production facilities under two of the three options described below.

4.5.2 Methodology for Estimating Costs of Mercury Reductions at Ferroalloy Facilities

The impacts of reducing mercury emissions from the furnace smelting process at 

ferroalloys production facilities are based on the costs and emission reductions achieved through 

the retrofit of ACI. This section summarizes the methodology and estimates the capital cost, 

annual cost, and expected mercury emission reduction of retrofitting ACI on the furnaces at 

Eramet and Felman. 
4-11

Capital and Annual Costs

The capital and annual costs of retrofitting ACI on ferroalloy furnaces were estimated 

using ACI cost algorithms5 developed for the Mercury and Air Toxics Standards (MATS). The 

total capital investment (TCI) equation uses exhaust gas flow rate and carbon injection rate as 

variables to scale the cost of retrofitting ACI to the exhaust duct. The equation used for 

estimating TCI for the retrofit of ACI in 2012 dollars is presented below:

TCIACI = 1, 350, 000 ∗ 1. 2 ∗ (Q ∗ ACI Injection Rate)

0.15 ∗

584. 6

521. 9

where;

Q = Volumetric flow rate of the exhaust gas in actual standard cubic feet per minute (acfm), 

ACI Injection Rate = Estimated carbon injection rate (lb/MMacf), assumed 2.0 for furnaces 

equipped with a fabric filter and 5.0 for furnaces equipped with a venturi scrubber,

1,350,000 = Cost constant for installing an ACI system,

1.2 = Retrofit factor,

584.6 = Chemical Engineering Price Cost Index for 2012,

521.9 = Chemical Engineering Plant Cost Index for 2009.

The TCI for the ACI algorithm include the costs for all of the equipment, installation, 

buildings, foundations, electrical, and retrofit factor to address difficulty of installation. This cost 

equation was used to estimate TCI for retrofitting ACI on each of the ferroalloy furnaces. It was 

assumed that the retrofit would take place upstream from the existing control device for Furnaces 

2, 5, and 7 at Felman and Furnace 12 at Eramet. For Furnace 1 at Eramet, it was assumed that a 

polishing baghouse would be installed and the ACI would be installed after the existing 

baghouse and prior to the newly installed polishing baghouse. The equation used to estimate the 

TCI for adding a polishing baghouse with an air-to-cloth ratio of 6.0 in 2012 dollars is presented 

below:

 

5 Sargent & Lundy, IPM Model – Revisions to Cost and Performance for APC Technologies, Mercury Control Cost 

Development, Final, March 2011.
4-12

TCIFF = 422 ∗ 1. 2 ∗ Q

0.81 ∗

584. 6

521. 9

where;

Q = Volumetric flow rate of the exhaust gas in actual standard cubic feet per minute (acfm), 

1,350,000 = Cost constant for installing an ACI system,

1.2 = Retrofit factor

584.6 = Chemical Engineering Price Cost Index for 2012,

521.9 = Chemical Engineering Plant Cost Index for 2009.

To estimate the total project cost (TPC), expenses for engineering and construction 

management (10% of TCI), labor adjustments (5% of TCI), and contractor profit and fees (5% of 

TCI) were included.

Annual costs for operation of the ACI were broken into direct annual costs and indirect 

annual costs. Direct annual costs included operating labor, administrative and supervisory labor, 

maintenance and materials, amount of activated carbon injected, and the cost for disposal of the 

captured carbon. Indirect annual costs consisted of overhead, property taxes, insurance, 

administration, and capital recovery. Table 4-3 lists the assumptions used to calculate each of 

these direct and indirect costs.

The capital recovery factor was calculated assuming a 20-year equipment life and a 7 

percent interest rate. Additional cost data used for this estimate was obtained from a mercury 

control cost document developed for coal-fired utility boilers6. This document provided the ACI 

injection rate (2 lb/MMacf for fabric filter applications), non-hazardous waste disposal costs 

($30/Ton), and cost for the ACI ($0.75/lb). A summary of the ACI costs is provided in 

Appendix C of the mercury cost memorandum.

Baseline Mercury Emissions

To estimate the reductions in mercury emissions that would be achieved under Option 2, 

first we calculated the estimated baseline annual mercury emissions during the production of 

FeMn. These baseline emissions for FeMn production for Option 2 were calculated using test 

data from Furnaces 1 and 12 at Eramet during FeMn production. Baseline emissions for Option 

 

6 Sargent & Lundy, IPM Model - Revisions to Cost and Performance for APC Technologies, Mercury Control Cost 

Development Methodology Final, March 2011.
4-13

2 were not calculated for Felman, because they produce only SiMn in each of their three 

furnaces. For each of the furnaces at Eramet, the average mercury emissions rate in pounds per 

hour (lb/hr) from the test data during FeMn production was multiplied by 4,380 hours per year 

(i.e., 50% annual production of FeMn). 

Table 4-3. Activated Carbon Injection Model Annual Costs

Parameter Equation/Assumptions

Direct Annual Cost ($/yr)

1

Additional 

Operating Labor1 = $0

2 Supervisory Labor = 0.03 * (Operating Labor + 40% of Maintenance Costs)

3 Maintenance = 0.005 * TCI for ACI/Retrofit Factor 

4 Activated Carbon = (ACI Injection rate, lb/MMacf)*(Exhaust Flow Rate, acf/min) 

*(MMacf/106acf)*(60 min/hr)*(8760 hr/yr)*($0.75/lb)

5 Dust Disposal

= (ACI Injection rate, lb/MMacf)*(Exhaust Flow Rate, acf/min) 

*(MMacf/106acf)*0.99*(60 min/hr)*(8760 hr/yr)*(Ton/2000 lb) 

*($40/Ton)

Indirect Annual Cost ($/yr)

1 Overhead = 0.6 * (Labor + Maintenance)

2

Property taxes, 

insurance, and 

administration

= 0.04 * TCI

3 Capital Recovery = CRF * TCI

1

It was assumed that no additional operating labor is needed to operate the ACI.

For Option 3, the Felman baseline mercury emissions were calculated using the average 

mercury emissions rate (lb/hr) from the test data and multiplying that average by 8,760 hours per 

year. The Eramet baseline mercury annual emissions were calculated by summing the product of 

the average mercury emission rate (lb/hr) for FeMn production by 4,380 hours per year, and the 

product of the average mercury emission rate (lb/hr) for SiMn production by 4,380 hours per 
4-14

year. This annual baseline emission estimate assumes that FeMn is produced 50 percent of the 

time and SiMn is produced 50 percent of the time in each of the two furnaces at Eramet.

Impacts

A summary of the impacts for each of the considered Mercury Control Options are 

presented in Table 4-4. The impacts for Control Option 1 were calculated to be zero. These 

impacts are based on the assumption that the facilities would be able to meet the mercury limits 

with their current furnace controls. The impacts for Control Option 2 are based on the 

installation of ACI on Furnace 1 and 12 at Eramet with operation only during the production of 

FeMn, and a polishing baghouse on Furnace 1. The emissions and annual cost for this option are 

based on the assumption that both furnaces produce FeMn 50 percent annually (or 4,380 hours 

per year). The mercury reduction is assumed to be 90% for the installation of ACI and the 

polishing baghouse on Furnace 1 at Eramet, and 50% for installation of ACI and the existing 

scrubber on Furnace 12 at Eramet. 

As explained in the Federal Register (FR) Notice for this supplemental proposal, the 

Agency is proposing Option 1 (the MACT floor) for mercury control for existing furnaces at 

these plants. Thus, no mercury control beyond the MACT is being proposed for existing 

sources. 

Table 4-4. Summary of Impacts for Main Mercury Control Options Considered for the 

Supplemental Proposal

Mercury Control 

Option

Hg Emission 

Reductions 

(lb/yr)

Total Capital 

Cost ($2012)

Total Annual 

Cost ($/year)

Cost 

Effectiveness 

($/lb)

Option 1 – MACT 

Floor for FeMn and 

SiMn Production

0 $0 $0 -----

Option 2 – Beyond 

the Floor for FeMn 

Production and 

MACT Floor for 

SiMn Production

197 $30,195,970 $3,357,000 $17,579
4-15

4.6 Summary of Total Cost by Facility 

Table 4-5 summarizes estimated costs for each facility in the Ferroalloys source category, 

assuming implementation of the emission reduction options selected for the supplemental 

proposal for process fugitive HAP emissions. As shown in Table 4-5, the total capital costs of 

the proposed rule are $37.6 million and the total annualized costs are almost $7.1 million. 

Table 4-5: Summary Cost Estimates by Facility*

Facility Capital Costs Annualized Costs

Eramet $25,167,000 $5,344,000

Felman $12,433,000 1,733,100

Totals: $37,600,000 $7,077,100

 Costs are in 2012 dollars. 
5-1

SECTION 5

ECONOMIC IMPACT ANALYSIS AND STATUTORY AND EXECUTIVE ORDER 

ANALYSES

5.1 Background

In this chapter, we present the results of the economic impact analysis and analyses 

prepared in adherence to statutory and Executive Order requirements. 

5.2 Regulatory Flexibility Act

The Regulatory Flexibility Act (RFA) generally requires an agency to prepare a 

regulatory flexibility analysis of any rule subject to notice and comment rulemaking 

requirements under the Administrative Procedure Act or any other statute unless the agency 

certifies that the rule will not have a significant economic impact on a substantial number of 

small entities. Small entities include small businesses, small organizations, and small 

governmental jurisdictions. 

For purposes of assessing the impacts of this rule on small entities, small entity is defined 

as: (1) a small business as defined by the Small Business Administration’s (SBA) regulations at 

13 CFR 121.201; (2) a small governmental jurisdiction that is a government of a city, county, 

town, school district or special district with a population of less than 50,000; and (3) a small 

organization that is any not-for-profit enterprise that is independently owned and operated and is 

not dominant in its field. For this source category, which has the NAICS code 331110 (i.e., Iron 

and Steel Mills and Ferroalloy manufacturing), the SBA small business size standard is 1,000 

employees according to the SBA small business size standard definitions.1

After considering the economic impacts of today’s rule on small entities, I certify that 

this action will not have a significant economic impact on a substantial number of small entities

(or SISNOSE). Neither of the companies affected by this rule is considered to be a small entity 

 

1 The SBA small business size standards can be found at

http://www.sba.gov/sites/default/files/Size_Standards_Table.pdf. These standards are up to date as of July 

14,2014. 
5-2

per the definition provided in this section. Hence, there is no SISNOSE for this supplemental 

proposal.

5.3 Economic Impacts

This section of the economic impact analysis focuses on the impacts of the supplemental 

proposal to the two affected ferroalloys producers in the US. We examine the impacts of the 

proposed option of enhanced local capture (called Option 1) for fugitive HAP emissions, and the

proposed option for mercury reductions (called Option 1) on the affected facilities. In doing so, 

we assume that each affected facility is entirely self-supporting; that is, the parent company for 

each facility does not contribute any capital or other supporting funds to the operation of the 

facility. This statement is consistent with statements made by Eramet Marietta Inc. in its 

comments on the previous ferroalloys proposed NESHAP (January 29, 2012). Felman 

Production LLC, which was known as Felman Production, Inc. prior to becoming an LLC in 

early 2012, made similar statements in its comments on the earlier proposed rule (January 31, 

2012). It should be noted, however, that Eramet Group, a French conglomerate that is the parent 

company for Eramet Marietta, Inc., has made substantial funds (>$100 million) available for 

several projects over the last few years implemented at the Eramet Marietta facility, including 

installation of a new baghouse, according to comments from its CEO in a local newspaper 

(March 8, 2012, Parkersburg, WV News and Record, available on the Internet). Estimating the 

impacts on affected facilities in such a way is a conservative estimate of impacts of the rule since 

any support from the parent company should reduce impacts on an individual plant owned by the 

company; thus, this level of estimate may overstate the calculated impacts of the supplemental 

proposal on each facility provided in this report. 

For this analysis of economic impacts, we apply microeconomic theory in a relatively 

straightforward fashion. Markets are composed of people and organizations as consumers and 

producers acting as economic agents to maximize utility or profits, respectively. One way 

economists illustrate behavioral responses to pollution control costs is by using market supply 

and demand diagrams. The market supply curve describes how much of a good or service firms 

are willing and able to sell to people at a particular price; we often draw this curve as upward 

sloping because some production resources are fixed. As a result, the cost of producing an 

additional unit typically rises as more units are made. The market demand curve describes how 

much of a good or service consumers are willing and able to buy at some price. Holding other 

factors constant, the quantity demanded is assumed to fall when prices rise. In a perfectly 
5-3

competitive market, equilibrium price (P0) and quantity (Q0) are determined by the intersection 

of the supply and demand curves (see Figure 5-1below). This approach is based on similar 

economic impact approaches presented in the final CI and SI RICE NESHAP and proposed 

residential wood heaters NSPS RIAs.2 

Changes in Market Prices and Quantities

To qualitatively assess how the regulation may influence the equilibrium price and 

quantity in the affected markets, we assumed the market supply function shifts up by the 

additional cost of producing the good or service; the unit cost increase is typically calculated by 

dividing the annual compliance cost estimate by the baseline quantity (Q0) (see Figure 5-1). As 

shown, this model makes two predictions: the price of the affected goods and services are likely 

to rise and the consumption/production levels are likely to fall.

The size of these changes depends on two factors: the size of the unit cost increase 

(supply shift) and differences in how each side of the market (supply and demand) responds to 

changes in price. Economists measure responses using the concept of price elasticity, which 

represents the percentage change in quantity divided by the percentage change in price. This 

dependence has been expressed in the following formula:3

Price Elasticity of Supply - Price Elasticity of Demand)

Price Elasticity of Supply Share of per-unit cost 

As a general rule, a higher share of the per-unit cost increases will be passed on to 

consumers in markets where:

- goods and services are necessities and people do not have good substitutes that they 

can switch to easily (demand is inelastic) and

- suppliers have excess capacity and can easily adjust production levels at minimal 

costs, or the time period of analysis is long enough that suppliers can change their 

fixed resources; supply is more elastic over longer periods.

 

2 These RIAs are available on the Internet at http://www.epa.gov/ttn/ecas/ria.html. 

3 For examples of similar mathematical models in the public finance literature, see Nicholson (1998), pages 444–

447, or Fullerton and Metcalf (2002).
5-4

consumer surplus = –[fghd + dhc]

producer surplus = [fghd − aehb] − bdc

total surplus = consumer surplus + producer surplus = −[aehb + dhc + bdc]

Figure 5-1. Market Demand and Supply Model: With and Without Regulation

Short-run demand elasticities for energy goods (electricity and natural gas), agricultural 

products, and construction are often inelastic. Specific estimates of short-run demand elasticities 

for these products can be obtained from existing literature. For the short-run demand of energy 

products, the National Energy Modeling System (NEMS) buildings module uses values between 

0.1 and 0.3; a 1% increase in price leads to a 0.1 to 0.3% decrease in energy demand. For the 

short-run demand of agriculture and construction, EPA has estimated elasticities to be 0.2 for 

agriculture and approximately 1 for construction. As a result, a 1% increase in the prices of 

agriculture products would lead to a 0.2% decrease in demand for those products, while a 1% 

increase in construction prices would lead to approximately a 1% decrease in demand for 

construction. Given these demand elasticity scenarios, approximately a 1% increase in unit costs 

would result in a price increase of 0.1 to 1%. As a result, 10 to 100% of the unit cost increase 

could be passed on to consumers in the form of higher goods/services prices. This price increase 

would correspond to a 0.1 to 0.8% decline in consumption in these markets.

For the proposed ferroalloys RTR, we have elasticity data that will allow us to estimate 

potential economic impacts for affected ferroalloy consumers and producers using the 

framework described above. Data from a 2013 U.S. International Trade Commission report 

Q1 Q0

P1

P0 h c

a

$

Output

e d

S1 : With Regulation S0 : Without Regulation Price Increase } Unit Cost Increase g } f b
5-5

indicate that the price elasticity of demand for silicomanganese ranges from -0.4 to -0.7, and the 

price elasticity of supply ranges from 5 to 7.4 Using the midpoint of these elasticity ranges and 

the equation shown in the Appendix, the share of per-unit output cost is equal to 6/(6-(-0.55)) = 

6/6.55 = 0.92. Thus, based on this calculation and the explanation of its implications as 

discussed previously, a 1% increase in per-unit cost yields a 0.92% reduction in demand for 

silicomanganese output. 

To calculate the change in per-unit cost of silicomanganese associated with the 

requirements of the proposed rule, we use the cost to sales estimate of impact to affected firms 

and knowledge of the firm’s net income (or profits) to help estimate a proxy for the change in 

per-unit output cost. According to the cost memos for this proposed RTR, the annualized cost of 

all the potential control requirements for the Eramet Marietta firm (the subsidiary of the Eramet 

Group that owns the affected facility in Ohio) is $5.34 million, which primarily includes the 

estimated costs to reduce process fugitive manganese emissions. 

Using the average of sales figures over the last two years, we construct an average annual 

sales estimate of $303.8 million for use in this calculation.5 The annualized cost to sales estimate 

is therefore 5.344/303.8 = 0.0176 or 1.76%. The cost to sales estimate reflects how much

product price will have to rise for a producer to have as much revenue as before for a given level 

of output. This would be difficult for Eramet Marietta to accomplish, even partially, in that 

Eramet is a price taker in the market for silicomanganese, which is a commodity traded on a 

worldwide market. Also, we know from information provided verbally by consultants working 

on behalf of Eramet Marietta that this facility experienced negative net income for the last two 

fiscal years. 6 We also recognize that an estimate of cost to sales exceeding the profit or net 

income margin (i.e., profit or net income/unit of sales) for a facility is a circumstance that, if this 

continues, could lead to a potential facility closure in the long term. This type of conclusion is 

drawn from standard microeconomic theory and has been part of economic analyses for EPA 

rulemakings, such as those for the final Lime Manufacturing NESHAP and for the proposed 

Revisions to the Underground Storage Tank rulemaking. 

 

4 U.S. International Trade Commission. Silicomanganese from India, Kazakhstan and Venezuela. Investigation 

Nos. 731-TA-929-931 (Second Review). Publication No. 4424. September 2013. Available on the Internet at 

http://www.usitc.gov/publications/701_731/4424.pdf. 

5 Based on revenue data for Eramet Marietta taken from Hoovers, Inc. Data retrieved on March 14, 2014. 

6 Verbal communication with staff from Policy Navigation Group, contractors for Eramet Marietta, Inc. March 12, 

2014. 
5-6

Economic Impact Results

With net income as a measure of profit, and profit = revenues – production costs, we can 

reasonably presume that the production costs at Eramet Marietta could be equal to or greater than 

the revenue estimate above over the last two years. Thus, the per-unit output cost in production 

resulting from the control requirements of the proposed rule at Eramet Marietta can be 

reasonably estimated as equal to the annualized cost to sales estimate, which for this case is 

1.76% shown above. Given this per-unit output cost estimate, then the decline in output 

resulting from imposition of the proposed RTR is calculated to be 1.76*0.92 = 1.62%. However, 

this estimated decline in production is before any consideration of the effect of imports, which is 

discussed below. Also, the decline in output will change to the extent the per-unit output cost is 

higher or lower than that estimated in this analysis. 

Regarding the effect of the global market and imports in our analysis, the elasticity of 

substitution between U.S. produced silicomanganese and imported silicomanganese ranges from 

3 to 6.7 Thus, a 1% increase in price for U.S. produced silicomanganese could yield a 3 to 6% 

increase in demand for imported silicomanganese and thus yield a corresponding decline in 

demand for U.S. produced silicomanganese. This high elasticity of substitution indicates the 

relative ease that consumers have to switch from U.S. produced silicomanganese to imported 

silicomanganese compounds. The ease that consumers have to switch from U.S. produced 

silicomanganese (from Eramet Marietta) will increase the decline in output estimated above. 

Using a midpoint estimate of 4.5 for the elasticity of substitution between U.S. produced and 

imported silicomanganese, an increase in price of 1.76% in silicomanganese produced in the 

U.S. would yield a 1.76*4.5 = 7.9% increase in demand for imported silicomanganese. (Note: 

Eramet Marietta also imports silicomanganese, so that may mitigate the substitution effect 

between U.S. produced and imported silicomanganese to some extent). Nevertheless, assuming 

the effects are additive, the decline in output from Eramet Marietta resulting from the costs 

incurred from the proposed RTR may be as high as 1.62 + 7.9 = 9.52% or a little less than 10% 

decline in output. Thus, the effect of an increase in silicomanganese price in the U.S. is not only 

a direct decline in silicomanganese output but also a switch by consumers to imported (non-U.S.) 

silicomanganese. 

 

7 Reference 1 in this report. 
5-7

If we required Option 2 for mercury (i.e., the beyond the MACT floor limits for mercury 

control for FeMn production furnaces), the estimated annualized costs for Eramet Marietta 

increase from $5.3 million to $8.7 million. The overall cost impacts of this Option 2 for mercury 

(in addition to the proposed controls for process fugitive emissions described above) can be 

calculated by the ratio of these costs (i.e., 8.7/5.3 =1.61). Thus, the projected increase in price 

becomes 1.61* 1.76 = 2.83.% from the direct effect of the costs. Likewise, the direct decrease in 

production would be calculated to be 2.83% (before consideration of the effects of the global 

market and imports). Regarding imports, using a midpoint estimate of 4.5 for the elasticity of 

substitution between U.S. produced and imported silicomanganese (as described above) and 

assuming the elasticity of substitution between U.S. produced and imported ferromanganese 

would be the same as for silicomanganese, we calculate that an increase in price of 2.83% in 

ferromanganese produced in the U.S. would yield a 2.83*4.5 = 12.7% increase in demand for 

imported ferromanganese. Therefore, the decrease in production of FeMn could be as high as 

about 16% (2.83 + 13 = 15.83%) at Eramet when accounting for substitution from U.S. produced 

to imported FeMn. We lack demand and supply elasticities information specifically for 

ferromanganese, but we believe it is reasonable to assume that the elasticity of FeMn would be 

similar to SiMn given that this ferroalloy is also a commodity with most of the same market 

characteristics and therefore we believe the economic impacts for FeMn production would be 

similar in magnitude to those calculated for SiMn production sources. 

Assuming market conditions remain approximately the same, we believe Eramet Marietta 

would not be able to sustain the costs of beyond-the-floor mercury controls (in addition to the 

fugitive control costs). This would likely result in substantial economic impacts to the facility in 

the short-term and potential closure in the longer-term. 

Given the substantial economic impacts estimated in this analysis associated with the 

emissions control when including the beyond the MACT floor option for mercury control in 

addition to the costs for the control of process fugitive HAP metals emissions, as well as other 

factors such as which HAP metals are being reduced and by how much, and the magnitude of the 

total capital costs and annual costs, the Agency is proposing emissions limits for mercury based 

on the MACT floor level of mercury control as part of this supplemental proposed rule. 
5-8

Caveats to the Economic Impact Analysis

Some important caveats to list for this analysis:

- We assume no earnings or net income is available to Eramet Marietta from previous 

fiscal years to offset any losses experienced during the timeframe of this analysis 

(2012 and 2013);

- We assume that no capital is supplied to Eramet Marietta by their parent company, 

the Eramet Group, to support the subsidiary in complying with this proposed RTR;

- We assume the demand and supply responsiveness of ferromanganese output from 

Eramet Marietta is consistent with that for silicomanganese.

Based on the costs to the industry shown in Section 4 for the proposed controls for 

process fugitive emissions (i.e., Option 1 shown in table 4-1), the supply and demand elasticities 

in Section 3 of this report and the economic impact results presented earlier in Section 5, a price 

increase for silicomanganese of up to 1.8 percent could potentially occur domestically, and an 

output decrease of as much as 9.5 percent could potentially also occur. Given that both of these 

producers of ferroalloys are also importers of the same alloys and Felman having a stockpile of 

silicomanganese, these economic impacts could potentially be reduced to some extent. 

One other note is that growth in the US steel industry should lead to growth in demand 

for ferromanganese. Ferromanganese is a major input to steel production. Apparent U.S. steel 

consumption is projected to increase by 3% from 2013 to 2014, according to a presentation to the 

Chicago Federal Reserve Bank in Dec. 2013 (found at

https://www.chicagofed.org/digital_assets/others/events/2013/eos/dicianni_120613.pdf). With 

increases in steel consumption in the US, increases in US production should follow and thus lead 

to increases in demand for ferromanganese. Any potential increase in ferromanganese demand is 

not accounted for in the calculations above. The same is true for silicomanganese demand. 

5.4 Energy Impacts

Executive Order 13211 (66 FR 28355, May 22, 2001) provides that agencies will prepare 

and submit to the Administrator of the Office of Information and Regulatory Affairs, Office of 

Management and Budget, a Statement of Energy Effects for certain actions identified as 
5-9

“significant energy actions.” Section 4(b) of Executive Order 13211 defines “significant energy 

actions” as any action by an agency (normally published in the Federal Register) that

promulgates or is expected to lead to the promulgation of a final rule or regulation, including 

notices of inquiry, advance notices of proposed rulemaking, and notices of proposed rulemaking: 

(1) (i) that is a significant regulatory action under Executive Order 12866 or any successor order, 

and (ii) is likely to have a significant adverse effect on the supply, distribution, or use of energy; 

or (2) that is designated by the Administrator of the Office of Information and Regulatory Affairs 

as a significant energy action.

This supplemental proposal is not a significant energy action as designated by the 

Administrator of the Office of Information and Regulatory Affairs because it is not likely to have 

a significant adverse impact on the supply, distribution, or use of energy. This action will not 

create any new requirements and therefore no additional costs for sources in the energy supply, 

distribution, or use sectors.

5.5 Unfunded Mandates Reform Act

5.5.1 Future and Disproportionate Costs

The UMRA requires that we estimate, where accurate estimation is reasonably feasible, 

future compliance costs imposed by the rule and any disproportionate budgetary effects. Our 

estimates of the future compliance costs of the rule are discussed previously in this EIA. We do 

not believe that there will be any disproportionate budgetary effects of the supplemental proposal 

on any particular areas of the country, state or local governments, types of communities (e.g., 

urban, rural), or particular industry segments.

5.5.2 Effects on the National Economy

The UMRA requires that we estimate the effect of the rule on the national economy. To 

the extent feasible, we must estimate the effect on productivity, economic growth, full 

employment, creation of productive jobs, and international competitiveness of U.S. goods and 

services if we determine that accurate estimates are reasonably feasible and that such effect is 

relevant and material. The nationwide economic impact of the rule is presented earlier in this 

EIA chapter. This analysis provides estimates of the effect of the rule on most of the categories 

mentioned above, and these estimates are presented earlier in this EIA chapter. The nature of this 

rule is such that it is not practical for us to use existing approaches, such as the Morgenstern et 
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al. approach,

8 or others to estimate the impact on employment to the regulated entities and others 

from this supplemental proposal. In addition, we have determined that the rule contains no 

regulatory requirements that might significantly or uniquely affect small governments. 

Therefore, today’s rule is not subject to the requirements of section 203 of the UMRA. 

5.6 Executive Order 13045: Protection of Children from Environmental Health Risks 

and Safety Risks

Executive Order 13045, “Protection of Children from Environmental Health Risks and 

Safety Risks” (62 FR 19885, April 23, 1997), applies to any rule that (1) is determined to be 

“economically significant,” as defined under Executive Order 12866, and (2) concerns an 

environmental health or safety risk that EPA has reason to believe may have a disproportionate 

effect on children. If the regulatory action meets both criteria, EPA must evaluate the 

environmental health or safety effects of the planned rule on children and explain why the 

planned regulation is preferable to other potentially effective and reasonably feasible alternatives 

considered by the Agency.

This rule is not subject to Executive Order 13045 (62 FR 19885, April 23, 1997) because 

the Agency does not believe the environmental health risks or safety risks addressed by this 

action present a disproportionate risk to children. The report, Analysis of Socio-Economic 

Factors for Populations Living Near Ferroalloys Facilities, shows that on a nationwide basis, 

there are approximately 26,000 people exposed to a cancer risk at or above 1-in-1 million and 

approximately 28,000 people exposed to a chronic noncancer TOSHI greater than 1 due to 

emissions from the source category. The percentages for the other demographic groups, 

including children 18 years and younger, are similar to or lower than their respective nationwide 

percentages. Further, implementation of the provisions included in this action is expected to 

significantly reduce the number of at-risk people due to HAP emissions from these sources (from 

between 26,000 to 28,000 people to about 1,000), providing significant benefit to all the 

demographic groups in the at-risk population.

This rule is expected to reduce environmental impacts for everyone, including children. 

This action proposes emissions limits at the levels based on MACT, as required by the Clean Air 

Act. Based on our analysis, we believe that this rule does not have a disproportionate impact on 

children. 

 

8 Morgenstern, R. D., W. A. Pizer, and J. S. Shih. 2002. “Jobs versus the Environment: An Industry-Level 

Perspective.” Journal of Environmental Economics and Management 43(3):412-436.
5-11

5.7 Executive Order 12898: Federal Actions to Address Environmental Justice in 

Minority Populations and Low-Income Populations

Executive Order 12898 (59 FR 7629 (Feb. 16, 1994)) establishes federal executive policy 

on environmental justice. Its main provision directs federal agencies, to the greatest extent 

practicable and permitted by law, to make environmental justice part of their mission by 

identifying and addressing, as appropriate, disproportionately high and adverse human health or 

environmental effects of their programs, policies, and activities on minority populations and lowincome populations in the United States.

For the supplemental proposal, the EPA has determined that the current health risks 

posed to anyone by emissions from this source category are unacceptable. There are about 

26,000 to 28,000 people nationwide that are currently subject to health risks which are nonnegligible (i.e., cancer risks greater than 1 in a million or chronic noncancer TOSHI greater than 

1) due to emissions from this source category. The demographic distribution of this “at-risk” 

population is similar or below the national distribution of demographics for all groups except for 

the “ages 65 and up” age group, which is 4 percent greater than its corresponding national 

percentage. The rule will reduce the number of people in this at-risk group from 26,000 - 28,000 

people to about 1,000 people, thereby providing disproportionate benefits to a greater percentage 

of minorities. Therefore, the EPA has determined that the rule will not have disproportionately 

high and adverse human health or environmental effects on minority or low-income populations

because it increases the level of environmental protection for all affected populations. 

5.8 Employment Impact Analysis

In addition to addressing the costs and benefits of the proposed rule, EPA has analyzed 

the impacts of this rulemaking on employment, which are presented in this section. While a 

standalone analysis of employment impacts is not included in a standard cost-benefit analysis, 

such an analysis is of particular concern in the current economic climate of sustained high 

unemployment. Executive Order 13563, states, “Our regulatory system must protect public 

health, welfare, safety, and our environment while promoting economic growth, innovation, 

competitiveness, and job creation” (emphasis added). A discussion of labor requirements 

associated with the installation, operation, and maintenance of control requirements, as well as 

reporting and recordkeeping requirements is included in the cost memoranda for this 

supplemental proposal. However, due to data and methodology limitations, we have not 

quantified the rule’s effects on labor, or the effects induced by changes in workers’ incomes. 

What follows is an overview of the various ways that environmental regulation can affect 

employment. EPA continues to explore the relevant theoretical and empirical literature and to 
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seek public comments in order to ensure that the way EPA characterizes the employment effects 

of its regulations is valid and informative.

This proposed regulation is expected to affect employment in the United States through 

the regulated sector – ferroalloy manufacturing. It is now an industry with only two facilities in 

the U.S., but it provides an important source of employment to their locales – Washington 

County, PA and Mason County, WV, respectively. 

From an economic perspective labor is an input into producing goods and services; if a 

regulation requires that more labor be used to produce a given amount of output, that additional 

labor is reflected in an increase in the cost of production. Moreover, when the economy is at full 

employment, we would not expect an environmental regulation to have an impact on overall 

employment because labor is being shifted from one sector to another. On the other hand, in 

periods of high unemployment, employment effects (both positive and negative) are possible. 

For example, an increase in labor demand due to regulation may result in a short-term net 

increase in overall employment as workers are hired by the regulated sector to help meet new 

requirements (e.g., to install new equipment) or by the environmental protection sector to 

produce new abatement capital resulting in hiring previously unemployed workers . When

significant numbers of workers are unemployed, the opportunity costs associated with displacing 

jobs in other sectors are likely to be smaller. And, in general, if a regulation imposes high costs 

and does not increase the demand for labor, it may lead to a decrease in employment. The 

responsiveness of industry labor demand depends on how these forces all interact. Economic 

theory indicates that the responsiveness of industry labor demand depends on a number of 

factors: price elasticity of demand for the product, substitutability of other factors of production, 

elasticity of supply of other factors of production, and labor’s share of total production costs. 

Berman and Bui (2001) put this theory in the context of environmental regulation, and suggest 

that, for example, if all firms in the industry are faced with the same compliance costs of 

regulation and product demand is inelastic, then industry output may not change much at all.

Regulations set in motion new orders for pollution control equipment and services. New 

categories of employment have been created in the process of implementing environmental 

regulations. When a regulation is promulgated, one typical response of industry is to order 

pollution control equipment and services in order to comply with the regulation when it becomes 

effective. On the other hand, the closure of plants that choose not to comply – and any changes 

in production levels at plants choosing to comply and remain in operation - occur after the 

compliance date, or earlier in anticipation of the compliance obligation. Environmental 

regulation may increase revenue and employment in the environmental technology industry. 
5-13

While these increases represent gains for that industry, they translate into costs to the regulated 

industries required to install the equipment. 

Environmental regulations support employment in many basic industries. Regulated firms 

either hire workers to design and build pollution controls directly or purchase pollution control 

devices from a third party for installation. Once the equipment is installed, regulated firms hire 

workers to operate and maintain the pollution control equipment—much like they hire workers 

to produce more output In addition to the increase in employment in the environmental 

protection industry (via increased orders for pollution control equipment), environmental 

regulations also support employment in industries that provide intermediate goods to the 

environmental protection industry. The equipment manufacturers, in turn, order steel, tanks, 

vessels, blowers, pumps, and chemicals to manufacture and install the equipment. Currently in 

most cases there is no scientifically defensible way to generate sufficiently reliable estimates of 

the employment impacts in these intermediate goods sectors. 

5.8.1 Employment Impacts Within the Regulated Sector 

It is sometimes claimed that new or more stringent environmental regulations raise 

production costs thereby reducing production which in turn must lead to lower employment. 

However, the peer-reviewed literature indicates that determining the direction of net employment 

effects in a regulated industry is challenging due to competing effects. Environmental regulations 

are assumed to raise production costs and thereby the cost of output, so we expect the “output” 

effect of environmental regulation to be negative (higher prices lead to lower sales). On the other 

hand, complying with the new or more stringent regulation requires additional inputs, including 

labor, and may alter the relative proportions of labor and capital used by regulated firms in their 

production processes. Two sets of researchers discussed here, Berman and Bui (2001) and 

Morgenstern, Pizer, and Shih (2002),

9 demonstrate using standard neoclassical microeconomics 

that environmental regulations have an ambiguous effect on employment in the regulated 

sector.59 These theoretical results imply that the effect of environmental regulation on 

employment in the regulated sector is an empirical question and both sets of authors tested their 

models empirically using different methodologies. Both Berman and Bui and Morgenstern et al. 

 

9 Berman, E. and L. T. M. Bui (2001). “Environmental Regulation and Labor Demand: Evidence from the South 

Coast Air Basin.” Journal of Public Economics 79(2): 265-295. 

Morgenstern, R. D., W. A. Pizer, and J. S. Shih. 2002. Jobs versus the Environment: An Industry-Level 

Perspective.‖ Journal of Environmental Economics and Management 43(3):412-436.
5-14

examine the effect of environmental regulations on employment and both find that overall they 

had no significant net impact on employment in the sectors they examined. 

Berman and Bui (2001) examine how an increase in local air quality regulation that 

reduces NOx emissions affects manufacturing employment in the South Coast Air Quality 

Management District (SCAQMD), which incorporates Los Angeles and its suburbs. During the 

time frame of their study, 1979 to 1992, the SCAQMD enacted some of the country’s most 

stringent air quality regulations, which were more stringent than federal and state regulations. 

Using SCAQMD’s local air quality regulations, Berman and Bui identify the effect of 

environmental regulations on net employment in the regulated industries.10,11 The authors find 

that “while regulations do impose large costs, they have a limited effect on employment” 

(Berman and Bui, 2001, p. 269). Their conclusion is that local air quality regulation “probably 

increased labor demand slightly” but that “the employment effects of both compliance and 

increased stringency are fairly precisely estimated zeros [emphasis added], even when exit and 

dissuaded entry effects are included” (Berman and Bui, 2001, p. 269).12

Morgenstern et al. (2002) estimated the effects of pollution abatement expenditures on 

net employment in four highly regulated sectors (pulp and paper, plastics, steel, and petroleum 

refining). They conclude that increased abatement expenditures generally have not caused a 

significant change in net employment in those sectors. While the specific sectors Morgenstern et 

al. examined are different than the sectors considered here, the methodology that Morgenstern et 

al. developed is still an informative way to qualitatively assess the effects of this rulemaking on 

employment in the regulated sector.

While there is an extensive empirical, peer-reviewed literature analyzing the effect of 

environmental regulations on various economic outcomes including productivity, investment, 

competitiveness as well as environmental performance, there are only a few papers that examine 

the impact of environmental regulation on employment, but this area of the literature has been 

growing. As stated previously in this RIA section, empirical results from Berman and Bui (2001) 

and Morgenstern et al (2002) suggest that new or more stringent environmental regulations do 

not have a substantial impact on net employment (either negative or positive) in the regulated 

sector. Nevertheless, other empirical research suggests that more highly regulated counties may 

 

10 Note, like Morgenstern, Pizer, and Shih (2002), this study does not estimate the number of jobs created in the 

environmental protection sector. 

11 Berman and Bui include over 40 4-digit SIC industries in their sample.

12 Including the employment effect of exiting plants and plants dissuaded from opening will increase the estimated 

impact of regulation on employment.
5-15

generate fewer jobs than less regulated ones (Greenstone 2002, Walker 2011). However, the 

methodology used in these two studies cannot estimate whether aggregate employment is lower 

or higher due to more stringent environmental regulation, it can only imply that relative 

employment growth in some sectors differs between more and less regulated areas. List et al. 

(2003) find some evidence that this type of geographic relocation, from more regulated areas to 

less regulated areas may be occurring. Overall, the peer-reviewed literature does not contain 

evidence that environmental regulation has a large impact on net employment (either negative or 

positive) in the long run across the whole economy.

While the theoretical framework laid out by Berman and Bui (2001) and Morgenstern et 

al. (2002) still holds for the industries affected under this supplemental proposal, important 

differences in the markets and regulatory settings analyzed in their study and the setting 

presented here lead us to conclude that it is inappropriate to utilize their quantitative estimates to 

estimate the employment impacts from this proposed regulation. In particular, the industries used 

in these two studies as well as the timeframe (late 1970’s to early 1990’s) are quite different than 

those in this proposed rule. For these reasons we conclude there are too many uncertainties as to 

the transferability of the quantitative estimates in these two studies to apply their estimates to 

quantify the employment impacts within the regulated sectors for this proposed regulation.

References for Employment Impacts

Greenstone, M. (2002). “The Impacts of Environmental Regulations on Industrial Activity: Evidence 

from the 1970 and 1977 Clean Air Act Amendments and the Census of Manufactures.” Journal of 

Political Economy 110(6): 1175-1219. 

List, J. A., D. L. Millimet, P. G. Fredriksson, and W. W. McHone (2003). “Effects of Environmental 

Regulations on Manufacturing Plant Births: Evidence from a Propensity Score Matching Estimator.” The 

Review of Economics and Statistics 85(4): 944-952. 

Walker, Reed. (2011). “Environmental Regulation and Labor Reallocation." American Economic 

Review: Papers and Proceedings, 101(2).

5-17
6-1

SECTION 6

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Mankiw, N.G. 1998. Principles of Economics. Orlando, Fl: Dryden Press.

U.S. Census Bureau. 2007. Survey of Plant Capacity: 2006. “Table 1a. Full Capacity Utilization 

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http://www.census.gov/manufacturing/capacity/historical_data/index.html .

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U.S. Census Bureau. 2010e. Census Regions and Divisions of the United States. Available at: 

http://www.census.gov/geo/www/us_regdiv.pdf. Accessed September 12, 2010.

U.S. Census Bureau. 2010f. North American Industrial Classification System [NAICS] Code 

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U.S. Environmental Protection Agency (EPA). 2006a. Final Guidance EPA Rulewriters: 

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standardstopics/size/index.html. 
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