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U.S. Environmental Protection Agency

Office of Air Quality Planning and Standards

March 2013

Economic Impact and Small Business Analysis – Proposed Wool Fiberglass Area Source NESHAP

This report is the economic impact analysis for the proposed Wool Fiberglass 

Manufacturing area source standard. This standard is scheduled to be proposed under a 

settlement agreement on March 15, 2013. The report presents impacts to firms affected by the 

requirements in the proposed rule and also their consumers. Impacts to small firms are 

accounted for in adherence to the Regulatory Flexibility Act as amended by the Small Business 

Regulatory Enforcement Fairness Act (SBREFA). 

The rule includes emissions limits for furnaces, test methods, startup/shutdown 

provisions, and other requirements. For more information on this regulatory action, please 

refer to the preamble for this action.

Wool fiberglass manufacturing facilities are included in NAICS 327993. The industry’s 

revenue for 2011 was $5.1 billion, and the estimated gross profit was 40.15%.1 We use 

economic data for 2011 in this analysis in order to be consistent with the year dollars for the 

costs (2011). 

This economic impact analysis identified the businesses that will be affected by this rule 

using information from the cost memo for this proposal, and provides an analysis at a screening 

level to help estimate the rule’s economic impact on affected businesses and their consumers. 

The analysis employed here is a “sales test” that computes the annualized compliance costs as 

a share of sales for each company. The annualized cost per sales for a company represents the 

maximum price increase in affected product needed for the company to completely recover the 

annualized costs imposed by the regulation. 

 

1 Mineral Wool Manufacturing Industry in the U.S. and its International Trade (2011 Edition). LLC Supplier 

Relations US. Found on Amazon.com on August 2, 2011. 
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The “sales test” is the impact methodology EPA employs in economic impact analysis 

such as this one as opposed to a “profits test”, in which annualized compliance costs are 

calculated as a share of profits.2 This is because revenues or sales data are commonly available 

data for entities normally impacted by EPA regulations and profits data normally made 

available are often not the true profits earned by firms due to accounting and tax 

considerations. Firms and entities often have ways legally available in the tax code to minimize 

their reported profits; thus, using reported profits may lead to a less than accurate estimate of 

the economic impact of a regulation to an affected firm or entity and their consumers. While 

screening level analyses are often employed to estimate impacts to small business or entities as 

part an analysis in compliance with the Regulatory Flexibility Act (RFA) as amended by the Small 

Business Regulatory Enforcement Fairness Act (SBREFA), a screening level analysis can also be 

employed in an economic impact analysis such as this one whose focus is on the regulated 

companies. 

In the next section is background information on the wool fiberglass industry, and 

impact results then follow. 

Background on the Wool Fiberglass Industry

Wool fiberglass is a thick, fluffy material made from discontinuous fibers, is used for 

thermal insulation and sound absorption. It is commonly found in ship and submarine 

bulkheads and hulls; automobile engine compartments and body panel liners; in furnaces and 

air conditioning units; acoustical wall and ceiling panels; and architectural partitions. Fiberglass 

can be tailored for specific applications such as Type E (electrical), used as electrical insulation 

tape, textiles and reinforcement; Type C (chemical), which has superior acid resistance, and 

Type T, for thermal insulation. 

The basic raw materials for fiberglass products are a variety of natural minerals and 

manufactured chemicals. The major ingredients are silica sand, limestone, borides and soda 

 

2 More information on sales and profit tests as used in analyses done by U.S. EPA can be found at 

http://www.epa.gov/sbrefa/documents/rfaguidance11-00-06.pdf, pp. 32-33. 
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ash. Other ingredients may include calcined alumina, borides, feldspar, nepheline syenite, 

magnesite, and kaolin clay, among others. Silica sand is used as the glass former, and soda ash 

and limestone help primarily to lower the melting temperature. Other ingredients are used to 

improve certain properties, such as borides for chemical resistance and ductability. Waste glass, 

also called cullet, is also used as a raw material and may be ‘internal’ from the production of 

fiberglass or may be ‘external’ from glass recycling. The raw materials must be carefully 

weighed in exact quantities, their chemical compositions evaluated, and thoroughly mixed 

together (called batching) before being melted into glass for the manufacture of fiberglass. 

There are three parent firms owning these facilities with major HAP sources that will 

incur costs as a result of this proposal, and these firms are shown in Table 1. The costs used as 

input to the economic impact analysis include the cost of emissions control and the costs of 

monitoring, recordkeeping, reporting and testing. These are the full cost of compliance 

estimated by EPA for this proposed rule. Based on emissions test data received, we estimate 

that there are currently eight gas-fired furnaces located at five facilities. Three of these eight 

furnaces do not meet the proposed chromium compounds emission limit; the remaining five 

furnaces currently meet the limit but would incur compliance testing costs because they meet 

the applicability requirements of the proposed rule (i.e., they are gas-fired glass-melting 

furnaces). We have estimated the add-on control cost impact for those affected facilities (three 

furnaces) based on the installation of a sodium hydroxide (NaOH) scrubber to remove 

chromium compounds from the furnace exhaust stream(s). The capital equipment cost was 

estimated to be $250,000 for each unit (scrubber) with an annual operation cost of $100,000 

per unit. Guardian and Johns-Manville (owned by Berkshire-Hathaway) are wool fiberglass 

producers who are expected to incur no compliance costs as a result of this proposal as shown 

in the cost memo for this proposal. None of these firms affected by the proposal is a small 

business as defined by the SBA (750 employees or less for an ultimate parent company, as 

mentioned earlier for the relevant NAICS code), for all of these firms have in excess of 10,000 

employees as of 2011.

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 Each of these firms has revenues in excess of $3 billion in 2011, as 

 

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U.S. Small Business Administration. Table of Small Business Size Standards, effective as of January 7, 2013. 

Available on the Internet at http://www.sba.gov/sites/default/files/files/Size_Standards_Table(1).pdf. 
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shown in Table 1. All of the firms are owned by parent companies based in the U.S. except for 

CertainTeed, which is owned by Saint-Gobain, a French conglomerate. Table 1 provides the 

annualized compliance costs and economic impacts to the affected firms from this proposed 

rule. EPA used no CBI in generating economic impacts for this industry.

Table 1: Wool Fiberglass Firms that Are Affected by the Proposed Area Source Rule, their 

Revenues and Costs Incurred from the Proposed Area Source Rule, and Economic Impacts 

from this Area Source Rule

Wool Fiberglass Firm Annual Revenues 

in 2011 (billions)

Total Annualized 

Costs (2011

dollars)e

Annualized Costs as a 

Percentage of Annual 

Revenues in 2011

Owens Corning

$5.30

c

$140,000 0.003

Certain Teed (owned by SaintGobain) $56.31a,b

20,000 0.000004

Knauf Group (owned by Gebr. 

Knauf Verwaltungsgesellschaft 

KG)

$3.02

d

220,000 0.007

a

Taken from http://www.irs.gov/Individuals/International-Taxpayers/Yearly-Average-Currency-Exchange-Rates. 

Conversion from euros uses euro to U.S. dollar value as an average for all of 2011. The conversion from euro to 

U.S. dollar value for 2011 is 0.748. That is, 0.748 euro = $1. 

b

Taken from 2011 annual report for Saint-Gobain, Inc., found at http://www.saint-gobain.com/files/SaintGobain-annual-report-2011.pdf, p. 4. 

c

Taken from http://investor.owenscorning.com/phoenix.zhtml?c=71581&p=irol-IRHome. 

d

http://www.investorpoint.com/stock/USG-Usg+Corp./income-statement/. 

e

Costs are taken from RTI International to U.S. EPA/OAQPS/SPPD/NRG, “Estimated Cost Impact for Wool 

Fiberglass Manufacturing Industry to Comply with Proposed Area Source Rule,” March 12, 2013.

The economic impact on these firms, measured in annual compliance costs as a percent 

of sales or revenues, is less than 0.01 percent for each of the affected parent firms based on 

using the most current year for available revenue data. The total annualized costs of the 

proposed rule to the wool fiberglass industry are $380,000 (2011 dollars). 
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To examine impacts on price and output from this proposal in an illustrative way, we 

use estimates of the price elasticity of demand and supply for this industry. The price elasticity 

of demand for the wool fiberglass industry is estimated at -0.84, and the price elasticity of 

supply for the wool fiberglass industry is estimated at -0.7.5 With the responsiveness of wool 

fiberglass demand and supply at less than 1:1 compared to a price change of 1 percent, and 

with the change in product price as approximated by the cost to revenue ratio at less than 0.01 

percent, for this ratio is the maximum price change that producers may face, it is expected that 

wool fiberglass price and output changes will be less than 0.01 percent.

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economic impact of this proposed rule should be relatively low on the affected industry and its 

consumers. It should be noted that the wool fiberglass firms mentioned above that are 

expected to not incur any costs as a result of this proposal will experience some increase in 

revenues to the extent that wool fiberglass prices increase as a response to this proposal. For 

more information on the compliance costs, please refer to the cost memo for this proposed 

rule. 

For the proposed rule, we find that we can certify that there is not a significant impact 

on a substantial number of small entities (or SISNOSE). This is based on no small firm being 

impacted by this rule as shown in the impact results presented in this economic impact and 

small business impact analysis, and that no wool fiberglass manufacturer is a small business. 

 

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Ho, M. S, R. Morgenstern, and J. S. Shih. 2008. “Impact of Carbon Price Policies on US Industry.” RFF Discussion 

Paper 08-37. Hhttp://www.rff.org/publications/pages/publicationdetails.aspx Publicationid=20680. 

Accessed August 2009. Table 8.A.6.

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Broda, C., N. Limao, and D. Weinstein. 2008b. “Export Supply Elasticities.” http://faculty.

chicagobooth.edu/christian.broda/website/research/unrestricted/TradeElasticities/

TradeElasticities.html.

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This conclusion is consistent with perfect competition for this industry. This conclusion may change somewhat to 

the extent that this industry is imperfectly competitive.