1

Economic Impact Analysis for the Proposed Secondary Aluminum NESHAP

1. Background

This report is the economic impact analysis for the proposed revisions to the Secondary

Aluminum NESHAP, which will be signed as per a court-ordered schedule by January 30, 2012. 

The proposed amendments will allow sources up to 90 days after promulgation to comply with

the provisions of the rule that are unrelated to testing. Otherwise, sources will have to comply

with the testing provisions upon their next regularly scheduled testing. The court-ordered 

deadline for promulgation is October 31, 2012. This proposal includes amendments to the 

existing NESHAP that was promulgated in 2000 to correct and clarify rule requirements and 

provisions. These proposed amendments would:

 Add a requirement that the existing numerical limits apply at times, including periods of 

startup and shutdown;

 Add a definition of affirmative defense;

 Add a requirement to report performance testing through the Electronic Reporting Tool 

(ERT);

 Add rule provisions allowing furnaces to change designations;

 Add operating requirements such as monitoring of lime injection rates and solicit comments

for improving the scrap inspection program; and 

 Make technical corrections and clarifications to the applicability, definitions, operating, 

monitoring, and performance testing requirements.

Details on the proposed rule can be found in the preamble contained in the public docket 

for this rulemaking. 

The EPA defined the Secondary Aluminum source category in 1992 as any establishment 

using clean charge, aluminum scrap, or dross from aluminum production, as the raw material and 

performing one or more of the following processes: scrap shredding, scrap 

drying/delacquering/decoating, thermal chip drying, furnace operations (i.e., melting, holding, 

sweating, refining, fluxing, or alloying), recovery of aluminum from dross, in-line fluxing, or 

dross cooling. The Secondary Aluminum Production source category includes facilities that 
2

produce aluminum from scrap aluminum material and consists of the following operations: (1) 

Preprocessing of scrap aluminum, including size reduction and removal of oils, coatings, and 

other contaminants;(2) Furnace operations including melting, in-furnace refining, fluxing, and 

tapping; (3) Additional refining, by means of in-line fluxing; and (4) Cooling of dross.

Table 1. NESHAP and Industrial Source Categories Affected By This Proposed Action

Source Category NESHAP NAICS 

code1

Secondary Aluminum Production

Primary aluminum production facilities

Aluminum sheet, plate, and foil manufacturing facilities

Aluminum extruded product manufacturing facilities

Other aluminum rolling and drawing facilities

Aluminum die casting facilities

Aluminum foundry facilities

Secondary 

Aluminum 

Production

331314

331312

331315

331316

331319

331521

331524

1 North American Industry Classification System

2 Maximum Achievable Control Technology

The secondary aluminum industry consists of approximately 161 secondary aluminum 

production facilities, of which the EPA estimates 53 to be major sources of HAP. Several of the 

secondary aluminum facilities are co-located with primary aluminum, coil coating, and possibly 

other source category facilities. 

The components of the proposal that are expected to have impacts on costs are the 

following:

 require uncontrolled furnaces to install testing hooding that meets American Council of 

Government Industrial Hygienists (ACGIH) guidelines,

 require uncontrolled furnaces to test for hydrogen fluoride (HF) in addition to hydrogen 

chloride (HCl), and

 allow furnaces to switch designations, such as from a controlled Group 1 furnace to 

uncontrolled Group 2 furnace.
3

The costs of the rule, and the economic and small business impacts associated with 

the proposed rule, can be found in Section 3. Section 2 below provides a profile for the 

secondary aluminum industry.

2. Industry Profile

This section introduces the secondary aluminum industry and provides aggregate 

statistics on the amount of secondary aluminum produced and other economic data about the 

secondary aluminum industry.

The secondary aluminum industry is based around recovery of aluminum, or production 

of aluminum from recycled aluminum (scraps). Recovered aluminum, along with primary

aluminum, is used for: containers (such as aluminum cans) and packaging (which in 2010 

accounted for 22.4 percent of end-use shipments in the United States and Canada), buildings and 

construction (10.2 percent), and transportation (28.2 percent) (Bray, 2011, 5.1).1

From 2006 to 2010 secondary recovery of aluminum, on average, accounted for 

64 percent of total aluminum production in the United States. In 2010, 2,800 metric tons of 

aluminum were recovered in the U.S. (Table 1-1). Secondary recovery decreased by 36 percent 

from 2006 to 2010. The annual decreases became progressively severe until the industry, at least 

temporarily, stabilized from 2009 to 2010.

Table 2. Salient Aluminum Statistics (Thousands of Metric Tons)

2006 2007 2008 2009 2010

Primary Production 2,284 2,554 2,658 1,727 1,726

Secondary Recovery Total: 4,380 4,110 3,630 2,820 2,800

New Scrap 2,800 2,450 2,130 1,570 1,550

Old Scrap 1,580 1,660 1,500 1,260 1,250

Note: New Scrap is generated in the manufacturing of primary aluminum and semi-fabricated aluminum mill, 

finished industrial and consumer products (EPA, 1999, 6). New scrap that is recycled by the same company that 

generated it is generally not counted in scrap consumption and secondary production data. Old scrap comes from 

recycled aluminum products (products recovered after their useful lives) such as used beverage cans (UBC) (EPA, 

1999, 7).

Source: Bray, Lee. 2011. “Minerals Yearbook: Aluminum [Advanced Release]” USGS. Table 1. 

<http://minerals.usgs.gov/minerals/pubs/commodity/aluminum/myb1-2010-alumi.pdf>

 

1

Primary aluminum is produced from alumina/bauxite (EPA 1999, 7)
4

Secondary Aluminum is produced by several different types of firms (Table 3). The 

principal manufacturers of recovered aluminum are Secondary Smelters and Independent Mill 

Fabricators. To simplify, this industry profile now focuses on firms whose sole purpose is to 

Table 3. U.S. Consumption and Recovery from Purchased New and Old Aluminum 

Scrap, by Class (Metric Tons)

Calculated Recoverya

Class Consumption Aluminum Metallic

2009

Secondary smelters 1,450,000 1,020,000 1,090,000

Independent mill fabricators 1,620,000 1,390,000 1,470,000

Foundries 74,800 61,200 65,400

Other Consumers 6,870 6,330 6,350

Total 3,160,000 2,470,000 2,630,000

Estimated full Industry Coverage 3,390,000 2,650,000 2,820,000

2010

Secondary Smelters 1,610,000 1,150,000 1,230,000

Independent mill fabricators 1,450,000 1,240,000 1,320,000

Foundries 50,700 41,400 44,200

Other Consumers 6,290 6,290 6,290

Total 3,120,000 2,430,000 2,590,000

Estimated full Industry Coverage 3,370,000 2,620,000 2,800,000

aMetallic Recovery includes both aluminum recovery and alloying metals, Aluminum Recovery is the aluminum 

content of the recovered metals.

Source: Bray, Lee. 2011. “Minerals Yearbook: Aluminum [Advanced Release]” USGS. Table 3.

<http://minerals.usgs.gov/minerals/pubs/commodity/aluminum/myb1-2010-alumi.pdf>

process aluminum scrap into molten aluminum or aluminum ingot. The Secondary Smelting and 

Alloying of Aluminum industry (NAICS 331314) “comprises establishments primarily engaged in 

(1) recovering aluminum and aluminum alloys from scrap and/or dross (i.e., secondary smelting) 

and making billet or ingot (except by rolling) and/or (2) manufacturing alloys, powder, paste, or 

flake from purchased aluminum” (U.S. Census Bureau, 2007). Secondary Smelters were 

responsible for 44 percent of total aluminum recovery in 2010.
5

2.1 Key Statistics

The Secondary Smelting industry’s shipments (output) expanded by 35 percent from 

2005 to 2007. This expansion not only stalled but was overwhelmed by a 57 percent decrease in 

output from 2007 to 2009, likely due to the overall economic recession during that period. There 

was an overall decrease in output of 43 percent from 2005 to 2009 (Table 4). Other indicators 

(payroll and number of employees) likewise exhibit this pattern of industry expansion from 2005 

to 2007 followed by drastic contraction from 2007 to 2009. Payroll increased by 10 percent and 

the number of employees increased by 12 percent from 2005 to 2007 but fell by 46 percent and 

43 percent from 2007 to 2009. 

Table 4. Key Statistics: Secondary Aluminum Manufacturing (North American 

Industry Classification [NAICS] 331314) ($2009)

2005 2007 2009

Shipments ($1,000) 6,037,839 8,149,043 3,440,336

Annual payroll ($1,000) 366,891 404,999 217,198

Employees 6,727 7,524 4,224

Sources: U.S. Census Bureau: generated by RTI International; using American Factfinder; “Sector 31: Annual 

Survey of Manufactures: General Statistics: Statistics for Industry Groups and Industries: 2009 and 2008, 2008 

and 2007, 2006 and 2005.” <http://factfinder.census.gov>; (December 13, 2011).

The average shipments per employee and shipments per dollar of payroll followed the 

same pattern as the aggregate statistics but the fluctuations were mostly less extreme. Average 

shipments per employee increased from 2005 to 2007 only to fall below the 2005 level by 2009. 

There was an overall decrease in average shipments per employee of 9 percent. Average 

shipments per dollar of payroll expanded by 25 percent from 2005 to 2007 only to fall back to 

the 2005 level by 2009. The average annual payroll per employee was unique as it did not 

increase before decreasing, but rather decreased slightly (1.3 percent) from 2005 to 2007 and 

decreased slightly more (4.5 percent) from 2007 to 2009 (Table 5).
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Table 5. Industry Data: Secondary Aluminum (NAICS 331314) ($2009)

Industry Data 2005 2007 2009

Total Shipments ($1,000) 6,037,839 8,149,043 3,440,336

Average Shipments per employee 898 1,083 814

Average Shipments per $ of payroll 16 20 16

Average Annual payroll per employee 54,540 53,827 51,420

Source: U.S. Census Bureau: generated by RTI International; using American Factfinder; “Sector 31: Annual 

Survey of Manufactures: General Statistics: Statistics for Industry Groups and Industries: 2009 and 2008, 2008 

and 2007, 2006 and 2005.” <http://factfinder.census.gov>; (December 13, 2011).

2.2 Supply and Demand Characteristics:

Secondary aluminum demand is determined by the industries that use secondary

aluminum as an input into their manufacturing process. Historically, data on the use of aluminum 

in product markets has not differentiated between the demand of primary and secondary (EPA, 

1999, 41). Conversely, there is more detailed data available for the supply and inputs used in 

secondary production.

2.2.1 Goods and Services Used in Secondary Aluminum

Material cost consistently accounted for the lion’s share (around 80 percent) of the value 

of shipments in secondary aluminum manufacturing from 2005 to 2009. This suggests that the 

cost of aluminum scrap has a major influence on the cost of secondary aluminum manufacturing. 

Total employee compensation took up a much smaller amount—an average of 7.3 percent of the 

value of shipments. About half of total compensation went to production workers’ wages. 

Purchased electricity (ranging from 3 to 4.7 percent) and purchased fuel (1.7 to 3.2 percent) 

accounted for small but not insignificant portions of the total value of shipments through the 

period (Table 6).

2.3 Firm and Market Characteristics

2.3.1 Location

The concentration of the Secondary aluminum industry has been attributed to the cost of 

transportation which causes establishments to locate near scrap supplies and consumers of 

secondary aluminum. “A cursory look at the distribution of secondary smelters in the U.S. 

reveals a heavy concentration of smelters in the automotive and appliance manufacturing areas 

of the country” (EPA, 1999, 19). The secondary aluminum industry was concentrated in the 

central U.S. in 1997 and remained that way through 2007. In 2007, Indiana had the most 
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secondary aluminum establishments, followed by Texas, Tennessee, Michigan, and California. 

Similarly, Indiana had the highest concentration of establishments, followed by Tennessee, 

Kentucky and New Hampshire (Table 7).

Table 6. Cost of Goods and Services Used in Secondary Aluminum Manufacturing 

(NAICS 331314) ($2009)

Industry Ratios 2005 Share 2007 Share 2009 Share

Total shipments ($1,000) 6,037,839 100.0% 8,149,043 100.0% 3,440,336 100.0%

Total compensation ($1,000) 487,199 8.1% 533,852 6.5% 280,485 8.6%

Annual payroll ($1,000) 366,891 6.1% 404,999 5.0% 217,198 6.3%

Fringe benefits ($1,000) 120,308 2.0% 128,853 1.6% 63,287 1.8%

Total employees 7,390 7,785 4,224

Total production workers’ wages 

($1,000)—2007 nonleased

246,744 4.1% 267,385 3.3% 125,503 3.7%

Average production workers per year 5,513 5,798 3,082

Total production hours (thousands) 12,603 14,066 6,429

Total cost of materials ($1,000) 4,793,596 79.4% 6,404,830 78.6% 2,840,494 82.6%

Materials, parts, packaging etc. used 

($1,000)

4,360,670 72.0% 5,697,489 70.0% 2,537,663 73.8%

cost of resales ($1,000) 134,966 1.6% 62,094 1.8%

Purchased electricity ($1,000) 114,150 1.9% 262,814 3.2% 59,873 1.7%

Cost of purchased fuel ($1,000) 260,314 4.3% 241,124 3.0% 162,076 4.7%

Source: U.S. Census Bureau: generated by RTI International; using American Factfinder; “Sector 31: Annual 

Survey of Manufactures: General Statistics: Statistics for Industry Groups and Industries: 2009 and 2008, 2008 

and 2007, 2006 and 2005.” <http://factfinder.census.gov>; (December 13, 2011).
8

Table 7. Establishment and Employee Concentration in Secondary Aluminum 

Manufacturing (NAICS 331314) (2007)

Geography

Number of 

Establishments

Average Number 

of Paid 

Employees per 

Pay Period 

Population/ 

Employees

Average 

Number of 

Employees per 

Establishment

Population/ 

Establishments

United States 134 7,468 40,388 56 2,250,904

Alabama 4 — — — 1,156,963

Arkansas 2 — — — 1,417,399

California 10 473 77,280 47 3,655,322

Florida 6 228 80,049 38 3,041,874

Georgia 3 — — — 3,181,583

Illinois 9 369 34,831 41 1,428,061

Indiana 15 898 7,066 60 423,019

Kentucky 7 454 9,342 65 605,925

Michigan 11 515 19,557 47 915,620

Minnesota 1 — — — 5,197,621

Missouri 4 165 35,627 41 1,469,604

New Hampshire 2 — — — 657,914

New York 6 901 21,418 150 3,216,288

Ohio 9 329 34,854 37 1,274,102

Pennsylvania 4 127 97,896 32 3,108,198

Tennessee 11 — — — 559,702

Texas 12 — — — 1,992,032

Wisconsin 3 — — — 1,867,213

Source: U.S. Census Bureau: generated by RTI International; using American Factfinder; “Table 1: Selected 

Industry Statistics for the U.S. and States: 2007.” <http://factfinder.census.gov>; (December 13, 2011).

2.3.2 Employment

Secondary aluminum manufacturing employment and the concentration of employment 

by state follows that of establishments fairly closely with the exception of New York which had 

relatively large amount of employees per establishment (Table 7). Indiana had the highest 

concentration of employees, followed closely by Kentucky, and less closely by Michigan and 

New York.
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2.3.3 Energy Use

The U.S. Energy Information Administration has not typically published energy 

consumption data disaggregated enough to build a time trend of the secondary aluminum 

industry’s energy use. However, energy consumption data specific to the secondary aluminum 

was published in 2006 (Table 8). This shows that the industry almost entirely uses natural gas to 

fuel aluminum production.

Table 8. Energy Use by Fuel Type, NAICS 331314 

Fuel Type (Unit: Trillion Btu) 2006

Total 21

Net electricity 2

Residual Fuel Oil —

Distillate Fuel Oil —

Natural Gas 18

LPG and NGL —

Coal —

Coke and Breeze 0

Other —

Source: U.S. Department of Energy, Energy Information Administration. 2009. “First Use of Energy for All 

Purposes (Fuel and Nonfuel), 2006” <http://www.eia.gov/emeu/mecs/mecs2006/2006tables.html>

2.3.4 Size Distribution

The Small Business Administration defines any Secondary Smelting and Alloying of 

Aluminum firm with less than 750 employees as small.2 As only 13 of 110 secondary smelting 

firms had more than 500 employees, it is fair to say that most firms in the industry will be 

classified as small. In spite of the high proportion of firms being classified as small, only a slight 

majority (56 percent) of the employees worked for firms with less than 500 (Table 9).

 

2

 U.S. Small Business Administration, Table of Size Standards. November 5, 2010. Found on the Internet at 

http://www.sba.gov/idc/groups/public/documents/sba_homepage/serv_sstd_tablepdf.pdf. 
10

Table 9. Distribution of Economic Data by Enterprise Size in Secondary Aluminum 

Manufacturing (NAICS 331314)

Enterprises with

Variable Total

1 to 20 

Employees

20 to 99 

Employees

100 to 499 

Employees

500+ 

Employees

Firms 110 55 32 10 13

Establishments 133 55 35 14 29

Employment 4,683 305 1,413 927 2,038

Source: U.S. Census Bureau. 2011. “Number of Firms, Number of Establishments, Employment, and Annual 

Payroll by Enterprise Employment Size for the United States, All Industries: 2009” 

<http://www.census.gov/econ/susb/>

The industry’s Concentration Ratios emphasize the relative dominance of large 

companies. While 108 companies were documented in 2007, the largest 50 companies accounted 

for 95.9 percent of the total value of shipments and the largest 4 companies accounted for 

54.8 percent (Table 10). Also shown in Table 10 is the Herfindahl-Hirshman Index (HHI) for 

NAICS 331314, which is 930.8. This HHI is at the upper end of the unconcentrated range (HHIs 

over 1,000 are considered moderately concentrated). 

Table 10. Secondary Aluminum Manufacturing (NAICS 331314) Concentration Ratios 

Companies

Total Value 

of 

Shipments

Percent of Total 

Value of 

Shipments (5)

HerfindahlHirschman Index

All companies 108 7,823,492 100.0 930.8

4 largest companies — 4,287,274 54.8

8 largest companies — 5,132,211 65.6

20 largest companies — 6,470,028 82.7

50 largest companies — 7,502,729 95.9

Source: U.S. Census Bureau; generated by RTI International; using American FactFinder; “Sector 31: 

Manufacturing: Subject Series: Concentration Ratios: Share of Value of Shipments Accounted for by the 4, 8, 20 

and 50 Largest Companies for Industries: 2007.” <http://factfinder.census.gov>: (December 20, 2011).
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2.3.5 Production and Capacity Utilization

Capacity utilization of secondary aluminum manufacturing increased from 2004 until 

2007 before starting a steep decline which left the industry well below the 2004 level by 2010

(Table 11).

Table 11. Capacity Utilization for Aluminum Manufacturing (NAICS 3313) 

2005 2006 2007 2008 2009 2010

Capacity Utilization 86.7% 83.7% 78.8% 74.1% 59.3% 63.8%

Source: Charles Gilbert, Senior Economist, Federal Reserve Board. Capacity Utilization data for NAICS 3313. 

Personal Communication with Christopher Sichko, RTI International, January 5, 2012. 

2.3.6 Profitability

While Total and Business receipts increased slightly from 2006 to 2008, Net Income, and 

Profit Margins decreased slightly from 2006 to 2007 then collapsed in 2008. It should be noted 

that these statistics are for the Metal Manufacturing Industry not the secondary aluminum 

industry specifically because more disaggregated data is not available (Table 12).

Table 12. Corporate Income and Profitability for Secondary Aluminum Manufacturing 

(NAICS 331) ($2009)

2006 2007 2008

Total receipts 298,104,481 305,773,370 312,467,335

Business receipts 286,730,514 292,550,057 302,877,203

Net income 22,503,070 21,519,223 13,694,559

Before-tax profit margin 7.8% 7.4% 4.5%

After-tax profit margin 5.6% 5.1% 2.9%

Source: Internal Revenue Service, U.S. Department of Treasury, 2008 (1), 2007 (1), 2006 (1) “Corporation Source 

Book of Statistics of Income: Primary Metal Manufacturing” <http://www.irs.gov/taxstats/article/ 

0,,id=168246,00.html>; (December 14, 2011)

2.3.7 International Trade

The U.S. consistently (from 2005–2010) was a net importer of aluminum. Imports for 

consumption fell fairly constantly each year for an overall decrease of 23 percent. Exports 

increased by 38 percent from 2005 to 2008 before decreasing by 17 percent from 2008 to 2009, 

then increasing again in 2010 (Table 13). While imports were more than double the volume of 
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exports in 2005, imports exceeded exports by a smaller fraction, about one-third, in 2010. Note 

that the international trade data is for all aluminum production, not just secondary.

Table 13. U.S. Imports and Exports of Aluminum (Metric Tons)

2005 2006 2007 2008 2009 2010

Imports for consumption 5,330,000 5,180,000 4,490,000 4,200,000 4,110,000 4,120,000

Exports 2,370,000 2,820,000 2,840,000 3,280,000 2,710,000 3,040,000

Source: Bray, Lee. 2011. “Minerals Yearbook: Aluminum” USGS. 2006 Tables 8 and 11; 2008 Tables 9 and 11; 

2010 Tables 10 and 12. <http://minerals.usgs.gov/minerals/pubs/commodity/aluminum>

2.4 2011 and Future Trends 

Fueled by low-cost power contracts and recovering aluminum prices, productive capacity

shut down in 2008 and 2009 was scheduled to restart in late 2010 and early 2011. Still, this is a 

small step and capacity use likely remained low through 2011. “World demand for aluminum in 

2011 was expected to remain at levels lower than in 2008 owing to depressed levels in 

automobile manufacturing and home construction” (Bray, 2011, 5.7).

Low demand for aluminum in U.S. domestic industries and other developed economies is 

likely to persist for several more years, as these economies have not recovered from the 2008 

downturn. However, the demand for aluminum in emerging economies is likely to increase more 

rapidly in the near future (Bray, 2011, 5.7). Table 13 shows that in 2010 aluminum exports were 

heading back towards their 2008 level, and this trend seems likely to continue.
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3. Impact Results

Section 2 provides information on the entire Secondary Aluminum industry. In this 

section, we provide the economic and small business impacts associated with the proposed rule. 

This analysis is focused on those businesses that will incur costs associated with this proposal. 

Based on information in the cost memo, there are 28 parent companies that are expected 

to incur costs associated with this proposed rule. Nine of these companies have fewer than 750 

employees, and thus are small businesses according to the Small Business Administration (SBA) 

size standards for the predominant NAICS code for companies subject to this rule (331314). 

The total annualized costs (TAC) of the rule for each parent owner company, which 

includes the annualized control, monitoring and recordkeeping costs as taken from the cost 

memo prepared for US EPA3, are in Table 14. A negative TAC denotes an estimated cost 

savings to the firm associated with the proposed rule. Small businesses are identified in the 

table. The nationwide total annualized costs of this rule are $0.6 million. All costs are in 2011

dollars, and are based on the estimates presented in the cost memo for the proposed rule. 

Table 14. TAC for each Parent Owner

Parent Company TAC per Owner Small Business? 

(N= No, Y=Yes)

Number of 

Employees in 

2011

Alcoa $377600 N 59,000

Aleris 39000 N 6,500

Aluminum Recovery 

Technologies -12000 Y

20

Aluminum Shapes, 

LLC 33600 N 1,100

Reynolds Group 

Holdings Ltd.

(owner of Reynolds 

Foil) 56800 N 25,500

Metal Exchange 

Corporation (owner 

of Continental 

Aluminum and 

Electro Cycle) -24000 Y 201 to 500

 

3 U.S. Environmental Protection Agency, Office of Air Quality Planning and Standards. “Cost Estimate for January 

2012 Proposed Rule Changes to Secondary Aluminum NESHAP.” Prepared by RTI, Inc. for Rochelle Boyd, U.S. 

Environmental Protection Agency, Office of Air Quality Planning and Standards. January 25, 2012.
14

Hydro (owner of 

Hydro Aluminum 

Wells North 

America) 22600 N 23,000

J.L. French Corp. -12000 N 2,000

Jupiter Aluminum -36000 Y 200

JW Aluminum -48000 N 772

Kaiser Aluminum -12000 N 2,470

Logan Aluminum 22000 N 1,000

Metalico (owner of 

Metalico Aluminum 

Recovery) -12000 N 800

Toyota Tsusho 

(owner of Most, Inc.) -12000 N 31,081

Quanex (owner of 

Nichols Aluminum) -36000 N 2,340

Noranda 79600 N 2,400

Novelis 19000 N 11,000

Owl's Head Alloys -12000 Y 50-100

Rio Tinto (owner of 

Alcan) 110000 N 77,000

Ritchey Metals -12000 Y 80

Orkla ASA (owner of 

Sapa Extrusion) 56000 N 30,000

Scepter -48000 Y 250

Smelter Service -24000 Y 10

Southwire 22400 N 4,180

Superior Aluminum 

Alloys -12000 Y 5-9

Tennessee 

Aluminum 

Processors -24000 Y 180

Tredegar (owner of 

William L. Bonnell) 33000 N 2,000

Wise Metals Group 20000 N 1,000

 aA negative sign denotes a cost savings to the parent owner. 

Of the nine small businesses expected to incur costs associated with this rule, all of them 

are expected to experience negative costs (or cost savings), based on estimates from the cost 

memo. We do not provide impact estimates for these businesses, and the large businesses with 

cost savings, since these estimates are positive. These cost savings are a result of the change in 

proposal to allow facilities to switch furnace designations from Group 1 to Group 2. In the cost 

memo, EPA presumed that one-fourth of the 200 affected furnaces would switch. For each of 

the 50 furnaces that switch, the cost savings is estimated at $12,000 annually. This cost savings 

is a result of shutting off a furnace that is controlled and the following effects:
15

 Fan power is approximately 50 kW

 Control device shut off 4000 hours per year

 Electricity cost of 10 cents/kWh.

More information is available in the cost memo for the proposed rule. 

This analysis identified the businesses that will be affected by this rule and provides an 

analysis at a screening level to assist in determining whether this rule is likely to impose a 

significant economic impact on affected businesses. The analysis employed here is a “sales test” 

that computes the annualized 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. 

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.4 This is because revenues or sales data is commonly available 

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

is 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. 

Economic impact estimates are shown in Table 15 below. The table lists the ultimate 

parent companies impacted by the rule that have positive or negative costs, the costs of the rule 

for each company basis, the annual revenues for these companies, and then the impact to the 

company on a cost to sales basis. Revenues are for the ultimate parent owners, and are for 2011

to be consistent with the year for the cost estimates. Applying such a calculation yields the 

 

4 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. 
16

following results as shown below. Impacts are only shown for those companies estimated to 

experience a positive cost as a result of the proposed rule. 

Table 15. Economic Impacts to Parent Companies

Parent 

Company

TAC per 

Owner 

(2011

dollars)

Total Annual 

Revenues for 

Parent 

Owners 

Small 

Business? 

(N= No, 

Y=Yes)

Impact 

Estimates 

(Annualized 

Compliance 

Cost/Revenue

s in % Terms)

Reference for 

Economic 

Dataa

Alcoa $377600

$21,013,000,000

N

0.0018

http://www.sec.g

ov/Archives/edga

r/data/4281/0001

19312511039230/

d10k.htm

http://www.elkem

.com/eway/defaul

t.aspx?pid=242&t

rg=MainLeft_688

6&Main_7127=6

886:0:4,4130:1:0:

0:::0:0&MainLeft

_6886=6271:330

29::1:7126:1:::0:0

Aleris 39000

3,000,000,000

N

0.0013

Reference USA

http://www.aleris.

com/about-aleris

and 

http://www.forbes

.com/lists/2010/2

1/privatecompanies10_AlerisInternational_ID

N6.html

Aluminum 

Recovery 

Technologies

-12000

10,460,000

Y

<0b Reference USA

Aluminum 

Shapes, LLC

33600

175,000,000

N

0.019 Reference USA

Reynolds Group 

Holdings Ltd. 

(owner of 

Reynolds Foil)

56800

N

http://www.reyn
17

9,972,000,000 0.00057

oldsgroupholdin

gs.com/Financia

ls/2011/28Mar2

011-RGHL-

2010-Results-

Presentation.pdf

, p. 4.

Metal Exchange 

Corp. 

-24000

99,400,000

Y

<0

http://www.met

alexchangecorp.

com/cf/metal/S

NA.asp?asm=sn

a&tmp=C011&

x=714&sid=714

&t=About%20

Us and 

http://www.insi

deview.com/dir

ectory/metal-

exchange-

corporation

Hydro 22600

17,977,000,000

N

0.000126

http://www.hydr

o.com/en/Invest

or-

relations/Report

ing/2010/Key-

figures/

J.L. French 

Corp. 

-12000

550,447,000

N

<0 Reference USA

Jupiter 

Aluminum

-36000

50,000,000

Y

<0 Reference USA

JW Aluminum-48000

250,000,000 -

500,000,000

N

<0

http://www.zoo

minfo.com/com

pany/JW+Alum

inum+Company -33687486

Kaiser 

Aluminum 

-12000

1,079,100,000

N

<0 Reference USA

Logan 22000 1,140,000,000N 0.002 Reference USA

Metalico -12000 291,733,000N <0 Reference USA

Toyota Tsusho 

(owner of Most, 

Inc.)

-12000

54,839,454,000

N

<0

http://www.toyo

ta-

tsusho.com/engl

ish/ir/report/ann

ual/uploadfiles/s

ection03_E.pdf

Quanex-36000 798,314,000N <0 Reference USA

Noranda 79600 1,226,400,000N 0.0065 Reference USA

Hindalco N
18

(owner of 

Novelis) 

19000

12,800,000,000 0.00015

http://www.hind

alco.com/invest

ors/downloads/

Hindalco_Annu

al_Report_2009

-10.pdf

Owl's Head 

Alloys

-12000

22,550,000

Y

<0 Reference USA

Rio Tinto 

(owner of 

Alcan)

110000

14,324,000,000

N

0.00076

http://www.rioti

ntoalcan.com/E

NG/media/medi

a_releases_1717

.asp

Ritchey Metals -12000

80,080,000

Y

<0 Reference USA

Orkla ASA 56000

9,822,000,000

N

0.00056

http://markets.ft

.com/research/

Markets/Tearsh

eets/Financials?

s=ORK:OSL&s

ubview=Income

Statement&peri

od=a

Scepter -48000 54,700,000 Y <0 Reference USA

Smelter Service -24000

28,100,000

Y

<0 Reference USA

Southwire 22400 1,340,000,000 N 0.0018 Reference USA

Superior 

Aluminum 

Alloys

-12000

7,980,000

Y

<0 Reference USA

Tennessee 

Aluminum 

Processors

-24000

81,180,000

Y

<0 Reference USA

Tredegar 

(owner of 

William L. 

Bonnell)

33000

740,000,000

N

0.004

http://www.tred

egar.com

Wise Metals 

Group

20000

618,000,000

N

0.0032

http://www.usato

day.com/printedit

ion/news/201101

25/states25_st.art.

htm

a

Economic data includes revenues and employee size for each affected firm in 2011. 

b

<0 = impact of less than zero, since the costs for the firm will be less than zero (cost savings).
19

As shown in this table, no firm will experience an annualized compliance cost of greater 

than 0.02 percent of its sales, according to this analysis, as a result of this proposed rule. 

It should also be noted that this analysis does not presume any incidence of the costs on 

the consumers of secondary aluminum and other products made by these companies. Thus, no 

estimate of the impact of this rule on secondary aluminum consumers, for intermediate or enduse, is included in this report. However, it should be noted that available estimates show that the 

price elasticity of demand for secondary aluminum is -1.05, and the price elasticity of supply for 

secondary aluminum is 0.6.6 Based on this information, one can conclude that demand will 

respond 1:1 with a change in secondary lead price, and that supply is inelastic (i.e., will respond 

less than 1:1) with a change in secondary lead price. Thus, the direct impact of this rule appears 

quite minor, and thus it is reasonable to infer that the impact on secondary aluminum consumers 

from this rule should also be minor. The TAC is taken from the cost memorandum mentioned 

earlier that was prepared by U.S. EPA for the proposed rule and in that memorandum can be 

found more information on the cost analysis. 

 

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

Discussion Paper 08-37). Http://Www.Rff.Org/Publications/Pages/Publicationdetails.Aspx?. 

Publicationid=20680. Accessed August 2009. Table 8.A.6.

6

Broda, C., N. Limao, and D. Weinstein. 2008a. “Export Supply Elasticities.” 

http://faculty.chicagobooth.edu/christian.broda/website/research/unrestricted/TradeElasticities/TradeElastic

ities.html. Accessed September 2009.