Document ID: EPA-HQ-OAR-2010-0544-0163
Agency: epa
Document Type: Supporting & Related Material
Title: 
Posted Date: 2012-02-14T05:00Z

Economic and Small Business Impact Analysis for the Proposed Secondary Aluminum NESHAP
      1.  Background
This report is the economic and small business impact analysis for the proposed Secondary Aluminum NESHAP, which will be signed as per a court-ordered schedule on January 31, 2012.   Implementation of the rule is required by 3 years after promulgation of the final rule, which will take place under court-order on October 30, 2012.  This proposal includes amendments to the existing NESHAP that was promulgated in 1999 to correct and clarify rule requirements and provisions. These proposed amendments would:
   *    Add work practice standards for periods of startup and shutdown for some processes;
   *    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 specifications for scrap cleaning processes; and 
   *    Make technical corrections and clarifications to the applicability, definitions, operating, monitoring, and performance testing requirements.
      Details on the 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 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 code[1]
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.
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).
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>
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 Recovery[a]
                                     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
[a]Metallic 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.
2.1	Key Statistics
The Secondary Smelting industry's shipments (output) expanded by 35 percent from 2005 to 2007. Unfortunately, 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).
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 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).

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.
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.  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).
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 1-9 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)
                          Herfindahl-Hirschman 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).
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 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.

      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 directly impacted by this proposal.  
         
         Based on information in the cost memo, there are 29 parent companies impacted by this proposed rule.  Ten 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 affected by 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 EPA, are in Table 2.  Small businesses are identified in the table.  The nationwide total annualized costs of this rule are $0.6 million.  All costs are in 2010 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 2010
Alcoa
                                                                       $354,000
N
59,000
Aleris 
                                                                         36,800
N
6,500
Aluminum Recovery Technologies
                                                                        -12,000
Y
20
Aluminum Shapes, LLC
                                                                         22,200
N

1,100
Reynolds Group Holdings Ltd.
 (owner of Reynolds Foil)
                                                                         55,000
N

25,500
Metal Exchange Corporation (owner of Continental Aluminum and Electro Cycle)
                                                                        -24,000
Y

201 to 500
Hydro (owner of Hydro Aluminum Wells North America)
                                                                         22,600
N

23,000
J.L. French Corp. 
                                                                        -12,000
N
2,000
Jupiter Aluminum
                                                                        -35,600
Y
200
JW Aluminum
                                                                        -46,600
N
772
Kaiser Aluminum 
                                                                        -12,000
N

2,470
Logan Aluminum
                                                                         22,200
N
1,000
Metalico (owner of Metalico Aluminum Recovery)
                                                                        -12,000
N

800
Toyota Tsusho (owner of Most, Inc.) 
                                                                        -12,000
N

31,081
Quanex (owner of Nichols Aluminum)
                                                                        -35,600
N

2,340
Noranda
                                                                         79,600
N
2,400
Novelis 
                                                                         20,400
N
11,000
Owl's Head Alloys
                                                                        -12,000
Y
50-100
Recycling Services of Ind. (or Newco Metal Processing)
                                                                            400
Y

50
Rio Tinto (owner of Alcan)
                                                                        111,600
N

77,000
Ritchey Metals
                                                                        -12,000
Y
80
Orkla ASA (owner of Sapa Extrusion) 
                                                                         55,000
N

30,000
Scepter
                                                                        -48,000
Y
250
Smelter Service 
                                                                        -24,000
Y
10
Southwire
                                                                         21,600
N
4,180
Superior Aluminum Alloys
                                                                        -12,000
Y

5-9
Tennessee Aluminum Processors
                                                                        -24,000
Y

180
Tredegar (owner of William L. Bonnell)
                                                                         33,000
N

2,000
Wise Metals Group
                                                                         20,000
N
1,000
           [a]A negative sign denotes a cost savings to the affected owner. 
	Of the ten small businesses affected by this rule, nine 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:
   * 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.  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 3 below.  The table lists the ultimate parent companies impacted by the rule that have positive 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 2010 to be consistent with the year for the cost estimates.  Applying such a calculation yields the 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.  Impacts to Affected Parent Companies
Parent Company
TAC per Owner (2010 dollars)
Total Revenues for Parent Owners in 2010
Small Business? (N= No, Y=Yes)
Impact Estimates (Annualized Compliance Cost/Revenues in % Terms)
Reference for Economic Data[a]
Alcoa
                                                                       $372,800

$21,013,000,000
N

0.0018
http://www.sec.gov/Archives/edgar/data/4281/000119312511039230/d10k.htm 
http://www.elkem.com/eway/default.aspx?pid=242&trg=MainLeft_6886&Main_7127=6886:0:4,4130:1:0:0:::0:0&MainLeft_6886=6271:33029::1:7126:1:::0:0 

Aleris 
                                                                         36,800

3,000,000,000
N

0.0013
Reference USA
http://www.aleris.com/about-aleris and http://www.forbes.com/lists/2010/21/private-companies-10_Aleris-International_IDN6.html 

Aluminum Recovery Technologies
                                                                        -12,000

10,460,000
Y

<0[b]

Reference USA
Aluminum Shapes, LLC
                                                                         22,200

175,000,000
N

0.013

Reference USA
Reynolds Group Holdings Ltd. (owner of Reynolds Foil)
                                                                         55,000

9,972,000,000
N

0.00055

http://www.reynoldsgroupholdings.com/Financials/2011/28Mar2011-RGHL-2010-Results-Presentation.pdf , p. 4.
Metal Exchange Corp. 
                                                                        -24,000

99,400,000
Y

<0

http://www.metalexchangecorp.com/cf/metal/SNA.asp?asm=sna&tmp=C011&x=714&sid=714&t=About%20Us and http://www.insideview.com/directory/metal-exchange-corporation 
Hydro 
                                                                         22,600

17,977,000,000
N

0.000126
http://www.hydro.com/en/Investor-relations/Reporting/2010/Key-figures/ 
J.L. French Corp. 
                                                                        -12,000

550,447,000
N

<0

Reference USA
Jupiter Aluminum
                                                                        -35,600

50,000,000
Y

<0

Reference USA
JW Aluminum
                                                                        -46,600

250,000,000 -500,000,000
N

<0
http://www.zoominfo.com/company/JW+Aluminum+Company-33687486 
Kaiser Aluminum 
                                                                        -12,000

1,079,100,000
N

<0

Reference USA
Logan
                                                                         22,200
1,140,000,000
N
0.0019
Reference USA
Metalico 
                                                                        -12,000
291,733,000
N
<0
Reference USA
Toyota Tsusho (owner of Most, Inc.)
                                                                        -12,000

54,839,454,000
N

<0

http://www.toyota-tsusho.com/english/ir/report/annual/uploadfiles/section03_E.pdf 
Quanex
                                                                        -35,600
798,314,000
N
<0
Reference USA
Noranda
                                                                         79,600
1,226,400,000
N
0.0065
Reference USA
Hindalco (owner of Novelis) 
                                                                         20,400

12,800,000,000
N

0.00016

http://www.hindalco.com/investors/downloads/Hindalco_Annual_Report_2009-10.pdf 
Owl's Head Alloys
                                                                        -12,000

22,550,000
Y

<0

Reference USA

Recycling Services of Ind. (or Newco Metal Processing)
                                                                               
                                                                               
                                                                               
                                                                               
                                                                            400

26,150,000

Y

0.0015

Reference USA
Rio Tinto 
                                                                        111,600

14,324,000,000
N

0.00078
http://www.riotintoalcan.com/ENG/media/media_releases_1717.asp
Ritchey Metals
                                                                        -12,000

80,080,000
Y

<0

Reference USA
Orkla ASA  
                                                                         55,000

9,822,000,000
N

0.00056
http://markets.ft.com/research/Markets/Tearsheets/Financials?s=ORK:OSL&subview=IncomeStatement&period=a 
Scepter
                                                                        -48,000
54,700,000
Y
<0
Reference USA
Smelter Service 
                                                                        -24,000

28,100,000
Y

<0

Reference USA
Southwire
                                                                         21,600
1,340,000,000
N
0.0016
Reference USA
Superior Aluminum Alloys
                                                                        -12,000

7,980,000
Y

<0

Reference USA
Tennessee Aluminum Processors
                                                                        -24,000

81,180,000
Y

<0

Reference USA
Tredegar (owner of William L. Bonnell)
                                                                         33,000

740,000,000
N

0.004

http://www.tredegar.com

Wise Metals Group
                                                                         20,000

618,000,000
N

0.0032

http://www.usatoday.com/printedition/news/20110125/states25_st.art.htm 

[a]Economic data includes revenues and employee size for each affected firm in 2010.  
[b]<0 = impact of less than zero, since the costs for the firm will be less than zero (cost savings).
      From this table, no affected 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 end-use, is included in this report.  However, it should be noted that available estimates show that the price elasticity of demand for secondary aluminum is -1.0, and the price elasticity of supply for secondary aluminum is 0.6.  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.