Document ID: EPA-HQ-OW-2002-0033-0228
Agency: epa
Document Type: Supporting & Related Material
Title: 
Posted Date: 2003-05-13T04:00Z

MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
5:
Facility
Impact
Analysis
Chapter
5:
Facility
Impact
Analysis
INTRODUCTION
The
facility
impact
analysis
assesses
whether
the
MP&
M
effluent
guidelines
are
likely
to
impose
severe
or
moderate
economic
and
financial
impacts
on
MP&
M
facilities.
EPA
undertook
the
facility
impact
analysis
to
aid
in
assessing
the
rule's
economic
achievability.
Severe
im
pacts
are
facility
closures
and
the
associated
losses
in
jobs,
earnings,
and
output
at
facilities
that
close
due
to
the
rule.
EPA
also
assessed
moderate
economic
impacts
to
support
its
evaluation
of
regulatory
options
and
to
understand
better
the
rule's
economic
impacts.
Moderate
impacts
are
adverse
changes
in
a
facility's
financial
position
that
are
not
threatening
to
its
short­
term
viability.

The
options
considered
for
regulation
would
have
affected
three
major
categories
of
MP&
M
facilities:
privately­
owned,

railroad
line
maintenance,
and
government­
owned
facilities.

EPA
developed
separate
analytic
methodologies
to
assess
economic
and
financial
impacts
for
each
type
of
facility:

1.
Private
MP&
M
facilities:
This
group
includes
all
privately­
owned
facilities
that
do
not
perform
railroad
line
maintenance.
This
major
category
of
facilities
operates
in
various
subcategories
and
includes
private
businesses
in
a
wide
range
of
sectors
or
industries,
including
facilities
that
manufacture
and
rebuild
railroad
equipment.
Only
facilities
that
repair
railroad
track
and
equipment
along
the
railroad
line
are
excluded.
There
are
39,248
private
MP&
M
facilities
other
than
railroad
line
maintenance
facilities
nationally
that
may
be
affected
by
the
rule,
representing
89.5
percent
of
the
43,858
facilities
that
discharge
process
wastewater
from
MP&
M
activities.
CHAPTER
CONTENTS
5.1
.................
..............
5­
2
5.2
odology
.................
..............
5­
2
5.2.1
ng
Engineering
Compliance
Costs
and
Survey
Financial
Data
to
Current
Year
Dollar
Values
.................
...............
5­
3
5.2.2
Market­
level
Impacts
and
Cost
Pass­
Through
Analysis
.................
.............
5­
4
5.2.3
......
5­
5
5.2.4
Maintenance
Facilities
..............
5­
12
5.2.5
t
Measures
for
Government­
Owned
Facilities
.................
............
5­
12
5.3
.................
.................
.
5­
14
5.3.1
.................
...
5­
14
5.3.2
.................
......
5­
15
5.3.3
iew
of
Impacts
.................
..
5­
16
5.3.4
for
Indirect
Dischargers
..........
5­
18
5.3.5
for
Direct
Dischargers
...........
5­
19
5.3.6
............
5­
20
5.3.7
Government­
Owned
Facilities
.
.
5­
21
Glossary
.................
.................
...
5­
25
Acronyms
.................
.................
..
5­
26
References
.................
.................
.
5­
27
Data
Sources
Meth
Converti
Impact
Measures
for
Private
Facilities
Impact
Measures
for
Railroad
Line
Impac
Results
Baseline
Closures
Price
Increases
Overv
Results
Results
Results
for
Private
Facilities
Results
for
2.
Railroad
line
maintenance
facilities:
Railroad
line
maintenance
facilities
maintain
and
repair
railroad
track
and
vehicles.
EPA
administered
a
separate
economic
and
financial
survey
to
these
facilities
and
applied
a
different
impact
analysis
methodology
than
that
used
for
other
private
facilities.
This
methodology
used
the
same
impact
tests
as
used
for
other
private
facilities
but
applied
these
tests
to
the
aggregate
of
maintenance
facilities
owned
by
a
single
railroad
company
instead
of
to
individual
facilities.
There
are
826
railroad
line
maintenance
facilities
in
the
analysis,

representing
1.9
percent
of
all
facilities
in
the
analysis.

3.
Government­
owned
facilities:
Government­
owned
facilities
include
MP&
M
facilities
operated
by
municipalities,
state
agencies
and
other
public
sector
entities
such
as
state
universities.
Many
of
these
facilities
repair,
rebuild,
and
maintain
buses,
trucks,
cars,
utility
vehicles
(
e.
g.,
snow
plows
and
street
cleaners),
and
light
machinery.
Government­
owned
facilities
operate
in
two
major
subcategories:
General
Metals
and
Oily
Waste.

There
are
3,785
government­
owned
facilities
in
the
analysis,
representing
8.6
percent
of
the
total.

The
specific
methodology
used
to
assess
impacts
differs
for
each
of
the
three
types
of
MP&
M
facilities.
In
each
case,
EPA
established
thresholds
for
measures
of
financial
performance
and
compared
performance
before
and
after
compliance
with
each
regulatory
option
to
these
thresholds.

This
chapter
describes
the
methodology
used
to
assess
facility­
level
economic
impacts
for
the
three
types
of
facilities,
and
then
presents
the
results
of
the
analyses.

5­
1
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
5:
Facility
Impact
Analysis
5.1
DATA
SOURCES
The
economic
impact
analyses
rely
on
data
provided
in
the
financial
portion
of
the
detailed
questionnaires
distributed
to
MP&
M
facilities
by
EPA
under
the
authority
of
Section
308
of
the
Clean
Water
Act.
The
surveys
were
conducted
in
two
phases,
covering
different
MP&
M
industry
sectors
in
each
phase.
The
Phase
I
survey
covered
seven
industry
sectors
and
reported
data
for
respondent s
fiscal
years
1987
to
1989.
The
Phase
II
survey
covered
an
additional
ten
industry
sectors
(
all
remaining
MP&
M
sectors
except
Iron
and
Steel,
which
was
the
subject
of
a
separate
survey)
and
reported
data
for
fiscal
years
1994
to
1996.1
EPA
administered
each
survey
to
a
random
stratified
sample
of
facilities
and
assigned
each
facility
a
sample
weight
based
on
the
stratification
process
and
the
number
of
facilities
surveyed,
so
that
sample­
weighted
results
would
represent
all
potentially­
affected
MP&
M
facilities
at
the
national
level.
The
results
of
the
impact
analyses
for
the
sample
facilities
were
extrapolated
to
the
national
level
using
these
facility
sample
weights.

The
survey
financial
data
for
private
businesses
included
three
years
of
facility
and
parent
firm
income
statements
and
balance
sheets,
and
the
composition
of
revenues
by
MP&
M
business
sector
to
which
the
facility's
goods
and
services
are
sold.

Data
for
railroad
line
maintenance
facilities
came
from
a
modified
version
of
the
Phase
II
survey
administered
to
railroad
operating
companies.
The
questionnaire
was
modified
because
railroad
operating
companies
generally
do
not
monitor
financial
performance
or
collect
financial
data
at
the
facility
level
for
their
numerous
line
maintenance
facilities.
The
railroad
operating
companies
reported
the
number
of
line
maintenance
facilities
in
each
operating
unit,
and
provided
both
operating
company
and
parent
firm
financial
data.
They
also
provided
technical
data
for
each
line
maintenance
facility.

Data
for
facilities
in
the
Iron
and
Steel
sector
came
from
a
1997
Section
308
survey
of
iron
and
steel
facilities.
This
survey
requested
financial
data
generally
similar
to
that
collected
by
the
MP&
M
surveys,
including
income
statements
and
balance
sheets
for
fiscal
years
1995­
1997
for
the
facility
and
the
parent
firm.

Government­
owned
MP&
M
facilities
provided
data
in
the
Phase
II
Section
308
survey
of
municipal
and
other
government
agency
facilities.
This
survey
requested
information
on
fiscal
year
1996
sources
and
amounts
of
revenue
and
debt
levels
for
both
the
government
entity
and
their
MP&
M
facilities,
and
demographic
data
for
the
population
served
by
the
government
entity.

In
addition
to
the
survey
data,
a
number
of
secondary
sources
were
used
to
characterize
economic
and
financial
conditions
in
the
industries
subject
to
the
MP&
M
effluent
guidelines.
Secondary
sources
used
in
the
analyses
include:

 
Department
of
Commerce
economic
census
and
survey
data,
including
the
Censuses
of
Manufactures,
Annual
Surveys
of
Manufactures,
and
international
trade
data;

 
the
Benchmark
Input­
Output
Tables
of
the
United
States,
published
by
the
U.
S.
Department
of
Commerce's
Bureau
of
Economic
Analysis;

 
price
index
series
from
the
Bureau
of
Labor
Statistics,
Department
of
Labor;

 
U.
S.
Industry
and
Trade
Outlook,
published
by
McGraw­
Hill
and
the
U.
S.
Department
of
Commerce;
and
 
industry
trade
publications.

5.2
METHODOLOGY
The
facility
impact
analysis
starts
with
compliance
cost
estimates
from
the
EPA
engineering
analysis
and
then
calculates
how
these
compliance
costs
would
affect
the
financial
condition
of
MP&
M
facilities.
2
EPA
first
eliminated
from
the
analysis
those
facilities
showing
materially
inadequate
financial
performance
in
the
baseline,
that
is,
in
the
absence
of
the
rule.
EPA
judged
these
facilities,
which
are
referred
to
as
baseline
closures,
to
be
at
substantial
risk
of
financial
failure
regardless
of
any
1
Appendix
A
provides
a
detailed
description
of
the
surveys
and
describes
how
EPA
combined
data
from
different
surveys.

2
EPA
made
several
changes
in
the
facility
impact
methodology
between
proposal
and
final
regulation.
These
changes,
which
to
a
large
degree
address
comments
on
the
proposal
impact
methodology,
are
documented
in
the
Notice
of
Data
Availability
(
reference).

5­
2
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
5:
Facility
Impact
Analysis
financial
burdens
that
may
result
from
the
MP&
M
rule.
Second,
for
the
remaining
facilities,
EPA
evaluated
how
compliance
costs
would
likely
affect
facility
financial
health.
In
this
analysis
of
compliance
cost
impact,
EPA
accounted
for
potential
price
increases
that
may
help
facilities
recover
compliance
costs.
EPA s
estimate
of
potential
price
increases
was
based
on
a
cost
pass­
through
analysis,
which
used
historical
input
and
output
price
changes
for
the
years
1982
through
1991
to
estimate
how
prices
might
change
in
response
to
regulation­
induced
production
cost
increases.
A
facility
is
identified
as
a
regulatory
closure
if
it
would
have
operated
under
baseline
conditions
but
would
fall
below
an
acceptable
financial
performance
level
when
subject
to
the
new
regulatory
requirements.

EPA
also
identified
private
MP&
M
facilities
that
would
likely
incur
moderate
impacts
from
the
rule
but
that
are
not
expected
to
close
as
a
result
of
the
rule.
The
test
of
moderate
impacts
examined
two
financial
ratios
pre­
tax
return
on
assets
and
interest
coverage
ratio
calculated
on
a
baseline
and
post­
compliance
basis.
Incremental
moderate
impacts
are
attributed
to
the
rule
if
both
financial
ratios
exceeded
threshold
values
in
the
baseline
(
i.
e.,
no
moderate
impacts
in
the
baseline),
but
at
least
one
financial
ratio
fell
below
the
threshold
value
in
the
post­
compliance
case.

5.2.1
Converting
Engineering
Compliance
Costs
and
Survey
Financial
Data
to
Current
Year
Dollar
Values
The
facility
survey
data
underlying
the
facility
financial
impact
analysis
are
based
on
the
periods
1987­
1989
(
Phase
I)
and
1994­
1996
(
Phase
II).
The
estimates
of
costs
for
complying
with
the
MP&
M
regulation
were
developed,
however,
in
dollars
of
the
year
1996,
the
baseline
year
of
the
MP&
M
regulatory
analysis.
3
To
ensure
consistent
impact
analyses,
EPA
aligned
facility
financial
data
and
compliance
cost
estimates
in
dollars
of
the
same
year.
In
addition,
for
understanding
the
significance
of
the
rule s
potential
costs
in
today s
economy,
EPA
further
brought
all
dollar
values
forward
to
2001.
EPA
used
the
following
procedures
to
perform
these
adjustments.

EPA
used
the
Construction
Cost
Index
(
CCI)
to
convert
compliance
cost
estimates
into
2001
constant
dollar
equivalents.

The
CCI
is
a
price
index
that
engineers
often
use
to
estimate
costs
associated
with
building,
installing,
and
operating
waste
treatment
equipment
and
facilities.
The
CCI
includes
the
costs
of
labor
and
building
materials
in
20
major
cities.
Table
5.1
shows
CCI
values
from
1996
to
2001.

Table
5.1:
nstruction
Cost
Index
Year
Value
%
Change
1996
5620
1997
5825
3.6%

1998
5920
1.6%

1999
6060
2.4%

2000
6221
2.7%

2001
6342
1.9%
Co
Source:
Engineering
News­
Record
EPA
used
the
Producer
Price
Index
(
PPI)
to
bring
MP&
M
survey
financial
data
to
the
current
year.
The
PPI
measures
average
changes
in
selling
prices
that
domestic
producers
receive
for
their
output.
4
EPA
used
sector­
specific
PPI
averages
to
3
The
engineering
cost
estimates
are
described
in
the
Technical
Development
Document
accompanying
this
rule.

4
EPA
used
the
PPI
to
bring
all
financial
statement
values
forward
to
2001.
EPA
understands
that
the
PPI
is
an
output
price
index
and
that
operating
statement
costs
and
balance
sheet
values
may
not
change
over
time
in
the
same
way
as
output
prices
(
and
revenue).

However,
in
adjusting
financial
statement
values
from
the
original
survey
data
years
to
the
current
year,
EPA s
purpose
is
to
bring
the
statement
values
forward
to
the
present
while
preserving
the
cost
and
financial
structure
relationships
as
reflected
in
the
original
income
statements
and
balance
sheets.
Accordingly,
use
of
a
single
index
is
appropriate
for
this
adjustment
and
EPA
judged
the
industry­
specific
PPI
values
as
a
better
basis
for
this
adjustment
than
other
non­
industry
specific
measures
of
inflation.

5­
3
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
5:
Facility
Impact
Analysis
update
financial
data
from
Phase
I
and
Phase
II
survey
respondents
to
1996,
the
base
year
of
the
analysis.
EPA
applied
an
aggregate
PPI
to
update
from
1996
to
2001
dollars.

Table
5.2
shows
aggregate
PPI
values
for
all
finished
goods.
Prices
increased
by
6.6
(
135.7/
127.3)
percent
from
1996
to
2001,
and
by
32.3
percent
from
1987
to
2001
(
135.7/
102.6).

Table
5.2:
Producer
Price
Index
Industrial
Commodities
Year
Value
%
Change
1987
102.6
1988
106.3
3.6%

1989
111.6
5.0%

1990
115.8
3.8%

1991
116.5
0.6%

1992
117.4
0.8%

1993
119.0
1.4%

1994
120.7
1.4%

1995
125.5
4.0%

1996
127.3
1.4%

1997
127.7
0.3%

1998
124.8
­
2.3%

1999
126.5
1.4%

2000
134.8
6.6%

2001
135.7
0.7%

Source:
Bureau
of
Labor
Statistics
5.2.2
Market­
level
Impacts
and
Cost
Pass­
Through
Analysis
Increased
costs
from
the
regulation
can
be
expected
to
affect
industry­
level
prices
and
output.
Changes
in
prices
and
output
in
turn
determine
the
distribution
of
economic
impacts
among
directly­
and
indirectly­
affected
industries
and
their
customers
and
suppliers.
The
facilities
and
industries
directly
affected
by
the
final
rule
might
ultimately
experience
little
adverse
impact,
for
example,
if
they
are
able
to
recover
most
or
all
of
their
added
costs
by
raising
prices
to
their
customers
or
by
lowering
the
prices
paid
to
their
suppliers
and
without
a
material
reduction
on
the
production
quantity
sold.
Some
regulated
facilities
and
companies
could
even
be
better
off
financially
as
a
result
of
the
rule,
if
they
benefit
from
industry­
wide
product
price
increases
and
incur
no
or
relatively­
low
compliance
costs
(
e.
g.,
if
they
already
have
treatment
in
place).
Understanding
impacts
at
the
industry
level
is
therefore
important
to
understanding
who
bears
the
impacts
of
the
rule.

The
MP&
M
effluent
guidelines
affect
facilities
in
a
wide
range
of
industries,
and
some
of
those
industries
produce
a
diverse
slate
of
products
that
are
sold
in
multiple
industrial
sectors.
Detailed
partial
equilibrium
modeling
of
product­
level
market
dynamics
in
each
of
the
affected
industries
was
therefore
not
feasible.
EPA
instead
used
a
combination
of
quantitative
and
qualitative
methods
to
estimate
a
proportion
of
compliance
costs
that
might
be
recovered
through
price
increases
in
each
MP&
M
sector.
This
cost
pass­
through
analysis
provided
sector­
specific
coefficients
that
were
applied
to
total
compliance
5­
4
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
5:
Facility
Impact
Analysis
costs
in
each
sector
to
estimate
percentage
changes
in
prices
and
revenues.
EPA
then
evaluated
facility­
level
impacts
5
assuming
that
all
analyzed
facilities
in
each
sector
benefit
from
the
same
percentage
increase
in
prices
and
revenues.

The
estimated
cost
pass­
through
potential
for
each
sector
reflects
an
econometric
analysis
of
historical
pricing
and
cost
trends
in
each
MP&
M
industry
sector,
coupled
with
a
qualitative
market
structure
analysis.
The
market
structure
factors
include:

 
market
power
based
on
horizontal
and
vertical
integration;

 
extent
of
competition
from
foreign
suppliers
(
in
both
domestic
and
export
markets);

 
barriers
to
competition,
as
indicated
by
above­
normal,
risk­
adjusted
profitability;
and
 
the
long­
term
growth
trend
in
the
industry.

EPA
developed
cost
pass­
through
coefficients
that
indicate
the
percentage
of
compliance
costs
that
EPA
expects
firms
subject
6
to
regulation
to
recover
from
customers
through
increased
revenues.
This
approach
may
either
overstate
or
understate
the
true
changes
in
revenue
for
any
one
particular
facility,
depending
on
the
diversity
of
products
produced
by
the
facility
and
the
percentage
of
competitors
in
each
product
market
that
incur
compliance
costs.

This
approach
to
estimating
market­
level
adjustments
is
a
simplification
because
it
does
not
simultaneously
estimate
changes
in
prices
and
output.
Instead,
EPA
estimated
price
changes
and
then
estimated
changes
in
output
based
on
predicted
closures,

taking
into
account
the
effect
of
the
predicted
price
increases
on
facilities'
financial
performance.
It
is
difficult
to
assess
how
this
simplified
approach
might
affect
the
estimated
economic
impacts
of
the
rule.
However,
EPA
does
not
believe
that
the
overall
impact
analysis
results
are
highly
sensitive
to
the
potential
biases
introduced
by
this
approach.

5.2.3
Impact
Measures
for
Private
Facilities
a.
Test
of
severe
impacts
The
analysis
of
severe
impacts
estimates
the
number
of
facilities
that
could
potentially
close
due
to
the
regulation.
EPA
predicted
that
a
facility
will
close
if
compliance
costs
cause
the
facility's
overall
financial
performance
and
resulting
implied
financial
value
to
fall
below
a
specified
threshold
level.
Compliance
costs
are
determined
by
the
type
and
number
of
processes
that
a
facility
performs,
the
characteristics
of
its
wastewaters,
and
the
level
of
treatment
performed
in
the
baseline.

EPA
took
the
number
and
type
of
processes
and
pollutants
produced
into
account
when
subcategorizing
the
industry.

However,
EPA
was
not
able
to
link
estimated
compliance
costs
to
specific
products.
Nor
was
EPA
able
to
link
facility
financial
performance
to
specific
products.
It
was
therefore
not
possible
to
conduct
an
impacts
analysis
at
the
product
level.

In
particular,
the
analysis
does
not
consider
output
reductions
short
of
closure
for
example,
closing
one
of
several
production
lines/
processes
or
continuing
to
produce
the
same
products
at
a
reduced
level.
It
is
quite
possible
that
a
facility
with
no
or
relatively
low
compliance
costs
for
most
processes
could
choose
to
out­
source
products
made
using
a
process
that
had
significant
compliance
costs
associated
with
it,
instead
of
performing
the
process
in­
house.
This
is
particularly
true
if
it
is
a
process
that
is
performed
infrequently.
It
is
also
possible
that
firms
with
multiple
facilities
could
consolidate
similar
processes
at
individual
facilities
to
reduce
their
compliance
costs.
These
situations
are
not
considered
in
this
economic
impact
analysis.
Numerous
compliance
responses
are
available
to
firms
and
facilities
that
EPA
is
unable
to
model.
In
addition,
the
analysis
of
severe
impacts
does
not
attempt
to
forecast
future
business
circumstances
for
a
facility
and
thus
does
not
account
for
potential
improvements
in
business
outlook
that
might
strengthen
a
facility s
ability
to
afford
compliance
outlays
and
thus
prevent
a
potential
closure
decision.
Because
of
these
unknowns,
estimated
severe
impacts
are
worst
case
and
are
likely
to
be
overstated.
In
addition,
the
relationship
between
the
compliance
costs
associated
with
the
specific
processes
performed,
specific
products
made
from
these
processes,
and
the
multiple
industrial
sectors
to
which
these
products
are
sold,
is
unknown
and
can
not
be
accounted
for
in
this
analysis.

5
EPA
also
performed
an
analysis
in
which
complying
facilities
are
assumed
to
pass
none
of
their
compliance
costs
through
to
consumers
(
zero­
cost
pass­
through
analysis).
The
results
of
this
analysis
are
in
the
in
the
Record
to
the
final
rule
(
see
Section
25.3.2,
DCN
37070).

6
Appendix
B
provides
a
detailed
description
of
the
cost
pass­
through
analysis.

5­
5
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
5:
Facility
Impact
Analysis
The
assessment
of
severe
impacts
for
MP&
M
private
facilities7
is
based
on
the
change
in
the
facility s
estimated
business
value,
as
determined
from
a
discounted
present
value
analysis
of
baseline
cash
flow
and
the
change
in
cash
flow
resulting
from
regulatory
compliance.
If
the
estimated
discounted
cash
flow
value
of
the
facility
is
positive
before
considering
the
effects
of
regulatory
compliance
but
becomes
negative
as
a
result
of
compliance
outlays,
then
the
facility
is
considered
a
regulatory
closure.
In
this
impact
test,
the
estimated
ongoing
business
value
of
the
facility
is
compared
with
a
threshold
value
of
zero
for
the
closure
decision:
as
long
as
the
discounted
cash
flow
value
of
the
facility
is
greater
than
zero,
the
business
is
earning
its
cost
of
invested
capital
and
continuation
of
the
business
is
warranted.
If
the
discounted
cash
flow
value
of
the
facility
is
less
than
zero
in
the
baseline
or
becomes
less
than
zero
as
a
result
of
compliance
outlays,
then
the
business
will
not
earn
its
cost
of
invested
capital
and
the
business
owners
will
be
better
off
financially
by
terminating
the
business.
As
noted
in
earlier
discussion,
facilities
for
which
EPA
estimated
a
negative
baseline
value
were
considered
baseline
closures
and
were
not
tested
for
additional
adverse
impacts
from
regulatory
compliance.

In
an
alternative,
theoretically
more
accurate,
formulation
of
this
concept,
business
owners
would
compare
the
discounted
cash
flow
value
of
the
facility
with
the
value
that
the
facility s
assets
would
bring
in
liquidation.
In
this
case,
the
estimated
ongoing
business
value
would
be
compared
with
a
value
that
may
be
different
from
zero:
liquidation
value
could
be
positive
or
negative.
When
liquidation
value
is
positive,
business
owners
might
benefit
financially
by
terminating
a
business
and
seeking
its
liquidation
value
even
when
the
ongoing
business
value
is
positive
but
less
than
the
estimated
liquidation
value.
With
negative
liquidation
value
which
generally
would
result
from
business
termination
liabilities
(
e.
g.,
site
clean­

up)
the
opposite
result
could
occur:
business
owners
may
find
it
financially
advantageous
to
remain
in
business
even
though
the
business
earns
less
than
its
cost
of
invested
capital
if
the
liquidation
value
of
the
business
is
 
more
negative ,
and
thus
less
in
value,
than
the
ongoing
business
based
on
the
discounted
cash
flow
analysis.
EPA
attempted
to
implement
this
alternative
impact
test
formulation.
However,
liquidation
values
were
unavailable
for
over
75
percent
of
sample
facilities.

Moreover,
EPA
judges
that
the
liquidation
value
estimates
are
substantially
speculative
and
subject
to
considerable
error.
For
these
reasons,
EPA
decided
against
using
liquidation
value
for
comparison
with
ongoing
business
value
in
the
closure
test.

The
cash
flow
concept
used
in
calculating
ongoing
business
value
for
the
closure
analysis
is
free
cash
flow
available
to
all
capital.
Free
cash
flow
is
the
cash
available
to
the
providers
of
capital
both
equity
owners
and
creditors
on
an
after­
tax
basis
from
business
operations,
and
takes
into
account
the
cash
required
for
ongoing
replacement
of
the
facility s
capital
equipment.
Free
cash
flow
is
discounted
at
an
estimated
after­
tax
total
cost
of
capital
to
yield
the
estimated
business
value
of
the
facility.
Details
of
the
calculation
of
free
cash
flow
and
the
discounting
of
free
cash
flow
to
yield
the
facility s
estimated
value
are
explained
in
the
following
sections.

 
Calculation
of
Baseline
Free
Cash
Flow
and
Performance
of
Baseline
Closure
Test
Calculation
of
baseline
free
cash
flow
and
performance
of
the
baseline
closure
test
involved
the
following
steps:

1.
Average
survey
income
statement
data
over
response
years
and
convert
to
2001
dollars:
EPA
averaged
income
statement
data
over
the
years
for
which
survey
respondents
reported
data.
For
example,
if
a
facility
reported
income
statement
data
for
1995,
1996,
and
1997,
then
a
simple
average
was
calculated
for
the
three
reported
years.
Reported
values
were
brought
forward
from
the
initial
reporting
period
to
1996
using
MP&
M
sector­
specific
PPI
adjustment
factors
and
then
from
1996
to
2001
using
an
aggregate
PPI
value
as
described
above.

2.
Calculate
after­
tax
income
excluding
the
effects
of
financial
structure:
The
questionnaire
responses
include
a
calculation
of
after­
tax
income
in
accord
with
conventional
accounting
principles.
However,
this
calculation
reflects
the
financial
structure
of
the
business,
which
may
include
debt
financing
and
thus
interest
charges
against
income.
Because
the
cash
flow
concept
to
be
discounted
in
the
business
value
analysis
is
cash
flow
available
to
all
capital,
it
is
necessary
to
restate
after­
tax
income
to
exclude
the
effects
of
debt
financing,
or
on
a
before­
interest
basis.
This
restatement
involves:
(
1)

increasing
after­
tax
income
by
the
amount
of
interest
charges
and
(
2)
increasing
taxes
(
and
thereby
reducing
after­
tax
income)
by
the
amount
of
tax
reduction
provided
by
interest
deductibility.
This
adjustment
amounts
to
adding
tax­

adjusted
interest
expense
to
after­
tax
income
and
yields
an
estimate
of
after­
tax
income
independent
of
capital
structure
or
financing
effects.
In
calculating
the
tax
adjustment
for
interest,
EPA
used
a
combined
federal/
state
corporate
income
tax
rate
of
39
percent,
which
reflects
a
combination
of
an
approximate
average
state
rate
of
7.5
percent
and
a
federal
rate
of
34
percent
with
state
taxes
deductible
from
federal
income
tax
liability.
After­
tax
income,
before
interest,
was
calculated
as
follows:

7
As
opposed
to
non­
business,
government
entities.

5­
6
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
5:
Facility
Impact
Analysis
ATI­
BI
=
ATI
+
I
­
 
I
or
(
5.1)

ATI­
BI
=
ATI
+
(
1
­
 
)
I
where:

ATI­
BI
=
after­
tax
income
before
interest;

ATI
=
after­
tax
income
from
baseline
financial
statement;

I
=
interest
charge
from
baseline
financial
statement;
and
 
=
estimated
combined
federal­
state
tax
rate
of
39
percent.

3.
Calculate
after­
tax
cash
flow
from
operations,
before
interest,
by
adjusting
income
for
non­
cash
charges:
The
calculation
of
after­
tax
income
may
include
a
non­
cash
charge
for
depreciation
(
and
potentially
amortization).
To
calculate
after­
tax
cash
flow
(
ATCF)
from
operations,
it
is
therefore
necessary
to
add
back
any
depreciation
charge
to
the
calculation
of
after­
tax
income,
before
interest.
Cash
flow,
before
interest,
was
calculated
as
follows:

ATCF­
BI
=
ATI­
BI
+
D
(
5.2a)

where:

ATCF­
BI
=
after­
tax
cash
flow
before
interest;

ATI­
BI
=
after­
tax
income
before
interest;
and
D
=
baseline
depreciation.

4.
Calculate
free
cash
flow
by
adjusting
after­
tax
cash
flow
from
operations
for
ongoing
capital
equipment
outlays:
The
measure
of
after­
tax
cash
flow
from
the
previous
step,
cash
flow
from
operations,
reflects
the
cash
receipts
and
outlays
from
ordinary
business
operations
and
includes
no
allowance
for
replacement
of
the
facility s
existing
capital
equipment.

However,
to
sustain
ongoing
operations,
a
business
must
expend
cash
for
capital
replacement.
Accordingly,
to
understand
the
true
cash
flow
of
a
business
and
thus
provide
a
conceptually
valid
cash
flow
measure
for
business
valuation,
it
is
necessary
to
reduce
cash
flow
from
operations
by
an
allowance
for
capital
replacement.
For
the
calculation
of
free
cash
flow,
EPA
estimated
baseline
capital
outlays
from
a
regression
analysis
of
capital
expenditures
by
public
firms
in
the
MP&
M
business
sectors
over
a
10­
year
period
(
details
of
this
analysis
and
estimation
framework
are
contained
in
Appendix
D).
Free
cash
flow
is
calculated
as
follows:

FCF
=
ATCF­
BI
­
CAPEX
where:

FCF
=
free
cash
flow
ATCF­
BI
=
after­
tax
cash
flow
before
interest;
and
CAPEX
=
estimated
baseline
capital
outlays.

Or
on
a
more
detailed
accounting
statement
basis:

FCF
=
REV
­
TC
­
T
­
 
I
­
CAPEX
where:

FCF
=
free
cash
flow
REV
=
revenue
TC
=
total
operating
costs,
excluding
interest,
depreciation,
and
taxes
T
=
baseline
income
tax
 
=
estimated
combined
federal­
state
tax
rate
of
39
percent;

I
=
interest
charge
from
baseline
financial
statement;
and
CAPEX
=
estimated
annual
baseline
capital
outlays.
(
5.2b)

(
5.2c)

This
calculation
of
free
cash
flow
is
based
on
a
static
representation
of
a
facility s
business.
Revenue
and
expenses
are
not
projected
forward
and
the
analysis
of
the
business
assumes,
in
effect,
that
the
facility s
business
will
continue
in
the
future
absent
the
effects
of
regulation
exactly
as
reflected
in
the
baseline
financial
statements
provided
in
the
survey
questionnaire.
Consistent
with
this
framework,
the
estimation
of
free
cash
flow
includes
no
adjustment
for
changes
in
working
capital,
which
might
ordinarily
be
included
in
the
capital
outlay
adjustment
to
operating
cash
flow.

5­
7
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
5:
Facility
Impact
Analysis
5.
Calculate
baseline
facility
value
as
the
present
value
of
free
cash
flow
over
a
15­
year
analysis
horizon:
To
calculate
baseline
business
value,
EPA
discounted
free
cash
flow
over
a
15­
year
period
at
an
estimated
real
(
i.
e.,
excluding
the
effects
of
inflation),
after­
tax
cost
of
capital
of
7
percent.
The
use
of
15
years
as
the
discounting
horizon
reflects
the
expected
useful
life
of
capital
equipment
to
be
installed
for
MP&
M
regulation
compliance.
Facility
baseline
business
value
is
calculated
as
follows:

(
5.3)

where:

VALUE
=
estimated
b
aseline
busine
ss
value
of
the
fac
ility
FCF
=
free
cash
flow
CoC
=
after­
tax
cost­
of­
capital;
and
t
=
year
index,
t
=
0­
14
(
15­
year
discounting
horizon).

In
the
present
value
c
alculation,
yearly
cash
flows
accrue
at
the
beginning
of
the
year.
result,
the
first
year
of
cash
flows
is
no
t
discounted
i.
e.,
t
=
0
for
the
first
yea
r
of
the
analysis
a
nd
ca
sh
flows
in
the
fifteenth
and
final
year
of
the
analysis
period
are
discounted
over
a
1
4­
year
period
i.
e.,
t
=
14
in
the
final
year
of
the
analysis.

As
explained
above,
EP
A
considered
a
facility
to
be
a
baseline
closure
if
its
estimated
business
value
was
negative
before
incurring
regulatory
compliance
costs.
ine
closures
were
not
tested
for
adverse
impact
in
the
post­
compliance
impact
analysis.

 
Calcu
lation
of
P
ost­
Com
pliance
F
ree
Ca
sh
Flow
and
P
erform
ance
of
Po
st­
Com
pliance
C
losure
T
est
For
the
post­
compliance
closure
analysis,
EPA
recalculated
annual
free
cash
flow
accounting
for
changes
in
revenue,

operating
costs,
and
taxes
that
are
estimated
to
result
from
compliance­
related
outlays.
post­
compliance
free
cash
flow
value
and
the
estimated
compliance
capital
outlay
in
the
present
value
framework
to
calculate
business
value
on
a
post­
com
pliance
ba
sis.

Calculation
of
post­
compliance
free
cash
flow
and
performance
of
the
post­
compliance
closure
test
involved
the
following
steps:

1.
Adju
st
baseline
an
nua
l
free
cash
flow
to
reflect
comp
liance
reve
nue
a
nd
exp
ense
effects:
Compliance­
related
effects
on
annual
free
cash
flow
include
compliance
operating
and
m
aintenance
(
O&
M)
expenses,
post­
comp
liance
c
hange
in
revenue
(
from
the
compliance
cost
pass­
thro
ugh
an
alysis),
and
change
in
taxes.
The
change
in
taxes
includes:
(
1)

the
tax
effect
of
compliance
expense
and
revenue
changes
and
(
2)
the
tax
effect
from
depreciation
of
compliance
capital
outlays.
calculating
the
tax
effect
of
depreciation,
EPA
assumed
that
compliance
capital
outlays
would
be
depreciated
for
tax
purposes
on
a
15­
year
straight­
line
schedule.
compliance
free
cash
flow
was
calculated
as
follows:

FCFPC
=
FCFBL
+
 
RE
V
­
 
TC
­
 
(
 
RE
V
­
 
TC
­
 
D)
(
5.4)

where:

FCFPC
=
post­
compliance
free
cash
flow;

FCFBL
=
baseline
free
cash
flow,
as
calculated
above;

 
REV
=
post­
com
pliance
chan
ge
in
revenue,
as
ca
lculated
in
the
cost
pass­
throu
gh
analysis;

 
T
C
=
change
in
total
facility
operating
costs
(
excluding
interest,
depreciation
and
taxes),
calculated
as
operating
and
maintenance
costs
of
compliance;

 
=
marginal
tax
rate
for
calculating
compliance­
related
tax
effects
(
combined
federal­
state
tax
rate
of
39
percent);
and
 
D
=
change
in
depreciation
expense,
calculated
as
compliance
capital
outlay
(
CC)
divided
by
15.

The
operating
and
m
aintenance
cost
of
compliance
(
 
T
C,
above)
is
the
change
in
costs
estimated
to
result
from
operating
and
maintaining
pollution
controls
adopted
to
comply
with
effluent
guidelines.
ting
costs
include
the
costs
of
monitoring.
As
a
Basel
EPA
combined
the
For
Post­

Opera
5­
8
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
5:
Facility
Impact
Analysis
2.
Limit
tax
adjustment
to
not
exceed
taxes
as
reported
in
baseline
financial
statement:
The
tax
effec
t
of
com
pliance
will
generally
be
to
reduce
tax
liability.
That
is,
in
the
prior
formulation,
the
term
 
(
 
RE
V
­
 
TC
­
 
D),
which
is
the
tax
effect
of
compliance,
will
generally
be
negative
as
the
increase
in
revenue
will
be
less
than
compliance­
related
operating
expenses
a
nd
co
mplia
nce
equip
ment
dep
reciatio
n:
 
TC
+
 
D)
>
 
REV
.
,
in
the
free
cash
flow
calculation,

the
tax
adjustment
will
generally
increase
cash
flow
and
business
value
and,
all
else
equal,
will
reduce
the
likelihood
that
a
facility
will
fail
the
post­
compliance
closure
test.
However,
the
extent
to
which
a
facility
will
realize
this
contribution
to
cash
flow
depends
on
its
tax
circumstances.
In
particular,
some
businesses
may
not
be
paying
sufficient
taxes
in
the
baseline
to
take
full
benefit
of
the
implied
tax
reduction
at
the
facility
level
unless
the
unused
tax
loss
can
be
transferred
to
other,
profitable
business
units
in
the
firm,
these
businesses
will
not
be
able
to
use
fully
the
implied
tax
reduction
on
a
current
basis.
Also,
the
marginal
tax
rate
for
businesses
with
relatively
lower
pre­
tax
income
may
be
less
than
the
assum
ed
39
percent
ra
te
used
in
the
ana
lysis.
hile
businesses
may
b
e
able
to
carry
forward
tax
lo
sses
to
re
duce
taxes
in
later
years,
EP
A
rec
ognizes
that
the
implied
cash
flow
benefit
from
tax
red
uction
may
no
t
be
fully
rea
lized,
p
articular
ly
in
circumstances
involving
single­
facility
firms.
ive
in
its
analysis,
EPA
therefore
limited
the
amount
of
tax
reduction
from
compliance
outlays
to
be
no
greater
than
the
amount
of
tax
paid
by
facilities
in
the
baseline
financial
statement.
he
ana
lysis
effectively
a
ssume
s
that
facilities
will
no
t
be
ab
le
to
offse
t
an
imp
licit
negativ
e
tax
liab
ility
against
positive
tax
liability
elsewhere
in
its
operations
or
to
carry
forw
ard
(
o
r
back)
the
ne
gative
inc
ome
and
its
im
plicit
negative
tax
liab
ility
to
other
p
ositive
inc
ome
/
positive
tax
liability
opera
ting
periods.
verag
e,
this
ap
pro
ach
w
ill
overstate
impacts
on
facilities,
because
some
MP&
M
businesses
may
be
able
to
benefit
from
tax
reductions
that
exceed
facility
baseline
taxes,
especially
if
the
facility
is
owned
by
a
multiple­
site
firm.
gly,
EPA
constrained
the
tax
effect
term
in
the
free
cash
flow
calculation,
[­
 
(
 
RE
V
­
 
TC
­
 
D)]
as
specified
above,
to
be
no
greater
than
baseline
financia
l
statement
ta
x
liability
,
T.

3.
Calculate
post­
compliance
facility
value,
including
post­
compliance
free
cash
flow
and
the
compliance
capital
outlay:

As
in
the
baseline
analysis,
EPA
calculated
post­
compliance
facility
value
as
the
present
value
of
free
cash
flow
and
acco
unting
fo
r
the
co
mplia
nce
capital
o
utlay
as
an
undisc
ounte
d
cas
h
outlay
in
the
first
analysis
perio
d.
cility
postcomp
liance
business
value
w
as
calculated
as
follow
s:

(
5.5)

where:

VALUEPC
=
estimated
p
ost­
co
mplia
nce
b
usiness
v
alue
o
f
the
facility
FCFPC
=
estimated
post­
compliance
free
cash
flow
CoC
=
after­
tax
cost­
of­
ca
pital;

t
=
year
index,
t
=
0­
14
(
15­
year
discounting
horizon);
and
CC
=
com
pliance
cap
ital
outlay.

EPA
considered
a
facility
to
be
a
post­
compliance
closure
if
its
estimated
business
value
was
positive
in
the
baseline
but
became
negative
after
ad
justing
for
com
pliance­
related
cost,
rev
enue
and
tax
effects.
dditio
n
to
tallying
c
losure
impa
cts
in
terms
o
f
the
num
ber
o
f
estimated
facility
closures,
E
PA
also
measured
the
significanc
e
of
clo
sures
in
terms
o
f
losses
in
employment
and
output.
losses
equal
the
number
of
employees
reported
by
closure
facilities
in
survey
responses;
output
losses
equal
total
revenue
reported
for
regulatory
closure
facilities.
imated
national
results
by
multiplying
facility
results
by
facility
sample
weights.

b.

EPA
also
conducted
an
analysis
of
financial
stress
short
of
closure
to
identify
the
rule s
moderate
impacts.
Facilities
experiencing
moderate
impacts
are
not
projected
to
close
due
to
the
MP&
M
effluent
guidelines.

reduce
the
ir
financial
performanc
e
to
the
point
whe
re
they
might
have
d
ifficulty
obtaining
financing
for
future
investme
nts.

The
analysis
of
mode
rate
impacts
exa
mined
two
financial
measures:

Pre­
Tax
Return
on
A
ssets
(
PTRA):
re­
tax
o
pera
ting
inco
me
earnings
before
inte
rest
and
taxes
(
E
BIT
)
to
assets.
This
ratio
measures
the
operating
performance
and
profitability
of
a
business 
assets
independent
of
financial
structure
and
tax
circumstances.
PTRA
is
a
comprehensive
measure
of
a
firm's
economic
and
financial
performance.
If
a
firm
cannot
sustain
a
competitive
PTRA
on
a
post­
compliance
basis,
it
may
have
difficulty
financing
its
investments,
including
the
outlay
for
co
mpliance
equipment.
(
As
a
result
W
To
be
conservat
T
On
a
Accordin
Fa
In
a
Employment
EPA
est
Test
of
moderate
impacts
The
rule,
however,
might
ratio
of
p
5­
9
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
5:
Facility
Impact
Analysis
Interest
Co
vera
ge
Ratio
(
ICR):
atio
of
pre­
tax
operating
cash
flow
earnings
before
interest,
taxes,
and
depreciation
(
EBIT
DA)
to
interest
expense.
o
measures
the
facility's
ability
to
service
its
debt
on
the
basis
of
current,
ongoing
financial
performa
nce
and
to
borro
w
for
capital
investmen
ts.
itors
will
be
concerne
d
abo
ut
a
firm
whose
ope
rating
ca
sh
flow
d
oes
not
comfortably
exceed
its
contractual
obligations.
he
greater
the
ICR
,
the
grea
ter
the
firm's
ability
to
meet
interest
payments,
and,
generally
speaking,
the
greater
the
firm's
credit­
carrying
ability.
CR
also
provides
a
measure
of
the
amo
unt
of
cash
flow
availab
le
for
equity
after
interest
payments.

Creditors
a
nd
eq
uity
investors
review
the
ab
ove
two
m
easures
as
criteria
to
d
eterm
ine
whe
ther
an
d
und
er
wha
t
terms
the
y
will
finance
a
busin
ess.
RA
and
ICR
also
p
rovid
e
insight
into
a
firm's
ability
to
g
enera
te
funds
for
co
mplia
nce
inv
estme
nts
from
internally­
generated
e
quity,
i.
e.,
from
after­
tax
cash
flow.
he
measu
res
are
defined
as
follows:

Pre­
Tax
R
eturn
on
A
ssets
(
5­
6)

where:

PTRA
=
pre­
tax
return
on
a
ssets,

EBIT
=
pre­
tax
operating
income,
or
earnings
before
interest
and
taxes,
and
T
A
=
total
assets.

Or,
stated
in
terms
o
f
MP
&
M
income
statem
ent
accou
nts,

(
5.7)

where:

PTRA
=
pre­
tax
return
on
a
ssets;

REV
=
revenue;

T
C
=
total
operating
costs
(
excluding
interest,
taxes,
and
depreciation/
amortization);

D
=
depreciation;
and
TA
=
total
assets.

Inter
est
C
ove
rag
e
Ratio
(
5.8)

where:

ICR
=
interest
coverage
ratio;

EBITDA
=
pre­
tax
operating
cash
flow,
or
earnings
before
interest,
taxes,
and
depreciation
(
and
amortization)

and
I
=
interest
expense.
r
This
rati
Investors
and
cred
T
I
PT
T
5­
10
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
5:
Facility
Impact
Analysis
Or,
stated
in
terms
of
MP&
M
income
statement
accounts,

(
5.9)

where:

PTRA
=
pre­
tax
return
on
a
ssets;

REV
=
revenue;

T
C
=
total
operating
costs
(
excluding
interest,
taxes,
and
depreciation/
amortization);
and
T
A
=
total
assets.

Includ
ing
the
effects
of
M
P&
M
com
plianc
e
cos
ts,
post­
comp
liance
P
TR
A
and
ICR
are
:

(
5.10)

(
5.11)

where:

PTRApc
=
pre­
tax
return
on
assets,
post­
compliance;

ICRpc
=
interest
coverage
ratio,
post­
compliance;

 
REV
=
post­
com
pliance
chan
ge
in
revenue,
as
ca
lculated
in
the
cost
pass­
throu
gh
analysis;

 
T
C
=
change
in
total
facility
operating
costs
(
excluding
interest,
depreciation
and
taxes),
calculated
as
operating
and
maintenance
costs
of
compliance;

 
D
=
change
in
depreciation
expense,
calculated
as
compliance
capital
outlay
(
CC)
divided
by
15;

CC
=
com
plianc
e
cap
ital
outlay
(
a
ssumin
g
all
of
the
o
utlay
wo
uld
b
e
cap
italized
and
repo
rted
a
s
an
ad
dition
to
assets
on
the
balance
sheet);
and
 
I
=
incremental
interest
expense
from
financing
of
compliance
capital
outlay.
As
a
simplifying,
conservative
assum
ption,
increm
ental
interest
exp
ense
is
calculated
assuming
that
the
co
mpliance
capital
o
utlay
is
fully
deb
t
financed
at
the
overall
real
co
st­
of­
cap
ital
of
7
p
ercen
t.
The
annua
l
increm
ental
interest
value
is
calculated
as
the
annualized
value
of
interest
payments
over
15
years,
assuming
a
constant
annual
payment
of
principal
a
nd
interest.

For
evaluating
MP&
M
facilities
according
to
the
moderate
impact
measures,
EPA
compared
baseline
and
post­
compliance
PT
RA
and
IC
R
to
M
P&
M
sector­
specific
thresholds
that
were
developed
from
data
comp
iled
by
Risk
Management
Association,
Inc.
(
RMA).
iles
and
reports
financial
statement
information
by
industry
as
provided
by
member
commercial
lending
institutions.
hreshold
values
represent
the
25th
percentile
values
of
P
TR
A
and
ICR
for
stateme
nts
received
by
RMA
for
the
eight
years
from
1994
to
2001
within
relevant
industries.
EPA
developed
M
P&
M
sector­
level
values
by
weighting
and
summing
the
RMA
industry
values
according
to
the
definition
of
MP&
M
sectors
(
see
Appendix
C
for
details
of
moderate
impact
threshold
development
and
sector­
specific
threshold
values).
Thresholds
by
sector
ranged
from
0
to
3.1
percent
for
PTR
A
and
from
1.4
to
2.9
for
ICR.
financial
statements
received
by
RMA
are
for
businesses
app
lying
for
credit
from
me
mbe
r
institutions,
the
data
d
on t
rep
resent
a
rand
om
samp
le.
In
pa
rticular,
the
RM
A
da
ta
will
likely
exclude
re
prese
ntation
fro
m
the
financially
weakest
b
usinesse
s,
which
a
re
unlike
ly
to
be
se
eking
c
redit.
s
a
result,

EP
A
views
the
thresho
ld
values
as
being
re
latively
conservative
and
likely
to
ov
erstate
the
occurre
nce
of
mo
derate
imp
acts.

Both
measures
are
important
to
financial
success
and
firms 
ability
to
attract
capital.
ities
failing
at
least
one
of
the
moderate
impact
measures
in
the
baseline
were
deemed
to
be
already
experiencing
moderate
financial
weakness
and
were
not
tested
for
additional
financial
impact
in
the
moderate
impact
analysis.
Facilities
that
passed
both
mode
rate
impact
tests
in
the
baseline
but
failed
o
ne
or
bo
th
threshold
co
mpariso
ns,
post­
com
pliance,
were
co
nsidered
to
incur
mod
erate
financial
impacts,

short
of
closure,
as
a
result
of
the
MP&
M
regulation.
RMA
comp
The
t
Because
the
A
Facil
5­
11
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
5:
Facility
Impact
Analysis
5.2.4
mpact
Measures
for
Railroad
Line
Maintenance
Facilities
The
proposed
M
P&
M
rule
would
have
applied
to
some
railroad
facilities
that
maintain
and
repair
railroad
track
and
that
perform
similar
operations
on
railroad
and
other
vehicles.
Railroad
representatives
indicated
during
data
collection
that
the
industry
does
not
collect
or
monitor
significant
financial
data
at
the
facility
level.
ed
EP
A
to
administer
a
modified
version
of
the
survey
to
railroad
operating
units
and
to
perform
the
primary
economic
impact
analysis
at
the
ope
rating
unit
level.

The
analysis
of
impacts
for
railroad
line
maintenance
facilities
uses
the
same
measures
of
impact
as
for
other
private
MP&
M
facilities,
but
applies
these
measures
for
the
railroad
operating
unit
as
a
whole.
road
are
the
sum
o
f
com
plianc
e
cos
ts
at
each
M
P&
M
railroad
line
m
aintena
nce
fac
ility
identified
b
y
the
op
erating
com
pany.

5.2.5
mpact
Measures
for
Government­
Owned
Facilities
Government­
owned
MP
&
M
facilities
include
all
facilities
owned
by
government
entities
that
discharge
process
wastewater
from
MP&
M
activities.
Most
government­
owned
facilities
that
fall
under
the
MP&
M
rule
provide
or
support
transportation
services.
facilities
repair,
rebuild,
and
maintain
buses,
trucks,
cars,
utility
vehicles
(
e.
g.,
snow­
plows
and
street
cleaners),
and
light
machine
ry.
e
M
P&
M
profile
describes
governme
nt­
owned
fac
ilities
in
detail.

Each
government
subject
to
the
MP&
M
effluent
guidelines
at
its
facilities
has
a
number
of
choices,
which
include:

 
 
contracting
o
ut
the
serv
ice
to
a
private
provider
or
oth
er
go
vernm
ental
ag
ency,

 
 
discontinuing
these
services
altogether,
or
 
 
paying
for
com
pliance
and
continuing
op
erations.

Th
e
impact
ana
lysis
does
not
predict
how
the
gove
rnment
will
respond
.
analysis
ev
aluates
only
whether
a
com
munity
incurring
com
pliance
co
sts
and
continuing
o
perations
und
er
the
rule
would
incur
a
severe
b
urden.
vernmen
t
may
choo
se
a
different
option
and
avoid
some
of
the
budgetary
impacts
estimated
here.

EP
A
evaluated
impa
cts
for
go
vernm
ent­
ow
ned
facilities
by
using
three
tests.
vernm
ent
that
fails
all
thr
ee
tests
is
like
ly
to
suffer
severe
adverse
impacts
as
a
result
of
the
rule.
test
is
applied
at
the
facility
level,
and
the
other
two
tests
are
app
lied
at
the
government
level.

a.
on
site­
level
cost
of
service
test
The
impacts
on
site­
level
cost
of
service
test
considers
whether
a
government­
owned
facility's
compliance
costs
exceed
one
percent
or
more
of
its
total
baseline
cost
of
service.
test
is
similar
to
the
test
used
to
assess
impacts
on
private
facilities
and
firms,
which
com
pares
costs
to
post­
comp
liance
revenues.
T
he
facility
will
likely
absorb
co
mpliance
costs
within
its
current
bud
get
if
those
costs
d
o
not
excee
d
one
percent
of
the
total.
omp
liance
c
osts
in
this
scenario
will
not
significantly
impa
ct
the
municipal
bud
get.
sts
in
exce
ss
of
one
percent
do
not,
in
and
o
f
itself,
indicate
that
a
bu
dgetary
imp
act
will
occur,
but
o
nly
that
ad
ditiona
l
analysis
sho
uld
b
e
per
formed
to
determine
if
the
re
is
an
im
pac
t.

EP
A
ca
lculated
the
ratio
of
complia
nce
costs
to
c
ost
of
se
rvice,
RC,
for
each
gove
rnment­
own
ed
facility
as
follows:

(
5.12)

where:

RC
=
ratio
of
compliance
costs
to
cost
of
service,

TACC
=
total
annualized
comp
liance
cost
for
the
facility,
and
CBaseline
=
total
ba
seline
co
st
of
service
at
the
fac
ility.

A
facility
whose
RC
is
equal
to
or
greater
than
on
e
percent
fails
this
test.
I
These
discussions
l
Compliance
costs
for
each
rail
I
These
Th
The
A
go
A
go
The
first
Impacts
This
C
Co
5­
12
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
5:
Facility
Impact
Analysis
b.
n
taxpayers
test
Th
e
imp
acts
on
taxpa
yers
test
ev
aluates
the
significa
nce
o
f
com
plianc
e
cos
ts
to
the
p
eop
le
serve
d
by
the
gove
rnme
nt.
A
government
will
fail
this
test
if
the
ratio
of
total
annualized
pollution
control
costs
per
household
to
median
household
income
exceeds
one
percent,
post­
compliance.
Post­
compliance
pollution
control
costs
include
all
pollution
control
costs
(
for
whatever
purpose)
reported
by
the
government
in
the
baseline
plus
the
sum
of
MP&
M
effluent
guideline
compliance
costs
at
all
M
P&
M
facilities
owned
by
the
go
vernm
ent.
his
test
clos
ely
follow
s
the
me
thod
olog
y
deve
lope
d
for
E
PA
'
s
Wa
ter
Q
uality
Standards
W
orkbook
(
E
PA,
199
5).

Th
e
surve
y
requ
ests
inform
ation
a
bou
t
curren
t
munic
ipal
ex
penditures
on
p
ollution
contro
l.
Total
annualized
com
pliance
co
sts
(
TACC)
for
each
government­
owned
facility
is
the
sum
of
costs
and
an
amortized
capital
cost.

of
TA
CC
a
t
all
MP
&
M
facilities
for
each
go
vernmen
t,
plus
baseline
municipa
l
expend
itures
on
pollution
co
ntrol,
yields
a
post­
compliance
total
annualized
pollution
control
cost.
otal
annualized
pollution
control
costs
by
the
number
of
households
to
calculate
an
average
cost
per
household.
or
median
household
income
in
the
geographic
area
serve
d
by
the
respo
nding
gove
rnment.

EP
A
ca
lculated
a
ratio
o
f
com
plianc
e
cos
ts
to
me
dian
h
ouse
hold
incom
e,
RH,
for
each
gove
rnment
as
follows:

(
5.13)

where:

RH
=
ratio
of
total
annualized
pollution
control
cost
to
median
household
income,

CBPC
=
total
baseline
municipal
expenditures
on
pollution
control,
and
TACCi
=
total
ann
ualized
com
plianc
e
cos
t
for
governm
ent­
ow
ned
facility
i,

M
H
I
=
median
household
income
for
the
government
jurisdiction.

Go
vernm
ents
that
inc
ur
co
mplia
nce
costs
that
c
ause
this
r
atio
to
e
xcee
d
on
e
per
cent
fail
this
test.
G
overnme
nts
that
fail
this
test
in
the
baseline
as
well
as
post­
compliance
are
not
judged
to
experience
major
bud
getary
impacts
attributable
to
the
rule.
If
the
rule
causes
an
increase
in
this
ratio
to
above
one
p
ercent,
then
EPA
concludes
that
the
rule
might
present
a
burden
to
the
taxpayers
that
supp
ort
the
affected
government.
he
calculation
is
a
con
servative
estimate
of
the
imp
act
on
taxpa
yers
because
it
does
not
take
into
account
the
fact
that
non­
residential
taxpayers
(
businesses)
will
bear
some
of
the
tax
burden
or
that
some
costs
might
be
rec
overed
in
fees.

This
test
is
used
in
EP
A s
Economic
Guidance
for
Water
Quality
Standards.
is
guidance
is
used
by
States
and
EPA
Regions
to
assess
economic
factors
in
setting
or
revising
water
quality
standards.
ng
mea
sure
o
f
econ
omic
impa
ct,
average
to
tal
pollution
co
ntrol
co
st
per
house
hold
divide
d
by
m
edian
house
hold
incom
e.

value
less
than
one
percent
indicates
that
a
community
would
incur
 
little
economic
impact .
8
c.
s
on
government
debt
test
The
impacts
on
government
deb
t
test
assesses
the
governm
ent's
ability
to
finance
comp
liance
w
ith
the
rule
b
y
issuing
debt.

gove
rnment
must
b
e
able
to
finance
cap
ital
com
pliance
costs
in
add
ition
to
m
eeting
o
ngoing
com
pliance
costs.
Go
vernm
ents
often
finance
capital
compliance
costs
by
issuing
debt.
This
criterion
tests
each
government's
capacity
to
issue
debt
by
examining
the
ratio
of
post­
compliance
debt
service
costs
to
the
government's
total
revenue.
he
interest
coverage
ratio
for
private
firms.

Th
e
ratio
o
f
deb
t
service
costs
to
reven
ue,
RD,
for
each
gove
rnment
is:
Impacts
o
T
The
sum
EPA
divided
t
The
questionnaire
also
asks
f
T
Th
The
guidance
includes
as
a
screeni
A
Impact
A
This
measure
is
analogous
to
t
8
Source:
EPA s
Economic
Guidance
for
Water
Quality
Standards:
Workbook
(
1995)
(
Chapter
2
 
Evaluating
Substantial
Impacts:

Public
Sector
Entities ).
Values
between
one
and
two
percent
indicate
potential
 
mid­
range
economic
impact. 
Governments
with
values
above
one
percent
are
subject
to
further
analysis
to
determine
whether
a
significant
economic
impact
would
in
fact
occur.

5­
13
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
5:
Facility
Impact
Analysis
(
5.14)

where:

RD
=
debt­
to­
revenue
ratio;

DB
=
baseline
municipal
debt
service
costs
(
principal
payments
and
interest);

Ck
=
annualized
capital
cost
of
compliance,
summed
over
all
government­
owned
facilities
in
each
government;

and
TRB
=
baseline
municipal
revenue.

EPA
judged
that
debt
service
costs
above
25
percent
of
revenues
might
impede
a
government s
ability
to
issue
debt
in
the
future
and
present
a
burden
on
the
budget.

This
criterion
is
used
in
EPA s
MUNIPAY
model.
This
model
is
used
in
enforcement
cases
to
assess
whether
municipalities
(
e.
g.,
towns,
villages,
cities,
counties,
and
public
utilities)
can
afford
to
pay
a
specific
level
of
compliance
costs,
Superfund
cleanup
contributions,
or
penalties.
The
model s
affordability
assessment
limits
the
amount
of
debt
that
can
finance
these
costs,
capping
the
debt
service
ratio
at
25
percent.
9
A
higher
ratio
 
may
reduce
the
confidence
of
creditors
that
the
municipality
can
repay
its
debt
on
time. 
The
MUNIPAY
manual
states
that
this
value
slightly
exceeds
the
 
warning
marks 

found
in
the
public
finance
and
management
literature.

5.3
RESULTS
This
section
presents
the
results
of
the
facility
impacts
analyses.
The
first
section
presents
the
results
of
the
baseline
closure
analysis.
The
subsequent
sections
report
the
results
of
the
analyses
for
the
rule
and
the
three
other
regulatory
options
that
EPA
analyzed.
Section
5.3.2
presents
the
predicted
price
increases.
Section
5.3.3
presents
an
overview
of
impacts
for
all
MP
&
M
facilities,
and
then
results
are
provided
for
indirect
dischargers
(
Section
5.3.4),
direct
dischargers
(
Section
5.3.5),

private
facilities
(
Section
5.3.6),
and
government­
owned
facilities
(
Section
5.3.7).
Section
5.3.8
provides
results
by
subcategory.

5.3.1
Baseline
Closures
Table
5.3
shows
the
results
of
the
baseline
closure
analysis
by
subcategory.
EPA
estimated
that
a
total
of
3,593
facilities
have
a
negative
business
value
before
incurring
regulatory
compliance
costs.
These
facilities
are
projected
to
close
in
the
baseline
and
are
not
considered
in
the
analysis
of
impacts
attributable
to
the
regulation.

Appendix
A
provides
information
on
typical
average
closure
rates
in
the
MP&
M
industry
sectors.
Census
data
show
that
over
10,000
facilities,
or
almost
eight
percent
of
all
facilities
in
these
industries,
close
annually.
The
number
of
baseline
closures
predicted
in
this
analysis
is
consistent
with
this
typical
closure
rate.

9
Source:
EPA
Office
of
Compliance
and
Enforcement
Assurance,
MUNIPAY
User s
Manual,
September
1999,
p.
4­
14.

5­
14
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
5:
Facility
Impact
Analysis
Table
5.3:
Summary
of
Baseline
Closures
Subcategory
Total
Number
of
Dischargers
Number
of
Baseline
Closures
Percent
Closing
in
the
Baseline
Number
Operating
in
the
Baseline
General
Metals
11,364
880
7.7%
10,484
Metal
Finishing
Job
Shops
1,542
50
3.2%
1,491
Non­
Chromium
Anodizing
122
29
23.8%
93
Oily
Wastes
29,185
2,409
8.3%
27,776
Printed
Wiring
Boards
848
239
28.2%
609
Railroad
Rebuilders
826
0
0.0%
826
Shipbuilding
Dry
Dock
14
0
0.0%
14
All
Subcategoriesa
43,858
3,593
8.2%
40,265
a
The
total
number
of
facilities
does
not
sum
to
the
number
of
facilities
by
subcategory
because
some
facilities
operate
in
more
than
one
subcategory
and
have
an
indirect
and
direct
discharging
operation
within
the
same
facility.

Source:
U.
S.
EPA
analysis
5.3.2
Price
Increases
The
price
increases
predicted
for
the
final
rule
and
alternative
regulatory
options
are
shown
in
Table
5.4.
The
percentage
price
increases
are
small,
falling
well
below
one­
half
of
one
percent
for
all
sectors
under
the
final
rule.

5­
15
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
5:
Facility
Impact
Analysis
Table
5.4:
Cost
Pass­
Through
Analysis:
Percentage
Price
Increases
by
Regulatory
Option
and
Sector
Sector
Option
I:
Selected
Option
(
Directs
Only)
Option
II:

Proposed/
NODA
Option
Option
III:
Directs
+
413
to
433
Upgrade
Option
IV:
Directs
+
All
to
433
Upgrade
Aerospace
0.00%
0.04%
0.00%
0.00%

Aircraft
0.00%
0.03%
0.00%
0.01%

Bus
and
Truck
0.00%
0.06%
0.00%
0.01%

Electronic
Equipment
0.00%
0.04%
0.00%
0.00%

Hardware
0.00%
0.08%
0.01%
0.01%

Household
Equipment
0.00%
0.02%
0.00%
0.00%

Instrument
0.00%
0.08%
0.00%
0.01%

Iron
and
Steel
0.00%
0.20%
0.00%
0.00%

Job
Shop
0.00%
0.61%
0.09%
0.09%

Mobile
Industrial
Equipment
0.00%
0.16%
0.01%
0.01%

Motor
Vehicle
0.00%
0.07%
0.00%
0.00%

Office
Machine
0.00%
0.00%
0.00%
0.00%

Ordnance
0.00%
0.12%
0.00%
0.00%

Other
Metal
Products
0.00%
0.04%
0.00%
0.01%

Precious
and
Non­
Precious
Metals
0.00%
0.03%
0.00%
0.00%

Printed
Circuit
Board
0.00%
0.00%
0.00%
0.00%

Railroad
0.00%
0.02%
0.00%
0.00%

Ships
and
Boats
0.00%
0.03%
0.00%
0.00%

Stationary
Industrial
Equipment
0.00%
0.05%
0.01%
0.01%

Source:
U.
S.
EPA
analysis
5.3.3
Overview
of
Impacts
Table
5.5
provides
an
overview
of
the
numbers
of
facilities
closing
and
experiencing
moderate
economic
impacts,
by
regulatory
option.
These
national
estimates
include
all
types
of
dischargers
(
direct
and
indirect)
and
types
of
facilities
(
private
MP&
M,
railroad
line
maintenance,
and
government­
owned
facilities.)

5­
16
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
5:
Facility
Impact
Analysis
Table
5.5:
ulatory
Impacts
for
All
Facilities
by
Option,
National
Estimates
Option
I:

Selected
Option
(
Directs
Only)
Option
II:

Proposed/
NODA
Optiona
Option
III:

Directs
+
413
to
433
Upgrade
Option
IV:

Directs
+
All
to
433
Upgrade
Number
of
facilities
operating
in
the
baseline:
total
40,265
60,253
40,265
40,265
private
MP&
M
and
railroad
line
maintenance
36,480
54,526
36,480
36,480
government­
owned
3,785
5,727
3,785
3,785
Number
of
facilities
below
low
flow
cutoffs
51,502
Number
of
facilities
with
subcategory
exclusions
37,883
136
36,820
36,339
Percent
of
facilities
operating
in
the
baseline
excluded
or
below
cutoffs
94.1%
85.7%
91.4%
90.3%

Number
of
facilities
operating
subject
to
regulatory
requirements
2,382
8,615
3,445
3,926
Number
of
regulatory
closures
0
785
120
120
Percent
of
facilities
operating
in
the
baseline
that
are
regulatory
closures
0.0%
9.1%
3.5%
3.1%

Number
of
facilities
experiencing
moderate
impacts
0
257
37
49
Percent
of
facilities
operating
in
the
baseline
that
experience
moderate
impacts
0.0%
3.0%
1.1%
1.2%
Reg
a
The
total
number
of
facilities
reported
for
the
Proposed/
NODA
Option
(
Option
II)
analysis
differs
from
the
facility
count
reported
for
the
final
rule
and
Options
III
and
IV.
After
deciding
in
July
2002
to
not
consider
the
NODA
option
as
the
basis
for
the
final
rule,
EPA
performed
no
more
analysis
on
the
NODA
option,
including
not
updating
facility
counts
and
related
analyses
for
the
change
in
subcategory
and
discharge
status
classifications.
These
differences
in
facility
counts
by
regulatory
option
appear
in
subsequent
tables.

Source:
U.
S.
EPA
analysis.

Table
5.5
shows
that
the
final
rule
substantially
reduces
facility­
level
impacts
as
compared
to
the
three
alternative
regulatory
options
considered
by
EPA.
None
of
the
facilities
that
continue
to
operate
in
the
baseline
close
or
experience
moderate
impacts
due
to
the
final
rule.
The
large
difference
in
results
between
the
final
rule
and
other
options
stems
largely
from
the
exclusion
from
regulatory
requirements
of
over
94
percent
of
facilities
that
continue
to
operate
in
the
baseline:
the
final
rule
excludes
from
regulatory
requirements
all
indirect
dischargers
and
direct
dischargers
in
all
subcategories
except
for
Oily
Wastes.
Significantly
larger
numbers
of
facilities
are
projected
to
close
under
the
Proposed/
NODA
Option
and
433
Upgrade
Options
(
785
and
120
facilities,
respectively).
See
Chapter
4
for
a
discussion
of
the
options
and
subcategory
exclusions.

Table
5.6
shows
the
estimated
burden
on
facilities
from
regulatory
compliance
by
option,
discharge
status,
and
subcategory.

The
estimated
burden
includes
annualized
compliance
costs
and
any
estimated
increase
in
facility
revenue
as
a
result
of
the
regulation,
and,
for
private
facilities,
reflects
the
effects
of
taxes
on
compliance
costs
and
revenue.
These
compliance
costs
therefore
represent
the
total
after­
tax
cash
flow
impact
on
regulated
facilities.

Table
5.6:
Total
Annualized
Facilitya
After­
tax
Compliance
Costs
by
Subcategory,
Discharge
Status,
and
Regulatory
Option
(
millions,
2001$)

Subcategory
Option
I:

Selected
Option
(
Directs
Only)
Option
II:

Proposed/
NODA
Option
Option
III:

Directs
+
413
to
433
Upgrade
Option
IV:

Directs
+
All
to
433
Upgrade
Direct
Indirect
Direct
Indirect
Direct
Indirect
Direct
Indirect
General
Metals
$
0.0
$
0.0
$
267.6
$
476.7
$
0.0
$
16.5
$
0.0
$
46.5
5­
17
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
5:
Facility
Impact
Analysis
Metal
Finishing
Job
Shop
$
0.0
$
0.0
$
2.9
$
139.9
$
0.0
$
8.2
$
0.0
$
8.2
Non­
Chromium
Anodizing
$
0.0
$
0.0
$
23.1
$
0.0
$
0.0
$
0.0
$
0.0
$
0.0
Oily
Waste
$
11.9
$
0.0
$
29.0
$
72.3
$
12.0
$
0.0
$
12.1
$
0.0
Printed
Wiring
Board
$
0.0
$
0.0
$
0.2
$
106.4
$
0.0
$
15.0
$
0.0
$
15.0
Railroad
Line
Maintenance
$
0.0
$
0.0
$
0.6
$
0.0
$
0.0
$
0.0
$
0.0
$
0.0
Shipbuilding
Dry
Dock
$
0.0
$
0.0
$
2.4
$
0.0
$
0.0
$
0.0
$
0.0
$
0.0
Steel
Forming
&
Finishingb
$
25.5
$
16.1
All
Categories:
Annual
Costs
$
11.9
$
0.0
$
351.2
$
811.4
$
12.0
$
39.7
$
12.1
$
69.7
All
Categories:
Number
of
Facilities
Operating
Post­

Compliance
Subject
to
Requirements
2,382
0
4,143
3,688
2,382
1,063
2,382
1,544
Total
Costs
to
Industry
by
Option,

Directs
+
Indirects
$
11.9
$
1,162.5
$
51.7
$
81.8
a
This
table
reflects
after­
tax
cash
flow
impacts
to
facilities
and
does
not
represent
the
cost
of
society
from
regulatory
compliance.

Chapter
11
discusses
the
social
costs
of
the
final
rule
and
the
other
options.
The
estimates
in
this
table
exclude
baseline
and
regulatory
closures,
and
are
after­
tax.

b
The
Steel
Forming
&
Finishing
subcategory
was
removed
from
the
MP&
M
universe
after
deciding
not
to
consider
the
Proposed/
NODA
Option
(
Option
II)
for
the
final
rule.
As
a
result,
compliance
costs
are
included
in
the
Steel
Forming
&

Finishing
subcategory
for
Option
II
only.

Source:
U.
S.
EPA
analysis.

Oily
Wastes
direct
dischargers
account
for
the
total
compliance
costs
of
$
11.9
million
under
the
final
rule.
Total
compliance
costs
incurred
by
facilities
that
continue
to
operate
post­
compliance
are
almost
100
times
higher
under
the
Proposed/
NODA
Option
than
under
the
final
rule,
over
four
times
higher
under
the
Directs
and
413
to
433
Upgrade
Option
than
under
the
final
rule,
and
almost
seven
times
higher
under
the
Directs
and
All
to
433
Upgrade
Option
than
under
the
final
rule.

5.3.4
Results
for
Indirect
Dischargers
The
sum
of
facilities
individually
identified
as
indirect
and
direct
dischargers
exceeds
the
total
of
all
facilities
as
identified
in
Table
5.5,
above.
Some
facilities
operate
in
more
than
one
subcategory,
and
some
have
both
an
indirect
and
direct
discharging
operation
in
the
same
facility.
Facilities
with
both
indirect
and
direct
discharging
operations
are
reported
in
the
tables
for
both
discharge
categories:
Table
5.7,
for
indirect
dischargers,
and
Table
5.8,
for
direct
dischargers.

Table
5.7
summarizes
the
results
of
the
facility
impact
analysis
for
indirect
dischargers,
including
both
private
businesses
and
government­
owned
facilities.

5­
18
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
5:
Facility
Impact
Analysis
Table
5.7:
ulatory
Impacts
for
Indirect
Dischargers
by
Option,
National
Estimates
Option
I:

Selected
Option
(
Directs
Only)
Option
II:

Proposed/

NODA
Option
Option
III:
Directs
+
413
to
433
Upgrade
Option
IV:

Directs
+
All
to
433
Upgrade
Number
of
facilities
operating
in
the
baseline:
total
37,652
56,071
37,652
37,652
private
MP&
M
and
railroad
line
maintenance
34,325
51,066
34,325
34,325
government­
owned
3,327
5,005
3,327
3,327
Number
of
facilities
below
low
flow
cutoffs
51,502
Number
of
facilities
with
subcategory
exclusions
37,652
136
36,589
36,108
Percent
of
facilities
operating
in
the
baseline
excluded
or
below
cutoffs
100.0%
92.1%
97.2%
95.9%

Number
of
facilities
operating
in
the
baseline
subject
to
regulatory
requirements
0
4,433
1,063
1,544
Number
of
regulatory
closures
0
746
120
120
Percent
of
facilities
operating
in
the
baseline
and
subject
to
regulatory
requirements
that
are
regulatory
closures
0.0%
16.8%
11.3%
7.8%

Number
of
facilities
experiencing
moderate
impacts
0
228
37
49
Percent
of
facilities
operating
in
the
baseline
and
subject
to
regulatory
requirements
that
experience
moderate
impacts
0.0%
5.1%
3.5%
3.2%
Reg
Source:
U.
S.
EPA
analysis.

Indirect
discharging
facilities
account
for
over
93
percent
of
water
discharging
MP&
M
facilities
as
a
whole.
However,

because
all
indirect
discharging
are
excluded
from
regulatory
requirements
under
the
final
rule,
EPA
estimates
that
no
indirect
dischargers
will
incur
impacts
under
the
final
rule.

5.3.5
Results
for
Direct
Dischargers
Table
5.8
summarizes
the
facility
impact
results
for
direct
dischargers,
which
represent
approximately
seven
percent
of
all
facilities
that
continue
to
operate
in
the
baseline.
In
addition,
most
operating
direct
dischargers
are
subject
to
requirements
under
the
final
rule:
only
10
percent
are
excluded
from
requirements
as
a
result
of
subcategory
exclusions.
As
shown
in
the
table,
EPA
estimates
that
no
direct
dischargers
will
close
or
incur
moderate
impacts
as
a
result
of
the
final
rule s
requirements.

Impacts
on
direct
dischargers
are
the
same
under
the
433
Upgrade
Option
impacts
as
under
the
final
rule,
since
these
Options
apply
the
same
requirements
to
the
same
universe
of
facilities.
The
Proposed/
NODA
Option
would
have
yielded
more
regulatory
closures
and
moderate
impacts
than
the
final
rule
and
433
Upgrade
Options.

5­
19
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
5:
Facility
Impact
Analysis
Table
5.8:
ulatory
Impacts
on
Direct
Dischargers
by
Option,
National
Estimates
Option
I:

Selected
Option
(
Directs
Only)
Option
II:

Proposed/
NODA
Option
Option
III:

Directs
+
413
to
433
Upgrade
Option
IV:

Directs
+
All
to
433
Upgrade
Number
of
facilities
operating
in
the
baseline
2,641
4,182
2,641
2,641
private
MP&
M
and
railroad
line
maintenance
2,183
3,459
2,183
2,183
government­
owned
458
722
458
458
Number
of
facilities
with
subcategory
exclusions
259
0
259
259
Percent
of
facilities
operating
in
the
baseline
with
subcategory
exclusions
9.8%
0.0%
9.8%
9.8%

Number
of
facilities
operating
in
the
baseline
subject
to
regulatory
requirements
2,382
4,182
2,382
2,382
Number
of
regulatory
closures
0
39
0
0
Percent
of
facilities
operating
in
the
baseline
and
subject
to
regulatory
requirements
that
are
regulatory
closures
0.0%
0.9%
0.0%
0.0%

Number
of
facilities
experiencing
moderate
impacts
0
28
0
0
Percent
of
facilities
operating
in
the
baseline
that
experience
moderate
impacts
0.0%
0.7%
0.0%
0.0%
Reg
Source:
U.
S.
EPA
analysis.

5.3.6
Results
for
Private
Facilities
Table
5.9
provides
the
facility
impact
analysis
results
for
privately­
owned
facilities,
including
Railroad
Line
Maintenance
facilities.
Because
privately­
owned
facilities
account
for
over
90
percent
of
all
MP&
M
facilities
operating
in
the
baseline,

these
results
are
similar
to
the
results
reported
for
all
MP&
M
facilities
in
Table
5.5.
Almost
95
percent
of
facilities
operating
post­
compliance
are
excluded
from
requirements
under
the
final
rule,
due
to
the
subcategory
exclusions
for
all
indirect
dischargers
and
all
direct
dischargers
except
for
Oily
Wastes.

5­
20
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
5:
Facility
Impact
Analysis
Table
5.9:
ulatory
Impacts
for
Private
Facilities
by
Option,
National
Estimates
Option
I:

Selected
Option
(
Directs
Only)
Option
II:

Proposed/
NODA
Option
Option
III:

Directs
+
413
to
433
Upgrade
Option
IV:

Directs
+
All
to
433
Upgrade
Number
of
facilities
operating
in
the
baseline
36,480
54,526
36,480
36,480
Number
of
facilities
below
low
flow
cutoffs
46,582
Number
of
facilities
with
subcategory
exclusions
34,556
136
33,123
32,745
Percent
of
facilities
operating
in
the
baseline
excluded
or
below
cutoffs
94.7%
0.2%
90.8%
89.8%

Number
of
facilities
operating
in
the
baseline
subject
to
regulatory
requirements
1,924
7,808
3,357
3,735
Number
of
regulatory
closures
0
785
120
120
Percent
of
facilities
operating
in
the
baseline
and
subject
to
regulatory
requirements
that
are
regulatory
closures
0.0%
10.1%
3.6%
3.2%

Number
of
facilities
experiencing
moderate
impacts
0
257
37
49
Percent
of
facilities
operating
in
the
baseline
and
subject
to
regulatory
requirements
that
experience
moderate
impacts
0.0%
3.3%
1.1%
1.3%
Reg
Source:
U.
S.
EPA
analysis.

5.3.7
Results
for
Government­
Owned
Facilities
Table
5.10
provides
facility
impact
analysis
results
for
government­
owned
facilities.
The
3,785
government­
owned
facilities
that
continue
to
operate
in
the
baseline
represent
over
9
percent
of
all
MP&
M
facilities
operating
in
the
baseline.
As
discussed
above,
instead
of
a
closure
test,
the
impact
analysis
for
government­
owned
facilities
assesses
whether
the
rule
would
impose
major
budgetary
impacts
on
these
facilities
and
the
governments
that
own
them.

Under
the
final
rule,
88
percent
of
government­
owned
facilities
would
be
excluded
from
requirements
because
they
qualify
for
subcategory
exclusions.
EPA s
analysis
indicates
that
none
of
the
options
would
impose
major
budgetary
impacts
on
the
governments
operating
the
facilities.

5­
21
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
5:
Facility
Impact
Analysis
Table
5.10:
gulatory
Impacts
for
Government­
Owned
Facilities
by
Option,
National
Estimates
Option
I:

Selected
Option
(
Directs
Only)
Option
II:

Proposed/
NODA
Option
Option
III:

Directs
+
413
to
433
Upgrade
Option
IV:

Directs
+
All
to
433
Upgrade
Number
of
government­
owned
facilities
operating
in
the
baseline
&
post­
regulation
3,785
5,727
3,785
3,785
Number
of
facilities
below
low
flow
cutoffs
4,920
Number
of
facilities
with
subcategory
exclusions
3,327
0
3,327
3,305
Percent
of
facilities
operating
in
the
baseline
excluded
or
below
cutoffs
87.9%
85.9%
87.9%
87.3%

Number
of
facilities
operating
subject
to
regulatory
requirements
458
807
458
480
Number
of
facilities
experiencing
significant
budgetary
impacts
a
0
0
0
Percent
of
facilities
operating
in
the
baseline
that
experience
significant
budgetary
impacts
0%
0%
0%
0%
Re
0
a
A
government
is
judged
to
experience
major
budgetary
impacts
if
(
1)
any
of
its
facilities
incur
compliance
costs
exceeding
1%
of
baseline
cost
of
service
and
(
2)
the
governmental
unit
fails
both
the
taxpayers
impact
and
government
debt
impact
tests.

Source:
U.
S.
EPA
analysis.

Tables
5.11
and
5.12
provide
additional
detail
on
the
results
of
the
facility
impact
analysis
for
government­
owned
facilities.

Table
5.11
shows
the
number
of
government­
owned
facilities
by
type
and
size
of
government,
and
the
number
that
fall
below
relevant
flow
cutoffs
under
the
final
rule.

5­
22
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
5:
Facility
Impact
Analysis
Table
5.11:
Number
of
Government­
Owned
Facilities
by
Type
and
Size
of
Government
Entity
Municipal
Government
State
Government
County
Government
Regional
Governmental
Authority
Total
Large
Governments
(
population>
50,000)

#

government
entities
26
129
23
0
178
#
ernment
entities
with
exclusions
592
248
758
46
1,645
Small
Governments
(
population
<=
50,000)

#
government
entities
280
0
0
0
280
#
ernment
entities
with
exclusions
1,470
0
212
0
1,682
All
Governments
#

government
entities
306
129
23
0
458
#
ernment
entities
with
exclusions
2,062
248
970
46
3,327
Total
2,368
377
993
46
3,785
of
regulated
of
gov
of
regulated
of
gov
of
regulated
of
gov
Source:
U.
S.
EPA
analysis
of
Municipal
Survey.

Table
5.12
provides
additional
information
on
the
results
of
the
three
tests
performed
in
the
government
impact
analysis.
The
vast
majority
of
facilities,
95.7
percent,
are
estimated
to
incur
costs
less
than
one
percent
of
their
baseline
cost
of
service.

EPA
assumes
that
these
facilities
(
and
their
owning
governments)
can
absorb
compliance
costs
within
their
current
budgets
with
no
material
burden.
The
remaining
162
facilities,
or
4.3
percent
of
government­
owned
facilities,
incur
costs
exceeding
one
percent
of
their
baseline
costs
of
service.
Although
EPA
estimates
that
these
facilities
will
incur
costs
exceeding
the
one
percent
no­
impact
threshold,
whether
these
costs
represent
a
material
burden
to
the
owning
government
depends
on
the
magnitude
of
costs
at
the
government
level.
To
understand
whether
this
higher
facility­
level
cost
would
constitute
a
significant
burden,
EPA
estimated
the
total
of
compliance
costs
incurred
by
a
government
for
all
of
its
affected
MP&
M
facilities
and
assessed
the
impact
of
these
costs
under
the
two
tests
outlined
above:
the
taxpayer
impact
test
and
the
government
debt
service
impact
test.
For
the
final
rule,
EPA
estimated
that
none
of
the
governments
with
facilities
incurring
costs
greater
than
one
percent
of
baseline
values
would
fail
either
of
the
two
government­
level
impacts
tests.

5­
23
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
5:
Facility
Impact
Analysis
Table
5.12:
Impacts
on
Governments
of
MP&
M
Facility
Compliance
Costs
by
Size
of
Government
Owned
by
Small
Governments
Owned
by
Large
Governments
All
Government­

Owned
Facilities
Number
of
government­
owned
MP&
M
facilities
affected
1,962
1,823
3,785
Number
Percent
Number
Percent
Number
Percent
Number
and
percent
of
governments
failing
all
three
budgetary
impact
criteria
0
0.0%
0
0.0%
0
0.0%

Individual
Test
Results:
number
and
percent
of
failures
Compliance
costs
>
one
percent
of
baseline
cost
of
service
test
140
7.1%
22
1.2%
162
4.3%

Impacts
on
taxpayers
test
0
0.0%
0
0.0%
0
0.0%

Impacts
on
government
debt
test
0
0.0%
0
0.0%
0
0.0%

Source:
U.
S.
EPA
analysis.

That
no
governments
incur
budgetary
impacts
at
the
government
level
is
not
surprising.
The
MP&
M
activities
regulated
under
the
final
rule
typically
represent
a
very
small
portion
of
governments 
budgets.
Even
a
significant
percentage
increase
in
the
cost
of
MP&
M
activities
(
as
measured
by
the
comparison
of
post­
regulation
costs
to
baseline
costs)
is
unlikely
to
present
any
serious
burden
on
the
budgets
of
the
affected
governments.

Moreover,
the
costs
to
government­
owned
facilities
are
quite
low.
The
large
majority
(
3,327
or
88
percent)
of
the
3,785
government­
owned
facilities
are
excluded
from
the
final
rule.
Of
the
458
government
facilities
remaining
under
regulation,

183
facilities
incur
no
costs,
and
275
incur
annualized
costs
averaging
$
32,674.

5­
24
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
5:
Facility
Impact
Analysis
GLOSSARY
after­
tax
cash
flow
(
ATCF):
After­
tax
cash
flow
available
to
equity.

baseline
closures:
Facilities
showing
inadequate
financial
performance
in
the
baseline,
that
is,
in
the
absence
of
the
rule.

These
facilities
closures
would
have
occurred
with
or
without
the
rule.

Construction
Cost
Index
(
CCI):
Measures
how
much
it
cost
to
purchase
a
hypothetical
package
of
goods
and
services
compared
to
what
is
was
in
the
base
year.
It
applies
to
general
construction
costs.
The
CCI
can
be
used
where
labor
costs
are
a
high
proportion
of
total
costs.
The
CCI
uses
200
hours
of
common
labor,
multiplied
by
the
20­
city
average
rate
for
wages
and
fringe
benefits.
(
http://
www.
enr.
com/
cost/
costfaq.
asp)

cost
of
capital:
Costs
incurred
for
a
firm
to
obtain
financing
from
all
capital
sources
including,
in
particular,
equity
and
debt.

cost
pass­
through
analysis:
Calculates
the
percentage
of
compliance
costs
that
EPA
expects
firms
subject
to
regulation
to
recover
from
customers
through
increased
revenues.

facility:
A
contiguous
set
of
buildings
or
machinery
on
a
piece
of
land
under
common
ownership.

free
cash
flow:
Cash
flow
generated
by
the
company
that
is
available
to
all
providers
of
the
company s
capital,
both
creditors
and
shareholders.

government­
owned
facility:
Includes
facilities
operated
by
municipalities,
state
agencies
and
other
public
sector
entities
such
as
state
universities.

interest
coverage
ratio
(
ICR):
Ratio
of
cash
operating
income
to
interest
expenses.
This
ratio
measures
the
facility's
ability
to
service
its
debt
and
borrow
for
capital
investments.

liquidation
value:
Net
amount
that
could
be
realized
by
selling
the
assets
of
a
firm
after
paying
the
debt.

(
http://
www.
duke.
edu/~
charvey/
Classes/
wpg)

moderate
impacts:
Adverse
changes
in
a
facility's
financial
position
that
are
not
threatening
to
its
short­
term
viability.

operating
and
maintenance
(
O&
M):
Costs
estimated
to
result
from
operating
and
maintaining
pollution
controls
adopted
to
comply
with
effluent
guidelines.
Operating
costs
include
the
costs
of
monitoring.

pre­
tax
return
on
assets
(
PTRA):
Ratio
of
cash
operating
income
to
assets.
This
ratio
measures
facility
profitability.

private
MP&
M
facility:
Includes
all
privately­
owned
facilities
that
do
not
perform
railroad
line
maintenance.

Producer
Price
Index
(
PPI):
A
family
of
indexes
that
measures
the
average
change
over
time
in
the
selling
prices
received
by
domestic
producers
of
goods
and
services.
PPI's
measure
price
change
from
the
perspective
of
the
seller.
This
contrasts
with
other
measures,
such
as
the
Consumer
Price
Index
(
CPI),
that
measure
price
change
from
the
purchaser's
perspective.
Sellers'
and
purchasers'
prices
may
differ
due
to
government
subsidies,
sales
and
excise
taxes,
and
distribution
costs.
(
http://
stats.
bls.
gov/
ppifaq.
htm#
1)

railroad
line
maintenance
facility:
Facilities
that
maintain
and
repair
railroad
track
and
other
vehicles.

regulatory
closure:
A
facility
that
is
predicted
to
close
because
it
can
not
afford
the
costs
of
complying
with
the
rule.

severe
impacts:
Facility
closures
and
the
associated
losses
in
jobs,
earnings,
and
output
at
facilities
that
close
due
to
the
rule.

total
annu
alized
com
pliance
co
st
(
TAC
C):
Sum
of
annual
operating
and
maintenance
costs
and
the
annualized
equivalent
of
one­
time
costs,
calculated
over
15
years
assuming
a
seven
percent
discount
rate.

5­
25
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
5:
Facility
Impact
Analysis
ACRONYMS
ATCF:
after­
tax
cash
flow
CCI:
construction
cost
index
ICR:
interest
coverage
ratio
O&
M:
operation
and
maintenance
PPI:
producer
price
index
PTRA:
pre­
tax
return
on
assets
TACC:
total
annualized
compliance
cost
5­
26
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
5:
Facility
Impact
Analysis
REFERENCES
Brealey,
Richard
A.
and
Stewart
C.
Myers.
1996.
Principles
of
Corporate
Finance,
5th
edition.
New
York:
McGraw­
Hill.

McKinsey
&
Company,
Inc.
et
al.
2000.
Valuation:
Measuring
and
Managing
the
Value
of
Companies,
3rd
edition.
New
York:
John
Wiley
&
Sons,
Inc.

U.
S.
Bureau
of
Labor
Statistics,
Producer
Price
Index
Revision­
Current
Series.
On­
line
database
at
http://
stats.
bls.
gov/
ppihome.
htm.

U.
S.
Department
of
Commerce,
Bureau
of
the
Census,
Annual
Survey
of
Manufactures.
On­
line
database
at
http://
www.
census.
gov/
prod/
www/
abs/
industry.
html.

U.
S.
Environmental
Protection
Agency
(
U.
S.
EPA).
1995.
Interim
Economic
Guidance
for
Water
Quality
Standards
Workbook.
Office
of
Water,
Economics
and
Statistical
Analysis
Branch.
March.

U.
S.
Environmental
Protection
Agency
(
U.
S.
EPA).
2000.
Technical
Development
Document
for
the
Proposed
Effluent
Limitations
Guidelines
and
Standards
for
the
Metal
Products
&
Machinery
Point
Source
Category
.
EPA
821­
B­
00­
005.

December.

5­
27
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
5:
Facility
Impact
Analysis
THIS
PAGE
INTENTIONALLY
LEFT
BLANK
5­
28
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
6:
Employment
Effects
Chapter
6:
Employment
Effects
INTRODUCTION
This
chapter
discusses
the
employment
effects
associated
with
the
final
rule
and
the
alternative
regulatory
options
considered
by
EPA.
The
MP&
M
regulation
can
generate
both
positive
and
negative
impacts
on
employment.
Any
facility
closures
induced
by
the
rule
would
result
in
reduced
demand
for
labor
and
compliance
activities
at
facilities
that
close,
but
would
also
increase
employment
requirements
in
facilities
that
remain
open
and
continue
to
operate.
The
regulation
could
also
create
a
demand
for
compliance­
related
equipment
and
installation,
which
would
also
generate
new
employment
requirements.
CHAPTER
CONTENTS
6.1
Job
Losses
Due
to
Closures
.................
6­
2
6.2
Job
Gains
Due
to
Compliance
Requirements
....
6­
3
6.3
Net
Effects
on
Employment
.................
6­
5
Glossary
.................
.................
..
6­
7
Acronym
.................
.................
..
6­
8
References
.................
.................
6­
9
EPA
assumed
that
any
estimated
facility
closures
would
result
in
the
loss
of
full­
time
equivalents
(
FTEs).

The
MP&
M
rule
may
affect
overall
employment
in
three
ways.

Direct
labor
requirements.
Direct
labor
requirements
are
job
losses
from
closures
and
job
gains
from
manufacturing,

installing,
and
operating
compliance­
related
equipment.
Direct
labor
requirements
also
include
labor
to
implement
the
rule s
pollution
prevention
activities.
1
Indirect
labor
requirements.
Compliance
expenditures
may
increase
employment
in
industries
doing
business
with
compliance
equipment
and
service
providers.
Economists
refer
to
these
as
linked
industries.
For
example,
a
firm
that
manufactures
a
treatment
system
will
purchase
pumps,
pipes,
and
other
intermediate
goods
and
services
from
other
firms
and
sectors
of
the
economy.
Employment
in
these
linked
industries
increases
when
treatment
equipment
manufacturers
purchase
goods
and
services
from
them.
Closures
of
MP&
M
facilities
can
also
lead
to
reduced
requirements
for
inputs
to
MP&
M
industry
products,
and
therefore
indirect
job
losses
in
the
supplier
industries.

Induced
labor
requirements.
Increased
direct
and
indirect
labor
employment
also
increases
spending
on
consumer­

oriented
service
and
retail
businesses.
Economists
refer
to
the
additional
labor
demand
in
the
businesses
patronized
by
people
working
in
the
direct
and
indirect
labor
industries
as
 
induced 
labor
requirements.
Conversely,
people
who
are
laid
off
from
MP
&
M
facilities
that
close
due
to
the
rule
may
spend
less,
reducing
employment
in
sectors
providing
consumer
services
and
products.

EPA
is
not
including
a
total
estimate
of
indirect
and
induced
job
gains
and
losses,
however,
because
the
magnitude
of
losses
and
gains
is
very
small
at
the
national
level
and
occur
across
all
states.
The
job
gains
after
the
first
three
years
are
expected
to
be
approximately
two
jobs
per
year,
without
any
regulation­
related
losses.
The
low
magnitude
of
these
gains
means
that
it
is
highly
unlikely
that
there
will
be
any
material
secondary
and
induced
impacts
from
the
regulation.

Because
EPA
estimates
that
no
facility
closures
will
occur
under
the
final
rule,
EPA
expects
that
the
rule
will
cause
no
job
losses.
However,
EPA
estimates
that
the
regulation
will
increase
employment,
with
the
manufacture
and
installation
of
compliance
equipment
causing
a
short­
term
gain
in
direct
employment
of
20
FTEs.
In
addition,
EPA
estimates
that
operation
and
maintenance
of
compliance
equipment
will
cause
a
continuing
direct
requirement
for
two
FTEs
per
year.
The
net
effect
on
direct
employment
of
the
regulation
is
an
estimated
increase
of
47
FTE­
years,
a
measure
that
reflects
both
the
number
and
duration
of
jobs
gained.
This
number
represents
an
average
gain
of
three
FTEs
per
year
over
the
15
year
analysis
period.

Although
EPA
expects
no
job
losses
under
the
final
rule,
EPA
considered
other
regulatory
options
that
would
likely
have
caused
facility
closures
and
job
losses.
The
following
sections
of
this
chapter
review
first
the
job
losses
from
facility
closures
under
the
alternative
regulatory
options,
and
second
the
expected
job
gains
from
compliance
equipment
installation
and
1
See
the
Technical
Development
Document
for
more
information
on
compliance
costs.

6­
1
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
6:
Employment
Effects
operation
for
both
the
final
rule
and
the
alternative
options.
The
last
section
discusses
net
impacts
on
employment
and
the
expected
timing
of
those
effects.

6.1
JOB
LOSSES
DUE
TO
CLOSURES
As
discussed,
EPA
estimates
that
the
final
rule
will
cause
no
facility
closures
and
thus
no
job
losses.
2
However,
EPA
considered
other
regulatory
options
that
would
likely
cause
facility
closures
and
job
losses.
To
calculate
job
losses
for
these
options,
EPA
assumed
that
all
employees
working
at
closing
facilities
will
lose
their
jobs,
and
that
one­
third
of
the
facilities
estimated
to
close
do
so
in
each
of
the
first
three
years
after
promulgation
of
the
option.
The
§
308
surveys
provide
the
number
of
employees
at
each
facility,
expressed
in
FTEs.
The
job
losses
attributable
to
an
option
are
simply
the
sum
of
employment
at
the
plants
estimated
to
close.
EPA
did
not
analyze
the
job
losses
that
would
occur
if
facilities
cut
production
or
ceased
production
of
products
that
required
certain
processes
instead
of
closing.
Table
6.1
shows
the
total
employment
and
estimated
job
losses
by
subcategory
due
to
facility
closures
under
the
alternative
regulatory
options
and
as
a
percent
of
the
total
employment
in
the
baseline.

Table
6.1:
Job
Losses
for
the
Alternative
Regulatory
Options
by
Subcategory;
Final
Rule
Subcategory
Total
Employment
in
the
Baseline
Option
I:

Selected
Option
Option
II:

NODA/
Proposed
Option
Option
III:

413
to
433
Upgrade
Option
Option
IV:

All
to
433
Upgrade
Option
Estimated
Job
Losses
%
of
Total
Jobs
Estimated
Job
Losses
%
of
Total
Jobs
Estimated
Job
Losses
%
of
Total
Jobs
General
Metals
3,641,623
n/
a
7,895
0.2%
6,087
0.2%
6,087
0.2%

Metal
Finishing
Job
Shop
63,083
n/
a
19,072
30.2%
1,425
2.3%
1,425
2.3%

Non­
Chromium
Anodizing
13,464
n/
a
0
0.0%
0
0.0%
0
0.0%

Oily
Waste
3,143,544
n/
a
104
0.0%
0
0.0%
0
0.0%

Printed
Wiring
Board
110,644
n/
a
3,998
3.6%
363
0.3%
363
0.3%

Railroad
Rebuildersa
n/
a
n/
a
n/
a
n/
a
n/
a
n/
a
n/
a
n/
a
Shipbuilding
Dry
Dock
994
n/
a
0
0.0%
0
0.0%
0
0.0%

Steel
Forming
and
Finishingb
21,753
1,660
7.6%

All
Subcategories
6,973,352
n/
a
32,729
0.5%
7,874
0.1%
7,874
0.1%

a
Employment
is
only
available
at
the
firm
level
for
the
Railraod
Rebuilders
subcategory.

b
The
Steel
Forming
&
Finishing
subcategory
was
removed
from
the
MP&
M
universe
after
deciding
not
to
consider
the
Proposed/
NODA
Option
(
Option
II)
for
the
final
rule.
As
a
result,
estimated
job
losses
are
included
in
the
Steel
Forming
&
Finishing
subcategory
for
Option
II
only.
Accordingly,
the
employment
from
this
subcategory
is
not
included
in
the
total.

Source:
U.
S.
EPA
analysis.

Job
losses
under
the
Proposed/
NODA
Option
equal
0.5
percent
of
total
employment
at
water
discharging
MP&
M
facilities
and
0.1
percent
under
the
433
Upgrade
Options.
The
metal
finishing
job
shop
subcategory
accounts
for
19,072
of
the
job
losses
under
the
Proposed/
NODA
Option
or
over
58
percent
of
the
total
32,729
estimated
job
losses.
The
subcategories
with
the
highest
percent
of
job
losses
under
the
Proposed/
NODA
Option
are
the
Metal
Finishing
Job
Shops
(
30.2
percent
of
total
employment
in
the
subcategory),
Steel
Forming
and
Finishing
(
7.6
percent)
and
Printed
Wiring
Boards
(
3.6
percent).
Job
2
EPA s
analysis
considers
employment
losses
only
for
facility
closures.
As
discussed
in
Chapter
5,
firms
may
consider
a
range
of
responses
in
structuring
a
compliance
strategy,
including
consolidation
and/
or
transfer
of
production
among
facilities
to
minimize
the
financial
burden
of
compliance.
In
some
instances,
these
actions
could
result
in
employment
losses
in
some
facilities
and
possible
increases
in
others.
Because
of
the
complexity
of
these
decisions,
EPA s
analysis
cannot
consider
the
full
range
of
such
compliance
responses
and
does
not
consider
the
potential
employment
effects
 
negative
or
positive
 
associated
with
these
compliance
options.

6­
2
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
6:
Employment
Effects
losses
under
the
433
Upgrade
Options
are
estimated
in
the
General
Metals,
Metal
Finishing
Job
Shops,
and
Printed
Wiring
Boards
subcategories
of
6,087,
1,425,
and
363
employees,
respectively.

6.2
JOB
GAINS
DUE
TO
COMPLIANCE
REQUIREMENTS
Direct
labor
requirements
arise
from
the
employment
necessary
to
manufacture,
install,
and
operate
equipment
that
MP&
M
facilities
need
to
comply
with
the
final
rule,
as
well
as
pollution
prevention
activities
undertaken
to
comply
with
the
regulation.
The
following
sections
discuss
labor
requirements
associated
with
manufacturing
compliance
equipment,

equipment
installation,
and
operation,
respectively.
This
section
provides
a
detailed
analysis
for
the
final
rule
only.
A
summary
of
the
net
job
gains
due
to
compliance
with
the
alternative
regulatory
options
is
presented
at
the
end
of
the
section.

Some
more
detail
on
the
compliance
costs
that
went
into
calculating
job
gains
under
the
alternative
regulatory
options
is
available
in
Appendix
E.

a.
Direct
labor
requirements
for
manufacturing
compliance
equipment
EPA
estimated
the
direct
labor
requirements
for
manufacturing
wastewater
treatment
systems
using
three
steps:

 
Calculate
the
cost
of
compliance
equipment;

 
Estimate
the
share
of
the
cost
of
compliance
equipment
due
to
labor
inputs.
This
estimate
shows
how
much
money
goes
to
employees
of
equipment
manufacturers;
and
 
Convert
the
dollars
spent
on
manufacturing
employees
to
a
full­
time
employment
equivalent
(
FTE),
based
on
a
yearly
labor
cost.

 
Compliance
cost
EPA
used
the
total
one­
time
capital
costs
estimated
by
the
engineers
to
calculate
the
purchase
cost
paid
to
manufacturers
of
compliance
equipment.
The
estimated
one­
time
direct
capital
equipment
cost
is
$
3.1
million
for
the
final
regulatory
option.

Appendix
E
explains
in
more
detail
how
this
value
was
calculated.

 
Labor
share
The
Bureau
of
Economic
Analysis
(
BEA)
calculates
direct
requirements
coefficients
that
measure
how
many
dollars
of
each
input
are
purchased
to
produce
a
dollar
of
a
given
output.
3
EPA
used
requirements
coefficients
for
BEA
Sector
40,
the
 
Heating,
Plumbing,
and
Fabricated
Structural
Metal
Products
Industry, 
for
the
employment
analysis.
MP&
M
project
engineers
identified
BEA
Sector
40
as
the
industrial
sector
that
most
nearly
matches
the
businesses
that
would
make,
install,

and
operate
waste
treatment
systems
for
MP&
M
facilities
complying
with
the
rule.
The
inputs
into
Sector
40
production
include
intermediate
goods,
materials,
and
services,
as
well
as
labor.

BEA s
direct
requirements
table
shows
that
every
dollar
of
Sector
40
output
delivered
to
final
demand
requires
$
0.30632
expended
to
compensate
Sector
40
employees.
Multiplying
labor's
share
of
output
value
(
30.63
percent)
by
the
value
of
compliance
equipment
purchases
for
the
regulation
($
3.1
million)
yields
the
labor
cost
of
manufacturing
treatment
system
equipment:
$
0.9
million.

 
FTE
jobs
EPA
converted
the
total
labor
cost
to
the
number
of
FTE­
equivalent
jobs
by
dividing
the
total
labor
cost
by
an
estimated
yearly
labor
cost
per
FTE
employee.
EPA
used
the
hourly
labor
rate
used
in
the
engineering
cost
analysis
 
$
29.67
per
hour
in
1996
dollars.
The
$
29.67
per
hour
rate
includes
fringe
benefits
(
e.
g.,
holidays,
vacation,
and
various
insurances)
and
payroll
taxes.
EPA
adjusted
this
amount
to
2001
dollars
using
the
Bureau
of
Labor
Statistics
Employment
Cost
Index
for
manufacturing
of
durable
goods,
to
provide
an
hourly
rate
in
2001$
of
$
34.69.
The
gross
2001
dollar
annual
labor
cost
per
FTE
position
for
a
2,000­
hour
work
year
is
$
69,373.
EPA
estimated
that
one­
time
spending
on
manufacturing
treatment
system
equipment
would
require
14
FTEs
(
941
(
in
thousands)
/
69.4).
EPA
assumed
that
one­
third
of
facilities
come
into
compliance
in
each
of
the
first
three
years,
therefore,
one­
third
of
these
FTEs
(
5)
would
be
associated
with
equipment
purchases
in
each
of
the
first
three
years
after
promulgation
of
the
rule.

3
See
 
Benchmark
Input­
Output
Accounts
for
the
U.
S.
Economy,
1992, 
in
Survey
of
Current
Business,
July
1997,
U.
S.
Department
of
Commerce,
Bureau
of
Economic
Analysis.

6­
3
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
6:
Employment
Effects
b.
Direct
labor
requirements
for
installing
treatment
systems
EPA s
method
for
estimating
the
direct
labor
requirements
to
install
treatment
system
equipment
parallels
its
method
for
analyzing
the
labor
requirements
for
equipment
manufacturing.

 
Compliance
cost
EPA
used
the
total
one­
time
capital
costs
estimated
by
the
engineers
to
calculate
the
cost
of
installation.
The
estimated
one­

time
cost
of
installation
labor
is
$
0.5
million
for
the
final
regulatory
option.
Appendix
E
explains
in
more
detail
how
this
value
was
calculated.

 
Labor
share
One
hundred
percent
of
the
installation
is
a
labor
cost.

 
FTE
jobs
EPA
used
the
loaded
hourly
labor
cost
of
$
34.69
per
hour
and
2,000
hours
per
year
to
convert
labor
costs
to
numbers
of
FTE
jobs.
Complying
facilities
will
require
an
estimated
7
FTEs
(
455
(
in
thousands)
/
69.4)
to
install
the
equipment
needed
to
comply
with
the
regulation.
This
corresponds
to
2
FTEs
in
each
of
the
first
three
years
after
promulgation
of
the
rule.

c.
Direct
labor
requirements
for
operating
and
maintaining
treatment
systems
MP&
M
project
engineers
estimated
that
labor
costs
represent
one
percent
of
total
compliance
operating
and
maintenance
(
O&
M)
costs.
For
the
final
rule,
the
labor
cost
of
O&
M
is
$
0.1
million
per
year
(
2001$),
corresponding
to
2
FTEs
(
131
(
in
thousands)
/
69.4).
EPA
assumed
that
one­
third
of
facilities
come
into
compliance
in
each
of
the
first
three
years
after
promulgation
of
the
rule.
Therefore,
one­
third
of
these
FTEs
(
1)
would
have
operating
maintenance
requirements
in
the
first
year,
two­
thirds
of
these
FTEs
(
1)
would
have
operating
maintenance
requirements
in
the
second
year,
and
all
of
these
FTEs
(
2)
would
have
operating
maintenance
requirements
in
the
third
year
when
all
facilities
reach
compliance.

d.
Total
direct
labor
requirements
The
total
direct
labor
requirement
for
complying
with
the
MP&
M
rule
is
the
sum
of
the
direct
labor
requirements
of
manufacturing,
installing,
and
operating
treatment
systems.
Table
6.2
summarizes
the
direct
labor
requirements
from
compliance
expenditures
under
the
regulation.
These
requirements
include
total
one­
time
expenditures
to
manufacture
and
install
compliance
equipment
equal
to
20
FTEs,
and
continuing
requirements
for
operating
and
maintenance
of
2
FTEs
per
year.

Table
6.2:
Total
Direct
Labor
Requirements
of
the
Final
Rule,
National
Estimates
(
millions,
2001$,
before
tax)

Total
Cost
Labor
Share
Total
Labor
Cost
FTEsa
One­
time
compliance
cost
$
3.6
$
1.4
20
Capital
equipment
manufacturing
$
3.1
30.6%
$
0.9
14
Installation
labor
$
0.5
100.0%
$
0.5
7
Annual
operating
and
maintenance
cost
$
13.1
1.0%
$
0.1
2
a
Number
of
jobs
calculated
on
the
basis
of
an
average
annual
labor
cost
of
$
69,373
which
assumes
an
average
hourly
wage
of
$
34.69
and
2,000
hours
per
labor­
year.

Source:
U.
S.
EPA
analysis,
Bureau
of
Labor
Statistics,
Bureau
of
Economic
Analysis.

Table
6.3
summarizes
the
total
direct
labor
requirements
from
compliance
expenditures
under
the
final
rule
and
alternative
regulatory
options.

6­
4
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
6:
Employment
Effects
Table
6.3:
Total
Direct
Labor
Requirements
of
the
Final
Rule
and
Alternative
Regulatory
Options
Option
One­
time
manufacturing
and
installation
of
compliance
equipment
Annual
operating
and
maintenance
Manufacturing
Installation
labor
Total
Option
I:
Selected
Option
14
7
20
2
Option
II:
NODA/
Proposed
Option
2,467
1,195
3,662
215
Option
III:
413
to
433
Upgrade
Option
294
142
436
8
Option
IV:
All
to
433
Upgrade
Option
457
221
678
13
Source:
U.
S.
EPA
analysis,
Bureau
of
Labor
Statistics,
Bureau
of
Economic
Analysis.

Requirements
under
the
Proposed/
NODA
Option
include
total
one­
time
expenditures
to
manufacture
and
install
compliance
equipment
equal
to
3,662
FTEs,
and
continuing
requirements
for
operating
and
maintenance
of
215
FTEs
per
year.
EPA
expects
the
413
to
433
Upgrade
Option
and
the
All
to
433
Upgrade
Option
to
require
436
and
678
one­
time
FTEs
and
8
and
13
continuing
FTEs
per
year,
respectively.

6.3
NET
EFFECTS
ON
EMPLOYMENT
The
timing
and
duration
of
employment
changes
resulting
from
the
rule
or
the
alternative
options
depend
on
the
type
of
employment
demands
and
the
condition
of
the
economy
at
the
time
those
demands
occur.
The
increased
employment
resulting
from
facilities 
purchase
and
installation
of
compliance
equipment
will
be
short­
term
and
is
expected
to
occur
in
the
early
years
of
implementation.
However,
the
increased
employment
needed
to
operate
and
maintain
compliance
systems
will
persist,
presumably
for
the
life
of
the
compliance
equipment.
For
job
losses
that
might
accompany
the
alternative
options,
the
duration
of
unemployment
would
depend
on
labor
demand
in
the
economy
and
specifically
in
the
locations
at
which
facilities
close,
and
the
skill
level
of
those
individuals
becoming
unemployed.

Table
6.4
reports
the
estimated
level
and
timing
of
direct
employment
impacts
of
the
final
rule.
The
estimates
assume
that:

(
1)
facilities
come
into
compliance
or
close
over
a
three
year
period,
(
2)
displaced
workers
are
out
of
work
for
one
year
on
average,
and
(
3)
the
requirements
to
operate
and
maintain
compliance
systems
continue
for
15
years.
As
shown
in
Table
6.4,

the
final
rule
results
in
a
small
increase
in
employment
in
all
years
of
the
analysis
period.
Summing
employment
each
year
over
the
15
year
analysis
period
indicates
that
the
regulation
would
increase
direct
labor
requirements
by
47
 
FTE­
years ,
or
an
average
gain
of
3
FTEs
per
year.
The
comparable
estimates
for
the
alternative
options
(
shown
in
Table
6.5)
include
the
effect
of
job
losses
from
facility
closures.

The
industries
in
which
employment
changes
are
expected
to
occur
also
depend
on
the
type
of
employment
demands
under
the
rule.
Increases
in
employment
for
operation
and
maintenance
of
compliance
equipment
are
expected
to
occur
in
the
MP&
M
industries.
In
addition,
because
the
MP&
M
industry,
itself,
is
likely
to
be
a
manufacturer
of
compliance
equipment,
a
material
portion
of
the
increase
in
employment
for
producing
and
installing
compliance
equipment
is
likely
to
occur
in
the
MP&
M
industries.
Accordingly,
a
substantial
part
of
the
total
employment
increase
will
likely
occur
in
the
MP&
M
industries.
Still,
on
balance,
the
impact
on
total
employment
 
both
in
the
economy
as
a
whole
and
in
the
MP&
M
industries
 
is
expected
to
be
very
small.
The
average
net
gain
of
3
FTEs
for
the
final
rule
equals
a
negligible
percent
of
total
employment
in
the
MP&
M
facilities
potentially
subject
to
the
rule
and
even
less
compared
with
total
1996
employment
in
the
industries
that
make
up
the
larger
MP&
M
industry.
4
EPA
did
not
consider
the
possible
effects
of
excess
capacity
or
underemployment
in
the
equipment
manufacturing
and
installation
industries,
and
assumed
that
all
compliance
requirements
would
result
in
proportional
changes
in
employment.

4
Total
employment
in
the
potentially
regulated
MP&
M
facilities
is
6,973,352
FTEs,
as
reported
in
the
Section
308
surveys.

6­
5
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
6:
Employment
Effects
Table
6.4:
Estimated
Final
Rule
Net
Direct
Employment
Impacts
over
15
Years
(
number
of
FTEs
per
year
and
total
FTE­
years)

Year
One­
Time
Manufacturing
&
Installationa
Annual
O&
Ma
Closures
Net
Change
in
Employment
1
7
2
7
3
7
4
2
5
2
6
2
7
2
8
2
9
2
10
2
2
11
2
2
12
2
2
13
2
2
14
2
2
15
2
2
Total
FTEs
over
15
years
20
26
0
47
7
0
1
8
0
1
9
0
2
2
2
2
2
2
2
a
Assumes
that
one­
third
of
facilities
come
into
compliance
in
each
of
3
years.

Source:
U.
S.
EPA
analysis.

Table
6.5
presents
the
estimated
direct
employment
impact
of
the
final
rule
and
the
alternative
options.
As
discussed
earlier,

the
final
rule
would
increase
direct
labor
requirements
over
the
15
year
period
by
an
estimated
47
FTEs;
however
under
each
of
the
alternative
regulatory
options,
direct
labor
requirements
would
decrease.
The
total
estimated
net
decrease
in
direct
labor
requirements
under
the
NODA/
Proposed
Option
of
26,060
FTEs
is
driven
by
the
32,729
job
losses
from
estimated
facility
closures
under
the
option.
The
7,874
job
losses
from
projected
facility
closures
under
the
433
Upgrade
Options
result
in
a
net
decrease
in
direct
labor
requirements
under
the
413
to
433
Upgrade
Option
of
7,319
FTEs
and
the
All
to
433
Upgrade
Option
of
7,011
FTEs.

Table
6.5:
Estimated
15
Year
Net
Employment
Effects
for
the
Final
Rule
and
Alternative
Regulatory
Options
Option
Net
Change
in
Employment
(
FTEs)

Option
I:
Selected
Option
47
Option
II:
NODA/
Proposed
Option
(
26,060)

Option
III:
413
to
433
Upgrade
Option
(
7,319)

Option
IV:
All
to
433
Upgrade
Option
(
7,011)

Source:
U.
S.
EPA
Analysis.

6­
6
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
6:
Employment
Effects
GLOSSARY
direct
labor
requirements:
employment
losses
resulting
from
lost
MP&
M
output
caused
by
the
rule
and
employment
gains
caused
by
compliance
expenditures
resulting
from
the
rule
in
the
directly­
affected
industries.

full­
time
equivalent
(
FTE):
hours
of
employment
equivalent
to
one
full­
time
job.

FTE­
year:
one
year
of
full­
time
employment.

indirect
labor
requirements:
changes
in
employment
in
industries
that
supply
directly
affected
industries
resulting
from
increased
purchases
or
reduced
output
in
the
directly
affected
industries.

induced
labor
requirements:
changes
in
employment
in
industries
providing
goods
and
services
to
people
whose
employment
is
directly
or
indirectly
affected
by
the
rule.

linked
industries:
industries
that
sell
goods
and
services
to
or
purchase
output
from
a
directly­
affected
industry.

6­
7
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
6:
Employment
Effects
ACRONYM
FTE:
full­
time
equivalent
6­
8
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
6:
Employment
Effects
REFERENCES
Apogee
Research,
Inc.
1992.
A
Report
on
Clean
Water
Investment
and
Job
Creation,
prepared
for
National
Utility
Contractors
Association.

U.
S.
Bureau
of
Labor
Statistics.
2000.
Employment
Cost
Index
­
Historical
Listing.
July
27.

http://
stats.
bls.
gov/
ecthome.
htm.

U.
S.
Department
of
Commerce.
1992
and
1997.
Bureau
of
Economic
Analysis,
Regional
Multipliers:
A
User
Handbook
for
the
Regional
Input­
Output
Modeling
System
(
RIMSII),
Second
Edition
and
Third
Edition.
Washington,
D.
C.

U.
S.
Department
of
Commerce.
1997.
Bureau
of
Economic
Analysis,
The
1992
Benchmark
Input­
Output
Accounts
of
the
United
States.

U.
S.
Environmental
Protection
Agency
(
U.
S.
EPA),
Office
of
Water.
1993.
Job
Creation
Fact
Sheet,
internal
document.

February.

6­
9
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
6:
Employment
Effects
THIS
PAGE
INTENTIONALLY
LEFT
BLANK
6­
10
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
7:
Government
and
Community
Impact
Analysis
Chapter
7:
Government
and
Community
Impact
Analysis
INTRODUCTION
In
this
chapter,
EPA
examines
how
the
final
MP&
M
rule
and
alternatives
for
regulation
considered
by
EPA
might
affect
the
economic
welfare
of
communities,
where
communities
are
defined
as
States,
counties
and
metropolitan
areas.

Communities
may
suffer
adverse
impacts
from
a
rule
in
two
ways.
First,
local
governments
may
incur
costs
to
comply
with
the
rule,
if
they
operate
MP&
M
facilities,
or
to
administer
the
rule.
Second,
communities
may
be
affected
if
MP&
M
facility
closures
resulting
from
the
rule
affect
the
health
of
their
local
economies.
CHAPTER
CONTENTS
7.1
ts
on
Governments
.................
.
7­
1
7.1.1
ts
on
Governments
that
Operate
MP&
M
Facilities
.................
..
7­
1
7.1.2
dministrative
Costs
.........
7­
2
7.2
Facility
Closures
.....
7­
6
Glossary
.................
.................
7­
7
Acronyms
.................
................
7­
8
Impac
Impac
POTW
A
Community
Impacts
of
This
analysis
was
undertaken
in
part
to
meet
potential
requirements
of
the
Unfunded
Mandates
Reform
Act
(
UMRA).

However,
the
final
rule
does
not
contain
a
Federal
mandate
under
UMRA
because
the
rule
will
not
result
in
expenditures
of
$
100
million
or
more
for
State,
local,
and
tribal
governments,
in
the
aggregate,
or
the
private
sector
in
any
one
year.
Thus,
the
final
rule
is
not
subject
to
the
requirements
of
the
UMRA
sections
202
and
205.
Although
the
final
rule
does
not
contain
a
Federal
mandate
under
UMRA,
this
chapter
summarizes
the
impacts
of
the
final
rule
on
State
and
local
governments
as
part
of
its
decision­
making
process.

7.1
IMPACTS
ON
GOVERNMENTS
The
analysis
considered
two
effects
on
governments:
1
 
Government­
owned
MP&
M
facilities
may
be
subject
to
the
regulation,
and
therefore
incur
compliance
costs;
and
 
Municipalities
that
own
publicly­
owned
treatment
works
(
POTWs)
that
receive
influent
from
MP&
M
facilities
subject
to
the
rule
may
incur
costs
to
implement
the
regulation.
These
include
costs
of
permitting
MP&
M
facilities
that
have
not
been
previously
permitted,
and
repermitting
some
MP&
M
facilities
with
existing
permits
earlier
than
would
otherwise
be
required.

7.1.1
Impacts
on
Governments
that
Operate
MP&
M
Facilities
Chapter
5
presented
EPA s
analysis
of
the
final
rule s
impacts
on
government­
owned
MP&
M
facilities
and
on
the
governments
that
own
them.
The
analysis
shows
that
the
final
rule
imposes
only
limited
costs
on
government­
owned
facilities,
because
3,327
(
88
percent)
of
the
3,785
facilities
are
not
subject
to
this
regulation
(
121
General
Metals
facilities
and
3,206
Oily
Wastes
facilities.)
Thus,
the
final
rule
applies
to
458
government
owned
facilities.

An
estimated
162
government­
owned
facilities
(
4.3
percent
of
the
total)
would
incur
costs
under
the
final
rule
exceeding
one
percent
of
their
baseline
cost
of
service.
Therefore,
96.3
percent
of
the
government­
owned
facilities
either
incur
no
costs
or
are
likely
to
be
able
to
absorb
the
added
costs
within
their
existing
budgets.
None
of
the
affected
governments
incur
costs
that
1
A
third
potential
cost
would
be
implementation
cost
for
direct
dischargers.
However,
all
direct
dischargers
regulated
under
the
final
rule
(
and
any
alternative
options
considered)
must
already
have
NPDES
permits
in
the
baseline.
EPA
therefore
does
not
expect
governments
to
incur
incremental
administrative
costs
as
a
result
of
this
rule
for
direct
dischargers,
because
governments
will
incorporate
the
new
standards
into
existing
NPDES
permits.

7­
1
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
7:
Government
and
Community
Impact
Analysis
cause
them
to
exceed
the
thresholds
for
impacts
on
taxpayers
or
for
government
debt
burden.
EPA
therefore
has
concluded
that
the
final
rule
will
not
impose
budgetary
burdens
on
any
of
the
governments
that
own
MP&
M
facilities.

7.1.2
POTW
Administrative
Costs
The
selected
option
excludes
all
indirect
dischargers
from
MP&
M
regulation.
Therefore,
there
are
no
POTW
administrative
costs
associated
with
the
final
rule.
However,
under
some
of
the
alternative
regulatory
options
considered,
State
and
local
governments
would
incur
implementation
costs
for
indirect
dischargers.
This
section
describes
the
administrative
activities
involved
and
presents
estimates
of
their
costs.

EPA
is
able
to
estimate
total
costs
to
POTWs,
but
is
not
able
to
estimate
the
costs
to
any
one
POTW,
since
it
is
not
possible
to
determine
which
POTWs
receive
discharges
from
the
regulated
MP&
M
facilities.
EPA
is
also
not
able
to
assess
budgetary
impacts
on
community­
owned
POTWs,
since
available
data
do
not
provide
estimates
of
financial
characteristics
for
the
specific
POTW
s
receiving
effluent
affected
by
this
rule.
The
relatively
low
POT
W
permitting
costs
per
facility
and
the
potential
cost
savings
estimated
in
this
section,
however,
suggest
that
impacts
on
individual
POTWs,
if
any,
would
be
minor.

a.
Permitting
activities
The
General
Pretreatment
Regulations
(
40
CFR
Part
403)
establish
procedures,
responsibilities,
and
requirements
for
EPA,

States,
local
governments,
and
industry
to
control
pollutant
discharges
to
POTWs.
Under
the
Pretreatment
Regulations,

POTWs
or
approved
States
implement
categorical
pretreatment
standards
(
i.
e.,
PSES
and
PSNS).

2
Discharges
from
an
MP&
M
facility
to
a
POTW
may
already
be
permitted
in
the
baseline.
For
example,
industrial
users
subject
to
another
Categorical
Pretreatment
Standard
would
have
a
discharge
permit.
Other
significant
industrial
users
(
SIU)

that
are
typically
permitted
by
POTWs
include
industrial
users
that:

 
discharge
an
average
of
25,000
gallons
per
day
or
more
of
process
wastewater
to
a
POTW,

 
contribute
a
process
waste
stream
which
makes
up
5
percent
or
more
of
the
average
dry
weather
hydraulic
or
organic
capacity
of
the
POT
W
treatment
plant,
or
 
have
a
reasonable
potential
for
adversely
affecting
the
POTW
 
s
operation
or
for
violating
any
pretreatment
standard.

Since
all
indirect
dischargers
have
been
excluded
from
the
final
rule,
EPA
expects
no
POTW
administrative
costs
to
be
associated
with
the
rule.
Under
the
alternative
options,
which
include
indirect
dischargers,
EPA
expects
no
increase
in
permitting
costs
for
facilities
that
already
hold
a
permit
in
the
baseline.
However,
governments
will
incur
additional
permitting
costs
for
unpermitted
facilities
(
under
the
NODA/
Proposal
option
only)
and
to
accelerate
repermitting
for
some
indirect
dischargers
that
currently
hold
permits.
On
the
other
hand,
some
administrative
costs
might
decrease.
For
example,

control
authorities
would
no
longer
have
to
repermit
facilities
that
are
estimated
to
close
as
the
result
of
the
regulatory
options
considered.
Communities
that
own
POTW
s
that
must
issue
permits
might
therefore
experience
a
change
in
costs
as
a
result
of
some
of
the
alternative
regulatory
options
considered.

b.
Data
sources
EPA
collected
information
from
POTWs
to
support
development
of
the
MP&
M
effluent
guideline.
Of
150
surveys
mailed,

EPA
received
responses
to
147,
for
a
98
percent
response
rate.
The
POTW
Survey
asked
respondents
to
provide
information
on
administrative
permitting
costs
for
indirect
dischargers,
sewage
sludge
use
and
disposal
costs
and
practices,
and
general
information
(
including
number
of
permitted
users
and
number
of
known
MP&
M
dischargers).
The
administrative
cost
information
included
the
number
of
hours
required
to
complete
specific
permitting
and
repermitting,
inspection,
monitoring,

and
enforcement
activities.
Respondents
were
also
asked
to
provide
an
average
labor
cost
for
all
staff
involved
in
permitting
activities.
EPA
used
the
survey
responses
on
administrative
costs
to
estimate
a
range
of
costs
incurred
by
POTWs
to
permit
a
single
MP&
M
facility.

EPA
also
used
the
data
provided
in
the
Association
of
Metropolitan
Sewerage
Agencies
(
AMSA)
survey
to
verify
and,
in
some
cases,
supplement
its
own
analyses
of
POTW
administrative
costs
of
the
final
MP&
M
rule.
AMSA
provided
EPA
with
2
Under
the
General
Pretreatment
Program,
a
facility's
discharges
may
be
controlled
through
a
"
permit,
order
or
similar
means".
For
simplicity,
this
report
refers
to
the
control
mechanism
as
a
permit.

7­
2
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
7:
Government
and
Community
Impact
Analysis
comments
on
the
proposed
MP&
M
rule
and
supplemented
these
comments
with
a
spreadsheet
database.
The
database
contains
data
from
an
AM
SA
formulated
survey
and
covers
responses
from
176
PO
TW
s,
representing
66
pretreatment
programs.
The
AMSA
survey
was
conducted
to
verify
data
from
EPA's
survey
of
POTWs
and
therefore
included
similar,

although
fewer,
variables
compared
to
EPA's
survey.
Elements
EPA
verified
using
the
AMSA
survey
include:
(
1)
the
estimated
number
of
indirect
dischargers
and
(
2)
the
unit
costs
of
certain
permitting
activities,
including
permit
implementation,
sampling,
and
sample
analysis.
Elements
EPA
added
to
its
analysis
using
the
AMSA
data
include:
(
1)

screening
costs
for
POTWs
that
do
not
currently
operate
under
a
pretreatment
program
and
(
2)
management
oversight
costs
associated
with
implementing
the
MP&
M
regulation.

c.
Methodology
EPA
estimated
the
annualized
costs
of
permitting
indirect
dischargers
under
the
different
regulatory
options
using
the
following
steps:

 
Determine
the
number
and
characteristics
of
indirect
dischargers
that
will
be
permitted
under
each
regulatory
option.
Only
the
NODA/
Proposal
option
includes
costs
for
permitting
an
MP&
M
facility
for
the
first
time.
The
final
rule
does
not
cover
indirect
dischargers
while
the
other
regulatory
options
only
regulate
those
indirect
dischargers
that
already
hold
permits
in
the
baseline.
For
the
NODA/
Proposal
option,
EPA
determined
how
many
new
permits
would
be
issued.
The
NODA/
Proposal
option
only
requires
concentration­
based
permits,
no
mass­
based
permits.
In
addition,
EPA
determined
the
number
of
facilities
that
currently
hold
a
permit
and
that
would
have
to
be
repermitted
sooner
than
would
otherwise
be
the
case.

 
Use
the
data
from
the
POTW
Survey
to
determine
a
high,
middle,
and
low
hourly
burden
for
permitting
a
single
facility.
EPA
defined
the
low
and
high
estimates
of
hours
such
that
90%
of
the
POTW
responses
fell
above
the
low
value
and
90%
of
responses
fell
below
the
high
value.
The
median
value
is
used
to
define
the
middle
hourly
burden.

 
Use
the
data
from
the
POTW
Survey
to
determine
the
average
frequency
of
performing
certain
administrative
functions.
For
administrative
functions
that
are
not
performed
at
all
facilities,
survey
data
were
used
to
calculate
the
portion
of
facilities
requiring
these
functions.
For
example,
the
survey
data
show
that
on
average
38.5%
of
facilities
submit
a
non­
compliance
report.

 
Multiply
the
per­
facility
burden
estimate
by
the
average
hourly
wage.
EPA
determined
a
high,
middle,
and
low
dollar
cost
of
administering
the
rule
for
a
single
facility
by
multiplying
the
per­
facility
hour
burden
by
the
average
hourly
wage.
The
POTW
Survey
reported
an
average
hourly
labor
rate
of
$
39.33
($
2001)
for
staff
involved
in
permitting.
This
is
a
fully­
loaded
cost,
including
salaries
and
fringe
benefits.

 
Calculate
the
annualized
cost
of
administering
the
rule.
The
number
of
facilities,
hourly
burden
estimate,

frequency
estimates,
and
hourly
wage
estimates
are
all
combined
to
determine
the
total
cost
of
administering
the
rule.

The
type
of
administrative
activities
required
varies
over
time
and
the
total
administrative
cost
is
calculated
over
a
15
year
time
period.
EPA
calculated
the
present
value
of
total
costs
using
a
seven
percent
discount
rate,
and
then
annualized
the
present
value
using
the
same
seven
percent
discount
rate.

d.
Unit
costs
of
permitting
activities
EPA
estimated
unit
costs
for
the
following
permitting
activities:

 
Permit
application
and
issuance:
developing
and
issuing
concentration­
based
permits
at
previously
unpermitted
facilities;
providing
technical
guidance;
and
conducting
public
and
evidentiary
hearings;

 
Inspection:
inspecting
facilities
both
for
the
initial
permit
development
and
to
assess
subsequent
compliance;

 
Monitoring:
sampling
and
analyzing
permittee s
effluent;
reviewing
and
recording
permittee s
compliance
self­

monitoring
reports;
receiving,
processing,
and
acting
on
a
permittee s
non­
compliance
reports;
and
reviewing
a
permittee s
compliance
schedule
report
for
permittees
in
compliance
and
permittees
not
in
compliance;

 
Enforcement:
issuing
administrative
orders
and
administrative
fines;
and
 
Repermitting.

7­
3
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
7:
Government
and
Community
Impact
Analysis
EPA
believes
that
these
functions
constitute
the
bulk
of
the
required
administrative
activities.
To
these
costs,
EPA
added
a
provision
for
managerial
oversight
of
25
percent.
3
There
are
other
relatively
minor
or
infrequent
administrative
functions
(
e.
g.,
providing
technical
guidance
to
permittees
in
years
other
than
the
first
year
of
the
permit,
or
repermitting
a
facility
in
significant
non­
compliance),
but
their
costs
are
likely
to
be
insignificant
compared
to
the
estimated
costs
for
the
five
major
categories
outlined
above.
EPA
also
added
a
cost
for
identifying
facilities
to
be
permitted
for
POTWs
that
do
not
currently
operate
under
a
Pretreatment
Program.
EPA
estimates
this
cost
to
be
approximately
$
0.8
million.
This
cost
only
applies
to
the
NODA/
Proposal
Option
since
facilities
subject
to
the
upgrade
options
already
hold
permits.

Table
7.1
provides
a
summary
of
the
estimated
unit
costs
for
each
permitting
activity.
Appendix
F
provides
a
detailed
discussion
of
these
unit
costs.

Table
7.1:
Government
Administrative
Activities
for
Indirect
Dischargers:
Per
Facility
Hours
and
Costs
Administrative
Activity
Percent
of
facilities
for
which
activity
is
required
Frequency
of
activity
Typical
hours
and
costs
(
2001$)

Low
Median
High
Develop
and
issue
a
concentration­
based
permit
at
a
previously
unpermitted
facility
100%
of
unpermitted
facilities
(
applicable
to
NODA/
Proposal
option
only)
One
time
4.0
hours;

$
122
10.0
hours;

$
304
40.0
hours;

$
1,217
Develop
and
issue
a
mass­
based
permit
at
a
previously
unpermitted
facility
100%
of
MP&
M
facilities
being
issued
a
new
mass­
based
permit
(
estimates
used
for
the
proposed
rule)
One
time
4.0
hours;
$
122
13.0
hours;
$
396
40.0
hours;
$
1,217
Develop
and
issue
a
mass­
based
permit
at
a
facility
holding
a
concentration­
based
permit
100%
of
MP&
M
facilities
with
permit
conversion
(
estimates
used
for
the
proposed
rule)
One
time
2.0
hours;
$
61
8.0
hours;
$
243
20.0
hours;
$
608
year
Provide
technical
guidance
to
a
permittee
on
permit
compliance
100%
of
MP&
M
facilities
being
issued
a
new
concentration­
based
permit
(
applicable
to
NODA/
Proposal
option
only)
One
time
1.5
hour;

$
46
4.0
hours;

$
122
12.0
hours;

$
365
100%
of
MP&
M
facilities
being
issued
a
new
mass­
based
permit
(
estimates
used
for
the
proposed
rule)
One
time
2.0
hours;

$
61
4.0
hours;

$
122
12.0
hours;

$
365
Conduct
a
public
or
evidentiary
hearing
3.2%
of
MP&
M
facilities
being
issued
a
new
mass­
based
or
concentration­
based
permit
(
applicable
to
NODA/
Proposal
option
only)
One
time
2.0
hours;
$
61
8.0
hours;
$
243
40.0
hours;
$
1,217
Inspect
facility
for
permit
development
100%
of
MP&
M
facilities
being
issued
a
new
permit
(
applicable
to
NODA/
Proposal
option
only)
One
Time
2.2
hours;
$
66
5.0
hours;
$
152
12.0
hours;
$
365
Inspect
facility
for
compliance
assessment
100%
of
MP&
M
facilities
being
issued
a
new
permit
(
applicable
to
NODA/
Proposal
option
only)
Annual
2.0
hours;
$
61
3.3
hours;
$
101
10.0
hours;
$
304
Sample
and
analyze
permittee s
effluent
100%
of
MP&
M
facilities
being
issued
a
new
permit
(
applicable
to
NODA/
Proposal
option
only)
Annual
1.0
hour;

$
30
3.0
hours;

$
91
17.7
hours;

$
537
3
The
25
percent
oversight
cost
provision
is
based
on
comments
and
data
received
from
the
Association
of
Metropolitan
Sewerage
Agencies
(
AMSA).

7­
4
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
7:
Government
and
Community
Impact
Analysis
Table
7.1:
Government
Administrative
Activities
for
Indirect
Dischargers:
Per
Facility
Hours
and
Costs
Administrative
Activity
Percent
of
facilities
for
which
activity
is
required
Frequency
of
activity
Typical
hours
and
costs
(
2001$)

Low
Median
High
Review
and
enter
data
from
permittee s
compliance
self­
monitoring
reports
100%
of
MP&
M
facilities
being
issued
a
new
permit
(
applicable
to
NODA/
Proposal
option
only)
2
reports
per
year
0.5
hours;
$
15
1.0
hour;
$
30
4.0
hours;
$
122
Receive,
process
and
act
on
a
permittee s
non­
compliance
reports
38.5%
of
all
indirect
dischargers
receiving
a
new
permit
(
applicable
to
NODA/
Proposal
option
only)
5
times
per
year
1.0
hour;
$
30
2.0
hours;
$
61
6.0
hours;
$
183
Review
a
compliance
schedule
report
Meeting
milestones:
16.0%
of
all
facilities
issued
a
new
permit
 
94%
of
the
17%
who
have
compliance
milestones
(
applicable
to
NODA/
Proposal
option
only)
2
reports
per
year
0.5
hours;

$
15
1.0
hour;

$
30
2.7
hours;

$
81
Not
meeting
milestones:
1%
of
all
facilities
issued
a
new
permit
 
6%
of
the
17%
who
have
compliance
milestones
(
applicable
to
NODA/
Proposal
option
only)
2
reports
per
year
1.0
hours;

$
30
2.0
hours;

$
61
6.0
hours;

$
183
Minor
enforcement
action
e.
g.,
issue
an
administrative
order
7%
of
MP&
M
facilities
being
issued
a
new
permit
(
applicable
to
NODA/
Proposal
option
only)
Annual
1.0
hour;
$
30
3.7
hours;
$
112
12.0
hours;
$
365
Minor
enforcement
action,
e.
g.,
impose
an
administrative
fine
7%
of
MP&
M
facilities
being
issued
a
new
permit
(
applicable
to
NODA/
Proposal
option
only)
Annual
1.0
hour;
$
30
5.0
hours;
$
152
24.0
hours;
$
730
Repermit
100%
of
MP&
M
facilities
being
issued
a
new
permit
(
applicable
to
NODA/
Proposal
option
only)
Every
5
years
1.0
hour;

$
30
4.0
hours;

$
122
20.0
hours;

$
608
Source:
U.
S.
EPA
analysis
of
POTW
Survey
responses.

e.
Results
Table
7.2
summarizes
the
number
of
facilities
permitted
and
the
estimated
POTW
permitting
costs
for
the
final
rule
and
the
alternative
options
considered.
Appendix
F
presents
detailed
calculations
of
permitting
costs
for
these
regulatory
options.

The
results
presented
in
Table
7.2
reflect
three
effects
of
the
regulatory
options
on
the
cost
of
permitting
indirect
dischargers:

(
1)
incremental
costs
from
permitting
currently
unpermitted
facilities
that
require
a
new
permit
for
the
first
time
(
NODA/
Proposal
option
only);
(
2)
incremental
costs
from
repermitting
some
facilities
that
currently
hold
a
permit
earlier
than
would
otherwise
be
the
case
(
within
three
years
rather
than
within
five
years);
and
(
3)
cost
savings
from
facilities
that
close
as
a
result
of
the
regulation
and
no
longer
require
repermitting.

The
first
part
of
the
table
shows
the
incremental
number
of
facilities
requiring
a
new
permit,
requiring
early
repermitting,
or
estimated
to
close
as
a
result
of
the
rule.
The
second
part
of
the
table
presents
the
resulting
change
in
permitting
costs.
Costs
are
calculated
by
multiplying
the
incremental
number
of
facilities
in
each
year
by
the
unit
hours
and
cost
per
facility
for
those
activities.
All
facilities
are
assumed
to
receive
a
permit
within
a
three­
year
compliance
period.
Some
facilities
with
existing
permits
are
repermitted
sooner
than
they
otherwise
would
be
on
the
normal
five­
year
permitting
cycle.
The
cost
analysis
calculates
incremental
costs
by
subtracting
the
costs
of
repermitting
these
facilities
on
a
five­
year
schedule
from
the
costs
of
repermitting
all
such
facilities
within
three
years.
EPA
assumes
that
the
required
initial
permitting
activities
will
be
equally
divided
over
the
three­
year
period.
The
analysis
also
calculates
the
net
change
in
the
number
of
facilities
requiring
permitting
by
subtracting
the
number
of
facilities
that
close
due
to
the
rule
from
the
number
of
facilities
that
will
require
new
permits
under
each
regulatory
option.

7­
5
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
7:
Government
and
Community
Impact
Analysis
Table
7.2:
POTW
Permitting
Costs
by
Regulatory
Option
I:
Selected
Option
II:
NODA/
Proposal
Option
III:
Directs
+
413
to
433
Upgrade
IV:
Directs
+

413+
50%
LL
Upgrade
Number
of
facilities
permitted:

New
concentration­
based
permit
n/
a
103
0
0
New
mass­
based
permita
n/
a
0
0
0
Conversion
of
existing
concentration­
based
to
a
mass­

based
permita
n/
a
0
0
0
Repermitted
within
3
rather
than
5
years
n/
a
1,434
382
566
Regulatory
closures
(
no
longer
requiring
permits)
b
n/
a
722
120
120
POTW
permitting
costs
over
15
years
(
2001$):

Net
present
value
Low
n/
a
($
422,000)
($
238,000)
($
236,000)

Medium
($
1,802,000)
($
509,000)
($
501,000)

High
($
9,357,000)
($
1,982,000)
($
1,940,000)

Annualized
(
at
7%)

Low
n/
a
($
46,000)
($
26,000)
($
26,000)

Medium
($
198,000)
($
56,000)
($
55,000)

High
($
1,027,000)
($
218,000)
($
213,000)

Maximum
costs
in
any
one
year
Low
n/
a
$
1,023,000
($
6,000)
($
3,000)

Medium
$
1,022,000
($
4,000)
$
6,000
High
$
991,000
$
1,000
$
48,000
a
EPA
does
not
require
mass­
based
permits
under
any
of
the
option
considered
for
the
final
rule.

b
Some
facilities
with
existing
permits
will
no
longer
require
permitting
due
to
regulatory
closures.

Source:
U.
S.
EPA
analysis.

Because
indirect
dischargers
were
excluded
from
the
final
regulation,
EPA
expects
no
additional
POTW
administrative
costs
from
the
final
rule.
Each
of
the
three
alternative
regulatory
options
considered
would
result
in
reduced
POT
W
regulatory
costs.
These
cost
savings
result
from
regulatory
closures
(
i.
e.,
facilities
that
currently
hold
a
permit
and
would
have
required
repermitting
in
the
baseline,
but
that
will
no
longer
require
repermitting
under
the
regulatory
options).
The
cost
savings
as
a
result
of
regulatory
closures
outweigh
the
additional
costs
associated
with
issuing
new
permits
(
under
the
NODA/
Proposal
option
only)
and
repermitting
on
an
accelerated,
three­
year
schedule.
Estimated
annualized
cost
savings
to
POTWs
for
the
three
alternative
regulatory
options
range
between
$
0.04
and
$
1.0
million
under
the
NODA/
Proposal
option,
and
between
$
0.03
and
$
0.2
million
under
the
Directs
+
413
to
433
Upgrade
option
and
the
Directs
+
413+
50%
LL
Upgrade
option
(
all
costs
in
($
2001).

7.2
COMMUNITY
IMPACTS
OF
FACILITY
CLOSURES
EPA
considered
the
potential
for
adverse
impact
of
regulation­
induced
changes
in
employment
on
communities
where
MP&
M
facilities
are
located.
Because
EPA
anticipates
no
facility
closures
and
associated
employment
losses
from
the
final
regulation,
EPA
expects
no
employment­
related
impacts
on
communities
in
which
MP&
M
facilities
operate.
See
Chapter
6
for
further
discussion
of
potential
employment
effects.

7­
6
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
7:
Government
and
Community
Impact
Analysis
GLOSSARY
publicly­
owned
treatment
works
(
POTW):
a
treatment
works
as
defined
by
section
212
of
the
Clean
Water
Act,
which
is
owned
by
a
State
or
municipality.
This
definition
includes
any
devices
or
systems
used
in
the
storage,
treatment,
recycling,

and
reclamation
of
municipal
sewage
or
industrial
wastes
of
a
liquid
nature.

(
http://
www.
epa.
gov/
owm/
permits/
pretreat/
final99
.
pdf)

Unfunded
Mandates
Reform
Act
(
UMRA
):
Title
II
of
the
Unfunded
Mandates
Reform
Act
of
1995
(
UMRA),
Public
Law
104­
4,
establishes
requirements
for
Federal
agencies
to
assess
the
effects
of
their
regulatory
actions
on
State,
local,
and
Tribal
governments
and
the
private
sector.
Under
§
202
of
the
UMRA,
EPA
generally
must
prepare
a
written
statement,

including
a
cost­
benefit
analysis,
for
proposed
and
final
rules
with
"
Federal
mandates"
that
may
result
in
expenditures
to
State,
local,
and
Tribal
governments,
in
the
aggregate,
or
to
the
private
sector,
of
$
100
million
or
more
in
any
one
year.

Before
promulgating
an
EPA
rule
for
which
a
written
statement
is
needed,
§
205
of
the
UMRA
generally
requires
EPA
to
identify
and
consider
a
reasonable
number
of
regulatory
alternatives
and
adopt
the
least
costly,
most
cost­
effective
or
least
burdensome
alternative
that
achieves
the
objectives
of
the
rule.

7­
7
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
7:
Government
and
Community
Impact
Analysis
ACRONYMS
POTW:
publicly­
owned
treatment
works
UMRA:
Unfunded
Mandates
Reform
Act
7­
8
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
8:
Foreign
Trade
Impacts
Chapter
8:
Foreign
Trade
Impacts
INTRODUCTION
EPA
assessed
the
likely
impacts
on
foreign
trade
as
a
result
of
the
final
rule
and
the
alternatives
considered
for
regulation
as
part
of
the
analysis
of
the
rule s
effect
on
the
national
economy.
Changes
in
the
balance
of
trade
have
the
potential
to
affect
currency
exchange
rates,
money
supply,
interest
rates,
inflation,
capital
flows
and
labor
migration.
The
CHAPTER
CONTENTS
8.1
Data
Sources
.................
..............
8­
1
8.2
Methodology
.................
.............
8­
2
8.3
Results
.................
.................
.
8­
3
References
.................
.................
..
8­
5
MP&
M
industry
sectors
include
a
substantial
portion
of
the
nation s
economy,
and
significant
impacts
on
the
balance
of
trade
in
these
industries
could
affect
the
overall
economy.

As
part
of
the
facility
impact
analysis
in
Chapter
5,
EPA
assessed
potential
price
increases
and
output
losses
that
may
result
from
the
rule.
EPA
assessed
the
impact
of
these
market­
level
changes
on
the
U.
S.
balance
of
trade
using
information
provided
by
MP&
M
private
facility
surveys
on
the
source
of
competition
in
domestic
and
foreign
markets.
The
trade
analysis
allocates
the
value
of
changes
in
output
for
each
facility
that
is
projected
to
close
due
to
the
rule
to
exports,
imports
or
domestic
sales,
based
on
the
predominant
source
of
competition
in
each
market
reported
in
the
surveys.

EPA s
analysis
predicts
no
foreign
trade
impacts
as
a
result
of
the
final
rule
because
no
facility
closures
are
expected.
This
analysis
does
not
account
for
factors
such
as
price
increases
from
the
rule
or
the
response
of
foreign
producers
to
the
rule,
but
EPA
believes
that
these
factors
will
have
a
negligible
effect
on
the
U.
S.
balance
of
trade.
This
chapter
analyzes
the
impact
on
foreign
trade
of
the
alternative
regulatory
options
for
which
closures
are
predicted.

8.1
DATA
SOURCES
The
assessment
of
foreign
trade
impacts
is
based
on
the
facility
closure
analysis
in
Chapter
5.
The
revenue
from
any
closing
facilities
is
assumed
to
be
lost
output
attributable
to
the
rule.

The
analysis
uses
survey
responses
to
determine
whether
a
closed
facility s
revenues
are
more
likely
to
be
replaced
by
either
domestic
or
foreign
producers.
Question
5
in
the
Phase
I
§
308
survey
asked
respondents
to
identify
their
 
major
source
of
competition 
in
each
of
three
markets:
local/
regional,
national,
and
international.
Question
8
in
the
Phase
II
survey
asked
respondents
to
identify
their
 
most
significant
source
of
competition 
in
domestic
and
international
markets.
Respondents
selected
one
of
the
following
possible
responses:

 
domestic
firms,

 
foreign
firms,

 
no
competition
in
this
market,
and
 
do
not
operate
in
this
market.

During
the
process
of
clarifying
survey
answers
with
respondents,
EPA
found
that
most
respondents
who
did
not
select
any
of
the
sources
of
competition
said
that
they
did
not
participate
in
the
relevant
market.
Therefore,
if
a
respondent
did
not
answer
the
question
regarding
the
most
important
source
of
competition
in
the
domestic
or
international
markets,
EPA
classified
the
facility
as
not
operating
in
the
respective
market
(
domestic
or
foreign).

The
analysis
also
uses
survey
responses
to
determine
revenues
from
exports.
The
Phase
I
§
308
survey
reported
the
percentage
of
revenues
earned
from
domestic
customers
and
from
overseas
markets.
EPA
used
export
share
and
total
revenues
for
each
facility
to
calculate
export
and
domestic
revenues.
The
Phase
II
survey
asked
respondents
to
report
8­
1
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
8:
Foreign
Trade
Impacts
revenues
from
MP&
M
exports.
EPA
then
calculated
domestic
sales
by
subtracting
export
revenues
from
total
revenues
for
each
facility.

The
Iron
&
Steel
survey
did
not
report
comparable
information
on
the
source
of
competition
in
domestic
and
foreign
markets.

EPA
relied
on
published
trade
statistics
for
the
products
produced
by
facilities
in
the
Steel
Forming
&
Finishing
subcategory
to
assess
potential
impacts
on
trade
for
these
facilities.

EPA
obtained
1996
import
and
export
data
from
the
Bureau
of
the
Census,
Foreign
Trade
Division
for
those
commodities
determined
to
be
MP&
M­
related.
The
data
included
imports
and
exports
by
all
facilities
in
relevant
industries,
including
both
dischargers
and
non­
dischargers.

8.2
METHODOLOGY
The
effect
of
an
increase
in
domestic
production
costs
on
the
foreign
trade
balance
is
influenced
by
a
variety
of
factors,

including:

 
the
extent
to
which
domestic
producers
attempt
to
raise
prices
to
recover
costs,

 
the
price
elasticity
of
demand
in
both
domestic
and
export
markets,

 
the
likely
pricing
and
supply
response
of
foreign
producers,
and
 
trends
in
currency
exchange
rates.

EPA
did
not
attempt
to
simultaneously
model
changes
in
prices,
output,
and
sales
in
domestic
and
foreign
markets
for
the
products
and
services
produced
by
the
MP&
M
industry
sectors.
As
in
the
facility
impact
analysis
described
in
Chapter
5,
the
trade
analysis
relies
on
a
sequential
analysis
that
assesses
price
increases
and
then
predicts
output
adjustments
based
on
closures.
EPA
used
facilities 
own
assessments
of
their
competitive
status
relative
to
foreign
producers,
as
reported
in
the
survey,
to
assess
impacts
of
these
output
adjustments
on
the
balance
of
trade.

EPA
expects
that
foreign
firms
would
replace
some
but
not
all
of
the
output
from
any
closing
facilities.
Domestic
firms
that
remain
open
or
enter
the
market
might
also
win
customers
that
used
to
buy
from
the
closing
facility.
Revenues
lost
by
closing
facilities
are
assigned
to
domestic
or
foreign
producers
as
follows:

 
Lost
exports:
If
a
closing
facility
stated
that
most
of
its
international
competition
came
from
foreign
firms,
then
EPA
assigned
the
facility s
export
revenues
to
foreign
firms.
U.
S.
exports
would
therefore
decline
by
the
amount
of
the
closing
facility s
exports.
If
the
facility
identified
domestic
businesses
as
its
greatest
source
of
competition
in
foreign
markets,
then
EPA
assigned
the
closing
facility s
export
revenues
to
other
domestic
firms.
Closures
of
these
facilities,
which
reported
relatively
low
foreign
competition
for
exports,
will
have
no
impact
on
U.
S.
exports
under
the
expected
scenario.

 
Increased
imports:
If
a
closing
facility
identified
foreign
producers
as
the
main
source
of
domestic
sector
competition,
then
EPA
assigned
the
facility s
lost
domestic
revenues
to
foreign
firms.
Imports
would
increase
by
the
same
amount.
If
other
domestic
businesses
posed
the
strongest
competition,
then
EPA
assigned
the
closing
facility s
domestic
sales
to
other
U.
S.
producers,
and
imports
would
remain
constant.

The
survey
data
collected
for
the
Steel
Forming
and
Finishing
facilities
did
not
provide
export
data.
EPA
assumed
that
the
ratio
of
exports
to
value
of
shipments
for
any
closing
facilities
in
the
analysis
was
the
same
as
the
ratio
for
the
industry
as
a
whole.

From
the
estimated
changes
in
exports
and
imports,
EPA
calculated
the
net
trade
impact
(
reduction
in
exports
plus
increase
in
imports)
and
compared
this
value
to
baseline
trade
levels
for
(
1)
all
commodities
and
(
2)
MP&
M
sector
commodities,
only.

8­
2
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
8:
Foreign
Trade
Impacts
8.3
RESULTS
Chapter
3
provides
an
overview
of
exports,
imports
and
the
balance
of
trade
in
the
MP&
M
industry
sectors.
U.
S.
MP&
M
producers
as
a
group
exported
products
with
a
value
of
$
345
billion
in
1996.
Imports
to
the
U.
S.
of
the
same
products
in
1996
totaled
$
421
billion,
resulting
in
an
overall
net
MP&
M
commodity
trade
deficit
of
$
76
billion.
Some
MP&
M
sectors
contribute
to
a
positive
commodity
trade
balance
(
e.
g.
aircraft,
with
a
$
27
billion
positive
balance
in
1996).
In
other
sectors,

substantially
more
products
are
imported
than
exported
(
e.
g.
motor
vehicles,
with
a
net
negative
balance
of
$
63
billion.)

Table
8.1,
below,
summarizes
the
estimated
impact
of
the
final
rule
and
alternative
options
on
the
U.
S.
balance
of
trade
for
all
commodities.
Because
EPA s
analysis
indicates
that
the
final
rule
will
cause
no
facility
closures,
EPA
expects
that
the
final
regulation
will
not
affect
the
balance
of
trade.
As
shown
in
the
table,
the
other
regulatory
options
would
have
a
negligible
impact
on
U.
S.
imports,
exports,
and
the
national
trade
balance.
Option
II
(
NODA
option)
results
in
the
most
closures
and
thus
the
largest
trade
impacts.
However,
even
in
this
option,
projected
imports
increase
by
only
$
85
million,
or
slightly
more
than
one
hundredth
of
one
percent
of
baseline
imports,
and
exports
decrease
by
only
$
55
million,
less
than
one
hundredth
of
one
percent
of
baseline
exports.
The
net
result
for
the
NODA
option
is
an
insignificant
0.08
percent
decline
in
the
national
balance
of
trade.

Table
8.1:
(
millions,
2001$)

1996
Exports
1996
Imports
Trade
Balancea
Baseline
$
666,321
$
847,767
($
181,446)

Option
I:
Selected
Option
Change
due
to
the
ruleb
n/
a
n/
a
n/
a
Option
II:
Proposed/
NODA
Option
Change
due
to
the
rule
($
55)
$
85
($
141)

Post­
compliance
$
666,266
$
847,852
($
181,587)

%
Change
from
baseline
­
0.008%
0.010%
0.078%

Option
III:
413
to
433
Upgrade
Option
Change
due
to
the
rule
$
0
$
22
($
22)

Post­
compliance
$
666,321
$
847,789
($
181,468)

%
Change
from
baseline
0%
0.0026%
0.012%

Option
IV:
All
to
433
Upgrade
Option
Change
due
to
the
rule
$
0
$
22
($
22)

Post­
compliance
$
666,321
$
847,789
($
181,468)

%
Change
from
baseline
0%
0.0026%
0.012%
Estimated
National
Impacts
on
Total
U.
S.
Foreign
Trade
a
Trade
balance
is
equal
to
exports
minus
imports.

b
There
were
no
regulatory
closures
in
the
selected
option,
and
so
this
analysis
predicts
no
foreign
trade
impacts.

Source:
Bureau
of
Census
and
U.
S.
EPA
analysis.

Table
8.2
shows
regulatory
impacts
on
foreign
trade
in
MP&
M
industry
commodities.
As
noted
above,
EPA
estimates
that
the
final
rule
will
cause
no
closures
and
thus
have
no
foreign
trade
impacts.
In
the
other
options,
the
projected
changes
in
exports
and
imports
represent
only
an
insignificant
percentage
of
commodity
trade
in
the
MP&
M
industry
sectors.
The
8­
3
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
8:
Foreign
Trade
Impacts
largest
impacts
occur
in
Option
II
(
NODA
Option),
but
even
these
impacts
result
in
only
a
0.2
percent
decline
in
the
net
trade
balance
in
these
industries.

Table
8.2:
Estimated
National
Impacts
on
MP&
M­
Related
Foreign
Trade
(
millions,
2001$)

1996
Exports
1996
Imports
Trade
Balancea
Baseline
$
345,274
$
421,015
($
75,741)

Option
I:
Selected
Option
Change
due
to
the
ruleb
n/
a
n/
a
n/
a
Option
II:
Proposed/
NODA
Option
Change
due
to
the
rule
($
55)
$
85
($
141)

Post­
compliance
$
345,219
$
421,100
($
75,882)

%
Change
from
baseline
­
0.016%
0.020%
0.186%

Option
III:
413
to
433
Upgrade
Option
Change
due
to
the
rule
$
0
$
22
($
22)

Post­
compliance
$
345,274
$
421,037
($
75,763)

%
Change
from
baseline
0%
0.005%
0.030%

Option
IV:
All
to
433
Upgrade
Option
Change
due
to
the
rule
$
0
$
22
($
22)

Post­
compliance
$
345,274
$
421,037
($
75,763)

%
Change
from
baseline
0%
0.005%
0.030%

a
Trade
balance
is
equal
to
exports
minus
imports.

b
There
were
no
regulatory
closures
in
the
selected
option,
and
so
this
analysis
predicts
no
foreign
trade
impacts.

Source:
Bureau
of
Census
and
U.
S.
EPA
analysis.

The
analysis
of
trade
impacts
does
not
explicitly
account
for
responses
to
price
increases
caused
by
the
rule,
as
noted
previously.
However,
EPA
expects
little
change
in
exports
and
imports
as
a
result
of
the
minimal
price
increases
predicted
for
the
final
rule.
The
estimated
price
increases
are
less
than
one
half
of
one
percent
in
all
sectors
(
see
Table
5.4
in
Chapter
5).

Annual
rates
of
inflation
for
the
United
States 
major
trading
partners
are
generally
well
above
the
projected
increases
in
MP&
M
prices,
and
price
increases
in
the
projected
range
are
not
likely
to
materially
affect
the
terms
of
U.
S.
trade
in
MP&
M
products.
1
1
The
following
are
1990­
98
annual
inflation
rates,
as
measured
by
the
GDP
implicit
deflator,
for
nine
of
the
U.
S. 
s
top
ten
trading
partners:
Canada
1.4%,
Mexico
19.5%,
Japan
0.2%,
China
9.7%,
Germany
2.2%,
United
Kingdom
3.0%,
Republic
of
Korea
6.4%,
France
1.7%,
and
Singapore
2.1%.
The
annual
change
in
the
U.
S.
GDP
deflator
over
the
same
period
is
1.9%
(
Data
were
not
reported
for
Taiwan.)
World
Bank,
2000
World
Development
Indicators,
Table
4.16.

8­
4
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
8:
Foreign
Trade
Impacts
REFERENCES
U.
S.
Department
of
Commerce,
Bureau
of
the
Census.
1997.
Current
Industrial
Reports:
Steel
Mill
Products.

U.
S.
Department
of
Commerce,
Bureau
of
the
Census,
Foreign
Trade
Division.
1996.
FT900.

http://
www.
census.
gov/
foreign­
trade/
Press­
Release/
96_
press_
releases/
Final_
Revisions_
1996/.

World
Bank,
2000
World
Development
Indicators.

8­
5
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
8:
Foreign
Trade
Impacts
THIS
PAGE
INTENTIONALLY
LEFT
BLANK
8­
6
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
9:
Firm
Level,
New
Source,
and
Industry
Impacts
Chapter
9:
Firm
Level,
New
Source,

and
Industry
Impacts
INTRODUCTION
The
previous
chapters
assessed
impacts
on
MP&
M
facilities,
on
governments
and
communities,
and
on
the
U.
S.

balance
of
trade.
This
chapter
considers
impacts
on
private
businesses
in
more
detail,
by
addressing
three
categories
of
impacts.
First,
the
analysis
of
impacts
on
firms
builds
on
the
facility
impact
analysis
to
assess
whether
firms
that
own
multiple
facilities
are
likely
to
incur
more
significant
impacts
than
indicated
by
the
facility
impact
analysis.

Second,
the
new
source
facility
impact
analysis
considers
whether
the
final
rule
might
impose
disproportionate
burdens
on
new
sources
relative
to
existing
sources,
and
thereby
pose
a
barrier
to
new
entry.
Third,
this
chapter
discusses
potential
industry­
level
impacts
of
the
final
rule.

9.1
FIRM
LEVEL
IMPACTS
CHAPTER
CONTENTS
9.1
evel
Impacts
.................
.........
9­
1
9.1.1
.................
.............
9­
1
9.1.2
Methodology
.................
........
9­
2
9.1.3
.................
.............
9­
2
9.2
ource
Impacts
.................
........
9­
3
9.2.2
Methodology
.................
........
9­
4
9.2.3
.................
.............
9­
5
9.3
Level
Impacts
.................
......
9­
7
Glossary
.................
.................
....
9­
9
Acronyms
.................
.................
..
9­
10
References
.................
.................
.
9­
11
Firm
L
Sources
Results
New
S
Results
Industry
EPA
analyzed
economic
impacts
on
firms
for
the
following
reasons:

 
Impacts
may
be
more
significant
at
the
firm
level
than
at
the
facility
level
if
a
firm
owns
a
number
of
facilities
that
incur
significant
costs.
To
the
extent
allowed
by
the
available
data,
the
analysis
therefore
looks
at
the
combined
effect
of
the
facility
compliance
costs
for
all
facilities
owned
by
a
given
firm.

 
A
firm­
level
analysis
is
needed
to
assess
impacts
on
small
businesses,
as
required
by
the
Regulatory
Flexibility
Act
and
SBREFA.
Certain
findings
from
the
firm­
level
analysis
are
used
in
the
small
business
impact
analysis
presented
in
the
following
Chapter
10.

9.1.1
Sources
The
firm­
level
analysis
begins
from
the
results
of
the
facility­
level
analysis
presented
in
Chapter
5,
supplemented
by
firm­

level
information
provided
by
the
MP&
M
facility
surveys
and
publically
available
information.

EPA
was
not
able
to
conduct
a
rigorous
national
analysis
of
firm­
level
impacts
because
the
sample
frame
used
to
provide
national
estimates
from
surveyed
facilities
reflects
the
population
of
facilities
rather
than
firms.
EPA
therefore
analyzed
impacts
for
a
hybrid
dataset
of
MP&
M
firms
that
includes
both
national
estimates
(
for
single­
facility
firms)
and
sample
firms
(
for
multiple­
facility
firms),
The
Agency
believes
that
the
analysis
of
firm­
level
impacts
presented
in
this
chapter
provides
a
useful
indication
of
national
firm­
level
impacts,
however,
for
two
reasons:

 
Most
MP&
M
facilities
are
single­
facility
firms.
The
survey
facility
sample
weights
can
be
used
to
extrapolate
to
the
national
number
of
firms
for
these
single­
site
firms.

 
EPA
requested
voluntary
information
in
the
Phase
II
detailed
questionnaires
on
other
MP&
M
facilities
owned
by
the
firms
responding
to
the
survey
for
a
sampled
facility.
EPA
aggregated
multiple­
facility
compliance
costs
to
the
firm­

level
by
including
costs
for
all
surveyed
facilities
and,
for
the
Phase
II
survey,
facilities
identified
in
voluntary
responses.

9­
1
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
9:
Firm
Level,
New
Source,
and
Industry
Impacts
It
is
unlikely
that
firm­
level
impacts
would
be
material
among
all
MP&
M
firms
in
the
nation,
if
this
partial
analysis
does
not
indicate
significant
impacts
among
the
firms
identified
in
this
analysis.

9.1.2
Methodology
The
various
surveys
asked
respondents
to
provide
firm­
level
revenues
for
the
parent
firm.
For
single­
facility
firms,
firm
revenue
and
compliance
costs
are
identical
to
those
for
the
facility.
For
firms
that
own
more
than
one
sample
facility,

compliance
costs
are
the
sum
of
costs
for
all
facilities
reported
on
in
the
survey.

In
Part
V
of
the
detailed
Phase
II
questionnaire,
respondents
had
the
option
to
submit
additional
voluntary
data
for
other
MP&
M
facilities
owned
by
the
same
parent
firm.
EPA
did
not
perform
a
detailed
engineering
analysis
to
develop
detailed
estimates
of
compliance
costs
for
these
facilities;
however,
EPA
used
the
detailed
estimates
of
compliance
costs
to
estimate
costs
for
these
additional
facilities.
EPA
assumed
that
these
additional
facilities
would
have
the
same
average
compliance
costs
as
facilities
in
the
same
subcategory,
flow
range,
and
discharge
type
for
which
detailed
cost
estimates
were
developed.

EPA
then
grouped
together
all
facilities
with
a
common
parent
firm
from
the
Phase
I,
Phase
II
and
Iron
and
Steel
surveys.

For
each
firm
in
the
analysis,
firm­
level
compliance
cost
is:

(
9.1)

where:

CCfirm
=
firm­
level
compliance
cost
CCi
=
compliance
cost
for
surveyed
facility
i
owned
by
the
firm
Firm­
level
compliance
costs
were
compared
to
firm
revenues.
EPA
judged
that
firms
with
compliance
costs
less
than
one
percent
of
revenues
would
not
be
materially
affected
by
the
regulation.
EPA
identified
firms
as
subject
to
potentially
more
serious
impacts
if
their
compliance
costs
exceeded
three
percent
of
revenues.

All
firm­
level
data
were
inflated
to
2001
dollars
using
the
Producer
Price
Index
(
PPI),
as
described
in
Chapter
5.

9.1.3
Results
As
noted
in
the
introduction,
the
Agency
was
not
able
to
estimate
the
national
numbers
of
firms
that
own
MP&
M
facilities
precisely,
because
the
sample
weights
based
on
the
survey
design
represent
numbers
of
facilities
rather
than
firms.
EPA
assumed
that
the
national
facilities
that
are
represented
by
the
307
sample
single­
site
firms
that
remain
open
in
the
baseline
are
also
all
single­
site
firms.
Based
on
this
assumption,
EPA
estimated
that
26,472
of
36,480
(
or
73
percent)
of
private
MP&
M
facilities
nationwide
are
single­
facility
firms.

In
addition,
from
the
survey
responses,
EPA
identified
389
sample
facilities
that
are
owned
by
276
multi­
facility
firms.
It
is
not
known
how
many
multi­
facility
firms
exist
at
the
national
level,
so
EPA
included
these
276
firms
in
the
firm­
level
analysis
without
extrapolation
to
the
national
level.

The
combined
set
of
26,748
firms
(
26,472
national­
level
single­
facility
firms
plus
276
sample
multi­
facility
firms)
provided
the
basis
for
the
firm­
level
analysis.
This
total
does
not
represent
a
valid
national
total
for
the
number
of
affected
MP&
M
firms.
Nonetheless,
this
analysis
provides
a
reasonable
indication
of
likely
firm­
level
impacts,
given
the
large
number
of
single­
facility
firms
and
the
use
of
Part
V
facility
data
to
supplement
the
sample
facility
data
for
multi­
facility
firms.

Table
9.1
presents
the
number
of
firms
in
the
firm­
level
analysis.
Of
the
26,472
facilities
that
are
single­
facility
firms,
25,297
are
owned
by
potentially
small
firms.
Of
the
276
firms
that
own
more
than
one
sample
facility,
85
are
potentially
small
firms.

9­
2
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
9:
Firm
Level,
New
Source,
and
Industry
Impacts
Table
9.1:
Number
of
Privately
Owned
Facilities
and
Firms
by
Firm
Type
and
Sizea
Total
Firms
Owned
by
a
small
firm
Owned
by
a
large
firm
National
number
of
single­
facility
firms
(
304
unique
sample
firms)
26,472
25,297
1,175
Sample
multi­
facility
firms
276
85
191
Number
of
firms
in
the
firm­
level
analysis
26,748
25,382
1,366
a
Excludes
firms
whose
only
facilities
close
in
the
baseline.

Source:
U.
S.
EPA
analysis.

Table
9.2
presents
estimated
firm­
level
impacts
of
the
MP&
M
rule.
None
of
the
firms
in
the
analysis
incur
after­
tax
compliance
costs
greater
than
1
percent
of
annual
revenues.
Of
the
1,027
firms
that
incur
any
costs
at
all,
none
close
or
incur
moderate
impacts
as
a
result
of
the
rule.

Table
9.2:
Firm­
level
After­
Tax
Annual
Compliance
Costs
as
a
Percent
of
Annual
Revenues
Firm
Type
Number
of
Firms
in
the
Analysis
a
Number
and
Percent
with
After­
Tax
Annual
Compliance
Costs/
Annual
Revenues
Equal
to:

0%
(
no
costs)
Between
0%
and
1%
>
1%

Number
%
Number
%
Number
%

Single­
site
26,472
25,453
96.2%
1,019
3.8%
0
0.0%

Multi­
site
276
269
97.5%
8
2.9%
0
0.0%

Total
26,748
25,722
96.2%
1,027
3.8%
0
0.0%

a
Single­
site
firms
whose
only
MP&
M
facilities
close
in
the
baseline
are
excluded.
To
be
conservative,
EPA
included
compliance
costs
for
facilities
that
are
owned
by
multi­
site
firms
but
predicted
to
be
baseline
closures
in
the
facility
impact
analysis.

Source:
U.
S.
EPA
analysis.

This
analysis
is
likely
to
overstate
costs
at
the
firm
level
because
it
does
not
consider
the
actions
a
multi­
facility
firm
might
take
to
reduce
its
compliance
costs
under
the
final
rule.
These
include
transferring
functions
among
facilities
to
consolidate
wet
processes
and
take
advantage
of
scale
economies
in
wastewater
treatment.

9.2
NEW
SOURCE
IMPACTS
This
section
assesses
the
impacts
of
New
Source
Performance
Standards
(
NSPS)
and
Pretreatment
Standards
for
New
Sources
(
PSNS
)
limitations
on
new
direct
and
indirect
MP&
M
dischargers.
EPA
examines
the
impact
of
these
regulations
on
new
dischargers
to
determine
whether
new
source
limitations
may
pose
sufficient
financial
burden
on
new
facilities
to
constitute
a
material
barrier
to
entry
of
new
establishments
into
the
MP&
M
industry
sectors.
The
first
section
summarizes
the
framework
for
assessing
new
source
impacts
and
the
second
section
reviews
the
findings
from
our
analysis.

Disproportionate
regulatory
burdens
for
new
sources
could
cause
adverse
industry­
level
outcomes
in
the
long­
run
in
several
ways:

 
Imposing
more
significant
costs
on
new
facilities
can
make
existing
sources
more
competitive
than
new
sources,

causing
barriers
to
new
entry.

9­
3
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
9:
Firm
Level,
New
Source,
and
Industry
Impacts
 
Barriers
to
entry
may
increase
the
market
power
of
existing
firms
and
could
discourage
competition
over
time,
with
resulting
losses
in
market
efficiencies.

 
Creating
a
competitive
advantage
for
existing
facilities
may
hinder
technological
innovation,
with
resulting
losses
in
productivity.

9.2.1
Methodology
EPA
used
the
existing
facility
database,
sample­
weighted,
as
the
basis
for
the
new
source
analysis.
This
assumes
that
future
entrants
to
the
industry
will
look
the
same
as
indicated
by
the
sample
of
facilities
in
the
existing
facility
database.

To
assess
the
potential
impact
of
new
source
limitations,
EPA
assessed
compliance
costs
for
two
cases:
(
1)
the
capital
and
operating
cost
of
compliance
systems
for
a
new
facility
built
in
compliance
with
existing
new
source
discharge
limits
( 
current
limits ),
and
(
2)
the
capital
and
operating
cost
of
compliance
systems
for
a
new
facility
built
in
compliance
with
discharge
limits
under
consideration
( 
revised
limits ),
which
would
be
more
stringent
than
the
current
new
source
limits.
The
estimated
capital
costs
for
these
cases
account
for
the
lower
cost
of
a
new­
construction
installation
compared
to
retrofit
construction
at
existing
facilities.
These
compliance
cost
estimates
are
described
in
detail
in
the
Technical
Development
Document.
For
analyzing
the
additional
cost
burden
of
meeting
new
limits,
EPA
calculated
the
incremental
cost
of
compliance
as
the
cost
of
meeting
the
revised
limits
less
the
cost
of
meeting
current
limits.

As
noted
above,
EPA
based
its
analysis
of
new
source
limits
on
the
economic
and
financial
information
for
the
sample
of
facilities
in
the
existing
facility
database.
The
new
source
analysis
excludes
sample
facilities
that
are
projected
to
close
or
to
experience
moderate
economic
impacts
in
the
baseline,
since
the
economic
characteristics
of
these
financially­
weak
facilities
are
unlikely
to
be
representative
of
new
facilities.
In
addition,
EPA
excluded
some
sample
facilities
from
the
analysis
because
of
issues
in
the
engineering
estimation
of
compliance
costs.

The
analysis
assumes
that
new
sources
would
benefit
from
price
increases
resulting
from
the
final
rule
for
existing
sources
in
the
same
way
as
existing
sources.
EPA
therefore
increased
the
average
baseline
revenue
for
new
facilities
by
the
average
percentage
price
increase
estimated
for
existing
facilities
in
each
subcategory/
discharge
category,
to
calculate
post­
regulation
revenues
for
new
sources.
This
effect
of
this
adjustment
on
new
facility
revenue
is
minor.

To
test
of
financial
burden
of
revised
limits
and
whether
this
burden
might
pose
a
material
barrier
to
entry
for
new
establishments,
EPA
compared
the
incremental
total
annualized
cost,
after­
tax,
with
facility
revenue
(
cost­
to­
revenue
ratio).

EPA
classified
the
results
in
ranges
as
follows,
fraction
of
sample­
weighted
facilities
with
cost­
to­
revenue
ratio
of
less
than
one
percent,
one
to
three
percent,
three
to
five
percent,
and
greater
than
five
percent.

Table
9.3
shows
the
total
number
of
privately
owned
MP&
M
facilities
in
the
survey
sample,
the
number
of
existing
facilities
excluded
from
the
new
source
analysis,
and
the
number
of
existing
facilities
used
in
this
analysis.

9­
4
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
9:
Firm
Level,
New
Source,
and
Industry
Impacts
Table
9.3:
Number
of
Existing
Facilities
Used
in
New
Source
Analysis
Subcategory
Discharger
Type
Total
Number
of
Private
MP&
M
Facilitiesa
Number
of
Existing
Facilities
Excluded
from
New
Source
Analysis
b
Number
of
Existing
Facilities
Included
in
New
Source
Analysis
General
Metals
Direct
888
181
707
Indirect
10,419
1,824
8,594
MF
Job
Shop
Direct
12
0
12
Indirect
1,530
165
1,365
Non­
Chromium
Anodizer
Directc
122
29
93
Oily
Wastes
Direct
2,108
936
1,172
Indirect
23,292
6,148
17,144
Printed
Wiring
Boards
Direct
8
0
8
Indirect
840
288
552
Railroad
Rebuilders
Direct
6
0
6
Shipbuilding
Dry
Dock
Direct
6
0
6
All
Subcategories
39,230
9,571
29,659
a
EPA
did
not
estimate
new
source
impacts
for
municipal
operations
because
 
barrier
to
entry"
is
not
a
relevant
consideration.

b
EPA
excluded
an
existing
facility
from
the
new
source
analysis
either
because
it
was
financially
weak
in
the
baseline
or
because
the
engineers
were
unable
to
accurately
estimate
compliance
costs.

c
For
the
analysis
of
new
source
limit
impacts
on
the
direct
discharge
Non­
Chromium
Anodizer
category,
EPA
used
sample
facility
information
for
indirect
dischargers.
The
final
sample
facility
database
contained
no
observations
for
direct
dischargers.

Source:
U.
S.
EPA
analysis.

9.2.2
Results
Table
9.4
summarizes
(
1)
the
currently
applicable
discharge
limit
or
technology
option
for
new
sources
in
each
subcategory
and
discharge
status,
and
(
2)
the
alternative
discharge
limits
or
technology
option
that
EPA
considered
in
assessing
whether
revised
new
source
discharge
limits
would
constitute
a
barrier
to
entry.
See
Preamble
Section
VI
and
the
Technical
Development
Document
for
discussion
of
the
specific
discharge
limits
and
technology
options
that
EPA
considered
for
revised
new
source
discharge
limits.

9­
5
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
9:
Firm
Level,
New
Source,
and
Industry
Impacts
Table
9.4:
Current
New
Source
Requirements
and
Potential
Revised
New
Source
Requirements
Subcategory
Discharge
Type
Current
New
Source
Requirements
Revised
New
Source
Requirements
General
Metals
Direct
40
CFR
433
 
Modified 
Option
2,

(
Two­
Stage
Precipitation)

Indirect
40
CFR
433
Option
2
MF
Job
Shops
Direct
40
CFR
433
 
Modified 
Option
2,

(
Two­
Stage
Precipitation)

Indirect
40
CFR
433
Option
2
Non­
Chromium
Anodizer
Direct
40
CFR
433
Option
2
Oily
Waste
Direct
Estimated
existing
baseline
Option
6
Indirect
Estimated
existing
baseline
Option
6
Printed
Wiring
Boards
Direct
40
CFR
433
Option
2
Indirect
40
CFR
433
Option
2
Railroad
Rebuilders
Direct
Option
6
Option
10
Shipbuilding
Dry
Dock
Direct
Option
10
Option
8
Source:
U.
S.
EPA
analysis.

Table
9.5
reports
the
estimated
percentages
of
new
facilities
incurring
cost­
to­
revenue
impacts
of:
(
1)
less
than
one
percent,

(
2)
one
to
three
percent,
(
3)
three
to
five
percent,
and
(
4)
greater
than
five
percent.
As
discussed
earlier,
these
estimates
are
based
on
estimated
incremental
new
source
compliance
costs
compared
to
revenues
for
existing
facilities
in
the
MP&
M
survey
universe.

From
this
analysis,
EPA
found
that
revised
new
source
limits
would
create
a
barrier
to
entry
for
direct
discharging
facilities
in
the
General
Metals,
Metal
Finishing
Job
Shops,
and
Non­
Chromium
Anodizer
subcategories
and
indirect
discharging
facilities
in
the
General
Metals,
Metal
Finishing
Job
Shops,
Printed
Wiring
Board,
and
Oily
Wastes
subcategories.
On
the
basis
of
this
finding,
EPA
decided
against
issuing
revised
new
source
discharge
limits
for
these
subcategories.
The
new
source
analysis
indicated
that
revised
new
source
limits
would
not
create
a
barrier
to
entry
for
direct
discharging
facilities
in
the
Oily
Wastes,
Printed
Wiring
Board,
and
Railroad
Rebuilders
subcategories.
This
finding
supported
EPA s
decision
to
promulgate
new
source
limits
for
the
Oily
Wastes
direct
discharger
subcategory.
Although
the
economic
analysis
did
not
indicate
a
barrier
to
entry
for
the
Printed
Wiring
Board
and
Railroad
Rebuilders
direct
dischargers
subcategories,
EPA
decided
against
issuing
new
source
limits
for
these
subcategories
based
on
other
technical
considerations
as
discussed
in
Preamble
Section
VI.

9­
6
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
9:
Firm
Level,
New
Source,
and
Industry
Impacts
Table
9.5:
Estimated
Percentages
of
New
Facilities
by
Cost­
to­
Revenue
Impact
Ranges
Subcategory
Discharger
Type
After­
Tax
Compliance
Costs
as
a
Percent
of
Revenue
<
1%
1­
3%
3­
5%
>
5%

General
Metals
Direct
62%
14%
22%
2%

Indirect
65%
14%
20%
1%

MF
Job
Shop
Direct
0%
0%
0%
100%

Indirect
80%
9%
5%
6%

Non­
Chromium
Anodizer
Direct
25%
0%
26%
49%

Oily
Wastes
Direct
97%
3%
0%
0%

Indirect
95%
1%
5%
0%

Printed
Wiring
Boards
Direct
100%
0%
0%
0%

Indirect
92%
3%
0%
5%

Railroad
Rebuilders
Direct
100%
0%
0%
0%

Shipbuilding
Dry
Dock
Direct
100%
0%
0%
0%

Source:
U.
S.
EPA
analysis.

9.3
INDUSTRY
LEVEL
IMPACTS
Potential
industry­
level
impacts
include
price
increases,
reduced
competitiveness
within
the
domestic
industry
and
in
world
markets,
and
reduced
rates
of
innovation.
EPA
did
not
perform
a
sector­
specific
analysis
for
several
reasons:

 
Sector­
level
impacts
are
complicated
by
the
large
number
of
product
and
service
markets
included
in
the
MP&
M
category
(
e.
g.,
over
200
SICs
and
three
activities
 
manufacturing,
rebuilding,
and
repair).

 
Revenue
and
cost
information
is
not
available
on
a
product
by
product
basis,
so
it
is
impossible
to
link
price
increases
to
individual
products.
and
 
Many
MP&
M
facilities
derive
revenue
from
multiple
industry
sectors.

EPA s
analysis
of
facility­
and
firm­
level
impacts
suggests,
however,
that
material
industry­
level
impacts
are
unlikely
in
any
of
the
affected
sectors.

The
Agency
does
not
expect
any
industry
level
impacts
from
the
MP&
M
regulation
because
of:
(
1)
the
low
number
of
facilities
that
will
have
costs,
(
2)
the
absence
of
regulatory
closures,
and
(
3)
the
absence
of
moderate
impacts.
Of
the
estimated
89,000
facilities
performing
MP&
M
activities,
slightly
over
half,
or
about
45,000,
do
not
discharge
water
and
thus
will
not
be
affected
by
the
rule.
An
additional
3,593
discharge
water
but
are
expected
to
close
in
the
baseline.
Of
the
remaining
40,265
facilities
that
do
discharge
water
and
remain
open
in
the
baseline,
EPA
estimates
that
only
1,380
will
incur
costs
under
the
final
rule.
That
so
few
MP
&
M
industry
facilities
incur
costs
results
from
the
rule s
subcategory
exclusions
and
low­
flow
cutoffs.

As
discussed
in
Chapter
5,
EPA
estimates
that
no
facilities
will
close
or
incur
moderate
impacts
as
a
result
of
the
final
regulation.
Given
no
regulatory
closures
or
moderate
impacts,
EPA
concludes
that
the
final
rule
is
unlikely
to
impose
significant
costs
on
a
substantial
number
of
facilities
in
the
MP&
M
industry
as
a
whole
or
at
the
subcategory
level.

Chapter
5
also
presented
information
on
the
prices
increases
predicted
to
occur
in
each
industry
sector
due
to
the
final
rule.

Table
5.4
in
Chapter
5
presented
EPA s
estimates
of
price
increases
by
sector.
Projected
price
increases
are
less
than
one
half
9­
7
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
9:
Firm
Level,
New
Source,
and
Industry
Impacts
of
one
percent
for
all
sectors.
Price
increases
of
these
magnitudes
are
unlikely
to
impose
burdens
on
customers
of
the
regulated
facilities
or
substantially
affect
MP&
M
producers 
position
relative
to
competitive
products
(
e.
g.,
products
made
with
plastics)
or
foreign
producers.
Price
increases
may
affect
only
some
components
of
a
product.
In
these
cases,
prices
to
end­
users
would
rise
even
less
than
the
amounts
detailed
in
Chapter
5.

EPA
does
not
expect
the
final
rule
to
affect
the
rate
of
technological
innovation
in
the
MP&
M
industry.
Innovation
impacts
could
result
if
the
rule
discouraged
new
entry,
contributed
to
increased
concentration
in
the
affected
industries,
or
specified
the
use
of
particular
technologies.
The
following
factors
suggest
that
these
conditions
do
not
apply
for
the
final
rule:

 
EPA s
analysis
of
new
source
impacts
presented
in
the
previous
section
suggests
that
the
final
rule
will
not
affect
entry
of
new
businesses
in
the
regulated
sectors.
The
final
rule
will
increase
the
investment
required
to
build
a
new
facility
somewhat.
However,
the
increased
capital
costs
are
generally
small
relative
to
the
overall
financial
resources
of
the
MP&
M
facilities,
as
indicated
by
the
results
of
the
facility
impact
analysis.
In
addition,
the
low
flow
cutoffs
applicable
to
a
large
number
of
MP&
M
facilities
reduce
the
potential
impacts
of
large
capital
requirements
on
small
facilities.

 
Given
the
small
fraction
of
facilities
regulated
in
each
sector,
and
absence
of
closures
of
moderate
impacts
for
the
final
regulation,
EPA
does
not
expect
the
rule
to
increase
concentration
in
any
of
the
MP&
M
sectors.

 
The
rule
does
not
require
the
use
of
specific
production
or
pollution
control
processes
or
technologies.
Rather,
it
specifies
a
performance
standard,
based
on
levels
of
pollutants
in
wastewaters
that
have
been
shown
to
be
achievable
by
available
technologies.
Facilities
have
the
flexibility
to
achieve
these
limitations
using
a
variety
of
approaches,

which
is
likely
to
encourage
rather
than
discourage
innovation
in
production
and
pollution
control
processes.

The
final
rule
may
affect
the
relative
competitive
position
of
different
firms
and
facilities
in
those
sectors
that
incur
costs.

Facilities
that
may
benefit
from
the
rule
include
those
that:
(
1)
do
not
discharge
wastewater,
(
2)
are
eligible
for
the
subcategory
exclusions
and
low­
flow
cutoffs,
(
3)
already
have
treatment
in
place,
or
(
4)
can
more
easily
make
process
changes
to
reduce
pollutant
loads.

Facilities
that
have
little
or
no
treatment
in
place
and
that
discharge
substantial
pollutant
loads
may
become
less
competitive.

The
final
rule
may
level
the
competitive
playing
field
for
facilities
that
have
taken
steps
to
reduce
their
environmental
impacts,
relative
to
facilities
that
have
avoided
investments
to
reduce
or
eliminate
pollutant
discharges.
EPA
views
these
effects
as
beneficial,
given
that
the
final
regulation
does
not
have
significant
impacts
on
the
industry
as
a
whole,
and
as
long
as
the
rule
does
not
disproportionately
impact
small
entities
as
a
group
(
impacts
on
small
entities
are
addressed
in
the
next
chapter).

9­
8
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
9:
Firm
Level,
New
Source,
and
Industry
Impacts
GLOSSARY
new
source:
Any
building,
structure,
facility,
or
installation
from
which
there
is
or
may
be
a
discharge
of
pollutants,
the
construction
of
which
commenced
after
promulgation
of
standards
of
performance
under
Section
306
of
the
Clean
Water
Act
which
are
applicable
to
such
source;
and
which
(
1)
is
constructed
at
a
site
at
which
no
other
source
is
located;
(
2)
totally
replaces
the
process
or
production
equipment
that
causes
the
discharge
of
pollutants
at
an
existing
source;
or
(
3)
consists
of
processes
that
are
substantially
independent
of
an
existing
source
at
the
same
site.

New
Source
Performance
Standards
(
NSPS):
effluent
limitations
for
new
direct
dischargers
based
on
the
best
available
demonstrated
control
technology.
NSPS
represents
the
greatest
degree
of
effluent
reduction
attainable
through
the
application
of
the
best
available
demonstrated
control
technology
for
all
pollutants
(
i.
e.,
conventional,
nonconventional,
and
priority
pollutants).
In
establishing
NSPS,
EPA
considers
the
cost
of
achieving
the
effluent
reduction
and
any
non­
water
quality
environmental
impacts
and
energy
requirements.

Pretreatment
Standards
for
New
Sources
(
PSNS):
pretreatment
standards
for
new
indirect
dischargers,
designed
to
prevent
discharges
of
pollutants
that
pass
through,
interfere
with,
or
are
otherwise
incompatible
with
the
operation
of
POTWs.

Addresses
all
pollutants
(
i.
e.,
conventional,
nonconventional,
and
priority
pollutants).
Based
on
the
same
factors
as
are
considered
in
promulgating
NSPS.

Producer
Price
Index
(
PPI):
a
family
of
indexes
that
measures
the
average
change
over
time
in
the
selling
prices
received
by
domestic
producers
of
goods
and
services.
PPI's
measure
price
change
from
the
perspective
of
the
seller.
This
contrasts
with
other
measures,
such
as
the
Consumer
Price
Index
(
CPI),
that
measure
price
change
from
the
purchaser's
perspective.

Sellers'
and
purchasers'
prices
may
differ
due
to
government
subsidies,
sales
and
excise
taxes,
and
distribution
costs.

(
http://
stats.
bls.
gov/
ppifaq.
htm#
1)

9­
9
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
9:
Firm
Level,
New
Source,
and
Industry
Impacts
ACRONYMS
NSPS:
New
Source
Performance
Standards
PPI:
Producer
Price
Index
PSNS:
Pretreatment
Standards
for
New
Sources
9­
10
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
9:
Firm
Level,
New
Source,
and
Industry
Impacts
REFERENCES
U.
S.
Bureau
of
Labor
Statistics,
Producer
Price
Index
Revision­
Current
Series.
On­
line
database
at
http://
stats.
bls.
gov/
ppihome.
htm.

U.
S.
Environmental
Protection
Agency
(
U.
S.
EPA).
2003.
Technical
Development
Document
for
the
Final
Effluent
Limitations
Guidelines
and
Standards
for
the
Metal
Products
&
Machinery
Point
Source
Category.
February.

9­
11
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
9:
Firm
Level,
New
Source,
and
Industry
Impacts
THIS
PAGE
INTENTIONALLY
LEFT
BLANK
9­
12
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
10:
Small
Entity
Impact
Assessment
INTRODUCTION
The
Regulatory
Flexibility
Act
(
RFA),
as
amended
by
the
Small
Business
Regulatory
Enforcement
Fairness
Act
(
SBREFA),
requires
EPA
to
consider
the
economic
impacts
a
rule
will
have
on
small
entities.
RFA/
SBREFA
requires
an
agency
to
prepare
a
Regulatory
Flexibility
Analysis
for
any
rule
subject
to
notice
and
comment
rulemaking
requirements,
unless
the
Agency
certifies
that
the
rule
will
not
have
a
significant
economic
impact
on
a
substantial
number
of
small
entities
(
Small
Business
Regulation
Enforcement
Fairness
Act
of
1996,
P.
L.
104­
121,
Section
243).

The
economic
analysis
prepared
for
the
1995
MP&
M
Phase
I
proposal
indicated
that
large
numbers
of
small
facilities
could
Chapter
10:
Small
Entity
Impact
Assessment
CHAPTER
CONTENTS
10.1
.................
....
10­
2
10.2
thodology
.................
............
10­
4
10.3
.................
.................
10­
4
10.3.1
all
Entities
.......
10­
4
10.3.2
ts
on
Facilities
Owned
by
Small
Entities
.................
.............
10­
5
10.3.3
Impacts
on
Small
Firms
...............
10­
6
10.4
tion
of
Small
Entity
Impacts
in
Developing
of
the
Final
Rule
.............
10­
7
Glossary
.................
.................
...
10­
8
Acronyms
.................
.................
..
10­
9
References
.................
.................
10­
10
Defining
Small
Entities
Me
Results
Number
of
Affected
Sm
Impac
Considera
be
impacted
by
the
rule
and
that
a
significant
number
of
publically­
owned
treatment
works
(
POTWs)
would
also
be
affected
by
the
rule.

EPA
addressed
this
issue
by
crafting
the
final
rule
to
exclude
as
many
small
facilities
as
possible
while
still
covering
as
much
of
the
pollutant
discharge
as
possible.
With
this
in
mind,
EPA
sought,
from
the
beginning,
to
design
a
combined
phase
regulation
that
would
not
unreasonably
burden
small
entities.

To
ensure
that
all
small
entities
were
considered
in
developing
the
MP&
M
regulation,
EPA
developed,
administered,
and
analyzed
questionnaires
for
all
entities
that
could
potentially
be
affected,
including:
privately­
and
government­
owned
facilities
that
would
have
to
comply
with
the
regulation,
and
POTWs
that
receive
MP&
M
discharges.
The
Agency
balanced
several
factors
when
defining
the
final
rule,
including:

 
the
predominance
of
small
entities
in
the
MP&
M
industry,

 
the
pounds
of
pollutants
discharged
by
large
and
small
facilities,

 
the
toxicity
of
the
pollutants
discharged
by
large
and
small
facilities,

 
the
need
for
additional
reduction
in
effluent
discharges
from
the
MP&
M
industry,

 
the
need
to
achieve
these
reductions
without
imposing
unreasonable
burdens
on
small
entities,
and
 
the
need
to
minimize
burden
on
POTWs.

Given
the
large
number
of
small
entities
that
could
be
affected
by
the
final
rule,
EPA
undertook
detailed
analyses
of
potential
small
entity
impacts
and
carefully
considered
the
findings
from
this
analysis
in
defining
the
final
rule.
From
these
assessments
and
based
on
the
coverage
and
requirements
of
the
final
rule,
EPA
concluded
that
the
final
rule
will
not
have
a
significant
economic
impact
on
a
substantial
number
of
small
entities.
EPA
has
therefore
not
prepared
a
Regulatory
Flexibility
Analysis.

The
following
sections
of
this
chapter
describe
the
methodology
and
results
of
EPA s
small
entity
impact
assessment,
and
discuss
EPA's
consideration
of
small
entity
impacts
in
designing
the
rule.

10­
1
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
10:
Small
Entity
Impact
Assessment
10.1
DEFINING
SMALL
ENTITIES
EPA
identified
small
entities
using
Small
Business
Administration
(
SBA)
size
threshold
guidelines.
1
These
thresholds
define
the
minimum
firm­
level
employment
or
revenue
size,
by
industry
(
four­
digit
SIC
codes),
below
which
a
business
qualifies
as
a
small
business
under
SBA
guidelines.
The
SBA
guidelines
also
set
a
threshold
for
small
public
sector
entities.
A
small
government
is
one
that
serves
a
population
of
50,000
or
less.
MP&
M
facilities
were
determined
to
be
owned
by
a
small
entity
if
the
parent
firm
or
government
fell
below
the
SBA
threshold.

The
SBA
guidelines
for
businesses
use
either
employment
or
revenue
to
measure
size,
depending
on
the
specific
four­
digit
SIC
industry.
Manufacturing
industries
generally
have
employment
size
thresholds,
while
non­
manufacturing
industries
typically
have
revenue
size
thresholds.
EPA
used
employment­
based
thresholds
for
the
manufacturing
portion
of
each
MP&
M
sector,
and
separate
non­
manufacturing
thresholds
for
sectors
that
include
non­
manufacturing
activities
(
e.
g.,

maintenance
and
repair).

EPA
selected
the
SBA
threshold
occurring
most
frequently
among
each
sector s
four­
digit
SIC
codes
as
the
sector
threshold.
2
Table
10.1
presents
the
resulting
employment
size
thresholds
for
manufacturers.

Table
10.1:

Thresholds
for
Manufacturers
MP&
M
Sector
Employees
Aerospace
1,000
Aircraft
1,000
Bus
and
Truck
500
Electronic
Equipment
750
Hardware
500
Household
Equipment
500
Instrument
500
Job
Shop
500
Mobile
Industrial
Equipment
500
Motor
Vehicle
500
Office
Machine
1,000
Ordnance
1,000
Other
Metal
Products
500
Precious
and
Non.
Precious
Metals
500
Printed
Circuit
Board
500
Railroad
1,000
Ship
and
Boat
1,000
Stationary
Industrial
Equipment
500
Steel
Forming
&
Finishing
1,000
Small
Business
MP&
M
Sector
Source:
SBA
and
U.
S.
EPA
analysis.

1
The
SBA
website
provides
the
most
recent
size
thresholds
at
http://
www.
sba.
gov/
regulations/
siccodes.

2
The
SBA
thresholds
for
four­
digit
SICs
were
not
used
directly
because
the
Phase
II
§
308
survey
reports
revenues
by
MP&
M
sector
but
does
not
report
facility
SIC
codes.

10­
2
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
10:
Small
Entity
Impact
Assessment
Table
10.2
presents
the
employment
size
thresholds
for
non­
manufacturers,
which
are
based
on
revenue
except
for
the
railroad
sector.
Some
sectors
do
not
have
non­
manufacturing
industries
and
do
not
appear
in
this
table.

Table
10.2:

Thresholds
for
Non­
Manufacturers
MP&
M
Sector
Revenue
Aircraft
$
5,000,000
Bus
and
Truck
$
5,000,000
Household
Equipment
$
5,000,000
Instrument
$
5,000,000
Motor
Vehiclea
$
5,000,000
Office
Machine
$
18,000,000
Other
Metal
Products
$
5,000,000
Precious
and
Non­
Precious
Metals
$
5,000,000
Railroad
1,500b
Ship
and
Boatc
$
5,000,000
Stationary
Industrial
Equipment
$
5,000,000
a
Also
has
a
threshold
of
100
employees.

b
Employees.

c
Also
has
a
threshold
of
500
employees.

Source:
lysis.

EPA
classified
facilities
as
manufacturing
or
non­
manufacturing
and
selected
an
MP&
M
sector
threshold
based
on
the
sector
from
which
they
rec
eived
the
mo
st
revenue,
as
repo
rted
in
the
§
30
8
surveys.
3
EPA
then
compared
the
firm­
level
employment
or
revenue
for
the
firm
owning
each
facility
to
the
appropriate
manufacturing
or
non­
manufacturing
threshold
for
that
sector.

The
Phase
II
surv
ey
asked
ea
ch
respo
ndent
to
pro
vide
firm­
level
emp
loyment
and
revenue
d
ata.
hase
I
survey
also
asked
for
firm­
lev
el
reve
nue
b
ut
not
for
firm
em
ploym
ent.
his
om
ission
did
not
matter
in
the
case
of
single
facility
businesses,
where
the
facility s
reported
employment
is
the
firm­
level
employment.
multiple­
facility
firms
in
the
Phase
I
survey,
EPA
estimated
firm­
level
employment
by
assuming
that
the
number
of
employees
per
revenue
dollar
for
the
firm
was
the
same
as
the
em
ployees
pe
r
dollar
at
the
facility.

(
10.1)

where:

Efirm
=
firm­
level
emp
loyme
nt,

Efacility
=
facility­
level
em
ploym
ent,

Rfirm
=
firm­
level
revenue,
and
Rfacility
=
facility­
level
revenue.

EP
A
ide
ntified
facilities
ope
rated
by
go
vernm
ents
that
se
rve
a
p
opu
lation
o
f
50,0
00
o
r
fewer
a
s
being
ope
rated
by
sma
ll
government
entities.
survey
responses
provided
population
data
in
most
cases,
which
EPA
supplemented
using
the
Bureau
o
f
the
Ce
nsus
online
1990
Po
pulatio
n
Ce
nsus
d
ataba
se
(
B
ureau
of
the
C
ensus.)
Small
Business
MP&
M
Sector
SBA
and
U.
S.
EPA
ana
The
P
T
For
Thus,

The
§
308
municipal
3
The
§
308
MP&
M
surveys
did
not
collect
firm­
level
revenues
by
sector
and
therefore
cannot
be
used
to
assign
a
unique
sector
to
each
firm.
The
assignment
of
a
threshold
was
therefore
based
on
the
facility­
level
revenues
by
sector.

10­
3
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
10:
Small
Entity
Impact
Assessment
10.2
METHODOLOGY
EPA
used
several
impact
measures
for
its
small
entity
impact
analysis.
First,
EPA
reviewed
the
results
of
the
facility
impact
analyses
described
in
Chapter
5
according
to
business
size
to
determine
whether
facilities
owned
by
small
entities
are
disproportionately
subject
to
moderate
impacts
at
the
facility
level.
Second,
EPA
calculated
the
ratio
of
annualized
compliance
costs
to
facility
revenues
and
examined
the
distribution
of
this
ratio
for
facilities
owned
by
small
versus
large
firms.

The
analysis
excluded
facilities
that
the
facility
impact
analysis
identifies
as
baseline
failures
(
see
Chapter
5).

10.3
RESULTS
10.3.1
Number
of
Affected
Small
Entities
There
are
an
estimated
40,265
MP&
M
facilities
nationwide
(
excluding
baseline
closures).
A
large
number
of
these
facilities
are
owned
by
small
entities,
based
on
SBA
thresholds.
Table
10.3
shows
the
total
number
of
facilities
operating
in
the
baseline
and
the
number
owned
by
small
entities.
Overall,
73
percent
of
all
MP&
M
facilities
are
owned
by
small
entities.

Table
10.3:
Number
and
Percent
of
MP&
M
Facilities
Owned
by
Small
Entities
Type
of
Facility
Number
of
Facilities
of
all
Sizes
Operating
in
the
Baseline
Number
of
Facilities
Owned
by
Small
Entities
Percent
of
Facilities
Owned
by
Small
Entities
Owned
by
small
business
36,480
27,418
75%

Owned
by
small
government
3,785
1,962
52%

Total
owned
by
small
entitiesa
40,265
29,380
73%

a
Excludes
baseline
closures.

Source:
U.
S.
EPA
analysis.

EPA
has
limited
the
scope
of
the
final
rule
to
MP&
M
facilities
performing
oily
operations.
Table
10.4
shows
that
only
a
small
percentage
(
five
percent)
of
small
entities
are
potentially
subject
to
regulation.
The
final
rule
excludes
a
large
percentage
(
95
percent)
of
small
entity­
owned
MP&
M
facilities
from
regulation.

Table
10.4:

Type
of
Facility
Number
of
Facilities
Operating
in
the
Baseline
Number
of
Facilities
Not
Subject
to
the
Final
Rule
Percentage
of
Facilities
Not
Subject
to
the
Final
Rule
Owned
by
small
business
27,418
26,368
96%

Owned
by
small
government
1,962
1,682
86%

Total
owned
by
small
entities
29,380
28,050
95%
Percent
of
Facilities
Owned
by
Small
Entities
Excluded
under
the
Final
Option
Source:
U.
S.
EPA
analysis.

10­
4
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
10:
Small
Entity
Impact
Assessment
10.3.2
Impacts
on
Facilities
Owned
by
Small
Entities
The
facility
impact
analysis
findings
provide
the
first
measure
EPA
used
to
assess
impacts
on
facilities
owned
by
small
entities.
No
facilities,
small
or
large,
are
projected
to
close
or
experience
moderate
impacts
as
a
result
of
the
final
rule.
A
second
approach
to
assessing
small
entity
impacts
 
based
on
a
comparison
of
compliance
costs
to
post­
compliance
revenues
 
indicates
that
no
facilities
will
incur
costs
exceeding
1
percent
of
revenues,
and
only
1,019
facilities
owned
by
small
private
businesses
will
incur
any
costs
at
all.
This
corresponds
to
3.7
percent
of
the
facilities
owned
by
small
private
businesses
that
operate
in
the
baseline.

Table
10.5
summarizes
the
results
of
the
facility
impact
analysis
for
facilities
owned
by
small
entities
for
the
final
rule
and
the
options
considered
by
EPA.

Table
10.5:
Closures
and
Moderate
Impacts
for
Facilities
Owned
by
Small
Entities
Final
Option
Option
II
Option
III
Option
IV
Number
of
facilities
operating
in
the
baseline
29,380
29,380
29,380
29,380
Number
of
facilities
excluded
from
option
28,050
23,893
27,118
26,907
Percent
excluded
95.5%
81.3%
92.3%
91.6%

Number
of
facilities
with
closures
0
813
109
109
Facilities
with
closures
as
a
percent
of
facilities
operating
in
the
baseline
0.0%
2.8%
0.4%
0.4%

Facilities
with
closures
as
a
percent
of
regulated
facilities
0.0%
14.8%
4.8%
4.4%

Number
of
facilities
with
moderate
impacts
0
0
37
37
Facilities
with
moderate
impacts
as
a
percent
of
facilities
operating
in
the
baseline
0.0%
0.0%
0.1%
0.1%

Facilities
with
moderate
impacts
as
a
percent
of
regulated
facilities
0.0%
0.0%
1.6%
1.5%

Source:
U.
S.
EPA
analysis.

In
summary,
no
facilities
owned
by
small
entities
that
operate
in
the
baseline
are
expected
to
close
or
experience
moderate
impacts
under
the
final
rule.

Table
10.6
shows
the
results
of
the
second
approach
to
assessing
small
entity
impacts,
based
on
a
comparison
of
compliance
costs
with
facility
revenues.
EPA
conducted
this
analysis
only
for
MP&
M
facilities
owned
by
private
entities
(
i.
e.,
businesses,

but
not
governments),
because
of
the
low
level
of
impacts
on
all
sizes
of
governments.

10­
5
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
10:
Small
Entity
Impact
Assessment
Table
10.6:
After­
Tax
Annual
Compliance
Costs
as
a
Percent
of
Annual
revenues
under
the
Final
Option
for
Facilities
Owned
by
Private
Small
Businessesa
Discharge
Status
Number
of
Facilities
Owned
by
Small
Private
Businesses
Operating
in
the
Baseline
Number
and
Percent
of
Facilities
Owned
by
Small
Businesses
that
are
Not
Regulated
Number
and
Percent
of
Facilities
Owned
by
Small
Businesses
with
After­
Tax
Annual
Compliance
Costs/
Annual
Revenues
Equal
to:

No
Cost
More
than
0%
and
less
than
1%
Over
1%

Number
%
Number
%
Number
%
Number
%

Direct
1,168
119
13.9%
31
2.5%
1,019
83.6%
0
0.0%

Indirect
26,253
26,253
100.0%
0
0.0%
0
0.0%
0
0.0%

Totalb
27,418
26,368
96.2%
31
0.1%
1,019
3.7%
0
0.0%

a
Includes
only
facilities
that
remain
open
in
the
baseline.

b
The
sum
of
the
number
of
direct
and
indirect
dischargers
does
not
add
up
to
the
total
because
some
facilities
are
both
indirect
and
direct
dischargers.

Source:
U.
S.
EPA
analysis.

Of
the
facilities
owned
by
small
entities
that
operate
in
the
baseline,
96.2
percent
are
not
regulated
under
the
final
rule.

Another
0.1
percent
are
regulated
but
do
not
incur
costs.
The
remaining
3.7
percent
incur
compliance
costs
but
none
incur
after­
tax
annualized
costs
exceeding
1
percent
of
annual
revenue.
These
results
are
consistent
with
the
finding
that
no
facilities
owned
by
small
business
will
close
or
experience
moderate
financial
impacts.

10.3.3
Impacts
on
Small
Firms
EPA
also
performed
a
firm­
level
analysis
in
which
it
compared
compliance
costs
with
revenue
at
the
firm
level
as
a
measure
of
compliance
cost
burden.
EPA
applied
this
analysis
only
for
facilities
owned
by
private
entities
(
i.
e.,
businesses,
but
not
governments).
Table
10.7
shows
the
results
of
this
comparison.
The
Agency
was
not
able
to
estimate
national
numbers
of
firms
that
own
MP&
M
facilities
precisely,
because
the
sample
weights
based
on
the
survey
design
represent
numbers
of
facilities
rather
than
firms.
Most
of
the
facilities
owned
by
small
firms
(
25,297
of
27,578,
or
92
percent)
are
single­
facility
firms,
however.
These
single­
facility
firms
can
be
analyzed
using
sample
weights.
In
addition,
85
small
multi­
facility
firms
own
at
least
one
sample
facility.
These
firms
are
included
in
the
analysis
but
with
a
sample
weight
of
one,
since
it
is
not
known
how
many
sample
firms
these
85
small
firms
represent.
The
results
shown
in
Table
10.7
therefore
represent
a
total
of
25,382
small
MP&
M
firms
(
25,297
+
85).

Table
10.7:
Firm
Level
Before­
Tax
Annual
Compliance
Costs
as
a
Percent
of
Annual
Revenues
for
Private
Small
Businesses
Number
of
Small
Firms
in
the
Analysisa
Number
and
Percent
with
Before­
Tax
Annual
Compliance
Costs/
Annual
Revenues
Equal
to:

0%
(
no
costs)
>
0%
and
<
1%
Over
1%

Number
%
Number
%
Number
%

25,382
24,363
95.99%
1,019
4.01%
0
0%

a
Firms
whose
only
MP&
M
facilities
close
in
the
baseline
are
excluded.

Source:
U.
S.
EPA
analysis.

The
vast
majority,
96
percent,
of
the
small
businesses
in
the
analysis
incur
no
costs
due
to
the
rule.
The
remaining
4
percent,

equal
to
1,019
firms,
incur
before­
tax
compliance
costs
of
less
than
1%
of
their
after­
tax
revenues.
Of
these
1,019
small
firms,
none
were
reported
in
the
facility
impact
analysis
to
experience
moderate
impacts
due
to
the
final
rule.

10­
6
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
10:
Small
Entity
Impact
Assessment
10.4
CONSIDERATION
OF
SMALL
ENTITY
IMPACTS
IN
DEVELOPING
THE
FINAL
RULE
EPA
gave
special
consideration
to
impacts
on
small
entities
in
defining
the
final
regulation.
In
particular,
EPA
attempted
to
minimize
impacts
on
small
entities
while
at
the
same
time
meeting
Clean
Water
Act
objectives
of
reducing
pollutant
discharges
to
the
nation s
waterways.
The
final
rule
minimizes
impacts
on
small
entities
primarily
by
excluding
all
indirect
dischargers
and
direct
dischargers
in
all
subcategories
except
Oily
Wastes.

Table
10.8
shows
the
number
and
percentage
of
facilities
owned
by
small
versus
large
entities
that
are
projected
to
close
or
experience
moderate
impacts
under
the
final
and
alternative
regulatory
options
analyzed
by
EPA
in
developing
the
final
regulation.

Table
10.8:
Percent
of
Facilities
Estimated
to
Close
or
Experience
Moderate
Impacts
by
Owning
Entity
Size
Class
and
by
Regulatory
Option
Regulatory
Option
and
Ty
pe
of
Facility
Number
of
Facilities
Subject
to
Regulation
Projected
to
Close
Percent
Closing
Experiencing
Moderate
Impacts
Percent
with
Moderate
Impacts
Final
Regulatory
Option
Owned
by
Small
Entities
1,330
0
0.0%
0
0.0%

Owned
by
Large
Entities
1,052
0
0.0%
0
0.0%

Total
2,382
0
0.0%
0
0.0%

Option
II
Owned
by
Small
Entities
5,487
813
14.8%
0
0.0%

Owned
by
Large
Entities
2,863
0
0.0%
0
0.0%

Total
8,350
813
9.7%
0
0.0%

Option
III
Owned
by
Small
Entities
2,262
109
4.8%
37
1.6%

Owned
by
Large
Entities
1,182
0
0.0%
0
0.0%

Total
3,444
109
0.5%
37
1.1%

Option
IV
Owned
by
Small
Entities
2,473
109
4.4%
37
1.5%

Owned
by
Large
Entities
1,453
0
0.0%
12
0.8%

Total
3,926
109
2.8%
49
1.2%

Source:
U.
S.
EPA
analysis.

As
reported
in
the
table,
the
final
rule
avoids
entirely
the
more
material
impacts
on
small
entities
that
likely
would
have
occurred
under
the
alternative
regulatory
options.

In
addition
to
avoiding
impacts
in
the
regulated
community,
the
final
rule,
by
excluding
indirect
discharging
facilities
from
revised
limits,
also
eliminated
the
potential
additional
burden
to
POTWs,
including
small
POTWs,
from
issuance
of
new
and
revised
permits.
Chapter
11
and
Appendix
F
discuss
POTW
administrative
activities
and
costs
under
the
four
regulatory
options.

10­
7
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
10:
Small
Entity
Impact
Assessment
GLOSSARY
Regulatory
Flexibility
Analysis:
an
evaluation
of
the
impact
of
a
rule
and
alternative
regulatory
options
on
small
entities.

small
entity:
a
business,
government
or
non­
profit
organization
defined
as
small
for
EPA s
RFA/
SBREFA
evaluation.

small
business:
a
business
with
employment
or
revenue
below
the
threshold
specified
by
the
Small
Business
Administration
for
each
4­
digit
SIC.

small
government:
a
government
that
serves
a
population
of
50,000
or
less,
as
defined
by
the
Small
Business
Administration.

10­
8
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
10:
Small
Entity
Impact
Assessment
ACRONYMS
POTW:
Publicly­
owned
treatment
works
RFA:
Regulatory
Flexibility
Act
SBA:
Small
Business
Administration
SBREFA:
Small
Business
Regulatory
Enforcement
Fairness
Act
10­
9
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
10:
Small
Entity
Impact
Assessment
REFERENCES
U.
S.
Department
of
Commerce,
Bureau
of
the
Census.
Statistics
of
U.
S.
Businesses.

U.
S.
Small
Business
Administration.
http://
www.
sba.
gov/
regulations/
siccodes.

10­
10
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
11:
Social
Costs
INTRODUCTION
This
chapter
presents
EPA s
estimates
of
the
regulation s
costs
to
society.
Previous
chapters
described
the
economic
impacts
of
the
final
rule
in
terms
of
facility
closures
and
moderate
financial
impacts,
employment
losses,
community
impacts,
international
trade
effects,
financial
impacts
on
firms
owning
MP&
M
facilities,
and
impacts
on
small
entities.
The
economic
impact
analyses
were
based
on
the
estimated
costs
to
MP&
M
facilities
of
complying
with
the
regulation.
These
costs
of
labor,
equipment,
material,
and
other
economic
resources
needed
for
regulatory
compliance
are
also
the
major
component
of
the
cost
to
society
of
the
regulation.
Other
components
of
social
costs
include
costs
to
governments
administering
the
regulation,
and
the
social
costs
associated
with
unemployment
resulting
from
facility
closures.
Chapter
11:
Social
Costs
CHAPTER
CONTENTS
11.1
s
of
Social
Costs
...............
11­
1
11.2
.............
11­
2
11.3
dministration
Costs
...............
11­
4
11.4
ts
of
Unemployment
.............
11­
5
11.4.1
ost
of
Worker
Dislocation
....
11­
5
11.4.2
Administering
Unemployment
Benefits
Programs
.................
...
11­
6
11.4.3
ost
of
Unemployment
.........
11­
6
11.5
ial
Costs
.................
......
11­
7
Glossary
.................
.................
.
11­
8
References
.................
................
11­
9
Component
Resource
Costs
of
Compliance
POTW
A
Social
Cos
Social
C
Cost
of
Total
C
Total
Soc
Section
11.1
provides
an
overview
of
the
three
components
of
social
cost
analyzed
for
this
regulation:
the
cost
of
society s
economic
resources
used
to
comply
with
the
rule;
the
cost
to
governments
of
administering
the
rule;
and
the
social
costs
of
unemployment
resulting
from
the
rule.
The
next
three
sections
discuss
each
of
these
three
components
of
social
cost
in
more
detail.
The
last
section,
Section
11.5,
summarizes
the
estimated
total
social
costs.

11.1
COMPONENTS
OF
SOCIAL
COSTS
The
social
costs
of
regulatory
actions
are
the
opportunity
costs
to
society
of
employing
scarce
resources
in
pollution
prevention
and
pollution
control
activities.
The
social
costs
of
regulation
include
both
monetary
and
non­
monetary
outlays
made
by
society.
Monetary
outlays
include
the
resource
costs
of
compliance,
government
administrative
costs,
and
other
adjustment
costs,
such
as
the
cost
of
relocating
displaced
workers.
Non­
monetary
outlays,
some
of
which
can
be
assigned
monetary
values,
include
losses
in
consumers 
and
producers 
surplus
in
affected
product
markets,
the
adverse
effects
of
involuntary
unemployment,
possible
loss
of
time
(
e.
g.,
delays
in
investment
decisions),
and
possible
adverse
impacts
on
the
rate
of
innovation.

To
assess
the
MP&
M
regulation s
social
costs,
EPA
relied
first
on
the
estimated
costs
to
MP&
M
facilities
for
the
labor,

equipment,
material,
and
other
economic
resources
needed
to
comply
with
the
regulation.
The
compliance
costs
used
to
estimate
total
social
costs
differ
from
those
used
to
assess
facility­
and
firm­
level
economic
impacts
in
their
consideration
of
taxes
and
revenue
effects.
In
the
facility
and
firm
impact
analysis,
compliance
costs
are
measured
as
they
affect
the
financial
performance
of
regulated
facilities
and
firms.
The
analyses
therefore
explicitly
consider
the
tax
deductibility
of
compliance
expenditures.
1
In
the
analysis
of
costs
to
society,
however,
these
compliance
costs
are
considered
on
a
before­
tax
basis.
In
general,
because
tax
deductibility
reduces
the
burden
of
compliance
expenditures
to
private
firms,
the
estimated
compliance
costs
are
greater
from
the
perspective
of
society
than
from
the
perspective
of
private
industry.
In
addition,
the
analysis
of
the
regulation s
impact
on
regulated
facilities
and
firms
accounted
for
potential
recovery
of
compliance
costs
through
output
price
increases.
The
assessment
of
social
cost
ignores
these
potential
cost
offsets
because,
like
taxes,
they
represent
only
a
transfer
of
compliance
costs
from
the
complying
entity
and
not
a
true
reduction
in
compliance
cost.

Social
costs
also
include
lost
producers 
and
consumers 
surplus
that
result
from
reduction
in
the
quantity
of
goods
and
services
produced.
Lost
producers 
surplus
is
measured
as
the
difference
between
revenues
earned
and
the
cost
of
production
for
the
lost
production.
Lost
consumers 
surplus
is
the
difference
between
the
price
paid
by
consumers
for
the
lost
production
and
the
maximum
amount
they
would
have
been
willing
to
pay
for
those
goods
and
services.

1
Costs
incurred
by
government
facilities
are
not
adjusted
for
taxes,
since
these
facilities
are
not
subject
to
income
taxes.

11­
1
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
11:
Social
Costs
Accurate
calculation
of
lost
producers 
and
consumers 
surplus
requires
knowledge
of
market
supply
and
demand
characteristics
for
each
affected
industry.
EPA
was
not
able
to
conduct
an
industry­
specific
partial
equilibrium
analysis
of
changes
in
market
prices
and
output,
both
because
of
the
very
large
number
of
markets
involved
and
because
it
was
not
possible
to
link
compliance
costs
to
specific
products
at
multi­
sector
facilities.

EPA s
assessment
of
social
cost
includes
two
additional
cost
elements:
the
cost
to
governments
of
administering
permitting
and
compliance
monitoring
activities
under
the
regulation,
and
the
social
costs
associated
with
unemployment
that
may
result
from
facility
closures.
The
unemployment­
related
costs
include
the
cost
of
administering
unemployment
programs
for
workers
who
are
projected
to
lose
employment
(
but
not
the
cost
of
unemployment
benefits,
which
are
a
transfer
payment
within
society);
and
an
estimate
of
the
amount
that
workers
would
be
willing
to
pay
to
avoid
involuntary
unemployment.

11.2
RESOURCE
COSTS
OF
COMPLIANCE
This
section
reviews
the
resource
costs
of
compliance
for
the
final
rule
and
the
costs
for
the
alternative
regulatory
options
considered
by
EPA.
The
resource
costs
of
compliance
are
the
value
of
society s
productive
resources
 
including
labor,

equipment,
and
materials
 
expended
to
achieve
the
reductions
in
effluent
discharges
required
by
the
regulation.
The
social
costs
of
these
resources
are
higher
than
the
financial
burden
borne
by
facilities
because
facilities
are
able
to
deduct
the
costs
from
their
taxable
income
and
may
be
able
to
recover
some
of
the
costs
through
price
increases
to
customers.
The
costs
to
society,
however,
are
the
full
value
of
the
resources
used,
whether
paid
for
by
the
regulated
facilities,
by
taxpayers
in
the
form
of
lost
tax
revenues,
or
by
customers
through
increased
prices.
EPA
included
no
costs
for
facilities
assessed
as
baseline
closures.

EPA
estimated
after­
tax
annualized
compliance
costs
of
$
11.9
million
for
the
final
regulation
(
see
Chapter
5:
Facility
Impact
Analysis,
Table
5.6).
The
estimated
social
value
of
these
compliance
costs,
however,
is
$
13.8
million,
as
shown
in
Table
11­
1.
This
amount
represents
the
value
to
society
of
the
resources
that
would
be
used
to
comply
with
the
rule.

For
the
alternative
regulatory
options,
EPA s
estimates
included
compliance
costs
both
for
facilities
estimated
to
close
because
of
the
rule
and
for
facilities
estimated
to
continue
operating
under
the
regulation.
This
approach
results
in
an
upper­

bound
estimate
of
the
social
costs
of
compliance,
since
the
lost
value
incurred
by
closing
facilities
is
presumably
less
than
the
2
estimated
cost
of
compliance.

Under
the
Proposed/
NODA
Option,
annual
compliance
costs
amount
to
$
1,111.4
million
for
indirect
dischargers
and
$
508.9
million
for
direct
dischargers
(
2001$).
The
total
annualized
compliance
costs
are
$
1,620.3
million,
or
approximately
117
times
the
compliance
costs
under
the
final
rule.
This
cost
increase
results
from
including
additional
subcategories
under
the
Proposed/
NODA
Option.
General
Metals
indirect
dischargers,
which
are
excluded
from
the
final
regulation,
account
for
approximately
40
percent
of
the
total
compliance
costs
under
the
Proposed/
NO
DA
O
ption.

Under
the
Directs
+
413
to
433
Upgrade
Option,
annual
compliance
costs
amount
to
$
83.0
million
for
indirect
dischargers
and
$
13.8
million
for
direct
dischargers
(
2001$).
The
total
annualized
compliance
costs
are
$
96.8
million,
or
approximately
7
times
the
final
rule s
compliance
costs.
This
cost
increase
results
from
requiring
indirect
dischargers
that
currently
comply
with
the
standards
of
413
to
upgrade
to
433
standards.
General
Metals
facilities,
which
are
excluded
from
the
final
regulation,

account
for
approximately
44
percent
of
the
total
compliance
costs
under
this
option.

Under
the
Directs
+
All
to
433
Upgrade
Option,
annual
compliance
costs
amount
to
$
124.4
million
for
indirect
dischargers
and
$
13.8
million
for
direct
dischargers
(
2001$).
The
total
annualized
compliance
costs
are
$
138.2
million,
or
approximately
10
times
the
compliance
costs
under
the
final
rule.
This
cost
increase
results
from
requiring
general
metals
facilities
that
currently
comply
local
limit
standards
to
upgrade
to
433
standards.
General
Metals
facilities,
which
are
excluded
from
the
final
regulation,
account
for
approximately
61
percent
of
the
total
compliance
costs
under
this
option.

2
Including
costs
for
regulatory
closures
yields
an
estimate
of
social
costs
assuming
that
every
facility
continued
to
operate
post­

regulation.
Calculating
costs
as
if
all
facilities
continue
operating
will
overstate
social
costs
if
some
facilities
find
it
more
economical
to
close
than
comply
with
the
regulation.

11­
2
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
11:
Social
Costs
Table
11.1:
Resource
Value
of
Compliance
Costs
(
millions,
2001$)

Subcategory
Indirect
Direct
Total
Option
I:
Selected
Option
(
Directs
Only)

General
Metals
$
0.0
$
0.0
$
0.0
MF
Job
Shop
$
0.0
$
0.0
$
0.0
Non
Chromium
Anodizing
$
0.0
$
0.0
$
0.0
Oily
Wastes
$
0.0
$
13.8
$
13.8
Printed
Wiring
Boards
$
0.0
$
0.0
$
0.0
Railroad
Rebuilders
$
0.0
$
0.0
$
0.0
Shipbuilding
Dry
Docks
$
0.0
$
0.0
$
0.0
Total
$
0.0
$
13.8
$
13.8
Option
II:
Proposed/
NODA
Option
General
Metals
$
652.9
$
396.1
$
1,049.0
MF
Job
Shop
$
185.2
$
4.6
$
189.8
Non
Chromium
Anodizing
$
0
$
38.0
$
38.0
Oily
Wastes
$
92.8
$
35.9
$
128.7
Printed
Wiring
Boards
$
157.9
$
0.3
$
158.2
Railroad
Rebuilders
$
0.0
$
0.7
$
0.7
Shipbuilding
Dry
Docks
$
0.0
$
3.2
$
3.2
Steel
Forming
&
Finishing
$
22.6
$
30.1
$
52.7
Total
$
1,111.4
$
508.9
$
1,620.3
Option
III:
Directs
+
413
to
433
Upgrade
Option
General
Metals
$
42.4
$
0.0
$
42.4
MF
Job
Shop
$
17.1
$
0.0
$
17.1
Non
Chromium
Anodizing
$
0.0
$
0.0
$
0.0
Oily
Wastes
$
0.0
$
13.8
$
13.8
Printed
Wiring
Boards
$
23.5
$
0.0
$
23.5
Railroad
Rebuilders
$
0.0
$
0.0
$
0.0
Shipbuilding
Dry
Docks
$
0.0
$
0.0
$
0.0
Total
$
83.0
$
13.8
$
96.8
Option
IV:
Directs
+
All
to
433
Upgrade
Option
General
Metals
$
83.8
$
0.0
$
83.8
MF
Job
Shop
$
17.1
$
0.0
$
17.1
Non
Chromium
Anodizing
$
0.0
$
0.0
$
0.0
Oily
Wastes
$
0.0
$
13.8
$
13.8
Printed
Wiring
Boards
$
23.5
$
0.0
$
23.5
Railroad
Rebuilders
$
0.0
$
0.0
$
0.0
Shipbuilding
Dry
Docks
$
0.0
$
0.0
$
0.0
Total
$
124.4
$
13.8
$
138.2
Source:
U.
S.
EPA
analysis.

11­
3
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
11:
Social
Costs
11.3
POTW
ADMINISTRATION
COSTS
This
section
discusses
the
POTW
administrative
costs
of
the
final
rule
and
the
costs
of
the
alternatives
considered
by
EPA.

EPA
estimates
that
the
final
rule
will
not
increase
POTW
administrative
costs.
EPA
expects
no
increase
in
permitting
costs
for
facilities
that
already
hold
a
permit
in
the
baseline.
However,
governments
will
incur
additional
permitting
costs
from
(
1)

permitting
of
unpermitted
facilities
(
under
the
NODA/
Proposal
option
only)
and
(
2)
acceleration
of
repermitting
for
some
indirect
dischargers
that
currently
hold
permits.
The
alternative
regulatory
options
may
also
cause
some
administrative
costs
to
decrease.
For
example,
control
authorities
will
no
longer
have
to
repermit
facilities
that
are
estimated
to
close
as
a
result
of
the
MP&
M
rule.

Table
11.2
shows
the
number
of
facilities
requiring
a
new
permit
under
the
four
options
considered
for
the
final
rule.
Only
the
NODA/
Proposal
option
would
require
POTWs
to
issue
new
concentration­
based
permits
for
the
first
time.
None
of
the
options
considered
would
require
a
new
mass­
based
permit
or
a
conversion
from
a
concentration­
based
to
a
mass­
based
permit.
The
table
also
shows
the
number
of
facilities
that
will
require
early
repermitting
(
within
three
years
rather
than
within
five
years),
the
number
of
estimated
regulatory
closures,
and
the
total
number
of
facilities
that
are
expected
to
require
permits
under
the
different
regulatory
options.

Table
11.2:
Permitting
Requirements
for
Regulatory
Alternatives
(
number
of
indirect
discharging
facilities)

Permitting
required:
Option
I:

Selected
Option
Option
II:

NODA/
Proposal
Option
Option
III:

Directs
+
413
to
433
Upgrade
Option
IV:

Directs
+
All
to
433
Upgrade
New
concentration­
based
permit
n/
a
103
0
0
New
mass­
based
permita
n/
a
0
0
0
Convert
from
existing
concentration­
based
to
mass­
baseda
n/
a
0
0
0
Repermit
within
3
rather
than
5
years
n/
a
1,434
382
566
Regulatory
closures
(
no
longer
requiring
permits)
b
n/
a
722
120
120
Number
of
facilities
operating
post­
regulation
requiring
a
permit
n/
a
3,687
954
1,414
a
EPA
does
not
require
mass­
based
permits
under
any
of
the
option
considered
for
the
final
rule.

b
Some
facilities
with
existing
permits
will
no
longer
require
permitting
due
to
regulatory
closures.

Source:
U.
S.
EPA
analysis.

Table
11.3
below
presents
the
estimated
permitting
costs
to
governments
of
administering
the
final
rule
and
alternative
options.
Chapter
7:
Government
and
Community
Impact
Analysis
describes
the
methodology
used
to
estimate
these
administrative
costs.

Because
the
final
regulation
excludes
from
coverage
all
indirect
dischargers,
EPA
estimates
that
the
final
rule
will
not
increase
POTW
administrative
costs.
Each
of
the
three
alternative
regulatory
options
considered
would
result
in
reduced
POT
W
regulatory
costs.
These
cost
savings
result
from
regulatory
closures
(
i.
e.,
facilities
that
currently
hold
a
permit
and
would
have
required
repermitting
in
the
baseline,
but
that
will
no
longer
require
repermitting
under
the
regulatory
options).

The
cost
savings
from
regulatory
closures
outweigh
the
additional
costs
for
issuing
new
permits
(
under
the
NODA/
Proposal
option
only)
and
repermitting
on
an
accelerated,
three­
year
schedule.
Estimated
annualized
cost
savings
to
POTWs
for
the
three
alternative
regulatory
options
range
between
$
0.05
and
$
1.0
million
under
the
NODA/
Proposal
option,
and
between
$
0.03
and
$
0.2
million
under
the
Directs
+
413
to
433
Upgrade
option
and
the
Directs
+
413+
50%
LL
Upgrade
option
(
all
costs
in
($
2001).

11­
4
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
11:
Social
Costs
Table
11.3:
Annualized
Government
Administrative
Costs
by
Regulatory
Option
($
2001)

Option
Low
Medium
High
Option
I:
Selected
Option
(
Directs
Only)
n/
a
n/
a
n/
a
Option
II:
Proposed/
NODA
Option
($
46,000)
($
198,000)
($
1,027,000)

Option
III:
Directs
+
413
to
433
Upgrade
Option
($
26,000)
($
56,000)
($
218,000)

Option
IV:
Directs
+
All
to
433
Upgrade
Option
($
26,000)
($
55,000)
($
213,000)

Source:
U.
S.
EPA
analysis.

11.4
SOCIAL
COSTS
OF
UNEMPLOYMENT
This
section
discusses
the
social
costs
of
unemployment
associated
with
the
final
rule
and
the
alternatives
EPA
considered.

The
loss
of
jobs
from
facility
closures
would
represent
a
social
cost
of
the
regulation.
However,
from
its
facility
impact
analysis,
EPA
estimates
that
no
facilities
will
close
as
a
result
of
the
regulation.
EPA
did
not
recognize
possible
savings
in
unemployment­
related
costs
from
jobs
created
by
the
rule
as
a
negative
cost
(
benefit)
of
the
regulation.
Accordingly,
EPA
estimates
a
zero
cost
of
unemployment
for
the
final
rule.

Chapter
6:
Employment
Effects
discusses
the
effects
of
the
alternative
regulatory
options
on
employment,
including
the
jobs
potentially
lost
due
to
facility
closures
and
the
jobs
potentially
created
by
expenditures
to
comply.
This
section
estimates
the
social
cost
of
the
estimated
changes
in
employment.
EPA
considered
two
components
of
the
social
cost
of
unemployment:

 
The
cost
of
worker
dislocation
(
exclusive
of
cash
benefits)
to
unemployed
individuals,
as
measured
by
their
willingness
to
pay
to
avoid
unemployment;
and
 
The
additional
cost
to
governments
to
administer
unemployment
benefits
programs.

11.4.1
Social
Cost
of
Worker
Dislocation
EPA
calculated
the
cost
of
worker
dislocation
based
on
an
estimate
of
the
value
that
workers
would
pay
to
avoid
involuntary
job
losses.
The
amount
that
workers
would
pay
to
avoid
a
job
loss
was
derived
from
hedonic
studies
of
the
compensation
premium
required
by
workers
to
accept
jobs
with
a
higher
probability
of
unemployment.
This
framework
has
been
used
in
the
past
to
impute
a
trade­
off
between
wages
and
job
security
(
Topel,
1984;
Adams,
1985;
Anderson
and
Chandran,
1987).

Specifically,
this
estimate
approximates
a
one­
time
willingness­
to­
pay
to
avoid
an
involuntary
episode
of
unemployment
and
reflects
all
monetary
and
non­
monetary
impacts
of
involuntary
unemployment
incurred
by
the
worker.
It
does
not
include
any
offsets
to
the
cost
of
unemployment,
such
as
unemployment
compensation
or
the
value
of
increased
leisure
time.

Studies
by
Topel
(
1984)
and
Adams
(
1985)
suggest
that
the
compensation
premium
for
accepting
a
one
percent
increase
in
the
annual
probability
of
unemployment
is
in
the
range
of
2.5
percent
to
3.3
percent
of
the
base
compensation
value.
To
illustrate
this
finding,
assume
that
a
worker
is
presented
with
a
choice
between
two
employment
opportunities:
one
with
compensation
of
$
30,000
per
year
and
an
annual
unemployment
probability
of
zero,
and
a
second
otherwise
equivalent
opportunity
but
with
an
annual
unemployment
probability
of
one
percent.
For
the
worker
to
accept
the
second
opportunity,
his
or
her
compensation
must
be
at
least
2.5
to
3.3
percent
greater
than
the
$
30,000
offered
for
the
first
opportunity,
or
at
least
$
30,750
to
$
30,990
(
depending
on
the
percentage
premium
used).
In
this
case,
the
dollar
premium
required
to
accept
the
additional
one
percent
annual
probability
of
unemployment
is
$
750
to
$
990.

For
analyzing
the
unemployment­
related
costs
of
the
MP&
M
regulation,
the
hypothetical
choice
is
assumed
to
be
between
an
employment
opportunity
with
a
zero
percent
annual
probability
of
unemployment
and
a
second
opportunity
with
a
100
percent
annual
probability
of
unemployment.
In
this
case,
the
one­
time
premium
for
accepting
the
employment
opportunity
with
the
100
percent
probability
of
employment
is
assumed
to
be
250
to
330
percent
of
the
compensation
for
the
otherwise
11­
5
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
11:
Social
Costs
comparable
employment
opportunity
with
the
assumed
zero
probability
of
employment.
3
To
estimate
the
premium
for
an
increase
in
the
probability
of
unemployment
requires
an
estimate
of
the
average
compensation
to
workers
in
the
MP&
M
industry.
EPA
calculated
an
average
annual
compensation
for
MP&
M
industry
production
workers
of
$
38,309
(
2001$)
4
Accordingly,
the
annual
compensation
premium
for
a
one
percentage
point
increase
in
the
annual
probability
of
unemployment
would
be
$
958
to
$
1,264
and
the
cost
of
a
100
percent
probability
event
would
be
$
95,772
to
$
126,420
(
2001$).
This
calculation
assumes
that
the
cost
of
a
certainty
unemployment
event
is
directly
proportional
to
the
increase
in
probability
from
the
low
probability
event
(
i.
e.,
one
percent)
on
which
the
calculation
is
based.

Chapter
6:
Employment
Effects
presents
EPA s
estimate
that
as
many
as
32,729
jobs
might
be
lost
due
to
facility
closures
under
the
Proposed/
NODA
Option.
Multiplying
these
32,729
job
losses
by
the
estimated
range
of
willingness­
to­
pay
values
for
avoiding
unemployment
results
in
a
total
cost
of
unemployment
for
the
Proposed/
NODA
Option
of
$
3.1
billion
to
$
4.1
billion
(
2001$).
EPA
annualized
these
values
over
a
15­
year
period
at
a
7
percent
rate,
yielding
an
annualized
cost
of
$
344
to
$
454
million.
These
values
are
the
annualized
amounts
over
a
15­
year
period
that
workers
would
be
willing
to
pay
to
avoid
the
job
losses
projected
to
result
from
compliance
with
the
Proposed/
NODA
Option.

EPA
estimates
that
as
many
as
7,874
jobs
might
be
lost
due
to
facility
closures
under
the
Directs
+
413
to
433
Upgrade
Option
and
the
Directs
+
All
to
433
Upgrade
Option.
Multiplying
these
7,874
job
losses
by
the
estimated
range
of
willingness­
to­
pay
values
for
avoiding
unemployment
results
in
a
total
cost
of
unemployment
for
both
of
the
433
Upgrade
Options
of
$
754
million
to
$
995
million
(
2001$).
EPA
annualized
these
values
over
a
15­
year
period
at
a
7
percent
rate,

yielding
an
annualized
cost
of
$
83
to
$
109
million.

11.4.2
Cost
of
Administering
Unemployment
Benefits
Programs
Unemployment
as
the
result
of
regulation
also
imposes
costs
on
society
through
the
additional
administrative
burdens
placed
on
the
unemployment
system.
The
cost
of
unemployment
benefits
per
se
is
not
a
social
cost
but
instead
a
transfer
payment
within
society
from
taxpayers
to
the
unemployed.
Administrative
costs
include
the
cost
of
processing
unemployment
claims,

retraining
workers,
and
placing
workers
in
new
jobs.
Data
obtained
from
the
Interstate
Conference
of
Employment
Security
Agencies
indicated
that
the
cost
of
administering
an
initial
unemployment
claim
over
the
period
1991­
1993
averaged
$
93.25
(
1991$­
1993$).
These
costs
included
total
Federal
and
State
funding
for
administering
unemployment
benefit
programs
but
not
the
cost
of
the
benefits
themselves.
Inflating
this
estimate
to
2001
dollars
using
the
BLS
Employment
Cost
Index
for
and
5
Local
Government
workers
yields
a
value
of
$
122
per
claim.
Based
on
this
estimate,
EPA
assumed
that
the
cost
of
administering
unemployment
programs
would
amount
to
approximately
$
122
per
job
loss.
Multiplying
this
figure
by
the
estimated
loss
of
32,729
jobs
under
the
Proposed/
NODA
Option
yields
an
additional
$
4.0
million
in
social
costs.
EPA
annualized
this
value
over
the
15­
year
analysis
period
at
a
7
percent
rate
to
yield
an
annual
cost
of
approximately
$
438,027
(
2001$).
Multiplying
the
per
job
loss
estimate
of
the
cost
of
administering
unemployment
by
the
estimated
loss
of
7,874
jobs
under
the
433
Upgrade
Options
yields
almost
an
additional
$
960,000
in
social
costs.
EPA
annualized
these
values
over
the
15­
year
analysis
period
at
a
7
percent
rate
to
yield
an
annual
cost
of
$
105,000
under
the
433
Upgrade
Options.

11.4.3
Total
Cost
of
Unemployment
As
mentioned
above,
EPA
did
not
estimate
a
cost
of
unemployment
for
the
final
rule
because
no
job
loss
is
expected.
As
shown
in
Table
11.4
below,
the
32,729
estimated
job
losses
at
facility
closures
under
the
Proposed/
NOD
A
Option
have
an
estimated
social
cost
of
$
345
million
to
$
455
million
(
2001$).
The
7,874
estimated
job
losses
at
facility
closures
under
the
433
Upgrade
Options
have
an
estimated
social
cost
of
$
83
million
to
$
109
million
(
2001$).

3
This
analysis
has
a
considerable
artificiality
in
that
a
worker
would
not
realistically
be
presented
with
this
choice.
The
artificiality
of
the
choice
in
turn
underscores
the
very
strong
assumption
in
the
analysis.
That
is,
that
the
cost
of
an
unemployment
event
can
be
estimated
by
linearly
extrapolating
the
premium
estimated
for
small
percentage
differences
in
the
probability
of
unemployment
to
a
circumstance
in
which
the
probability
of
unemployment
is
100
percent.
An
investigation
of
literature
on
unemployment
failed
to
find
an
alternative
method
for
estimating
unemployment
costs.
This
analytic
issue
warrants
further
research.

4
Calculated
the
total
payroll
($
407.7
billion)
/
total
employment
(
12.2
million)
in
MP&
M
SIC
codes
based
on
data
obtained
from
the
1997
Economic
Censuses
which
is
$
33,508.
Inflated
this
estimate
to
2001
dollars
using
the
BLS
Seasonally
Adjusted
Employment
Cost
Index
(
ECI)
for
Private
Industry
Manufacturing
­
1997
(
4th
Qtr):
135.4,
2001
(
4th
Qtr):
154.8.

5
BLS,
2000.
Table
1a:
Employment
Cost
Index
(
Compensation),
State
and
Local
Government:
1992
(
December):
118.5,
1999
(
December):
144.2.

11­
6
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
11:
Social
Costs
Table
11.4:
Total
Annual
Social
Costs
of
Unemployment
(
millions,
2001$)

Social
Cost
of
Unemployment
Categories
Option
I:

Selected
Option
(
Directs
Only)
Option
II:

Proposed/
NODA
Option
Option
III:

Directs
+
413
to
433
Upgrade
Option
IV:

Directs
+
All
to
433
Upgrade
Employment
Loss
in
Closing
Facilities
n/
a
32,729
7,874
7,874
Annualized
Worker
Dislocation
Cost
Low
Unit
Cost
(
based
on
2.5
percent
premium)
n/
a
$
344.16
$
82.80
$
82.80
High
Unit
Cost
(
based
on
3.3
percent
premium)
n/
a
$
454.29
$
109.30
$
109.30
Annualized
Unemployment
Administration
Cost
(
million
2001$)
n/
a
$
0.44
$
0.11
$
0.11
Sum,
Worker
Dislocation
and
Unemployment
Administration
Costs
(
based
on
employment
loss
in
closing
facilities)

Low
Value
n/
a
$
344.60
$
82.91
$
82.91
High
Value
n/
a
$
454.73
$
109.40
$
109.40
Source:
U.
S.
EPA
analysis.

11.5
TOTAL
SOCIAL
COSTS
Summing
across
the
final
rule s
social
cost
components
results
in
a
total
social
cost
estimate
of
$
13.8
million
annually
(
2001$),
as
shown
in
Table
11.5.
The
total
social
costs
of
the
Proposed/
NODA
Option
range
between
$
2.0
billion
and
$
2.1
billion.
The
total
social
costs
for
the
Directs
+
413
to
433
Upgrade
Option
range
between
$
180
million
and
$
206
million.

The
total
social
costs
for
the
Directs
+
All
to
433
Upgrade
Option
range
between
$
221
million
and
$
247
million.

Table
11.5:
Total
Social
Cost
(
millions,
2001$)

Social
Cost
Categories
Option
I:

Selected
Option
(
Directs
Only)
Option
II:

Proposed/
NODA
Option
Option
III:

Directs
+
413
to
433
Upgrade
Option
IV:

Directs
+
All
to
433
Upgrade
Low
High
Low
High
Low
High
Resource
cost
of
compliance
expenditures
$
13.8
$
1,620.3
$
96.8
$
138.2
Costs
to
POTWs
of
administering
the
rule
$
0.0
($
0.05)
($
1.0)
($
0.03)
($
0.2)
($
0.03)
($
0.2)

Social
costs
of
unemployment
$
0.0
$
344.6
$
454.7
$
82.9
$
109.4
$
82.9
$
109.4
Total
Social
Cost
$
13.8
$
1,964.8
$
2,074.0
$
179.7
$
206.0
$
221.1
$
247.4
Source:
U.
S.
EPA
analysis.

11­
7
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
11:
Social
Costs
GLOSSARY
consumers 
surplus:
the
value
that
consumers
derive
from
goods
and
services
above
the
price
they
have
to
pay
to
obtain
the
goods
and
services.

opportunity
cost:
the
lost
value
of
alternative
uses
of
resources
(
capital,
labor
and
raw
materials)
used
in
pollution
control
activ
ities.

producers 
surplus:
the
difference
between
what
producers 
earn
on
their
output
and
the
economic
costs
of
producing
that
output,
including
a
normal
return
on
capital.

social
costs:
the
costs
incurred
by
society
as
a
whole
as
a
result
of
the
final
rule;
does
not
include
costs
that
are
simply
transfers
among
parties
but
that
do
not
represent
a
net
cost
overall.

11­
8
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
11:
Social
Costs
REFERENCES
Adams,
James
D.
1985.
Permanent
differences
in
unemployment
and
permanent
wage
differentials.
Quarterly
Journal
of
Econometrics
100,
no.
1,
29­
56.

Anderson,
Donald
W.
and
Ram
V.
Chandran.
1987.
Market
estimates
of
worker
dislocation
costs.
Economics
Letters
24,

381­
384.

Interstate
Conference
of
Employment
Security
Agencies.
Employment
Security
Funding
Survey
1991­
1993.
Presented
in
Christopher
Van
Atten,
 
Cost
of
Unemployment, 
memorandum
to
the
MP&
M
Record,
March
16,
1995.

Topel,
Robert
H.
1984.
Equilibrium
earnings,
turnover,
and
unemployment:
new
evidence.
Journal
of
Labor
Economics
2
no.
4:
500­
522.

U.
S.
Bureau
of
Labor
Statistics.
2000.
Employment
Cost
Index,
Historical
Listing
(
June
1989=
100).

http://
stats.
bls.
gov/
ecthome.
htm.
July
27.

U.
S.
Department
of
Labor.
1995.
State
Unemployment
Claims
1989­
1993.
Presented
in
Christopher
Van
Atten,
 
Cost
of
Unemployment ,
memorandum
to
the
MP&
M
Record,
March
16.

11­
9
MP&
M
EEBA
Part
II:
Costs
and
Economic
Impacts
Chapter
11:
Social
Costs
THIS
PAGE
INTENTIONALLY
LEFT
BLANK
11­
10