Document ID: EPA-HQ-OAR-2021-0200-0010
Agency: epa
Document Type: Supporting & Related Material
Title: 
Posted Date: 2022-06-21T04:00Z

MEMORANDUM
TO:	Docket for rulemaking, "New Source Performance Standards Review for Industrial Surface Coating of Plastic Parts for Business Machines" (EPA-HQ-OAR-2021-0200)
DATE: 	April 13, 2022
FROM:	Tess Petesch
		US EPA/OAR/OAQPS/HEID/AEG
SUBJECT:	Economic Impact Analysis for the Proposed New Source Performance Standards Review for Industrial Surface Coating of Plastic Parts for Business Machines

Introduction
      The Environmental Protection Agency (EPA) is proposing amendments to the New Source Performance Standards (NSPS) for Industrial Surface Coating of Plastic Parts for Business Machines. This NSPS, found at 40 CFR part 60 subpart TTT, was promulgated January 29, 1988, and affected sources that were constructed, reconstructed, or modified after January 8, 1986. In this action, the EPA is proposing to add a requirement for electronic reporting of periodic compliance reports in subpart TTT. The EPA is also proposing subpart TTTa, which contains volatile organic compound (VOC) emission limitation requirements for prime, color, texture, and touch-up coating operations at affected facilities that commence construction, modification, or reconstruction after the publication date of the proposed rule.
      This document presents the economic and small business impacts of the proposed NSPS review. The EPA estimates that there are three existing facilities currently subject to subpart TTT which conduct surface coating of plastic parts for business machines and will be incrementally affected by the proposed electronic reporting amendments in subpart TTT. The EPA does not expect any new facilities or modifications or reconstructions of existing facilities that perform surface coating of plastic parts for business machines over the next eight years from 2022 to 2029. Therefore, the EPA expects that no facilities will be affected by or incur cost impacts due to the proposed requirements and emissions limits in subpart TTTa. 
      The cost impacts of this proposed rule are expected to be very minimal. The only incremental costs are associated with the proposed electronic reporting requirements for the three existing facilities affected by subpart TTT. The EPA estimates total costs for this proposed rule of $828 in 2021 dollars, which will be incurred in the first year following the effective date of the rule. No other costs are expected between 2022 and 2029 other than these Year 1 costs. Two of the three facilities affected by this proposed rule are owned by small entities. However, neither small entity is expected to experience significant cost impacts. Since the estimated compliance costs are minimal, this proposed rule is not expected to result in market impacts, regardless of whether costs are passed on to consumers or absorbed by affected firms. 
      This proposal is not expected to reduce emissions in practice or have air quality impacts. The EPA is not proposing any changes to the emission limits established in 1988 in subpart TTT and we do not anticipate that any new facilities or modified or reconstructed facilities will become subject to subpart TTTa over the next eight years, so no sources will need to limit their emissions to comply with the proposal relative to the baseline. The following sections provide a brief industry description, regulatory background, and further discussion of the estimated costs and small entity impacts for this proposed rule. 
Industry Description
Plastic parts of business machines are coated for several reasons. Surface coating may be applied to provide color, texture, and protection; improve appearance and durability; attenuate electromagnetic interference/radio frequency interference; and conceal mold lines and flaws. Examples of coated plastic parts in business machines include plastic housings for electronic office equipment, such as computers and copy machines, and for medical equipment. Coating of plastic parts for business machines may be performed by several types of facilities, including business machine manufacturers, independent plastic molders and coaters, and "coating only" shops. 
Typically, a plastic part is surface coated in a structure housing automatic or manual spray application equipment. The type of coating in part determines the appropriate spray application technique. After being coated, parts are moved to a flash-off area to allow some of the solvents from the newly applied coating to evaporate. Next, the parts are moved to a curing oven, which applies heat to create a chemical reaction that stabilizes the new coating.
Regulatory Background
      Section 111 of the Clean Air Act (CAA) authorizes the EPA to set New Source Performance Standards for categories of sources which the EPA has listed because they cause or contribute significantly to air pollution which may reasonably be anticipated to endanger public health or welfare. The primary purpose of the standards is to attain and maintain ambient air quality by ensuring that the best demonstrated emission control technologies are installed as industrial infrastructure is modernized. 
      CAA section 111(b)(1)(B) requires the EPA to review and, if appropriate, revise these standards at least every eight years. In setting or revising a NSPS, CAA section 111(a)(1) states that the standards are to reflect the degree of emission limitation achievable through the application of the best system of emission reduction (BSER) that has been adequately demonstrated, taking into account the cost of achieving such emissions reductions, any non-air quality health and environmental impacts, and energy requirements. The EPA determines the technology and other practices that represent BSER for regulated entities in a source category as well as the degree of emission limitation achievable through the application of BSER. Affected sources have flexibility to choose any measure or combination of measures that will achieve the emission limits.
      In reviewing an NSPS, the EPA evaluates BSER by considering advances in technologies and production practices and changes in compliance costs and other factors since the standards were established (or since the last review). The EPA also evaluates whether emission limitations and percent reductions beyond those required by the existing NSPS are achieved in practice. Potential industry growth is also assessed, including how many new facilities, reconstructions, and modifications may trigger NSPS applicability in the future.
The 1988 NSPS for surface coating of plastic parts for business machines (subpart TTT) applies to affected facilities that commence construction, reconstruction, or modification after January 8, 1986. The emission sources covered in subpart TTT include spray booths, flash-off areas, and curing ovens. In 1986, the EPA estimated that approximately 80 percent of the category's VOC emissions came from spray booths, 10 percent from flash-off areas, and 10 percent from ovens. Subpart TTT established VOC emission limits for each type of coating used at each spray booth at affected facilities, including prime coats, color coats, texture coats, and touch-up coats. 
Cost Impacts
      The review of the emission limits established in the 1988 NSPS determined that there are techniques used in practice that achieve greater emission reductions than those currently required by subpart TTT for surface coating operations. However, the EPA is not proposing changes to the 1988 NSPS applicability or the VOC emission limits that apply to existing sources affected by subpart TTT for reasons discussed in the preamble. The emission limits being proposed in subpart TTTa are slightly more stringent that those in subpart TTT. The proposed subpart TTTa emission limits reflect the VOC reductions that were found to be achievable through improved coating formulation with lower VOC content, which in combination with the transfer efficiency of the coating application method now represents the updated BSER for facilities that may be affected by subpart TTTa.
The EPA identified three facilities, located in three states, that are currently subject to subpart TTT. Only these three facilities are expected to incur incremental cost impacts to comply with this proposal. The EPA is not proposing changes to the subpart TTT emission limits and the only incremental costs are related to electronic reporting requirements. Based on information collected from the existing affected facilities, a trade association, and a coatings manufacturer, the EPA expects no new, modified, or reconstructed sources to become subject to the new subpart TTTa over the next eight years from 2022 to 2029. While the VOC emission limits being proposed in subpart TTTa are slightly more stringent than in subpart TTT, no sources are expected to incur costs from them.  
      Please see the preamble for detailed descriptions of all the proposed changes to subpart TTT and the requirements being proposed in subpart TTTa. The EPA is proposing to require facilities subject to subpart TTT to submit electronic copies of required performance test reports, quarterly reports of noncompliance, and semiannual statements of compliance through the EPA's Central Data Exchange (CDX) using the Compliance and Emissions Data Reporting Interface (CEDRI). To comply with the electronic reporting requirements, it is assumed that the three facilities affected by subpart TTT will incur labor costs in Year 1 to become familiar with CDX and CEDRI. The EPA estimates that each facility will require two hours of technical labor to accomplish this task, which will cost an estimated $276 per facility in 2021 dollars for a total of $828 for all the affected facilities in 2022. See the Information Collection Request in the docket for the assumptions regarding the labor costs to for the affected facilities (e.g., hourly wages and expenses related to benefits). 
Small Entity Impacts
      The EPA performed a screening analysis to assess potential impacts of this proposal on small entities. Based on the small entity size standards defined by the U.S. Small Business Administration (SBA), the EPA determined that two of the three facilities affected by this proposal are ultimately owned by small entities. Neither of these small entities are expected to incur significant impacts based on the methodology described below. Therefore, the EPA has determined that this proposed rule will not have a significant impact on a substantial number of small entities (i.e., no SISNOSE). 
      To conduct a small entity screening, the EPA first identifies the ultimate parent companies of affected facilities, and obtains those companies' most recent annual revenue figures, number of employees, and North American Industrial Classification System (NAICS) code using the Dun & Bradstreet Hoover's online database. SBA size standards are defined for each NAICS code based on either annual revenues or employees. To determine whether an entity is small, the EPA identifies the size standard corresponding to the ultimate parent company NAICS code and determines whether the ultimate parent company is a small entity based on its annual revenues or employees. The two small entities affected by this proposal are classified under NAICS 326199 (All Other Plastics Product Manufacturing). Entities in NAICS 326199 are considered small if they have 750 or fewer employees.
      To assess potential impacts on small entities, the EPA calculates cost-to-sales ratios, which compare facility-level annualized compliance costs to annual sales revenues of the ultimate parent company. This metric for evaluating impacts is known as the "sales test" and is consistent with guidance published by the SBA's Office of Advocacy. Since the estimated costs are $276 per entity, and the two affected small entities have annual revenues in the tens of millions of dollars, their cost-to-sales ratios are lower than 0.01 percent. Therefore, the EPA concludes that the proposed review of the NSPS for Industrial Surface Coating of Plastic Parts for Business Machines will not have a significant economic impact on a substantial number of small entities.