[Federal Register: January 3, 2001 (Volume 66, Number 2)]
[Proposed Rules]
[Page 473-522]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr03ja01-30]
[[pp. 473-522]] Effluent Limitations Guidelines, Pretreatment Standards, and New
Source Performance Standards for the Metal Products and Machinery Point
Source Category; Proposed Rule
[[Continued from page 472]]
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limitation for total sulfide based on potential POTW interference or
upset associated with discharges of total sulfide from facilities in
this subcategory. EPA is proposing limitations for TOC and TOP as part
of a compliance alternative for organic pollutant discharges. (See
Section XXI.C for a discussion of monitoring flexibility.) The Agency
based these proposed limitations on the same four EPA sampling episodes
that EPA discussed in Section XIII.A.3.
4. PSNS Analysis
Like NSPS, the Agency determined that the cost of compliance with
PSNS based on Option 4 would make up 4.64 percent of a new facility's
projected revenues and expects that this would not create a barrier to
entry. EPA notes that this is a higher percentage than for other
subcategories and solicits comment on whether EPA should consider
Option 2 for these facilities.
E. NSPS for the Non-Chromium Anodizing Subcategory
1. Need for NSPS
EPA expects that new facilities in the Non-Chromium Anodizing
subcategory will discharge similar quantities of the same pollutants
that existing sources discharge. EPA notes that it did not identify any
existing direct dischargers in this subcategory and that estimates of
costs and pollutant loadings were transferred from the best performing
indirect dischargers in this subcategory (see Section IX.C). Therefore,
the need for NSPS regulation is the same as the need for BPT
regulation. (See Section IX.C.1).
2. Selected NSPS Option
EPA is proposing New Source Performance Standards for this
subcategory based on BAT Option 2. As discussed in the BPT analysis for
this subcategory, non-chromium anodizers discharge large quantities of
aluminum but have very low levels of other metals in their wastewater.
EPA determined that Option 2 is capable of removing most of the
aluminum discharged by facilities in this subcategory and that any
additional removals achieved by Option 4 are not justified by the
additional cost.
The Agency also evaluated not proposing NSPS for facilities in this
subcategory and instead continuing to require compliance with NSPS
limitations established under 40 CFR part 433. However, the Agency has
tentatively rejected this option because these new proposed NSPS
limitations require an increased removal of TSS and the Agency feels
that the pollutants proposed for regulation here are more appropriate
for the non-chromium anodizing industry. The NSPS limitations
established in 40 CFR part 433 require facilities to meet an average
monthly discharge of 31 mg/L of TSS and allow for a maximum daily
discharge of 60 mg/L. These proposed MP&M limitations require non-
chromium anodizers to meet an average monthly discharge for TSS of 22
mg/L and allow for a monthly maximum discharge of 52 mg/L. EPA believes
that the costs associated with NSPS are justified by the additional
removal of TSS from this subcategory. In addition, 40 CFR part 433
requires non-chromium anodizers to meet effluent limitations for 7
metal pollutants. EPA's data show that these seven metals are present
only in very small quantities at non-chromium anodizing facilities. In
40 CFR part 433, EPA did not establish a limit for aluminum, the metal
found in the largest quantity in non-chromium anodizers' wastewater.
The Agency has determined that direct discharging facilities in the
Non-Chromium Anodizing subcategory should have a limit for aluminum and
thus is proposing to cover them here. The Agency notes that this will
reduce the number of pollutants that non-chromium anodizers would have
to monitor for.
3. Calculation of NSPS Limitations
The Agency is proposing NSPS limitations for all of the pollutants
that it proposed BPT and BAT limitations for in this subcategory. The
NSPS limitations for this subcategory can be found in the proposed rule
(which accompanies this preamble) at Sec. 438.36. (See Section XXI.C
for a discussion of monitoring flexibility.)
4. NSPS Analysis
A barrier to entry analysis is typically performed for new
facilities by using existing facilities as a model. However, there are
no existing direct dischargers in this subcategory. Therefore, the
Agency could not perform an economic analysis in order to determine if
Option 2 presented a barrier to entry for new facilities in the Non-
Chromium Anodizing subcategory.
F. PSNS for the Non-Chromium Anodizing Subcategory
1. Need for PSNS
EPA expects that new facilities in the Non-Chromium Anodizing
subcategory will discharge similar quantities of the same pollutants
that existing sources discharge and therefore EPA is not proposing
pretreatment standards for new sources for this subcategory for the
same reasons it is not proposing PSES for this subcategory. See Section
XII.F and VI.C.3.
G. NSPS for the Printed Wiring Board Subcategory
1. Need for NSPS
EPA expects that new facilities in the Printed Wiring Board
subcategory will discharge similar quantities of the same pollutants
that existing sources discharge. Therefore, the need for NSPS
regulation is the same as the need for BPT regulation. (See Section
IX.D.1).
2. Selected NSPS Option
EPA is proposing New Source Performance Standards for this
subcategory based on BAT Option 4. The Agency determined that Option 4
is the best available demonstrated technology for the removal of
pollutants in this subcategory. EPA's analytical data shows that Option
4 is capable of achieving much lower long term averages than Option 2
for several of the metal pollutants of concern. In addition, EPA's data
shows that microfiltration greatly reduces the variability in the
concentration of the metal pollutants in the treatment effluent.
Although Option 4 costs $162,000 more than Option 2 annually for a new
facility with a wastewater flow of 25.5 MGY (the wastewater flow for a
representative direct discharging facility in the Printed Wiring Board
subcategory), EPA is proposing Option 4 because of the lower levels of
metal pollutants in the wastewater effluent. EPA is not proposing
Option 4 for BPT/BAT because of the lack of significant overall
additional removals and the fact that it removes less COD, O&G, and
organic pollutants, relative to Option 2. EPA also requests comment on
basing NSPS on Option 2.
The Agency also strongly considered proposing NSPS based on
ultrafiltration for oil and grease removal and chemical precipitation
followed by sedimentation for TSS and metals removal. This option is
equivalent to BAT Option 2 with the oil/water separator replaced by an
ultrafilter. The Agency is soliciting comment and data on this NSPS
option for the final rule.
3. Calculation of NSPS Limitations
The Agency is proposing NSPS limitations for all of the pollutants
that it proposed BPT and BAT limitations for in this subcategory. The
NSPS limitations for this subcategory can be found in the proposed rule
(which accompanies this preamble) at Sec. 438.46.
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(See Section XXI.C for a discussion of monitoring flexibility.) EPA
based these proposed regulations on the same four EPA sampling episodes
that it used to calculate NSPS for the General Metals subcategory. (See
Section XIII.A.3). As mentioned above, EPA collected analytical
wastewater treatment data from a printed wiring board manufacturer that
employed this technology.
4. NSPS Analysis
The Agency also performed an economic analysis in order to
determine if Option 4 presented a barrier to entry for new facilities
in the Printed Wiring Board subcategory. EPA determined that the cost
of compliance with NSPS based on Option 4 would make up only 0.02
percent of a new facility's projected revenues. Therefore, EPA
concluded that NSPS based on Option 4 would not create a barrier to
entry.
H. PSNS for the Printed Wiring Board Subcategory
1. Need for PSNS
EPA expects that new facilities in the Printed Wiring Board
subcategory will discharge similar quantities of the same pollutants
that existing sources discharge. Therefore, the need for PSNS
regulation is the same as the need for PSES regulation. (See Section
XII.G.1).
2. Selected PSNS Option
EPA is proposing Pretreatment Standards for New Sources for this
subcategory based on BAT Option 4 for the same reasons it is proposing
this option for NSPS. It is also requesting comment on PSNS based on
Option 2. As was the case for PSES, EPA is not proposing a flow cutoff
exclusion for this subcategory for the same reasons discussed in
Section XII.G.2, but is requesting comment on a flow cutoff of 1 MGY ,
as with PSES.
The Agency also strongly considered proposing PSNS based on
ultrafiltration for oil and grease removal and chemical precipitation
followed by sedimentation for TSS and metals removal. This option is
equivalent to BAT Option 2 with the oil/water separator replaced by an
ultrafilter. The Agency is soliciting comment and data on this PSNS
option for the final rule.
3. Calculation of PSNS Limitations
The Agency is proposing PSNS limitations for the same pollutants
that it proposed PSES regulations. The PSNS limitations for this
subcategory can be found in the proposed rule (which accompanies this
preamble) at Sec. 438.47. EPA determined that all of the pollutants
listed in Sec. 438.47 (except for Total Sulfide, TOC, and TOP) pass
through POTWs. EPA is proposing a limitation for total sulfide based on
potential POTW interference or upset associated with discharges of
total sulfide from facilities in this subcategory. EPA is proposing
limitations for TOC and TOP as part of a compliance alternative for
organic pollutant discharges. (See Section XXI.C for a discussion of
monitoring flexibility.) EPA determined that all of these pollutants
pass through POTWs. The Agency based these proposed limitations on the
same four EPA sampling episodes that EPA discussed in Section XIII.A.3.
As mentioned above, EPA collected analytical wastewater treatment data
from a printed wiring board manufacturer that employed this technology.
4. PSNS Analysis
Like NSPS, the Agency determined that the cost of compliance with
PSNS based on Option 4 would make up only 0.20 percent of a new
facility's projected revenues and concluded that this would not create
a barrier to entry.
I. NSPS for the Steel Forming and Finishing Subcategory
1. Need for NSPS
EPA expects that new facilities in the Steel Forming and Finishing
subcategory will discharge similar quantities of the same pollutants
that existing sources discharge. Therefore, the need for NSPS
regulation is the same as the need for BPT regulation. (See Section
IX.E.1).
2. Selected NSPS Option
EPA is proposing New Source Performance Standards for this
subcategory based on BAT Option 4. The Agency determined that Option 4
is the best available demonstrated technology for the removal of
pollutants in this subcategory. EPA's analytical data shows that Option
4 is capable of achieving much lower long-term averages than Option 2
for several of the metal pollutants of concern. In addition, EPA's data
shows that microfiltration greatly reduces the variability in the
concentration of the metal pollutants in the treatment effluent.
Although Option 4 costs $42,400 more than Option 2 annually for a new
facility with a wastewater flow of 18.4 MGY (the wastewater flow for a
representative direct discharging facilities in the Steel Forming and
Finishing subcategory), EPA determined that the additional cost of
Option 4 are justified by the lower levels of metal pollutants in the
wastewater effluent.
The Agency also strongly considered proposing NSPS based on
ultrafiltration for oil and grease removal and chemical precipitation
followed by a clarifier for TSS and metals removal. This option is
equivalent to BAT Option 2 with the oil/water separator replaced by an
ultrafilter. The Agency is soliciting comment and data on this NSPS
option for the final rule.
3. Calculation of NSPS Limitations
The Agency is proposing NSPS limitations for all of the pollutants
that it proposed BPT and BAT limitations for in this subcategory. The
NSPS limitations for this subcategory can be found in the proposed rule
(which accompanies this preamble) at Sec. 438.56. (See Section XXI.C
for a discussion of monitoring flexibility.) The Agency based these
proposed limitations on the same four EPA sampling episodes that EPA
discussed in Section XIII.A.3.
4. NSPS Analysis
The Agency also performed an economic analysis in order to
determine if Option 4 presented a barrier to entry for new facilities
in the Steel Forming and Finishing subcategory. EPA determined that the
cost of compliance with NSPS based on Option 4 would make up only 0.14
percent of a new facility's projected revenues. Therefore, EPA
concluded that NSPS based on Option 4 would not create a barrier to
entry.
J. PSNS for the Steel Forming and Finishing Subcategory
1. Need for PSNS
EPA expects that new facilities in the Steel Forming and Finishing
subcategory will discharge similar quantities of the same pollutants
that existing sources discharge. Therefore, the need for PSNS
regulation is the same as the need for PSES regulation. (See Section
XII.H.1).
2. Selected PSNS Option
EPA is proposing Pretreatment Standards for New Sources for this
subcategory based on BAT Option 4 for the same reasons it is proposing
this option for NSPS. In addition, EPA is not proposing a flow cutoff
exclusion for PSNS for this subcategory for the same reasons that it
did not propose a flow cutoff for PSES, but is requesting comment on
flow cutoffs of 1, 2, and 3 MGY as with PSES. (See Section XII.H.)
The Agency also strongly considered proposing PSNS based on
ultrafiltration for oil and grease removal and chemical precipitation
followed by sedimentation for TSS and metals removal. This option is
equivalent to BAT Option 2 with the
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oil/water separator replaced by an ultrafilter. The Agency is
soliciting comment and data on this PSNS option for the final rule.
3. Calculation of PSNS Limitations
The Agency is proposing PSNS limitations for the same pollutants
that it proposed PSES regulations. The PSNS limitations for this
subcategory can be found in the proposed rule (which accompanies this
preamble) at Sec. 438.57. EPA determined that all of the pollutants
listed in Sec. 438.57 (except for Total Sulfide, TOC, and TOP) pass
through POTWs. EPA is proposing a limitation for total sulfide based on
potential POTW interference or upset associated with discharges of
total sulfide from facilities in this subcategory. EPA is proposing
limitations for TOC and TOP as part of a compliance alternative for
organic pollutant discharges. (See Section XXI.C for a discussion of
monitoring flexibility.) The Agency based these proposed limitations on
the same four EPA sampling episodes that EPA discussed in Section
XIII.A.3.
4. PSNS Analysis
Like NSPS, the Agency determined that the cost of compliance with
PSNS based on Option 4 would make up only 0.17 percent of a new
facility's projected revenues and concluded that this would not create
a barrier to entry.
K. NSPS for the Oily Wastes Subcategory
1. Need for NSPS
EPA expects that new facilities in the Oily Wastes subcategory will
discharge similar quantities of the same pollutants that existing
sources discharge. Therefore, the need for NSPS regulation is the same
as the need for BPT regulation. (See Section IX.F.1).
2. Selected NSPS Option
EPA is proposing New Source Performance Standards for this
subcategory based on BAT Option 6, oil-water separation by chemical
emulsion breaking, gravity separation, and oil skimming. The Agency
determined that Option 6 is the best available demonstrated technology
for the removal of pollutants in this subcategory and is proposing this
option for the same reasons it selected this option for BPT and BAT.
(See Section IX.F.2).
3. Calculation of NSPS Limitations
The Agency is proposing NSPS limitations equivalent to those
proposed for BPT for this subcategory. The NSPS limitations for this
subcategory can be found in the proposed rule (which accompanies this
preamble) at Sec. 438.66. (See Section XXI.C for a discussion of
monitoring flexibility.)
4. NSPS Analysis
Since EPA is proposing to set NSPS equal to BAT (Option 6) and this
option is determined to be economically-achievable for these facilities
under BAT, EPA concluded that NSPS based on Option 6 would not create a
barrier to entry.
L. PSNS for the Oily Wastes Subcategory
1. Need for PSNS
EPA expects that new facilities in the Oily Wastes subcategory will
discharge similar quantities of the same pollutants that existing
sources discharge. Therefore, the need for PSNS regulation is the same
as the need for PSES regulation. (See Section XII.I.1).
2. Selected PSNS Option
EPA is proposing Pretreatment Standards for New Sources for this
subcategory based on BAT Option 6 for the same reasons it is proposing
this option for NSPS. In addition, EPA is proposing a 2 MGY flow cutoff
exclusion for PSNS with serious consideration of a 3 MGY flow cutoff as
well. This is the same flow cutoff level that EPA is proposing for PSES
for the existing indirect discharging facilities in the Oily Wastes
subcategory. The Agency is proposing a 2 MGY flow cutoff for new
indirect discharging facilities in the Oily Wastes subcategory based on
the potential POTW permitting burden that would be associated with
developing and then maintaining permits for new sources with low flows
and the likelihood that these facilities discharge a small amount of
pound-equivalents at these low flow rates. The Agency assumes that the
pound-equivalents per facility for new facilities with flows below or
equal to 2 MGY would be even lower than the 2 pound-equivalents per
facility for similarly sized existing sources in this subcategory. The
Agency concluded that a similar (or even smaller) amount of pollutant
removal is not justified by the cost of the regulation for new indirect
Oily Waste facilities discharging less than or equal to 2 MGY.
3. Calculation of PSNS Limitations
The Agency is proposing PSNS limitations equivalent to PSES for the
same pollutants that it proposed PSES regulations. The PSNS limitations
for this subcategory can be found in the proposed rule (which
accompanies this preamble) at Sec. 438.67. (See Section XII.I.3. for
PSES discussion and see Section XXI.C for a discussion of monitoring
flexibility.)
4. PSNS Analysis
Since EPA is proposing to set PSNS equal to PSES (Option 6) and
this option is determined to be economically achievable for these
facilities under PSES, the Agency concluded that this would not create
a barrier to entry.
M. NSPS for the Railroad Line Maintenance Subcategory
1. Need for NSPS
EPA expects that new facilities in the Railroad Line Maintenance
subcategory will discharge similar quantities of the same pollutants
that existing sources discharge. Therefore, the need for NSPS
regulation is the same as the need for BPT regulation. (See Section
IX.G.1.)
2. Selected NSPS Option
EPA is proposing New Source Performance Standards for this
subcategory based on BAT Option 10, dissolved air flotation plus in-
process flow control and pollution prevention. The Agency determined
that Option 10 is the best available demonstrated technology for the
removal of pollutants in this subcategory and is proposing this option
for the same reasons it selected this option for BPT and BAT. (See
Section IX.G.2).
3. Calculation of NSPS Limitations
The Agency is proposing NSPS limitations equivalent to those
proposed for BPT for this subcategory. The NSPS limitations for this
subcategory can be found in the proposed rule (which accompanies this
preamble) at Sec. 438.76. (See Section XXI.C for a discussion of
monitoring flexibility.)
4. NSPS Analysis
EPA notes that railroad line maintenance facilities do not have
revenue reported at the facility level, and it is therefore not
possible to compare costs as a percent of facility revenue for new and
existing facilities in this subcategory. In addition, EPA is proposing
to set NSPS equal to BAT (Option 10) and has determined this option is
economically achievable for these facilities under BAT, therefore, EPA
concluded that NSPS based on Option 10 would not create a barrier to
entry.
N. PSNS for the Railroad Line Maintenance Subcategory
1. Rationale for Not Proposing PSNS
EPA expects that new facilities in the Railroad Line Maintenance
subcategory will discharge similar quantities of the
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same pollutants that existing sources discharge. Therefore, EPA is
proposing to not establish PSNS for this subcategory for the same
reasons that it did not propose PSES. (See Section XII.J.1).
O. NSPS for the Shipbuilding Dry Dock Subcategory
1. Need for NSPS
EPA expects that new facilities in the Shipbuilding Dry Dock
subcategory will discharge similar quantities of the same pollutants
that existing sources discharge. Therefore, the need for NSPS
regulation is the same as the need for BPT regulation. (See Section
IX.H.1).
2. Selected NSPS Option
EPA is proposing New Source Performance Standards for this
subcategory based on BAT Option 10, dissolved air flotation plus in-
process flow control and pollution prevention. The Agency determined
that Option 10 is the best available demonstrated technology for the
removal of pollutants in this subcategory and is proposing this option
for the same reasons it selected this option for BPT. (See Section
IX.H.2).
3. Calculation of NSPS Limitations
The Agency is proposing NSPS limitations equivalent to those
proposed for BPT for this subcategory. The NSPS limitations for this
subcategory can be found in the proposed rule (which accompanies this
preamble) at Sec. 438.76. (See Section XXI.C for a discussion of
monitoring flexibility.)
4. NSPS Analysis
Since EPA is proposing to set NSPS equal to BAT (Option 10) and has
determined that this option is economically achievable for these
facilities under BAT, EPA concluded that NSPS based on Option 10 would
not create a barrier to entry.
P. PSNS for the Shipbuilding Dry Dock Subcategory
1. Rationale for Not Proposing PSNS
EPA expects that new facilities in the Shipbuilding Dry Dock
subcategory will discharge similar quantities of the same pollutants
that existing sources discharge. Therefore, EPA is proposing to not
establish PSNS for this subcategory for the same reasons that it did
not propose PSES. (See Section XII.K.1)
XIV. Issues Related to the Methodology Used to Determine POTW
Performance
For today's proposal, EPA used its traditional methodology to
determine POTW performance (percent removal) for toxic and non-
conventional pollutants. POTW performance is a component of the pass-
through methodology used to identify the pollutants to be regulated for
PSES and PSNS. It is also a component of the analysis to determine net
pollutant reductions (for both total pounds and toxic pound-
equivalents) for various indirect discharge technology options.
However, as discussed in more detail below, EPA is evaluating several
issues related to its traditional methodology for determining POTW
performance and solicits comments a variety of methodological changes.
A. Assessment of Acceptable POTWs
EPA developed the principal pass-through analysis for today's MP&M
proposal by using data from all 50 POTWs that were part of the 50 POTW
Study data base. Some of these POTWs were not operated to meet the
secondary treatment requirements at 40 CFR part 133 for all portions of
their wastestream. Most POTWs today have secondary treatment or better
in place. EPA estimates that as of 1996, POTWs with at least secondary
treatment in place service greater than 90 percent of the indirect
discharging population. If the POTW removal calculations do not reflect
the upgrades and system improvements that have occurred since the time
of the 50 POTW Study, they would tend to under-estimate POTW removals.
This would result in overestimating the pollutant reductions that are
achieved through the regulation of indirect dischargers, thereby making
the regulation appear more cost-effective for indirect dischargers than
it is.
One partial solution to this methodological issue would be to
evaluate individual treatment trains in the 50 POTW Study data base,
and include only those treatment trains that achieved compliance with
40 CFR part 133 in the analysis of POTW pollutant removal rates. There
were 29 treatment trains that achieved BOD5 and TSS effluent
concentrations between 15 mg/l and 45 mg/l during the sampling and
could potentially be considered reflective of secondary treatment
(based on 40 CFR 133.102 limitations of 30 mg/l monthly average and 45
mg/l weekly max for secondary treatment), and an additional 2 treatment
trains were either trickling filters or waste stabilization ponds that
achieved BOD5 and TSS effluent concentrations between 40 mg/
l and 65 mg/l and could potentially be considered equivalent to
secondary treatment pursuant to 40 CFR 133.101(g) (based on 40 CFR
133.105 limitations of 45 mg/l monthly average and 65 mg/l weekly
maximum). In addition, 15 treatment trains achieved BOD5 and
TSS effluent concentrations below 15 mg/l each, and could potentially
be considered greater than secondary treatment.
Using data from these 46 treatment trains only would omit the worst
performers in the 50 POTW Study that are probably not reflective of
current performance. It might not fully correct, however, for
additional upgrades and optimization that may have occurred over the
past two decades.
B. Assessment of Acceptable Data
EPA developed the pass-through analysis that is the basis for
today's proposal using POTW data editing criteria that are generally
consistent with those used for the industry data. Specifically, EPA
included only data from POTWs for which influent concentrations were 10
times the analytical minimum (quantitation) level (10xML) if available.
If none of the average pollutant influent concentrations are at least
10 times the ML, then EPA retained only data from POTWs for which
influent concentrations were 2 times the analytical minimum level.
Because it is difficult to achieve the same pollutant reduction (in
terms of percent) in a dilute wastestream as in a more concentrated
wastestream, EPA believes that a 10 X ML editing criteria may
overestimate the percent removals that are calculated for both industry
and POTWs in the pass-through analysis.
As a general rule, more POTW data than industry data is eliminated
through this editing criteria for the specific pollutants that are
being examined. This is not surprising since the pass-through analysis
would not even be performed on pollutants generally found at less than
10 times the method minimum level in industry since EPA would, in many
cases, not require pretreatment for such low levels of a pollutant. As
a result of this imbalance (pollutant influent levels at POTWs being
less than pollutant influent levels to industrial pretreatment), EPA
believes that it is possible that this editing criteria may bias the
pass-through results by over-estimating POTW removals where influent
concentrations are generally lower. This would result in
underestimating the pollutant reductions that are achieved through the
regulation of indirect dischargers thereby making the rule appear less
cost-effective than it is. On the other hand, there may be little
difference in percent removals across the range of
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influent concentrations generally experienced by POTWs.
One potential solution to this methodological question would be to
include data (for both indirect dischargers and POTWs) even if the
influent concentration is not 10 times the analytical minimum level.
This solution needs to be considered in context, however, with data
handling criteria for effluent measurements of ``non-detect'' discussed
below.
C. Assessment of Removals When Effluent Is Below the Analytical Method
Minimum Level
EPA developed the pass-through analysis that is the basis for
today's proposal using the analytical method minimum level as the
effluent value when the pollutant was not detected in the effluent.
This is the approach that is generally used when developing pollutant
reduction estimates for the regulation, performing cost-effectiveness
calculations, and developing effluent limitations. EPA believes that
this methodology may underestimate the performance of the selected
technology option for both directs and indirects. Once again, this
would result in underestimating the removals estimated for direct
dischargers, and thereby making the rule appear less cost-effective
than it is. For indirect dischargers, EPA believes that the overall
effect of using the minimum level for non-detect values for both
industry and POTW data creates a bias for underestimating POTW removals
in comparison to industry removals. This may result in an
overestimation of pollutant removals by indirect dischargers, and may
make the rule appear more cost-effective than it is. [Note that this
problem is minimized by only using data with influent levels exceeding
10 X ML, because a non-detect assures that at least 90 percent of the
pollutant has been removed. It is arguably less important that the true
removal may be greater than 90 percent, rather than exactly 90 percent.
Using a less stringent editing criteria of 2 X ML as discussed above
would exacerbate this problem. If the influent were only 2 X ML, then
removals greater than 50 percent could never be measured.]
One potential alternative would be to assume a value of one half of
the minimum level for effluent values of non-detect. This approach
would have to be applied uniformly for the indirect dischargers as well
as the POTWs in order for the percent removal calculations to be
reasonable.
For a more detailed discussion of alternative approaches to the
POTW pass-through analysis, see the Appendix to Section 7 of the
Technical Development Document. EPA solicits comment on the
significance of each of these methodological issues and the potential
alternatives.
XV. Methodology for Estimating Costs and Pollutant Reductions
EPA estimated industry-wide compliance costs and pollutant loadings
using model sites based on technical questionnaire respondents and a
computerized design and cost model for the MP&M technology options (see
Sections 11 and 12 of the Technical Development Document for a detailed
discussion of EPA's MP&M Design & Cost Model). The Agency estimated
industry-wide costs and pollutant loadings for several technology
options based on technologies designed for each subcategory of model
sites. EPA used these model sites to estimate costs for 63,000 MP&M
wastewater-discharging sites nationwide using statistically calculated
industry weights (i.e., survey sample weights). EPA notes that once the
low flow exclusion is applied, the number of sites expected to incur
costs under the MP&M regulation is 10,300.
There are 890 sites which indicated that they were water
dischargers on their technical questionnaire and provided EPA with
enough data to include them in the cost model. EPA assessed each of the
890 sites selected to determine the unit operations, wastewater
characteristics and treatment technologies currently in place at the
sites.
Based on the information provided by the sites in their
questionnaire responses, follow-up letters, and phone calls, EPA
classified each wastewater stream by the type of unit operation (e.g.,
machining, electroplating, acid treatment, etc.) and base metal type
(e.g., steel, aluminum, zinc, etc.). The Agency used the following
additional questionnaire data to characterize process wastewater
streams: wastewater discharge flow rate, production rate, operating
schedule, and discharge destination. Many of the sites provided these
data for all wastewater streams generated on site. For sites that did
not provide complete data, EPA either estimated the missing data based
on technical considerations specific to the site, or statistically
imputed the data. The Agency modeled the concentration of each
pollutant in each wastewater stream from field sampling of wastewater
discharges from the unit operations at MP&M sites. EPA used
questionnaire responses to identify the following information about
end-of-pipe technologies in place at MP&M sites: the types of treatment
units in place; the unit operations discharging process wastewater to
each treatment unit; and the operating schedule of each treatment unit.
EPA developed a computerized design and cost model to estimate
compliance costs and pollutant loadings for the MP&M technology
options, taking into account each site's level of treatment in place.
As a conservative estimate for estimating baseline (prior to compliance
with these proposed regulations) pollutant loadings, EPA assumed that
all sites with treatment currently in place (including those sites not
currently covered by the Metal Finishing regulations) were currently
meeting the long-term average (LTA) concentrations (i.e., design
concentrations) for the pollutants limited under the Metal Finishing
effluent guidelines (40 CFR part 433) with the exception of cyanide and
were meeting the LTA concentrations achieved by EPA's sampled MP&M BAT
facilities for cyanide and other pollutants of concern. For sites that
did not report treatment in place, EPA based baseline pollutant
loadings on EPA's unit operation-by-unit operation sampling data for
raw wastewater. The Agency programmed the model with technology-
specific modules which calculated the costs for various combinations of
technologies included in the technology options for each subcategory.
EPA based design and cost data on MP&M site data, literature data, and
vendor data. The Agency developed technology-specific cost modules for
the in-process pollution prevention and water use reduction
technologies and end-of-pipe treatment technologies discussed in
Section VII.A of this notice.
The model provided the following types of information for each
technology designed for a model site: capital costs; operating and
maintenance costs; electricity used and associated cost; sludge
generation and associated disposal costs; waste oil generation and
associated disposal costs; water use reduction and associated cost
credit; chemical usage reduction and associated cost credit; effluent
flow rate; and effluent pollutant concentrations. This data enabled EPA
to develop site by site compliance costs and pollutant reductions for
the costed sites.
If contract hauling of wastewater for off-site treatment and
disposal was less costly than on-site treatment, EPA estimated costs
assuming the model site would contract haul the wastewater. EPA made
this assessment on a technology-specific basis. When estimating costs
for sludge disposal, EPA assumed all sludge to be F006
[[Page 478]]
listed (or other F-listed hazardous waste) hazardous waste under RCRA
(40 CFR 261.31) and would, therefore, be disposed of off-site as
hazardous waste. As a conservative estimate for the model, EPA did not
allow the time for storage of the sludge prior to disposal to exceed 90
days, regardless of the facilities RCRA generator status (i.e., exempt,
small, large). EPA notes that on March 8, 2000 (65 FR 12377), the
Agency published a final regulation in the Federal Register extending
the accumulation time, under RCRA, for certain wastewater treatment
sludges from electroplating processes to be held on-site without
requiring a hazardous waste storage permit. Facilities implementing
pollution prevention, recycling and metals recovery meeting certain
requirements can accumulate F006 sludge for up to 180 days for large
quantity generators (or 270 days for small quantity generators).
After estimation of capital and operating and maintenance costs,
EPA calculated the total capital investment (TCI), and the total
annualized cost (TAC). The Agency assumed that facilities meeting local
limitations or national effluent limitation guidelines and pretreatment
standards will already incur monitoring costs. EPA solicits comment on
the whether facilities will incur additional monitoring costs to comply
with today's proposal (and how much that monitoring would cost). EPA
has incorporated several options for adding additional flexibility in
regards to monitoring (See Section XXI.C for a discussion on monitoring
flexibility). EPA expects that these proposed flexibilities will
decrease the overall burden and costs of analytical wastewater
monitoring for facilities within the scope of this rule.
XVI. Economic Impact and Social Cost Analysis
A. Introduction
EPA's economic analyses are presented in the report titled
``Economic, Environmental, & Benefit Analysis of the Proposed Metal
Products & Machinery Rule [EPA-821-B-00-008] (hereafter referred to as
the ``EEBA''). This report presents the social costs and benefits of
the proposed rule and alternatives, and estimates the expected economic
impacts of compliance with the proposed rule in terms of facility
closures and associated losses in employment. Other measures of
economic impact include firm-level impacts, local community impacts,
international trade effects, employment effects, and effects on new
MP&M facilities. An analysis of impacts on small businesses supports
EPA's compliance with the Regulatory Flexibility Act (RFA) as amended
by the Small Business Regulatory Enforcement Fairness Act (SBREFA).
This section of the preamble summarizes the economic impact and social
cost findings from the EEBA. The reader is referred to the full report
for the details of these analyses.
EPA's determination of economic achievability are based on the
findings reported in the EEBA and discussed below. The options analyzed
consist of combinations of comparable technology options for the
different subcategories. The three options analyzed in the economic
analyses are defined as follows:
Table XVI-1.--Regulatory Options Considered in the Economic Analyses
----------------------------------------------------------------------------------------------------------------
Subcategory Proposed rule Option 2/6/10 Option 4/8
----------------------------------------------------------------------------------------------------------------
General Metals....................... Technology option 2; 1 Technology option 2.... Technology option 4.
mgy flow cutoff for
indirect dischargers.
Metal Finishing Job Shop............. Technology option 2.... Technology option 2.... Technology option 4.
Non-Chromium Anodizing............... Technology option 2; no Technology option 2.... Technology option 4.
PSES/PSNS for indirect
dischargers.
Printed Wiring Board................. Technology option 2.... Technology option 2.... Technology option 4.
Steel Forming & Finishing............ Technology option 2.... Technology option 2.... Technology option 4.
Oily Wastes.......................... Technology option 6; 2 Technology option 6.... Technology option 8.
mgy flow cutoff for
indirect dischargers.
Railroad Line Maintenance............ Technology option 10; Technology option 10... Technology option 8.
no PSES/PSNS for
indirect dischargers.
Shipbuilding Dry Dock................ Technology option 10; Technology option 10... Technology option 8.
no PSES/PSNS for
indirect dischargers.
----------------------------------------------------------------------------------------------------------------
Technology options 1 through 10 are described in Section VIII.A. of the preamble.
Technology options 1, 3, 5, 7 and 9 (without pollution prevention) were
not further analyzed, because they remove fewer pollutants and cost
more than the comparable technology options with pollution prevention.
The economic impact analyses assess how facilities will be affected
financially by the proposed rule. Key outputs of the facility impact
analysis include expected facility closures in the MP&M industries,
associated losses in employment, and the number of facilities
experiencing financial stress short of closure (``moderate impacts'').
The findings from the facility impact analysis also provide the basis
for the following analyses:
A firm-level analysis, which assesses the impact on the
financial performance and condition of firms owning MP&M facilities;
An employment effects analysis, which assesses the
increase in employment associated with compliance activities, the loss
of employment due to facility closures, and the net effect on overall
employment;
A community impact analysis, which assesses the job losses
caused by facility closures and job gains associated with compliance;
A foreign trade analysis, which assesses the effect of the
proposed rule on the U.S. balance of trade;
A new source impact analysis, which assesses the effect of
effluent guidelines on the costs and financial viability of new
facilities in the MP&M industries; and
The Initial Regulatory Flexibility Analysis (IFRA), which
assesses the economic and financial impacts of the proposed rule on
small entities.
B. Facility Level Impacts
1. Facility Categories Analyzed
EPA performed economic impact analyses for three categories of
facilities, using different methodologies to evaluate each of the
groups. The three groups are:
Private MP&M Facilities. This group includes privately-
owned facilities that do not perform railroad line maintenance and are
not owned by governments. This major category
[[Page 479]]
includes private businesses in a wide range of sectors or industries,
including. This segment includes facilities that manufacture and
rebuild railroad equipment. Only facilities that repair railroad track
and equipment along the railroad line are not included.
Railroad line maintenance facilities maintain and repair
railroad track, equipment and vehicles.
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.
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 the
facilities' performance before and after compliance with each
regulatory option with these thresholds.
2. Data Sources for the Facility Impact Analysis
The economic analyses rely on data provided by the financial
portion of the detailed questionnaire distributed to MP&M facilities by
EPA under the authority of Section 308 of the Clean Water Act
(``Section 308 Survey''). (See Section V.B for information on the MP&M
survey questionnaires). The survey was conducted in two phases,
covering different MP&M industries in each phase. The Phase I survey
covered seven industry sectors and reported data for fiscal years 1987
to 1989. The Phase II survey covered an additional ten industry sectors
(all remaining MP&M sectors except Steel Forming and Finishing, which
was the subject of a separate survey) and reported data for fiscal
years 1994 to 1996. The survey financial data were extrapolated to 1999
dollars using the Producer Price Index. The survey financial data
included three years of income statements and balance sheets for the
facility; the composition of revenues by customer type and MP&M
business sector; estimated value of facility assets and liabilities in
liquidation; borrowing costs; ownership of the facility; and total
revenues and employment of the owning entity (if separate from the
facility). The impacts assessed for these sample facilities were
extrapolated to the national level using facility sample weights that
are based on the sample design for the industrial detailed surveys.
Data for facilities in the railroad line maintenance subcategory
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 line
maintenance facilities. The railroad operating companies reported the
number of MP&M facilities in each operating unit, and provided detailed
operating company financial data and technical data for each line
maintenance facility.
Data for the Steel Forming and Finishing Subcategory 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 response to a
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 the 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
provided data for the analysis. Secondary source data were used to
characterize background economic and financial conditions in the
industries subject to the MP&M effluent guideline. Secondary sources
used in the analysis 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 Bureau of Economic Analysis in the Department of
Commerce;
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;
Industry trade publications; and
Financial publications, including the Value Line
Investment Survey and Robert Morris Associates annual data summaries.
3. Methodology and Impact Measures for the Facility Level Analysis
a. Private MP&M Facilities
EPA performed two categories of financial analysis, one to assess
the potential for facility closures and the other to assess the
potential for moderate financial impacts on MP&M facilities. These
analyses considered facility financial condition in the absence of the
rule (under baseline conditions) and changes in financial condition
that would result from the proposed rule.
EPA used two financial tests to estimate closures among general
MP&M facilities:
After-Tax Cash Flow: EPA examined after-tax cash flow
(ATCF) over a three year period to determine the financial condition of
general MP&M facilities.
Net Present Value: EPA also performed a net present value
(NPV) test, which compared the liquidation value of each facility to
the present value of expected future earnings. A business may close if
the value of closing (its liquidation value) exceeds its value as an
ongoing business (calculated as the present value of expected future
earnings).
EPA determined that a facility is subject to severe financial
stress and is a potential closure if ATCF is negative, since businesses
generally cannot sustain negative cash flows for long periods of time.
This test used the average of reported financial data over three fiscal
years. Baseline cash flow is defined as the sum of reported net income
and depreciation. The measure is widely used within industry in
evaluating capital investment decisions because both net income and
depreciation (which is an accounting offset against income, but not an
actual cash expenditure) are potentially available to finance future
investment. However, assuming that total baseline cash flow is
available over an extended time horizon (for example, 15 years) to
finance investments related to environmental compliance could overstate
a site's ability to comply. In particular, the cost of existing capital
equipment (not associated with regulatory compliance) is not netted out
of cash flow, as it is of income through the subtraction of
depreciation. Thus, any costs associated with either replacing existing
capital equipment, or repaying money that was previously borrowed to
pay for it, are omitted from the facility analysis. EPA requests
comment on its use of cash flow as a measure of resources available to
finance environmental compliance and suggestions for alternative
methodologies. (See Section XXII of today's notice.)
Where estimates of liquidation values were available, EPA also
conducted the NPV test. NPV is the present value of expected future
earnings less the
[[Page 480]]
liquidation value (including closure and post-closure costs) of the
facility. If NPV is negative, then a business owner is financially
better off closing the facility and liquidating its assets, rather than
keeping the facility open. EPA estimated the present value of the
facility's expected future earnings by discounting its annual after-tax
cash flow over a fifteen-year period using a 7 percent discount rate.
EPA presumed that a facility was a potential closure if the facility
had an NPV less than zero.
Where liquidation values were available, facilities that failed
both tests under baseline conditions are baseline closures. Facilities
that pass at least one of the two tests in the baseline case but then
fail both tests post-compliance were considered closures due to the
rule. Where liquidation values were not provided by the survey, EPA
applied only the ATCF test to identify baseline and regulatory
closures.
In many past rules, EPA has used only the cash flow test to predict
both baseline and regulatory closures. Using both tests presents a
higher hurdle and thus makes it less likely that a facility
experiencing stress will be projected to close. Due to data
limitations, both tests were used for only 18,913 (approximately a
third) of the 58,421 private MP&M facilities considered in the
analysis. For the remaining two-thirds of the facilities, only the
after-tax cash flow test was used. Table XVI-2 shows the impacts on
estimated closures of using both tests, rather than the cash flow test
alone, to predict closures.
Table XVI-2.--Baseline Closures, Regulatory Closures, and National Estimates of Compliance Costs for Private
MP&M Facilities by Status under Tests for Closures: 18,913 Facilities for Which Both Tests Were Used
----------------------------------------------------------------------------------------------------------------
Status under proposed option
Facilities -------------------------------
Baseline remaining open Pre-tax
Closure test closures in the Regulatory compliance
baseline closures costs ($1999
million)
----------------------------------------------------------------------------------------------------------------
Fail ATCF Only.................................. 3,211 15,766 225 $1,782.6
Fail NPV Only................................... 4,243 14,734 244 1,657.2
Double Test: Fail ATCF and NPV Text............. 2,711 16,266 169 1,793.4
----------------------------------------------------------------------------------------------------------------
If the cash test alone had been used, about 500 additional baseline
closures and 56 additional regulatory closures would have been
projected for the proposed rule. Depending on the subcategories in
which these facilities were located, this could have affected EPA's
achievability determinations in some cases. EPA requests comment on its
methodology for estimating facility closures for this rule.
All sellers in an affected market may benefit from higher prices
when prices rise in response to compliance costs, whether or not they
incur compliance costs under the rule. Some facilities that have very
low compliance costs may even gain more from increased prices than they
lose due to increased costs associated with the rule. The analysis
takes into account the effect of price increases that are attributable
to the regulation. The estimated price increases were generally less
than 1 percent and in no case exceeded 2 percent.
EPA also identified private MP&M facilities that are not expected
to close but that might nonetheless experience moderate financial
impacts as a result of the rule. The analysis of moderate financial
impacts examined two financial indicators:
Pre-Tax Return on Assets (PTRA): The ratio of cash
operating income to total assets measures the facility's profitability.
Interest Coverage Ratio (ICR): The ratio of cash operating
income to interest expenses measures the facility's ability to service
its debt and borrow for capital investments.
These two measures are among the criteria that creditors and equity
investors use to determine whether and under what terms to provide
financing to a business. The PTRA and ICR also provide insight into the
ability of a business to generate funds for compliance investments
internally. A business may have some trouble obtaining financing if its
profitability is low and its ability to pay its continuing interest
expenses is uncertain. EPA compared baseline and post-compliance PTRA
to an 8 percent threshold and ICR to a threshold of 4. A facility is
considered subject to incremental moderate impacts attributable to the
proposed regulation if its PTRA and its ICR both pass these thresholds
in the baseline but it fails one or both of the tests after compliance
with the rule. Facilities failing one of the tests in the baseline and
both tests post-compliance were not counted as experiencing moderate
impacts, but this may in some cases be indicative of moderate rule-
related impacts as well.
EPA assumed that MP&M facilities would be able to recover some of
their regulatory costs by raising prices to their customers. An
analysis of the potential for cost recovery considered conditions in
each individual MP&M industrial sector industry (e.g. aircraft,
aerospace, electronic equipment, etc.) Cost pass-through factors were
estimated for each sector. The cost pass-through factor blends findings
from two separate analyses to estimate a composite measure of pass-
through potential:
An econometric analysis of the historical relationship
between output prices and changes in input costs; and
An analysis of indicators of pass-through potential based
on market structure and performance.
Market structure factors include:
Market power based on the degree of 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
Long term growth trends in the industry.
The analysis of pass-through potential indicates the percentage of
compliance costs that EPA expects firms subject to regulation to
recover from customers through increased prices. The estimated
percentage price increases were very small for the proposed rule,
ranging from 0.02 percent to less than two percent in different
sectors. This analysis can be found in Appendix B of the EEBA.
Table XVI-3 summarizes the measures used to assess impacts for
private MP&M facilities.
[[Page 481]]
Table XVI-3.--Summary of Facility Impact Methodology for Private MP&M Facilities
----------------------------------------------------------------------------------------------------------------
Significance of
Impact category Description Criteria negative finding
----------------------------------------------------------------------------------------------------------------
Baseline Closure..................... Identifies facilities 1. After-tax cash flow Facilities failing both
that are in jeopardy (ATCF) negative? and tests are considered
of financial failure 2. Liquidation value baseline closures and
independent of the exceed going concern excluded from
proposed regulation. value (NPV test)?. subsequent analyses.
Post-Compliance Closure.............. Identifies facilities 1. Post-compliance Facilities failing both
that are likely to after-tax cash flow tests are projected to
close instead of (ATCF) negative? and close as the result of
implementing the 2. Liquidation value regulation--an
pollution prevention exceed post-compliance incremental severe
and treatment systems going concern value?. economic impact.
required to comply
with the rule.
Moderate Financial Impacts........... Identifies facilities 1. Decline in pre-tax Facilities passing both
that may have return on assets tests in the baseline
difficult financing (PTRA) to a level that but failing one or
compliance investments jeopardizes access to both tests post-
or on-going business financing? or compliance are
investments as a 2. Decline in interest considered to
result of the rule. coverage ratio (ICR) experience incremental
to a level that moderate economic
jeopardizes access to impacts attributable
financing?. to the regulation.
----------------------------------------------------------------------------------------------------------------
b. Railroad Line Maintenance Facilities
Railroad operators are unlikely to evaluate the financial
performance of repair and maintenance facilities as separate profit
centers, and are therefore not likely to estimate revenues at the
facility level. EPA conducted an analysis of impacts of these
facilities at the railroad operating company level, and assessed
whether the combined impact of compliance costs for the regulated
facilities owned by each operating company would cause a deterioration
in the company's financial performance. The analysis predicted that
railroad line maintenance facilities would close only if the railroad
operating company as a whole was predicted to close, based on the same
closure tests described above for other private MP&M facilities.
Railroad facilities other than the line maintenance facilities perform
the same type of operations as other MP&M facilities and are included
in the General Metals and Oily Wastes subcategories, depending on their
MP&M activities.
c. Government-Owned Facilities
Governments with facilities affected by the proposed rule may take
one of three actions in response to the rule:
Replace one or more MP&M municipal facilities with a non-
municipal provider for services;
Discontinue these services altogether; or
Pay for compliance and continue operations.
EPA assumed that all government-owned facilities would continue
operating under the proposed rule. The economic impact analysis for
these facilities evaluates whether a government entity would incur a
major budgetary burden as a result of complying with the proposed rule.
Like private firms, governments could in some cases minimize the impact
of the proposed rule on their budgets by discontinuing operations at
the regulated facility, rather than paying the costs of compliance.
Unlike the analysis for private sector MP&M facilities, the analysis of
government impacts did not consider potential closures and therefore
may overstate the impacts of the rule on governments that own MP&M
facilities.
EPA evaluated impacts for government-owned facilities by performing
three tests.
Impacts on site-level cost of service: This test assesses
whether facility compliance costs would exceed one or more percent of
the total baseline cost of service at that facility. EPA assumed that
facilities can absorb compliance costs within their current budget if
the costs do not exceed one percent of total costs in the baseline.
Impacts on taxpayers: This test compared compliance costs
to the income of households that are served by the relevant government,
and that may support the government through taxes and fees. (If the
government is a regional transit authority, for example, then the
households included in this analysis are all households in the region
that provides funding for the transit authority, as reported in the
Phase II Section 308 survey.) A government might be expected to
experience impacts if the ratio of total annualized pollution control
costs per household to median household income exceeds one percent
post-compliance. This comparison considered the government entity's
existing pollution control costs plus the compliance costs incurred by
all of its MP&M facilities under this rule. EPA uses this test in its
Economic Guidance for Water Quality Standards as a screening measure to
determine when communities would incur ``little economic impact'' from
total pollution control costs. EPA recognizes that most local
governments receive at most a few percent of the income of their tax or
fee base (and some receive much less). Thus, one percent of median
income for pollution control costs alone may be a very significant
share of the local government's total budget.
Impact on government debt levels: This test assessed the
impact of financing the capital costs of compliance on the government's
overall debt burden. The government might be expected to experience
impacts if financing all of the compliance capital investments would
increase its total debt service payments to more than 25 percent of
baseline revenue. This criterion is used in EPA's MUNIPAY model as a
level beyond which debt service costs might adversely affect a
community's credit-worthiness. EPA determined that a government
facility that failed all three tests is likely to suffer severe adverse
impacts as a result of the rule. As shown in Table XVI-12 below, no
governments fail the latter two tests. However, 215 facilities failed
the site-level cost of service test. The governments operating these
facilities could experience some level of impacts as a result of the
rule, if these facilities represent a significant cost to their
budgets. Government owned facilities perform the same type of
operations as other MP&M facilities and are included in the General
Metals and Oily Wastes subcategories, depending on their MP&M
activities.
4. Baseline Closure Analysis
The estimated baseline closures for both indirect and direct
discharge facilities are summarized in Table XVI-4. Of the estimated
62,752 discharging facilities, 6.1 percent or 3,829 facilities
[[Page 482]]
were assessed as baseline closures. The 3,829 baseline closures include
3,678 indirect dischargers, or 6.3 percent of indirect dischargers, and
151 direct dischargers, or 3.1 percent of direct dischargers. The
facilities estimated to close in the baseline analysis are in jeopardy
of financial failure independent of the proposed rule. These facilities
were excluded from the post-compliance analysis of regulatory impacts.
Data on facility start-ups and closures from the Census Statistics of
U.S. Businesses indicate that between 6 and 12 percent of facilities in
the major metal products manufacturing industries close in any given
year. EPA's estimate may therefore understate actual baseline closures
somewhat.
Table XVI-4.--Summary of Baseline Closures
----------------------------------------------------------------------------------------------------------------
Number of Percent of
Subcategory Total number baseline baseline Operating in
of dischargers closures closures baseline
----------------------------------------------------------------------------------------------------------------
General Metals.................................. 29,975 3,199 10.7 * 26,776
Metal Finishing Job Shop........................ 1,530 286 18.7 1,244
Non-Chromium Anodizing.......................... 190 40 21.1 150
Printed Wiring Board............................ 635 3 0.5 632
Steel Forming & Finishing....................... 153 6 3.9 147
Oily Wastes..................................... 29,425 295 1.0 29,130
Railroad Line Maintenance....................... 832 0 0.0 832
Shipbuilding Dry Dock........................... 11 0 0.0 11
---------------------------------------------------------------
All Categories.............................. 62,752 3,829 6.1 * 58,922
----------------------------------------------------------------------------------------------------------------
* Excludes 64 facilities that close under baseline conditions but that are expected to continue operating under
the proposed rule.
Note: may not sum to totals due to independent rounding.
Of the facilities closing in the baseline, 64 are projected to
continue operating under the proposed rule because they qualify for the
low flow cutoff (and therefore incur no compliance costs) but benefit
from price increases caused by the rule. These 64 facilities are not
considered in the remainder of the economic impact analysis.
5. Facility Level Costs by Subcategory
The Technical Development Document presents EPA's engineering
estimates of costs that will be incurred by facilities to comply with
the proposed rule and other regulatory options. EPA adjusted the
engineering costs from 1996 to 1999 dollars using the Engineering News-
Record Construction Cost Index (CCI), and adjusted the costs to reflect
the effect of taxes using the maximum Federal income tax rate of 34
percent. The annual equivalent of capital and other one-time costs is
calculated by annualizing costs at a seven percent discount rate over
an estimated 15 year equipment life.
The compliance costs of the rule are the costs paid by those
facilities that continue to operate in compliance with the rule.
Aggregate compliance costs presented in this section differ from the
costs presented in Section IX because they exclude costs for facilities
that are baseline closures or that close due to regulatory
requirements. They therefore represent only the compliance outlays of
facilities that continue to operate. Section H presents EPA's estimates
of social costs, which include costs for regulatory closures. Table
XVI-5 shows the total annualized compliance costs by subcategory for
the 9,577 dischargers (direct and indirect) that are subject to
requirements, make the necessary investments to meet the requirements,
and continue operating under the proposed rule. The table also presents
costs for Option 2/6/10 and Option 4/8, but results are discussed for
only the proposed option to reduce the length of this document.
Total annualized costs are the sum of the annual operating and
maintenance costs and the annualized equivalent of capital and other
one-time costs. Annualized after-tax compliance costs are estimated to
be $1,328.9 million ($1.33 billion) \3\ per year under the proposed
rule, of which 13 percent is paid by direct dischargers and 87 percent
is paid by indirect dischargers. A total of 49,147 indirect dischargers
are excluded from regulation by the proposed exclusions and low flow
cutoffs. Total compliance costs would be 36 percent higher under Option
2/6/10 ($1,812 million per year paid by 57,641 facilities) and 120
percent higher under Option 4/8 ($2,918 million per year paid by 55,959
facilities) than under the proposed rule.
---------------------------------------------------------------------------
\3\ EPA notes that pre-tax annualized compliance costs are
estimated to be $1.98 billion (in 1999 dollars).
Table XVI-5.--Total Annualized Facility * Compliance Costs by Subcategory, Discharge Status and Regulatory Option
[After-tax, million $1999]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Proposed rule Option 2/6/10 Option 4/8
Subcategory -----------------------------------------------------------------------------------------------
Direct Indirect Direct Indirect Direct Indirect
--------------------------------------------------------------------------------------------------------------------------------------------------------
General Metals.......................................... $132.3 $969.9 $132.3 $1,295.8 $195.1 $1,885.5
Metal Finishing Job Shop................................ 0.8 80.1 0.8 80.1 1.5 112.1
Non-Chromium Anodizing.................................. .............. 0.0 .............. 17.5 .............. 26.0
Printed Wiring Board.................................... 1.7 93.4 1.7 93.4 3.0 141.2
Steel Forming & Finishing............................... 20.9 14.0 20.9 14.0 22.7 21.8
Oily Wastes............................................. 9.3 4.3 9.3 143.8 50.0 457.4
Railroad Line Maintenance............................... 0.8 0.0 0.8 0.2 0.9 0.4
[[Page 483]]
Shipbuilding Dry Dock................................... 1.4 0.0 1.4 0.1 0.4 0.1
All Categories: Annual Costs............................ 167.2 1,161.7 167.2 1,644.9 273.6 2,644.5
All Categories: Number of Regulated Facilities 4,633 4,944 4,633 53,008 4,615 51,344
Continuing to Operate Post-Regulation..................
-----------------------------------------------------------------------------------------------
Total Costs to Industry by Option, Directs + Indirects.. $1,328.9
$1,812.1
$2,918.1
--------------------------------------------------------------------------------------------------------------------------------------------------------
* This table includes facility compliance costs only. Section XVI.H. discusses the social costs of the rule. The estimates in this table exclude
baseline and regulatory closures.
Note: May not sum to totals due to independent rounding.
6. Facility Level Impacts by Subcategory
The findings from the post-compliance impact analyses are
summarized below, first for the PSES requirements considered for
indirect discharging facilities, and then for the BAT/BPT options
considered for direct discharging facilities. A third section
summarizes the findings for both discharger classes. Impacts are
discussed for only the proposed option, to reduce the length of the
document; however, the tables present the results for Option 2/6/10 and
Option 4/8. Impacts are not presented for Options 1, 3, 5, 7, and 9
(without pollution prevention) because these options remove fewer
pollutants and cost more than the comparable Options 2, 4, 6, 8, and
10.
a. Indirect Dischargers
Of the 54,270 indirect discharging facilities subject to regulation
after baseline closures, EPA estimates that 179 facilities or 0.3
percent could be expected to close as the result of the proposed rule,
as shown in Table XVI-6. More than 90 percent of the indirect
dischargers are excluded from the regulation by the low-flow cutoffs
for the General Metals and Oily Wastes subcategories, and the
exclusions for Non-Chromium Anodizers, Railroad Line Maintenance and
Shipbuilding Dry Docks. The employment losses associated with the
facility closures are estimated at 5,738 full-time equivalent (FTE)
positions. The estimated losses in employment are probably substantial
overestimates because the analysis does not account for the likelihood
that non-closing facilities will absorb some of the employment lost
from closing facilities. The proposed rule also creates new employment
demand to build, install, maintain and operate compliance equipment,
which offset these job losses. These job gains are discussed in Section
XVI-H.4.
Another 575 facilities, or one percent of the indirect dischargers
operating in the baseline, are expected to experience moderate economic
impacts under the proposed rule, as shown in Table XVI-7. Both closures
and moderate impacts increase substantially for Option 2/6/10 and
Option 4/8, compared to the proposed rule.
Table XVI-6.--Incremental Severe Impacts (Facility Closures) on Indirect Dischargers
----------------------------------------------------------------------------------------------------------------
Number of facility closures due to the rule
Subcategory Total operating --------------------------------------------------------
in baseline Proposed rule Option 2/6/10 Option 4/8
----------------------------------------------------------------------------------------------------------------
General Metals...................... 23,140 24 1,017 2,140
Metal Finishing Job Shops........... 1,231 128 128 393
Non-Chromium Anodizing.............. 150 0 91 91
Printed Wiring Board................ 620 7 7 25
Steel Forming & Finishing........... 105 6 6 6
Oily Wastes......................... 28,219 14 14 271
Railroad Line Maintenance........... 799 0 0 0
Shipbuilding Dry Dock............... 6 0 0 0
---------------------------------------------------------------------------
All Categories.................. 54,270 179 1,262 2,925
----------------------------------------------------------------------------------------------------------------
Note: May not sum to totals due to independent rounding.
Table XVI-7.--Incremental Moderate Impacts on Indirect Dischargers
----------------------------------------------------------------------------------------------------------------
Number of facilities experiencing moderate impacts due
Total operating to the rule
Subcategory in baseline --------------------------------------------------------
Proposed rule Option 2/6/10 Option 4/8
----------------------------------------------------------------------------------------------------------------
General Metals...................... 23,140 153 1,753 1,737
Metal Finishing Job Shops........... 1,231 117 117 117
Non-Chromium Anodizing.............. 150 0 0 0
Printed Wiring Board................ 620 301 301 315
Steel Forming & Finishing........... 105 4 4 4
Oily Wastes......................... 28,219 0 0 26
Railroad Line Maintenance........... 799 0 0 0
Shipbuilding Dry Dock............... 6 0 0 0
---------------------------------------------------------------------------
[[Page 484]]
All Categories.................. 54,270 575 2,175 2,199
----------------------------------------------------------------------------------------------------------------
Note: May not sum to totals due to independent rounding.
Another 575 facilities, or one percent of the indirect dischargers
operating in the baseline, are expected to experience moderate economic
impacts under the proposed rule, as shown in Table XVI-7. Both closures
and moderate impacts increase substantially for Option 2/6/10 and
Option 4/8, compared to the proposed rule.
b. Direct Dischargers
Of the 4,653 direct discharging facilities subject to regulation
after baseline closures, EPA estimates that 20 facilities or 0.4
percent could be expected to close as the result of the proposed rule.
These 20 are all General Metals facilities, and represent 0.6 percent
of the 3,636 General Metals Direct Dischargers operating in the
baseline. The employment losses associated with these facility closures
are estimated at 178 FTEs. Again, estimated losses in employment
associated with closures are likely to be overstated, because the
analysis does not account for the likelihood that non-closing
facilities will absorb some of the employment from closing facilities.
In addition, compliance requirements at facilities that continue to
operate will lead to off-setting increases in employment.
Another 41 facilities, or 0.9 percent of the 4,653 direct
dischargers operating in the baseline, would be expected to experience
moderate financial impacts due to the rule, as shown in Table XVI-9.
Table XVI-8.--Incremental Severe Impacts (Facility Closures) on Direct Dischargers
----------------------------------------------------------------------------------------------------------------
Number of facility closures due to the rule
Subcategory Total in baseline --------------------------------------------------------
operating Proposed rule Option 2/6/10 Option 4/8
----------------------------------------------------------------------------------------------------------------
General Metals...................... 3,636 20 20 35
Metal Finishing Job Shops........... 12 0 0 0
Non-Chromium Anodizing *............ ................. ................. ................. .................
Printed Wiring Board................ 11 0 0 0
Steel Forming & Finishing........... 43 0 0 2
Oily Wastes......................... 911 0 0 0
Railroad Line Maintenance........... 34 0 0 0
Shipbuilding Dry Dock............... 6 0 0 0
---------------------------------------------------------------------------
All Categories.................. 4,653 20 20 37
----------------------------------------------------------------------------------------------------------------
* EPA estimates that there are no facilities in the Non-Chromium Anodizing subcategory that discharge directly
to surface waters.
Note: May not sum to totals due to independent rounding.
Table XVI-9.--Incremental Moderate Impacts on Direct Dischargers
----------------------------------------------------------------------------------------------------------------
Number of facilities experiencing moderate impacts due
Total operating to the rule
Subcategory in the baseline --------------------------------------------------------
Proposed rule Option 2/6/10 Option 4/8
----------------------------------------------------------------------------------------------------------------
General Metals...................... 3,636 34 34 103
Metal Finishing Job Shops........... 12 0 0 0
Non-Chromium Anodizing *............ ................. ................. ................. .................
Printed Wiring Board................ 11 0 0 0
Steel Forming & Finishing........... 43 7 7 7
Oily Wastes......................... 911 0 0 0
Railroad Line Maintenance........... 34 0 0 0
Shipbuilding Dry Dock............... 6 0 0 0
---------------------------------------------------------------------------
All Categories.................. 4,653 41 41 110
----------------------------------------------------------------------------------------------------------------
* EPA estimates that there are no facilities in the Non-Chromium Anodizing subcategory that discharge directly
to surface waters.
Note: May not sum to totals due to independent rounding.
c. Summary of Facility Impacts
Table XVI-10 summarizes the results of the economic impact analysis
for all facilities and for all regulatory options analyzed. Closures
and moderate impacts under the proposed option are substantially lower
than in Option 2/6/10 and Option 4/8. Of the 616 facilities
experiencing moderate impacts due to the proposed rule, 137 facilities
fell below the threshold for pre-tax return on assets only, 38 fell
below the interest coverage ratio threshold only, and 441 fell below
both thresholds due to the rule. Job losses due to closures are more
than off-set by job gains associated with compliance requirements under
the proposed option. (See Section XVI-H.4 for a discussion of
employment impacts.)
[[Page 485]]
Table XVI-10.--Summary of Incremental Facility Impacts for All Facilities
----------------------------------------------------------------------------------------------------------------
Regulatory option
Subcategory --------------------------------------------------------------------------
Proposed rule Option 2/6/10 Option 4/8
----------------------------------------------------------------------------------------------------------------
Number of Facilities Operating in 58,922................. 58,922................. 58,922.
Baseline.
Number of Closures (severe impacts).. 199.................... 1,282.................. 2,963.
Percent Closing...................... 0.3.................... 2.2.................... 5.0.
Job losses due to closures (FTE- 5,916 (over 3 years)... 16,834 (over 3 years).. 48,070 (over 3 years).
years).
Job gains due to compliance 8,487 (over 15 years).. 12,023 (over 15 years). 27,535 (over 15 years).
requirements (FTE-years).
Number of Additional Facilities with 616.................... 2,216.................. 2,309.
Moderate Impacts.
Percent with Moderate Impacts........ 1.0.................... 3.8.................... 3.9.
Annualized Compliance Costs (pre-tax, $1.98.................. $2.67.................. $4.18.
billion $1999).
Annualized Compliance Costs (after- $1.33.................. $1.81.................. $2.92.
tax, billion $1999).
----------------------------------------------------------------------------------------------------------------
C. Firm Level Impacts
EPA examined the impacts of the proposed rule on firms that own
MP&M facilities, as well as on the financial condition of the
facilities themselves. A firm that owns multiple MP&M facilities could
experience adverse financial impacts at the firm level if its
facilities are among those that incur significant impacts at the
facility level. The firm-level analysis is also used to compare impacts
on small versus large firms, as required by the Regulatory Flexibility
Act and the Small Business Regulatory Enforcement Fairness Act. (RFA/
SBREFA issues are discussed in Section XX.C of this preamble.)
EPA compared compliance costs with revenue at the firm level as a
measure of the relative burden of compliance costs. EPA applied this
analysis only to MP&M facilities owned by private entities. (Section
XVI.D discusses impacts on governments that own MP&M facilities). The
Phase I, Phase II industrial detailed, and Iron & Steel surveys
identified the parent firm that owns each facility that responded to
the survey. In addition, the Phase II industrial detailed survey
requested that respondents provide information on other MP&M facilities
owned by the same firm, on a voluntary basis. EPA estimated firm-level
compliance costs by summing costs for all facilities owned by the same
firm that responded to the survey plus estimated compliance costs for
additional facilities for which respondents submitted information.
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.
Most MP&M facilities (43,118 of 54,590, or 80 percent) are single-
facility firms, however. These firms can be analyzed using the survey
weights. In addition, there are 289 firms that own more than one sample
facility. These firms are included in the analysis with a sample weight
of one, since it is not known how many firms these 289 sample firms
represent. EPA's analysis of firm-level impacts is presented in Chapter
9 of the EEBA.
Table XVI-11 shows the results of the firm-level analysis. The
results represent a total of 43,407 MP&M firms (43,118 + 289), owning
54,590 facilities (43,118 owned by single-facility firms + 11,473 owned
by multi-facility firms).
Table XVI-11.--Firm Level Before-Tax Annual Compliance Costs as a Percent of Annual Revenues for Private Small
Businesses: Proposed Rule
----------------------------------------------------------------------------------------------------------------
Number and percent with before-tax annual compliance costs/
annual revenues equal to:
-----------------------------------------------------------------
Number of firms in the analysis* Less than 1% 1-3% Over 3%
-----------------------------------------------------------------
Number Percent Number Percent Number Percent
----------------------------------------------------------------------------------------------------------------
43,407........................................ 41,236 95 1,070 2.5 1,101 2.5
----------------------------------------------------------------------------------------------------------------
*Firms whose only MP&M facilities close in the baseline are excluded.
A small percentage (2.5 percent) of the firms in the analysis incur
before-tax compliance costs equal to 3 percent or more of annual
revenues. Ninety-five percent incur compliance costs less than 1
percent of annual revenues, and the remaining 2.5 percent incur costs
between 1 and 3 percent of revenues. Of 2,171 firms in the analysis
that incur costs greater than 1 percent of revenues, 636 are single-
facility small firms that were reported in the facility impact analysis
to close (161 firms) or experience moderate impacts (475 firms) due to
the rule.
This analysis is likely to overstate costs at the firm level for
two reasons. First, it includes compliance costs for facilities that
are projected to close due to the rule. The estimated compliance costs
for these facilities are higher than the true cost to the firm of
shutting down the facility, as illustrated by the detailed facility
impact analysis that projects closures. Second, the analysis does not
take account of actions a multi-facility firm might take to reduce its
compliance costs under the proposed rule. These include transferring
functions among facilities to consolidate wet processes and take
advantage of scale economies in wastewater treatment.
D. Impacts on Governments
The proposed MP&M rule will affect governments in two ways:
Government-owned MP&M facilities may be directly affected
by the MP&M regulation and therefore incur compliance costs; and
[[Page 486]]
Municipalities that own Publically Owned Treatment Works
(POTWs) that receive influent from MP&M facilities subject to the
regulation may incur additional costs to implement the proposed rule.
These include costs associated with permitting MP&M facilities that
have not been previously permitted, and with repermitting some MP&M
facilities with existing control mechanisms (e.g., permits) earlier
than would otherwise be required. In addition, POTWs may elect to issue
mass-based control mechanisms to some MP&M facilities that currently
have concentration-based control mechanisms, at an additional cost.
1. Impacts on Government-Owned Facilities
EPA administered a survey (the ``Municipal Survey'') to government-
owned facilities to assess the cost of the regulation on these
facilities and the government entities that own them. (See Section V.B
for a discussion of EPA's data collection efforts.) The survey
requested information that provides the basis for EPA's analysis of the
budgetary impacts of the proposed regulation, including the size and
income of the populations served by the affected government entities;
the government's current revenues by source, taxable property, debt,
pollution control spending and bond rating; and the costs, funding
sources and other characteristics of the MP&M facilities owned by each
government entity.
EPA discusses the methodology for assessing impacts on government-
owned facilities in more detail in Section XVI.B.3.c. In summary, EPA
used three tests to assess whether MP&M facility compliance costs would
impose major budgetary impacts on the governments that own the
facilities: impacts on site-level cost of service, impacts on
taxpayers, and impacts on government debt. The first test assesses
impacts at the facility level and the second two tests assess impacts
at the government level. The Agency judged that a government would
incur major budgetary impacts due to the rule if it failed all three
tests.
The two government-level tests are applied incrementally.
Governments that fail the test in the baseline are not considered to
experience budgetary impacts attributable to the rule.
Table XVI-12 provides national estimates of the number of MP&M
facilities operated by governments that are potentially subject to the
proposed rule, by type and size of government.
Table XVI-12.--Number of Government-Owned Facilities by Type and Size of Government Entity
--------------------------------------------------------------------------------------------------------------------------------------------------------
Regional
Size of government and status under proposed option Municipal State government County governmental Total
government government authority
--------------------------------------------------------------------------------------------------------------------------------------------------------
Large Governments (population> 50,000)................... 572 366 686 36 1,660
Small Governments (population =50,000)................... 2,191 ................. 481 ................. 2,672
----------------------------------------------------------------------------------------------
All Governments...................................... 2,763 366 1,167 36 4,332
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table XVI-13 summarizes the status of government-owned facilities
under the various regulatory options, their compliance costs and
measures of impacts on government that own MP&M facilities.
Table XVI-13.--Number of Regulated Government-Owned Facilities, Compliance Costs and Budgetary Impacts by
Regulatory Option
----------------------------------------------------------------------------------------------------------------
Proposed option Option 2/6/10 Option 4/8
----------------------------------------------------------------------------------------------------------------
Total Number of Government-Owned Facilities............ 4,332 4,332 4,332
Number of facilities exempted by low-flow cutoff....... 3,603 ................. .................
Number of facilities subject to regulation............. 729 4,332 4,332
Compliance costs ($1999 million)....................... $14.1 $64.8 $224.7
Number of facilities with compliance costs > one 215
percent of baseline cost of service*..................
Number of governments failing the ``impact on 0
taxpayers'' criterion**...............................
Number of governments failing the ``impacts on 0
government debt'' criterion***........................
Number of governments failing all three impacts 0
criteria +............................................
----------------------------------------------------------------------------------------------------------------
* Annualized compliance costs as a percent of total facility costs and expenditures, including operating,
overhead and debt service costs and expenses.
** Based on comparison of compliance costs for all facilities owned by the government to the income of
households that are served by the relevant government. A government is judged to experience impacts if the
proposed rule results in a ratio of total annualized pollution control costs per household to median household
income that exceeds one percent post-compliance. Includes existing pollution control costs plus the compliance
costs due to the MP&M rule.
*** Based on comparison of total debt service costs (including costs to finance MP&M capital costs entirely with
debt) with baseline government revenue. A government is judged to experience impacts if the rule causes its
total debt service payments to exceed 25% of baseline revenue.
+ A government is judged to experience major budgetary impacts if it has one or more facilities with costs of
compliance above 1% of baseline cost of service and fails both the taxpayers impact and government debt impact
tests.
Table XVI-13 shows that the proposed rule substantially reduces
costs and impacts relative to the other options considered for
government-owned facilities, because 3,603 (83 percent) of the
facilities are exempted under the low flow cutoffs (110 General Metals
facilities and 3,492 Oily Wastes facilities.) Compliance costs would be
more than 4\1/2\ times higher under Option 2/6/10 and 16 times higher
under Option 4.
An estimated 215 government-owned facilities (5 percent of the
total) would incur costs under the proposed rule exceeding one percent
of their baseline cost of service. Therefore, 95 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
[[Page 487]]
governments incur costs that cause them to exceed the thresholds for
impacts on taxpayers or for government debt burden. EPA therefore
concludes that the proposed rule will not impose major budgetary
burdens on any of the governments that own MP&M facilities.
2. POTW Administrative Costs
EPA also evaluated the costs incurred by governments to administer
the rule. The rule is not expected to impose any new administrative
costs associated with direct dischargers, which are already permitted
by States. However, control authorities will have to issue control
mechanisms (e.g., permits) for the first time to some indirect
discharging facilities and will have to accelerate repermitting for
some indirect dischargers that currently hold control mechanisms.
The costs of issuing and enforcing permits and control mechanisms
associated with the proposed rule are discussed in Section XVI.H.3 of
this preamble. 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 what POTWs receive discharges from MP&M facilities except for
those that responded to the surveys.
EPA estimates that POTWs as a whole will incur incremental average
annualized costs over 15 years of between $115,000 and $912,000 under
the proposed rule. The maximum expenditures by all affected POTWs in
any one year will be between $186,000 and $1,607,000. These costs
include issuing new control mechanisms (e.g., permits) to facilities
that do not currently have permits, issuing mass-based permits to some
facilities that currently have concentration-based permits, and
repermitting some facilities sooner than would otherwise be required to
meet the three-year compliance schedule. On average, a POTW's costs for
the incremental permitting are only $23 to $184 per permitted MP&M
indirect discharger under the proposed rule.
EPA is requiring mass-based permits/control mechanisms only for the
Steel Forming & Finishing subcategory; permits/control mechanisms for
other subcategories may be concentration-based. EPA is encouraging
permit writers and control authorities to issue mass-based permits and
control mechanisms, however, where appropriate and feasible. The
analysis of permitting costs assumes for costing purposes that one-
third of the new or reissued permits/control mechanisms in
subcategories other than Steel Forming & Finishing will be mass-based.
EPA expects that these increases in costs will be partially offset
by reductions in government administrative costs for facilities that
are already permitted under local limits and that will be repermitted
under this rule. The proposed technical guidance provided by EPA as a
part of this rulemaking may reduce the research required by permit
writers/control authorities in developing permits and control
mechanisms based on Best Professional Judgement (BPJ) for industrial
dischargers not previously covered by a categorical standard or a water
quality standard. Further, the establishment of discharge standards may
reduce the frequency of evidentiary hearings. The promulgation of
limitations may also enable EPA and the authorized States to cover more
facilities under general permits. EPA did not estimate these cost
savings to permitting authorities that may result from the rule.
E. Community Level Impacts
EPA considered the potential impacts of changes in employment due
to the proposed rule on the communities where MP&M facilities are
located. Changes in employment due to the rule include both job losses
that occur when facilities close and job gains associated with
facilities' compliance activities. EPA estimated that a total of 5,916
jobs would be lost at the 199 facilities projected to close under the
proposed rule. At the same time, EPA estimated that manufacturing and
installing compliance equipment would lead to 4,488 full-time
equivalent (FTE) positions, and that operating and maintaining
compliance systems would result in another 286 FTEs per year. Over a 15
year analysis period, the net effect of job gains and losses caused by
the rule is an increase of 2,575 FTE-years or an average of 172 FTEs
per year. This estimate assumes that workers that lose their job are
unemployed for an average of one year, and that compliance investments
and closures occur evenly over the first three years after
promulgation. This estimate of employment impacts is likely to
understate the net increase, because it ignores the fact that some
production and employment lost at closing plants is likely to result in
increased production and employment at other MP&M facilities. (EPA's
analysis of employment impacts is discussed in more detail in Section
XVI-H.4 below and in Chapter 6 of the EEBA.)
Given the projected overall increase in employment due to the
proposed rule, EPA does not expect the rule to have significant impacts
at the community level. It is not possible to predict precisely where
the job gains and losses will occur. However, facilities that are
projected to close due to the rule have employment ranging from 2 to
205 FTEs. MP&M facilities tend to be located in industrialized urban
areas, and closures of this size are not likely to have a major impact
on a local economy.
F. Foreign Trade Impacts
U.S. MP&M producers as a group exported products with a value of
$380.3 billion in 1999. Imports to the U.S. of the same products in
1999 totaled $539.1 billion, resulting in an overall net MP&M commodity
trade deficit of $153.8 billion. Some MP&M sectors contribute to a
positive commodity trade balance (e.g. aircraft, with a $37.0 billion
positive balance in 1999). In other sectors, substantially more
products are imported than exported (e.g. motor vehicles, with a net
negative balance of $96.8 billion.) Exports and imports by MP&M sector
are discussed in Chapter 3 of the EEBA.
The proposed rule will have an impact on the balance of trade in
MP&M products to the extent that prices for MP&M products increase and
MP&M facilities reduce production. Imports may increase if domestic
customers switch from domestic suppliers to foreign suppliers of MP&M
products, and exports may decrease if foreign customers switch from
purchasing U.S. exports to other suppliers. On the other hand, business
lost by the regulated MP&M facilities due to their increased costs may
be captured by other domestic producers.
Section XVI.B of this preamble and Chapter 5 of the EEBA describe
EPA's analysis of changes in output that are expected to result from
the proposed rule. EPA assessed the impact of these market-level
changes on the U.S. balance of trade using information provided by the
industrial general surveys on the source of competition in domestic and
foreign markets. This 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.
Table XVI-14 shows the results of this analysis. The table compares
the projected changes in exports, imports and balance of trade
(expressed in $1999) to baseline 1999 values for both the MP&M
industries and for the U.S. balance of trade in commodities as a whole.
The projected changes in trade under the proposed rule have a very
[[Page 488]]
small impact on the balance of trade. The total U.S. balance of trade
in commodities would decline by less than 0.01 percent and the balance
of trade in the MP&M industries would decline by 0.01 percent.
Table XVI-14.--Proposed Rule Impacts on Foreign Trade
[Million $1999]
----------------------------------------------------------------------------------------------------------------
1999 value of 1999 value of Balance of
exports imports Trade
----------------------------------------------------------------------------------------------------------------
Baseline
----------------------------------------------------------------------------------------------------------------
U.S. Commodity Trade............................................ 695,797 1,024,618 (328,821)
MP&M Industries................................................. 380,305 534,141 (153,836)
----------------------------------------------------------------------------------------------------------------
Post-Compliance
----------------------------------------------------------------------------------------------------------------
Change Due to the Proposed Rule................................. 0 21.1 (21.1)
Percent Change In U.S. Commodity Trade Balance.................. 0% 0.01% 0.01%
Percent Change in MP&M Industries Trade Balance................. 0% 0.01% 0.01%
----------------------------------------------------------------------------------------------------------------
Source: U.S. Census and U.S. Environmental Protection Agency.
G. Impacts on New Facilities
EPA assessed the impacts of the proposed rule on new facilities
based on the characteristics of a model facility in each subcategory
and (in some cases) discharge category (direct and indirect).
Engineering estimates of compliance costs for Option 2/6/10 and Option
4/8 for a representative facility reflect the typical flow size and
other technical characteristics of facilities in each category. (See
the Technical Development Document.) Table XVI-15 lists the compliance
costs and flow size for a representative model facility in each
category, along with the regulatory option considered for each
subcategory.
In absence of the MP&M rule, new sources in the Metal Finishing Job
Shop and Printed Wiring Board subcategories would comply with 40 CFR
part 433 new source requirements, and Steel Forming & Finishing new
sources would comply with 40 CFR part 420 new source requirements.
Therefore, the analysis considers only the incremental costs of
proposed MP&M new source requirements beyond those baseline
requirements.
EPA estimated facility revenues for the model facilities based on
the revenues reported for existing facilities in the Section 308
surveys. The analysis excludes 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. EPA sorted the
existing financially-sound facilities in each subcategory/discharge
status by flow size, and identified facilities in each quartile based
on flow size. The Agency then identified the flow size quartile that
the hypothetical facility would fall into. Finally, EPA calculated the
average revenue for the existing facilities in that same flow size
quartile, and assumed that the hypothetical new facility would have
revenues equal to that average. Table XVI-15 shows the facility revenue
estimated for each model facility.
EPA calculated compliance costs as a percentage of post-compliance
revenues as a measure of impacts. The projected revenues include
estimated prices increases due to the rule. The analysis assumes that
new sources would benefit from the small price increases resulting from
the proposed rule for existing sources, and applies the same percentage
price increase to calculate post-regulation revenues for the new
sources. Table XVI-15 shows before-tax annual compliance costs as a
percent of facility post-regulation revenues.
Finally, Table XVI-15 presents the cost-to-revenue percentage
estimated for new facilities in each subcategory.
Table XVI-15.--New Source Impacts
--------------------------------------------------------------------------------------------------------------------------------------------------------
New source Annualized Facility Revenue
Subcategory Discharge status Existing source options compliance costs \c\ ($1999) New Source ACC as
options proposed considered \a\ \b\ ($1999) % of Revenue
--------------------------------------------------------------------------------------------------------------------------------------------------------
General Metals........................ I 2 4 $393,220 $417,071,318 0.09
General Metals........................ D 2 4 167,342 398,818,659 0.04
Metal Finishing Job Shops............. I 2 4 65,369 1,428,443 4.64
Metal Finishing Job Shops............. D 2 4 70,735 5,089,823 1.41
Non-Chromium Anodizing................ I 2 4 97,108 24,201,166 0.40
Oily Wastes........................... I 6 8 355,874 474,228,616 0.08
Oily Wastes........................... D 6 8 37,815 116,772,943 0.03
Printed Wiring Board.................. I 2 4 70,563 35,930,097 0.20
Printed Wiring Board.................. D 2 4 160,184 1,029,783,596 0.02
Railroad Line Maintenance............. I&D 10 8 184,261 n.a. n.a.
Shipbuilding Dry Dock................. I&D 10 8 220,492 192,018,827 0.11
Steel Forming & Finishing............. I 2 4 114,851 69,640,244 0.17
Steel Forming & Finishing............. D 2 4 46,945 32,759,295 0.14
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Technology Options 1 through 10 are described in Section VIII.A of the preamble.
a EPA is not proposing the new source option considered in this analysis for the Non-Chromium Anodizing, Oily Wastes, Railroad Line Maintenance, and
Shipbuilding Dry Dock subcategories. See Section XIII for a discussion on new source options selection.
b Incremental to baseline new source requirements (found in 40 CFR 433 and 420, as applicable) for Metal Finishing Job Shop, Printed Wiring Board and
Steel Forming & Finishing new sources.
c Equal to the average revenues of existing facilities in the same quartile based on flow size of the new source model facility, excluding existing
facilities that close or experience moderate impacts in the baseline. Assumes the same percentage price increases for new as for existing sources
under the proposed option.
d Includes existing facilities in all flow categories that continue operating post-compliance.
[[Page 489]]
New sources in all but the Metal Finishing Job Shop direct
discharger subcategory incur costs that are below one percent of post-
regulation revenues. Cost increases of this magnitude are unlikely to
place new facilities at a competitive disadvantage relative to existing
sources. Moreover, costs as a percentage of revenues are generally
comparable for new sources and existing sources with which they will
compete.
Railroad line maintenance facilities do not have revenue reported
at the facility level, and it is therefore not possible to compare
costs as a percent of facility revenue for new and existing facilities
in this subcategory. The representative new source railroad line
maintenance facility would incur annualized costs ($184,261) that are
somewhat higher than those incurred by existing facilities in this
subcategory (which range from zero to $122,042.)
See Section XIII for a discussion of new source options selection.
EPA notes that it did not select the ``New Source Option Considered''
in Table XVI-15, above, for the Non-Chromium Anodizing, Oily Wastes,
Railroad Line Maintenance, and Shipbuilding Dry Dock subcategories, but
rather selected a lower cost option for new sources.
H. Social Costs
1. Components of Social Costs
The social costs of regulatory actions are the opportunity costs to
society of employing scarce resources in pollution control activity.
The largest component of economic costs to society is the cost incurred
by MP&M facilities for the labor, equipment, material, and other
economic resources needed to comply with the proposed rule.
The social costs associated with the proposed MP&M regulation
differ from the compliance costs estimated to assess impacts on the
regulated facilities and firms, because of different treatment of
taxes. Social costs include compliance costs that are considered on a
before-tax basis. Privately-owned facilities are able to deduct the
costs of compliance as business expenses, reduce their tax liability
for a given level of revenue, and thereby share the burden of the costs
with other taxpayers. The burden is shared with other taxpayers because
the Federal government loses the money saved by industry through tax
shields. The cost to society includes the costs borne by industry, as
well as the cost borne by the Federal government through lost tax
revenues. The cost to society, therefore, is higher than the cost to
industry. The annualized lost Federal tax revenues can be calculated as
the difference between the annualized cost before and after tax
shields.
Social costs also include lost producers' and consumers' surplus
that result when the quantity of goods and services produced decreases
as a result of the rule. 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.
Calculating lost producers' and consumers' surplus accurately requires
knowledge of the characteristics of market supply and demand for each
affected industry. EPA instead calculated an upper-bound estimate of
social compliance costs using the simplifying assumption that all
facilities continue operating in compliance with the rule, and pay the
associated compliance costs (i.e., assuming that there are no
regulation-related closures.) This provides an upper-bound estimate of
social costs because, for facilities predicted to close, continuing to
operate and incurring compliance costs is more costly than closing the
facility with the lost producers' and consumers' surplus associated
with the closure.
In addition to the resource costs to society associated with
compliance, the estimated social cost includes two other cost elements:
the cost to local governments of implementing the rule and the costs
associated with unemployment that may result from the proposed
regulation. The government administration costs include the costs to
POTWs of permitting and compliance monitoring and enforcement
activities. The unemployment-related costs include the cost of
administering unemployment programs for workers who would lose
employment, and an estimate of the amount that workers would be willing
to pay to avoid involuntary unemployment.
2. Resource Cost of Compliance
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 proposed rule. The social costs of these resources are higher than
the costs incurred by facilities because facilities are able to deduct
the costs from their taxable income. The costs to society, however, are
the full value of the resources used, whether they are paid for by the
regulated facilities or by all taxpayers in the form of lost tax
revenues. EPA calculated costs at a 7 percent rate. EPA included
facilities predicted to close due to the rule when calculating social
costs.
The estimated after-tax private compliance costs incurred by
facilities, excluding costs for facilities that close, are $1.3
billion. The estimated social value of these compliance costs,
calculated before-tax assuming no regulatory closures, is $2.0 billion.
This represents the value to society of the resources that would be
used to comply with the proposed rule if all facilities continued to
operate rather than some closing due to the rule. This estimate
represents an upper-bound social value of the compliance resources
associated with the proposed rule.
3. Cost of Administering the Proposed Regulation
EPA estimated the cost to governments of administering the proposed
regulation, including the use of labor and material resources to write
permits/control mechanisms under the regulation and to conduct
compliance monitoring and enforcement activities.
EPA does not expect increases in administrative costs for
facilities that discharge their wastewater directly to surface water,
because the National Pollution Discharge Elimination System (NPDES)
permit program requires that these facilities hold permits. POTWs will
incur additional permitting costs for indirect dischargers that do not
already have a control mechanism (e.g., permit) prior to implementation
of the proposed rule.
Information on the baseline number of indirect dischargers with
control mechanisms comes from the industrial detailed facility surveys,
which reported the baseline permit status of each MP&M facility. (See
Section V.B for a description of EPA's survey questionnaires.) EPA
estimated costs and impacts for these facilities. Results of the impact
analysis indicate that of the 58,922 MP&M facilities continuing to
operate in the baseline (including 64 avoided baseline closures), 199
facilities are expected to close rather than comply with the
regulation. Another 49,147 are excluded or fall below the proposed low
flow cut-offs. Of the 9,577 facilities that are expected to continue
operating and comply with the regulation, 4,633 facilities are direct
dischargers and 4,944 are indirect dischargers. EPA estimates that
4,296 of the indirect dischargers already have permits or other control
mechanisms (629 with concentration-based permits and 3,667 with mass-
based permits) and that 648 indirect discharging facilities will be
required to get a permit/control mechanism for the first time.
[[Page 490]]
EPA conducted the POTW survey of 150 POTWs to support analysis of
the administrative burdens imposed by the proposed rule on POTWs that
receive discharges from MP&M facilities. The questionnaire requested
detailed information on the costs of various activities per facility
permitted, including estimated hours required to develop and issue
permits/control mechanisms, provide technical guidance, inspect
facilities, conduct sampling, review compliance reports, take
enforcement actions, and repermit facilities. The survey requested this
information for facilities of different sizes (based on flow). In
addition, the survey requested information on the frequency with which
specific administrative activities are required for activities that are
not required for every permitted facility (such as conducting a public
hearing). EPA used the POTW survey responses to estimate a range of
permitting labor hour burdens and costs per MP&M facility permitted,
with separate estimates for concentration- and mass-based permits/
control mechanisms. This analysis is presented in Appendix C of the
EEBA.
Estimated annualized POTW administrative costs for each facility
issued a new concentration-based control mechanism range from $236 to
$1,890, and from $240 to $1,924 for each facility issued a new mass-
based control mechanism, with the range depending on the complexity of
the facility being permitted. EPA applied these costs per facility to
the estimated number of facilities requiring new control mechanisms or
conversion of a concentration-based to a mass-based control mechanism
each year, to estimate the total administrative cost to permitting
authorities. (See Section XXI.B for a discussion on implementation of
the MP&M limitations and standards.)
EPA is requiring mass-based permits/control mechanisms only for the
Steel Forming and Finishing subcategory. For other subcategories,
permit writers and control authorities can determine what type of
permit/control mechanism to issue. EPA is encouraging POTWs to
institute mass-based limits where possible, however. (See Section
XXII.B.) For purposes of estimating costs, EPA assumed that all Steel
Forming and Finishing and one-third of the permits/control mechanisms
issued in other subcategories will be mass-based.
Table XVI-16 summarizes the estimated range of administrative costs
that will be incurred by POTWs under the proposed rule. The estimates
reflect the low and high estimates of permitting cost per facility, and
take account of the need to repermit indirect dischargers with existing
control mechanisms (e.g., permits) within the three year compliance
period rather than on the normal five-year permitting schedule. These
estimates are described in detail in Chapter 7 of the EEBA.
Table XVI-16.--POTW Administrative Costs: Proposed Rule
------------------------------------------------------------------------
------------------------------------------------------------------------
Number of facilities permitted:
Converted from existing concentration-based to * 223
mass-based......................................
Issued new concentration-based permit............ * 432
Issued new mass-based permit..................... * 216
Repermitted 1-2 years earlier.................... 4,073
Number of closing facilities with existing permits 143
not requiring repermitting under the proposed rule..
Total POTW Administrative Costs (net present value of $1.407-$8.311
incremental costs over 15 years) (million $1999)....
Total POTW Administrative Costs (annualized over 15 $0.115-$0.912
years @ 7% (million $1999)..........................
------------------------------------------------------------------------
* Assumes that permitting authorities will chose to issue mass-based
control mechanisms (e.g., permits) to \1/3\ of the facilities
requiring new permits, and \1/3\ of the facilities with existing
concentration-based permits, other than Steel Forming & Finishing.
Mass-based permits are assumed