
April 4, 2016

MEMORANDUM

SUBJECT:	Economic Impact Analysis for Site Remediation NESHAP Amendments 

FROM:	Brian Keaveny
		Economist
		OAQPS/HEID/AEG (C439-02)

TO:		Paula Hirtz
		OAQPS/SPPD/RCG (E143-01)


Overview
This document addresses the potential economic impacts of the proposed amendments to the Site Remediation National Emission Standards for Hazardous Air Pollutants (NESHAP). A workbook titled Economic Impact Analysis Workbook For the Proposed Site Remediation NESHAP Amendments that documents the analysis presented in this memorandum is available in the docket for this action (Docket ID No. EPA-HQ-OAR-2002-0021).
The proposed amendments to the Site Remediation NESHAP are projected to affect 69 facilities. Of these, 13 facilities are owned by the federal government, which is not a small entity. The remaining 56 facilities are owned by 46 different firms. None of these 46 firms are small entities because they all exceed the Small Business Administration's (SBA) size standards for their respective industries. Because there are no small entities, this action will not have a significant economic impact on a substantial number of small entities. In addition, the EPA conducted a cost-to-sales impact analysis for large entities and expects that this action will not have a significant economic impact on those entities. The remainder of this memorandum provides background on the small business screening analysis, as well as on the cost-to-sales impact analysis for large entities.

Small Business Screening Analysis
In this screening analysis, the EPA considered the preliminary list of 125 facilities performing remediation activities required either under the Resource Conservation and Recovery Act (RCRA) or the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA). More information for this list of facilities is presented in the memorandum titled National Impacts Associated with the Proposed Amendments to Remove the Exemption for Facilities Performing Site Remediations under CERCLA or RCRA in the NESHAP for Site Remediation located in the docket for this action. 
The EPA conducted this small business screening analysis at the ultimate (i.e., highest) level of ownership, evaluating parent entities of potentially-affected facilities. This analysis draws on facility-level data available in RCRAInfo, as well as ownership, employment, and financial information for the potentially affected entities drawn from other resources described in more detail below. 
The EPA identified the size of ultimate parent entities by using the SBA size standard guidelines. The criteria for size determination vary by the organization/operation category of the ultimate parent entity. Federal and state governments are considered to be large entities. Municipalities and other political units with populations fewer than 50,000 are considered to be small entities. For privately-owned (non-government) entities, small entities are those with less than the threshold level of sales or number of employees specified by SBA for each of the relevant North American Industry Classification System (NAICS) sectors. For instance, the NAICS Industry Description of Petrochemical Manufacturers, with the NAICS code 325110, has an SBA size standard of 1,000 employees. This means that the ultimate parent entity that owns a facility is considered to be small if it has fewer than 1,000 employees.
First, we examined the preliminary list of facilities performing site remediation activities required either under RCRA or CERCLA and identified the facilities that are projected to incur costs as a result of this action. Hereafter, this analysis is focused only on facilities projected to incur costs. Facilities projected to incur no compliance costs will not be significantly impacted by this action. 
Second, we determined facility ownership information for each facility projected to incur compliance costs. To do this, we identified the ultimate parent entity owning each facility, and then determined the status of each ultimate parent entity (e.g., federal government, state, municipality, firm, etc.). We primarily used publicly available data self-published by entities. In some cases, we used the Hoover's, Inc. online database to identify the ultimate owner of a facility. The list of facilities projected to incur costs was comprised entirely of either privately-owned facilities or federally-owned facilities. We did not identify any facilities that were owned by states, municipalities, or other types of owners.
Third, we followed SBA size standards to determine which privately-owned ultimate parent entities should be considered small entities in this analysis. These SBA size standards are specified by industry, each having a threshold level of employees, revenue, or assets below which an entity is considered small. SBA guidelines list all industries, along with their associated NAICS code and SBA size standard. Therefore, it was necessary to identify the specific NAICS code associated with each ultimate parent entity to determine the appropriate size standard to apply. 
The NAICS codes for most companies were found in the EPA's RCRAInfo database. In one case, data from Hoover's, Inc. was used to identify the NAICS codes for the ultimate owner of a facility. Because the facilities affected by this action are owned by ultimate parent companies in a broad range of industries, we considered SBA entity size standard guidelines for 30 different NAICS codes.
We compared the relevant entity size criterion for each ultimate parent entity to the SBA size standard (i.e., number of employees or sales). We used self-reported company data as the primary source for information on ultimate parent entity employee numbers, revenue, and assets. We also used data from Hoover's, Inc. to supplement publicly available data.
      The proposed amendments to the Site Remediation NESHAP are projected to affect 69 facilities. Of these, 13 are owned by the federal government, which is not a small entity. The remaining 56 facilities are owned by 46 different firms. None of these 46 firms are small entities because they all exceed the SBA size standards for their respective industries. As there are no small entities, this action will not have a significant economic impact on a substantial number of small entities.
      
Cost-to-Sales Ratio Analysis for Large Entities
For the large entities that are projected to incur compliance costs, we compared compliance costs to firm-level sales and the results indicate that the affected firms will not experience a significant economic impact.
To assess the potential impact of this action on large entities, we calculated the share of projected annual compliance costs relative to baseline sales for each firm. This is known as the cost-to-sales ratio (CSR). Annual compliance costs are defined in this analysis as the estimate of regulatory costs imposed on these firms; thus, they do not reflect any changes in production expected to occur in response to imposition of these costs or resulting market adjustments.
	The total estimated annual compliance costs of the action are estimated to be $2.16 million, with this being entirely comprised of monitoring, recordkeeping, and reporting costs. There are no estimated capital or operations and maintenance costs for this action. The total estimated annual compliance cost is spread across 69 facilities. The federal government owns 13 of these facilities, incurring an estimated annual compliance cost of $0.31 million. The remaining 56 facilities are owned by firms, incurring a total estimated annual compliance cost of $1.85 million. Estimated annual compliance costs range from $13,000 to $41,000 per facility.
	For each facility owned by a firm, the estimated annual compliance cost was compared to the ultimate parent firm's sales. Facility-level sales and production data were unavailable. Instead, firm-level sales information was collected for the CSR analysis. As with the small business screening analysis described earlier, we primarily relied on self-reported sales and revenue data from the ultimate owners of facilities. We also used data from Hoover's, Inc. to supplement publicly available data.
	We computed the CSR at the firm level, rather than the facility level. For firms that own more than one facility, we summed the costs for each facility owned by the firm. For each firm, the annual compliance cost estimate is divided by the sales in order to calculate the CSR. 
The annual compliance costs for these firms are all less than 0.03 percent of sales. These costs are not expected to result in business closures, significant price increases, or substantial profit loss. Therefore, the EPA expects that this action will not have a significant economic impact on the affected entities.

