
                                                








Economic Impact Analysis for the Nitric Acid Manufacturing NSPS


Final Report















                                                                               
                                                               EPA-452/R-12-004
                                                                       May 2012





        Economic Impact Analysis for the Nitric Acid Manufacturing NSPS
                                       
                                       
                                       
                                       
                                       
                                     By: 
                                 Kathy Heller
                            RTI International, Inc.
                    Research Triangle Park, North Carolina
                                       
                                       
                                       
                                 Prepared for:
                                John L. Sorrels
                   Health and Environmental Impacts Division
                                       
                                       
                                       
                                       
                           Contract No. EP- W-11-029
                                       
                                       
                                       
                                       
                                       
                                       
                                       
                     U.S. Environmental Protection Agency
                 Office of Air Quality Planning and Standards
                   Health and Environmental Impacts Division
                              Air Economics Group
                          Research Triangle Park, NC






May 2012


Economic Impacts of NSPS for Nitric Acid 


Final Report




Prepared for

Larry Sorrels
U.S. Environmental Protection Agency
                           Office of Air Quality Planning and Standards (OAQPS)
                                                           Air Economics Group 
                                                                   (MD-C439-02)
                                               Research Triangle Park, NC 27711


Prepared by

Katherine Heller
Brooks Depro
Stephanie Norris
Tony Lentz
RTI International
3040 Cornwallis Road
Research Triangle Park, NC 27709


RTI Project Number 0209897.004.094


	




Contents
Section	Page
1 	Background	1-1
2	Industry Profile	2-1
2.1	Supply of Nitric Acid	2-1
2.1.1	Nitric Acid Production Process	2-1
2.1.2	Product Types	2-2
2.1.3	Materials and Costs of Production	2-2
2.1.4	Nitric Acid and Materials Transportation	2-3
2.2	Demand for Nitric Acid	2-5
2.2.1	Nitric Acid Applications	2-5
2.2.2	Influential Factors	2-6
2.3	Market Characteristics	2-7
2.3.1	Competition and Entry	2-7
2.3.2	Concentration	2-9
2.3.3	Price-Responsiveness of Supply and Demand	2-11
2.4	Market Trends	2-11
2.4.1	Derived Demand for Nitric Acid	2-11
2.4.2	International Trade in the Sectors that Consume Nitric Acid	2-12
2.4.3	Industry Trends and Projections for Sectors Using Nitric Acid as an Input	2-13
2.4.4	Projected Production of Nitric Acid	2-14
2.5	Overview of Businesses Potentially Affected by the Rule	2-15
2.5.1	Parent Companies	2-15
2.5.2	Parent Company Sales and Employment	2-18
2.6	References for Section 2	2-20
3	Engineering Cost analysis	3-1
3.1	Emission Limit of 0.5 lb NOX/ton	3-2
3.2	References for Section 4	3-4

4	Economic Impacts on New Sources in the Nitric Acid Industry	4-1
4.1	Modeling Approach to Estimating the Impacts on the Market for Nitric Acid	4-1
4.2	Possible Impacts on Market for Nitric Acid	4-4
4.3	Estimated Impacts on Markets for Products Using Nitric Acid as an Input	4-5
4.5	Impacts on Small Entities of the NSPS Review of Nitric Acid for NOX on New Sources	4-7
4.6	References for Section 4	4-8
5	Conclusions	5-1
Appendix
A	Industry Data and Projections for NAICS 32521	A-1

List of Figures
Number	Page
4-1	2010 Market for Nitric Acid	4-2
4-2	Market Supply of Nitric Acid, including New Source	4-2
4-3	Increased Demand for Nitric Acid at Baseline	4-3
4-4	Market for Nitric Acid, With  NSPS	4-4
List of Tables
Number	Page
2-1	Cost Comparisons for Labor and Materials across Several NAICS Codes	2-4
2-2	Concentration Ratios for Sectors Using Nitric Acid as an Input, 2002	2-10
2-3	Market Price-Elasticities of Supply and Demand	2-11
2-4	Exports of Sectors that Consume Nitric Acid (FAS Value, 103 $2009)	2-12
2-5	Imports for Consumption of Sectors that Consume Nitric Acid (Customs Value, 103 $2009)	2-13
2-6	Projected Nitric Acid Production	2-14
2-7	Parent Companies with Facilities Potentially Covered Under the Rule	2-16
2-8	Annual Revenue and Employment Data for Each of the Parent Companies	2-19

3-1	Normalized NOX Control Costs by Model Plant	3-1
3-2	NOX Control Costs for All New Production Trains in 2016	3-2
3-3	NOX Control Efficiencies	3-2
3-4	NOX Emission Reductions for All New Production Trains with SCR Control in 2016	3-3
3-5	Incremental Costs in the Fifth Year after Promulgation for All New Production Trains	3-3
3-6	Incremental Cost Effectiveness in the Fifth Year after Promulgation for All New Production Trains	3-4


4-1	Market Impacts of the  Rule: Market for Nitric Acid	4-5
4-2	Estimated Impacts of Nitric Acid NSPS on Sectors Using Nitric Acid as an Input	4-6
4-3	Employment and Revenue of Existing Small Entities	4-8
4-4	Cost-to-Sales Ratios for Model Small Firms Owning New 300 tpd and 1,000 tpd Plants	4-8


	
Background
New Source Performance Standards (NSPS), mandated under Section 111 of the Clean Air Act (CAA), are directly enforceable federal regulations issued for categories of sources that cause, or contribute significantly to, air pollution that may reasonably be anticipated to endanger public health or welfare. Section 111 of the CAA requires that NSPS reflect the "degree of emissions limitation achievable through application of the best system of emission reduction which (taking into account the cost of achieving such reduction and any non-air quality health and environmental impact and energy requirements) the Administrator determines has been adequately demonstrated." This level of control is commonly referred to as best demonstrated technology (BDT). By requiring BDT for new, modified, and reconstructed sources, the NSPS program seeks to attain and maintain ambient air quality as the industrial infrastructure is modernized. Since 1970, the NSPS have been successful in achieving long-term emissions reductions in numerous industries by ensuring that cost-effective controls are installed on such sources.
The Environmental Protection Agency (EPA) is required by Section 111(b)(1)(B) of the CAA to review and, if appropriate, revise existing NSPS at least every 8 years. The purpose of an NSPS review is to determine if the standards reflect BDT. The nitric acid NSPS (part 60, subpart G) has been reviewed in the past, but the last review was more than 8 years ago. As a result of this, EPA received a citizen suit from Sierra Club and Environmental Integrity Project prompting a review of the standards.  
Section 111(b)(1)(B) of the CAA requires EPA to periodically review and revise the standards of performance, as necessary, to reflect improvements in methods for reducing emissions. EPA is currently reviewing the nitric acid manufacturing NSPS and has noted that improvements in technology allow emissions to be better controlled than the current NSPS requires. In light of this review, EPA is revising the current NSPS. These revisions include tightening the current nitrogen oxides (NOx) limit set back in 1971 for plants that manufacture nitric acid.  The revised NSPS will be promulgated on May 14, 2012 under a court-order.  
Following legislative and administrative requirements, EPA conducts economic analyses of its regulatory actions. EPA's Air Economics Group is responsible for conducting such economic analyses in support of residual risk and national emission standards for hazardous air pollutants (NESHAP), NSPS, and national ambient air quality standards (NAAQS) for criteria pollutants. 
This economic impact analysis (EIA) contains four other sections. Section 2 is a profile of the nitric acid manufacturing industry. It provides the reader with a basic understanding of the structure of the nitric acid production process, and characterizes nitric acid suppliers and demanders. Section 3 describes the estimated costs that the nitric acid industry would incur with the promulgation of the revised regulations for the industry. Section 4 analyzes the impacts of these costs on the industry, including potential impacts on small businesses owning nitric acid production facilities. Section 5 provides conclusions.

	
Industry Profile
EPA has developed this industry profile to provide the reader with a general understanding of the technical and economic aspects of the nitric acid industry. We begin by examining the supply of nitric acid by discussing the nitric acid production process and the associated costs. We then examine the demand for nitric acid and the end products for which it serves as an intermediate. We then address the characteristics that define the nitric acid market and profile the companies owning nitric acid production facilities. 
2.1	Supply of Nitric Acid
Nitric acid is an inorganic chemical with a variety of productive applications, including nitrogen-based fertilizers, explosives, and many specialty chemicals including polyurethane intermediates, dyes, and pharmaceuticals (Dow, 2008). Although there is a small direct market for nitric acid, many producers share the role of supplier and consumer by using nitric acid internally as an input to final market goods. 
2.1.1	Nitric Acid Production Process
Nitric acid is produced through chemical reactions in two main phases: oxidation and absorption. Specifically, it is produced through a series of chemical reactions stemming from the oxidation of ammonia with air over an alloy catalyst (EFMA, 2000). In the oxidation phase, ammonia (NH3) is oxidized at a high temperature over the catalyst, which is usually a platinum-alloy gauze-like structure, into nitric oxide (NO) (EFMA, 2000). As the gases cool, the nitric oxide is oxidized into nitrogen dioxide (N2O) (EFMA, 2000). Nitrous oxide, water, and nitrogen are also formed in secondary reactions during this phase (EFMA, 2000). In the absorption phase, the nitrogen dioxide (N2O) reacts with water to form nitric acid (HNO3):
                            4NH3 + 5O2  4 NO + 6H2O
                                2NO + O2  2NO2
                            3NO2 + H2O  2HNO3 + NO
In addition to the composition and efficiency of the platinum-alloy catalyst, the pressure and temperature in the oxidation environment can influence the yield of nitric oxide recovered from the catalytic reaction (EFMA, 2000). The first reaction of ammonia into nitric oxide is more efficient at a high temperature and low pressure, whereas the reaction of nitric oxide to nitrogen dioxide and the oxidation to nitric acid are more conducive to low temperatures and high pressure (EFMA, 2000). Production plants may be designed as dual-pressure or single-pressure plants. Dual-pressure plants separate the oxidation and absorption phases and use lower pressure for oxidation than absorption; single-pressure plants use the same degree of pressure throughout production (EFMA, 2000). 
2.1.2	Product Types
Nitric acid is a water-soluble liquid that can range in color from clear to yellow and has a pungent acidic odor (Dow, 2008). Most of the chemical is used as weak, or industrial-grade, nitric acid and tends to range from a 50% to 70% concentration of nitric acid in water (Dow, 2008). Fuming or concentrated nitric acid ranges from 85% to 100% in concentration (Dow, 2008). 
2.1.3	Materials and Costs of Production
Ammonia is the chief raw material required for nitric acid production, and many nitric acid producers also manufacture their own ammonia supplies to vertically integrate production. Although some producers fuel ammonia production with coal, the majority of world ammonia production is based on natural gas (PotashCorp, 2010). As an example, one affected fertilizer company, CF Industries, notes that natural gas purchases represented over 50% of total 2009 cost of sales in the nitrogen production segment (CF Industries, 2010). Securing an affordable fuel supply in a volatile natural gas market is pivotal for a company's competitiveness and sustainability in the industry (PotashCorp, 2010). One affected entity, Coffeyville Resources, is the only nitrogen plant in the United States to use lower cost petroleum coke instead of natural gas (CVR, 2009). Because of the unpredictable nature of natural gas prices, some other smaller facilities are also looking into alternative fuel options (REMC, 2010). 
Since the shift toward deregulation in the natural gas market in the 1980s, natural gas prices have played an increasingly significant role in ammonia production. In the period immediately following deregulation (1985 to 1999), natural gas prices remained relatively stable (Huang, 2007a). There was little correlation between natural gas prices and ammonia prices until 2000, when natural gas prices began to fluctuate erratically. Between 2000 and 2006, the correlation between natural gas and ammonia prices was 0.8 (Huang, 2007a). Further analysis suggests that the long-run price elasticity of ammonia with respect to natural gas is 0.79 (Huang, 2007b). 
Ammonia producers use a variety of purchasing options to manage the inherent volatility of natural gas prices. Since natural gas is traded as a commodity, companies can buy natural gas at real-time spot prices or under contract in the futures market (NGSA, 2004). In contrast to the immediate purchase of natural gas at its daily spot price, buying into a future contract involves an agreement between buyer and seller on a physical transaction at a later date (NGSA, 2004). Natural gas is traded in the United States at market hubs around the country, the largest of which is Henry Hub in Louisiana (NGSA, 2004). Roughly 30 hubs are strategically located at major natural gas pipeline intersections (NGSA, 2004). The natural gas futures prices that are used for futures trading on the New York Mercantile Exchange (NYMEX) are the Henry Hub contract prices and illustrate the price of the physical delivery of natural gas from this hub (NGSA, 2004). The "location differential" is the variation between prices at Henry Hub and another market hub, which arises from different supply and demand dynamics between the different hubs (NGSA, 2004). Heavy users of natural gas, including ammonia producers, benefit from building facilities close to these market hubs.
Table 2-1 illustrates the cost comparisons for labor and materials across the North American Industry Classification System (NAICS) codes in which the affected entities are classified. Both nitric acid production and the production activities of facilities and firms that use nitric acid as an input are classified within NAICS 325, Chemical Manufacturing. Most nitric acid is used in making ammonium nitrate (AN), the majority of which is used in nitrogenous fertilizer production, NAICS 325311. Other consumers of nitric acid fall within NAICS 325211, 325510, and 325920. In all of these NAICS industries, the cost of materials, including nitric acid, represents approximately half of the value of shipments in a typical year. The cost of materials is typically several times higher than the payroll costs (or cost of labor) for these affected industries. 
An additional capital cost to consider in nitric acid production is that of the catalyst used in ammonia oxidation, which is typically made primarily with platinum and supplemented with other metals (EFMA, 2000). Catalyst costs could thereby be influenced by variation in metals supply and pricing. 
2.1.4	Nitric Acid and Materials Transportation
Since the majority of nitric acid is consumed in the facility or complex in which it is produced, transporting the product is not of paramount concern. However, some companies do sell nitric acid to industrial customers or potentially need to transfer between facilities, so the 


Table 2-1.	Cost Comparisons for Labor and Materials across Several  NAICS Codes
Geographic Area Name
NAICS-Based Code
Meaning of NAICS-Based Code
Year
Number of Employees
Annual Payroll ($1,000)
Production Workers Average per Year
Total Cost of Materials ($1,000)
Materials, Parts, Containers, Packaging, etc. Used ($1,000)
Cost of Purchased Fuels ($1,000)
Cost of Purchased Electricity ($1,000)
Total 
Value of Shipments ($1,000)
United States
325
Chemical manufacturing
                                     2008
                                                                        780,127
                                                                     50,766,204
                                                                        448,790
                                                                    396,684,686
                                                                    322,593,772
                                                                     17,055,845
                                                                      9,898,041
                                                                    751,029,562
United States
325
Chemical manufacturing
                                     2007
                                                                        803,904
                                                                     50,643,442
                                                                        465,557
                                                                    362,244,062
                                                                    297,388,193
                                                                     14,368,287
                                                                      8,908,756
                                                                    724,080,627
United States
325211
Plastics material and resin manufacturing
                                     2008
                                                                         67,410
                                                                      4,261,853
                                                                         44,809
                                                                     60,505,056
                                                                     55,097,538
                                                                      2,141,353
                                                                      1,840,588
                                                                     83,802,525
United States
325211
Plastics material and resin manufacturing
                                     2007
                                                                         70,514
                                                                      4,360,808
                                                                         47,312
                                                                     57,459,312
                                                                     52,197,817
                                                                      2,000,583
                                                                      1,637,878
                                                                     85,069,731
United States
325311
Nitrogenous fertilizer manufacturing
                                     2008
                                                                          3,818
                                                                        275,321
                                                                          2,481
                                                                      4,456,195
                                                                      3,539,303
                                                                        575,847
                                                                        191,581
                                                                      8,272,625
United States
325311
Nitrogenous fertilizer manufacturing
                                     2007
                                                                          3,997
                                                                        269,249
                                                                          2,709
                                                                      3,465,718
                                                                      2,724,769
                                                                        455,402
                                                                        193,225
                                                                      6,157,614
United States
325510
Paint and coating manufacturing
                                     2008
                                                                         40,407
                                                                      2,108,485
                                                                         22,924
                                                                     11,556,743
                                                                     10,527,160
                                                                         68,649
                                                                        108,754
                                                                     22,418,425
United States
325510
Paint and coating manufacturing
                                     2007
                                                                         42,021
                                                                      2,193,104
                                                                         23,876
                                                                     12,177,643
                                                                     11,090,399
                                                                         70,723
                                                                        110,149
                                                                     23,636,807
United States
325920
Explosives manufacturing
                                     2008
                                                                          6,042
                                                                        312,208
                                                                          4,183
                                                                        958,319
                                                                        828,569
                                                                         19,829
                                                                         13,168
                                                                      1,934,663
United States
325920
Explosives manufacturing
                                     2007
                                                                          6,532
                                                                        321,152
                                                                          4,348
                                                                        857,000
                                                                        728,615
                                                                         16,530
                                                                         12,316
                                                                      1,745,029
Source: U.S. Census Bureau. 2010. American Fact Finder. Sector 31: Annual Survey of Manufactures: General Statistics: Statistics for Industry Groups and Industries: 2008 and 2007. http://factfinder.census.gov. Accessed April 20, 2010. 

costs and dangers of moving the hazardous chemical can play a role in the supply side of the market. Nitric acid can be shipped via tanker truck, rail, and, in fewer cases, barge.
More important than nitric acid transportation may be the transportation costs associated with the final products. Ammonium nitrate, the primary end product of nitric acid, can be particularly dangerous if not handled carefully. Suppliers are responsible for taking all necessary precautions to avoid mishaps and for complying with federal regulations for shipping hazardous materials.
 2.2	Demand for Nitric Acid
Although some nitric acid is sold to outside customers, the majority of nitric acid is used by its producers in the vertically integrated production of a wide range of chemical products. Roughly 90% of nitric acid is manufactured for on-site consumption within the facility, so the retail nitric acid market represents only 10% of total nitric acid production (ICIS, 2008a). Because it is an intermediate good, the demand for nitric acid is largely contingent on the demand for the end products for which it serves as an input. The total U.S. nitric acid demand in 2007 was 8.9 million tons, and this was projected to grow to 10.1 million tons in 2011 (ICIS, 2008a). 
2.2.1	Nitric Acid Applications
Ammonium nitrate production represents the largest demand market for nitric acid, accounting for roughly 76% of total U.S. demand in 2007 (ICIS 2008a). About 9% of nitric acid demand is for adipic acid, which is used for nylon 6,6 polymers and resins, polyester polyols for polyurethane resins, and other related fibers and resins (ICIS, 2007). Toluene di-isocyanate (TDI) and nitrobenzene each account for 6% of nitric acid demand, with the remaining 3% going toward metal nitrate and other miscellaneous applications.
Of ammonium nitrate produced from nitric acid, the majority (86%) is used in the nitrogen-based fertilizer industry, either as a direct fertilizer or in the production of alloy-fertilizer blends like urea ammonium nitrate (UAN) (ICIS, 2008a). The balance of the ammonium nitrate derived from nitric acid is used mainly for manufacturing explosives. 
Because the majority of nitric acid is consumed by ammonium nitrate producers, the demand for ammonium nitrate products, especially fertilizer, is the main driver of nitric acid demand. The dominance of ammonium nitrate demand is also reflected in the production and sales for the companies affected by the rule, so the market discussion in this profile is focused on the fertilizer industry and, to a lesser extent, ammonium nitrate-based explosives. 
2.2.2	Influential Factors
Fertilizer
As noted in the previous section, the nitric acid market is driven chiefly by the demands of the fertilizer industry. In the United States, the agricultural industry consumes 80% of the country's fertilizer demand (Richardson, 2010a). Within the agricultural demand side, corn production is the largest nitrogenous fertilizer consumer, followed by wheat, soybeans, and cotton (Richardson, 2010). Nurseries, golf courses, and landscaping projects are small-scale fertilizer consumers (Richardson, 2010a). 
The U.S. farm economy and income within the sector is the main force behind fertilizer demand. Unpredictable weather conditions are probably the most important determinant in fertilizer needs. In poor weather seasons, fertilizer demand declines as farmers reduce or abandon crop fields and pastures (Richardson, 2010a). Demand is also seasonal and increases during planting season. Global food demand also plays a role in determining the crop needs and thus contributes to fertilizer needs. Food security is a concern for policy makers as the global population increases, and the demand for fertilizer may increase in the coming years (IFA, 2009). 
Explosives
Because industrial explosives are mainly used in the mining and mineral industries, the demand for coal and basic metals drives the demand for these products (IBISWorld, 2009). Coal mining is the main use for industrial explosives in the United States, accounting for around two-thirds of explosives consumption. Stone quarrying and construction are also industries that consume the blasting agents and oxidizers provided by the industry (IBISWorld, 2009). One key factor in maintaining the level of demand for explosive products is the relative affordability of coal as a fuel source compared to its alternatives (IBISWorld, 2009). 
Chemicals and Resins
Adipic acid and TDI are the other main chemical products in which nitric acid is used, both of which have a wide variety of applications and tend to follow gross domestic product (GDP) trends in terms of demand. Nylon 6,6 fibers and resins represent 84% of adipic acid demand (ICIS, 2007). Although historically, nylon 6,6 has been used mainly in industrial carpeting, the demand for nylon 6,6 resins has been driven by automobile and truck parts as the industry has trended toward replacing metal parts with plastic. It is often used for exterior body pieces, internal components under the hood, and various mechanical parts (ICIS, 2007). The demand for automobiles and the growing acceptance of nylon as a viable replacement for metal is likely to influence market conditions.
TDI is used mainly in the production of flexible urethane foams, which are used across several industries. Transportation, furniture, carpet underlay, bedding, packaging, and other miscellaneous applications of the flexible foams make up 88% of total TDI consumption in the United States (ICIS, 2008b). The remaining demand for TDI is used in the production of rigid urethane forms and polyurethane products like adhesives, sealants, coatings, and elastomers (ICIS, 2008b). Demand for these products is expected to grow in the future (ICIS, 2008b).
 2.3	Market Characteristics
A review and description of market characteristics (i.e., geography, product differentiation, product transportation, entry barriers, and degree of concentration) can enhance our understanding of the mechanisms underlying the market for nitric acid and its end products. These characteristics provide indicators of a firm's ability to influence market prices by varying the quantity of product it sells. For example, in markets with large numbers of sellers and identical products, firms are unlikely to be able to influence market prices via their production decisions (i.e., they are "price takers"). However, in markets with few firms, significant barriers to entry (e.g., licenses, legal restrictions, or high fixed costs), or products that are similar but can be differentiated, a firm may have some degree of market power (i.e., to set or significantly influence market prices). In addition, if a product is difficult to transport over long distances (because of weight or its hazardous nature), then the market size may be more restricted than one might expect, ceteris paribus. 
Nitric acid producers are mainly involved in the supplying nitrogenous fertilizer, industrial explosives, and specialty chemicals and resins. Each of these markets has a set of distinct characteristics and is discussed individually below.
2.3.1	Competition and Entry
Fertilizer
The environments in which the targeted companies participate are extremely competitive, driven mainly by the firms' ability to control production costs rather than differentiate their products. This is especially true in the fertilizer industry where companies have individual fertilizer solution formulas, but the basic chemical properties are consistent. Firms with larger production facilities have the advantage of using economies of scale to become low-cost suppliers relative to their competitors (Richardson, 2010a). Comprehensive vertical integration of the entire production process is another tool that larger firms, like Agrium, use to control costs (Richardson, 2010a). 
Because fertilizer is generally treated as a commodity, prices are determined at a global level (Richardson, 2010a). Agrium, Koch, and CF Industries are among the dominant domestic forces in the fertilizer market, but in 2006, more than 60% of nitrogen-based fertilizer consumed in the United States was purchased internationally (Richardson, 2010a). Not only do U.S. companies face steep domestic competition, they also must compete with foreign companies that might face lower fuel prices and production costs. With many firms vying for a global consumer base and selling nearly identical products, the nitrogenous fertilizer industry provides individual companies with very little market power. 
In addition to the fierce market competition, other significant barriers to entry into the fertilizer industry exist. Initial capital expenses to purchase fertilizer manufacturing equipment can be very high; building a nitrogenous fertilizer plant with a 1 million metric ton capacity can cost between $700 million and $1 billion and can take several years to construct (Richardson, 2010a). Maintaining ammonia and natural gas inputs is also costly and prevents easy entry into the market. Because the industry is dominated by a few global firms, nascent companies also must compete with established product identification and brand names (Richardson, 2010a).
Explosives
As in the fertilizer industry, explosives products are essentially similar in their basic structure and content. Competition in this industry is based more on price than product differentiation (IBISWorld, 2009). However, recent years have seen an increase in the role of customer service and specializing explosives for customers as a means of competition (IBISWorld, 2009). Firms are gradually shifting away from providing basic commodity explosives and more toward becoming comprehensive demolition and blast solution providers (IBISWorld, 2009). Entry into the market is difficult because the market in the United States is dominated by two major companies with name recognition and ongoing customer relationships. The technical requirements, capital costs, and pricey raw materials essential to success in the industry also prohibit new companies from gaining market share (IBISWorld, 2009).
Chemicals and Resins
Because of the wide range of chemical products derived from nitric acid, the network of markets in which they are sold is extensive. Compared to fertilizer and explosives, there is also a greater degree of product differentiation between products like coatings and adhesives, so the market as a whole is likely to be less competitive than that of nitrogenous fertilizers. 
2.3.2	Concentration
Table 2-2 provides information about the concentration of sectors using nitric acid as an input. The most recent industry concentration data compiled by the Census Bureau (U.S. Census Bureau, 2006) are based on Economic Census data from 2002. Thus, the data reflect conditions in these sectors in 2002. As noted in the sector-specific sections below, many of these sectors have recently become increasingly concentrated. 
Table 2-2 shows the total number of companies in each sector potentially affected by the rule and the total value of shipments for all companies in the sector. Next, it shows the percentage of sector value of shipments for the largest 4, 8, 20, and 50 companies. Finally, it provides the Herfindahl-Herschman Index (HHI) for the sectors. The HHI is a commonly accepted measure of market concentration. It is calculated by squaring the market share of each firm competing in the market and then summing the resulting numbers. The HHI takes into account the relative size and distribution of the firms in a market and approaches zero when a market consists of a large number of firms of relatively equal size. The HHI increases both as the number of firms in the market decreases and as the disparity in size between those firms increases. Markets in which the HHI is between 1,000 and 1,800 points are considered to be moderately concentrated, and those in which the HHI is in excess of 1,800 points are considered to be concentrated. Two of the sectors in Table 2-2, nitrogenous fertilizer manufacturing and explosives manufacturing, had HHI values between 900 and 1,000 (approaching moderate concentration values) in 2002.
Fertilizer
Although many entities operate in the fertilizer and ammonia products industries, the market is dominated by the larger firms that can secure low-cost raw materials and gain market share by pricing below their competitors. Four major firms have over 50% of the entire global fertilizer market share (Richardson, 2010a). Recently, there has been even more of a trend toward increased concentration. Agrium submitted a $5.43 billion takeover bid for CF Industries but let the offer expire in early 2010 after CF Industries refused to engage in discussions (Agrium, 2010; Katz, 2010). CF Industries in turn acquired competitor Terra Industries in March 2010 after a bitter yearlong battle (Katz, 2010). With this move, CF Industries became one of the world's largest fertilizer producers and increased its customer diversity by acquiring Terra's industrial customers (CF Industries, 2010). 
 
Table 2-2.	Concentration Ratios for Sectors Using Nitric Acid as an Input, 2002
NAICS Code
Industry Description
Total Companies
Total Value of Shipments ($1000), 2002
Percentage, 4 Largest Companies
Percentage, 8 Largest Companies
Percentage, 20 Largest Companies
Percentage, 50 Largest Companies
HHI
325
Chemical manufacturing
9,659
462,438,453
13.7
21.8
36.8
54.3
99.9
325211
Plastics material and resin manufacturing
445
46,846,851
32.4
45.8
67.9
87.8
442.5
325311
Nitrogenous fertilizer manufacturing
116
3,291,075
53.9
78.8
94.6
98.2
976.9
325510
Paint and coating manufacturing
1,149
19,917,828
37.3
54.5
69.9
78.6
505.0
325920
Explosives manufacturing
57
1,027,797
54.2
77.8
93.4
99.9
991.3
Source: http://www.census.gov/prod/ec02/ec0231sr1.pdf 


Explosives
The explosives manufacturing industry is highly concentrated around the two largest manufacturers in the United States: Orica and Dyno Nobel (IBISWorld, 2009). These two companies maintained 30% and 40% of the market share, respectively, through 2009 (IBISWorld, 2009). In recent years, the industry has witnessed further concentration as companies have engaged in acquisitions to reinforce their market positions (IBISWorld, 2009). Between 1998 and 2005, the number of active companies in the industry declined by 16% (IBISWorld, 2009). 
Chemicals and Resins
Multiple markets sell nitric acid - based products, each with its own dynamics. For example, the market for adipic acid in the United States seems to be concentrated around INVISTA (owned by Koch) and Solutia (ICIS, 2007). Because of the diversity in adipic acid and TDI end products, there is less concentration of market power relative to the other two industries. 
2.3.3	Price-Responsiveness of Supply and Demand
EPA used elasticities of demand and supply to characterize the responsiveness of supply and demand to changes in price, in each affected market. These elasticities are shown in Table 2-3.
Table 2-3.	Market Price-Elasticities of Supply and Demand
Sector
NAICS
Supply 
Demand
Nitrogenous fertilizer
                                     3253
                                      0.7
                                    −1.0
Other chemicals (nitric acid)
                                     3259
                                      0.6
                                    −1.0
Plastics
                                     3252
                                      0.7
                                    −1.0
Explosives
                                     3259
                                      0.6
                                    −1.0
Sources:  Ho, M. S, R. Morgenstern, and J. S. Shih. 2008. "Impact of Carbon Price Policies on US Industry." RFF Discussion Paper 08-37). Http://Www.Rff.Org/Publications/Pages/Publicationdetails.Aspx?. Publicationid=20680. Table 8.A.6.
	       Broda, C., N. Limao, and D. Weinstein. 2008a. "Export Supply Elasticities." http://faculty.chicagobooth.edu/christian.broda/website/research/unrestricted/TradeElasticities/TradeElasticities.html.

 2.4	Market Trends
This section provides an overview of conditions in the sectors that consume nitric acid as an input. The projected trends for these sectors will affect future demand for nitric acid.
2.4.1	Derived Demand for Nitric Acid
Nitric acid is an intermediate good that is used in the production of fertilizers, explosives, plastics and resins, and paints and coatings, among other products. Because it is an intermediate good, nitric acid is valued because it is needed to produce those products; thus, the demand for nitric acid is driven by the demand for the products it is used to produce. These, in turn, are generally intermediate goods, whose demand depends on the demand for the final products they are used to produce. For example, demand for fertilizers depends on the demand for agricultural products, the supply of other inputs to agriculture, and the ability to substitute fertilizer for other inputs. Similarly, nitrate-based explosives are used in mining (especially coal mining) and construction. The demand for explosives thus depends on the demand for coal and other minerals and the demand for new buildings and infrastructure.
2.4.2	International Trade in the Sectors that Consume Nitric Acid
Table 2-4 presents historical data on exports for the four sectors that dominate demand for nitric acid. Export values were converted from current-year dollars to 2009 dollars using the GDP deflator. Each of the sectors grew during the period 2005 through 2007. Beginning in 2008, several of the sectors' exports contracted, and all of them fell from 2008 to 2009, reflecting the contraction of the world economy.
Table 2-4.	Exports of Sectors that Consume Nitric Acid (FAS Value, 10[3] $2009) 
Sector
2005
2006
2007
2008
2009
Percentage Change,
2008 - 2009
325211 Plastics and Resins
20,719,115 
23,153,733 
26,189,230 
27,796,054 
21,891,848
−21.2
325311 Fertilizer Mfg
1,900,234 
2,080,653 
2,126,120 
2,087,632 
1,820,042
−12.8
325510 Paint and Coating
460,977 
520,502 
543,554 
535,996 
487,616
−9.0
325920 Explosives Mfg
3,214,101 
3,140,175 
3,482,423 
693,429 
444,080
−36.0
	Total
26,294,427 
 28,895,064 
32,341,327 
31,113,109 
24,643,585
−20.8
Source: http://dataweb.usitc.gov/.
Table 2-5 presents historical data on these sectors' imports for consumption into the United States. In each sector, imports generally display an upward trend through 2007; imports of fertilizers, the major user of nitric acid, increased through 2008. In 2008, and even more in 2009, the imports of these commodities declined, reflecting the contraction of the U.S. economy.
Table 2-5.	Imports for Consumption of Sectors that Consume Nitric Acid (Customs Value, 10[3] $2009) 
Sector
2005
2006
2007
2008
2009
Percentage Change, 2008 - 2009
325211 Plastics and Resins
 10,964,777 
11,452,755 
10,735,086 
11,040,286 
7,281,554
−34.0
325311 Fertilizer Mfg
4,829,611 
4,348,070 
5,739,289 
 8,120,624 
3,264,581
−59.8
325510 Paint and Coating
796,634 
 898,904 
 923,868 
 850,706 
589,295
−30.7
325920 Explosives Mfg
303,669 
366,150 
378,236 
355,657 
306,703
−13.8
	Total
16,894,691 
 17,065,878 
17,776,479 
20,367,273 
11,442,132
−43.8
Source: http://dataweb.usitc.gov/.
2.4.3	Industry Trends and Projections for Sectors Using Nitric Acid as an Input
Appendix A presents industry data and projections for four of the sectors that demand nitric acid as an input: 32521, Plastics and Resins Manufacturing; 32531, Fertilizer Manufacturing; 32551, Paint Manufacturing; and 32592, Explosives Manufacturing, compiled by industry analysts IBISWorld (IBISWorld, 2009, 2010a and 2010b, and Richardson, 2010b).
NAICS 32521, Plastics and Resins Manufacturing, is closely tied to the automobile manufacturing and housing industries. During the period 2005 to 2010, these industries experienced volatility that was reflected in their demand for plastics (and thus, nitric acid). Nevertheless, IBISWorld (2010b) projects growth in revenue of approximately 3% per year for the period 2010 to 2015.
NAICS 32531, Fertilizer Manufacturing, depends largely on crop production decisions and fertilizer prices. In the short run, IBISWorld (2010a) notes that demand levels are influenced by grain prices, weather patterns, world economic conditions, and international trade variables. In the longer term, population growth, living standards, and food consumption patterns also influence demand. IBISWorld notes that inputs, specifically nitrogen and potash, are sourced internationally (60% of nitrogen and 88% of potash for fertilizer production are supplied by imports), so the strength of the U.S. dollar affects costs. In addition, approximately 30% of domestic demand for fertilizer is met by imports. Although domestic and international economic conditions resulted in a reduction in output and revenue in 2009, both are expected to increase from 2010 through 2015.
Demand for the coatings and paints covered under NAICS 32551, Paint Manufacturing, is contingent on the demand for downstream products in the housing and automobile industries. Domestic demand dropped in 2008 and 2009 because of the downturn in the housing market and declines in automobile sales but is expected to increase in 2010 and continue to grow through 2015 (Richardson, 2010b).  
NAICS 32592, Explosives Manufacturing, is projected to experience moderate growth. Demand for blasting agents (99% of explosives) is driven by demand levels for energy and minerals. Coal mining accounted for 66% of product consumption in 2007. Overall, IBISWorld (2009) projects continued moderate growth (about 3% per year) over the 2010 to 2015 period.
2.4.4	Projected Production of Nitric Acid
To estimate the number of new sources that might be affected by the rule, EPA projected production of nitric acid through 2016. Nitric acid production was estimated for 2006 (TSD for Greenhouse Gas Reporting Rule), using the production growth of 6.5% from 2006 to 2007 (ICIS). For the period 2007 through 2016, EPA used a predicted production growth rate of 3% for 2007 through 2016 (ICIS). These estimates are shown in Table 2-6. In the period from 2010 to 2016, the growth was approximately 1.6 million tons of nitric acid. 
Table 2-6.	Projected Nitric Acid Production
Year
Nitric Acid Produced
Increase (tons)

Metric tons
Tons

                                     2006
                                   6,446,767
                                   7,107,560
                                    461,991
                                     2007
                                   6,865,806
                                   7,569,552
                                    227,087
                                     2008
                                   7,071,781
                                   7,796,638
                                    233,899
                                     2009
                                   7,283,934
                                   8,030,537
                                    240,916
                                     2010
                                   7,502,452
                                   8,271,453
                                    248,144
                                     2011
                                   7,727,526
                                   8,519,597
                                    255,588
                                     2012
                                   7,959,351
                                   8,775,185
                                    263,256
                                     2013
                                   8,198,132
                                   9,038,441
                                    271,153
                                     2014
                                   8,444,076
                                   9,309,594
                                    279,288
                                     2015
                                   8,697,398
                                   9,588,882
                                    287,666
                                     2016
                                   8,958,320
                                   9,876,548
                                       -- 
                                  2010 - 2016
                                       
                                       
                                   1,605,095

2.5	Overview of Businesses Potentially Affected by the Rule
The regulation may affect up to 40 nitric acid facilities owned by 18 different parent companies. Table 2-7 lists the parent companies with facilities potentially covered under the rule and summarizes the nitric acid products that may be affected by the rule. In addition to producing nitric acid, the affected facilities and firms produce a variety of products using nitric acid.
To give the reader a better understanding of the specific characteristics that define each of the potentially affected entities, the following section gives a brief overview of each parent company. 
2.5.1	Parent Companies 
Agrium (3 facilities)
Agrium produces and markets a range of potash-, phosphate-, and nitrogen-based fertilizer products. In addition to the seven major nitrogen facilities worldwide, Agrium also operates five facilities in North America that upgrade ammonia to fertilizer products, including urea, nitric acid, and ammonium nitrate. Agrium's output serves a customer base that is roughly 75% agricultural and 25% industrial.
Air Products and Chemicals (1 facility)
Air Products and Chemicals produces an extensive range of chemical products, including gases, equipment, and performance materials for a variety of industries. At its Pasadena, Texas, facility, Air Products and Chemicals uses nitric acid to produce dinitrotoluene (DNT), which is converted to toluene diamine and sold to industrial customers as an intermediate for polyurethane products.
Apache Nitrogen (1 facility)
Apache Nitrogen is a small firm producing nitric acid and ammonium nitrate - based products for agricultural, mining, and industrial customers. 
CF Industries (4 facilities)
After the acquisition of Terra Industries in 2010, CF Industries became one of the largest fertilizer companies in the world. CF produces nitrogen fertilizers, phosphate products, and custom fertilizer solutions. The company manufactures 900,000 tons of nitric acid annually, mainly for internal ammonium nitrate production. 


Table 2-7.	Parent Companies with Facilities Potentially Covered Under the Rule 
Parent Company
Number of Affected Facilities
Small Business 
Sells Nitric Acid as an End Product
Nitrogenous Fertilizer (Uses Nitric Acid as Intermediate)
Ammonia (Industrial Grade, for Market, for Internal Use)
Explosives (Uses Nitric Acid as Intermediate)
Polyurethane Intermediates, Polymers, Nylon Fibers, Coatings, Resins, and Other 
Agrium
                                       3
                                      No
                                       
                                       x
                                       
                                       
                                       
Air Products and Chemicals, Inc.
                                       1
                                      No
                                       
                                       
                                       
                                       
                                       x
Apache Nitrogen
                                       1
                                      Yes
                                       x
                                       x
                                       
                                       x
                                       x
CF Industries
                                       4
                                      No
                                       x
                                       x
                                       x
                                       
                                       
Incitec Pivot Ltd.
                                       1
                                      No
                                       x
                                       x
                                       x
                                       x
                                       
CVR Energy
                                       1
                                      No
                                       
                                       x
                                       x
                                       
                                       
DuPont
                                       1
                                      No
                                       
                                       
                                       
                                       
                                       x
LSB Industries
                                       2
                                      No
                                       x
                                       
                                       
                                       
                                       
J.R. Simplot
                                       1
                                      No
                                       x
                                       x
                                       
                                       
                                       
Koch Industries
                                       3
                                      No
                                       
                                       x
                                       x
                                       
                                       x
Potash Corp.
                                       2
                                      No
                                       
                                       x
                                       
                                       
                                       
Rentech, Inc.
                                       1
                                      Yes
                                       x
                                       x
                                       x
                                       
                                       
Solutia Inc.
                                       1
                                      No
                                       
                                       
                                       
                                       
                                       x
TradeMark Nitrogen
                                       1
                                      Yes
                                       
                                       x
                                       
                                       
                                       
	Total
                                      23
                                       
                                       
                                       
                                       
                                       
                                       



CVR Energy (1 facility: Coffeyville Resources)
CVR Energy produces nitrogen-based fertilizers at its Coffeyville Resources facility. Instead of natural gas, the facility uses petroleum coke from its adjacent petroleum refining plant to produce ammonia products. 
DuPont (1 facility)
DuPont is another well-known chemical conglomerate with operations worldwide. At its U.S. facilities affected by the rule, DuPont manufactures a variety of polymer, aniline, and specialty chemical products. It also produces agricultural seed at its Victoria location.
Incitec Pivot, Ltd. (1 facility)
Incitec Pivot Ltd. acquired Dyno Nobel in June 2008. Dyno Nobel offers a range of explosives products and blasting solutions and is the largest explosives company in the United States. Incitec Pivot is an Australian-based fertilizer company. 
J.R. Simplot (1 facility)
J.R. Simplot is one of the largest privately held companies in the United States. In addition to sell varying grades of nitric acid, the company also manufactures fertilizers, turf, and a variety of other products. 
Koch Industries (3 facilities)
As one of the largest private companies in the world, Koch Industries offers a range of services, including commodity trading, ranching, refining, polymers, and fertilizers. In 2004, Koch acquired INVISTA, which is a leading producer in nylon fibers and adipic acid. Through Koch Fertilizers, LLC, the company operates a number of nitrogenous fertilizer facilities throughout the central United States.
LSB Industries (2 facilities: El Dorado Nitrogen/El Dorado Chemical)
LSB Industries is an Oklahoma City - based company providing customers with agricultural products, industrial chemicals, and explosives. Through its El Dorado Nitrogen subsidiary, LSB is the largest domestic merchant supplier of nitric acid. 
PotashCorp (2 facilities)
PotashCorp is a major player in all areas of agricultural fertilizer production. At its nitrogenous fertilizer plants, the company produces ammonia, nitric acid, urea, and other agricultural solutions.
Rentech, Inc. (1 facility: Rentech Energy Midwest Corporation)
Rentech produces nitrogen products, including anhydrous ammonia, ammonium nitrate, urea solutions, and nitric acid. It currently uses natural gas as a feedstock but is considering the transition to coal gasification. Rentech sells the majority of its products to customers within 150 miles of the facility.
Solutia (1 facility)
Solutia's primary business is specialty chemicals and it conducts business across the globe. Solutia produces window coatings and films at its Martinsville plant.
Trademark Nitrogen (1 facility)
Trademark Nitrogen is a small Florida company that manufactures nitrogen-based fertilizer products.
2.5.2	Parent Company Sales and Employment
To supplement the qualitative company profiles in the previous section, Table 2-8 displays annual revenue and employment data for each of the parent companies. This data is the most recent we are able to obtain for each parent company. The data reflect annual revenue and employment for either 2009 or 2010. Firms producing plastics and resins (NAICS 325211) are classified as small by the Small Business Administration (SBA, 2008) if they have fewer than 750 employees. Firms producing nitrogenous fertilizers (NAICS 325311) are considered small if they have fewer than 1,000 employees. Firms producing paints and coatings (NAICS 325510) are considered small if they have fewer than 500 employees. Based on these criteria and the data presented in Table 2-8, three firms producing nitric acid are classified as small businesses.

Table 2-8.	Annual Revenue and Employment Data for Each of the Parent Companies
Facility Name
State
Parent Company
Headquarters
Parent Company




Sales (millions $)
Employees
Agrium US
WA
Agrium
Canada
9,129.00
10,000
Agrium US
OH
Agrium
Canada
9,129.00
10,000
Agrium US
CA
Agrium
Canada
9,129.00
10,000
Air Products
TX
Air Products and Chemicals, Inc.
United States
8,256.20
18,900
Apache Nitrogen Products
AZ
Apache Nitrogen
United States
31.70
82
CF Industries
LA
CF Industries
United States
2,608.40
1,500
CF Industries
OK
CF Industries
United States
2,608.40
1,500
CF Industries
MS
CF Industries
United States
2,608.40
1,500
CF Industries
IA
CF Industries
United States
2,608.40
1,500
Coffeyville Resources
KS
CVR Energy
United States
3,136.30
667
Dyno Nobel
WY
Incitec Pivot Ltd
Australia
3,418.90
4,500
El Dorado Nitrogen
TX
LSB Industries
United States
531.84
1,179
El Dorado Nitrogen
AR
LSB Industries
United States
531.84
1,179
First Chemical
MS
DuPont
United States
26,109.00
60,000
Geneva Nitrogen
UT
Geneva Nitrogen
United States
5,400,000
32
INVISTA
TX
Koch Industries
United States
100,000.00
80,000
INVISTA
TX
Koch Industries
United States
100,000.00
80,000
JR Simplot
CA
J.R. Simplot
United States
4,500.00
10,000
Koch Nitrogen
IA
Koch Industries
United States
100,000.00
80,000
PCS Nitrogen
GA
Potash Corp
Canada
3,976.70
5,136
PCS Nitrogen
LA
Potash Corp
Canada
3,976.70
5,136
Rentech Energy Midwest Corporation
IL
Rentech, Inc
United States
183.00
250
Solutia
FL
Solutia Inc
United States
1,667.00
3,400
TradeMark Nitrogen
FL
TradeMark Nitrogen
United States
                                      NA
                                      NA
NA = no information available. 

2.6	References for Section 2
Agrium, Inc. 2010. 2009 Annual Report. http://www.agrium.com/investors/2009_annual_report.jsp.
CF Industries. 2010. Profile: History. CF Industries. http://www.cfindustries.com/profile_history.html.
CVR. 2009. CVR Energy Nitrogen Fertilizer Operations. CVR Energy Website. 2009. http://www.cvrenergy.com/NitrogenFertilizerOperations/index.html.
Dai, R. June 2010. IBISWorld Industry Report 32521. Plastic, Resin, & Rubber Manufacturing in the US. http://www.ibisworld.com.
Dow Chemical Company. 2008. Product Safety Assessment: Nitric Acid. Accessed April 21, 2010. http://www.dow.com/PublishedLiterature/dh_0131/0901b80380131028.pdf?filepath=productsafety/pdfs/noreg/233-00312.pdf&fromPage=GetDoc.
European Fertilizer Manufacturers' Association (EFMA). 2000. "European Fertilizer Manufacturers' Association." Best Available Techniques for Pollution Prevention and Control in the European Fertilizer Industry: Production of Nitric Acid, Booklet No. 2 of 8. Accessed April 26, 2010. http://www.efma.org/PRODUCT%20STEWARDSHIP%20PROGRAM%2008/images/EFMABATNIT.pdf.
Huang, W-Y. 2007a. Impact of Rising Natural Gas Prices on U.S. Ammonia Supply/WRS-0702. U.S. Department of Agriculture, Economic Research Service. http://www.ers.usda.gov/publications/WRS0702/wrs0702.pdf.
Huang, W-Y. 2007b. "Influence of Natural Gas Price on the Ammonia price, 2000 to 2006." Paper presented at annual meetings of the Southern Agricultural Economics Association, Mobile, AL. February 3-6. http://ageconsearch.umn.edu/bitstream/34929/1/sp07hu05.pdf.
IBISWorld. 2009. "Explosives Manufacturing in the U.S.: 32592." http://www.ibisworld.com.www.lib.ncsu.edu:2048/industryus/default.aspx?indid=502.
IBISWorld. 2010a. "Fertilizer Manufacturing in the U.S.: 32531." http://www.ibisworld.com.www.lib.ncsu.edu:2048/industryus/default.aspx?indid=502.
IBISWorld. 2010b. "Plastic, Resin, and Rubber Manufacturing in the U.S.: 32521." http://www.ibisworld.com.www.lib.ncsu.edu:2048/industryus/default.aspx?indid=502.
ICIS. 2007. "Adipic Acid." ICIS Chemical Business Online. http://www.icis.com/Articles/2007/07/06/4503569/Adipic-acid.html.
ICIS. 2008a. "Chemical Profile: Nitric Acid." ICIE Chemical Business Online. http://www.icis.com/Articles/2008/05/19/9124327/chemical-profile-nitric-acid.html.
ICIS. 2008b. "Chemical Profile: Toluene Di-isocyanate." ICIS Chemical Business Online. http://www.icis.com/Articles/2008/04/07/9113516/Chemical-profile-Toluene-di-isocyanate.html.
International Fertilizer Association (IFA). December 2009. Short-Term Fertilizer Outlook 2009-2010. Prepared by Patrick Heffer and Michel Prud'homme. http://www.fertilizer.org/ifa/Home-Page/FERTILIZERS-THE-INDUSTRY/Market-outlooks.html.
Katz. J. April 15, 2010. "IW 50 Best: CF Industries and Terra Together At Last." Industryweek.com. http://www.industryweek.com/articles/iw_50_best_cf_industries_and_terra_together_at_last_21609.aspx.
Natural Gas Supply Association (NGSA). 2004. "Marketing." NaturalGas.org. Accessed June 29, 2010. http://www.naturalgas.org/naturalgas/marketing.asp.
PotashCorp. 2010. 2009 Financial Review Annual Report. http://www.potashcorp.com/media/POT_2009_AR_Financial_Review.pdf.
REMC. 2010. Rentech Energy Midwest Corporation. http://www.rentechinc.com/remc.php.
Richardson, A. September 2009. IBISWorld Industry Report 32592. Explosives Manufacturing in the US. http://www.ibisworld.com.
Richardson, A. 2010a. IBISWorld Industry Report 32531: Fertilizer Manufacturing in the U.S. http://www.ibisworld.com.www.lib.ncsu.edu:2048/industryus/default.aspx?indid=480.
Richardson, A. 2010b. IBISWorld Industry Report 32551: Paint Manufacturing in the U.S. http://www.ibisworld.com.www.lib.ncsu.edu:2048/industryus/default.aspx?indid=492.
U.S. Census Bureau. May 2006. Concentration Ratios: 2002. http://www.census.gov/prod/ec02/ec0231sr1.pdf.
U.S. Census Bureau. 2010. American Fact Finder. Sector 31: Annual Survey of Manufactures: General Statistics: Statistics for Industry Groups and Industries: 2008 and 2007. Accessed April 20, 2010.
U.S. International Trade Commission. 2010. http://dataweb.usitc.gov/.
U.S. Small Business Administration. November 5, 2010. Table of Small Business Size Standards Matched to North American Industry Classification Codes. http://www.sba.gov/idc/groups/public/documents/sba_homepage/serv_sstd_tablepdf.pdf.



Engineering Cost and Emissions analysis
This section presents EPA's estimated cost impacts for new, modified, and reconstructed sources to comply with a final standard of 0.5 lb NOX/ton nitric acid.
To gather data for the cost estimation, EPA issued an Information Collection Request (ICR) under Section 114 authority to obtain NOX emissions data using EPA Methods 7, 7A, 7B, 7C, 7D, 7E (modified version), or 320. The ICR also collected cost data for NOX abatement technologies, including nonselective catalytic reduction (NSCR), selective catalytic reduction (SCR), and hydrogen peroxide (H2O2 ) injection. Cost data were received from 9 facilities with a total of 12 nitric acid production trains. This information was summarized in Summary of Cost Data Received from Section 114 ICR (NOX Summary) dated November 22, 2010. The capital recovery factor was based on 7% interest and a 15-year useful life.  
In addition, EPA has also revised the cost analysis done for proposal in response to public comments.  There are now testing costs included that were not included in the proposal, and there is now one modified plant impacted along with five new plants, instead of six new plants as projected in the proposal.  The modified facility will incur control equipment costs. 
The NOX Summary memo contained production data ranging from 40 tons per day (tpd) to 1,600 tpd of nitric acid. The data support the use of two model plants to represent the nitric acid production industry. The first model plant is 300 tpd, and the second model plant is 1,000 tpd. In the NOX Summary memo, the cost data were normalized based on the production rate at the facility (cost per ton of nitric acid produced). Table 3-1 shows the results of the cost data analysis for NOX control.
Table 3-1.	Normalized NOX Control Costs by Model Plant
Control
300 tpd ($/ton)
1,000 tpd ($/ton)
                                     NSCR
                                    $20.02
                                     $7.80
                                      SCR
                                     $3.93
                                     $1.10
                                     H2O2
                                     $2.06
                                     $1.36

      Table 3-2 shows the control device cost for an SCR installed at Agrium North Bend as part of a modification to the nitric acid plant. The plant produces 288 tons acid per day. SCR costs associated with a modification of a 1,000 tpd plant were not supplied. 


Table 3-2.  Normalized SCR Costs by Model Plant for Modified or Reconstructed Sources
Control
288 tpd ($/ton)
1,000 tpd ($/ton)
SCR
$3.52
-----
  
      Nitric acid production was estimated beginning with 2006 production data (TSD for Greenhouse Gas Reporting Rule), using the production growth of 6.5% from 2006 to 2007 (ICIS), the predicted production growth rate of 3% for 2007 through 2017 (ICIS), and the exclusion of plants that were not operating in 2010. These estimates are shown in Table 3-3. In the period from 2012 through 2017, the growth is expected to be approximately 1.48 million tons of nitric acid. Assuming 365 days per year, this equals approximately 4,000 tpd of nitric acid production. Using the model plants, the estimate equals 3 production trains that produce 300 tpd, and 3 production trains that produce 1,000 tpd over the five year period after promulgation.
      For purposes of the cost assessment, the growth will consist of five newly constructed production trains and one modification of an existing production train. These six production trains will become subject to the Subpart Ga limit of 0.50 lb NOX/ton acid between 2012 and 2017.
Table 3-3.  Nitric Acid Production Growth
                                     Year
                      Nitric acid produced (metric tons)
                          Nitric acid produced (tons)
                                Increase (tons)
                                                                           2010
                                                                      6,729,836
                                                                      7,419,644
                                                                    -----------
                                                                           2011
                                                                      6,931,731
                                                                      7,642,233
                                                                        222,589
                                                                           2012
                                                                      7,139,683
                                                                      7,871,500
                                                                        229,267
                                                                           2013
                                                                      7,353,873
                                                                      8,107,645
                                                                        236,145
                                                                           2014
                                                                      7,574,489
                                                                      8,350,874
                                                                        243,229
                                                                           2015
                                                                      7,801,724
                                                                      8,601,401
                                                                        250,526
                                                                           2016
                                                                      8,035,776
                                                                      8,859,443
                                                                        258,042
                                                                           2017
                                                                      8,276,849
                                                                      9,125,226
                                                                        265,783

      For the five new production trains predicted from 2012 to 2017, the annualized costs of controlling NOX emissions for the 3 types of control equipment outlined in the NOX Summary were calculated using the costs in Table 3-1. The control costs are shown in Table 3-4. These are the costs for each of the control devices in the 5[th] year after promulgation of these standards.

Table 3-4.  Annualized Control Costs for New Production Trains in 2017
                               Model Plant (tpd)
                               Number of Plants
                              Nitric Acid (tons)
                                     NSCR
                                      SCR
                                     H2O2
                                                                            300
                                                                              2
                                                                        220,000
                                                                     $4,400,000
                                                                       $860,000
                                                                       $450,000
                                                                          1,000
                                                                              3
                                                                       1,10,000
                                                                     $8,500,000
                                                                     $1,200,000
                                                                     $1,500,000

      For the 1 production train that will undergo modification or reconstruction from 2011 to 2016, the annualized costs of controlling NOX emissions for SCR were calculated using the costs in Table 3-2. The control costs are shown in Table 3-5. These are the costs for each of the control devices in the 5[th] year after promulgation of these standards.

Table 3-5.  Annualized Control Costs for Reconstructed or Modified Trains in 2016
                               Model Plant (tpd)
                               Number of Plants
                              Nitric Acid (tons)
                                      SCR
                                                                            300
                                                                              1
                                                                        105,000
                                   $370,000

      The production trains could use any of the three control types to control NOX emissions, , but we assumed that SCR would be universally applied as this is BSER. While hydrogen peroxide injection has the lowest potential costs, this control may not be feasible for all new production trains. Also, some H2O2 and NSCR installations may not be able to achieve emissions less than or equal to 0.50 lb NOX/ton acid.

      Using the control efficiency for SCR, the potential NOX emission reductions were calculated in Table 3-6. The baseline emissions were calculated as 3.0 lb NOX/ton acid (the level of the existing NSPS). The controlled emissions were calculated as 0.50 lb NOX/ton acid.

Table 3-6.  NOX Emission Reductions for All New, Modified, or Reconstructed Production Trains with SCR Control in 2017
                                  Plant Type
                               Model Plant (tpd)
                                 Days per year
                               Number of Plants
                              Nitric Acid (tons)
                                 Baseline NOX
                                  @3.0 lb/ton
                                  (tons NOX)
                                Controlled NOX
                                 @0.50 lb/ton
                                  (tons NOX)
                        NOX Emission reductions (tons)
                                      New
                                      300
                                      365
                                       2
                                    220,000
                                      355
                                      55
                                      300
                                      New
                                     1,000
                                      365
                                       3
                                   1,100,000
                                     1,779
                                      274
                                     1,506
                                   Modified
                                      288
                                      365
                                       1
                                    105,000
                                      315
                                      17
                                      299
                                       
                                       
                                       
                                       
                                       
                                       
                                       
                                       
                                    TOTALS
                                   1,423,500
                                     2,449
                                      345
                                     2,104
      
      The last step in calculating impacts for sources to meet the revised standard of 0.50 lb NOX/ton acid is to calculate the costs and reductions per year over the 5 year period after promulgation.  In addition to control equipment, each modified or reconstructed production train will be required to install the following: a stack gas flow monitor and a dual range NOX concentration monitor. The capital costs are $39,000 and $23,000, respectively. The annualized costs are $15,000 and $9,000, respectively. These costs include installation.
      In addition to control equipment, each new or modified production train will be required to perform an annual stack test according to Appendix F. These testing costs were inadvertently excluded from the proposed rule. These tests are estimated at $12,000 per test. 
      These costs are based on comments received from The Fertilizer Institute (TFI). The requirement of a NOX CEMS was included in the existing NSPS so its cost is not included in this analysis.
      SCR is already being used to control NOX emissions to the current NSPS level of 3.0 lb NOX/ton acid. As shown in Statistical Evaluation of CEMS Data to Determine the NOX Emission Standard (Updated Memo for Final Standard), dated May 14, 2012, there are at least 3 production trains using SCR that already meet the revised NSPS level of 0.50 lb NOX/ton acid. The control device costs are based on current usage where sources are only required to meet 3.0 lb NOX/ton. Sources are not likely to spend additional money to meet a limit of 0.50 lb NOX/ton acid when they were only required to meet a limit of 3.0 lb NOX/ton.  Therefore, we believe that the lower limit is achievable without additional cost impacts.
      Accordingly, there is no incremental control cost to control NOX emissions from the current NSPS limit of 3.0 lb NOX/ton acid to the proposed revised NSPS limit of 0.50 lb NOX/ton acid. The costs of monitors and operation and maintenance costs in the 5[th] year after promulgation are shown in Table 3-7 and Table 3-8.
Table 3-7.  Incremental Costs in 5[th] Year after Promulgation for All New Production Trains
                               Model Plant (tpd)
                               Number of Plants
                                   SCR Cost
                             ($2010-2[nd] quarter)
                                  Stack flow 
                                 monitor cost
                             ($2010-2[nd] quarter)
                                       
                                       
                          Dual range NOX monitor cost
                           Annual stack testing cost
                            Total Annualized Costs
                              ($2010-2nd quarter)
                                      300
                                       2
                                      $0
                                    $30,000
                                    $18,000
                                    $24,000
                                    $72,000
                                     1,000
                                       3
                                      $0
                                    $45,000
                                    $27,000
                                    $36,000
                                   $108,000




Table 3-8.  Incremental Costs in 5[th] Year after Promulgation for All Modified or Reconstructed Production Trains
                               Model Plant (tpd)
                               Number of Plants
                                   SCR Cost
                             ($2010-2[nd] quarter)
                                  Stack flow 
                                 monitor cost
                             ($2010-2[nd] quarter)
                                       
                                       
                          Dual range NOX monitor cost
                           Annual stack testing cost
                            Total Annualized Costs
                              ($2010-2nd quarter)
                                      288
                                       1
                                   $370,000
                                    $15,000
                                    $8,900
                                    $12,000
                                   $406,000


      Using the total monitoring costs, the cost effectiveness was also calculated.  These numbers are shown in Table 3-9.  


Table 3-9.  Total Incremental Cost Effectiveness in 5[th] Year after Promulgation for All New, Reconstructed, and Modified Production Trains
                               Model Plant (tpd)
                                     Type
                               Number of Plants
                            Total Annualized Costs
                             ($2010-2[nd] quarter)
                         NOX Emission reductions (tpy)
                              Cost effectiveness
                                  ($/ton NOX)
                                      300
                                      New
                                       2
                                    $72,000
                                      300
                                     $240
                                     1,000
                                      New
                                       3
                                   $108,000
                                     1,500
                                      $70
                                      300
                                      Mod
                                       1
                                   $406,000
                                      300
                                    $1,360
                                       
                                       
                                       
                                       
                                       
                                       
                                      All
                                     ----
                                       6
                                   $585,000
                                     2,100
                                     $280


      For the new 300 tpd model plants, total annualized costs in the 5[th] year after promulgation are $72,000. The amount of NOX reductions expected in the 5[th] year after promulgation is approximately 300 tpy. This results in a cost effectiveness of approximately $240.

      For the new 1,000 tpd model plants, total annualized costs in the 5[th] year after promulgation are $108,000. The amount of NOX reductions expected in the 5[th] year after promulgation is approximately 1,500 tpy. This results in a cost effectiveness of approximately $70.

      For the modified 288 tpd model plant, total annualized costs in the 5[th] year after promulgation are $406,000. The amount of NOX reductions expected in the 5[th] year after promulgation is approximately 140 tpy. This results in a cost effectiveness of approximately $1,360.

      Overall, total annualized costs in the 5[th] year after promulgation are $585,000. The amount of NOX reductions expected in the 5[th] year after promulgation is approximately 2,100 tpy. This results in a cost effectiveness of approximately $280.
      
References
      
CEMS Cost Model.  Updated March 2007.  Accessed November 17, 2010.

Memorandum from W. C. Herz, Vice President of Scientific Affairs, The Fertilizer Institute.  TFI Comments on New Source Performance Standards Review for Nitric Acid Plants, Docket No. EPA-HQ-OAR-2010-0750. Document number EPA-HQ-OAR-2010-0750-0098. November 28, 2011.

Memorandum from  M. Icenhour, RTI International, to B. Neuffer, EPA. Summary of Cost Data Received from Section 114 ICR. November 22, 2010.

Memorandum from  M. Icenhour, RTI International, to B. Neuffer, EPA. Summary of Test Data Received from Section 114 ICR. August 25, 2010.
  
U. S. EPA. Technical Support Document for the Nitric Acid Production Sector: Proposed Rule for Mandatory Reporting of Greenhouse Gases, January 22, 2009.
http://www.epa.gov/climatechange/emissions/archived/downloads/tsd/TSD%20Nitric%20Acid%20_EPA%201-22-09.pdf.



Economic Impacts on New Sources in the Nitric Acid Industry
The rule will increase the cost of investing in new nitric acid production capacity, which in turn will increase the cost of producing nitric acid. As noted above, only a small share of nitric acid is sold (approximately 10%); the rest is consumed on site to produce other chemical products, including fertilizer, plastics and resins, and explosives. Thus, the nitric acid NSPS may result in market impacts in the market for nitric acid or in the markets for the other products that nitric acid is used to produce.
4.1	Modeling Approach to Estimating the Impacts on the Market for Nitric Acid
EPA's analysis of impacts on the market for nitric acid employs a model that recognizes that the decision facing a firm considering investing in new nitric acid production capacity is an investment decision. Investment decisions differ from operating decisions in that they involve whether the firm should put in place new plant and equipment. The investment decision is thus a long-run decision, since the time frame is sufficiently long that all inputs, including capital, can be varied. A firm will invest in new capital only if the current and future expected market price is sufficient to cover both the cost of operating the new capital and the annualized cost of purchasing and installing it.
To analyze the possible impacts of the NSPS on the market for nitric acid, EPA assumes that existing nitric acid production lines are operating more or less at capacity, and the market for nitric acid begins the period of analysis (2012 through 2017) in long-run equilibrium. Figure 4-1 shows the market for nitric acid in 2012; demand is shown by D1, and is downward sloping. Equilibrium quantity is shown by Q1 and equilibrium market price is shown by P1.
However, as demand for nitric acid grows over time, the market price increases. Existing producers would like to produce more nitric acid to meet this demand but are unable to do so, given their plant capacity. Thus, new product lines must be installed to meet the increased demand. Producers will be willing to invest in new nitric acid production capacity as long as the price of nitric acid is sufficient to cover the per-ton cost of operating the product lines plus the per-ton annualized cost of purchasing and installing the equipment. Figure 4-2 shows a long-run supply curve for nitric acid. Existing suppliers produce Qe; new suppliers face a per-ton cost (average total cost) that includes both the average variable cost of producing the nitric acid (a) and the average fixed cost of purchasing and installing the new capital equipment (f), for an average total cost of t, and produce Qn. 

Figure 4-1.	2012 Market for Nitric Acid


Figure 4-2.	Market Supply of Nitric Acid, including New Source

Figure 4-3 shows the baseline market conditions in 2017. In 2017, demand for nitric acid has increased to D2. In the new market equilibrium, Q1 would be produced by existing suppliers, and Q2−Q1 would be produced by newly installed nitric acid product lines.

Figure 4-3.	Increased Demand for Nitric Acid at Baseline (2017)

The revised nitric acid NSPS standard will increase the cost of producing nitric acid, resulting in an upward shift in the supply curve for new facilities in the amount of the per-ton costs of compliance. S3 in Figure 4-4 shows the with-regulation supply. Note that in this figure, D1 has been omitted for simplicity. As a result of the new higher costs, the equilibrium quantity of nitric acid is projected to decline slightly from Q2 to Q3. 

Figure 4-4.	Market for Nitric Acid, With NSPS

4.2	Possible Impacts on Market for Nitric Acid
To implement the modeling approach described above, EPA gathered information on the estimated market quantity and market price for nitric acid. Over the period 2012 through 2017, EPA projects that nitric acid production will increase by 1.48 million tons. Historically, approximately 10% of nitric acid production has been marketed, with the remaining 90% used in house to produce other commodities. For simplicity, EPA modeled the impacts in the market for nitric acid under the assumption that one of the 300 tpd (105,000 tpy) product lines is a new commercial facility. This is a simplification, because not all marketed nitric acid is produced in exclusively commercial facilities. We thus assigned the per-facility cost ($72,000) to this new facility and computed the per-ton increase in their cost of approximately $0.72 per ton. The social cost of the rule was computed as the costs borne by producers of nitric acid and the costs borne by consumers of nitric acid. These are shown by areas labeled A, B, and C in Figure 4-4. The costs borne by producers include the compliance costs paid on the (remaining) quantity produced by new sources (Area A), and the production cost savings due to the reduction in output ( -  - - area B -- a cost savings). The costs facing consumers include the loss in consumption (areas B plus C) due to the reduction in equilibrium market quantity. Summing these areas, the social cost of the rule = A  -  B + B + C, or A + C. 
Table 4-1 shows the market impacts and estimated social costs for this scenario. The baseline quantity of nitric acid sold is approximately 932,000 tons, including 105,000 tons produced by a new product line. With the rule, the market price increases by approximately $0.72 per ton or about 0.36%, and the market quantity declines. After the market has adjusted to these increased costs, the equilibrium output falls by approximately 1,100 tons or 1.1%; thus, the new facility produces not 105,000 tons but 103,900 tons. 
Table 4-1.	Market Impacts of the Rule: Market for Nitric Acid

Baseline
                                With-Regulation
                               Percentage Change
Quantity (tons)
                                    932,145
                                    931,068
                                   −0.13%
 Existing producers
                                    827,145
                                    827,145
                                     0.00%
 New /modified producers
                                    105,000
                                    103,922
                                   −0.58%
 Price ($/ton)
                                    $220.00
                                    $220.72
                                     0.36%
Social cost
                                       
                                       
                                       
 Change in producers' surplus
                                   $584,794
                                       
                                       
 Change in consumers' surplus
                                  −$654,573
                                       
                                       
Total social cost
                                  −$69,779
                                       
                                       

The engineering cost of the rule (assuming one new commercial production train is affected) is $72,000; taking into account market adjustments, the social cost of the rule is estimated to be $69,800, about 0.3% less than the engineering cost.
4.3	Estimated Impacts on Markets for Products Using Nitric Acid as an Input
Next, EPA estimated the economic impacts on three markets that use nitric acid as a production input: nitrogenous fertilizer, explosives, and plastics and resins. If producers in these sectors invest in new nitric acid product lines or purchase nitric acid from commercial suppliers that invest in new nitric acid product lines, the costs of complying with the NSPS would increase the cost of producing the final products that use nitric acid as an input. In each of these markets, EPA estimated the economic impacts using industry-level data for value of shipments at baseline. EPA used this dollar value to represent baseline market quantity and assigned a normalized price of $1. The impacts are thus measured against the baseline of domestic value of shipments in each market with no change in international trade in the final goods. This is a simplification, but because the costs and thus the estimated impacts are very small, it is not unrealistic.
To assess the maximum potential impact in each market, EPA assigned all the compliance costs from Section 3 of this RIA to each of the markets (reflecting the possibility that all the new sources may be supplying nitric acid to that industry). Using the demand and supply elasticities for these markets shown previously in Table 2-3, EPA then estimated the percentage change in market output in each market and computed the associated change in market quantity.
Table 4-2 shows the market impacts and estimated social costs in the markets for each of these nitric acid - using products in 2017. Even assuming that all the affected sources are within a given sector and thus all the costs are incurred by that sector, market quantity is estimated to change by a small fraction of a percentage. Thus, if the costs of complying with the NSPS are incurred by affected nitric acid product lines in the sectors that use nitric acid as an input, there will be extremely small impacts on the markets for their products, even if all the costs are assumed to be incurred by a single sector.
Table 4-2.	Estimated Impacts in 2017 of the Nitric Acid NSPS on Sectors Using Nitric Acid as an Input[a]

Nitrogenous Fertilizer Production (325311)
Explosives (325920)
Plastics and Resins (325211)
Market impact analysis



Baseline value of shipments ($10[3])
                                  $8,437,377
                                  $1,973,192
                                  $85,471,475
Annual cost of compliance 
                                   $585,000
                                   $585,000
                                   $585,000
Percentage change in value of shipments
                                 −0.002921%
                                    0.0110%
                                   0.000266%
Social cost 
                                       
                                       
                                       
 Change in consumers' surplus ($10[3])
                                  −$249.683
                                  −$218.595
                                  −$247.291
 Change in producers' surplus ($10[3])
                                  −$335.320
                                  −$366.411
                                  −$337.714
Change in total surplus ($10[3])
                                  −$585.003
                                  −$585.006
                                  −$585.005
[a] Impacts on each sector are estimated assuming that all the new or modified sources are within that sector and thus all compliance costs are incurred by that sector.
4.5	Impacts on Small Entities of the NSPS Review of Nitric Acid for NOX 
Under the RFA as amended by SBREFA, EPA must evaluate potential impacts to small entities resulting from its actions. Small entities may be defined as (1) a small business, as defined by SBA's regulations at 13 CFR Part 121.201 (SBA, 2008); (2) a small governmental jurisdiction that is a government of a city, county, town, school district, or special district with a population of less than 50,000; or (3) a small organization that is any not-for-profit enterprise that is independently owned and operated and is not dominant in its field.
EPA assessed the possible impacts of the NSPS on small entities. To analyze the economic impacts on small entities with new or modified sources, EPA first gathered data on facilities producing nitric acid and then identified those facilities that could be affected by the regulation. In total, EPA identified 40 nitric acid facilities owned by 18 different parent companies. Of the 18 owner firms, four qualify as small entities based on guidance from the SBA and EPA's 2006 Final SBREFA Guidance (EPA, 2006) and sales/revenue data collected. Three of the entities, Apache Nitrogen, TradeMark Nitrogen, and Rentech Energy Midwest Corporation, are manufacturers of nitrogen-based fertilizers (NAICS 32531), and the fourth entity, Geneva Nitrogen, engages in manufacturing explosives (NAICS 32592). According to the SBA's small business size standards, a small entity in each of these industries is a parent company with 1,000 employees or less.
To measure the size of the potential impacts on small entities of complying with the NSPS, EPA developed cost-to-sales ratios (CSRs) for a 300 tpd and 1,000 tpd  new source model plant. EPA assumes that the model plants' operating costs and revenues are similar to the four existing small entities described above. Using the estimated total annualized compliance cost for a new source model plant and the most recent available revenue data for the existing small entities (Table 4-3), EPA generated mean and median CSRs. 
Table 4-3.	Employment and Revenue of Existing Small Entities
Parent Company
Employment
Revenue ($2010)
Apache Nitrogen
                                      82
$63,580,000
Geneva Nitrogen
                                      32
$5,400,000
TradeMark Nitrogen
                                      32
$35,000,000
Rentech 
                                      252
$130,600,000

Based on the model small firm CSRs, expected impacts to small entities are characterized in Table 4-4. The CSRs for model small firms withnew plants aresimilar , because total annualized compliance costs are close to each, and do not exceed 0.2%.  The CSR for model small firms with the modified and reconsidered plant is higher since the total annualized compliance costs are higher, and this CSR does not exceed 0.65%.  Based on these low expected impacts to small entities, EPA does not expect the NSPS to have a significant impact on a substantial number of small entities (SISNOSE) owning new, modified, or reconstructed sources that produce nitric acid.
Table 4-4.	Cost-to-Sales Ratios for Model Small Firms Owning New, Modified, or Reconstructed 288 tpd, 300 tpd and 1,000 tpd Plants
Summary Statistic
Employment
Revenue ($2010)
Cost-to-Sales Ratio 




288 tpd Plant
300 tpd Plant
1,000 tpd Plant
Mean small entity data
                                      100
                                  $58,645,000
                                     0.65%
                                     0.12%
                                     0.17%
Median small entity data
                                      57
                                  $49,290,000
                                     0.55%
                                     0.10%
                                     0.15%

4.6	References for Section 4
U.S. Environmental Protection Agency (EPA). 2006. "Final Guidance for EPA Rulewriters: Regulatory Flexibility Act as amended by the Small Business Regulatory Enforcement Fairness Act." http://www.epa.gov/sbrefa/documents/rfaguidance11-00-06.pdf
U.S. Small Business Administration. November 5, 2010. "Table of Small Business Size Standards Matched to North American Industry Classification System Codes."  http://www.sba.gov/idc/groups/public/documents/sba_homepage/serv_sstd_tablepdf.pdf  



Conclusions
This document has analyzed the economic impacts of the New Source Performance Standards for Nitric Acid Producers. The rule imposes more stringent limits on NOX emissions from new, modified, or reconstructed sources in the nitric acid industry. 
EPA estimates that there will be six new nitric acid production trains during the years following promulgation (2012 through 2017), three with production capacity of 300 tpd and three with production capacity of 1,000 tpd. To comply with the NSPS, EPA estimates that new sources would not incur incremental control costs (a modified source may incur control costs, those costs have been accounted for), but new sources would be required to undertake enhanced monitoring, recordkeeping, and reporting at a cost of $15,019 per new product line. (National total annualized cost of compliance for the six new sources is estimated to be $586,000 in 2010-2[nd] quarter dollars.)
EPA examined the potential impacts of the NSPS on a new or modified source in the commercial nitric acid sector and on new or modified sources owned by facilities that produce nitrogenous fertilizers, explosives, or plastics and use nitric acid as an input in their production processes. Overall, EPA estimates that market impacts in all of the affected markets will be extremely small. 
EPA also examined the potential for significant impacts on small businesses that invest in new or modified nitric acid product lines. EPA used the characteristics (firm employment and firm sales revenues) for the four small entities that currently produce nitric acid to create model small firms in the affected industry. Using the mean and median sales revenues for the existing small firms as typical company sales for small entities that produce nitric acid, EPA estimates that the CSRs would be less than 0.2%. Thus, EPA does not expect the NSPS to impose a significant impact on a substantial number of small entities (or SISNOSE).




Appendix A: 
Industry Data and Projections for NAICS 32521


Table A-1.	Industry Data and Projections for NAICS 32521, Plastic, Resin, and Rubber Manufacturing ($2010)
Year
Revenue
($m)
Industry Value Added ($m)
Establish-ments
Enterprises
Employment
Exports ($M)
Imports ($m)
Wages($m)
Domestic Demand ($m)
Production ($m)
                                     2001
                                    62,790
                                    20,902
                                      783
                                      494
                                    68,363
                                    17,367
                                     8,294
                                     4,889
                                    53,717
                                    39,200
                                     2002
                                    62,599
                                    22,778
                                      965
                                      630
                                    76,817
                                    17,542
                                     8,210
                                     5,264
                                    53,267
                                    41,600
                                     2003
                                    66,034
                                    23,941
                                      954
                                      664
                                    72,032
                                    18,659
                                     9,147
                                     4,973
                                    56,522
                                    41,000
                                     2004
                                    74,768
                                    29,040
                                      944
                                      653
                                    65,408
                                    22,108
                                    10,409
                                     4,703
                                    63,068
                                    43,500
                                     2005
                                    92,193
                                    34,367
                                      976
                                      686
                                    67,539
                                    25,090
                                    13,089
                                     4,954
                                    80,192
                                    41,300
                                     2006
                                    91,756
                                    34,756
                                      944
                                      669
                                    62,612
                                    27,887
                                    13,427
                                     4,624
                                    77,296
                                    41,500
                                     2007
                                    90,750
                                    34,000
                                      949
                                      660
                                    62,000
                                    31,417
                                    12,643
                                     4,582
                                    71,976
                                    41,200
                                     2008
                                    87,500
                                    33,000
                                      915
                                      645
                                    60,300
                                    33,139
                                    13,374
                                     4,486
                                    67,736
                                    38,750
                                     2009
                                    80,530
                                    31,000
                                      875
                                      630
                                    55,000
                                    25,450
                                    10,180
                                     4,174
                                    65,260
                                    35,500
                                     2010
                                    83,052
                                    31,750
                                      865
                                      625
                                    56,000
                                    27,000
                                    10,750
                                     4,100
                                    66,802
                                      N/A
                                     2011
                                    85,070
                                    32,300
                                      867
                                      627
                                    56,750
                                    29,500
                                    12,000
                                     4,150
                                    67,570
                                      N/A
                                     2012
                                    88,565
                                    33,200
                                      868
                                      629
                                    56,250
                                    31,000
                                    12,950
                                     4,125
                                    70,515
                                      N/A
                                     2013
                                    92,510
                                    34,500
                                      865
                                      628
                                    55,000
                                    32,550
                                    13,750
                                     4,085
                                    73,710
                                      N/A
                                     2014
                                    94,250
                                    34,750
                                      863
                                      627
                                    54,500
                                    34,000
                                    14,500
                                     4,075
                                    74,750
                                      N/A
                                     2015
                                    96,520
                                    35,450
                                      860
                                      625
                                    54,000
                                    35,300
                                    15,250
                                     4,050
                                    76,470
                                      N/A
Source: Dai, R. June 2010. IBISWorld Industry Report 32521. Plastic, Resin, & Rubber Manufacturing in the US. http://www.ibisworld.com.
Table A-2.	Industry Data and Projections for NAICS 32531, Fertilizer Manufacturing ($2010)
Year
Revenue ($m)
Industry Value Added ($m)
Establish-ments
Enterprises
Employment
Exports ($M)
Imports ($m)
Wage ($m)
Domestic Demand ($m)
Production ($m)
                                     2001
                                    12,281
                                     2,491
                                      704
                                      492
                                    21,405
                                     2,850
                                     3,412
                                     1,180
                                    12,843
                                    19,000
                                     2002
                                    12,287
                                     4,077
                                      727
                                      511
                                    20,718
                                     2,809
                                     2,778
                                     1,127
                                    12,256
                                    18,000
                                     2003
                                    13,207
                                     4,338
                                      679
                                      478
                                    19,688
                                     3,100
                                     4,097
                                     1,076
                                    14,204
                                      N/A
                                     2004
                                    14,704
                                     5,345
                                      674
                                      474
                                    17,843
                                     3,360
                                     4,907
                                     1,009
                                    16,251
                                      N/A
                                     2005
                                    14,084
                                     5,137
                                      659
                                      474
                                    17,076
                                     3,665
                                     6,656
                                      979
                                    17,074
                                      N/A
                                     2006
                                    14,430
                                     5,517
                                      664
                                      482
                                    16,054
                                     3,517
                                     6,063
                                      926
                                    16,976
                                      N/A
                                     2007
                                    16,805
                                     5,894
                                      665
                                      503
                                    17,777
                                     4,012
                                     7,814
                                     1,031
                                    20,607
                                      N/A
                                     2008
                                    21,075
                                     7,000
                                      670
                                      489
                                    17,350
                                     8,268
                                    12,919
                                     1,000
                                    25,726
                                      N/A
                                     2009
                                    18,000
                                     6,300
                                      660
                                      486
                                    16,500
                                     4,500
                                     6,500
                                      950
                                    20,000
                                      N/A
                                     2010
                                    19,200
                                     6,625
                                      656
                                      485
                                    16,550
                                     4,800
                                     8,150
                                      955
                                    22,550
                                      N/A
                                     2011
                                    19,700
                                     6,755
                                      653
                                      483
                                    16,250
                                     5,085
                                     8,800
                                      940
                                    23,415
                                      N/A
                                     2012
                                    20,150
                                     7,000
                                      652
                                      483
                                    15,850
                                     5,300
                                     9,250
                                      920
                                    24,100
                                      N/A
                                     2013
                                    20,700
                                     7,200
                                      651
                                      481
                                    15,300
                                     5,600
                                     9,900
                                      895
                                    25,000
                                      N/A
                                     2014
                                    21,200
                                     7,400
                                      650
                                      480
                                    14,750
                                     5,900
                                    10,500
                                      870
                                    25,800
                                      N/A
                                     2015
                                    21,750
                                     7,600
                                      650
                                      480
                                    14,500
                                     6,225
                                    11,100
                                      855
                                    26,625
                                      N/A
Source: Richardson, A. March 2010a. IBISWorld Industry Report 32531. Fertilizer Manufacturing in the U.S. http://www.ibisworld.com.
Table A-3.	Industry Data and Projections for NAICS 32551, Paint Manufacturing ($2010)
Year
Revenue ($m)
Industry Value Added ($m)
Establish-ments
Enterprises
Employment
Exports ($m)
Imports ($m)
Wages($m)
Domestic Demand ($m)
Production (gallons)
                                     2001
                                   24,447.8
                                   12,043.8
                                     1,463
                                     1,192
                                    51,084
                                    1,851.4
                                      902
                                    2,677.2
                                   23,498.4
                                      N/A
                                     2002
                                    24,219
                                   11,592.3
                                     1,363
                                     1,107
                                    46,347
                                    1,813.3
                                     719.8
                                     2,495
                                   23,125.5
                                      N/A
                                     2003
                                   23,954.2
                                   12,217.1
                                     1,371
                                     1,114
                                    44,852
                                    1,835.1
                                     742.5
                                    2,244.7
                                   22,861.6
                                      N/A
                                     2004
                                   25,595.8
                                   13,516.7
                                     1,374
                                     1,115
                                    41,547
                                    1,857.9
                                     773.1
                                    2,352.5
                                    24,511
                                      N/A
                                     2005
                                   25,847.2
                                   13,360.3
                                     1,365
                                     1,105
                                    40,073
                                     1,939
                                     812.9
                                    2,296.4
                                   24,721.1
                                      N/A
                                     2006
                                   25,338.1
                                   13,039.7
                                     1,344
                                     1,095
                                    39,006
                                    2,155.9
                                     917.3
                                    2,207.6
                                   24,099.5
                                      N/A
                                     2007
                                   24,861.5
                                   12,130.6
                                     1,369
                                     1,131
                                    41,893
                                     2,203
                                     942.7
                                    2,308.5
                                   23,601.2
                                      N/A
                                     2008
                                    23,750
                                    11,500
                                     1,325
                                     1,090
                                    40,000
                                    2,170.7
                                     868.1
                                     2,225
                                   22,447.4
                                      N/A
                                     2009
                                    22,000
                                    10,800
                                     1,290
                                     1,060
                                    37,500
                                     1,892
                                     599.9
                                     2,125
                                   20,707.9
                                      N/A
                                     2010
                                    22,550
                                    11,000
                                     1,280
                                     1,055
                                    36,250
                                     2,000
                                      675
                                     2,050
                                    21,225
                                      N/A
                                     2011
                                    23,200
                                    11,350
                                     1,283
                                     1,060
                                    36,350
                                     2,175
                                      825
                                     2,055
                                    21,850
                                      N/A
                                     2012
                                    23,900
                                    11,750
                                     1,278
                                     1,057
                                    36,200
                                     2,325
                                      910
                                     2,050
                                    22,485
                                      N/A
                                     2013
                                    24,650
                                    12,100
                                     1,270
                                     1,053
                                    36,000
                                     2,450
                                      990
                                     2,040
                                    23,190
                                      N/A
                                     2014
                                    25,400
                                    12,450
                                     1,265
                                     1,050
                                    35,850
                                     2,550
                                     1,035
                                     2,035
                                    23,885
                                      N/A
                                     2015
                                    26,150
                                    12,775
                                     1,260
                                     1,045
                                    35,700
                                     2,650
                                     1,080
                                     2,030
                                    24,580
                                      N/A
Source: Richardson, A. 2010b. IBISWorld Industry Report 32551: Paint Manufacturing in the U.S. http://www.ibisworld.com.www.lib.ncsu.edu:2048/industryus/default.aspx?indid=492.

Table A-4.	Industry Data and Projections for NAICS 32592, Explosives Manufacturing ($2010)
Year
Revenue ($m)
Industry Value Added ($m)
Establish-ments
Enterprises
Employment
Exports ($M)
Imports ($m)
Wages($m)
Domestic Demand ($m)
Production ($m)
                                     2001
                                     1,322
                                      737
                                      100
                                      63
                                     6,473
                                      256
                                      195
                                      312
                                     1,261
                                     2,376
                                     2002
                                     1,230
                                      718
                                      92
                                      61
                                     5,721
                                      300
                                      200
                                      277
                                     1,129
                                     2,510
                                     2003
                                     1,193
                                      712
                                      89
                                      57
                                     5,534
                                      413
                                      233
                                      263
                                     1,013
                                     2,287
                                     2004
                                     1,212
                                      659
                                      84
                                      53
                                     5,234
                                      480
                                      288
                                      266
                                     1,019
                                     2,523
                                     2005
                                     1,330
                                      571
                                      82
                                      54
                                     5,617
                                      463
                                      305
                                      285
                                     1,171
                                     3,200
                                     2006
                                     1,506
                                      710
                                      82
                                      53
                                     6,018
                                      536
                                      368
                                      302
                                     1,338
                                     3,160
                                     2007
                                     1,807
                                      939
                                      83
                                      56
                                     6,000
                                      581
                                      381
                                      324
                                     1,607
                                     3,120
                                     2008
                                     1,950
                                     1,035
                                      81
                                      55
                                     5,970
                                      573
                                      358
                                      320
                                     1,734
                                     3,115
                                     2009
                                     1,850
                                      950
                                      79
                                      53
                                     5,950
                                      500
                                      275
                                      300
                                     1,625
                                     3,100
                                     2010
                                     1,875
                                      970
                                      78
                                      N/A
                                     5,930
                                      N/A
                                      N/A
                                      N/A
                                      N/A
                                      N/A
                                     2011
                                     1,950
                                     1,015
                                      78
                                      N/A
                                     5,900
                                      N/A
                                      N/A
                                      N/A
                                      N/A
                                      N/A
                                     2012
                                     2,050
                                     1,075
                                      79
                                      N/A
                                     5,925
                                      N/A
                                      N/A
                                      N/A
                                      N/A
                                      N/A
                                     2013
                                     2,100
                                     1,100
                                      79
                                      N/A
                                     5,920
                                      N/A
                                      N/A
                                      N/A
                                      N/A
                                      N/A
                                     2014
                                     2,150
                                     1,130
                                      78
                                      N/A
                                     5,920
                                      N/A
                                      N/A
                                      N/A
                                      N/A
                                      N/A
                                     2015
                                     2,200
                                     1,155
                                      78
                                      N/A
                                     5,915
                                      N/A
                                      N/A
                                      N/A
                                      N/A
                                      N/A
Source: Richardson, A. September 2009. IBISWorld Industry Report 32592. Explosives Manufacturing in the US. http://www.ibisworld.com



United States
Environmental Protection
Agency
                 Office of Air Quality Planning and Standards
                   Health and Environmental Impacts Division
                          Research Triangle Park, NC
                                               Publication No. EPA-452/R-12-004
                                                                       May 2012


