U.S. Environmental Protection Agency
Office of Air Quality Planning and Standards
November 2011
Economic Impact and Initial Regulatory Flexibility Analysis  -  Proposed Mineral Wool and Wool Fiberglass RTR NESHAP
	This report is the economic impact and initial regulatory flexibility analysis (or IRFA) for the proposed Mineral Wool and Wool Fiberglass Risk and Technology Review (RTR) standard.   This standard is scheduled to be proposed under court-order on November 4, 2011.   The report presents impacts to firms affected by the requirements in the proposal and their consumers.   Impacts to small firms are accounted for in adherence to the Regulatory Flexibility Act as amended by the Small Business Regulatory Enforcement Fairness Act (SBREFA).  
Background on Mineral Wool Industry
	Mineral wood often is defined as any fibrous glassy substance made from minerals or mineral products such as slag and glass. The chemical composition of mineral wool can vary widely.   The basic materials for glass wool manufacture include sand, soda ash, dolomite, limestone, sodium sulfate, sodium nitrate, and minerals containing boron and alumina.  Traditional stone wool production involves melting a combination of alumino-silicate rock (usually basalt), blast furnace slag, and limestone or dolomite.  In addition, for both glass and stone wool the batch may contain recycled process or product waste.  For glass wool, other forms of waste glass (cullet) are also used as feedstock.  
	These materials are processed into insulation and other fibrous building materials that are used for structural strength and fire resistance.  Generally, these products take one of four forms:  "blowing" wool or "pouring" wool, which is put into the structural spaces of buildings; batts, which may be covered with a vapor barrier of paper or foil and are shaped to fit between the structural members of buildings; industrial and commercial products such as high-density fiber felts and blankets, which are used for insulating boilers, ovens, pipes, refrigerators, and other process equipment; and bulk fiber, which is used as a raw material in manufacturing other products, such as ceiling tile, wall board, spray-one insulation, cement, and mortar.  
	Glass wool and stone wool production make use of different proprietary technologies, including melting, fiberising and curing.   Production of mineral wool is a high temperature, energy intensive process.  Mineral wool plants use a mix of technologies and fuels:  a total of 11 proprietary fiberising technologies are employed worldwide.  Glass wool furnaces are predominantly gas fired, but there are a substantial number of furnaces that are electrically heated.   
In the production of mineral wool products that do not require high rigidity, oil is typically applied to suppress dust and add some strength to the fiber; the fiber is then sized and bagged or baled. This is known as a "nonbonded" product which is manufactured on a "nonbonded" production line.  

For mineral wool products requiring a higher structural rigidity, a HAP-based (phenol/formaldehyde) binder may be applied to the fiber. This is known as a "bonded" product made on a bonded production line. The binder-laden fiber mat is then thermoset in a curing oven and cooled. The major differences between the "nonbonded" and bonded production lines are the application of binder and the presence of the curing oven. Four facilities only manufacture nonbonded products, while the other 3 facilities operate both bonded and nonbonded production lines. A total of 11 cupolas and 3 curing ovens are operated by the facilities in this source category. 

Mineral wool manufacturing facilities are included in NAICS 327993.     The industry's revenue for 2010 was $5.1 billion, and the estimated gross profit was 40.15%.  Exports from US mineral wool firms exceeded imports by about $330 million in 2010.  No new mineral wool facilities have been built in the last 21 years, but new mineral wool facilities may be built in the foreseeable future. According to the size definition applied to this industry by the U.S. Small Business Administration (500 company employees or less), five of the six parent firms in this industry are classified as small businesses.   Of the five small firms, their average number of employees is 108.   All of these firms are U.S. owned.  

For these firms, the impacts of the proposed rule range from 0.01 percent to 6.7 percent, expressed as annual compliance costs as a percent of sales.  Only one firm is expected to experience an impact of more than 3 percent of sales, and thus it experiences a significant impact.    The price elasticity of demand for the mineral wool industry is estimated at -0.8, and the price elasticity of supply for the industry is estimated at -0.7.  With the responsiveness of mineral wool demand and supply to be less in percentage terms than the change in product price as approximated by the cost to revenue ratio, since this ratio is the maximum price change that producers may face, and with this ratio at or below 1 percent for the majority of production from this industry, it is expected that mineral wool price and output changes in response to this proposal will be less than 1 percent.  The total annual compliance costs of the proposal for this industry are less than $600,000 (2010 dollars).  Since confidential business information (CBI) has been used to estimate these impacts, we will not provide the names of the affected firms nor provide impact estimates by firm.  

Background on the Wool Fiberglass Industry	
      Wool fiberglass is a thick, fluffy material made from discontinuous fibers, is used for thermal insulation and sound absorption. It is commonly found in ship and submarine bulkheads and hulls; automobile engine compartments and body panel liners; in furnaces and air conditioning units; acoustical wall and ceiling panels; and architectural partitions. Fiberglass can be tailored for specific applications such as Type E (electrical), used as electrical insulation tape, textiles and reinforcement; Type C (chemical), which has superior acid resistance, and Type T, for thermal insulation. 

	The basic raw materials for fiberglass products are a variety of natural minerals and manufactured chemicals. The major ingredients are silica sand, limestone, and soda ash. Other ingredients may include calcined alumina, borax, feldspar, nepheline syenite, magnesite, and kaolin clay, among others. Silica sand is used as the glass former, and soda ash and limestone help primarily to lower the melting temperature. Other ingredients are used to improve certain properties, such as borax for chemical resistance. Waste glass, also called cullet, is also used as a raw material. The raw materials must be carefully weighed in exact quantities and thoroughly mixed together (called batching) before being melted into glass. 
	Wool fiberglass facilities are also included in NAICS (North American Industrial Classification System) 327993 along with mineral wool facilities.   There are two  parent firms owning these facilities with major HAP sources affected by this proposal, and these firms are shown in Table 1.  Neither of these two firms is a small business.     Each of these firms have revenues in excess of $1 billion in 2010.   Both of the firms, Johns Manville and Owens Corning, are owned by parent companies based in the U.S.  EPA used no CBI in generating economic impacts for this industry.
	Table 1:  Wool Fiberglass Firms Operating in the U.S. That Are Affected by the Proposed Rule
Wool Fiberglass Firm 
Annual Revenues in 2010 (billions)
Owens Corning
                                                                      $5.00[d] 
Johns Manville (owned by Berkshire-Hathaway)
                                                                    $136.19[e] 
[a] Revenues are for 2009.  Taken from http://www.forbes.com/lists/2010/21/private-companies-10_Guardian-Industries_BARO.html.  
b Taken from http://www.reuters.com/article/2011/07/22/idUS50641+22-Jul-2011+BW20110722.  Conversion from euros uses euro to U.S. dollar value as of August 15, 2011.
c Taken from 2010 annual report for Saint-Gobain, Inc., found at   http://www.saint-gobain.com/files/Rapport_annuel_2010_EN.pdf, p. 6.    Conversion from euros uses euro to U.S. dollar value as of August 15, 2011.
[d] Taken from http://investor.owenscorning.com/phoenix.zhtml?c=71581&p=irol-IRHome.  
[e] Taken from the 2010 Berkshire-Hathaway annual report at http://www.berkshirehathaway.com/2010ar/2010ar.pdf, p. 27.  
	The economic impact on these firms, measured in annual compliance costs as a percent of sales or revenues, is less than 0.001 percent for each of the affected parent firms.    The total annualized costs of the proposal to the wool fiberglass industry are approximately $0.1 million (2010 dollars).  The impacts to producers affected by this proposed rule are annualized costs of less than 0.1 percent of their revenues using the most current year available for revenue data. The price elasticity of demand for the wool fiberglass industry is estimated at -0.8, and the price elasticity of supply for the wool fiberglass industry is estimated at -0.7.  With the responsiveness of wool fiberglass demand and supply at less than 1:1 compared to a price change of 1 percent, and with the change in product price as approximated by the cost to revenue ratio at less than 0.1 percent, for this ratio is the maximum price change that producers may face, it is expected that wool fiberglass price and output changes will be less than 0.1 percent. Hence, the overall economic impact of this proposed rule should be low on the affected industry and its consumers.The total annualized costs of the proposal are approximately $0.7 million (2010 dollars).  For more information on the compliance costs (i.e., the costs of control + the costs of monitoring, testing, and other administrative costs), please refer to the cost memos for these industries for this proposal. 
	For the proposal, we find that there is a significant impact on a substantial number of small entities (or SISNOSE).  This is based on the high economic impact to one small firm affected by this proposal and the dominance of small businesses to the mineral wool industry, an industry that makes up about half of the facilities affected by this proposal.  Thus, this report serves as the Initial Regulatory Flexibility Analysis (IRFA) for this proposal.  Of the eleven firms affected by this proposal, five are small firms, and one of the small firms is affected significantly.  All of these small firms are mineral wool manufacturers.   
      A Small Business Regulatory Enforcement Fairness Act (SBREFA) panel was convened for this proposal.  Details of the findings and conclusions of this panel can be found in the report of the panel in the docket for this rulemaking.  Some of the flexibilities under consideration in this proposal for mitigation small entity impacts are the following:
               oo Subcategorize  - applies only to collection  -  sets emission limits at current levels for all sources.  Bundle collection with curing to maximize flexibility in reduction technology. 
               oo Basing cupola MACT limits on available existing test data (not emission factors as well)  -  sets COS, HCl, HF limits at cost effective levels
               oo Remove surrogacy (except PM for HAP metals)- low cost impact
               oo Extend compliance deadlines (up to 4 years total)
      	

