		Economic Impact Analysis for the Secondary Lead NESHAP
      This report is the economic impact analysis for the final Secondary Lead NESHAP, which will be signed as per a court-ordered schedule on December 16, 2011.   Implementation of the rule is required by 3 years after promulgation of the final rule.  The standard is the MACT floor of control for each source type controlled.  Details on the rule can be found in the preamble contained in the public docket for this rulemaking.  
      The Secondary Lead Smelting source category is defined as any facility at which lead-bearing scrap materials (including, but not limited to lead acid batteries) are recycled by smelting into elemental lead or lead alloys. For more information on the source category definition, please refer to the preamble.  Secondary lead smelters can be found worldwide.  In fact, secondary lead now accounts for more than half of all lead produced around the world.  In the U.S., more than 80 percent of all lead comes from secondary production.  Fourteen smelters can be found in the U.S.  Production of secondary lead totaled 1.15 million tons in 2010, an amount equivalent to 82 percent of reported domestic lead consumption.  Nearly all of it was recovered from old (post-consumer) scrap.   In the U.S., a new secondary lead smelter being built by Johnson Controls, Inc. (JCI) will be completed in Florence, SC in 2012, and an existing EnviroFocus facility in Tampa, FL will expand by 400% in 2012.
      There are eight parent owner companies affected by the rule.  These companies are found in NAICS 331492  -  Secondary Lead Smelting.   Two of these firms, Gopher Resources, LLC, and Battery Recycling Company, are small businesses as defined by the Small Business Administration (SBA) for this industry  -  750 employees or less for a parent owner in the secondary smelting and refining of nonferrous metal (except copper and aluminum) industry.  A separate memo provides the impacts of the rule on these small companies, and concludes that there is no significant economic impact on a substantial number of small entities (SISNOSE) as a result of this rule.  
      The total annualized costs (TAC) of the rule for each parent owner company, which includes the annualized control, monitoring and recordkeeping costs as taken from the cost and emission reductions memo prepared for US EPA, are in Table 1.  The nationwide total annualized costs of this rule are $13.2 million.  All costs are in 2009 dollars.

            Table 1.  TAC for Each Parent Owner
Parent Owner and Subsidiary
Total Annualized Costs per Parent Owner
Exide Technologies (owner of Exide Electronics)
 $4,920,000
Quexco (owner of Revere Smelting and Refining  -  RSR and Quemetco)
$150,000
The Renco Group (owner of Doe Run Resources)
$3,600,000
East Penn Manufacturing
$300,000
Sanders Lead
$2,490,000
Gopher Resources, LLC (owner of EnviroFocus)
$600,000
Battery Recycling Company
$700,000
Johnson Controls, Inc. (JCI)
$420,000
Total:
$13,180,000
 
      This analysis identified the businesses that will be affected by this rule and provides an analysis at a screening level to assist in determining whether this rule is likely to impose a significant economic impact on affected businesses.  The analysis employed here is a "sales test" that computes the annualized compliance costs as a share of sales for each company. The annualized cost per sales for a company represents the maximum price increase in affected product needed for the company to completely recover the annualized costs imposed by the regulation.  
      The "sales test" is the impact methodology EPA employs in economic impact analysis such as this one as opposed to a "profits test", in which annualized compliance costs are calculated as a share of profits.  This is because revenues or sales data is commonly available data for entities normally impacted by EPA regulations and profits data normally made available is often not the true profits earned by firms due to accounting and tax considerations.  Firms and entities often have ways legally available in the tax code to minimize their reported profits; thus, using reported profits may lead to a less than accurate estimate of the economic impact of a regulation to an affected firm or entity and their consumers.   While screening level analyses are often employed to estimate impacts to small business or entities as part an analysis in compliance with the Regulatory Flexibility Act (RFA) as amended by the Small Business Regulatory Enforcement Fairness Act (SBREFA), a screening level analysis can also be employed in an economic impact analysis such as this one whose focus is on the regulated companies. 
      Economic impact estimates are shown in Table 2 below.  The table lists the 8 ultimate parent companies impacted by the rule, the costs of the rule for each company basis, the annual revenues for these companies, and then the impact to the company on a cost to sales basis.  Revenues are for the ultimate parent owners, and are for 2009 to be consistent with the year for the cost estimates.  Applying such a calculation yields the following results as shown below:
Table 2:  Economic Impact Results by Parent Owner for the Secondary Lead NESHAP
Parent Owner and Subsidiary
Total Annualized Costs per Parent Owner
Total Revenues in 2009 per Parent Owner (billions US dollars)
Annualized Costs per Revenues for Each Parent Owner (in %)
Exide Technologies (owner of Exide Electronics)
 $4,920,000
$3.32[a]
                                                             0.152
Quexco (owner of Revere Smelting and Refining and Quemetco) 
$150,000
$0.44[b]
                                                                          0.032
The Renco Group (owner of Doe Run Resources)
$3,600,000
$4.75[c]
                                                                          0.076
East Penn Manufacturing
$300,000
$1.1[d]
                                                                          0.027
Sanders Lead Company (part of Wiley Sanders Truck Lines and KW Plastics)
$2,490,000
$0.10[e]
                                                                           2.40
Gopher Resources, LLC
$600,000
N/A
                                                                      <1%[f]
Battery Recycling Company
$700,000
$0.03[g]
                                                                          2.33%
Johnson Controls, Inc. (JCI)
$420,000
$28.50[h]
                                                                          0.015
[a] Exide Technologies annual revenue for 2009 is found in the Annual Report for 2009 at http://www.annualreports.com/HostedData/AnnualReports/PDFArchive/xide2009.pdf., p. 2.
[b]Quexco's revenue estimated for  2009 can be found at http://www.hoovers.com/company/Quexco_Incorporated/hkhyki-1.html.  
[c]The Renco Group (Doe Run Resources)'s revenue estimated for  2009 can be found at http://www.forbes.com/lists/2010/21/private-companies-10_Renco-Group_QQ4T.html.  
[d]East Penn Manufacturing's revenue in 2009 can be found at http://www.indeed.com/cmp/East-Penn-Manufacturing.  
[e] The Sanders's companies's revenue in 2009 is the sum of the revenues for Wiley Sanders Truck Lines, KW Plastics, and the Sanders Lead Company as taken from lower-bound estimates of revenues for each company found at  www.manta.com.  
[f] Gopher Resources, LLC's revenue is such that the TAC of this proposed rule is less than 1% of its revenues in 2009.  See U.S. Environmental Protection Agency, Office of Air Quality Planning and Standards. "Small Business Evaluation for the Secondary Lead Smelting Source Category" for more details. 
[g] Revenue data for the Battery Recycling Company is found in the "Small Business Evaluation for the Secondary Lead Smelting Source Category".  
[h] JCI's revenues in 2009 can be found at http://investing.businessweek.com/research/stocks/financials/financials.asp?ticker=JCI:US.  

      On a firm by firm basis, the results show that two parent owners affected by this rule will experience an annualized compliance cost of more than 2 percent of its sales.  One of these companies is the Battery Recycling Company, located in Puerto Rico, and is a small business as mentioned earlier in the report. The other is the Sanders Lead Company of Troy, Alabama, a company that is part of a business that includes the Wiley Sanders Truck Lines and KW Plastics. The impact on the small business, while not trivial, does not qualify as a significant impact and thus does not change the conclusion of the Agency that there is no SISNOSE for this rule.   It should be noted that this company, and Johnson Controls, Inc.  were not included in the Agency's analysis for the proposed rule.  
      It should also be noted that this analysis does not presume any incidence of the costs on the consumers of secondary lead and other products made by these companies.  Thus, no estimate of the impact of this rule on secondary lead consumers, for intermediate or end-use, is included in this report.  However, it should be noted that available estimates show that the price elasticity of demand for secondary lead is -1.0, and the price elasticity of supply for secondary lead is 0.6.  Based on this information, one can conclude that demand will respond 1:1 with a change in secondary lead price, and that supply is inelastic (i.e., will respond less than 1:1) with a change in secondary lead price.  Thus, the direct impact of this rule appears quite minor, and thus it is reasonable to infer that the impact on secondary lead consumers from this rule should also be minor.  The TAC is taken from the cost memorandum mentioned earlier that was prepared by U.S. EPA for the rule and in that memorandum can be found more information on the cost analysis. 

