MEMORANDUM
TO:	Docket for rulemaking, "National Emission Standards for Hazardous Air Pollutants: Lime Manufacturing Plants Technology Review" (EPA-HQ-OAR-2017-0015)
DATE:		November 3, 2022
SUBJECT:	Economic Impact and Small Business Screening Assessments for Proposed Amendments to the National Emission Standards for Hazardous Air Pollutants for Lime Manufacturing Facilities
Introduction
The U.S. Environmental Protection Agency (EPA) is proposing amendments to the National Emission Standards for Hazardous Air Pollutants (NESHAP) for Lime Manufacturing facilities. To complete the required technology review originally promulgated on July 24, 2020, the EPA is proposing hazardous air pollutant (HAP) standards for the following pollutants: hydrogen chloride (HCl), mercury (Hg), total hydrocarbon (THC) as a surrogate for organic HAP (o-HAP), and dioxins/furans (D/F). This document summarizes the economic impact analysis and small business screening assessment for the proposed amendments.
Affected Facilities and Industry Profile
The EPA estimates that there are currently 35 major sources subject to the Lime Manufacturing NESHAP operating in the United States, with no new sources anticipated in the foreseeable future. An affected source under the NESHAP is the owner or operator of a lime manufacturing plant (LMP) that is a major source, or that is located at, or is a part of, a major source of HAP emissions, unless the LMP is located at a kraft pulp mill, soda pulp mill, sulfite pulp mill, beet sugar manufacturing plant, or only processes sludge containing calcium carbonate from water softening processes. An LMP is an establishment engaged in the manufacture of lime products (calcium oxide, calcium oxide with magnesium oxide, or dead burned dolomite) by calcination of limestone, dolomite, shells, or other calcareous substances. A major source of HAP is a plant site that emits or has the potential to emit any single HAP at a rate of 9.07 megagrams (10 tons) or more, or any combination of HAP at a rate of 22.68 megagrams (25 tons) or more per year from all emission sources at the plant site. 
The North American Industry Classification System (NAICS) code for the Lime Manufacturing industry is 327410. LMPs are also found in NAICS 327125 (Nonclay Refractory Manufacturing), 33111 (Iron and Steel Mills and Ferroalloy Manufacturing), and 3314 (Nonferrous Metal (except Aluminum) Production and Processing). 
NAICS 327410 comprises establishments primarily engaged in manufacturing lime from calcitic limestone, dolomitic limestone, or other calcareous materials, such as coral, chalk, and shells. Lime manufacturing establishments may mine, quarry, collect, or purchase the sources of calcium carbonate. In the 2012 NAICS revision, NAICS code 327125 was combined with several other NAICS codes to form NAICS code 327120 (Clay Building Material and Refractories Manufacturing). NAICS 327120 comprises establishments primarily engaged in shaping, molding, baking, burning, or hardening clay refractories, nonclay refractories, ceramic tile, structural clay tile, brick, and other structural clay building materials. A refractory is a material that will retain its shape and chemical identity when subjected to high temperatures and is used in applications that require extreme resistance to heat, such as furnace linings. NAICS 33111 comprises establishments primarily engaged in one or more of the following: (1) direct reduction of iron ore; (2) manufacturing pig iron in molten or solid form; (3) converting pig iron into steel; (4) making steel; (5) making steel and manufacturing shapes (e.g., bar, plate, rod, sheet, strip, wire); (6) making steel and forming pipe and tube; and (7) manufacturing electrometallurgical ferroalloys. Ferroalloys add critical elements, such as silicon and manganese for carbon steel and chromium, vanadium, tungsten, titanium, and molybdenum for low- and high-alloy metals. Ferroalloys include iron-rich alloys and more pure forms of elements added during the steel manufacturing process that alter or improve the characteristics of the metal. In this industry, lime is used to convert iron into pig iron, as a fluxing agent to remove impurities from steel being manufactured, or to enhance the refractory life of the furnaces. NAICS 3314 comprises establishments primarily engaged in nonferrous metal (except aluminum) smelting, refining, rolling, drawing, extruding, and alloying. Lime is a key component is several processes in the production of nonferrous metal.
The total number of firms and establishments in each NAICS potentially affected by this proposed rule, as well as their employment and annual payroll are summarized in Table 1 below. The information in Table 1 is not meant to serve as an exhaustive presentation for each affected industry but is instead meant to serve as a high-level summary of potentially relevant information for these industries.
Table 1. Number of Firms and Establishments, Employment, and Annual Payroll for Affected Industries: 2019
                                     NAICS
                               NAICS Description
                                     Firms
                                Establishments
                                  Employment
                            Annual Payroll
($1,000)
327410
Lime Manufacturing
                                      33
                                      105
                                     4,755
                                    316,861
327120
Clay Building Material and Refractories Manufacturing
                                      356
                                      505
                                    23,618
                                   1,265,975
33111
Iron and Steel Mills and Ferroalloy Manufacturing
                                      312
                                      452
                                    90,066
                                   7,968,104
3314
Nonferrous Metal (except Aluminum) Production and Processing
                                      641
                                      823
                                    59,574
                                   3,888,628
Source: U.S. Census Bureau, 2019 Statistics of U.S. Businesses.


Control Requirements and Costs
The current Lime Manufacturing NESHAP defines the affected source as each lime kiln and its associated cooler and each individual processed stone handling (PSH) operations system. The PSH operations system includes all equipment associated with PSH operations beginning at the process stone storage bin(s) or open storage pile(s) and ending where the process stone is fed into the kiln. It includes man-made process stone storage bins (but not open process stone storage piles), conveying system transfer points, bulk loading or unloading systems, screening operations, surge bins, bucket elevators, and belt conveyors. The materials processing operations associated with lime products, lime kiln dust handling, quarry or mining operations, limestone sizing operations, and fuels are not subject to the NESHAP. Finally, lime hydrators and cooler nuisance dust collectors are not included under the definition of affected source under the NESHAP.
This proposed rule addresses currently unregulated emissions of HAP from the lime manufacturing source category. Emissions data collected for the 2020 residual risk and technology review (RTR) from the exhaust stack of existing lime kilns in the source category indicated the following unregulated pollutants were present: HCl, mercury, THC (as a surrogate for organic HAP), and D/F. Therefore, the EPA is proposing amendments establishing standards that reflect maximum achievable control technology (MACT) for these four pollutants emitted by the source category. 
Capital Investment and Annual Costs
Using test data submitted through the 2017 Information Collection Request (ICR) conducted in support of the 2020 RTR in conjunction with additional data provided by the industry, the costs of control devices expected to be used to meet the proposed standards were estimated using the methods described in the EPA Air Pollution Control Cost Manual (US EPA, 2017). All costs were updated to 2021 using the Chemical Engineering Plant Cost Index annual value for 2021. The capital costs were annualized using an interest rate of 4 percent and an assumed equipment life for all controls of 20 years.
Detailed information on control devices used by the industry and assumptions made to estimate the emission reductions, control costs, and cost effectiveness are provided in the memorandum titled Development of Impacts for the Proposed Lime Manufacturing Plants NESHAP, located in the docket for this action. That analysis found that Activated Carbon Injection (ACI) was the most cost-effective control enabling compliance with the mercury standard, Dry Sorbent Injection (DSI) was the most cost-effective control enabling compliance with the HCl standard, and the THC standard could be met using ACI with some units also requiring the use of a Regenerative Thermal Oxidizer (RTO). ACI was also the most cost-effective control for meeting the standard for D/F. The modeled control cost for each type of control is presented in Table 2.
Table 2. Modeled Air Pollution Control Device Costs and Estimated Number of Controls Required for Compliance with Proposed Standards
                                     APCD
                               HAP(s) Controlled
                   Number of Controls for Proposed Standards
                 Total Capital Investment per Control (2021$)
                     Total Annual Cost per Control (2021$)
Dry Sorbent Injection
                                      HCl
                                      55
                                    97,888
                                    95,105
Activated Carbon Injection
                               Mercury, THC, D/F
                                      90
                                    97,888
                                    251,425
Regenerative Thermal Oxidizer
                                      THC
                                       4
                                   3,310,638
                                   1,077,631

Based on the new and existing source limits for lime kilns, new sources will be required to demonstrate initial compliance within 180 days after start-up, and existing sources must demonstrate initial compliance within 3 years after the promulgation of the final rule. Additionally, consistent with the existing performance testing requirements of the Lime Manufacturing NESHAP, subsequent performance testing will be required every five years. Continuous compliance with the emission limits will be demonstrated through control device parameter monitoring coupled with periodic emissions testing. Consistent with NESHAP general provisions, a source owner will be required to operate and maintain the source, its air pollution control equipment, and its monitoring equipment in a manner consistent with safety and good air pollution control practices for minimizing emissions, to include operating and maintaining equipment in accordance with manufacturer's recommendations. Owners will be required to prepare and keep records of calibration and accuracy checks of the continuous parameter monitoring system (CPMS) to document proper operation and maintenance of the monitoring system. Consistent with existing requirements in the Lime Manufacturing NESHAP, a source owner will be required to submit semi-annual compliance summary reports which document both compliance with the requirements of the Lime Manufacturing NESHAP and any deviations from compliance with any of those requirements. Owners and operators will be required to maintain the records specified by 40 CFR § 63.10 and, in addition, will be required to maintain records of all inspection and monitoring data, in accordance with the Lime Manufacturing NESHAP. The costs of these requirements are presented in Table 3 below and summarized in the supporting statement for the Information Collection Request (ICR) titled NESHAP for Lime Manufacturing (40 CFR Part 63, Subpart AAAAA) (2021 LEAN Proposed Rule), available in the docket for this action.

Table 3. Testing, Monitoring, Recordkeeping, and Reporting Costs
Cost Element
Cost per Respondent
One-time Costs
Development and/or Adjustment of Recordkeeping System
                                    $2,803


Recurring Costs
Annualized Capital and O&M Costs Associated with Testing and Monitoring
                                    $9,571
Familiarization with Reporting and Recordkeeping Requirements
                                     $234
Inspection and Maintenance
                                     $467
Performance Testing per facility (first year and every five years thereafter)
                                    $4,672
Performance Test Reporting (first year and every five years thereafter)
                                     $234
Recording and Transmitting information
                                    $18,278
Semiannual Compliance and Emergency SSM Reports
                                    $2,803

For this proposed rule, we selected an 8-year analysis period and estimated compliance will begin in 2023. We selected an 8-year period for the calculations to follow the technology review cycle in the Clean Air Act (i.e., section 112(d)(6)). Table 4 summarizes the total cost of controls as well as testing, monitoring, recordkeeping, and reporting for facilities over the eight-year analysis period. While existing sources must demonstrate initial compliance within 3 years after the promulgation of the final rule, for the purposes of this analysis the initial test is assumed to occur in the first year. Facilities are then assumed to perform an additional test five years later. Likewise, controls are assumed to be installed in the first year of the rule. The total annual cost of controls comprises the annualized capital cost of installed air pollution control devices and the operating and maintenance costs of these controls. The range of estimated annual costs was $95,105 to $3,815,975 per facility, and the average was $919,128 per facility. 
Table 4. Summary of Estimated Costs in Each of the First 8 Years After the Rule is Final
                                     Year
                         Total Annual Cost of Controls
                                    (2021$)
                          Recordkeeping and Reporting
                                    (2021$)
                                     Total
                                    (2021$)
                                     2023
                                  $32,169,491
                                  $1,367,163
                                  $33,536,654
                                     2024
                                  $32,169,491
                                  $1,097,370
                                  $33,266,860
                                     2025
                                  $32,169,491
                                  $1,097,370
                                  $33,266,860
                                     2026
                                  $32,169,491
                                  $1,097,370
                                  $33,266,860
                                     2027
                                  $32,169,491
                                  $1,097,370
                                  $33,266,860
                                     2028
                                  $32,169,491
                                  $1,269,056
                                  $33,438,547
                                     2029
                                  $32,169,491
                                  $1,097,370
                                  $33,266,860
                                     2030
                                  $32,169,491
                                  $1,097,370
                                  $33,266,860

Present Value Analysis
Consistent with the Office of Management and Budget's Circular A-4, we calculated the present value in 2023 of the costs of the requirements using both 3 and 7 percent discount rates (OMB, 2003). Table 5 below shows the undiscounted stream of costs per year. Capital costs are presented as completely incurred in their initial year, though large capital expenditures are typically financed over many years.
Table 5. Undiscounted Costs in 2023 (2021$)
                                     Year
                                    Capital
                                    (2021$)
                                    O&M
                                    (2021$)
                          Recordkeeping and Reporting
                                    (2021$)
                                     Total
                                    (2021$)
                                     2023
                                  $27,436,324
                                  $30,150,678
                                  $1,367,163
                                  $58,954,165
                                     2024
                                      $0
                                  $30,150,678
                                  $1,097,370
                                  $31,248,048
                                     2025
                                      $0
                                  $30,150,678
                                  $1,097,370
                                  $31,248,048
                                     2026
                                      $0
                                  $30,150,678
                                  $1,097,370
                                  $31,248,048
                                     2027
                                      $0
                                  $30,150,678
                                  $1,097,370
                                  $31,248,048
                                     2028
                                      $0
                                  $30,150,678
                                  $1,269,056
                                  $31,419,735
                                     2029
                                      $0
                                  $30,150,678
                                  $1,097,370
                                  $31,248,048
                                     2030
                                      $0
                                  $30,150,678
                                  $1,097,370
                                  $31,248,048
Note: Recordkeeping and Reporting value for 2023 includes cost of required initial performance test. 
Table 6 shows the 2023 present values and equivalent annualized values of the net costs shown in Table 5 at 3 and 7 percent discount rates. The equivalent annualized value is calculated over 8 periods.
Table 6. 2023 Present Value and Equivalent Annualized Value (2021$)
                                       
                               3% Discount Rate
                               7% Discount Rate
Present Value
                                 $253,786,442
                                 $227,481,347
Equivalent Annualized Value
                                  $36,153,500
                                  $38,095,792

Economic Impacts and Small Business Screening
Economic impact analyses focus on changes in market prices and output levels. If changes in market prices and output levels in the primary markets are significant enough, impacts on other markets may also be examined. Both the magnitude of costs needed to comply with a rule and the distribution of these costs among affected facilities can have a role in determining how the market will change in response to a rule. 
For this proposed rule, the EPA performed a screening analysis for impacts on affected facilities by comparing compliance costs to revenues at the ultimate parent company level. This is known as the cost-to-revenue or cost-to-sales test, or the "sales test." The sales test is an impact methodology the EPA employs in analyzing entity impacts as opposed to a "profits test," in which annualized compliance costs are calculated as a share of profits. The sales test is frequently used because revenues or sales data are commonly available for entities impacted by the EPA regulations, and profits data normally made available are often not the true profit earned by firms because of accounting and tax considerations. Also, the use of a sales test for estimating small business impacts for a rulemaking is consistent with guidance offered by the EPA on compliance with the Regulatory Flexibility Act and is consistent with guidance published by the U.S. Small Business Administration's Office of Advocacy that suggests that cost as a percentage of total revenues is a metric for evaluating cost increases on small entities in relation to increases on large entities (SBA, 2017). The 35 affected facilities are owned by 12 different parent companies, and for each parent company the costs associated with the proposed requirements are less than 1 percent of annual sales. These costs are not expected to result in a significant market impact, regardless of whether they are passed on to the purchaser or absorbed by the firms.
EPA also prepared a small business screening assessment to determine if any of the identified affected entities are small entities, as defined by the U.S. Small Business Administration (SBA). The parent companies of affected lime manufacturing plants fall into one of the following NAICS codes, where the associated SBA small entity size threshold appears in parentheses: 212312, Crushed and Broken Limestone Mining and Quarrying (750 or fewer employees); 212313, Crushed and Broken Granite Mining and Quarrying (750 or fewer employees); 327110, Pottery, Ceramics, and Plumbing Fixture Manufacturing (1,000 or fewer employees); 327310, Cement Manufacturing (1,000 or fewer employees); 327410, Lime Manufacturing (750 or fewer employees); 331110, Iron and Steel Mills and Ferroalloy Manufacturing (1,500 or fewer employees); 333998, All Other Miscellaneous General Purpose Machinery Manufacturing (500 or fewer employees); and 486110, Pipeline Transportation of Crude Oil (1,500 or fewer employees). Three of the ultimate parent companies owning affected facilities are small entities. However, the costs associated with the proposed requirements for these entities are less than 1 percent of annual sales for each affected small entity. Therefore, it is not anticipated that there will be a significant economic impact on a substantial number of small entities (SISNOSE) from these amendments.
To summarize, the costs of this proposed rule are not expected to result in a significant market impact, regardless of whether they are passed on to the purchaser or absorbed by the firms. In addition, because no small entity is expected to have a cost-to-sales ratio greater than one percent, the EPA has determined that the cost impacts for the proposed amendments to the National Emission Standards for Hazardous Air Pollutants for Lime Manufacturing will not have a significant economic impact on a substantial number of small entities.
Benefits
EPA did not monetize the benefits from the estimated mercury, HCl, THC, and D/F emissions reductions associated with the proposed amendments to the NESHAP. However, as shown in Table 7, the proposed amendments are expected to result in the reduction of 1,163 tons of HCl per year, 0.24 tons of mercury per year, 566 tons of THC per year, and 0.0000000474 tons of dioxins/furans compared to the allowable emissions under the current NESHAP. These reductions will have beneficial effects on air quality and public health for populations exposed to emissions from lime manufacturing facilities.

Table 7. Estimated HAP Reductions from Proposed Amendments
                                      HAP
                         Baseline Emissions (tons/yr)
                             Emissions Reductions
                                   (tons/yr)
Hydrogen Chloride (HCl)
                                     2,273
                                     1,163
Mercury (Hg)
                                     0.32
                                     0.24
Total Hydrocarbon (THC)
                                      890
                                      566
Dioxins/Furans (DF)
                                  0.00000134
                                 0.0000000474

References
Office of Management and Budget (OMB). 2003. Circular A-4, Regulatory Analysis. https://www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/circulars/A4/a-4.pdf
Office of Management and Budget (OMB). 2022. North American Industry Classification System: United States, 2022. https://www.census.gov/naics/reference_files_tools/2022_NAICS_Manual.pdf
U.S. Census Bureau. 2022. 2019 Statistics of U.S. Businesses, 2019 SUSB Annual Data Tables by Establishment Industry. https://www.census.gov/data/tables/2019/econ/susb/2019-susb-annual.html
U.S. EPA. 2017. EPA Air Pollution Control Cost Manual. Office of Air Quality Planning and Standards, Research Triangle Park, NC. Available at https://www.epa.gov/economic-and-cost-analysis-air-pollution-regulations/cost-reports-and-guidance-air-pollution.
U.S. SBA, Office of Advocacy. 2017. A Guide for Government Agencies, How to Comply with the Regulatory Flexibility Act, Implementing the President's Small Business Agenda and Executive Order 13272. https://cdn.advocacy.sba.gov/wp-content/uploads/2019/06/21110349/How-to-Comply-with-the-RFA.pdf 

