
MEMORANDUM

TO:	Dockets for rulemaking, "Surface Coating of Large Appliances (Subpart NNNN)" (EPA-HQ-OAR-2017-0670)
DATE:		February 5, 2018
SUBJECT:	Economic Impact and Small Business Screening Assessments for Proposed Amendments to the National Emission Standards for Hazardous Air Pollutants for the Surface Coating of Large Appliances (Subpart NNNN)

Introduction
      
This document summarizes economic impact and small business screening assessments for the proposed amendments to the National Emission Standards for Hazardous Air Pollutants for the Surface Coating of Large Appliances (40 CFR part 63, Subpart NNNN) based on the residual risk and technology review. The potential costs estimated for the proposed amendments to subpart NNNN are associated with familiarization with the rule requirements and changes to the Startup, Shutdown, and Malfunction (SSM) requirements for all ten affected entities. Facilities will be required to use high efficiency coating applications methods; meet the standards during startup, shutdown and malfunction; and use the electronic reporting tool for annual reports, performance testing, and notifications. A discussion of the regulatory options evaluated and their detailed cost estimates is provided in the December 12, 2017 technical memorandum entitled "Costs/Impacts of the Proposed 40 CFR Part 63 Subparts NNNN, OOOO and RRRR Monitoring Review Revisions," available in the docket.

Costs of the Proposed Amendments

This proposal will require that the emission standards be met at all times, including during startup, shutdown, and malfunction, and will require the use of the electronic reporting tool for annual reports, performance testing, and notifications. The burden associated with this rule is the recordkeeping requirement for startup, shutdown, and malfunction, and the requirement that facilities use the electronic reporting tool. While the electronic reporting requirement is expected to be no more burdensome than the current reporting requirement, there are costs associated with becoming familiar with the rule requirements and re-evaluating previously developed SSM record systems. The one-time total cost of this rule is estimated to be $23,000 for the ten affected entities.

Facilities will also be required to use high efficiency coating application methods such as high-volume low-pressure (HVLP) spray guns, air assisted airless spray, and electrostatic spray. As noted in the November 27, 2017 technical memorandum entitled "Technology Review for the Surface Coating of Large Appliances Category", available in the docket, the majority of large appliance surface coating facilities subject to subpart NNNN are already required to use HVLP or equivalent application technology by state rules in Indiana, Ohio, and Wisconsin to limit VOC emissions. It is likely that most other large appliance surface coating facilities are also using high-efficiency application equipment for spray applied coatings as a cost saving measure to reduce coating and spray booth filter consumption and to reduce the amount of solid waste generated in the form is used spray booth filters.

If a large appliance surface coating facility were required to replace any of their conventional coating spray guns with a higher efficiency spray guns, such as an HVLP spray gun, an earlier EPA analysis estimated that the cost to do so would be a capital cost of approximately $700 per gun. The earlier analysis estimated these costs for an industrial-quality HVLP spray gun and accessories (e.g., larger diameter hose, gauges, extra air caps), based on vendor information. Assuming a 10-year life and a 7 percent interest rate, the annualized capital cost per HVLP gun would be about $100. However, these potential costs would be offset by savings in coating costs, filter costs, and in the cost of solid waste disposal for used paint booth filters that would result from increased coating transfer efficiency and the reduced generation of coating overspray, compared to conventional spray guns. As a result, it is assumed that there are no net costs associated with this provision.

Economic Impacts

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 proposed 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 proposed rule. For the purpose of analyzing the impact on firms, the per-facility costs for familiarization with the rule requirements and changes to the SSM requirements were compared to the annual sales revenue per affected entity to estimate the total burden for each facility. The total costs associated with Subpart NNNN's proposed requirements range from 0.000002 to 0.02 percent of annual sales revenues per affected entity. 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.

The EPA 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 affected facilities that perform surface coating of large appliances fall into one of the following North American Industry Classification System (NAICS) codes: 332313, Plate Work Manufacturing; 333413, Industrial and Commercial Fan and Blower and Air Purification Equipment Manufacturing; 333415, Air‑Conditioning and Warm Air Heating Equipment and Commercial and Industrial Refrigeration Equipment Manufacturing; or 335220, Major Household Appliance Manufacturing. The SBA defines small entities in these NAICS codes as having 750 or fewer employees, 500 or fewer employees, 1,250 or fewer employees, or 1,500 or fewer employees, respectively. 
One of the affected facilities was identified as a small entity, but as the costs associated with Subpart NNNN's proposed requirements are 0.02 percent of that facility's annual sales revenue, there are no significant economic impacts on a substantial number of small entities (SISNOSE) from these proposed amendments.
