
MEMORANDUM

TO:	Dockets for rulemaking, "Metal Can Manufacturing Surface Coating  (Subpart KKKK)" (EPA-HQ-OAR-2017-0684)
DATE:		February 15, 2019
SUBJECT:	Economic Impact and Small Business Screening Assessments for Proposed Amendments to the National Emission Standards for Hazardous Air Pollutants for Metal Can Manufacturing Surface Coating (Subpart KKKK)

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 Metal Can Manufacturing Surface Coating (40 CFR part 63, Subpart KKKK) based on the residual risk and technology review. The costs estimated for the proposed amendments to subpart KKKK are associated with performance testing once every five years for one facility, as well as costs associated with familiarization with the rule requirements and changes to the Startup, Shutdown, and Malfunction (SSM) requirements for all five affected facilities. A discussion of the cost estimates is provided in the February 2019 technical memorandum entitled "Costs/Impacts 40 CFR Part 63 Subparts KKKK and SSSS Monitoring Review Revisions," available in the docket.

Costs of the Proposed Amendments

This proposal would require periodic air emissions testing to measure organic HAP destruction or removal efficiency at the inlet and outlet of the add-on control device, or control device outlet concentration of organic HAP, once every five years for existing and new surface coating affected sources using the emission rate with add-on controls compliance option. Currently, there are three facilities that use add-on control devices for metal can coating operations. Two of these facilities are already required to perform testing as part of renewing their 40 CFR part 70 operating permit and would not be affected by this proposal.

This proposal will also 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 related to changes in 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 electronic reporting system, as well as re-evaluating previously developed SSM record systems. 

The costs for each year in the time period of analysis are presented in the table below. A seven-year time period was chosen for this analysis because it is assumed that facilities will become familiar with the regulation in the first year, must test by the third year, and testing is required every five years thereafter. The costs in 2020 are related to familiarization with the rule requirements and changes to the SSM requirements, while the costs reported in 2022 are those related to performing the emissions tests and reporting the results. The 2019 equivalent annualized value (in 2016$) of the costs over the seven-year time period range is $9,900 assuming a three percent discount rate and $11,000 assuming a seven percent discount rate. In the absence of changes to the rule, additional testing costs of $52,000 (unannualized) would be required in 2027 and every five years thereafter.

Table 1. National Cost of Proposed Amendments (2016$)
                                       
                              Undiscounted Costs
                            Total Discounted Value
                                     Year
                                     Labor
                                 Testing Costs
                                     Total
                                      3%
                                      7%
                                     2020
                                    $13,000
                                      $0
                                    $13,000
                                    $13,000
                                    $13,000
                                     2021
                                      $0
                                      $0
                                      $0
                                      $0
                                      $0
                                     2022
                                    $5,300
                                    $47,000
                                    $52,000
                                    $49,000
                                    $46,000
                                     2023
                                      $0
                                      $0
                                      $0
                                      $0
                                      $0
                                     2024
                                      $0
                                      $0
                                      $0
                                      $0
                                      $0
                                     2025
                                      $0
                                      $0
                                      $0
                                      $0
                                      $0
                                     2026
                                      $0
                                      $0
                                      $0
                                      $0
                                      $0
                                 Present Value
                                      --
                                      --
                                      --
                                    $62,000
                                    $58,000
                          Equivalent Annualized Value
                                      --
                                      --
                                      --
                                    $9,900
                                    $11,000
Note: Values rounded to two significant digits and may not add exactly due to rounding. Labor costs adjust 2018$ values in ICR package for this rule to their 2016$ equivalent using GDP Implicit Price Deflator.

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, performance testing costs were treated as capital costs because facilities are expected to contract with a testing company to perform the testing. The testing costs were annualized at a 5.25 percent interest rate over the 5-year testing period, under the assumption that facilities would obtain a 5-year loan to finance the testing. Some facilities only face costs associated with familiarization with the rule requirements and changes to the SSM requirements, while other facilities face additional costs associated with conducting emissions tests and reporting the results. To assess the maximum potential impact, the largest cost expected to be experienced in any one year is compared to the total sales for the ultimate owner of the affected facilities to estimate the total burden for each facility. The five affected facilities are owned by four different parent companies, and the costs associated with Subpart KKKK's proposed requirements range from 0.00002 to 0.77 percent of annual sales per ultimate owner. 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 affected facilities that perform metal can manufacturing surface coating fall into one of the following North American Industry Classification System (NAICS) codes, where the associated SBA small entity size threshold appears in parentheses: 312120, Breweries (1,250 or fewer employees) or 332431, Metal Can Manufacturing (1,500 or fewer employees). One of potentially affected entities is a small entity. However, the annualized cost associated with Subpart KKKK's requirements for this entity is 0.77 percent of annual sales revenues for the affected entity. Therefore, there are no significant economic impacts on a substantial number of small entities (SISNOSE) from these amendments.
