MEMORANDUM
TO:	Docket for rulemaking, "National Emission Standards for Hazardous Air Pollutants: Carbon Black Production Residual Risk and Technology Review" (EPA-HQ-OAR-2020-0505)
DATE: 	December 7, 2020
FROM:	Nathan Pfisterer
		US EPA/OAR/OAQPS/HEID/AEG
SUBJECT:	Economic Impact Analysis for Proposed Residual Risk and Technology Review of the National Emission Standards for Hazardous Air Pollutants for Carbon Black Production 

      This memo summarizes the economic impacts of the U.S. Environmental Protection Agency's (EPA) proposed Residual Risk and Technology Review (RTR) of the National Emission Standards for Hazardous Air Pollutants (NESHAP) for Carbon Black Production (40 CFR part 63 subpart YY). The Carbon Black Production source category consists of facilities engaged in the manufacture of carbon black using the channel, thermal, or furnace process. Carbon Black is used in specialty purposes like ink, polymers, and coatings and in rubber products as reinforcing agent. The EPA also conducted a technology review of the Carbon Black Production Area Source rule (40 CFR part 63 subpart YY). 
      The revisions proposed in the RTR for Carbon Black Production for the major source category are requirements for broadening the emission limit to include all process vents, resulting in initial applicability performance testing. Additionally, we are proposing to require boiler/process heater maintenance requirements and are adding a periodic performance test requirement to be conducted once every five years, which will have cost impacts on the 15 major sources in the category. This memo provides an estimate of costs associated with the one-time initial performance applicability test, subsequent performance testing, and boiler maintenance requirements that are in being proposed in the rule.  
      The initial performance applicability test costs account for the proposed requirement to determine whether emissions control is needed for process vents after the main unit filter process vent. This is estimated to be a one-time requirement due to the assumption that the majority of hazardous air pollutants (HAP) is removed and controlled at the main unit filter (MUF), resulting in the vent stream concentration located after the MUF to fall under the HAP applicability concentration threshold (260 ppmv).
      Performance test costs account for the proposed requirement to conduct emissions tests at the subject process vents every five years starting in the first year of the compliance period.
      Boiler/process heater maintenance costs account for the proposed requirement to ensure that boilers and process heaters are operating at peak efficiency and not creating excess emissions through inefficient operation of the mechanicals. Initial costs of tuning the mechanicals is assumed to be higher to get the unit back to peak efficiency. Following year costs are estimated to be lower as less maintenance is assumed to be required to maintain peak efficiency. 
      Table 1 presents the costs of the proposed requirements. Costs are denominated in 2019 dollar values. See Carbon Black Cost Memorandum available in the docket for this rulemaking. 
Table 2. Cost Impacts of Proposed Requirements (2019$)*
                                       
                         Cost of Proposed Requirements
                                     Year
                               PT Applicability
                                 Subsequent PT
                                 Boiler Maint.
                                  Total Cost
                                       1
                                    $21,350
                                    $15,241
                                    $6,750
                                    $43,341
                                       5
                                       
                                       
                                       
                                    $15,241
                              Annually Recurring
                                       
                                       
                                    $1,350
                                    $1,350
      
      Table 2 below summarizes the costs over a 10-year time frame for all 15 affected facilities from 2021 to 2030 and shows the discounted stream of costs, net present value (NPV), and equivalent annualized value (EAV) at 3% and 7% discount rates. 
Table 2. Cost Impacts of Proposed Rule over 2021 to 2030 (2019$)*
                                     Year
                             PT Applicability Test
                          Emissions Performance Test
                              Boiler Maintenance
                                  Discounted 
                                       


                                       
                                       
                                      7%
                                      3%
                                     2021
                                   $320,300
                                   $228,700
                                   $101,300
                                   $650,100
                                   $650,100
                                     2022
                                       
                                       
                                    $20,300
                                    $18,900
                                    $19,700
                                     2023
                                       
                                       
                                    $20,300
                                    $17,700
                                    $19,100
                                     2024
                                       
                                       
                                    $20,300
                                    $16,500
                                    $18,500
                                     2025
                                       
                                       
                                    $20,300
                                    $15,400
                                    $18,000
                                     2026
                                       
                                   $228,700
                                    $20,300
                                   $177,400
                                   $214,700
                                     2027
                                       
                                       
                                    $20,300
                                    $13,500
                                    $17,000
                                     2028
                                       
                                       
                                    $20,300
                                    $12,600
                                    $16,500
                                     2029
                                       
                                       
                                    $20,300
                                    $11,800
                                    $16,000
                                     2030
                                       
                                       
                                    $20,300
                                    $11,000
                                    $15,500
                                                                               
                                                                               
                                                              Net Present Value
                                   $945,000
                                  $1,005,000
                                                                               
                                                                               
                                                    Equivalent Annualized Value
                                   $134,600
                                   $117,900
*Costs rounded to the nearest hundredth.
      See the workbook titled "Carbon Black RTR Cost and Economic Calculations" in the docket for the calculations of the estimated impacts. The NPV of the estimated cost impacts of the proposal is $1,005,000 and $945,000 at 3% and 7% discount rates, respectively, over the 10-year time frame from 2021 to 2030 in 2019 dollars. 
      The EAV of the cost impacts is $117,900 and $134,600 at 3% and 7% discount rates, respectively. The EAV is the value of the costs at time t if the stream of costs were equally distributed across periods in the time horizon. It is the amount that, if incurred each year over the time horizon, would generate the same present value as the actual (i.e., time-varying) stream of expenditures. In other words, the sum of EAVs across time periods in present value terms yields the present value (i.e., the discounted stream of costs).  Since the cost impacts are minimal, this proposed rule is not anticipated to have market impacts. 
      The net present value of the estimated cost per individual facility of the rule proposal is $70,000 and $63,000 at 3% and 7% discount rates, respectively, over the 10-year time frame from 2021 to 2030 in 2019 dollars. The EAV of the cost impacts per individual facility is $7,900 and $9,000 at 3% and 7% discount rates, respectively.
      The EPA conducted a small entity screening analysis to determine whether small entities may be affected by this proposed rule and incur significant economic impacts. The EPA used sourced information from the Hoover's, Inc. online database to identify the ultimate parent company for each facility and the number of employees and annual revenue of the parent company. 
      The 15 major sources affected by the proposal are included in NAICS 325180: Other Basic Inorganic Chemical Manufacturing.  The Small Business Administration (SBA) defines an entity in NAICS 325180 as small if the parent company employees fewer than 1,000 employees. The 15 facilities are owned by five different parent companies. All five of the parent companies have more than 1,000 employees and, additionally, have revenues in excess of $700 million; therefore, no carbon black major source is considered a small entity as defined by the SBA. Thus, this proposed rule will not have a significant impact on a substantial number of small entities (SISNOSE). 
