MEMORANDUM

TO:	Lisa Sutton, SPPD
DATE: 	July 28[th], 2022
FROM:	Ryan Callihan
		Economist, Air Economics Group
SUBJECT:	Economic Impact Analysis for the National Emissions Standards of Hazardous Air Pollutants: Paint Stripping and Miscellaneous Surface Coating Operations at Area Sources 
            
      This document addresses the economic impacts of the Rule for National
Emission Standards for Hazardous Air Pollutants: Paint Stripping and Miscellaneous
Surface Coating Operations at Area Sources. The economic impact analysis focuses 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 are also
examined.

      Both the magnitude of control costs needed to comply with the rule and the distribution
of these costs among affected facilities can have a role in determining how the market
prices and quantities will change in response to rule. This NESHAP covers a wide range of facilities in different industry sectors. The Agency estimates that there are approximately 40,000 individual facilities covered, with the vast majority of those being in the automotive body, paint, and interior repair and maintenance industry. As stated in section V.C of the preamble, there will be no net increase in annual costs from the proposed regulation for surface coating operations. The Agency estimates that each facility in the source category will experience one-time costs of approximately $400. These costs are a combination of the estimated reporting and recordkeeping costs, and the time to read and understand the rule amendments (preamble section V.C).

      These costs are too small to have any significant market impact. Whether the costs are
absorbed by the affected facilities or passed on to the purchaser in the form of higher
prices, the impacts would be quite small.

      This NESHAP also covers a large amount of small business. A further screening was conducted to analyze if there is any significant economic impact on a substantial number of small entities (SISNOSE). To analyze the effects on small business we collected information from the automotive body, paint, and interior repair and maintenance industry from the U.S. Census Bureau (Table 1). The Small Business Administration defines small business in this industry as those with less than $8 million in annual revenue. 

      The 2019 Census data for the automotive paint shop industry provided the number of establishments and payroll by size category. This data was used to apportion the 2017 sale data for the industry (the most recent available year) by establishment size. Finally, the sales estimate per firm size was divided by the estimated costs to get the costs to sales revenue ratio. According to the data, approximately 99 percent of the establishments fall below the small business threshold. However, the cost to sales ratio is well below one percent for these firms. Thus, a significant impact is not expected for a substantial number of small entities.

Table 1: Automotive Body, Paint, and Interior Repair and Maintenance Industry 
(NAICS: 811121) Data and Analysis
                                     Size
                          Number of Establishments[a]
                          Estimated Sales per Firm[b]
                         Costs as a Percent of Revenue
                              All establishments
                                    35,306
                                   1,127,800 
                                     0.04%
                             Less than 5 employees
                                    19,041
                                    228,700 
                                     0.18%
                               5 to 9 employees
                                     7,853
                                    928,100 
                                     0.04%
                              10 to 19 employees
                                     5,885
                                   2,245,100 
                                     0.02%
                              20 to 49 employees
                                     2,319
                                   5,077,000 
                                     0.01%
                              50 to 99 employees
                                      164
                                  11,605,500 
                                     0.00%
                             100 to 249 employees
                                      30
                                  19,368,000 
                                     0.00%
                             250 to 499 employees
                                      14
                                  50,218,400 
                                     0.00%
[a] U.S Census Bureau. 2019 County Business Patterns, Table CB1900CBP
[b] The estimated sales per firm for each size grouping is based on the total sales for the industry in 2017 and the 
percent of total payroll. 2017 is the most recent year that sales data was available for at the time of the analysis. 
