Economic Analysis for Regulatory Modifications to the Definition of Solid Waste for ZincContaining Hazardous WasteDerived Fertilizers, Notice of Final Rulemaking Report U. S. Environmental Protection Agency Office of Solid Waste 1200 Pennsylvania Ave. N. W. Washington, DC 20460 July 2002 Economic Analysis for Regulatory Modifications to the Definition of Solid Waste for ZincContaining Hazardous WasteDerived Fertilizers, Notice of Final Rulemaking Report July 2002 U. S. Environmental Protection Agency 1200 Pennsylvania Ave, N. W. Washington, DC 20460 iii CONTENTS Chapter Page 1 Introduction and Executive Summary ..................................... 1 1 1.1 Introduction ................................................... 1 1 1.2 Summary of Findings ............................................. 1 2 1.3 Organization of the Economic Analysis ................................ 1 4 2 Profile of the Affected Industry .......................................... 2 1 2.1 The Supply of Zinc Micronutrient Fertilizers ............................ 2 1 2.1.1 Raw Materials ............................................ 2 1 2.1.2 Production Processes ...................................... 2 4 2.1.3 Costs of Production ....................................... 2 4 2.2 The Demand for Zinc Micronutrient Fertilizers .......................... 2 5 2.2.1 Product Characteristics ..................................... 2 5 2.2.2 Uses and Consumers ....................................... 2 5 2.3 Industry Organization ............................................ 2 7 2.3.1 Market Structure .......................................... 2 9 2.3.2 Manufacturing Plants ...................................... 2 11 2.3.3 Firm Characteristics ...................................... 2 13 2.4 Markets ..................................................... 2 13 2.4.1 Market Volumes ......................................... 2 15 2.4.2 Market Prices ........................................... 2 17 3 Methodology and Data Limitations ....................................... 3 1 3.1 Baseline Conditions .............................................. 3 1 3.1.1 Zinc Fertilizer Manufacturers ................................. 3 1 3.1.2 Zinc Raw Material Suppliers ................................. 3 2 3.2 Analytical Methodology ........................................... 3 2 3.3 Data Sources, Data Limitations, and Assumptions ....................... 3 3 4 Final Rulemaking .................................................... 4 1 4.1 Current Regulation .............................................. 4 1 4.2 Final Rulemaking ................................................ 4 1 5 Costs and Economic Impacts ........................................... 5 1 5.1 Cost Analysis .................................................. 5 1 5.1.1 Costing Model and Assumptions .............................. 5 1 5.1.2 Estimated Costs and Cost Savings ............................. 5 1 5.1.3 Use of Brass Baghouse Dust in ZSM Production .................. 5 4 iv Chapter Page 5.2 Economic Impact Analysis ........................................ 5 10 5.2.1 Expected Market Effects of the Conditional Exclusion ............. 5 10 5.2.2 Estimated Impacts on Companies Owning Zinc Micronutrient Facilities .................................... 5 11 5.2.3 Impacts on Small Businesses ................................ 5 11 5.3 Conclusions .................................................. 5 12 6 Benefits of the Final Rulemaking ......................................... 6 1 6.1 A Conceptual Framework for Analyzing the Benefits of Regulating Zinc Micronutrient Fertilizers ............................... 6 1 6.2 Identifying Categories of Benefits .................................... 6 3 6.3 Potential Exposure to Metals and Dioxin from Zinc Micronutrient Fertilizers ........................................... 6 4 7 Other Administrative Requirements ....................................... 7 1 7.1 Environmental Justice ............................................ 7 1 7.2 Unfunded Mandates Reform Act .................................... 7 1 7.3 Protection of Children from Environmental Health Risks and Safety Risks ................................................... 7 2 8 References ......................................................... 8 1 Appendices A Cost Algorithms for Conversion to ZSM Lines from Oxy sul Lines .............. A 1 B Overview of Zinc Market Model and Results ............................... B 1 C (Reserved) ........................................................ C 1 D Sensitivity Analysis .................................................. D 1 v LIST OF FIGURES Number Page 2 1 Zinc Micronutrient Production and Consumption ............................. 2 2 2 2 Zinc Sulfate Imports and Exports, 1992 1999 (Metric Tons) .................. 2 19 2 3 Imports of Chinese Zinc Sulfate, 1989 1999 (Metric Tons) .................... 2 19 3 1 Annual Domestic ZSM Production, 1993– 1999 (standard tons) ................. 3 4 3 2 Annual Domestic Oxy sul Production, 1993– 1999 (standard tons) ............... 3 4 3 3 Annual Domestic Liquid Zinc Sulfate Production, 1993– 1999 (standard tons) ............................................................. 3 5 3 4 Annual Domestic Zinc Micronutrient Fertilizer Production in Zinc Tons, 1993– 1999 (standard tons) ............................................ 3 5 6 1 Conceptual Framework for Benefits Analysis of Regulating Zinc Micronutrient Fertilizer ................................................ 6 2 vi LIST OF TABLES Number Page 2 1 Domestic Zinc Bearing Secondary Materials Used in Micronutrient Fertilizer Production, 1997 or Most Current Year ................................... 2 3 2 2 Fertilizer Forms and Zinc Solubility ....................................... 2 6 2 3 Zinc Application Rates (lbs/ acre) ........................................ 2 6 2 4 Total Zinc Micronutrient Fertilizer Consumed in the United States and Regions in 1996 (tons) ................................................ 2 8 2 5 Domestic Producers of Zinc Micronutrient Fertilizer: 1999 ..................... 2 9 2 6 Parent Company Information for Potentially Affected Companies ............... 2 14 2 7 Volumes and Prices of Zinc Micronutrient Fertilizer, 1997 ..................... 2 15 2 8 Highest Volume U. S. Trading Partners, International Trade in Zinc Sulfate, 1992 1999, in Metric Tons ........................................... 2 18 2 9 1997 Plant and Product Specific Output Prices of Zinc ...................... 2 21 3 1 Baseline Conditions for Directly Affected Zinc Fertilizer Producers and Feedstocks ........................................................ 3 2 5 1 Estimated Costs of Complying with the Conditional Exclusion for Frit Industries, Scenario 1: Shutting Down .................................... 5 2 5 2 Estimated Costs of Complying with the Condition Exclusion for Frit Industries, Scenario 2: Moving to Walnut .......................................... 5 4 5 3 Estimated Change in Costs and Revenues for Frit Industries from Substituting Nonhazardous Feedstock .................................... 5 5 5 4 Typical Brass Mill, Brass Foundry, and Brass Ingot Maker ..................... 5 7 5 5 Financial Impacts on Brass Baghouse Dust Generators ........................ 5 8 5 6 ZSM Producers Using or Projected to Use Brass Baghouse Dust ................ 5 8 5 7 Estimated Cost Savings due to the Rulemaking for Big River, Sauget, IL ........... 5 9 5 8 Estimated Revenue Increases for Madison Industries and Tetra, Fairbury, NE ...... 5 10 5 9 Estimated Company Impacts of the Conditional Exclusion ..................... 5 12 1 1 CHAPTER 1 INTRODUCTION AND EXECUTIVE SUMMARY Zinc is among several micronutrients required for normal plant growth and development. Because of its role in plant nutrition, zinc is incorporated in some fertilizers, especially those targeted at crops sensitive to lower soil zinc levels (e. g., corn, sorghum, flax, grapes). Typically, zinc micronutrient fertilizer is sold to fertilizer distributors who then mix the micronutrient into customized blends of other required nutrients, such as potassium or nitrogen; the relative amounts of each fertilizer are blended based on the specific soil deficiencies of the end users' farm land. Farmers purchase these custom blends to apply to their fields. Zinc micronutrient fertilizer is produced in two forms: Oxy sul (a combination of zinc oxide and zinc sulfate) and zinc sulfate monohydrate (ZSM).

1.1 Introduction A variety of secondary materials are used in the manufacturing of zinc containing micronutrient fertilizers for agriculture. Some of these materials are hazardous wastes under Federal regulations promulgated under the Resource Conservation and Recovery Act (RCRA). Examples of hazardous secondary materials used to manufacture zinc containing micronutrient fertilizer include emission control dust from electric arc furnaces (EAFs) in the iron and steel industry (K061, a listed hazardous waste) and tire ash (characteristically hazardous for both lead and cadmium and designated as D006 and D008). Brass fume dust is mostly used to produce zinc micronutrient for animal feed or sent for zinc reclamation. It is possible that zinc micronutrient manufacturers or zinc manufacturers will use brass fume dust to produce zinc micronutrient fertilizer or ZSM in the future. Brass fume dust from brass ingot makers, brass mills, and brass and bronze foundries is usually characteristically hazardous for both lead and cadmium and is designated as D006 and D008. Examples of nonhazardous secondary materials include zinc fines from galvanizing and zinc hydroxide from electrowinning of automobiles for rust prevention.

Currently, handlers of hazardous wastes used in manufacturing zinc containing micronutrient fertilizers are subject to generator and transporter standards as well as applicable standards for facilities that treat, store, or dispose of hazardous wastes (see 40 CFR §§ 266.21 23). Storage prior to recycling of these wastes is subject to RCRA permit requirements. The use of zinc containing hazardous waste derived fertilizers other than K061 derived fertilizers is conditionally exempt from RCRA regulation provided that they meet the applicable treatment standard specified under Subpart D of Part 268 of RCRA regulation (see 40 CFR §266.20( b)). K061 derived fertilizers are currently exempt from RCRA regulation, although the K061 used to produce them is fully regulated until the product is made.

In 1998, the U. S. Environmental Protection Agency (EPA) promulgated two regulations affecting the status of hazardous waste derived fertilizers. In May 1998, EPA promulgated the 1 2 Phase IV final rule for toxicity characteristic for metals (hereafter TC metals) wastes (63 FR 28556 [May 26, 1998]). This rule revised the treatment standards for hazardous wastes that exhibited the TC metals (hereafter TC metals) to the Universal Treatment Standards (UTS) specified in 40 CFR §268.40. The rule did not change the regulatory exemption for K061 derived fertilizers. The revised UTS standards for TC metal wastes are more stringent than the previous treatment standards. In reconsideration of the appropriateness of the UTS standards for zinc containing fertilizer, the Agency in August 1998 administratively stayed the effect of the treatment standards for zinc containing fertilizers (63 FR 46631 [August 31, 1998]).

EPA is developing a notice of final rulemaking that ° removes the K061 fertilizer exemption from RCRA regulation,

° provides a conditional exclusion from the definition of solid waste for hazardous secondary feedstocks (e. g., brass dust, EAF dust from steel mills, and tire ash) used to produce zinc containing fertilizers, and ° provides product specifications based on ZSM for excluding hazardous waste derived zinc containing fertilizers.

The conditions for excluding the hazardous secondary feedstocks would include handling requirements for storage and transport (e. g., no land storage), reporting requirements, and labeling requirements. This report provides analytic support to the Agency's notice of final rulemaking effort.

1.2 Summary of Findings EPA projects that one firm currently producing zinc micronutrient fertilizers using hazardous feedstocks will have to change its operations at one facility to comply with the conditional exclusion. One raw material supplier may have to change its disposal practices. These two firms are the only directly affected entities. Also, EPA projects that two other zinc micronutrient producers will modify their output markets and one zinc producer will change its raw material supplier. Some brass fume dust generators will change their disposal practices, according to EPA estimates.

One directly affected firm, Frit Industries, is projected to shut down operations at one of its facilities or move the production operation to another location. Given available data, it appears that moving its operation from Norfolk, NE, to Walnut Ridge, AR, would be Frit's leastcost method of complying with the conditional exclusion. Under this compliance scenario, Frit is projected to have an increase in costs of approximately $3.1 million but realize increased revenues of approximately $3.4 million as a result of its transition to a nonhazardous feedstock. The firm is estimated to increase its revenues, because Oxy sul produced with a nonhazardous feedstock sells for a higher price than Oxy sul produced with a hazardous feedstock. Overall, this scenario is projected to improve Frit's profitability by $326,000. The fact that Frit has not chosen to make this apparently profit enhancing change in the absence of the regulation suggests that contractual obligations or costs may be associated with such a move that are not currently considered in EPA's analysis. 1 Queneau, Paul. Personal communication with Paul Borst, U. S. Environmental Protection Agency, March 9, 1999.

1 3 Another directly affected company, Nucor, is expected to be affected by the conditional exclusion, because Frit is projected to no longer purchase its EAF dust. The firm will thus incur the incremental costs of $1,400,000 of additional disposal costs.

This scenario assumes that Frit chooses to move its operation to its plant in Arkansas and substitute a nonhazardous feedstock for the K061 that it currently uses. However, Frit may also choose to shut down its operation entirely. This alternative would require vacating and cleaning up the site of its plant in Norfolk, NE, and, based on the assumptions made by EPA, would result in a net increase in annual costs of approximately $1.5 million.

Given the uncertainty of many of EPA's assumptions in this analysis, the Agency has chosen to present the two alternative scenarios described above. These two scenarios, their associated costs, and the assumptions used by the Agency to calculate these costs and impacts are described in greater detail in Chapter 5 of this report.

Madison Industries and Tetra Micronutrients, two other zinc micronutrient fertilizer producers, are expected to change their output markets as a result of the conditional exclusion. Madison Industries currently sells all of their product to animal feed suppliers, and Tetra Micronutrients sells one half of their product to animal feed suppliers. EPA predicts that both fertilizer manufacturers will sell all of their product to fertilizer dealers in a post rule environment. Fertilizer demands a higher price than animal feed; therefore, both producers should experience an increase in revenues 1 . Madison Industries is expected to experience a cost savings of $500,000, while Tetra Micronutrients is expected to experience a cost savings of $250,000. Big River Zinc, a zinc producer, is expected to switch its raw material supplier as a result of the conditional exclusion. Currently, Big River Zinc purchases zinc oxide from Zinc Nacional. EPA predicts that Big River Zinc will substitute brass fume dust for its raw material, resulting in feedstock purchase savings of approximately $328,000. Big River Zinc will incur additional disposal costs, because a sludge is produced when a hazardous material is incorporated. These disposal costs amount to about $209,000; thus, Big River Zinc's net cost savings are expected to amount to $119,000. EPA expects several of the brass fume dust generators to experience cost savings as a result of the conditional exclusion, since Big River Zinc will create an increased demand for brass fume dust. These brass fume dust generators will no longer pay disposal costs for their dust; instead, they will receive payment for their dust. EPA expects ten brass mills to experience cost savings of $36,300 each ($ 363,000 aggregate savings). Three brass foundries are expected to realize cost savings of $29,000 each ($ 87,000 aggregate savings), and ten brass ingot makers are expected to realize cost savings of $121,000 each ($ 1,210,000 aggregate savings).

One of the directly affected firms, Frit Industries, is a small businesses. In compliance with the Small Business Regulatory Enforcement Fairness Act (SBREFA), EPA examined the potential impacts of the conditional exclusion on these small businesses. For Frit, the costs of complying are estimated to be substantial; however, EPA's analysis indicates that they may experience increases in revenues that largely offset their costs. Taking all costs, cost savings, and estimated revenue increases into account, Frit Industries may experience increased 1 4 profitability through substituting a nonhazardous feedstock. EPA estimates that the cost of disassembling its plant in Norfolk, NE; cleaning up the site; moving its capital equipment to Walnut Ridge, AR; and substituting a nonhazardous feedstock would be approximately $2.9 million. In addition, EPA estimates that Frit would incur costs of over $149,000 to move its plant to the facility in Arkansas. However, the Oxy sul made from the nonhazardous feedstock would sell at a higher price, increasing Frit's revenues by an estimated $3.4 million.

Because only one small entity is projected to be directly affected, and because it may be able to completely recover its costs, EPA certifies that the conditional exclusion will not have a significant impact on a substantial number of small entities.

The benefits of the conditional exclusion can be expressed as the reduction in adverse health and ecosystem effects that will result from the final standards. The rulemaking is expected to result in human health and ecosystem benefits, because it will reduce releases of heavy metals, including lead, cadmium, chromium, and nickel, to the environment. Unfortunately, EPA has only limited information on which to evaluate the benefits; thus, the Agency has conducted a qualitative benefits assessment. Nevertheless, it is evident that the conditional exclusion, with its resulting reductions in releases of heavy metals and dioxins, would convey substantial benefits to the human population. Thus, the standards are projected to result in human health benefits; in addition, improved materials handling practices at zinc micronutrient manufacturers are projected to result in ecosystem benefits due to reduced releases of heavy metals to the environment.

1.3 Organization of the Economic Analysis This report is organized into seven chapters. Chapter 2 provides an industry profile of the zinc micronutrient fertilizer industry; it discusses the supply side and demand side dynamics, industry organization, and the market for zinc micronutrient fertilizers. Chapter 3 examines the methodology and data limitations of this analysis. The final rulemaking and current regulations are presented in Chapter 4. Chapter 5 discusses a cost analysis for the final rulemaking. The economic impacts of the final regulations are also examined in Chapter 5. Chapter 6 discusses the potential benefits of the final rulemaking, while Chapter 7 considers other regulatory requirements. Appendix A provides a more detailed description of the costs used to estimate economic impacts in Chapter 5. Appendices B, and C provide greater detail about how the costs of the standards were estimated and analyzed. Appendix D provides a sensitivity analysis of the economic impacts, analyzing the impacts when the production levels of zinc micronutrient fertilizer vary.

In addition to the zinc micronutrient fertilizers made from hazardous secondary feedstocks, considered in the body of this report, EPA is considering regulating the practice of recycling wastes from extraction and beneficiation to make fertilizer products. These wastes (referred to hereafter as mining wastes) are currently exempt from hazardous waste regulations according to RCRA section 3001( b)( 3)( A)( ii), commonly referred to as the "Bevill exemption." 1 Queneau, Paul et al. June 27 29, 2000. "Recycling Heavy Metals in Solid Waste." Sponsored by Office of Special Programs and Continuing Education, Colorado School of Mines.

2 1 CHAPTER 2 PROFILE OF THE AFFECTED INDUSTRY This chapter presents an industry profile of the zinc micronutrient fertilizer industry in the United States. Section 2.1 considers the supply of zinc micronutrient fertilizers, and Section 2.2 covers the demand for zinc micronutrient fertilizers. The organization of the zinc micronutrient fertilizer industry is addressed in Section 2.3. This chapter concludes with a discussion of the markets involved in this industry.

2.1 The Supply of Zinc Micronutrient Fertilizers This section provides an overview of zinc micronutrient fertilizer production in the United States. The industry is small, relative to the fertilizer industry as a whole; the United States has fewer than 20 zinc micronutrient producers. This section examines the raw materials used, the production processes incorporated, and the costs of production and discusses production in terms of "zinc tons" rather than in tons of input or product.

2.1.1 Raw Materials Zinc micronutrient fertilizers are made from a variety of raw materials, or feedstocks. Figure 2 1 presents an overview of zinc micronutrient production and consumption. In 1999, the amount of zinc tons of fertilizer produced annually derived from nonhazardous materials was roughly equivalent to the zinc tons produced annually derived from EAF dust, brass dust, or tire ash, which EPA classifies as hazardous waste. 1 Table 2 1 presents the amount of each type of feedstock used in the production of zinc fertilizer, as well as its RCRA status and percentage of zinc content. The nonhazardous materials have a much higher concentration of zinc.

The nonhazardous raw materials include zinc fines from galvanizing, zinc hydroxide from electrowinning of automobiles for rust protection, and some crude zinc oxide from nonhazardous sources or crude zinc oxide refined from a hazardous waste source such as K061, EAF dust. These materials do not have the high levels of heavy metals that are characteristic of the hazardous raw materials and are therefore not regulated by the Federal government. 2 2 Brass ingot makers, tire ash generators, etc. EAFs Electrowinners, zinc oxide manufacturers Zinc micronutrient manufacturing process Zinc micronutrient manufacturing process Zinc micronutrient manufacturing process Chemical manufacturers Animal feed manufacturers Farmers Nonhazardous zinc K061 D006 D008 Fertilizer dealers ZSM, Oxy sul (nonhazardous)

Oxy sul (H)

ZSM (H)

Figure 2 1. Zinc Micronutrient Production and Consumption 2 3 Table 2 1. Domestic Zinc Bearing Secondary Materials Used in Micronutrient Fertilizer Production, 1997 or Most Current Year Material Annual generation (tons) Annual amount used in fertilizer production (tons) a Typically hazardous or nonhazardous under RCRA b Zinc content (%)

Electric arc furnace dust from steel mills (K061) d 925,000 10,000 Hazardous (Pb, Cr, Cd) 15 25 Brass fume dust (D006, D008) e 32,200 842 Hazardous (Pb, Cd) 40 60 Zinc fines from galvanizing Unknown 10,836 Nonhazardous 72 f Zinc hydroxide from electrowinning for rust protection Unknown 4,715 Nonhazardous 60 75 f a The annual amount of K061 destined for fertilizer production is estimated based on Oxy sul volume given for Frit in Queneau, Paul, et al. June 27 29, 2000. "Recycling Heavy Metals in Solid Waste," Sponsored by Office of Special Programs and Continuing Education, Colorado School of Mines. The amount of brass fume dust incorporated into fertilizer production was estimated based on volumes given in a handout entitled, "Zinc Micronutrient Fertilizer/ Estimated Market Share Analysis," given to EPA during a meeting between representatives of the zinc micronutrient fertilizer industry and EPA, April 14, 1998.

b Camp, Richard, Bay Zinc, handout to U. S. Environmental Protection Agency. 1998.

c Borst, Paul, U. S. Environmental Protection Agency, personal communication with Ken Wycherley, Exeter Energy Ltd. November 19, 1998.

d Queneau, Paul, P. B. Queneau & Associates, Inc., facsimile to Paul Borst, U. S. Environmental Protection Agency. "EAF Dust— U. S. A. 1998." February 10, 1999.

e Personal communication between Paul Borst, U. S. Environmental Protection Agency and Gary Mosher, American Foundrymen's Society, November 19, 1998. Personal communication between Paul Borst, U. S. Environmental Protection Agency and George Obeldobel, Big River Zinc, July 12, 1999. Total generation of brass fume dust is a total of ingotmaker, brass foundry, and brass mill dust generation. Total estimated brass fume production is based on a 450 ton per ingot maker times 12 ingot makers, 32 ton per foundry annual generation rate times 791 nonferrous foundries, 125 tons per brass mill times 12 brass mills.

f Borst, Paul, U. S. Environmental Protection Agency, personal communication with Richard Camp, Bay Zinc. November 18, 1998.

Source: Unless otherwise noted, volumes used in fertilizer production were derived from a handout entitled "Zinc Micronutrient Fertilizer/ Estimated Market Share Analysis" given to EPA during a meeting between representatives of the zinc micronutrient fertilizer industry and EPA, April 14, 1998. Note: Some imported sources of zinc bearing secondary materials may also be used in micronutrient fertilizer production. 2 Schauble, Carl, Frit Industries, teleconference with Paul Borst, David Fagan, Mitch Kidwell, Matt Hale, Caroline Ahearn, and Steve Silverman, U. S. Environmental Protection Agency. February 24, 1999. Page 1.

3 Ibid. Page 1.

4 Obeldobel, George, teleconference with Lindsay James, Research Triangle Institute, May 9, 2001.

5 Borst, Paul, U. S. Environmental Protection Agency, personal communication with Richard Camp, President, Bay Zinc. April 16, 1999. Page 1.

2 4 2.1.2 Production Processes The production processes vary according to the type of fertilizer produced. Oxy sul is produced by adding sulfuric acid (H2SO4) to the raw material. Producers may or may not add crude zinc oxide (ZnO) to the raw material, depending on the zinc concentration in the raw material. The sulfuric acid granulates the raw material dust to create a form more appropriate for fertilizer application. The addition of sulfuric acid also converts some of the zinc oxide into zinc sulfate. Oxy sul is produced from both hazardous and nonhazardous feedstocks. This production process does not remove any of the heavy metals that may be present in the raw material. For example, Oxy sul from EAF dust averages approximately 20 percent zinc, 6,000 ppm lead, and 200 ppm cadmium. 2 The production of ZSM involves more elaborate capital equipment. This production process removes heavy metals (lead and cadmium) from hazardous raw materials through a twostep process involving filtration. While the production of Oxy sul only partially converts the raw zinc oxide to zinc sulfate, the ZSM production process completes the chemical reaction, and nearly all of the zinc oxide in the raw material is converted to ZSM.

2.1.3 Costs of Production Production of zinc fertilizer requires a combination of variable inputs such as raw materials, labor, transportation and energy, and fixed capital equipment. Costs are also associated with complying with RCRA regulations for those producers who use hazardous raw materials. This report focuses on the costs of raw materials and the change in costs of complying with the final regulations. (Chapter 5 examines the regulatory costs.)

A major component of the variable costs for zinc fertilizer producers is the cost of raw zinc materials. The price that the zinc fertilizer producers pay to the raw zinc suppliers is mainly a function of the zinc concentration in the raw material. Transportation costs are also a factor in the cost of zinc raw material. Frit Industries pays $10 per ton of EAF dust, or approximately $0.025 per pound of zinc. 3 Nonhazardous zinc feedstocks are more expensive and are estimated to cost $0.18 per pound of zinc. 4 The capital equipment for ZSM production is much more expensive than the capital equipment for Oxy sul production. One fertilizer producer recently purchased the ZSM production equipment for approximately $4.5 million. 5 6 Green, Richard, Martin Resources, teleconference with Katherine Heller and Lindsay James, Research Triangle Institute. March 19, 1999. Page 1.

7 Armani, M., D. G. Westfall, and G. A. Peterson. 1997. "Zinc Plant Availability as Influenced by Zinc Fertilizer Sources and Zinc Water Solubility." Colorado Agricultural Experiment Station Technical Bulletin TB 97 4 (pre publication draft). Page 1.

2 5 2.2 The Demand for Zinc Micronutrient Fertilizers This section characterizes the consumption of zinc micronutrient fertilizers. It describes the characteristics of zinc fertilizers, its uses and consumers, and the substitution possibilities in consumption.

2.2.1 Product Characteristics As noted earlier, there are two major types of zinc micronutrient fertilizer: Oxy sul and ZSM. As described above, Oxy sul consists of a combination of zinc oxide and zinc sulfate, while the zinc in ZSM is in the form of zinc sulfate monohydrate. Oxy sul is always sold in the granular form; ZSM is sold in either a granular form or a liquid form (liquid ZnSO4 or L. ZnSO4), usually depending on consumer preference. Both types of zinc fertilizer can be produced from either hazardous or nonhazardous raw material. Because the production of ZSM incorporates a filtration process, the product characteristics of ZSM will be the same regardless of the raw material, and the concentration of heavy metals in ZSM is low. Oxy sul, however, will differ in both zinc concentration and heavy metal concentration, depending on the raw material. Oxy sul produced from nonhazardous feedstocks has higher zinc concentration and lower levels of lead and cadmium than Oxy sul produced from hazardous feedstocks.

Although most fertilizer distributors perceive no difference between the two types of fertilizer, some believe that ZSM is more readily available for plant uptake, because zinc sulfate is more soluble than zinc oxide. 6 This point is quite controversial. Some proponents of Oxy sul argue that many chemical reactions occur in the soil, and it is possible that the effects of microbes, temperature, and sunlight convert the less soluble zinc oxide to soluble zinc sulfate. Armani et al. 7 recently concluded that ZSM is more effective as fertilizer, because they discovered a high correlation between water solubility of zinc in fertilizer material and measured plant parameters. Table 2 2 presents their findings. The researchers examined six different types of Oxy sul; the grades of Oxy sul differ as a result of the different characteristics of the raw zinc used.

2.2.2 Uses and Consumers Zinc micronutrient fertilizer producers typically sell their product to fertilizer dealers or distributors. These fertilizer dealers blend many different kinds of fertilizer (e. g., nitrogen, potassium) and sell these blends to farmers. There are two methods for blending fertilizers. The more expensive option is referred to as precision agriculture. This site specific method requires soil testing in grids of farmland every 2 to 5 years. Based on the soil tests, the fertilizer dealer recommends precise blends, and a "variable rate application machine" is used to apply the 8 Skillen, Jim, The Fertilizer Institute, teleconference with Katherine Heller and Lindsay James, Research Triangle Institute. March 10, 1999. Page 1.

9 Fertilizer Institute. 1999. "Fertilizer: From Plant to Plant." The Fertilizer Institute. <http:// www. tfi. org/ brochure. htm>. As obtained on March 5, 1999. Page 13.

2 6 fertilizer. This machine actually changes the blend as it is driven across the farmland. The other method of blending is more general. The dealer blends the fertilizer at the plant, based on the average nutrient needs for soil in that area. 8 Farmers consider the zinc concentration when applying fertilizer, and the amount of zinc applied is usually referred to in zinc pounds. The average application rate for zinc fertilizers is 5 zinc pounds per acre. Table 2 3 displays the application rates for zinc fertilizer. Sometimes micronutrients are applied directly to the plant leaves in a technique called foliar fertilization. 9 Table 2 2. Fertilizer Forms and Zinc Solubility Zinc source Zinc fertilizer symbol Total zinc (%) Water soluble zinc (%)

ZnSO4 × H2O ZnSO4 35.5 99.9 Zn Oxy sul Zn20 20.4 98.3 Zn Oxy sul Zn27 27.3 66.4 Zn Oxy sul Zn40 39.9 26.5 Zn Oxy sul ZnOxS 37.7 11.0 Zn Oxy sul ZnOS 17.5 0.7 Zn Oxy sul (K061) ZnK 15.0 1.0 Source: Armani, M., D. G. Westfall, and G. A. Peterson. 1997. "Zinc Plant Availability as Influenced by Zinc Fertilizer Sources and Zinc Water Solubility." Colorado Agricultural Experiment Station Technical Bulletin TB 97 4 (pre publication draft). Page 3.

Table 2 3. Zinc Application Rates (lbs/ acre)

Average 5 High 10 Maximum 20 Source: U. S. Environmental Protection Agency (EPA). June 1998. Background Report on Fertilizer Use, Contaminants and Regulations. Washington, DC: U. S. Environmental Protection Agency, Office of Pollution Prevention and Toxics. EPA 747 R 98 003. Page 72. 10 ChemExpo. "Chemical Profile: Zinc Sulfate." <http:// www. chemexpo. com/ news/ PROFILE970811. cfm>. As obtained on March 17, 1999. Page 2.

11 Queneau, Paul et al. June 27– 29, 2000. "Recycling Metals from Industrial Waste." Sponsored by Office of Special Programs and Continuing Education, Colorado School of Mines.

12 Obeldobel, George, Big River, teleconference with Katherine Heller and Charles Pringle, Research Triangle Institute. April 15, 2002.

13 Camp, Richard, Bay Zinc, Teleconference with Charles Pringle, Research Triangle Institute, April 30, 2002.

2 7 A look at the regional consumption patterns of zinc micronutrient fertilizer reveals that the West North Central region (including KS, IA, MN, MO, NB, ND, SD) consumes more zinc fertilizer than the rest of the country (see Table 2 4). Zinc is a required nutrient for corn production, so this consumption pattern is logical.

ZSM has other uses beyond providing nutrients for crops, although 75 percent of ZSM produced is used for fertilizer. Animal feed comprises about 7 percent of the ZSM market, and another 7 percent of ZSM produced is used for water treatment. Approximately 11 percent of ZSM is used for miscellaneous purposes, including chemical manufacturing and froth flotation. Zinc stearate is zinc sulfate's largest chemical use. 10 2.3 Industry Organization Zinc micronutrient fertilizer producers are part of the zinc sulfate industry; in addition to its use in fertilizers, zinc sulfate is also used in animal feed and as a feedstock for various chemical production processes. In 1999, approximately 16 plants produced micronutrient fertilizers, including both Oxy sul and ZSM technical grade zinc sulfate. 11 Of these, one plant in Cheyenne, WY, owned by Tetra Micronutrients, has since closed. The rest of the companies, their plant locations, products, and zinc micronutrient fertilizer production volumes for 1999 are listed in Table 2 5. Interview data collected by the Agency indicate that Big River currently produces 7,000 tons of ZSM per year. 12 Bay Zinc shut down operations from April to September 2001 but has since resumed production and expects to produce 18,000 tons of ZSM in 2002. 13 Although Oxy sul is suitable only as a fertilizer input, ZSM can be used as an ingredient in animal feed. Currently, one of the zinc micronutrient fertilizer producers uses hazardous feedstocks, specifically EAF dust, in animal feed. (Other zinc sulfate producers incorporate brass fume dust into the production of animal feed, but because this is not a use constituting disposal, the feedstock is not categorized as hazardous.) Other manufacturers of zinc sulfates use zinc from nonharardous sources, including zinc fines, zinc hydroxide, or zinc oxide. Demand for zinc sulfate comes from fertilizer dealers, who incorporate the zinc micronutrients into their fertilizer products; from animal feed manufacturers, who incorporate it into animal feeds; and from chemical manufacturers. 2 8 Table 2 4. Total Zinc Micronutrient Fertilizer Consumed in the United States and Regions in 1996 (tons)

Description New England Middle Atlantic South Atlantic East north central West north central East south central West south central Mountain Pacific Alaska, Hawaii, Puerto Rico U. S. and Puerto Rico Percentage of total Zinc chelate 2 95 83 3 2,955 61 646 4,989 790 0 9,623 24.67 Zinc oxide 0 367 120 673 4,849 359 63 243 1,482 0 8,158 20.91 Zinc oxy sulfate 0 72 22 331 39 114 0 0 35 0 612 1.57 Zinc sulfate 20 298 34 206 12,645 186 141 1,526 3,499 15 18,569 47.61 Zinc sulfate solution 0 0 0 0 1,883 0 144 17 0 0 2,044 5.24 TOTAL 22 832 259 1,213 22,371 720 994 6,775 5,806 15 39,006 Source: U. S. Environmental Protection Agency (EPA). June 1998. Background Report on Fertilizer Use, Contaminants and Regulations . Washington, DC: U. S.

Environmental Protection Agency, Office of Pollution Prevention and Toxics. EPA 747 R 98 003. Page 12. 14 Ibid. Page 9.

2 9 Thirteen companies own the 15 plants producing zinc micronutrients in this country; at least six Standard Industrial Classification (SIC) codes describe their primary businesses. 14 All of the industries designated by those SIC codes (although not all of the firms) produce many other goods in addition to zinc micronutrients. Therefore, traditional measures of market concentration at the industry level may not be useful in this analysis. Instead, this report examines the markets for zinc micronutrients.

2.3.1 Market Structure Several markets are potentially affected, either directly or indirectly, by the final rulemaking. The market for zinc micronutrient fertilizers is expected to be directly affected by the final rulemaking, because the final rulemaking is expected to change the costs of zinc micronutrient fertilizer manufacturers, who in response will change their supply decisions. This Table 2 5. Domestic Producers of Zinc Micronutrient Fertilizer: 1999 Company Location Products Quantity produced (zinc tons/ year)

Agrium USA Saginaw, MI Oxy Sul 850 Bay Zinc Moxee City, WA ZSM, L. ZnSO4, Oxy Sul 2,650 Big River Sauget, IL ZSM 2,000 Cameron Chemical Suffolk, VA Oxy Sul 900 Cyprus Chemical West Helena, AR Oxy Sul 800 Frit Industries Norfolk, NE Oxy Sul 2,400 Frit Industries Chesapeake, VA Oxy Sul 350 Frit Industries Walnut Ridge, AR Oxy Sul 1,100 Madison Industries Oak Bridge, NJ ZSM, L. ZnSO4 5,300 Mineral King Minerals Hanford, CA Oxy Sul, L. ZnSO4 2,300 Moore Ag Goodlen, TX Oxy Sul, L. ZnSO4, ZSM 1,400 Scott G. Williams Co. Conyers, GA Oxy Sul 850 Sims Ag Products Mt. Gilead, OH Oxy Sul 1,100 Tetra Micronutrients Fairbury, NE ZSM, L. ZnSO4 10,300 ZCA Monaca, PA L. ZnSO4 200 Total Production in 1999 32,500 Source: Queneau, Paul et al. June 27 29, 2000. "Recycling Metals from Industrial Waste." Sponsored by Office of Special Programs and Continuing Education, Colorado School of Mines. 15 Green, Richard, Martin Resources, teleconference with Katherine Heller and Lindsay James, Research Triangle Institute. March 19, 1999. Page 1.

16 Skillen, Jim, The Fertilizer Institute, teleconference with Katherine Heller and Lindsay James, Research Triangle Institute. March 10, 1999. Page 1.

17 U. S. International Trade Commission Database. "U. S. Imports for Consumption" and "U. S. Domestic Exports." HTS Code = 283326. 1989 2001.

2 10 response by manufacturers may change the overall supply of zinc micronutrient fertilizers and will likely change the market behavior of various zinc micronutrient fertilizer manufacturers, depending on how their operations are affected by the final rulemaking. Other markets, including the markets for hazardous and nonhazardous zinc containing materials for use as inputs into the zinc micronutrient production process and the markets for the products made with zinc micronutrient fertilizers, are expected to be indirectly affected. Because the final rulemaking impacts the relative costs of producing zinc micronutrient fertilizers from different zinccontaining materials, EPA expects the demand for these inputs to increase or decrease (depending on whether the cost of producing zinc micronutrient fertilizers using the material has decreased or increased). Similarly, the markets for outputs made from zinc micronutrient fertilizers may experience increases or decreases in supply (and market price) depending on the overall impact on the price of zinc micronutrient fertilizers.

Fertilizer dealers stated that the market for zinc micronutrient fertilizers is regional, or possibly national. That is, zinc micronutrient fertilizer producers may serve customers located in many different parts of the country. Although the zinc sulfate products vary significantly from producer to producer, fertilizer dealers focus on the zinc content of the product and state that the price they pay is based largely on the product's zinc content. Nevertheless, Oxy sul, L. ZnSO4, and granular ZnSO4 (ZSM) have different production costs and somewhat different uses. These differences are reflected in their prices, per pound of zinc. Oxy sul has the lowest median price, liquid ZnSO4 has the next lowest median price, and ZSM has the highest median price, where the prices are defined in terms of price per pound of zinc (see Section 2.4, Table 2 7). Similarly, within each category, the zinc micronutrients made from hazardous feedstocks tend to sell for a lower price per pound of zinc than zinc micronutrients made from nonhazardous feedstocks. Thus, the zinc sulfate commodities are probably not perfect substitutes for one another, from the dealers' perspective. The fertilizer dealers also noted that zinc micronutrient fertilizer manufacturers might offer lower f. o. b. prices to customers who are located farther from their plant to account for higher transportation costs. 15 Because there are fewer than 20 domestic suppliers of zinc micronutrients and because their products are somewhat differentiated, the market for them may not be perfectly competitive. This means that prices for zinc micronutrient fertilizers may differ depending on quality. Faced with increased costs, therefore, they may be able to pass some share of the increased cost along to their customers in the form of higher prices.

There is some international trade in zinc by products and secondary zinc sources, as well as zinc sulfate. EAF dust is exported to Mexico, where it is converted into crude zinc oxide and then imported into the U. S. for use as a feedstock. 16 The U. S. imports zinc sulfate from several countries; the highest volume import countries are China, Mexico, and Germany. 17 Also, the U. S. 18 Ibid.

19 Queneau, Paul et al. June 27– 29, 2000. "Recycling Metals from Industrial Waste." Sponsored by Office of Special Programs and Continuing Education, Colorado School of Mines.

20 When hazardous feedstocks are used to make animal feed, they are presumptively not used in a manner constituting disposal and are therefore not solid wastes because they are used as ingredients in an industrial process to make a product per 40 CFR §261.2( e)( 1)( i).

21 Schauble, Carl, Frit Industries, teleconference with Paul Borst, David Fagan, Mitch Kidwell, Matt Hale, Caroline Ahearn, and Steve Silverman, U. S. Environmental Protection Agency. February 24, 1999. Page 1.

2 11 exports zinc sulfate to several countries, mostly to Canada, Mexico, and Costa Rica. 18 China's imports have risen sharply, especially in 2000 and 2001. Below there is a more detailed discussion of ZSM imports and exports.

2.3.2 Manufacturing Plants Zinc micronutrients (Oxy sul and ZSM) are manufactured by 15 plants located in 12 states. 19 Of these 15 plants, three currently use hazardous waste as a feedstock. One of these three uses the hazardous waste to produce zinc micronutrient that is used as a fertilizer. The other two plants use brass fume dust (a characteristic hazardous waste when landfilled or used in fertilizer production) as a feedstock, but these plants state that they produce zinc micronutrients that are used exclusively for animal feed. 20 The remaining 12 plants produce zinc micronutrients from nonhazardous feedstocks, such as zinc oxide, zinc hydroxide, or zinc fines. This rulemaking will directly affect the one producer making zinc micronutrient fertilizer using hazardous waste as a feedstock. The others will be indirectly affected because they compete with the directly affected facility in the markets for zinc micronutrients. Also the suppliers of the hazardous feedstocks will be affected by the rulemaking. The following sections describe in greater detail the directly and indirectly affected facilities.

<IP_ADDRESS> Potentially Affected Zinc Micronutrient Manufacturers Frit is currently the only zinc micronutrient fertilizer producer incorporating hazardous waste as a feedstock; therefore, they are the only zinc micronutrient fertilizer manufacturer that will be directly affected by the final rulemaking.

Frit owns and operates a fertilizer manufacturing facility at Norfolk, NE, located on site at a Nucor Steel facility. Frit processes Nucor's EAF dust (K061, a listed hazardous waste) into Oxy sul, a zinc micronutrient fertilizer used in agriculture, principally corn. Because Frit operates its facility on site, it incurs no hazardous waste transportation cost and does not require a RCRA storage permit. 21 Frit also owns two plants that produce Oxy sul from zinc oxide (a 22 Queneau, Paul et al. June 27– 29, 2000. "Recycling Metals from Industrial Waste." Sponsored by Office of Special Programs and Continuing Education, Colorado School of Mines.

23 Camp, Richard, Bay Zinc, teleconference with Paul Borst, U. S. Environmental Protection Agency. April 16, 1999.

24 Oberlin, Mike, I. Schumann Inc., personal communications with Paul Borst, U. S. Environmental Protection Agency. July 14, 1999, July 27, 2000, Arnett, John E. Copper and Brass Fabricators Council, Inc. June 2, 2000.

25 Hoover's Online. 2002. "Nucor Corporation." <www. hoovers. com>. As obtained on April 30, 2002.

2 12 nonhazardous feedstock). These plants are located in Walnut Ridge, AR, and Chesapeake, VA. 22 Frit is a small business.

In addition to Frit, EPA has identified three other zinc micronutrient manufacturers that may be indirectly affected by the rulemaking. These are Tetra's Fairbury, NE, plant, Madison Industries, and Big River Zinc. Tetra and Madison Industries currently use brass baghouse dust as an input to their ZSM production but sell all their brass dust derived ZSM for animal feed. In addition, under the conditional exclusion, Big River Zinc, which has used brass dust in the past, is projected to substitute brass dust for the nonhazardous feedstock they are currently using.

<IP_ADDRESS> Secondary Material Suppliers This section provides information on the suppliers of the hazardous waste feedstocks used by zinc micronutrient manufacturers. There are generally three types of hazardous feedstocks: EAF dust from steel mills; tire ash; and brass fume dust from brass ingot makers, brass mills, and brass and bronze foundries. Currently, only EAF dust is used solely in the production of zinc micronutrient fertilizer. Brass fume dust, another hazardous waste that would be conditionally exempt under the final rulemaking, is mostly incorporated in the production of ZSM for animal feed. EPA predicts that at least two companies (Madison Industries and Tetra Micronutrients) will use brass fume dust to produce ZSM for fertilizer in the future and one company will use brass fume dust to produce zinc (Big River Zinc), because the final conditional exclusion could increase demand for this material as a feedstock. The two companies that currently market their product as feed will most likely switch to selling their product as fertilizer. 23 All of the EAF dust feedstock is supplied by one steel company. In contrast, there are approximately 6 to 12 brass ingot makers, 10 brass mills, and 3 or 4 foundries supplying brass fume dust for zinc animal feed production, or zinc reclamation. 24 The EAF dust facility is discussed specifically, but the secondary brass ingot makers and brass foundries are discussed in aggregate, because EPA does not have individual facility data.

Nucor Steel is a large company with multiple plants, using EAFs to produce a wide range of steel products. Nucor is in SIC 3312, primary iron and steel manufacturing, for which the small businesses are those with 1,000 or fewer employees. Nucor is a large company, with 8,400 employees in 2001 and $4.1 billion in sales. 25 Nucor directly pipes its EAF dust from its Norfolk, NE, plant to a storage silo at the co located Frit plant. 26 Queneau, Paul et al. June 27– 29, 2000. "Recycling Metals from Industrial Waste." Sponsored by Office of Special Programs and Continuing Education, Colorado School of Mines.

2 13 Under the conditional exclusion, brass baghouse dust generators are projected to be able to sell more of their baghouse dust to fertilizer manufacturers. At baseline, they are estimated to provide 1,352 tons of zinc to ZSM manufacturers, who produce ZSM for animal feed from this brass dust. The rest of their brass baghouse dust is assumed to be sent for reclamation to Zinc Nacional in Monterey, Mexico. Post rule, ZSM manufacturers will be able to use brass baghouse dust for fertilizer production and are projected to increase the quantity of brass dust they purchase.

2.3.3 Firm Characteristics The 15 plants manufacturing zinc micronutrient fertilizer are owned by 13 parent companies. 26 The potentially affected fertilizer manufacturers' and raw material suppliers' parent companies are shown in Table 2 6, together with the location of the potentially affected facility, their North American Industrial Classification System (NAICS) code (primary industry), their sales, their employment, the Small Business Administration's (SBA) criteria for a small business in that NAICS code, and whether the company is a small business according to this criterion.

2.4 Markets The final rulemaking will change the costs of producing zinc micronutrient fertilizers relative to compliance with current standards. This change in costs, in turn, will affect firm behavior in the markets in which the companies buy inputs and sell their outputs. The markets directly affected are those for zinc micronutrients produced from hazardous waste feedstocks. Markets for zinc micronutrients produced from nonhazardous zinc feedstocks, and the market for the hazardous and nonhazardous feedstocks themselves, as well as other inputs used to produce the zinc micronutrients, will be indirectly affected by market forces and behavioral changes. This section summarizes the market volumes and prices at baseline in affected markets. Table 2 7 shows volumes of zinc micronutrient fertilizer product derived from hazardous waste and derived from nonhazardous feedstocks.

Table 2 7 shows the volume of Oxy sul and ZSM manufactured and also reports the volumes made from hazardous and nonhazardous zinc feedstocks in 1997. The volume of the final product Oxy sul exceeded the volume of ZSM produced by 14,000 tons. The majority of the Oxy sul volume was made from nonhazardous feedstocks, as was the majority of the liquid ZnSO4. However, the majority of ZSM was produced from hazardous feedstocks. 2 14 Table 2 6. Parent Company Information for Potentially Affected Companies Parent company Facility location Parent NAICS code Parent sales ($ 10 6 2001) Parent employment (2001) Small business size standard Small business?

Frit Inc. Norfolk, NE 325311 $67.5 250 1,000 Yes Tetra Micronutrients Fairbury, NE 325311 $7.5 35 1,000 Yes Madison Industries Old Bridge, NJ 332312 $35.0 175 500 Yes Big River Zinc Sauget, IL 331491 $300.0 375 750 Yes Nucor Steel Norfolk, NE 331111 $4,139.2 8,400 1,000 No Sources: Reference USA. 2002a. "Frit Industries." <http:// www. referenceusa. com>. As obtained on May 1, 2002.

Reference USA. 2002b. "Big River Zinc." <http:// www. referenceusa. com>. As obtained on May 1, 2002.

Reference USA. 2002c. "Madison Industries." <http:// www. referenceusa. com>. As obtained on May 1, 2002.

Reference USA. 2002d. "Tetra Micronutrients." <www. referenceusa. com>. As obtained on May 1, 2002.

Hoover's Online. 2002. "Nucor Corporation." <www. hoovers. com>. As obtained on April 30, 2002. 27 Schauble, Carl, Frit Industries, teleconference with Paul Borst, David Fagan, Mitch Kidwell, Matt Hale, Caroline Ahearn, and Steve Silverman, U. S. Environmental Protection Agency. February 24, 1999.

28 Queneau, Paul et al. June 27 29, 2000. "Recycling Heavy Metals in Solid Waste." Sponsored by Office of Special Programs and Continuing Education, Colorado School of Mines.

29 Queneau, Paul B., et al. June 22– 24, 1999. "Recycling Heavy Metals in Solid Waste." Sponsored by Office of Special Programs and Continuing Education, Colorado School of Mines.

2 15 Table 2 7. Volumes and Prices of Zinc Micronutrient Fertilizer, 1997 Zinc fertilizer type Volume of product (tons) Volume of zinc (tons) Median price per pound zinc Oxy sul 35,336 a 9,772 a $0.66 From hazardous feedstock 16,836 a 3,367 a $0.59 From nonhazardous feedstock 18,500 6,405 $0.69 ZSM 21,500 7,330 $0.87 From hazardous feedstock 15,500 5,200 $0.87 From nonhazardous feedstock 6,000 2,130 $0.85 Liquid ZnSO4 24,650 2,913 $0.75 From hazardous feedstock 11,000 1,320 $0.75 From nonhazardous feedstock 13,650 1,593 $0.75 a Volumes for Frit were estimated, based on industry information.

Source: Handout entitled "Zinc Micronutrient Fertilizer/ Estimated Market Share Analysis" given to EPA during a meeting between representatives of the zinc micronutrient fertilizer industry and U. S .Environmental Protection Agency, April 14, 1998.

2.4.1 Market Volumes Zinc micronutrient fertilizers are produced from both hazardous and nonhazardous feedstocks. Hazardous feedstocks currently include EAF dust (K061). At present, only Frit's Nebraska facility uses K061 to manufacture zinc micronutrient fertilizers. 27 In 1999, Frit accepted 10,000 tons of K061 and manufactured approximately 12,000 tons of Oxy sul. 28 Many other facilities produce Oxy sul as well, and these facilities incorporate nonhazardous feedstocks into their production. The total volume of Oxy sul produced in 1998 was nearly 15 percent less than the volume produced in 1997. 29 Despite increasing ZSM production, Oxy sul production 30 Queneau, Paul B., et al. "Recycling Heavy Metals in Solid Waste." Sponsored by Office of Special Programs and Continuing Education, Colorado School of Mines. June 28 30, 1994; June 25 27, 1996; June 24 26, 1997; June 22 24, 1999; June 27 29, 2000.

Queneau, Paul B. U. S. Recycling of Industrial Metals, Office of Solid Waste, Hazardous Waste Minimization and Management Division. December 1 2, 1998.

31 Ibid.

32 Painter, David, Martin Resources, personal communication with Lindsay James, Research Triangle Institute, July 2000.

33 Queneau, Paul et al. June 22– 24, 1999. "Recycling Heavy Metals in Solid Waste." Sponsored by Office of Speical Programs and Continuing Education, Colorado School of Mines.

34 Queneau, Paul B., et al. Recycling Heavy Metals in Solid Waste. Sponsored by Office of Special Programs and Continuing Education, Colorado School of Mines. June 28 30, 1994; June 25 27, 1996; June 24 26, 1997; June 22 24, 1999; June 27 29, 2000.

Queneau, Paul B. U. S. Recycling of Industrial Metals, Office of Solid Waste, Hazardous Waste Minimization and Management Division. December 1 2, 1998.

35 U. S. International Trade Commission Database. "U. S. Imports for Consumption" and "U. S. Domestic Exports." HTS Code = 283326. 1989 2001.

2 16 volumes have been decreasing, on average, since 1993. 30 This decline has been especially marked from 1997 to 1999. 31 Even in the absence of government regulation, the trend of decreasing Oxy sul is apparent. One explanation for why the demand for ZSM exceeds the demand for Oxy sul is the perceived lack of heavy metals in ZSM. 32 The other major category of zinc micronutrient fertilizer is ZSM. Unlike Oxy sul, ZSM volumes are increasing for the most part. In 1998, total ZSM volume was approximately 13 percent larger than the volume produced in 1997. 33 Although the trend from 1993 to 1999 indicates increasing levels of ZSM, ZSM levels declined slightly in 1999. 34 This decline in ZSM production is most likely a result of several factors, including decreasing demand for zinc micronutrient fertilizer. The demand for zinc micronutrient fertilizer appears to be cyclical, possibly based on the amount of zinc in the soil or cyclical cropping patterns. This fluctuating demand for zinc micronutrient fertilizer, mirrored by the volume of zinc sulfate imports, seems to cycle every 4 or 5 years. Import volumes of zinc sulfate are also cyclical, although the highs and lows of the import cycle are offset from the domestic cycle by 1 year. 35 EPA reasons that the imports absorb excess demand during the first year of an upswing, before domestic producers have increased their production. Another contributing factor to the recent decline of ZSM is the closing of Tetra Micronutrient's Salida, CO, plant. Please refer to Appendix D for a discussion of the potential economic impacts when the demand for zinc micronutrient fertilizer has fallen or risen.

There is some international trade in zinc feedstocks and zinc micronutrient fertilizers, in addition to zinc sulfate. For example, K061 is exported to Mexico, where it is converted to crude 36 Green, Richard, Martin Resources, teleconference with Katherine Heller and Lindsay James, Research Triangle Institute. March 19, 1999. Page 1.

37 ChemExpo. "Chemical Profile: Zinc Sulfate." <http:// www. chemexpo. com/ news/ PROFILE970811. cfm>. As obtained on March 17, 1999. Page 1.

38 U. S. International Trade Commission Database. "U. S. Imports for Consumption" and "U. S. Domestic Exports." HTS Code = 283326. 1989 2001.

39 Ibid.

40 ChemExpo. "Chemical Profile: Zinc Sulfate." <http:// www. chemexpo. com/ news/ PROFILE970811. cfm>. As obtained on March 17, 1999. Page 2.

41 Prices are on a per ton basis, powder, bulk, f. o. b. works.

2 17 ZnO and imported back into the United States as a nonhazardous feedstock. 36 .. Also, in 1995 ZSM exports were 3,800 tons, and ZSM imports were 4,900 tons. 37 The United States imported a total of 10,517 metric tons of zinc sulfate in 1999 and exported about 4,700 metric tons the same year. In 2001, imports rose to almost 16,250 metric tons, and exports remained relatively stable at approximately 4800 metric tons. 38 Historically, the United States imports most extensively from China, Mexico, and Germany, although imports from Germany have declined sharply since 1999. Korea exported 538 tons of ZSM to the United States in 2001, but the country has had little history of extensive trading with the United States in this commodity prior to 2001. The three leading countries to whom the United States exports zinc sulfate are Canada, Mexico, and Costa Rica. 39 Table 2 8 lists the import and export volumes for these countries from 1992 to 2001. The most notable trend presented in Table 2 8 is the dramatic rise in Chinese imports over the last decade. In 2001, the United States imported 7,265 metric tons of ZSM from China. This represents almost 45 percent of all imports. Mexico still sends more ZSM to the United States than any other country. The United States imported almost 7,800 metric tons of ZSM from Mexico in 2001, or 48 percent of total imports for 2001. Figures 2 2 and 2 3 show historical trends in imports and exports of zinc sulfate and imports from China, respectively.

2.4.2 Market Prices Prices for zinc micronutrient fertilizer products, per pound of zinc, vary depending on the type of product and the type of feedstock used to produce it. Thus, ZSM is uniformly priced higher than Oxy sul, and Oxy sul made from nonhazardous feedstocks is uniformly priced higher than Oxy sul made from hazardous feedstocks. This pattern confirms information received from Richard Green, a fertilizer distributor. Mr. Green says zinc micronutrient's price varies primarily because of zinc content, but that somewhat lower prices would be paid for micronutrients with higher (nonnutritive) heavy metal content. According to a chemical industry database, 1997 ZSM prices range from $480 to $520 per ton. 40, 41 2 18 Table 2 8. Highest Volume U. S. Trading Partners, International Trade in Zinc Sulfate, 1992 2001, in Metric Tons 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Imports China 22 1,237 2,576 264 74 306 1,971 2,037 5,594 7,265 Mexico 3,379 3,589 3,986 4,361 3,547 6,247 7,684 7,800 7,656 7,798 Germany 154 172 233 237 232 213 188 237 140 107 All countries 3,828 5,617 7,197 5,399 4,054 7,094 10,366 10,517 13,747 16,248 Exports Canada 1,734 2,128 2,054 2,461 3,282 2,414 2,563 2,703 3,245 2,467 Mexico 112 40 122 928 617 596 724 732 485 1,090 Costa Rica 250 1,096 412 251 436 420 518 689 537 649 All countries 2,826 4,334 4,803 4,206 5,114 4,658 4,289 4,691 5,320 4,782 Source: U. S. International Trade Commission Database. "U. S. Imports for Consumption" and "U. S. Domestic Exports." HTS Code = 283326. 1989

2001. 2 19 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Year Metric Tons Imports Exports Figure 2 2. Zinc Sulfate Imports and Exports, 1992 2001 (Metric Tons)

0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Year Metric Tons Figure 2 3. Imports of Chinese Zinc Sulfate, 1989 2001 (Metric Tons) 42 Schauble, Carl, Frit Industries, teleconference with Paul Borst, David Fagan, Mitch Kidwell, Matt Hale, Caroline Ahearn and Steve Silverman, U. S. Environmental Protection Agency. February 24, 1999. Page 1.

43 ChemExpo. "Chemical Profile: Zinc Sulfate 7/ 3/ 2000." <http:// www. chemexpo. com/ news/ PROFILE970811. cfm>. As obtained on August 11, 2000 Page 2.

44 Ibid.

45 Obeldobel, George, teleconference with Lindsay James, Research Triangle Institute, May 9, 2001.

2 20 Plant and product specific output prices per pound of zinc are shown in Table 2 9 (1997 data). Although the data in the table indicate a price of $0.59 per pound of zinc for Frit's Oxy sul product, Frit president Carl Schauble indicates that their product sells for approximately $0.475 per pound of zinc. 42 This decrease in price may be due to a decline in market demand for zinc oxysulfates because of their heavy metal content. 43 Throughout this analysis, EPA uses the prices listed in Table 2 9.

Prices of zinc feedstocks also vary. Hazardous feedstocks are considerably cheaper than nonhazardous ones. Frit pays $10 per ton on average for the EAF dust from Nucor. Assuming the K061 has 20 percent zinc content, Frit pays approximately $0.025 per pound of zinc. 44 Nonhazardous zinc feedstocks are more expensive and are estimated to cost about $0.18 per pound of zinc. 45 2 21 Table 2 9. 1997 Plant and Product Specific Output Prices of Zinc Manufacturer Location Raw material Product % zinc in product Finished product annual tons Zinc tons Annual capacity tons Sales price per ton of product Sales price per pound zinc Comments Agrium Reise, MI ZnOH/ Var Oxy sul 40 1,500 600 uk $465 $0.58 Agrium ZnOH/ Var Oxy sul 27 1,500 405 uk $375 $0.69 Bay Zinc Moxee City,

WA Tire Ash Oxy sul 20 5,000 1,000 12,000 $235 $0.59 Zn fines L. ZnSO 4 10.5 3,000 315 5,000 $155 $0.74 Big River Sauget, Il Brass dust ZSM 31 6,500 2,015 6,500 $475 $0.77 Chem & Pigment Pittsburgh, CA Zn fines ZSM 35.5 2,000 710 8,000 $620 $0.87 Chem & Pigment Zn fines L. ZnSO 4 12 2,500 300 3,000 $180 $0.75 Frit Norfolk, NE K061 Oxy sul 20 15,000 a 3,000 a Excess $235 $0.59 Frit Walnut Ridge,

AR ZnO Oxy sul 35.5 9,000 3,240 Excess $455 $0.63 Madison Industries Old Bridge, NJ Zn fines and brass dust ZSM 35 2,000 700 uk $620 $0.69 Product used for animal feed Madison Industries Zn fines and brass dust L. ZnSO 4 12 8,000 960 uk $180 $0.75 Product used for animal feed Mineral King Hanford, CA Zn fines L. ZnSO 4 12 7,000 840 10,000 $165 $0.69 Sims Mt. Gilead, OH ZnOH/ Var Oxy sul 20 500 100 uk $300 $0.75 Sims ZnOH/ Var Oxy sul 31 2,000 620 uk $440 $0.71 Sims ZnOH/ Var Oxy sul 36 4,000 1,440 uk $500 $0.69 Tetra Micronutrients Fairbury, NE Zn fines and brass dust ZSM 35.5 7,000 2,495 25,000 $620 $0.87 Product used for animal feed (½ total volume)

Zn fines and brass dust L. ZnSO 4 12 3,000 360 5,000 $180 $0.75 Product used for animal feed (½ total volume)

Note: Big River is no longer using brass dust for the production of zinc micronutrient fertilizer. Bay Zinc closed in 2001, but has now resumed operations using a nonhazardous zinc sulfate solution feedstock.

uk = unknown.

a The finished product and zinc volumes have been estimated based on industry sources and production process requirements.

Source: Handout entitled "Zinc Micronutrient Fertilizer/ Estimated Market Share Analysis" given to EPA during a meeting between representatives of the zinc micronutrient fertilizer industry and U. S. Environmental Protection Agency, April 14, 1998. 1 Schauble, Carl, Frit Industries, teleconference with Paul Borst, David Fagan, Mitch Kidwell, Matt Hale, Caroline Ahearn, and Steve Silverman, U. S. Environmental Protection Agency. February 24, 1999. Page 1.

3 1 CHAPTER 3 METHODOLOGY AND DATA LIMITATIONS This chapter discusses the methodology used in the cost and economic impact analysis, as well as the data limitations and the assumptions that were used. This chapter begins with a description of the baseline conditions and behaviors of the zinc micronutrient fertilizer producers and zinc raw material suppliers. The analytical methodology used for calculating the costs and economic impacts is covered later in the chapter. The data sources, data limitations, and assumptions of the analysis are discussed in this chapter as well.

3.1 Baseline Conditions To calculate the costs and economic impacts of the final rulemaking, the Agency must have an understanding of the costs that the affected entities are incurring prior to the rulemaking. This set of costs and behaviors occurring in the industry prior to the rulemaking is called the baseline.

This section characterizes the baseline conditions that are incorporated into the cost and economic impact analysis described in Chapter 5. These baseline conditions assume that all affected companies are handling their hazardous waste according to current applicable RCRA regulations.

3.1.1 Zinc Fertilizer Manufacturers Under the baseline conditions, the Agency assumes that the zinc fertilizer producers that are using hazardous waste are all RCRA compliant. This means that every facility, with the exception of Frit, which does not require one, has a RCRA permit and handles the raw material in such a manner that it does not touch the soil and cannot be wind dispersed. A description of compliance behavior for Frit Industries is given below.

Table 3 1 shows the zinc fertilizer producer currently using hazardous waste as a feedstock. Frit Industries' plant in Norfolk, NE, uses EAF dust (K061) from Nucor Steel as a feedstock for the production of Oxy sul. Frit operates its facility on site with Nucor; therefore, it incurs no hazardous waste transportation costs and does not require a RCRA storage permit. 1 The 2 Borst, Paul, U. S. Environmental Protection Agency, e mail message to Katherine Heller, Research Triangle Institute. March 16, 1999. Revised Frit meeting notes and handling requirements for fertilizer. Page 1.

3 Queneau, Paul et al. June 27 29, 2000. "Recycling Heavy Metals in Solid Waste." Sponsored by Office of Special Programs and Continuing Education, Colorado School of Mines.

4 K061 volume estimated based on Queneau, Paul et al. June 27 29, 2000. "Recycling Heavy Metals in Solid Waste." Sponsored by Office of Special Programs and Continuing Education, Colorado School of Mines.

5 Schauble, Carl, Frit Industries, teleconference with Paul Borst, David Fagan, Mitch Kidwell, Matt Hale, Caroline Ahearn, and Steve Silverman, U. S. Environmental Protection Agency. February 24, 1999. Page 1.

3 2 K061 dust is directly piped from Nucor to a Frit operated storage silo. 2 In 1999, Frit produced 12,000 tons of Oxy sul. 3 3.1.2 Zinc Raw Material Suppliers Under these baseline conditions, this analysis assumes the raw material suppliers are RCRA compliant. Every facility must handle the hazardous waste in a manner compliant with RCRA, including shipping the waste in a manifest fashion. The compliance behaviors for the two types of facilities are described below.

Nucor Steel does not store the K061 for more than 90 days; therefore, this facility does not require a RCRA storage permit. In 1999, Nucor sent at least 10,000 tons of EAF dust through the pipeline to Frit; 4 in 1999, Nucor may have transported as much as 12,500 tons of EAF dust to Frit. 5 EPA assumed Frit currently processes 10,000 tons of EAF dust to model the economic impacts in this analysis.

3.2 Analytical Methodology Under the assumption that the affected entities are currently in compliance with RCRA regulations, the Agency characterized the baseline operations of each entity. The Agency then compared the facility operations in the baseline conditions to the facility operations under the conditions of the final rulemaking and identified any changes that might be expected. Based on these expected changes, the Agency then estimated the costs or cost savings for zinc micronutrient fertilizer producers and their raw material suppliers. The Agency considered the effects the changes in costs will have on the markets and derived the economic impacts. Table 3 1. Baseline Conditions for Directly Affected Zinc Fertilizer Producers and Feedstocks Manufacturer Location Zinc feedstock Volume of feedstock processed (tons) Source of zinc feedstock Price paid per ton of raw material Frit Norfolk, NE K061 (EAF dust) 10,000 Nucor Steel, NE $10 3 3 3.3 Data Sources, Data Limitations, and Assumptions The zinc micronutrient fertilizer industry is a small industry, with fewer than 20 manufacturers. Because of its size, publicly available information on the zinc micronutrient fertilizer industry is scarce. The main sources of information used for this analysis were Paul Queneau's short course documents and telephone conversations with industry representatives, such as fertilizer dealers, company leaders, and representatives from trade associations.

Data limitations are present throughout this analysis. The exact amount of K061 incorporated into Frit's production of Oxy sul was unknown and had to be estimated. The sales and employment data for each facility were obtained from publicly available sources. Some of these data were in the form of ranges. For these data, the Agency chose the midpoint for the analysis. The risk information that the Agency possessed was limited; therefore, the benefits assessment had to be qualitative rather then quantitative.

The Agency made several assumptions throughout the analysis. First of all, the baseline incorporated into the cost analysis assumed that all affected entities were currently in full compliance with RCRA regulations. Throughout the economic analysis, the Agency had to project post rule behaviors for the directly and indirectly affected entities, and this projection required several basic economic assumptions. For example, the Agency assumed a company would choose the least cost alternative when making a company decision.

Throughout this analysis, EPA uses price data from 1997, from a handout entitled "Zinc Micronutrient Fertilizer/ Estimated Market Share Analysis," which was given to EPA during a meeting between representatives of the zinc micronutrient fertilizer industry and EPA on April 14, 1998. Volume data are adjusted to reflect 1999 quantities, based on data from Paul Queneau's "Recycling Heavy Metals in Solid Waste," 2000 short course. Because of the cyclical nature of zinc micronutrient fertilizer demand, choosing a single year as a baseline may seem risky. However, EPA has examined zinc micronutrient fertilizer volume data for several years (1993, 1995, 1996, 1997, 1998, and 1999), and 1997 is indeed a representative year in terms of zinc micronutrient fertilizer production, according to Paul Queneau's data for these years. (EPA chose to use the above mentioned handout as a primary source because this source provides both price and volume data. EPA relied on Paul Queneau's "Recycling Heavy Metals in Solid Waste" data for examining production trends, because this data source provides a time series.) When comparing 1997 volumes to the average volume from these 6 years, the 1997 volumes fall within one standard deviation of the average. For ZSM volumes, liquid zinc sulfate volumes, and volumes of contained zinc, the 1997 volumes are two fifths or less of one standard deviation from the average, indicating that 1997 is a representative year for zinc micronutrient fertilizer production. Figures 3 1 through 3 4 present these trends.

EPA estimates economic impacts on firms producing zinc fertilizers and on firms providing inputs to fertilizer manufacturers based on an assumption that market prices do not change from baseline conditions. Because only one producer and one generator are directly 3 4 1993 1995 1996 1997 1998 1999 Year ZSM Tons ZSM Average Standard Dev High Standard Dev Low 40,000 50,000 60,000 70,000 80,000 Figure 3 1. Annual Domestic ZSM Production, 1993– 1999 (standard tons)

Source: Queneau, Paul et al. 1994– 2000. "Recycling Heavy Metals in Solid Waste." Sponsored by the Office of Special Programs and Continuing Education, Colorado School of Mines.

40,000 50,000 60,000 70,000 80,000 1993 1995 1996 1997 1998 1999 Year Oxy sul Tons Oxy sul Average Standard Dev High Standard Dev Low Figure 3 2. Annual Domestic Oxy sul Production, 1993– 1999 (standard tons)

Source: Queneau, Paul et al. 1994– 2000. "Recycling Heavy Metals in Solid Waste." Sponsored by the Office of Special Programs and Continuing Education, Colorado School of Mines. 3 5 30,000 35,000 40,000 45,000 50,000 55,000 60,000 1993 1995 1996 1997 1998 1999 Year L. ZSM Tons Liquid Zinc Sulfate Average Standard Dev High Standard Dev Low Figure 3 3. Annual Domestic Liquid Zinc Sulfate Production, 1993– 1999 (standard tons)

Source: Queneau, Paul et al. 1994– 2000. "Recycling Heavy Metals in Solid Waste." Sponsored by the Office of Special Programs and Continuing Education, Colorado School of Mines.

30,000 35,000 40,000 45,000 50,000 1993 1995 1996 1997 1998 1999 Year Zinc Tons Contained Zinc Average Standard Dev High Standard Dev Low Figure 3 4. Annual Domestic Zinc Micronutrient Fertilizer Production in Zinc Tons, 1993– 1999 (standard tons)

Source: Queneau, Paul et al. 1994– 2000. "Recycling Heavy Metals in Solid Waste." Sponsored by the Office of Special Programs and Continuing Education, Colorado School of Mines. 3 6 affected by the regulation, EPA believes that their ability to pass these costs along to customers will be limited. Thus the "no cost pass through" assumption appears reasonable. To assess the possible distribution of impacts across directly affected, indirectly affected, and unaffected firms, EPA performed a market analysis, which is presented in Appendix B. 4 1 CHAPTER 4 FINAL RULEMAKING EPA's final rulemaking would ° remove the K061 fertilizer exemption from RCRA regulation,

° provide a conditional exclusion from the definition of solid waste for hazardous secondary feedstocks (e. g., brass fume dust, EAF dust from steel mills) used to produce zinc containing fertilizers, and ° provide product specifications based on ZSM for excluding hazardous waste derived zinc containing fertilizers.

The conditions for the exclusion of the hazardous secondary feedstocks would include handling requirements for storage and transport (e. g., no outdoor storage), reporting requirements, and labeling requirements. The current regulation and the final rulemaking are described in more detail below.

4.1 Current Regulation Under current RCRA regulation, the following feedstocks used in zinc fertilizer manufacturing are typically characterized as solid wastes and hazardous wastes because they are used in a manner constituting disposal: EAF dust (K061) and brass fume dust (D006, D008) (40 CFR §261.2[ c][ 1]). All of these hazardous wastes are currently fully regulated until the product is made. This means that hazardous waste generator requirements, transporter requirements, and storage requirements (i. e., must have a permit at the recycling facility) are all applicable (see 40 CFR Part 266 Subpart B). The current handling requirements proscribe land storage and require the prevention of wind dispersal.

Hazardous waste derived fertilizers, except for K061 derived fertilizers, are conditionally exempt from regulation. There are two conditions: the fertilizer must be produced for the public's use, and the fertilizer must meet the applicable treatment standard listed under Subpart D of Part 268. K061 derived fertilizers are currently unconditionally exempt from regulation (40 CFR §266.20[ b]).

In May 1998, the Phase IV LDR final rule changed the treatment standard for hazardous waste fertilizers from the Third Third treatment standard to the more stringent UTS levels. The Agency stayed the effect of the rule in August 1998, however, effectively placing hazardous waste derived fertilizers back under the Third Third standard.

4.2 Final Rulemaking The primary regulatory difference in the final rulemaking is a change in the status of EAF dust and brass fume dust used to produce fertilizers. Secondary feedstocks currently classified as 4 2 solid wastes that are also hazardous wastes when used to produce fertilizer will no longer be classified as solid wastes or hazardous wastes, provided that they meet the following conditions:

° prior to recycling, such secondary materials are stored in tanks, containers, or buildings so that the materials are not placed on soils and that wind dispersal of the material is prevented;

° records of all shipments of hazardous secondary materials to the fertilizer manufacturer are maintained by the manufacturer for no less than 3 years, and these records identify at a minimum the volume, source, and type of material shipped; and ° for zinc micronutrient fertilizer made from hazardous secondary materials, the fertilizer meets the following standards for Maximum Allowable Concentrations of Hazardous Constituents (milligrams per kilogram of zinc):

– Lead: based on ZSM levels – Cadmium: based on ZSM levels The last provision of the conditional exemption will require that all zinc fertilizers have levels of cadmium and lead that are as low as the levels in ZSM. Oxy sul produced from hazardous materials will most likely not be able to meet these treatment standards. Because the Agency is setting treatment standards, the final rulemaking includes a deletion of the provision that stayed the effectiveness of Phase IV LDR for zinc fertilizers.

In addition to the provisions described above, the rule requires some additional recordkeeping and reporting activities for generators and intermediate handlers of secondary hazardous materials.

The rulemaking also considers commercial fertilizers (beyond zinc fertilizers) that contain recyclable materials and are produced for the general public's use. These fertilizers would not be subject to regulation provided that they meet the same treatment standards. 5 1 CHAPTER 5 COSTS AND ECONOMIC IMPACTS In this section, EPA examines possible responses to the conditional exclusion; estimates the costs or cost savings associated with those responses; and analyzes the impacts of these costs or cost savings on affected facilities, companies, and markets.

5.1 Cost Analysis EPA analyzed the cost of compliance by first assessing baseline regulatory requirements and baseline performance, then determining what changes would be required or would be likely in response to the rulemaking. The baseline conditions are described in Section 2. This section describes EPA's analysis of possible facility choices in response to the conditional exclusion. EPA then compares performance that will comply with the conditional RCRA exclusion being considered to the baseline and computes the incremental cost (or cost savings) associated with the conditional RCRA exclusion. In this section, EPA presents the models used to estimate the costs of the rulemaking relative to each baseline and discusses the estimated costs and/ or cost savings.

5.1.1 Costing Model and Assumptions EPA estimates that the final rulemaking will directly affect one zinc micronutrient fertilizer manufacturer and one raw material supplier. EPA assumed that all facilities are complying with all applicable RCRA requirements at baseline, and that they will choose to respond to the conditional RCRA exclusion in the manner that is most profitable to them. Other facilities may be indirectly affected by the final rulemaking. These facilities are discussed in Section 5.1.3.

One facility, owned by Frit Industries, is currently producing Oxy sul fertilizer from hazardous feedstocks. These products are not believed to meet the conditional exclusion's treatment standards. The facilities projected to be directly affected by the final conditional exclusion therefore include ° Frit Industries' Norfolk, NE, plant, which manufactures Oxy sul from EAF dust it receives from the Nucor Industries steel plant with which it is co located, and ° Nucor Steel, which sells its EAF dust to Frit as a feedstock.

5.1.2 Estimated Costs and Cost Savings Frit Industries' Norfolk, NE, plant is located on property owned by Nucor Steel and receives EAF dust that is piped directly from Nucor's air pollution control device to a silo at 1 K061 volume estimated based on 12,000 ton Oxy sul production volume given in Queneau, Paul et al. June 27 29, 2000. "Recycling Heavy Metals in Solid Waste." Sponsored by Office of Special Programs and Continuing Education, Colorado School of Mines.

5 2 Frit's plant. Frit is assumed to accept 10,000 tons of EAF dust at baseline. 1 EPA examined two possible responses for Frit:

° shutting down its Norfolk, NE, plant, selling its equipment for salvage, and cleaning up the site and ° closing its Norfolk, NE, plant, cleaning up the site, and transporting the capital equipment to Frit Industries' facility in Walnut Ridge, AR.

To evaluate which of the two responses Frit would select, EPA examined the cost and revenue implications of each. Both options are estimated to increase both Frit's costs and revenues. The more costly option, the closure of its Norfolk plant and salvaging the equipment, is shown in Table 5 1.

Table 5 1 shows the estimated changes in Frit's costs and revenues associated with complying by shutting down its plant in Norfolk, NE. Frit's costs of shutting down its operation are estimated to be $320,000. This cost includes dismantling the plant and packing the capital equipment for transport and the salvage value of the capital equipment. In addition to these costs, Frit will lose profits equal to $1,513,000. After annualizing the costs of shutting down over 15 years at an interest rate of 7 percent, the total annual costs of closing the plant in Norfolk, NE, are $1,548,000. The costs of disassembly and site cleanup are based on costs reported by Tetra Micronutrients for dismantling one of its plants. These costs were then scaled to adjust for the differences in the relative size of operations between the two plants. For a more detailed description of these costs, see Appendix A.

If Frit chooses Scenario 2, to close its plant in Norfolk, NE, and transport its operation to Walnut Ridge, AR, it will likely substitute a nonhazardous feedstock and continue to make Oxy Table 5 1. Estimated Costs of Complying with the Conditional Exclusion for Frit Industries, Scenario 1: Shutting Down Cost ($)

Disassembly $329,000 Site cleanup $152,000 Salvage value of equipment $161,000 Total cost of shutdown $320,000 Lost profit $1,513,000 Total annual cost of shutdown $1,548,000 2 Queneau, Paul, personal communication with Paul Borst, U. S. Environmental Protection Agency. April 16, 1999. Page 1.

3 Schauble, Carl, Frit Industries, teleconference with Paul Borst, David Fagan, Mitch Kidwell, Matt Hale, Caroline Ahearn, and Steve Silverman, U. S. Environmental Protection Agency. February 24, 1999.

5 3 sul. The company will incur the increased cost of purchasing the nonhazardous feedstock, and it will receive higher revenues from the sale of its product, for two reasons:

° The zinc content of the nonhazardous feedstock is higher. Nonhazardous feedstock is approximately 60 percent zinc, 2 while K061 is 20 percent zinc. 3 ° The Oxy sul made from nonhazardous feedstocks can be sold for a higher price: $0.69 per pound of zinc for nonhazardous derived Oxy sul, compared to $0.59 per pound of zinc for K061 derived Oxy sul.

Nucor will be forced to pay for the disposal of its EAF dust when Frit stops producing Oxy sul at its plant in Norfolk, NE. Nucor will incur costs of disposal for K061 that total $1.4 million. This represents an increase of $1.5 million in costs for Nucor because it was receiving $100,000 from Frit as payment for its K061 prior to the rulemaking.

Table 5 2 shows the estimated changes to Frit's costs if Frit chooses to move its operation to Walnut Ridge, AR. These costs include planning, packing, site cleanup, shipping, unpacking and reassembly, permitting revision, the relocation of three households, lost production, and the construction of a new storage facility at the Arkansas plant. The total costs of moving the operation to Walnut Ridge, AR, are estimated to be $1,360,000. This total, annualized over 15 years at an interest rate of 7 percent, is equal to $149,300. For a more detailed description of the assumption underlying these costs, see Appendix A.

Both Frit's costs and revenues are estimated to increase significantly if it transports its capital equipment to the Arkansas plant and substitutes nonhazardous zinc feedstock in its Oxysul operation. Table 5 3 describes the changes in costs and revenues for Nucor and Frit that would result from Frit's move to Arkansas and substitution of a nonhazardous zinc feedstock. The table shows that Frit would increase its revenues by $3,386,000 by substituting a nonhazardous feedstock. Frit's costs will also increase by $2,910,500 because of increased raw material costs and by $149,300 because of its move to Arkansas.

Overall, EPA estimates that Frit will realize a cost savings of $326,000 if it chooses this option. EPA recognizes that the analysis may omit some costs of substituting a nonhazardous feedstock. The analysis results suggest that this substitution would be profitable even in the absence of the regulation. Additional costs, which are not accounted for in the analysis may explain why Frit has not already made this move and feedstock substitution. For example, depending on the terms of Frit's contract with Nucor, fees may be associated with no longer accepting K061 from Nucor. It appears that Frit may already be substituting some nonhazardous zinc for K061, because in 2000, Frit accepted only slightly more than 5,000 tons of K061 from 4 Miller, Tomas A., Nucor Steel. June 22, 2001. Electronic mail message to Ken Herstowski, U. S. Environmental Protection Agency, Region 7.

5 Madison Industries' and Tetra Micronutrient's use of brass dust comes from a handout entitled "Zinc Micronutrient Fertilizer/ Estimated Market Share Analysis" given to EPA during a meeting between representatives of the zinc micronutrient fertilizer industry and EPA, April, 14,1998 5 4 Nucor. 4 Nucor, which had received $100,000 per year for its K061 when Frit used it as a feedstock, would now be required to spend an estimated $1.4 million annually to recycle its K061.

Based on the analysis described in Tables 5 1 and 5 2, and the potential for Frit to increase revenues as a result of feedstock substitution, EPA projects that Frit would choose the second option and close its operation in Norfolk, NE; clean up the site; move its production to its plant in Walnut Ridge, AR; and substitute a nonhazardous feedstock. Because of the uncertainties inherent in the analysis, EPA has chosen to present a range of impacts, reflecting both scenarios.

5.1.3 Use of Brass Baghouse Dust in ZSM Production Based on available information, Madison Industries and Tetra Micronutrients are the two zinc micronutrient manufacturers who are currently using brass fume dust as a feedstock. 5 Big River Zinc, a zinc producer, had used the dust in 1997 but is not using this material now. The number and type of brass dust suppliers (either an ingot maker or large foundry) to each micronutrient manufacturing firm are unknown. Tetra Micronutrients in 1998 produced 10,000 tons of ZSM containing 2,845 tons of zinc. However, Tetra produces some of its zinc Table 5 2. Estimated Costs of Complying with the Conditional Exclusion for Frit Industries, Scenario 2: Moving to Walnut Cost ($)

Planning $6,000 Dismantling and packing $329,000 Site cleanup $151,600 Shipping $25,600 Unpacking $518,100 Permitting revision $1,137 Household relocation— 3 employees $7,700 Foregone profit on lost production $210,000 Build new storage capacity $112,000 Grand total $1,360,000 Annualized cost $149,300 6 Tetra indicates that all zinc derived from hazardous feedstocks (brass dust) is used in the feed industry and is not used to produce fertilizer currently. Personal communication between Paul Borst, USEPA, and Mike Deiker, Tetra Micronutrients, July 16, 1999.

7 Personal communication between Paul A. Borst, USEPA, and Mike Oberlin, I Schumann Inc. (a brass ingot maker), July 14, 1999.

8 Personal communication between Paul Borst, USEPA, and George Obeldobel, Big River Zinc, July 12, 1999.

5 5 micronutrients from nonhazardous galvanizing fines as well as brass dust. Because the proportion of zinc made from hazardous feedstocks is limited to the feed market, 6 this analysis assumes that a small proportion of 20 to 40 percent of the throughput at Tetra's Fairbury, NE, facility is derived from hazardous brass dust sources. This analysis uses a value of 854 tons. Madison Industries, in 1997, produced 10,000 tons of ZSM containing 1,660 tons of zinc. Again, EPA estimates that 20 to 40 percent of the feedstock is derived from brass dust, so EPA estimates that Madison produces 489 tons of zinc from brass dust. In addition, Big River produces ZSM using nonhazardous feedstock at present. Producing their current volume of ZSM requires 2,015 tons of zinc. Thus, if Big River switches to brass dust as a feedstock, the total volume of brass dust derived zinc used for ZSM production is estimated to be 3,366 tons.

EPA used the following assumptions to develop model facilities for brass dust generators:

° There are approximately 12 brass ingot makers in the United States. 7 ° A typical ingot maker may generate between 100 and 2,500 tons of baghouse dust annually. 8 Table 5 3. Estimated Change in Costs and Revenues for Frit Industries from Substituting Nonhazardous Feedstock Frit's costs and revenues a Oxy sul derived from K061 Oxy sul derived from nonhazardous feedstock Change resulting from substitution of nonhazardous feedstock Estimated revenues from sale of Oxy sul $2,832,000 $6,218,000 $3,386,000 Estimated feedstock costs $393,500 $3,304,000 $2,910,500 Costs of moving plant to Walnut Ridge, AR NA NA $149,300 Estimated profit $2,440,000 $2,930,000 $326,000 Nucor's cost to dispose of K061 –$ 100,000 $1,400,000 $1,500,000 a There may be some additional capital equipment required to use nonhazardous feedstock, for managing feedstock received from offsite. The cost of this equipment, if any, has been omitted from this calculation, as well as the possible costs of relocation. 9 Borst and Oberlin, July 14, 1999.

10 Personal communication between Paul Borst, USEPA, and Allan Silber, Recyclers of Copper Alloy Products. (RE CAP), July 14, 1999.

11 Letter from Collier, Shannon, Rill, and Scott on behalf of the American Foundrymen's Society to the EPA RCRA Information Center commenting on the Phase IV LDR proposed rulemaking, November 27, 1995.

12 Personal communication between Paul Borst, USEPA, and Gary Mosher, American Foundrymen's Society, November 19, 1998.

5 6 ° Brass ingot maker baghouse dust averages 60 to 70 percent zinc. 9 ° A typical ingot maker may ship one to two railroad cars of baghouse dust per month with between 75 and 90 tons of dust per car. 10 ° This analysis assumes an average generation rate of 450 tons of ingot maker baghouse dust per year, with a concentration of 65 percent zinc. Because the zinc content in the ingot maker baghouse dust is relatively high and there is a comparatively larger volume of dust per facility than a foundry, this analysis assumes that ingot makers are the principal suppliers of this type of material to zinc micronutrient manufacturers.

° There are approximately 791 brass and bronze or brass, bronze, and aluminum foundries in the United States that generate TC metal hazardous waste. 11 Typically nonferrous foundries generated 32 tons of baghouse dust per year. 12 However, empirically, larger brass foundries generate more dust and are therefore better able to afford the freight costs associated with shipping baghouse dust longer distances. Therefore, this analysis assumes a value of 100 tons per nonferrous foundry rather than the 32 ton average that characterizes the industry and assumes that three foundries supply baghouse dust to the fertilizer producers.

° There are 12 brass mills in the country. They are assumed to generate, on average, 125 tons of baghouse dust per year. EPA assumes that 10 of the 12 supply baghouse dust to fertilizer producers.

The conditional exclusion will mean the brass fume dust, if recycled into ZSM fertilizer or animal feed, is not solid waste. To analyze the impact of the conditional exclusion on brass fume dust generators, EPA assumes that ten ingot makers, ten brass mills, and the three largest brass foundries generating brass fume dust sell their brass fume dust to ZSM manufacturers. Because EPA does not know the characteristics of the specific generators, a model facility approach is used to characterize the generators. Table 5 4 depicts the characteristics of each typical brass fume generator.

Overall, the Agency expects brass baghouse dust generators to benefit from the regulation. In the absence of the conditional exclusion, the brass generators are assumed to sell only about 1,350 tons of baghouse dust to ZSM producers; the rest is assumed to be sent to Zinc Nacional, Horsehead Resource Development, or another zinc reclaimer for reclamation, at an average cost 13 Arnett, John E. June 2, 2000. Copper and Brass Fabricators Council, Inc. Brass Mill Baghouse Dust. Brass fume dust averages 46 percent zinc; the average cost for reclamation is $0.15/ lb.

14 Obeldobel, George, Big River, teleconference with Charles Pringle, Research Triangle Institute. April 30, 2002.

5 7 of $0.15 per pound. 13 Currently, the average price of brass fume dust is approximately $0.08 per pound. 14 Post rule, the generators are assumed to sell approximately 3,500 tons of their brass baghouse dust to ZSM manufacturers, at an average price of $0.08 per pound. The actual cost for reclamation and price received from the ZSM manufacturers is assumed to reflect the variation in zinc content from the different types of brass baghouse dust generators. Brass mills and brass foundries are assumed to generate brass baghouse dust with an average zinc concentration of 35 percent, while brass ingot makers are assumed to generate dust with an average zinc concentration of 65 percent. Ingot makers are thus assumed to pay less for reclamation and earn more from ZSM makers for their brass baghouse dust. For all types of generators, the rulemaking is expected to result in reduced cost and increased revenues, averaging an increase in revenues of $0.22 per pound of brass dust sold to ZSM producers. Table 5 5 shows estimated impacts on typical brass dust generators.

The Agency also expects several ZSM manufacturers to benefit from the rule's change in the treatment of brass baghouse dust. As noted above, EPA expects three ZSM manufacturers to use brass baghouse dust to manufacture ZSM for fertilizer post rule. Of the three, two currently use brass baghouse dust as an input to ZSM manufacturing but sell their ZSM made from brass dust exclusively for animal feed. The third is not currently using brass baghouse dust; EPA expects that, post rule, this company will substitute brass dust for the more costly nonhazardous ZnO it is currently using as a feedstock.

EPA expects differing impacts on these three ZSM manufacturers. Big River Zinc, which currently uses nonhazardous ZnO as a feedstock, is expected to switch to using brass dust. This switch is predicted to reduce their costs of production but leave their revenues unchanged. Madison Industries and Tetra currently use at least some brass dust as feedstock but produce only Table 5 4. Typical Brass Mill, Brass Foundry, and Brass Ingot Maker Brass mill Brass foundry Brass ingot maker Size (tons/ yr) 125 100 450 Zinc content 35% 35% 65%

Baseline management Send for reclamation, cost: $0.15/ lb Send for reclamation, cost: $0.15/ lb Send for animal feed, cost: $0.12/ lb Post rule management Sell to ZSM manufacturer, $0.071/ lb Sell to ZSM manufacturer, $0.071/ lb Sell to ZSM manufacturer, $0.091/ lb Number of generators 10 3 10 15 Queneau, Paul. Personal communication with Paul Borst, U. S. EPA. March 9, 1999.

5 8 animal feed from the brass dust. These two producers are projected to switch from selling animal feed to selling fertilizer, because fertilizer commands a higher price, due to its seasonal nature. 15 Table 5 6 shows the characteristics of the three ZSM manufacturers that EPA expects will use brass baghouse dust as an input for fertilizer manufacturing, as a result of the rulemaking. Table 5 5. Financial Impacts on Brass Baghouse Dust Generators Brass mill Brass foundry Brass ingot maker Dust volume 125 100 450 Baseline cost of reclamation $18,500 $14,800 $38,900 Post rule revenue from sales to ZSM $17,800 $14,200 $82,100 Net revenue $36,300 $29,000 $121,000 Number of generators 10 3 10 National net revenue $362,300 $87,000 $1,209,000 Note: Values are rounded.

Table 5 6. ZSM Producers Using or Projected to Use Brass Baghouse Dust Big River, Sauget, IL Madison Industries Tetra, Fairbury, NE Quantity of ZSM tons/ yr 7,000 2,000 granular, 8,000 liquid 7,000 granular, 3,000 liquid Baseline feedstock ZnO Zinc fines, brass dust Zinc fines, brass dust Post rule feedstock Brass dust Zinc fines, brass dust Zinc fines, brass dust Baseline product Fertilizer ½ feed, ½ fertilizer ½ feed, ½ fertilizer Post rule product Fertilizer Fertilizer Fertilizer 16 Obeldobel, George, Big River, teleconference with Katherine Heller and Charles Pringle, Research Triangle Institute. April 15, 2002.

17 For example, Tetra's Sauget, IL, facility has indicated its capacity and interest in obtaining brass fume dust as an alternative feed material for zinc metal. The company produces a ZSM from its process that has been and could be marketed for fertilizer use. Personal communication between Paul Borst, U. S. Environmental Protection Agency and George Obeldobel, Big River Zinc, July 2000.

5 9 To assess the potential impact of the rulemaking on these ZSM manufacturers, we first focus on Big River Zinc. At baseline, this company is estimated to produce 7,000 tons per year of ZSM. 16 EPA assumes this facility purchases zinc fines, a nonhazardous feedstock, which has a 75 percent zinc content, at $0.18 per pound. Post rule, the company will be able to purchase brass dust, with an average zinc content of 46 percent, at $0.08 per pound. The facility will also incur some additional costs as a result of using brass dust. Specifically, the Agency assumes the company will incur the costs of treating and transporting the sludge created as a by product from ZSM production. Table 5 7 shows projected cost savings for Big River as a result of the rulemaking.

Madison Industries and Tetra's Fairbury, NE, plant are not projected to change their operations, only the market in which they sell their ZSM as a result of the rulemaking. EPA thus projects no changes in their costs as a result of the rulemaking, only an increase in their revenues because ZSM for fertilizer commands a higher price than ZSM for feed. In fact, Madison Industries and Tetra may choose to substitute brass dust for the zinc fines they are currently using as part of their feedstock; if they did so, they might realize additional cost savings. But to avoid overstating the benefits of the rulemaking for these firms, EPA estimates only changes in revenues for them. Table 5 8 shows these estimated changes in revenues.

Overall, EPA projects that the conditional exclusion will benefit both brass baghouse dust generators and ZSM manufacturers. Brass baghouse dust generators will find an improved market for their baghouse dust, enabling them to sell it rather than paying to have it reclaimed. 17 Nationwide, ten brass mills, ten ingot makers, and three foundries are projected to sell their Table 5 7. Estimated Cost Savings due to the Rulemaking for Big River Zinc, Sauget, IL Cost element Value Quantity of ZSM produced 8,000 tons Baseline cost of Zn fines 2,485 tons Zn × $. 018/ lb Zn × (2000/. 75) = $1,192,800 Post rule cost of brass dust 2,485 tons Zn × $0.08 × (2000/ 0.46) = $864,400 Post rule cost of treatment 1,195 tons sludge × $175/ ton transport, treat, and dispose = $209,100 Cost savings due to the rule $119,300 Note: Values are rounded. 5 10 baghouse dust to ZSM producers, at a net savings of approximately $1.7 million. Big River Zinc is projected to substitute brass dust for the nonhazardous feedstock currently used, at a cost savings of $119,000. Madison Industries and Tetra are projected to be able to sell all their ZSM, regardless of feedstock, for fertilizer, increasing their revenues by $750,000.

5.2 Economic Impact Analysis As described above, EPA estimates that the conditional exclusion will result in changes in the operations of at least three facilities, which in turn is estimated to change their costs and revenues. This section describes the projected impacts on affected markets, facilities, and companies.

5.2.1 Expected Market Effects of the Conditional Exclusion The conditional exclusion is expected to reduce the cost of using hazardous materials as feedstocks in zinc fertilizer manufacturing, because materials managed in compliance with the exclusion will no longer be subject to RCRA regulatory requirements. The change in regulatory status of the waste derived zinc feedstocks will reduce the cost of using them relative to the cost of using nonhazardous zinc feedstocks. Zinc micronutrient producers may choose to substitute some waste derived zinc feedstocks for nonwaste derived feedstocks, thus increasing the demand (and price) for the waste derived zinc feedstocks and decreasing the demand (and price) for the nonwaste derived zinc feedstocks. Overall, the costs of production for zinc micronutrients are expected to decrease somewhat, resulting in an increased supply of zinc micronutrients and a decrease in the market price.

Because only a subset of the suppliers of zinc micronutrients are currently using hazardous waste feedstocks, and because the cost changes for these facilities are estimated to be fairly small, EPA expects the market impacts to be correspondingly small. The Agency has therefore not attempted to quantify the change in the market price of zinc micronutrients or zinc feedstocks; the Table 5 8. Estimated Revenue Increases for Madison Industries and Tetra, Fairbury, NE Revenue Element Value Madison Industries All ZSM used for animal feed at baseline Current revenues 8,000 tons ZnSO4 × $180 + 2,000 tons ZSM × 620 = $2,680,000 Estimated post rule revenues 8,000 tons ZnSO4 × $230 + 2,000 tons ZSM × 670 = $3,180,000 Estimated increased revenues $3,180,000 – $2,680,000 = $500,000 Tetra, Fairbury, NE Half ZSM used for animal feed at baseline Current revenues 3,000 tons ZnSO4 × $180 + 7,000 tons ZSM × $620 = $4,880,000 Estimated post rule revenues 0.5 × $4,880,000 + 0.5 × (3,000 × $230 + 7,000 × $670) = $5,130,000 Estimated increased revenues $5,130,000 – $4,880,000 = $250,000 5 11 economic impact analysis is conducted using a "full cost absorption" approach, based on market prices that do not change from their baseline levels. This modeling approach tends to estimate the maximum impacts on the directly affected facilities, and it makes use of the details of variations in price between feedstocks and outputs of various qualities in various markets. Thus, for facility level impacts, EPA believes this to be the most realistic approach. However, EPA also recognizes that facilities that are not affected by this rulemaking may also experience impacts (either positive or negative) due to the rulemaking. To illustrate the possible distribution of impacts across producers, EPA presents a market analysis in Appendix B. The market analysis abstracts from some of the quality premia realized by some zinc producers (for products made from nonhazardous feedstocks, for example), and treats the zinc content of various micronutrient products as perfect substitutes. In spite of this simplification, EPA believes that the sign if not the magnitude of impacts projected by the market analysis may be meaningful.

5.2.2 Estimated Impacts on Companies Owning Zinc Micronutrient Facilities EPA measures the impacts of the conditional exclusion by comparing the net costs of complying with the conditional exclusion (taking into account any estimated changes in revenues or cost savings) with the companies' baseline revenues. Table 5 9 shows the estimated net costs to comply with the conditional exclusion as a share of baseline company revenues for Frit Industries and Nucor. The estimated costs for these companies range from a cost savings of approximately $500,000 for Madison Industries to a cost of $1,500,000 for Nucor. Frit's estimated cost savings are approximately 0.5 percent of their baseline revenues. The Agency believes, based on this analysis, that none of the firms directly affected by the conditional exclusion will incur significant impacts.

In addition to the specific companies listed above, several generators of brass baghouse dust are estimated to incur cost savings as a result of the conditional exclusions. Currently, they are able to sell only an estimated 1,350 tons of baghouse dust to ZSM manufacturers. Under the conditional exclusion, they are projected to increase those sales by more than 2,000 tons. As a result, they will experience cost savings because they will not have to pay a zinc reclamation facility to accept their baghouse dust and will experience increased revenues because they will be able to sell the dust to ZSM manufacturers. However, EPA does not have sufficient information about brass baghouse dust generators to identify individual generators that may experience these cost savings and increased revenues.

5.2.3 Impacts on Small Businesses SBREFA requires EPA to analyze and attempt to minimize economic impacts on small entities, including small businesses, small nonprofit organizations, and small governments. SBREFA amended the Regulatory Flexibility Act (RFA), which requires that a regulatory flexibility analysis be performed for any rule that imposes a significant economic impact on a substantial number of small entities.

EPA has determined that one small business, a zinc micronutrient manufacturer, will be directly affected by the final standards. At least three other small businesses will be indirectly affected. EPA conducted a screening analysis, comparing the estimated costs of the standards with this company's baseline sales. For the zinc micronutrient manufacturer, the final standards 5 12 Table 5 9. Estimated Company Impacts of the Conditional Exclusion Company Baseline revenues Net costs of compliance Costs as a percentage of sales Zinc Micronutrient Manufacturers Frit Inc. $67,500,000 –$ 326,000 –0.48%

Madison Industries $35,000,000 –$ 500,000 –1.43%

Tetra Micronutrients — –$ 250,000 –3.33%

Big River Zinc $300,000,000 $ 119,306 –0.04%

Feedstock Suppliers Nucor Steel 4,139,200,000 $1,500,000 0.04%

Note: Negative net costs reflect EPA's estimate that a company's revenues will increase by more than their costs. Source: Reference USA. 2002a. "Frit Industries." <http:// www. referenceusa. com>. As obtained on May 1, 2002. Reference USA. 2002b. "Big River Zinc." <http:// www. referenceusa. com>. As obtained on May 1, 2002. Reference USA. 2002c. "Madison Industries." <http:// www. referenceusa. com>. As obtained on May 1, 2002. Reference USA. 2002d. "Tetra Micronutrients." <www. referenceusa. com>. As obtained on May 1, 2002. Hoover's Online. 2002. "Nucor Corporation." <www. hoovers. com>. As obtained on April 30, 2002.

are projected to result in cost savings or in revenue increases that largely offset the increased costs. Similarly, the small businesses indirectly affected are projected to experience increased revenues or cost savings.

EPA therefore certifies that the conditional exclusion will not have a significant economic impact on a substantial number of small entities, because ° only one small entity is directly affected,

° the overall financial impacts of the conditional exclusion on this small entity are expected to be affordable, and ° the small business may be able to recover its costs in a post rule environment.

5.3 Conclusions The conditional exclusion is expected to require one zinc micronutrient manufacturer to modify its operations. Frit Industries is estimated to not only incur incremental costs, but also to have a substantial increase in revenues, which may offset the increased costs. Its current supplier of K061, Nucor Steel, is projected to incur increased costs to recycle its K061.

Three additional zinc micronutrient producers, Big River Zinc, Madison Industries, and Tetra Micronutrients, are projected to experience either cost savings or increased revenues because of the effect of the conditional exclusion on the regulatory status of brass baghouse dust. 5 13 The brass mills, brass foundries, and brass ingot producers that generate brass baghouse dust are also projected to experience cost savings.

Overall, therefore, EPA estimates that few companies will be directly affected by the conditional exclusion, and for those that are, most will incur relatively small impacts, when estimated costs, cost savings, and changes in revenue are accounted for. 1 Rogowski, D., G. Golding, D. Bowhay, and S. Singleton. 1999. Screening Survey for Metals and Dioxins in Fertilizers, Soil Amendments, and Soils in Washington State. Washington State Department of Ecology, Olympia, WA, Ecology Publication No. 99 309.

2 Freeman, A. 1993. The Measurement of Environmental and Resource Values: Theory and Methods. Washington, DC: Resources for the Future.

6 1 CHAPTER 6 BENEFITS OF THE FINAL RULEMAKING Zinc micronutrient fertilizers have the potential to harm human and environmental health through a variety of environmental media and exposure pathways. As a result, the final conditional exclusion for zinc micronutrient fertilizer, which is designed to reduce the release of hazardous materials into the environment, can improve human welfare by generating environmental services. This chapter identifies the primary linkages between zinc micronutrient fertilizer pollution and human welfare, drawing on a study by Rogowski et al. conducted for Washington State 1 . The chapter begins with a conceptual discussion of the link between changes in environmental quality and human welfare as characterized in a standard benefits analysis. The second section identifies potential categories for benefits from the final rule limiting exposure to dioxins and some metals. In the final section, evidence is presented linking zinc micronutrient fertilizers to elevated levels of metals and dioxin exposure.

6.1 A Conceptual Framework for Analyzing the Benefits of Regulating Zinc Micronutrient Fertilizers Following the established procedures for benefits analysis, 2 we can use a three stage framework, illustrated in Figure 6 1, to conceptualize the economic benefits of regulating zinc micronutrient fertilizers. In Stage 1 (the first arrow), we propose that the conditional exclusion for zinc micronutrient fertilizer generates environmental services by reducing the release of hazardous substances. The main task is therefore to identify the primary environmental media, exposure pathways, and reductions in chemical concentration associated with the rulemaking.

In Stage 2 (the second set of arrows) the reduction in dioxin exposure generates two main effects: human health effects and ecosystem effects. Health effects can be further subcategorized into mortality (typically cancer related) and morbidity effects. In addition, because of altruistic concerns society at large may gain some nonuse benefits from knowing that others are healthy. Although there are several ways to characterize and categorize the ecosystem effects of fertilizer regulation, EPA believes there are four primary areas:

° commercial effects in terms of productivity of agriculture and fishing;

° nonmarket effects from improved recreational opportunities and aesthetic qualities of nature; 6 2 ° maintenance or improvements of natural ecological functions such as water filtration, nutrient cycling, and habitat preservation; and ° nonuse effects to society (not necessarily individuals) from the knowledge that ecosystems are healthy.

Nonuse services may also contribute to an individual's welfare through a sense of stewardship for the environment. Generate Health Effects a. Mortality b. Morbidity — acute, chronic c. Nonuse Environmental Policy Regulate Zinc Micronutrient Fertilizer Change Air, Water, and Soil Quality and Provide Environmental Services STAGE 1 Change Human Welfare and Generate Benefits (Values) Generate Ecosystem Effects a. Commercial — crops, fish b. Nonmarket — recreation, aesthetics c. Ecological functions d. Nonuse STAGE 2 STAGE 3 Figure 6 1. Conceptual Framework for Benefits of Regulating Zinc Micronutrient Fertilizer 3 Freeman provides a comprehensive discussion of the nonmarket valuation methods. (Freeman, A. 1993. The Measurement of Environmental and Resource Values: Theory and Methods.) Washington, DC: Resources for the Future.

4 U. S. EPA Report of RCRA Compliance Evaluation Inspection at American MicroTrace Corporation, Fairbury, NE. September 19, 1996 and October 3 4, 1996.

6 3 Finally, in Stage 3 (the third set of arrows), the health and ecosystem effects generate benefits by increasing the welfare of human beings. Economists measure this gain in terms of changes in utility and translate them into monetary terms by using a nonmarket valuation method. The main basis for these methods is the relation between these health and ecosystem services and other conventionally valued market goods that are either substitutes or complements because people make production and consumption tradeoffs among market and nonmarket goods. By identifying the main economic tradeoffs, the benefits of the conditional exclusion can be estimated as willingness to pay that is measured in terms of market products. 3 6.2 Identifying Categories of Benefits To identify the primary exposure pathways, environmental media, exposure reduction, and human welfare gains associated with regulating zinc micronutrient fertilizers, this analysis draws from the Rogowski et al. study for Washington State on metals and dioxins in fertilizers and soils. The health benefits lie primarily in the control of lead, cadmium, chromium, and dioxins pollution. The benefits of the final conditional exclusion can be expressed as the reduction in adverse health and ecosystem effects that will result from the final standards. Potential benefits include ° fewer cancer cases among the most exposed population from reductions in dioxin concentrations and additional reductions in cancer cases in the remaining 90 percent of the population;

° reduction in cancer cases associated with exposure to lead, chromium, and cadmium;

° reductions in kidney tissue decay and other morbidity effects associated with exposure to chromium;

° reductions in kidney damage, significant proteinuria, and other morbidity effects from exposure to cadmium; and ° reductions in various cardiovascular, developmental, and central nervous system effects due to exposure to lead.

In addition to the human health risks avoided by reducing exposures to lead and dioxins, the rulemaking is expected to yield ecological benefits, because of reduced loadings of heavy metals to the environment. Improved material handling procedures would prevent contamination of soil, groundwater, and surface water. For example, materials handling at one zinc fertilizer manufacturer resulted in contaminated storm water running off into a wetland area and creek, contaminating them with heavy metals including lead and cadmium. 4 Another zinc micronutrient fertilizer manufacturer was recently fined $35,000 for spilling and improperly disposing of waste 5 Washington Department of Ecology. September 23, 1999. Fertilizer company fined for improper handling of hazardous waste. News Release. <http:// www. wa. gov: 80/ ecology/ pie/ 1999news/ 99 186. html>.

6 As of July 1, 1999, Washington State law (RCW 15.54.820) requires a review of fertilizers that includes TCLP analysis for several metals. The TCLP is used to determine if a solid waste is also a dangerous waste.

6 4 containing lead and cadmium. 5 The plant was also ordered to immediately prevent any further releases of hazardous waste to the environment and to develop a plan for cleaning up the site, which has both soil and groundwater contamination resulting from its fertilizer manufacturing activities. Compliance with the terms of the conditional exclusion would reduce releases of heavy metals to the environment.

It is evident that the conditional exclusion, with its resulting reductions in releases of heavy metals and dioxins, would convey benefits to the human population.

6.3 Potential Exposure to Metals and Dioxin from Zinc Micronutrient Fertilizers Zinc micronutrient fertilizers have relatively high concentrations of metals compared to other fertilizers tested, including lead, mercury, and silver (see Table 1 1 in Rogowski et al.). At the maximum application rates, zinc fertilizer application results in soil additions of less than 0.1 kg/ hectare of all metals except for lead (0.884 kg/ ha). Frit K061 derived fertilizer also exceeded the Toxic Characteristic Leaching Procedure (TCLP) 6 limits for cadmium.

Dioxin in fertilizer is also a concern. The final regulation limits dioxin in zinc fertilizers to 8 ppt. The Rogowski et al. study for Washington State found greater than 140 ppt of dioxin congeners and one exceeded 50 ppt in one hazardous waste derived fertilizer and a level of 9 ppt in the other hazardous waste derived fertilizer tested.

Regulating the composition of hazardous waste derived fertilizers would result in lower amounts of metals, especially cadmium, and dioxin entering the environment. 7 1 CHAPTER 7 OTHER ADMINISTRATIVE REQUIREMENTS This chapter describes the Agency's response to other rulemaking requirements established by statute and executive order, within the context of the notice of final rulemaking for zinc containing hazardous waste derived fertilizers.

7.1 Environmental Justice EPA is committed to addressing environmental justice concerns and is assuming a leadership role in environmental justice initiatives to enhance environmental quality for all residents of the United States. The Agency's goals are to ensure that no segment of the population, regardless of race, color, national origin, or income, bears disproportionately high and adverse human health and environmental impacts as a result of EPA's policies, programs, and activities, and that all people live in clean and sustainable communities. In response to Executive Order 12898 and to concerns voiced by many groups outside the Agency, EPA's Office of Solid Waste and Emergency Response formed an Environmental Justice Task Force to analyze the array of environmental justice issues specific to waste programs and to develop an overall strategy to identify and address these issues (OSWER Directive No. 9200.3 17).

It is not certain whether the environmental problems addressed by the final conditional exclusion from hazardous waste regulation for zinc containing hazardous waste derived fertilizers could disproportionately affect minority or low income communities, due to the widespread distribution of fertilizers throughout the United States. As mentioned in Chapter 2, the West North Central region— which includes KS, IA, MN, MO, NE, ND, and SD— are the largest consumers of zinc fertilizer, principally used in corn production. The Pacific and Mountain regions are second to the North West Central region in zinc fertilizer consumption. Because the final rule removes the exclusion for K061 derived fertilizers, retains protective management standards for hazardous secondary fertilizer feedstocks, and establishes technologybased protective product standards for zinc micronutrient fertilizers derived from hazardous feedstocks, the Agency does not believe that this rule will increase risks or result in any disproportionately negative impacts on minority or low income communities relative to affluent or nonminority communities. As stated in Chapter 6, EPA believes that this rule will reduce lead and cadmium loadings from zinc micronutrient fertilizers to the environment including groundwater and food supply.

7.2 Unfunded Mandates Reform Act Under Section 202 of the Unfunded Mandates Reform Act of 1995, signed into law on March 22, 1995, EPA must prepare a statement to accompany any rule for which the estimated costs to state, local, or tribal governments in the aggregate, or to the private sector, will be $100 1 An economically significant rule is defined by Executive Order 12866 as any rulemaking that has an annual effect on the economy of $100 million or more, or would adversely affect in a material way the economy; a sector of the economy; productivity; competition; jobs; the environment; public health; or safety; or state, local, or tribal governments or communities.

7 2 million or more in any one year. Under Section 205, EPA must select the most cost effective and least burdensome alternative that achieves the objective of the rule and is consistent with statutory requirements. Section 203 requires EPA to establish a plan for informing and advising any small governments that may be significantly affected by the rule.

An analysis of the costs and benefits of the final rule was conducted and it was determined that this rule does not include a Federal mandate that may result in estimated costs of $100 million or more to either state, local, or tribal governments in the aggregate. The private sector also is not expected to incur costs exceeding $100 million per year in this RIA.

7.3 Protection of Children from Environmental Health Risks and Safety Risks On April 21, 1997, the President signed Executive Order 13045 entitled, "Protection of Children from Environmental Health Risks and Safety Risks." The executive order requires all economically significant rules 1 that concern an environmental health risk or safety risk that may disproportionately affect children to comply with requirements of the executive order. Because EPA does not consider today's final rule to be economically significant, it is not subject to Executive Order 13045. Because this rulemaking removes the exclusion for K061 derived fertilizers, retains protective management standards for hazardous secondary fertilizer feedstocks, and establishes technology based protective product standards for zinc micronutrient fertilizers derived from hazardous feedstocks, EPA believes that this final rulemaking will not result in increased exposures to children. EPA believes that removing the exemption for K061 derived fertilizers and establishing the technology based performance standard for excluded fertilizers will reduce lead and cadmium loading to the environment, including the food supply and groundwater over current management practices. Moreover, the prohibition on outdoor storage of the hazardous secondary feedstocks used to produce the fertilizer assures proper management of these materials. For these reasons, the environmental health risks or safety risks addressed by this action do not have a disproportionate effect on children. 8 1 CHAPTER 8 REFERENCES Armani, M., D. G. Westfall, and G. A. Peterson. 1997. "Zinc Plant Availability as Influenced by Zinc Fertilizer Sources and Zinc Water Solubility." Colorado Agricultural Experiment Station Technical Bulletin TB 97 4 (pre publication draft).

Arnett, John E. June 2, 2000a. Copper and Brass Fabricators Council, Inc. Facsimile to Paul Borst, U. S. Environmental Protection Agency. Brass fume dust.

Arnett, John E. June 2, 2000b. Copper and Brass Fabricators Council, Inc. Facsimile to Paul Borst, U. S. Environmental Protection Agency. Brass Mill Baghouse Dust.

Borst, Paul, U. S. Environmental Protection Agency, personal communication with Richard Camp, Bay Zinc. November 18, 1998.

Borst, Paul, U. S. Environmental Protection Agency, personal communication with Gary Mosher, American Foundrymen's Society. November 19, 1998.

Borst, Paul, U. S. Environmental Protection Agency, personal communication with Ken Wycherley, Exeter Energy Ltd. November 19, 1998.