Food manufacturing
                                     3110
$638
$18,782
$19,421
Printing and related support activities
                                     3230
$13,320
$3,874
$17,194
General state and local government services
                                     S007
$6,065
$7,792
$13,857
Pulp, paper, and paperboard mills
                                     3221
$4,155
$1,415
$5,569
Newspaper, periodical, book, and directory publishers
                                     5111
$4,851
$168
$5,018
Plastics and rubber products manufacturing
                                     3260
$1,249
$3,403
$4,651
Wholesale trade
                                     4200
$990
$2,619
$3,609
Food services and drinking places
                                     7220
$1,510
$2,597
$4,107
Total intermediate use
                                     T001
$76,729
$80,862
$157,591
Personal consumption expenditures
                                     F010
$11,882
$9,295
$21,177
Exports of goods and services
                                     F040
$7,724
$5,799
$13,523
Imports of goods and services
                                     F050
−$15,284
−$5,720
−$21,005
Total final uses (GDP)
                                     T004
$4,996
$9,607
$14,604
Total commodity output
                                     T007
$81,725
$90,469
$172,195
Source:	U.S. Bureau of Economic Analysis (BEA). 2008. "2002 Benchmark Input-Output Accounts: 2002 Standard Make and Use Tables at the Summary Level." Table 2. Washington, DC: BEA.
Firm and Market Characteristics
This section describes geographic, production, and market data. These data provide the basis for further analysis, including regulatory flexibility analyses, and give a complete picture of the recent historical trends of production and pricing.
Location
As Figure 2-24 illustrates, California is home to the most paper manufacturing establishments in the United States, followed by Illinois and some bordering northeastern states. The location of establishments in the paper manufacturing industry varies a great deal by subsector. Wisconsin and New York have the most pulp, paper, and paperboard establishments, while California dominates with over 500 converted paper product establishments. Overall, the United States has 561 pulp, paper, and paperboard establishments and 4,956 converted paper product establishments.

Figure 2-24.	Establishment Concentration in Paper Manufacturing Industry (NAICS 322): 2002
Source:	U.S. Census Bureau; generated by RTI International; using American FactFinder; "Sector 31: Manufacturing: Geographic Area Series: Industry Statistics for the States, Metropolitan and Micropolitan Statistical Areas, Counties, and Places: 2002." <http://factfinder.census.gov>; (July 23, 2008).
Production Capacity and Utilization
Capacity utilization of the paper manufacturing subsector has been experiencing a steady decline, similar to the decline of the total manufacturing sector. However, paper manufacturing has managed to use its capacity at a consistently higher rate than the average for manufacturing industries (Figure 2-25).

Figure 2-25.	Capacity Utilization Trends in the Paper Manufacturing Industry (NAICS 322)
Source:	Federal Reserve Board. 2009. "Industrial Production and Capacity Utilization: Capacity Utilization." <http://www.federalreserve.gov/datadownload/>.
Employment
Wisconsin has the largest number of employees in the paper manufacturing subsector with over 38,008 reported in the 2002 census followed by 29,379 in California (Figure 2-26). The converted paper products group has more employees per establishment, 283, than the pulp, paper, and paperboard group, 67.

Figure 2-26.	Employment Concentration in the Paper Manufacturing Industry (NAICS 322): 2002
Source:	U.S. Census Bureau; generated by RTI International; using American FactFinder; "Sector 31: Manufacturing: Geographic Area Series: Industry Statistics for the States, Metropolitan and Micropolitan Statistical Areas, Counties, and Places: 2002." <http://factfinder.census.gov>; (July 23, 2008).
Plants and Capacity
While the manufacturing sector has been growing consistently since 1997, the paper manufacturing sector has not experienced the same amount of success in the same period. Despite a small amount of growth in capacity between 1997 and 2001, the paper manufacturing subsector's capacity has declined to as much as 7% below 1997 capacity levels (Figure 2-27).
Firm Characteristics
In 2006, the top 10 paper and forest product companies produced over $75 billion in sales, with the top two companies -- International Paper and Weyerhaeuser -- generating nearly $22 billion each (Table 2-27). The top two companies' revenue consists of 58% of the revenue of the top 10 companies in Standard & Poor's (S&P's) list (Benwart, 2006). Although these numbers do not exclusively reflect paper products, they do convey the market environment in which firms in this sector compete.

Figure 2-27.	Capacity Trends in the Paper Manufacturing Industry (NAICS 322)
Source:	 Federal Reserve Board. 2009. "Industrial Production and Capacity Utilization: Industrial Capacity." <http://www.federalreserve.gov/datadownload/>.
Table 2-27.	Largest U.S. Paper and Forest Products Companies: 2006
Company
                            Revenues ($millions)[a]
International Paper
21,995
Weyerhaeuser
21,896
Smurfit-Stone
7,157
MeadWestvaco
6,530
Temple-Inland
5,558
Bowater
3,530
Grief Inc.
2,628
Louisiana-Pacific
2,235
Packaging Corp.
2,187
Plum Creek
1,627
[a]	Includes revenues from operations other than paper and forest products in certain cases.
Sources:	Benwart, S.J. 2006. "Paper & Forest Products. Standard and Poor's Industry Surveys." 176(28).
	U.S. and international sales data from company reports.
Size Distribution
The primary criterion for categorizing a business as small is the number of employees, using definitions by the SBA for regulatory flexibility analyses. According to SUSB reports for 2002, large companies dominated revenue-generating transactions in the paper manufacturing subsector; 80% of receipts were generated by companies with 500 employees or more (Table 2-28). This was especially true in the pulp, paper, and paperboard group, in which large companies generated 92% of receipts. The number of employees in the small business cutoff varies according to six-digit NAICS codes (Table 2-29). The cutoff for all subsectors in the pulp, paper, and paperboard group is 750 employees, while the cutoff for most converted paper product groups is 500 employees.
Table 2-28.	Distribution of Economic Data by Enterprise Size: Paper Manufacturing (NAICS 322)

                               Enterprises with
                                   Variable
                                     Total
                             1 to 20 Employees[a]
                              20 to 99 Employees
                             100 to 499 Employees
                             500 to 749 Employees
                             750 to 999 Employees
                           1,000 to 1,499 Employees
Firms
                                                                          3,538
                                                                          1,482
                                                                          1,200
                                                                            476
                                                                             43
                                                                             22
                                                                             33
Establishments
                                                                          5,546
                                                                          1,488
                                                                          1,271
                                                                            755
                                                                             83
                                                                             69
                                                                            138
Employment
                                                                        495,990
                                                                         11,325
                                                                         52,334
                                                                         78,402
                                                                         13,293
                                                                         12,496
                                                                         23,283
Receipts ($millions )
                                                                       $154,746
                                                                         $2,218
                                                                         $9,483
                                                                        $17,620
                                                                         $3,034
                                                                         $3,951
                                                                         $6,798
Receipts/firm ($thousands)
                                                                        $43,738
                                                                         $1,497
                                                                         $7,903
                                                                        $37,017
                                                                        $70,561
                                                                       $179,577
                                                                       $206,001
Receipts/establishment ($thousands)
                                                                        $27,902
                                                                         $1,491
                                                                         $7,461
                                                                        $23,338
                                                                        $36,556
                                                                        $57,256
                                                                        $49,261
Receipts/employment ($)
                                                                       $311,994
                                                                       $195,850
                                                                       $181,203
                                                                       $224,742
                                                                       $228,250
                                                                       $316,157
                                                                       $291,974
[a]	Excludes SUSB employment category for zero employees. These entities only operated for a fraction of the year.
Source:	U.S. Census Bureau. 2008. "Firm Size Data from the Statistics of U.S. Businesses: U.S. Detail Employment Sizes: 2002." <http://www.census.gov/csd/susb/download_susb02.htm>.
Table 2-29.	Small Business Size Standards: Paper Manufacturing (NAICS 322)
                                     NAICS
                               NAICS Description
                                   Employees
322110
Pulp Mills
                                      750
322121
Paper (except Newsprint) Mills
                                      750
322122
Newsprint Mills
                                      750
322130
Paperboard Mills
                                      750
322211
Corrugated and Solid Fiber Box Manufacturing
                                      500
322212
Folding Paperboard Box Manufacturing
                                      750
322213
Setup Paperboard Box Manufacturing
                                      500
322214
Fiber Can, Tube, Drum, and Similar Products Manufacturing
                                      500
322215
Non-Folding Sanitary Food Container Manufacturing
                                      750
322221
Coated and Laminated Packaging Paper Manufacturing
                                      500
322222
Coated and Laminated Paper Manufacturing
                                      500
322223
Coated Paper Bag and Pouch Manufacturing
                                      500
322224
Uncoated Paper and Multiwall Bag Manufacturing
                                      500
322225
Laminated Aluminum Foil Manufacturing for Flexible, Packaging Uses
                                      500
322226
Surface-Coated Paperboard Manufacturing
                                      500
322231
Die-Cut Paper and Paperboard Office Supplies, Manufacturing
                                      500
322232
Envelope Manufacturing
                                      500
322233
Stationery, Tablet, and Related Product Manufacturing
                                      500
322291
Sanitary Paper Product Manufacturing
                                      500
322299
All Other Converted Paper Product Manufacturing
                                      500
Source:	U.S. Small Business Administration (SBA). 2008. "Table of Small Business Size Standards Matched to North American Industry Classification System Codes." Effective August 22, 2008. <http://www.sba.gov/services/contractingopportunities/sizestandardstopics/size/index.html>.
Domestic Production
Similar to industry capacity rates, subsector production rates for paper manufacturing have witnessed a decreasing rate of production compared to the steady increase in production for the manufacturing sector since 1997 (Figure 2-28). It seems that the paper manufacturing sector was not able to return to its former levels of growth following the 2001 recession; it has experienced a downward production trend since then.

Figure 2-28.	Industrial Production Trends in the Paper Manufacturing Industry (NAICS 322): 1997 - 2009
Source:	Federal Reserve Board. 2009. "Industrial Production and Capacity Utilization: Industrial Production." <http://www.federalreserve.gov/datadownload/>.
International Trade
Since 1997, paper manufacturing products, both pulp, paper, and paperboard products and converted paper products, have contributed to an increasing trade surplus in this sector (Figure 2-29). Imports and exports have been changing at similar rates since 1999.
Market Prices
Prices of goods in paper manufacturing have been increasing at a rate consistent with all manufacturing products (Figure 2-30). Producer price indices (PPIs) show that producer prices for paper in 2007 increased by 20% since 1997, while producer prices for all manufacturing goods increased by roughly 27%.

Figure 2-29.	International Trade Trends in the Paper Manufacturing Industry (NAICS 322)
Source:	U.S. International Trade Commission. 2008. "U.S. Domestic Exports" & "U.S. Imports for Consumption." <http://dataweb.usitc.gov/scripts/user_set.asp>.

Figure 2-30.	Producer Price Trends in the Paper Manufacturing Industry (NAICS 222)
Source:	U.S. Bureau of Labor Statistics (BLS). 2009b. "Producer Price Index." Series ID: PCU322 - 322 -  & PCUOMFG - OMFG - . <http://www.bls.gov/ppi/home.htm>.
Chemical Manufacturing
Introduction
The chemical manufacturing industry produces over 70,000 chemical substances, many of which are ubiquitous in American life. Broadly speaking, chemical manufacturing operates by converting feedstocks into chemical products that can serve as intermediate goods or final products such as medicine, soap, and printer ink. From 1997 to 2007, shipments in the industry grew 42%, while employment declined by 8% (Table 2-30). While total payroll dropped 0.6% over this time, annual payroll per employee rose 7.8% from 1997 to 2007 because of the decline in the number of employees (Table 2-31). Shipments per employee grew 54% from 1997 to 2007, with much of that growth taking place between 2002 and 2006 (Table 2-31).
Chemical manufacturing (NAICS 325) covers a diverse set of industry groups, which we have aggregated into the following three groups:
Bulk Chemicals -- Includes the most energy-intensive industry groups as aggregated by the Department of Energy (DOE). Basic Chemical Manufacturing (NAICS 3251); Resin, Rubber, and Artificial Fibers Manufacturing (NAICS 3252); and Agricultural Chemical Manufacturing (NAICS 3253).
Pharmaceutical and Medicine Manufacturing (NAICS 3254) -- Consists primarily of pharmaceutical preparation manufacturing. This industry group is the largest importer of goods within chemical manufacturing.
Other Chemical Manufacturing: Consists of Paint, Coating, and Adhesive Manufacturing (NAICS 3255); Soap, Cleaning Compound, and Toiletry Manufacturing (NAICS 3256); and Other Chemical Product and Preparation Manufacturing (NAICS 3259).
In 2007, each of these groups generated approximately one-third of the total employment in chemical manufacturing (Figure 2-31). The bulk chemicals group accounted for the biggest share of chemical manufacturing's total value of shipments (Figure 2-32).
Table 2-30.	Key Statistics: Chemical Manufacturing (NAICS 325)

1997
2002
2006
2007
Shipments ($2007, millions)
$521,251
$531,173
$675,223
$738,303
Payroll ($2007, millions)
$49,961
$51,317
$46,981
$49,648
Employees
882,645
853,224
747,134
814,024
Establishments
13474
13,475
                                      NA
12,937
NA = Not available.
Sources:	U.S. Census Bureau; generated by RTI International; using American FactFinder; "Sector 31: Annual Survey of Manufactures: General Statistics: Statistics for Industry Groups and Industries: 2006 and 2005." <http://factfinder.census.gov>; (July 8, 2008).
	U.S. Census Bureau; generated by RTI International; using American FactFinder; "Sector 00: All Sectors: Core Business Statistics Series: Comparative Statistics for the United States and the States (1997 NAICS Basis): 2002 and 1997." <http://factfinder.census.gov>; (July 8, 2008).
	U.S. Census Bureau; generated by Kapur Energy and Environment; using American FactFinder; "Sector 00: EC0700A1: All Sectors: Geographic Area Series: Economy-Wide Key Statistics: 2007." <http://factfinder.census.gov>. Accessed on December 27, 2009. [Source for 2007 numbers]
Table 2-31.	Industry Data: Chemical Manufacturing (NAICS 325)
Industry Data
1997
2002
2006
2007
Total shipments ($2007, millions)
                                   $521,251
                                   $531,173
                                   $675,223
                                   $738,303
Shipments per establishment ($thousands)
                                    $38,686
                                    $39,419
                                      NA
                                    $57,069
Shipments per employee ($2007)
                                   $590,556
                                   $622,548
                                   $903,750
                                   $906,979
Shipments per $ of payroll ($2007)
                                    $10.43
                                    $10.35
                                    $14.37
                                    $14.87
Annual payroll per employee ($2007)
                                    $56,603
                                    $60,145
                                    $62,882
                                    $60,991
Employees per establishment
                                      66
                                      63
                                      NA
                                      63
NA = Not available.
Sources:	U.S. Census Bureau; generated by RTI International; using American FactFinder; "Sector 31: Annual Survey of Manufactures: General Statistics: Statistics for Industry Groups and Industries: 2006 and 2005." <http://factfinder.census.gov>; (July 8, 2008).
	U.S. Census Bureau; generated by RTI International; using American FactFinder; "Sector 00: All Sectors: Core Business Statistics Series: Comparative Statistics for the United States and the States (1997 NAICS Basis): 2002 and 1997." <http://factfinder.census.gov>; (July 8, 2008).
	U.S. Census Bureau; generated by Kapur Energy and Environment; using American FactFinder; "Sector 00: EC0700A1: All Sectors: Geographic Area Series: Economy-Wide Key Statistics: 2007." <http://factfinder.census.gov>. Accessed on December, 27, 2009. [Source for 2007 numbers]

Figure 2-31.	Distribution of Employment within Chemical Manufacturing (NAICS 325): 2007
Source:	U.S. Census Bureau; generated by Kapur Energy and Environment; using American FactFinder; "Sector 31: EC0731I1: Manufacturing: Industry Series: Detailed Statistics by Industry for the U.S.: 2007." Release date: October 30, 2009. Accessed on December 27, 2009.

Figure 2-32.	Distribution of Total Value of Shipments within Chemical Manufacturing (NAICS 325): 2007
Source:	U.S. Census Bureau; generated by Kapur Energy and Environment; using American FactFinder; "Sector 31:EC0731I1: Manufacturing Industry Series: Detailed Statistics by Industry for U.S.: 2007." <http://factfinder.census.gov>. Accessed on December 27, 2009.
Supply and Demand Characteristics
Next, we provide a broad overview of the supply and demand side of the chemical manufacturing industry. We emphasize the economic interactions this industry has with other industries and people, including identifying the key goods and services used by the industry and the major uses and consumers of chemical manufacturing products.
The top 10 industry groups supplying inputs to the chemical manufacturing industry in 2002 accounted for 71% of the total intermediate inputs (Table 2-32). Bulk chemicals' production was the most energy intensive, using 79% of the chemical manufacturing inputs from petroleum and coal products, electric power generation, transmission and distribution, and natural gas distribution.
Table 2-32.	Key Goods and Services Used in Chemical Manufacturing (NAICS 325) ($2007, millions)
Good or Service
BEA Code
Bulk Chemicals
Pharmaceuticals
Other Chemicals
Total
Basic chemicals
                                     3251
                                                                        $59,495
$4,772
$14,021
                                                                        $78,288
Management of companies and enterprises
                                     5500
                                                                        $15,071
$19,380
$16,396
                                                                        $50,846
Pharmaceuticals and medicines
                                     3254
                                                                             $0
$25,125
$0
                                                                        $25,125
Wholesale trade
                                     4200
                                                                         $9,428
$8,367
$6,077
                                                                        $23,872
Scientific research and development services
                                     5417
                                                                         $6,172
$6,139
$5,554
                                                                        $17,865
Petroleum and coal products
                                     3240
                                                                        $10,066
$398
$3,432
                                                                        $13,896
Plastics and rubber products
                                     3260
                                                                         $2,675
$1,132
$5,556
                                                                         $9,363
Resins, rubber, and artificial fibers
                                     3252
                                                                         $4,048
$0
$4,949
                                                                         $8,996
Electric power generation, transmission, and distribution
                                     2211
                                                                         $6,025
$716
$807
                                                                         $7,548
Natural gas distribution
                                     2212
                                                                         $6,390
$154
$390
                                                                         $6,934
Total intermediate use
                                     T005
                                                                       $167,699
$82,403
$91,833
                                                                       $341,935
Source:	U.S. Bureau of Economic Analysis (BEA). 2008. "2002 Benchmark Input-Output Accounts: 2002 Standard Make and Use Tables at the Summary Level." Table 2. Washington, DC: BEA.
Goods and Services Used in Chemical Manufacturing
In 2007, the cost of materials made up 49% of chemical manufacturing's total shipment value (Table 2-32). Total compensation to employees represented 9% of total shipment value, down from 10% in 2005.
<IP_ADDRESS>.1 Energy. The Department of Energy (DOE) classifies bulk chemical manufacturing as an energy-intensive industry. Pharmaceuticals and other chemical manufacturing are categorized as non-energy-intensive industries, grouped together with other industry groups under the "Balance of Manufacturing" category (DOE, 2008).
Fuel used in chemical production can either facilitate chemical processes or provide the feedstock to derive value-added chemicals. In 2007, 70% of chemical manufacturing's energy bill was spent on fuel used as feedstocks (O'Reilly, 2008). These fuel costs represented 2% of chemical manufacturing's total value of shipments (Table 2-33).
As a whole, chemical manufacturing use less energy over the last 10 years. According to DOE, natural gas use by the chemical manufacturing industry dropped 30% from 1998 to 2006, and electricity use fell 10% (Table 2-34). From 1997 to 2005, when data ceased to be available, chemical manufacturing used less electricity relative to the manufacturing sector as a whole (Figure 2-33).
Uses and Consumers
Products manufactured in the groups bulk chemicals, pharmaceuticals, and other chemicals have very different consumer profiles. Bulk chemicals is dominated by intermediate use, representing 93% of its total commodity output and 56% of the total intermediate use of chemical manufacturing products. Pharmaceuticals has both a high level of demand from personal consumption, accounting for 67% of the total personal consumption of chemical manufacturing products, and a large trade deficit (Table 2-35).
Table 2-33.	Costs of Goods and Services Used in Chemical Manufacturing (NAICS 325) ($2007)
Variable
2005
Share
2006
Share
2007
Share
Total shipments
$646,895
100%
$675,223
100%
$722,494
100%
Total compensation (millions)
$62,669
10%
$61,683
9%
$63,591
9%
  Annual payroll
$48,159
7%
$46,981
7%
$48,780
7%
  Fringe benefits
$14,510
2%
$14,702
2%
$14,811
2%
Total employees
756,078

747,134

801,567

  Average compensation per employee
$82,887

$82,559

$79,333

Total production workers' wages (millions)
$22,643
4%
$22,231
3%
$23,157
3%
Total production workers
431,502

430,880

463,802

Total production hours (thousands)
899,499

885,993

948,244

  Average production wages per hour
$25

$25

$24

Total cost of materials ($thousands)
$299,859
46%
$318,945
47%
$357,055
49%
  Materials, parts, packaging
$247,851
38%
$260,934
39%
$291,656
40%
  Purchase electricity
$8,291
1%
$8,490
1%
$8,936
1%
  Purchased fuel
$14,568
2%
$13,667
2%
$14,227
2%
  Other
$29,148
5%
$35,855
5%
$42,236
6%
Sources:	U.S. Census Bureau; generated by RTI International; using American FactFinder; "Sector 31: Annual Survey of Manufactures: General Statistics: Statistics for Industry Groups and Industries: 2006 and 2005." <http://factfinder.census.gov>; (July 8, 2008).
	U.S. Census Bureau; generated by Kapur Energy and Environment; using American FactFinder; "Sector 31: EC0731I1: Manufacturing: Industry Series: Detailed Statistics by Industry for the United States: 2007." Accessed on December, 27, 2009.
Table 2-34.	Energy Used in Chemical Manufacturing (NAICS 325)
Fuel Type
1998
2002
2006
Total (trillion BTU)
3,704
3,769
3,159
Net electricity[a] (million kWh)
169,233
153,104
151,646
Residual fuel oil (million bbl)
8
7
4
Distillate fuel oil[b] (million bbl)
2
2
2
Natural gas[c] (billion cu ft)
1,931
1,634
1,349
LPG and NGL[d] (million bbl)
15
9
2
Coal (million short tons)
13
14
8
Coke and breeze (million short tons)
*
*
*
Other[e] (trillion BTU)
748
1,158
1,045
Total (trillion BTU)
3,704
3,769
3,159
[a]	Net electricity is obtained by summing purchases, transfers in, and generation from noncombustible renewable resources, minus quantities sold and transferred out. It does not include electricity inputs from on-site cogeneration or generation from combustible fuels because that energy has already been included as generating fuel (for example, coal).
[b]	Distillate fuel oil includes Nos. 1, 2, and 4 fuel oils and Nos. 1, 2, and 4 diesel fuels.
[c]	Natural gas includes natural gas obtained from utilities, local distribution companies, and any other supplier(s), such as independent gas producers, gas brokers, marketers, and any marketing subsidiaries of utilities.
[d]	Examples of liquefied petroleum gases (LPGs) are ethane, ethylene, propane, propylene, normal butane, butylene, ethane-propane mixtures, propane-butane mixtures, and isobutene produced at refineries or natural gas processing plants, including plants that fractionate raw natural gas liquids (NGLs).
[e]	Other includes net steam (the sum of purchases, generation from renewables, and net transfers), and other energy that respondents indicated was used to produce heat and power.
*	Estimate less than 0.5.
Sources:	U.S. Department of Energy, Energy Information Administration. 2007b. "2006 Energy Consumption by Manufacturers -- Data Tables." Table 3.1. Washington, DC: DOE. <http://www.eia.doe.gov/emeu/mecs/
mecs2006/2006tables.html>. [Source for 2006 numbers]
	U.S. Department of Energy, Energy Information Administration. 2007a. "2002 Energy Consumption by Manufacturers -- Data Tables." Tables 3.2 and N3.2. Washington, DC: DOE. <http://www.eia.doe.gov/emeu/mecs/mecs2002/data02/shelltables.html>.

Figure 2-33.	Electric Power Use Trends in Chemical Manufacturing (NAICS 325):
1997 - 2005
Source:	Federal Reserve Board. 2009. "Industrial Production and Capacity Utilization: Electric Power Use: Manufacturing and Mining." <http://www.federalreserve.gov/datadownload/>.
Firm and Market Characteristics
This remaining subsection describes geographic, production, and market data. These data provide the basis for further analysis, including regulatory flexibility analyses, and give a complete picture of the recent historical trends of production and pricing.
Location
In 2002, California had the most chemical manufacturing establishments in the United States, followed by Texas and New Jersey (Figure 2-34). The composition of establishments in these states differs among the different industry groups. Despite the fact that each group employed an approximately equal share of people in 2002, 54% of the total establishments were other chemicals establishments, and only 13% were pharmaceutical establishments.
Table 2-35.	Demand by Sector: Chemical Manufacturing (NAICS 325) ($2007 millions)
Sector
BEA Code
Bulk Chemicals
Pharmaceuticals
Other Chemicals
Total
Plastics and rubber products manufacturing
                                     3260
$39,353
$0
$3,057
                                                                        $42,410
Basic chemical manufacturing
                                     3251
$33,972
$0
$1,675
                                                                        $35,647
Pharmaceutical and medicine manufacturing
                                     3254
$4,778
$25,125
$462
                                                                        $30,365
Resin, rubber, and artificial fibers manufacturing
                                     3252
$28,249
$0
$1,076
                                                                        $29,325
Ambulatory health care services
                                     6210
$2,716
$22,900
$934
                                                                        $26,550
General state and local government services
                                     S007
$7,150
$10,586
$8,807
                                                                        $26,543
Hospitals
                                     6220
$2,936
$15,390
$394
                                                                        $18,720
Other chemical product and preparation manufacturing
                                     3259
$8,021
$0
$2,680
                                                                        $10,701
Textile mills
                                     3130
$9,568
$0
$930
                                                                        $10,498
Soap, cleaning compound, and toiletry manufacturing
                                     3256
$3,886
$0
$6,289
                                                                        $10,176
Total intermediate use
                                     T001
$212,996
$83,279
$82,107
                                                                       $378,382
Personal consumption expenditures
                                     F010
$4,449
$123,746
$55,882
                                                                       $184,077
Exports of goods and services
                                     F040
$47,121
$15,683
$13,136
                                                                        $75,940
Imports of goods and services
                                     F050
−$38,732
−$67,950
−$10,906
                                                                    −$117,588
Total final uses (GDP)
                                     T004
$15,733
$73,485
$58,023
                                                                       $147,241
Total commodity output
                                     T007
$228,729
$156,765
$140,129
                                                                       $525,623
Source:	U.S. Bureau of Economic Analysis (BEA). 2008. "2002 Benchmark Input-Output Accounts: 2002 Standard Make and Use Tables at the Summary Level." Table 2. Washington, DC: BEA.

Figure 2-34.	Establishment Concentration in Chemical Manufacturing (NAICS 325): 2002
Source:	U.S. Census Bureau; generated by RTI International; using American FactFinder; "Sector 31: Manufacturing: Geographic Area Series: Industry Statistics for the States, Metropolitan and Micropolitan Statistical Areas, Counties, and Places: 2002." <http://factfinder.census.gov>; (July 23, 2008).
Production Capacity and Utilization
Capacity utilization of the chemical manufacturing industry has been broadly in line with the manufacturing sector (Figure 2-35). In the second half of 2005, the chemical manufacturing industry's capacity utilization fell dramatically because of the multiple hurricanes affecting the Gulf Coast states. The impact of the economic downturn in 2001 can be seen in the capacity utilization of both manufacturing and chemical manufacturing.
Employment
The geographic distribution of employment in chemical manufacturing differs largely among the different groups. In California, 52% of the chemical manufacturing employment comes from the pharmaceutical industry, while 60% of the chemical manufacturing employment in the Gulf Coast states comes from bulk chemicals manufacturing (Figure 2-36).
Plants and Capacity
Production capacity in chemical manufacturing has grown 33% since 1997. This growth, however, is 9% less than the growth rate for the manufacturing industry as a whole (Figure 2-37).

Figure 2-35.	Capacity Utilization Trends in Chemical Manufacturing (NAICS 325)
Source:	Federal Reserve Board. 2009. "Industrial Production and Capacity Utilization: Capacity Utilization." <http://www.federalreserve.gov/datadownload/>.

Figure 2-36.	Employment Concentration in Chemical Manufacturing (NAICS 325): 2002
Source:	U.S. Census Bureau; generated by RTI International; using American FactFinder; "Sector 31: Manufacturing: Geographic Area Series: Industry Statistics for the States, Metropolitan and Micropolitan Statistical Areas, Counties, and Places: 2002." <http://factfinder.census.gov>; (July 23, 2008).

Figure 2-37.	Capacity Trends in Chemical Manufacturing (NAICS 325)
Source:	Federal Reserve Board. 2009. "Industrial Production and Capacity Utilization: Industrial Capacity." <http://www.federalreserve.gov/datadownload/>.
Firm Characteristics
In 2007, the top six companies by chemical sales had greater than $10 billion in sales. Together, their sales are greater than the next 44 highest chemical companies combined. These, however, are global companies, with a large portion of both sales and production coming from operations outside of the United States (Table 2-36). The largest chemical manufacturing company, Dow Chemicals, has 108 out of 150 manufacturing sites located outside of the United States (Dow Chemical Company, 2008).
In 2007, 58% of U.S. chemical manufacturing corporations generated net income. Including those with and without net income, chemical manufacturers had an average before-tax profit margin of 10.24%. Profitability is highest for pharmaceutical and medicine corporations (Table 2-37).
Table 2-36.	Top Chemical Producers: 2007

Chemical Sales ($millions)
% of Total Sales
% of Sales in United States
Dow Chemical
53,513
100%
35%
ExxonMobil
36,826
9%
38%
DuPont
29,218
100%
38%
Lyondell[a]
16,165
57%
80%
Chevron Phillips
12,534
100%
86%
PPG Industries[a]
10,025
90%
56%
Huntsman Chemical
9,651
100%
50%
Praxair
9,402
100%
43.5%
Air Products[a]
8,820
88%
51%
Rohm & Haas[b]
7,837
88%
49%
[a]	Percentage of sales in the United States calculated from total sales, not chemical sales.
[b]	Percentage of sales in the United States is actually percentage of sales in North America.
Source:	O'Reilly, R. 2008. "Chemicals." Standard and Poor's Industry Surveys. 176(28).
Table 2-37.	2007 Corporate Income and Profitability (NAICS 325)
Industry
Number of Corporations
Number of Corporations with Net Income
Total Receipts
($thousands)
Business Receipts
($thousands)
Before-Tax Profit Margin
After-Tax Profit Margin
Basic chemical
1,244
757
                                                                   $195,022,700
                                                                   $178,019,490
5.07%
4.10%
Resin, synthetic rubber, and artificial synthetic fibers and filaments
1,067
648
                                                                    $44,692,366
                                                                    $40,078,009
8.06%
6.33%
Pharmaceutical and medicine
1,034
611
                                                                   $381,339,258
                                                                   $317,414,432
15.63%
11.66%
Paint, coating, and adhesive
1,411
1,260
                                                                    $51,778,868
                                                                    $49,486,744
5.39%
4.02%
Soap, cleaning compound, and toilet preparation
1,862
463
                                                                   $150,506,485
                                                                   $139,836,602
9.07%
7.51%
Other chemical product and preparation
2,946
1,773
                                                                    $89,014,032
                                                                    $84,062,534
6.71%
5.27%
Chemical manufacturing
9,564
5,512
                                                                   $912,353,710
                                                                   $808,897,810
10.24%
7.89%
Source:	Internal Revenue Service, U.S. Department of Treasury. 2008b. "Corporation Source Book: Data File 2007." <http://www.irs.gov/taxstats/article/0,,id=167415,00.html>; (January, 15, 2010).
Size Distribution
The primary criterion for categorizing a business as small is number of employees, using definitions by the SBA for regulatory flexibility analyses. The data describing size standards are provided in Table 2-38 and Table 2-39. In 2002, enterprises with fewer than 500 employees accounted for 27% of employment and 15% of receipts within the chemical manufacturing industry).
Domestic Production
In the late 1990s, overall manufacturing production was growing much faster than the chemical manufacturing component (Figure 2-38). Following the recession of 2001, however, the components have moved broadly in line with one another, except for the drop in chemical manufacturing production caused by the hurricane season of 2005.
International Trade
In the year 2000, the United States moved from having a trade surplus to a trade deficit in chemical manufacturing products (Figure 2-39). This change occurred because the trade deficit in pharmaceutical manufacturing, currently at $35 billion, overwhelmed the trade surplus of bulk chemicals and other chemical manufacturing combined, currently at $22 billion.
Market Prices
Prices of goods in chemical manufacturing have accelerated rapidly in the last 2 years, having outpaced overall manufacturing since 2002 (Figure 2-40). Much of this recent acceleration seen in the industry PPI is due to the bulk chemicals segment, largely reflecting the rapid increase in fertilizer prices.
Table 2-38.	Small Business Size Standards: Chemical Manufacturing (NAICS 325)
                                     NAICS
Description
                                   Employees
                                    325110
Petrochemical Manufacturing
1,000
                                    325120
Industrial Gas Manufacturing
1,000
                                    325131
Inorganic Dye and Pigment Manufacturing
1,000
                                    325132
Synthetic Organic Dye and Pigment Manufacturing
750
                                    325181
Alkalies and Chlorine Manufacturing
1,000
                                    325182
Carbon Black Manufacturing
500
                                    325188
All Other Basic Inorganic Chemical Manufacturing
1,000
                                    325191
Gum and Wood Chemical Manufacturing
500
                                    325192
Cyclic Crude and Intermediate Manufacturing
750
                                    325193
Ethyl Alcohol Manufacturing
1,000
                                    325199
All Other Basic Organic Chemical Manufacturing
1,000
                                    325211
Plastics Material and Resin Manufacturing
750
                                    325212
Synthetic Rubber Manufacturing
1,000
                                    325221
Cellulosic Organic Fiber Manufacturing
1,000
                                    325222
Noncellulosic Organic Fiber Manufacturing
1,000
                                    325311
Nitrogenous Fertilizer Manufacturing
1,000
                                    325312
Phosphatic Fertilizer Manufacturing
500
                                    325314
Fertilizer (Mixing Only) Manufacturing
500
                                    325320
Pesticide and Other Agricultural Chemical Manufacturing
500
                                    325411
Medicinal and Botanical Manufacturing
750
                                    325412
Pharmaceutical Preparation Manufacturing
750
                                    325413
In-Vitro Diagnostic Substance Manufacturing
500
                                    325414
Biological Product (except Diagnostic) Manufacturing
500
                                    325510
Paint and Coating Manufacturing
500
                                    325520
Adhesive Manufacturing
500
                                    325611
Soap and Other Detergent Manufacturing
750
                                    325612
Polish and Other Sanitation Good Manufacturing
500
                                    325613
Surface Active Agent Manufacturing
500
                                    325620
Toilet Preparation Manufacturing
500
                                    325910
Printing Ink Manufacturing
500
                                    325920
Explosives Manufacturing
750
                                    325991
Custom Compounding of Purchased Resins
500
                                    325992
Photographic Film, Paper, Plate and Chemical Manufacturing
500
                                    325998
All Other Miscellaneous Chemical Product and Preparation Manufacturing
500
Source:	U. S. Small Business Administration (SBA). 2008. "Table of Small Business Size Standards Matched to North American Industry Classification System Codes." Effective August 22, 2008. <http://www.sba.gov/services/contractingopportunities/sizestandardstopics/size/index.html>.
Table 2-39.	Distribution of Economic Data by Enterprise Size: Chemical Manufacturing (NAICS 325)

                               Enterprises with
                                   Variable
                                     Total
                             1 to 20 Employees[a]
                              20 to 99 Employees
                             100 to 499 Employees
                             500 to 749 Employees
                             750 to 999 Employees
                           1,000 to 1,499 Employees
Firms
                                                                          9,341
                                                                          5,413
                                                                          1,974
                                                                            790
                                                                             95
                                                                             56
                                                                             71
Establishments
                                                                         13,096
                                                                          5,433
                                                                          2,208
                                                                          1,352
                                                                            250
                                                                            185
                                                                            276
Employment
                                                                        827,430
                                                                         34,838
                                                                         78,090
                                                                        113,326
                                                                         28,025
                                                                         18,119
                                                                         28,338
Receipts ($millions)
                                                                       $468,211
                                                                         $9,631
                                                                        $21,394
                                                                        $39,111
                                                                        $12,217
                                                                         $7,324
                                                                        $14,762
Receipts/firm ($thousands)
                                                                        $50,124
                                                                         $1,779
                                                                        $10,838
                                                                        $49,507
                                                                       $128,603
                                                                       $130,779
                                                                       $207,913
Receipts/establishment ($thousands)
                                                                        $35,752
                                                                         $1,773
                                                                         $9,689
                                                                        $28,928
                                                                        $48,869
                                                                        $39,587
                                                                        $53,485
Receipts/employment ($)
                                                                       $565,862
                                                                       $276,464
                                                                       $273,971
                                                                       $345,117
                                                                       $435,942
                                                                       $404,195
                                                                       $520,920
[a]	Excludes SUSB employment category for zero employees. These entities only operated for a fraction of the year.
Source:	U.S. Census Bureau. 2008. "Firm Size Data from the Statistics of U.S. Businesses: U.S. Detail Employment Sizes: 2002." <http://www.census.gov/csd/susb/download_susb02.htm>.

Figure 2-38.	Industrial Production Trends in Chemical Manufacturing (NAICS 325)
Source:	Federal Reserve Board. 2009. "Industrial Production and Capacity Utilization: Industrial Production." <http://www.federalreserve.gov/datadownload/>.

Figure 2-39.	International Trade Trends in Chemical Manufacturing (NAICS 325)
Source:	U.S. International Trade Commission. 2008. "U.S. Domestic Exports" & "U.S. Imports for Consumption." <http://dataweb.usitc.gov/scripts/user_set.asp>.

Figure 2-40.	Producer Price Trends in Chemical Manufacturing (NAICS 325)
Source:	U.S. Bureau of Labor Statistics (BLS). 2009c. Producer Price Index. Series ID: PCU325 -- 325 -- &PCUOMFG -- OMFG -- . <http://www.bls.gov/ppi/home.htm>.
Section 2 References
Benwart, S.J. 2006. "Paper & Forest Products." Standard and Poor's Industry Surveys 176(28).
Dow Chemical Company. 2008. "Transforming: The Dow Chemical Company 2007 10-K and Stockholder Summary." <http://www.dow.com/financial/2007ann/>.
Federal Reserve Board. 2009. "Industrial Production and Capacity Utilization." <http://www.federalreserve.gov/datadownload/>.
Graves, T. 2008. "Food and Nonalcoholic Beverages." Standard and Poor's Industry Surveys 176(25).
Internal Revenue Service, U.S. Department of Treasury. 2008a. "Corporation Source Book: Data File 2005." <http://www.irs.gov/taxstats/article/0,,id=167415,00.html>.
Internal Revenue Service, U.S. Department of Treasury. 2008b. "Corporation Source Book: Data File 2007." <http://www.irs.gov/taxstats/article/0,,id=167415,00.html>.
Kraft Foods Inc. 2008. "Form 10-K, Period ending December 31, 2007." <http://www.kraft.com/Investor/sec-filings-annual-report/>.
O'Reilly, R. 2008. "Chemicals." Standard and Poor's Industry Surveys. 176(28).
Standard & Poors, 2008. Standard & Poor's netAdvantage [electronic resource]. New York: Standard & Poors.
U.S. Bureau of Economic Analysis (BEA). 2008. "2002 Benchmark Input-Output Accounts: 2002 Standard Make and Use Tables at the Summary Level." Table 2. Washington, DC: BEA. U.S. Bureau of Labor Statistics. 2009a. "Producer Price Index." Series ID: PCU321 -- 321 -- & PCUOMFG -- OMFG -- . <http://www.bls.gov/ppi/home.htm>.
U.S. Bureau of Labor Statistics. 2009b. "Producer Price Index." Series ID: PCU322 - 322 -  & PCUOMFG - OMFG - . <http://www.bls.gov/ppi/home.htm>.
U.S. Bureau of Labor Statistics. 2009c. "Producer Price Index." Series ID: PCU325 -- 325 -- &PCUOMFG -- OMFG -- . <http://www.bls.gov/ppi/home.htm>.
U.S. Census Bureau. 2001. "1997 Census NAICS Definitions." <http://www.census.gov/epcd/ec97/industry/E322.HTM#def>.
U.S. Census Bureau. 2008. "Firm Size Data from the Statistics of U.S. Businesses: U.S. Detail Employment Sizes: 2002." <http://www.census.gov/csd/susb/download_susb02.htm>.
U.S. Census Bureau. "Sector 00: All Sectors: Core Business Statistics Series: Comparative Statistics for the United States and the States (1997 NAICS Basis): 2002 and 1997" (generated by RTI International using American FactFinder). <http://factfinder.census.gov>. Accessed July 8, 2008.
U.S. Census Bureau. "Sector 00: All Sectors: Core Business Statistics Series: Comparative Statistics for the United States and the States (2007 NAICS Basis): 2002 and 2007" (generated by RTI International using American FactFinder). <http://factfinder.census.gov>. Accessed January 4, 2010.
U.S. Census Bureau. "Sector 00: EC0700A1: All Sectors: Geographic Area Series: Economy-Wide Key Statistics: 2007" (generated by Kapur Energy and Environment using American FactFinder). <http://factfinder.census.gov>. Accessed December 27, 2009.
U.S. Census Bureau. "Sector 31: Annual Survey of Manufactures: General Statistics: Statistics for Industry Groups and Industries: 2006 and 2005" (generated by RTI International using American FactFinder). <http://factfinder.census.gov>. Accessed July 8, 2008.
U.S. Census Bureau. "Sector 31: EC0731I1: Manufacturing: Industry Series: Detailed Statistics by Industry for the United States: 2007" (generated by Kapur Energy and Environment using American FactFinder). <http://factfinder.census.gov>. Accessed December 27, 2009.
U.S. Census Bureau. "Sector 31: Manufacturing: Geographic Area Series: Industry Statistics for the States, Metropolitan and Micropolitan Statistical Areas, Counties, and Places: 2002" (generated by RTI International using American FactFinder). <http://factfinder.census.gov>. Accessed July 23, 2008.
U.S. Department of Energy, Energy Information Administration. 2007a. "2002 Energy Consumption by Manufacturers -- Data Tables" (Tables 3.2 and N3.2). <http://www.eia.doe.gov/emeu/mecs/mecs2002/data02/shelltables.html>.
U.S. Department of Energy, Energy Information Administration. 2007b. "2006 Energy Consumption by Manufacturers -- Data Tables" (Table 3.1). <http://www.eia.doe.gov/emeu/mecs/mecs2006/2006tables.html>.
U.S. Department of Energy, Energy Information Administration. 2008. "Assumptions to the Annual Energy Outlook 2008: With Projections for 2030." <http://www.eia.doe.gov/oiaf/aeo/assumption/>.
U.S. Department of Labor, Bureau of Labor Statistics. 2010. "Producer Price Indexes." <http://www.bls.gov/pPI/Series Id: PCU311 -- 311 -- Food Manufacturing & PCUOMFG - OMFG - Total Manufacturing>.
U.S. Environmental Protection Agency. 2002. "Profile of the Pulp and Paper Industry. Sector Notebook Project." <http://www.epa.gov/Compliance/resources/publications/assistance/
sectors/notebooks/index.html>.
U.S. International Trade Commission. 2008. "U.S. Domestic Exports" and "U.S. Imports for Consumption." <http://dataweb.usitc.gov/scripts/user_set.asp>.
U.S. Small Business Administration. 2008. "Table of Small Business Size Standards Matched to North American Industry Classification System Codes." <http://www.sba.gov/services/
contractingopportunities/sizestandardstopics/size/index.html>.

Engineering Cost Analysis
We provide an overview of the engineering cost analysis used to estimate the additional private expenditures industry may make in order to comply with the rule. A detailed discussion of the methodology used to estimate cost impacts is presented in Appendices C and D.
Several provisions in the rule and the data used to generate regulatory impacts analysis between proposal and the final rule. As a result, the costs of the RIA analysis decreased from the proposal to final analysis.
The major regulatory provisions resulting in a reduction in the cost estimates were:
Consolidating the biomass and coal subcategories into a single solid fuel subcategory for fuel-based HAP and HAP surrogates (Hg, HCl, PM). This provision has reduced the number of biomass units expected to require HCl control in order to meet the emission limits.
Creating a hybrid grate/suspension category for combustion based HAP and HAP surrogates to address boilers that express unique design features to handle the combustion of fuels with a very high moisture content. This increased the CO emission level for this subcategory which resulting in less units needing CO catalyst or advanced combustion controls in order to meet the limit.
Creating a limited use subcategory. This subcategory removes the control, testing and monitoring costs for 134 large boilers firing solid and liquid fuels that operate less than 876 hours per year.
Creating a fuel gas specification to allow additional gaseous fuels to qualify for the gas 1 subcategory. Based on the data in the record, most fuels are expected to meet the mercury specification and will qualify for a work practice standard instead of meeting emission limits. The number of gas 2 units estimated to meet emission limits at proposal was and this has been reduced to an estimated 71 units in the final rule, compared with an estimated 199 gas 2 units in the proposed analysis.
Removing the CO CEMS monitoring requirement for units with a heat input capacity. Although this change in monitoring is offset in part by O2 parameter monitoring requirement.
Removing duplicative monitoring requirements for PM CEMS, opacity monitoring and bag leak detection monitors. The proposal had included requirements to measure more than one of these parameters and this duplication has been removed from the final rule.
Reducing testing frequency for dioxin/furan emissions. The final rule requires a one-time initial test instead of annual testing.
The major data analysis elements resulting in a reduction in cost were:
As discussed in detail in the "Handling and Processing of Corrections and New Data in the EPA ICR Databases" memorandum, several new data submissions and corrections to existing entries were received from the public comment process. These new data incorporated into the revised MACT floor, baseline emission, and emission reduction analysis.
The criteria for considering data in the MACT floor analysis were revised to reduce the low bias impact from tests conducted during co-firing configurations. In the final rule, the test had to be fired with at least 90 percent of its heat input belonging to the same subcategory for existing sources and 100 percent of its heat input belonging to the same subcategory for new sources. At proposal, data were considered relevant for consideration in the MACT floor analysis if at least 10 percent of its heat input belonged to the same subcategory. This modified the make-up of the top performing units and the resulting.
The CO emission data analysis was revised to incorporate measurement error resulting from calibration error, system bias, and drift requirements using the reported instrument calibration span as the basis for estimating the error. This increased CO emission levels in several cases in order to better incorporate this error in the final standard.
Several elements of the MACT floor analysis statistical approach were incorporated from public commenters, which resulted in increased emission limits in some cases. The memorandum "Revised MACT Floor Analysis (2011) for the Industrial, Commercial, and Institutional Boilers and Process Heaters National Emission Standards for Hazardous Air Pollutants -- Major Source" details the specific statistical modifications that were made in the final analysis.
Major Sources
To estimate the national cost impacts of the proposed rule for existing sources, EPA developed average baseline emission factors for each fuel type/control device combination based on the emission data obtained and contained in the Boiler MACT emission database. If a unit reported emission data, we assigned its unit-specific emission data as its baseline emissions. For units that did not report emission data, but similar units at the same facility reported data, we assigned the average emission factors from similar units at the same facility to the baseline emissions of the unit. For all other units that did not report emission data, we assigned the appropriate emission factors to each existing unit in the inventory database, based on the average emission factors for boilers with similar fuel, design, control devices. We then compared each unit's baseline emission factors to the proposed MACT floor emission limit to determine if control devices were needed to meet the emission limits. The control analysis considered fabric filters and activated carbon injection to be the primary control devices for mercury control, electrostatic precipitators for units meeting mercury limits but requiring additional control to meet the PM limits, wet scrubbers and dry injection fabric filter combinations to meet the HCl limits, tune-ups, replacement burners, combustion controls, and CO oxidation catalyst for CO and organic HAP control. We identified where one control device could achieve reductions in multiple pollutants, for example a fabric filter was expected to achieve both PM and mercury control in order to avoid overestimating the costs. We also included costs for testing and monitoring requirements contained in the proposed rule. The resulting total national cost impact of the proposed rule is 5.1 billion dollars in capital expenditures and 1.8 billion dollars per year in total annual costs. Considering estimated fuel savings resulting from work practice standards and combustion controls, the total annualized costs are reduced to 1.4 billion. The total capital and annual costs include costs for control devices, work practices, testing and monitoring. Table 3-1 of this shows the capital and annual cost impacts for each subcategory. Costs include testing and monitoring costs, but not recordkeeping and reporting costs.
Table 3-1.	Summary of Capital and Annual Costs for New and Existing Major Sources[a]
Source
Subcategory
Estimated/ Projected No. of Affected Units
Capital Costs
(million)
Annualized Cost
(million per yr)[a]
Annualized Cost
(million per yr)[b]
 Existing Units
 Solid units
                                     1,014
                                     $2,182
                                      $873
                                      $846

 Liquid units
                                      713
                                     $2,656
                                      $833
                                      $828

 Non-Continental Liquid Units
                                       27
                                      $86
                                      $24
                                      $21

 Gas 1 units
                                     10,797
                                      $70
                                      $31
                                     $(325)

 Gas 1 Metallurgical Furnaces
                                      694
                                      $4.5
                                      $2.0
                                      $(6)

 Gas (other) units
                                      118
                                      $79
                                      $39
                                      $37

 Limited Use
                                      477
                                      $3.1
                                      $1.3
                                     $(25)
 Energy Audit

New Units
 ALL

                                       27
                                      $27

 Total Existing Costs
                                     13,840
                                     $5,081
                                     $1,803
                                     $1,403

 Solid units
                                       0
                                       0
                                       0
                                       0

 Liquid units
                                       13
                                      $21
                                      $6.1
                                      $6.1

 Gas 1 units
                                       34
                                      $0.2
                                      $0.1
                                       0

 Total New Costs
                                       47
                                     $21.2
                                      $6.1
                                      $6.1
[a]	Does not include fuel savings.
[b]	Includes Fuel Savings.
Using Department of Energy (DOE) projections on fuel expenditures, the number of additional boilers that could be potentially constructed was estimated. A detailed description of how the DOE data was used to project new units expected to be constructed is discussed in the memorandum, "Revised New Unit Analysis Industrial, Commercial, and Institutional Boilers and Process Heaters National Emission Standards for Hazardous Air Pollutants -- Major Source (Gibson et al., 2011)." This analysis consisted of two steps, (1) calculating the predicted percent change in fuel consumption in the industrial and commercial/institutional sectors between the baseline year (2008) of the major source boiler and process heater inventory and the target years of the projection (2013 and 2015); and (2) calculating the expected fuel consumption in future in boilers and heaters and predicting the number of new units required to fire a particular fuel. The resulting total national cost impact of the proposed rule in the 3rd year is 21 million dollars in capital expenditures and 6 million dollars per year in total annual costs, when considering a 1 percent fuel savings.
The fuel savings are based on an estimated savings of 1 percent from tuning the boiler to adjust oxygen levels and inspecting the flame pattern, consistent with manufacturer's specifications. For units with an automatic air to fuel ratio control, it also includes inspection and calibration of that system. It is primarily the tune-ups that are expected to obtain these fuel savings, but approximately 440 units are estimated to retrofit their units with linkageless boiler management systems in order to reduce CO emissions and improve boiler efficiency. Fuel savings of one percent was selected for the basis of the fuel savings analysis. The fuel savings was estimated for units firing gaseous, liquid, and coal fuels only. Biomass fuels were not considered in the fuel savings analysis since it is difficult to establish a market value for the various biomass fuel streams
The estimated fuel savings between proposal and promulgation are similar. At proposal, fuel savings from existing units was estimated to be $376 million, this assumed that 12,887 units would install combustion controls or conduct a tune-up in order to meet the CO emission limit or comply with a work practice standard. At the final rule, the fuel savings was estimated to be $428 million, based on 13,279 units installing combustion controls or conducting a work practice standard. The difference resulted from two main changes:
First, more units were added to the inventory, based on comments received from additional facilities that were left out of the analysis at the proposal. Many of these additional units will conduct a tune-up or install combustion controls in order to meet the work practice or CO emission limit.
Second, the baseline emission and emission limits have been modified, which have in turn increased some of the limits for CO. As a result, the assumptions associated with how many units will conduct a tune-up or install combustion controls in order to meet the emission limits have changed. At proposal, 458 units were estimated to install a linkageless boiler management system, one boiler was expected to install a replacement burner, and 12,428 boilers were estimated to conduct a tune-up. In the final analysis, 440 units were estimated to install a linkageless boiler management system, 1 unit was expected to install a replacement LNB, and 12,838 boilers were expected to conduct a tune-up.
Third, the treatment of gas 2 units has been modified to use a fuel gas specification. This is expected to increase the number of gas units eligible for a work practice standard instead of an emission limit. As a result of this change more of these units are expected to conduct a tune-up to fulfill the requirements of the work practice standard.
Although the age of the boiler can affect combustion efficiency, periodic tune-ups are expected to improve the combustion units of both new and existing units. Even new units are susceptible of being operated at air-to-fuel ratios that are not optimal. EPA adopted the same fuel savings assumptions for both new and existing units. The analysis estimates that if the annual tune-up provisions are incorporated, a savings of one percent would be achieved on an annual basis when compared to a new boiler installation that does not conduct routine tune-ups. The analysis projects the construction of 6,424 new liquid fired boilers at area sources, as opposed to 155 new coal units and 200 biomass units, respectively. All of these boilers are expected to conduct a tune-up in order to meet the requirements of the final rule. Liquid-fired units have the greatest energy cost on a per mmBtu basis of any of the subcategories, on which the fuel savings are based. For residual fuels, the energy cost was calculated to be $12.96/mmBtu. Distillate fuels were found to have an energy cost of either $22.66 for commercial units, units or $23.23 for industrial units. The combination of the large number of projected units in the liquid subcategory and the high energy cost resulted in the fuel savings shown.
A discussion of the methodology used to estimate cost impacts is presented in "Revised Methodology for Estimating Cost and Emission Impacts for Industrial, Commercial, and Industrial Boilers and Process Heaters National Emission Standards for Hazardous Air Pollutants -- Major Source (2011)" in an Appendix.
Area Sources
To estimate the national cost impacts of the proposed rule for existing sources, EPA developed several model boilers and determined the cost of control for these model boilers. The EPA assigned a model boiler to each existing unit based on the fuel, size, and current controls. The analysis considered all air pollution control equipment currently in operation at existing boilers. Model costs were then assigned to all existing units that could not otherwise meet the proposed standards. The resulting total national cost impact of the final rule for existing units is $487 million dollars in total annualized costs after considering fuel savings from efficiency improvements. The total annualized costs for installing controls, conducting an annual tune-up and an energy assessment, and implementing testing and monitoring requirements, is $535 million. Table 3-2 of this preamble shows the total annualized cost impacts for each subcategory.
Table 3-2.	Summary of Annual Costs for New and Existing Area Sources
Source
Subcategory
Estimated/
Projected No. of Affected Units
Total Annualized Cost (million per yr)[a]
Existing Units
Coal
3,710
$37

Biomass
10,958
$24

Oil
168,003
$374
Facility Energy Audit
All

$52
New Units[b]
Coal
155
$0.4

Biomass
200
$2.6

Oil
6,424
$45
[a]	TAC does not include fuel savings from improving combustion efficiency.
[b]	Impacts for new units assume the number of units online in the first 3 years of this rule (2010 to 2013).
EPA also estimated the number of additional boilers that could be potentially constructed. The resulting total national cost impact of the final rule on new sources by the 3rd year, 2013, is $48 million dollars in total annualized costs. When accounting for a 1 percent fuel savings resulting from improvements to combustion efficiency, the total national cost impact on new sources is ($3.6 million). The size of the fuel savings estimate resulted primarily from the large number of new liquid fired boilers, for which the cost of energy is the highest on a per mmBtu basis. This large energy cost created to a correspondingly high cost savings with the increased combustion efficiency.
Section 3 References
Gibson et al., 2011. Revised New Unit Analysis Industrial, Commercial, and Institutional Boilers and Process Heaters National Emission Standards for Hazardous Air Pollutants -- Major Source.

Economic Impact Analysis
EPA prepares an RIA to provide decision makers with a measure of the social costs of using resources to comply with a program (EPA, 2000). The social costs can then be compared with estimated social benefits (as presented in Section 6). As noted in EPA's (2010) Guidelines for Preparing Economic Analyses, several tools are available to estimate social costs and range from simple direct compliance cost methods to the development of a more complex market analysis that estimates market changes (e.g., price and consumption) and economic welfare changes (e.g., changes in consumer and producer surplus).
The Office of Air Quality Planning and Standards (OAQPS) adopted a standard market analysis as described in the Office's resource manual (EPA, 1999). The approach uses a single-period multimarket partial equilibrium model to compare pre-policy market baselines with expected post-policy market outcomes. The analysis' time horizon is the short run; some production factors are fixed and some are variable and is distinguished from the very short run where all factors are fixed and producers cannot adjust inputs or outputs (EPA, 1999, 5-6). The time horizon allows us to capture important transitory stakeholder outcomes. Key measures in this analysis include industry-level changes in price levels, production and consumption, jobs, international trade, and social costs (changes in producer and consumer surplus).
Partial Equilibrium Analysis (Multiple Markets)
The partial equilibrium analysis develops a market model that simulates how stakeholders (consumers and industries) might respond to the additional regulatory program costs. In this section, we provide an overview of the economic model. Appendix A provides additional details on the behavioral assumptions, data, parameters, and model equations.
Overview
Although several tools are available to estimate social costs, current EPA guidelines suggest that multimarket models "...are best used when potential impacts on related markets might be considerable" and modeling using a computable general equilibrium model is not available or practical (EPA, 2010, p. 9-21). Other guides for environmental economists offer similar advice (Berck and Hoffmann, 2002; Just, Hueth, and Schmitz, 2004). Multimarket models focus on "short-run" time horizons and measure a policy's near-term or transition costs (EPA, 1999). Note that the multimarket model is not designed to directly estimate employment impacts. Job effects are discussed later, in section <IP_ADDRESS>. The multimarket model contains the following features:
Industry sectors and benchmark data set
100 industry sectors
a single benchmark year (2010)
industry employment data
Economic behavior
industries respond to regulatory costs by changing production rates
market prices rise and fall to reflect higher energy and other non-energy material costs and changes in demand
customers respond to these price increases and consumption falls
Model scope
100 sectors are linked with each other based on their use of energy and other non-energy materials. For example, the construction industry is linked with the petroleum, cement, and steel industries and is influenced by price changes that occur in each sector. The links allow EPA to account for indirect effects the regulation has on related markets.
production adjustments influence employment levels
international trade (imports/exports) responds to domestic price changes
Model time horizon ("short run") for a single period (2014)
fixed production resources (e.g., capital) lead to an upward-sloping industry supply function
firms cannot alter input mixes; there is no substitution among intermediate production inputs
price of labor (i.e., wage) is fixed
investment and government expenditures are fixed
Economic Impact Analysis Results
Market-Level Results
Market-level impacts include price and quantity adjustments including the changes in international trade (Figure 4-1). Under the major source NESHAP, the Agency's economic model suggests the average national price increases for industrial sectors are less than 0.01%, while average annual domestic production may fall by less than 0.01%. Because of higher domestic prices, imports slightly rise. Market-level effects for the area source NESHAP are smaller when compared to the major source rule; average price, production, and import changes are less than 0.01%. Industrial sector details are provided in Appendix B.
--------------------------------------------------------------------------------

Figure 4-1.	Market-Level Changes by Source and Option

Social Cost Estimates Major Source Rule
In the near term, the Agency's economic model suggests that industries are able to pass on $0.5 billion (2008$) of the major source rule's costs to U.S. households in the form of higher prices (Table 4-1). Existing U.S. industries' surplus falls by $1.4 billion and the net U.S. loss in aggregate is $1.9 billion. As U.S. prices rise, other countries are affected through international trade relationships. The price of goods produced in the United States increase slightly and domestic production declines, replaced to a certain degree by imports; the model estimates a net gain of less than $0.1 billion to foreign companies. As shown in Figure 4-2, the U.S. surplus losses are concentrated in other services (23 percent), lumber, paper, and printing (16 percent), energy industries (15 percent), and chemicals (13 percent).
Table 4-1.	Distribution of Social Costs Major Sources (billion, 2008$): 2014
Method

Selected Option
Alternative Option
Partial Equilibrium Model (Multiple Markets)

  Change in U.S. consumer surplus

−$0.530
−$0.600
  Change in U.S. producer surplus

−$1.360
−$1.730
  Change in U.S. surplus

−$1.890
−$2.330
Direct Compliance Costs Method (Not Modeled)

Total annualized costs, new major sources[a]

−$0.006
−$0.920
Fuel savings, existing major sources

$0.430
$0.400
Fuel savings, new major sources[a]

                               Less than $0.001
                               Less than $0.001
Net Change in U.S. Surplus[b]

−$1.470
−$1.940
  Net change in rest of world surplus

$0.060
$0.090
  Net change in total surplus

−$1.410
−$1.850
[a]	Estimates for the Alternative option are assumed to be the same as the Selected option.
[b]	U.S. surplus changes add the partial equilibrium model estimates and the direct compliance estimates not included in the partial equilibrium model. For example, the selected option's net change in U.S. surplus is $1.890 + (0.430  -  0.006) =  - $1.470 billion.

Figure 4-2.	Distribution of U.S. Surplus Changes by Sector: Major Sources

The Agency also considered other elements of the engineering cost analysis that could not be modeled within the multimarket model (e.g., fuel savings benefits [existing and new major sources] and total annualized compliance costs [new major sources]). The net effect of the adjustments is a U.S. surplus loss estimate of $1.5 billion.
Social Cost Estimates Area Source Rule
In the near term, the Agency's economic model suggests that industries are able to pass on $0.2 billion (2008$) of the area source rule's costs to U.S. households in the form of higher prices (Table 4-2). Existing U.S. industries' surplus falls by $0.3 billion and the net loss for U.S. stakeholders is $0.5 billion. As U.S. prices rise, other countries are affected through international trade relationships. Households that buy U.S. exports pay higher prices and purchase fewer U.S. produced goods. Other countries that that sell goods to the United States benefit; the model estimates a net rest of the world gain of less than $0.01 billion. As shown in Figure 4-3, the U.S. surplus losses are concentrated in the other services (82 percent ). Other services include information, finance and insurance, real estate, professional services, management, administrative services, education, health care, arts, accommodations, and public services.
Table 4-2.	Distribution of Social Costs Area Sources (billion, 2008$): 2014
Method

Final MACT/GACT Approach
Proposed MACT Approach
Partial Equilibrium Model (Multiple Markets)

  Change in U.S. consumer surplus

−$0.240
−$0.300
  Change in U.S. producer surplus

−$0.250
−$0.330
  Change in U.S. surplus

−$0.490
−$0.630
Direct Compliance Costs Method (Not Modeled)

Total annualized costs, unknown existing area sources

−$0.003
−$0.008
Total annualized costs, new area sources

−$0.050
−$0.270
Fuel savings, existing and new area sources)

$0.050
$0.050
Net Change in U.S. Surplus a

−$0.490
−$0.850
  Net change in rest of world surplus

$0.004
$0.005
  Net change in total surplus

−$0.480
−$0.850
[a]	U.S. surplus changes add the partial equilibrium model estimates and the direct compliance estimates not included in the partial equilibrium model. For example, the Final MACT/GACT net change in U.S. surplus is $0.490 + (0.050  -  0.050 - 0.003) =  - $0.490 billion.

Figure 4-3.	Distribution of Total Surplus Changes by Sector: Area Sources
[a]	Other services include information, finance and insurance, real estate, professional services, management, administrative services, education, health care, arts, accommodations, and public services.
The Agency also considered other elements of the engineering cost analysis that could not be modeled within the multimarket model (e.g., fuel-savings benefits [existing and new area sources] and total annualized compliance costs [unknown existing and new area sources]). The net effect of the adjustments is a total surplus loss estimate of $0.5 billion.
Job Effects
<IP_ADDRESS>.1 Background
In addition to estimating this rule's social costs and benefits, EPA has estimated the employment impacts of the final rule based on Morgenstern, Pizer and Shih (2002).  A stand-alone analysis of jobs is not included in a standard cost-benefit analysis.   Executive Order 13563 however, states, "Our regulatory system must protect public health, welfare, safety, and our environment while promoting economic growth, innovation, competitiveness, and job creation" (emphasis added).  Therefore, we have provided this analysis to inform the discussion of job impacts.   EPA continues to explore the relevant theoretical and empirical literature and to seek public comments in order to ensure that such estimates are as accurate as possible.
 From an economic perspective labor is an input into producing goods and services; if regulation requires that more labor be used to produce a given amount of output, that additional labor is reflected in an increase in the cost of production.  Moreover, when the economy is near full employment, jobs created in one industry as a result of regulation displace jobs in other industries. On the other hand, in periods of high unemployment, an increase in labor demand due to regulation may have a stimulative effect that results in a net increase in overall employment. With significant numbers of workers unemployed, the opportunity costs associated with displacing jobs in other sectors are likely to be much smaller.
For this reason, this RIA looks carefully at a subset of the employment consequences of this final rule. It is important to note that EPA has estimated only a portion of the employment effects -- namely, those associated with the direct impacts on employment in the regulated industry. A full analysis would include estimates of the direct impacts on other industries (e.g. suppliers of pollution control equipment) as well as the indirect and induced effects on employment throughout the economy as a whole in response to changes in output and factor prices.
We expect that the rule's direct impact on employment will be small. The Agency's analysis does not include all the direct effects of this regulation.  For example, EPA is currently exploring ways to quantify the job impacts in the pollution control sector that result from these and future regulations.  Furthermore, we have not quantified the rule's indirect or induced impacts. What follows is an overview of the various ways that environmental regulation can affect employment, followed by a discussion of the estimated impacts of this rule. An environmental regulation can affect the demand for labor in several ways:

Direct Effects:
Increased prices for industry output may reduce the demand for labor: Environmental regulations increase production costs causing firms to increase prices; higher prices reduce consumption (and production), thus reducing demand for labor within the regulated industry.  The extent of this effect will depend on the extent of the price increase and the elasticity of the demand curve.
Regulated firms demand labor workers to operate and maintain pollution controls within those firms.  Once pollution control equipment is installed, regulated firms may hire workers to operate and maintain it, just as they would hire workers to produce more output. The extent of this effect will depend in part on whether the operation and maintenance of pollution controls are labor intensive
Increased demand for pollution control equipment and services: When a regulation requiring emission reductions is promulgated, affected sources must immediately place orders for pollution control equipment and services. Filling these orders will require a scale-up in manufacturing of pollution control equipment, performance of engineering analyses and significant expenditures for assembly and installation of such equipment. These activities will be job-creating during the period before firms must comply with the rule, at which point all pollution control equipment must be installed and operating.

          .
 Indirect and Induced Effects:
Environmental regulations create employment in many basic industries.  In addition to the increase in employment in the environmental protection industry (increased orders for pollution control equipment), environmental regulations also create employment in industries that provide intermediate goods to the environmental protection industry.  For example, capital expenditures to reduce air pollution involve the purchase of abatement equipment. The equipment manufacturers, in turn, order steel, tanks, vessels, blowers, pumps, and chemicals to manufacture and install the equipment. On the other hand, demand for labor will decrease in  sectors that supply inputs for, or demand the outputs of the regulated industry. None of these impacts is accounted for in the current analysis. We also do not estimate employment impacts "induced" by increased output of the environmental protection sector, or decreased output of the regulated sectors.

<IP_ADDRESS>.2 Methodology and Results
The estimated impacts of the final rule on employment in affected sources are based on an empirically derived relationship reported in Morgenstern, Pizer and Shih (2002), a peer-reviewed, published study. Estimates of the employment impacts of the capital investments and other non-recurring requirements of the rule are derived from the cost analysis developed for the regulation.
Morgenstern, Pizer and Shih (2002): Overview of Conceptual Approach

The fundamental insight of Morgenstern, Pizer and Shih (2002) is that environmental regulations can be understood as requiring regulated firms to add a new output (environmental quality) to their product mixes. Although legally compelled to satisfy this new demand, regulated firms have to finance this additional production with the proceeds of sales of their other (market) products. Satisfying this new demand requires additional inputs, including labor, and may alter the relative proportions of labor and capital used by regulated firms in their production processes.
Thus, Morgenstern et al., decompose the overall effect of a regulation on employment into the following three subcomponents:

The "Demand Effect": higher production costs raise market prices,reducing consumption (and production), thereby reducing demand for labor within the regulated industry [;]
The "Cost Effect": As production costs increase, plants use more of all inputs, including labor, to maintain a given level of output.  For example, in order to reduce pollutant emissions while holding output levels constant, regulated firms may require additional labor;
The "Factor-Shift Effect": Regulated firms' production technologies may be more or less labor intensive after complying with a regulation (i.e., more/less labor is required per dollar of output).
Decomposing the overall employment impact of environmental regulation into three subcomponents clarifies the conceptual relationship between environmental regulation and employment in regulated sectors, and permitted Morgenstern, et al. to provide an empirical estimate of the net impact. For present purposes, the net effect is of particular interest, and is the focus of our analysis.
Morgenstern, Pizer and Shih (2002): Empirical Results
Morgenstern et al. empirically estimate a model for four highly polluting, regulated industries (pulp and paper, plastics, petroleum refining and steel) to examine the effect of higher abatement costs from regulation on employment.  They conclude that increased abatement expenditures generally do not cause a significant change in employment. More specifically, their results show that, on average across the four industries, each additional $1 million spending on pollution abatement results in a (statistically insignificant) net increase of 1.55 (+/- 2.24) jobs. "In plastics and petroleum, [Morgenstern et al] find that increased regulation raises employment by a small but statistically significant amount:  6.9 and 2.2 jobs per million dollars of regulatory expense, respectively.  In pulp and paper and steel, the estimates are even smaller and insignificantly different from zero."  By applying these estimates to pollution abatement costs, we estimated the net employment effect for major and areas sources to range from -4,100 to +8,500 jobs in the directly affected sectors with a central estimate of +2,200 (Table 4-3). [,]

Table 4-3.	Employment Impacts Using Morgenstern, Pizer, Shih (2002) (FTE)

                                 Demand Effect
                                  Cost Effect
                              Factor Shift Effect
                                      Net
                                     Effect
Change in Full-Time Jobs per Million Dollars of Environmental Expenditure[a]
                                    −3.56
                                     2.42
                                     2.68
                                     1.55
Standard Error
                                     2.03
                                     1.35
                                     0.83
                                     2.24
EPA estimate for Major Sources Rule
                                   −3,900
                               −8,200 to +500
                                     2,600
                                +900 to +4,400
                                     2,900
                                  0 to +5,800
                                     1,700
                              −3,100 to +6,500
EPA estimate for Area Source Rule
                                   −1,200
                               −2,600 to +100
                                      800
                                +300 to +1,400
                                      900
                                  0 to +1,800
                                      500
                              −1,000 to +2,000
EPA estimate for both Rules [b]
                                   −5,100
                               −10,800 to +600
                                     3,500
                               +1,100 to +5,800
                                     3,900
                                   0 to 7,700
                                     2,200
                              −4,100 to +8,500
[a] Estimates from Morgenstern, Pizer, and Shih (2002) expressed in 2010 dollars using the GDP price deflator (see footnote 7).
[b]Totals may not add due to independent rounding.

Figure 4-3.  Employment Impacts Using Morgenstern, Pizer, Shih (2002) (1,000 FTEs)

Limitations of the Analysis
Although the Morgenstern et al. paper provides information about the potential job effects of environmental protection programs, there are several caveats associated with using those estimates to analyze the final rule. First, the Morgenstern et al. estimates presented in Table 4-3 and used in EPA's analysis represent the weighted average parameter estimates for a set of manufacturing industries (pulp and paper, plastics, petroleum, and steel).  This set of industries only partially overlaps with the sectors affected by this rule. Second, relying on Morgenstern et al. implicitly assumes that estimates derived from 1979 - 1991 data are still applicable.  Third, the methodology used in Morgenstern et al. assumes that regulations affect plants in proportion to their total costs. In other words, each additional dollar of regulatory burden affects a plant by an amount equal to that plant's total costs relative to the aggregate industry costs. By transferring the estimates, EPA assumes a similar distribution of regulatory costs by plant size and that the regulatory burden does not disproportionately fall on smaller or larger plants.  Further, Morgenstern et al. does not include most indirect effects and all induced effects.

Small Entity Analyses
The RFA as amended by SBREFA generally requires an agency to prepare a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements under the Administrative Procedure Act or any other statute, unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities (SISNOSE). Small entities include small businesses, small governmental jurisdictions, and small not-for-profit enterprises. EPA assessed the potential small entity economic impacts using a screening analysis. After reviewing screening analysis results, EPA has determined it cannot certify that the rules will not have a SISNOSE and presumes that both rules are not eligible for certification under the RFA as amended by SBREFA.
Small Entity Screening Analysis
Small Businesses
The sectors covered by the rule were identified through lists of small entities at major and area sources provided by the engineering analysis. Table 5-1 provides a list of the sectors affected (3-digit NAICS) and the range of SBA size definitions.
Representative Small Business Analysis Using Census Statistics of U.S. Businesses
For each 3-digit NAICS code, the SUSB provides national information on the distribution of economic variables by industry and enterprise size (U.S. Census Bureau, 2008). The Census Bureau and the Office of Advocacy of the SBA supported and developed these files for use in a broad range of economic analyses. Statistics include the total number of establishments and receipts for all entities within an industry; however, only a subset of entities will be covered by the rule. SUSB also provides statistics by enterprise employment and receipt size.
  The Census Bureau's definitions used in the SUSB are as follows:
Establishment: An establishment is a single physical location where business is conducted or where services or industrial operations are performed.
Receipts: Receipts (net of taxes) are defined as the revenue for goods produced, distributed, or services provided, including revenue earned from premiums, commissions and fees, rents, interest, dividends, and royalties. Receipts exclude all revenue collected for local, state, and federal taxes.
Table 5-1.	Affected Sectors and Size Standards
2007 NAICS
Description
Size Standard
(Effective August 22, 2008)
                                      211
Oil and Gas Extraction
500 employees
                                      212
Mining (except Oil and Gas)
500 employees
                                      221
Utilities
[a]
                                      311
Food Manufacturing
500 to 1,000 employees
                                      312
Beverage and Tobacco Product Manufacturing
500 to 1,000 employees
                                      313
Textile Mills
500 to 1,000 employees
                                      321
Wood Product Manufacturing
500 employees
                                      322
Paper Manufacturing
500 to 750 employees
                                      323
Printing and Related Support Activities
500 employees
                                      324
Petroleum and Coal Products Manufacturing
Typically 500 to 1,500 employees
                                      325
Chemical Manufacturing
500 to 1,000 employees
                                      326
Plastics and Rubber Products Manufacturing
Typically 500 to 1,000 employees
                                      327
Nonmetallic Mineral Product Manufacturing
500 to 1,000 employees
                                      331
Primary Metal Manufacturing
500 to 1,000 employees
                                      332
Fabricated Metal Product Manufacturing
500 to 1,500 employees
                                      335
Electrical Equipment Manufacturing
500 to 1,000 employees
                                      336
Transportation Equipment Manufacturing
500 to 1,000 employees
                                      337
Furniture and Related Product Manufacturing
500 employees
                                      339
Miscellaneous Manufacturing
500 employees
                                      423
Merchant Wholesalers, Durable Goods
100 employees
                                      493
Warehousing and Storage
$25.5 million in annual receipts
                                      562
Waste Management and Remediation Services
Typically $7 to $14 million in annual receipts
                                      611
Educational Services
Typically $7 to $35.5 million in annual receipts
[a]	NAICS codes 221111, 221112, 221113, 221119, 221121, 221122: A firm is small if, including its affiliates, it is primarily engaged in the generation, transmission, and/or distribution of electric energy for sale and its total electric output for the preceding fiscal year did not exceed 4 million megawatt hours.
Enterprise: An enterprise is a business organization consisting of one or more domestic establishments that were specified under common ownership or control. The enterprise and the establishment are the same for single-establishment firms. Each multi-establishment company forms one enterprise -- the enterprise employment and annual payroll are summed from the associated establishments. Enterprise size designations are determined by the total employment of all associated establishments.
Because the SBA's business size definitions (SBA, 2008) apply to an establishment's "ultimate parent company," we assumed in this analysis that the "enterprise" definition above is consistent with the concept of ultimate parent company that is typically used for SBREFA screening analyses, and the terms are used interchangeably.
The analysis generated a set of establishment sales tests (represented as cost-to-receipt ratios) for NAICS codes associated with sectors listed in Table 5-2. Although the appropriate SBA size definition should be applied at the parent company (enterprise) level, we can only compute and compare ratios for a model establishment owned by an enterprise within an SUSB size range (employment or receipts). Using the SUSB size range helps us account for receipt differences between establishments owned by large and small enterprises and also allows us to consider the variation in small business definitions across affected industries. Using establishment receipts is also a conservative approach, because an establishment's parent company (the "enterprise") may have other economic resources that could be used to cover the costs of the regulatory program.
Table 5-2.	Major Sources: Sales Tests Using Small Companies Identified in the Combustion Survey
Sample Statistic
Proposal
Selected Option
Alternative Option
Mean
4.9%
4.0%
3.8%
Median
0.4%
0.2%
0.4%
Maximum
72.9%
59.8%
31.4%
Minimum
<0.01%
<0.01%
<0.01%
Ultimate parent company observations
                                      50
50
                                      50
Ultimate parent companies with sale tests exceeding 3%
                                      14
8
                                      13

For each representative establishment in the SUSB data, we developed a range of facility-level cost numerators based on the engineering cost analysis. For major sources, we used the maximum and minimum small entity facility-level costs observed within each 3-digit NAICS code. For area sources, we were limited to two representative small entity facility-level costs (approximately $27,000,000 to $43,000). Using these cost data and the Census estimates of average establishment receipts, a substantial number of SUSB NAICS/enterprise categories have ratios over 3% (Figure 5-1).

Figure 5-1.	Share of NAICS/Enterprise Employment Categories (<500 employees) with Sales Tests Exceeding 3%

Additional Small Business Analysis Using Sample of Small Businesses Identified in Combustion Facility Survey
Next, we performed a more detailed analysis that compares the Census SUSB representative small entity results with a firm-specific sample of major small private enterprises. In this approach, we identified a sample of survey facility names listed as small, traced the ultimate parent company name to verify the facility was owned by a small business, and collected the most recent parent company sales and employment figures. As Table 5-2 shows, the average cost-to-sales ratios for small major source companies are above 3%. The median ratios are below one percent.
Small Governmental Jurisdictions and Not-for-Profit Enterprises
In addition to the private sector, this rule also covers sectors that include entities owned by small and large governments and not-for-profit enterprises. Given the uncertainty and data limitations associated with identifying and appropriately classifying these entities, we computed a "revenue" test, where the annualized compliance cost is a percentage of annual revenues (U.S. Census, 2005a and b).
Compliance costs were estimated for model facilities for major and area sources for multiple options. A summary of the compliance costs used for the small entity analysis follows:
Major Sources:
Selected option: $1.1 million (median cost small public facility)
Alternative Option: $0.9 million (median cost small public facility)
Area Sources:
Final MACT/GACT Approach and Proposed MACT Approach:
Other Public: $45,000
Hospital: $11,300
Schools: $4,500
Churches: $2,200
From the 2002 Census (in 2008 dollars), the average revenue for small governments (counties and municipalities with populations fewer than 10,000) are $3 million per entity, and the average revenue for local governments with populations fewer than 50,000 is $7 million per entity. Churches are assumed to have an operation budget of $150,000.
Representative small major public entities would have cost-to-revenue ratios above 10 percent. The following types of representative small area source facilities would have cost-to-revenue ratios exceeding 1 percent but below 3 percent:
Final MACT/GACT Approach: other public (ratio > 1.7 percent) and churches (ratio = 1.5 percent)
Proposed MACT Approach: other public (ratio > 1.7 percent) and churches (ratio = 1.5 percent)
Final Regulatory Flexibility Analysis (FRFA): Major Sources
Pursuant to section 603 of the RFA, EPA prepared an initial regulatory flexibility analysis (IRFA) for the proposed rule and convened a Small Business Advocacy Review Panel to obtain advice and recommendations of representatives of the regulated small entities. A detailed discussion of the Panel's advice and recommendations is found in the final Panel Report (Docket ID No. EPA-HQ-OAR-2002-0058-0797). A summary of the Panel's recommendations is also presented in the preamble to the proposed rule at 75 FR 32044-32045 (June 4, 2010). In the proposed rule, EPA included provisions consistent with four of the Panel's recommendations. As required by section 604 of the RFA, we also prepared a final regulatory flexibility analysis (FRFA) the final rule.
Need for Rule and Objectives
The rule is intended to reduce emissions of HAP as required under section 112 of the CAA. Section II.A of the final rule's preamble describes the reasons that EPA is finalizing this action.
Summary of the Significant Issues raised by the Public Comments and Agency Assessment
Many significant issues were raised during the public comment period, and EPA's responses to those comments are presented in section V of this preamble or in the response to comments document contained in the docket. Significant changes to the rule that resulted from the public comments are described in section IV of the final rule's preamble.
The primary comments on the IRFA were provided by SBA, with the remainder of the comments generally supporting SBA's comments. Those comments included the following: EPA should have adopted a health-based compliance alternative (HBCA) which provides alternative emission limits for threshold chemicals; EPA should have adopted additional subcategories, including the following: subcategories based on fuel type (including coal rank, bagasse, biomass by type, and oil by type), unit design type (e.g., process heater, fluidized bed, stoker, fuel cell, suspension burner), duty cycle, geographic location, boiler size, burner type (with and without low-NOx burners), and hours of use (limited use); EPA should have minimized facility monitoring and reporting requirements; EPA should not have proposed the energy audit requirement; EPA's proposed emissions standards are too stringent; and, EPA should provide more flexibility for emissions averaging.
In response to the comments on the IRFA and other public comments, EPA made the following changes to the final rule. EPA adopted additional subcategories, including a limited-use subcategory for units that operate less than 10 percent of the operating hours in a year, a non-continental liquid unit subcategory for units with the unique challenges faced by remote island locations, and a combination suspension/grate boiler subcategory. EPA also consolidated the subcategories for units combusting various types of solid fuels, which will simplify compliance and will allow units to combust varying percentages of different solid fuels without triggering subcategory changes. EPA also decreased monitoring and testing costs by eliminating the CO CEMS requirement for units greater than 100 mmBtu/hr and changing the dioxin testing requirement to a one-time test. The final rule also includes work practice standards for additional subcategories, including limited-use units, new small units, and units combusting gaseous fuels that are demonstrated to have similar contaminant levels to natural gas. Finally, EPA is finalizing emission limits that are less stringent than the proposed limits for most of the category/pollutant combinations. The emission limit changes are largely due to the changes in subcategories, data corrections, and incorporation of new data into the floor calculations. Additional details on the changes discussed in this paragraph are included in sections IV and V of the final rule's preamble.
Description of and Estimate of the Number of Small entities to Which the Rules Will Apply
Based on the distribution of major source facilities with affected boilers or process heaters reported in the 2008 survey entitled "Information Collection Effort for Facilities with Combustion Units. (ICR No. 2286.01)," there are 1,639 existing facilities with affected boilers or process heaters. Of these, 94 percent are located in the private sector and the remaining 6 percent are located in the public sector. Table 5-3 summarizes the types of small entities expected to be affected by the major source rule. The number of small entities is based on the facilities which responded to the ICR by confirming small entity status. If that question was not answered, or if the facility answered that their small entity status was unknown, it was assumed that those facilities were not small entities. The summary in Table 5-3 is for major source facilities which have at least one boiler or process heater expected to be covered by the rule. Table 5-4 summarizes the EPA estimates of the number of area source facilities expected to be affected by the major source rule (84,700 total). EPA does not have sufficient information to estimate the number of small entities expected to be covered by the area source rule.
Table 5-3.	Information Collection Effort for Facilities with Combustion Units: Major Sources
NAICS
NAICS Description
Total Number of Facilities
Total Self-Reported Facilities Owned by Small Businesses
                                      111
Crop Production
1
0
                                      113
Forestry and Logging
1
0
                                      115
Support Activities for Agriculture and Forestry
1
0
                                      211
Oil and Gas Extraction
24
3
                                      212
Mining (Except Oil and Gas)
14
1
                                      221
Utilities
183
23
                                      311
Food Manufacturing
110
7
                                      312
Beverage and Tobacco Product Manufacturing
5
0
                                      313
Textile Mills
14
1
                                      314
Textile Product Mills
1
0
                                      316
Leather and Allied Product Manufacturing
3
1
                                      321
Wood Product Manufacturing
183
18
                                      322
Paper Manufacturing
186
14
                                      323
Printing and Related Support Activities
33
5
                                      324
Petroleum and Coal Products Manufacturing
84
8
                                      325
Chemical Manufacturing
220
17
                                      326
Plastics and Rubber Products Manufacturing
89
11
                                      327
Nonmetallic Mineral Product Manufacturing
41
2
                                      331
Primary Metal Manufacturing
57
6
                                      332
Fabricated Metal Product Manufacturing
46
8
                                      333
Machinery Manufacturing
13
0
                                      334
Computer and Electronic Product Manufacturing
2
0
                                      335
Electrical Equipment, Appliance, and Component Manufacturing
12
0
                                      336
Transportation Equipment Manufacturing
100
7
                                      337
Furniture and Related Product Manufacturing
45
8
                                      339
Miscellaneous Manufacturing
15
1
                                      423
Durable Goods Merchant Wholesalers
1
1
                                      424
Nondurable Goods Merchant Wholesalers
1
0
                                      441
Motor Vehicle and Parts Dealers
1
0
                                      481
Air Transportation
7
0
                                      482
Rail Transportation
1
0
                                      486
Pipeline Transportation
60
0
                                      488
Support Activities for Transportation
3
0
                                      493
Warehousing and Storage
5
1
                                                                    (continued)
Table 5-3.	Information Collection Effort for Facilities with Combustion Units: Major Sources (continued)
NAICS
NAICS Description
Total Number of Facilities
Total Self-Reported Facilities Owned by Small Businesses
                                      531
Real Estate
1
0
                                      541
Professional, Scientific, and Technical Services
8
0
                                      561
Administrative and Support Services
1
0
                                      562
Waste Management and Remediation Services
7
2
                                      611
Educational Services
29
2
                                      622
Hospitals
4
0
                                      623
Nursing and Residential Care Facilities
1
0
                                      811
Repair and Maintenance
1
0
                                      921
Executive, Legislative, and Other General Government Support
2
0
                                      928
National Security and International Affairs
23
0

As discussed in Section 5.1 of this RIA, using these cost data and the Census estimates of average establishment receipts, a substantial number of SUSB NAICS/enterprise categories have ratios over 3%. EPA determined 8 of 50 small ultimate parent companies owning major source facilities listed in Table 5-3 will experience an impact of over 3 percent of revenues. Representative small major public entities would have cost-to-revenue ratios above 10 percent.
Description of the Projected Reporting, Record keeping and Other Compliance Requirements of the Rule
The information collection activities in this ICR include initial and annual stack tests, fuel analyses, operating parameter monitoring, continuous O2 monitoring for all units greater than 10 mmBtu/hr, continuous emission monitoring for PM at units greater than 250 mmBtu/hr, certified energy audits, annual or biennial tune-ups (depending on the size of the combustion equipment), preparation of a startup, shutdown, malfunction plan (SSMP), preparation of a site-specific monitoring plan and a site-specific fuel monitoring plan, one-time and periodic reports, and the maintenance of records.
For sources that can demonstrate compliance through fuel analysis, the regulation requires an initial fuel analysis and monthly fuel analyses. Sources must conduct additional fuel analyses if they burn a new type of fuel. For sources that are demonstrating that their gaseous fuels other than natural gas and refinery gas meet the specifications for H2S and Hg contained in the final rule, they must conduct either an initial or monthly fuel analysis to remain in the gas 1 subcategory. If the content of these constituents are not going to exceed the specifications, these units may conduct an initial testing and include a statement that the gas will not exceed the specification in the initial Notification of Compliance Status. If the gaseous fuel constituents will vary, the unit is required to conduct monthly testing and maintain records to demonstrate that the gaseous fuels meet the specifications.
An initial performance test must be completed for particulate matter, mercury, hydrogen chloride, carbon monoxide, and dioxin and furans for affected sources with applicable emission limits. During the initial performance test, the owner or operator must establish maximum or minimum values for each operating parameter. Thereafter, the owner or operator must, in some cases, conduct annual stack tests for particulate matter, mercury, hydrogen chloride, carbon monoxide, and dioxin and furans and must continuously monitor the operating parameters. If a source is required to use PM CEMS, performance testing is not required for particulate matter.
Following the initial performance test, the owner or operator must submit a report that documents the performance test results and the values for their required operating parameters.
All existing units will be required to conduct an initial certified energy audit by qualified personnel which includes a visual inspection of the boiler system, establishing operating characteristics, identifying major energy consuming systems and energy savings potential, reviewing available engineering plans, and listing major energy conservation measures. A signed certification that an audit has been completed should be submitted to the Agency for each energy audit.
All new and existing small and limited use units, and all large units firing natural gas, refinery gas, or other gas 1 fuels meeting the fuel spec can demonstrate compliance by conducting a tune-up of the boiler. Small and limited use units are requested to conduct a tune-up biennially and large natural gas, refinery gas, or other gas 1 units will conduct a tune-up annually. Any large natural gas, refinery gas, or other gas 1 unit will also submit a notification of alternative fuel use if the unit fires alternative fuels during periods of gas curtailment or gas supply emergencies.
For all units other than small and limited use boilers and process heaters and units firing natural gas a semiannual report is required that documents the values for the operating parameters; any deviation; the results of any annual stack tests; the results of any fuel analysis and emissions calculations; fuel usage, and if no deviation occurred, a statement that no deviations occurred.
As specified in the ICI Boiler and Process Heater NESHAP, owners or operators of boilers and process heaters must keep records of certain parameters and information for a period of five years. Owners or operators must maintain records of the initial performance test, annual stack tests, fuel analyses, and any subsequent stack tests or fuel analyses. Owners or operators must also maintain records of the monitoring data for the operating parameters and daily fuel usage.
Owners or operators must also maintain records for boiler or process heater malfunctions and any deviations from the operating parameters. Records must also be maintained of all monitoring device calibration data.
The Agency expects that persons with knowledge of .pdf software, spreadsheet and relational database programs will be necessary in order to prepare the report or record. Based on experience with previous emission stack testing, we expect most facilities to contract out preparation of the reports associated with emission stack testing, including creation of the Electronic Reporting Tool submittal, which will minimize the need for in depth knowledge of databases or spreadsheet software at the source. We also expect affected sources will need to work with web-based applicability tools and flowcharts to determine the requirements applicable to them, knowledge of the heat input capacity and fuel use of the combustion units at each facility will be necessary in order to develop the reports and determine initial applicability to the rule. Affected facilities will also need skills associated with vendor selection in order to identify service providers that can help them complete their compliance requirements, as necessary.
Description of the steps the Agency has Taken to Minimize the Significant Economic Impact on Small Entities
While EPA did make significant changes based on public comment, EPA did not finalize a HBCA or HBELs and is maintaining, but clarifying, the energy assessment requirement. The discussion of the HBCA decision is included in section V of this preamble. Some changes to the energy assessment requirement that will reduce costs for small entities include a the following provisions: the energy assessment for facilities with affected boilers and process heaters using less than 0.3 trillion Btu per year heat input will be one day in length maximum. The boiler system and energy use system accounting for at least 50 percent of the energy output will be evaluated to identify energy savings opportunities, within the limit of performing a one-day energy assessment; and the energy assessment for facilities with affected boilers and process heaters using 0.3 to 1.0 trillion Btu per year will be 3 days in length maximum. The boiler system and any energy use system accounting for at least 33 percent of the energy output will be evaluated to identify energy savings opportunities, within the limit of performing a 3-day energy assessment. While EPA did not make major adjustments to the emissions averaging provisions, the change to a solid fuel subcategory will enable all solid fuel-fired units at a facility to use the emissions averaging provision for Hg, PM, and HCl.
As required by section 212 of SBREFA, EPA also is preparing a Small Entity Compliance Guide to help small entities comply with this rule. Small entities will be able to obtain a copy of the Small Entity Compliance guide at the following web site: http://www.epa.gov/ttn/atw/boiler/boilerpg.html.
Final Regulatory Flexibility Analysis (FRFA): Area Sources
Pursuant to section 603 of the RFA, EPA prepared an initial regulatory flexibility analysis (IRFA) for the proposed rule and convened a Small Business Advocacy Review Panel to obtain advice and recommendations of representatives of the regulated small entities. A detailed discussion of the Panel's advice and recommendations is found in the final Panel Report (Docket ID No. EPA-HQ-OAR-2002-0058-0797). A summary of the Panel's recommendations is also presented in the preamble to the proposed rule at 75 FR 32044-32045 (June 4, 2010). In the proposed rule, EPA included provisions consistent with four of the Panel's recommendations. As required by section 604 of the RFA, we also prepared a final regulatory flexibility analysis (FRFA) the final rule.
Need for Rule and Objectives
The rule is intended to reduce emissions of HAP as required under section 112 of the CAA. Section II.A of the final rule's preamble describes the reasons that EPA is finalizing this action.
Summary of the Significant Issues raised by the Public Comments and Agency Assessment
Many significant issues were raised during the public comment period, and EPA's responses to those comments are presented in section V of this preamble or in the response to comments document contained in the docket. Significant changes to the rule that resulted from the public comments are described in section IV of the final rule's preamble.
The primary comments on the IRFA were provided by SBA, with the remainder of the comments generally supporting SBA's comments. Those comments applicable to the proposal regarding area source boilers included the following: EPA should have adopted additional subcategories, including the following: unit design type (e.g., fluidized bed, stoker, fuel cell, suspension burner), duty cycle, geographic location, boiler size, burner type (with and without low-NOx burners), and hours of use (limited use); EPA should have minimized facility monitoring and reporting requirements; EPA should not have proposed the energy audit requirement; and EPA's proposed emissions standards are too stringent.
In response to the comments on the IRFA and other public comments, EPA made the following changes to the final rule. EPA is promulgating management practice standards requiring the implementation of a boiler tune-up program for area source boilers in the biomass and oil subcategories instead of the proposed CO emission limits. This change will significantly reduce the monitoring and testing costs for existing and new biomass-fired and oil-fired area source boilers. EPA also decreased monitoring and testing costs for coal-fired area source boilers by eliminating the CO CEMS requirement for boilers greater than 100 MMBtu/h. The final rule also includes work practice standards or management practice standards, instead of emission limits, for new area source boilers less than 10 MMBtu/h. Finally, EPA is finalizing emission limits that are less stringent than the proposed limits. The emission limit changes are largely due to the changes in data corrections and incorporation of new data into the floor calculations. Additional details on the changes discussed in this paragraph are included in sections IV and V of the final rule's preamble.
Description of and Estimate of the Number of Small entities to Which the Rules Will Apply
Table 5-4 summarizes the EPA estimates of the number of area source facilities expected to be affected by the major source rule (84,700 total). EPA does not have sufficient information to estimate the number of small entities expected to be covered by the area source rule.
As discussed in Section 5.1 of this RIA, using these cost data and the Census estimates of average establishment receipts, a substantial number of SUSB NAICS/enterprise categories have ratios over 3%. The following types of representative small area source public facilities would have cost-to-revenue ratios exceeding 1 percent but below 3 percent: other public facilities (ratio > 1.7 percent) and churches (ratio = 1.5 percent).
Table 5-4.	Estimated Affected Facilities Using 13 State Boiler Inspector Inventory: Area Sources
SIC
Total Number of Affected Facilities in SIC Code
                                      01
0
                                      02
247
                                      07
0
                                      09
0
                                      14
83
                                      16
0
                                      17
247
                                      20
5,733
                                      23
83
                                      24
2,676
                                      26
0
                                      40
329
                                      41
0
                                      42
83
                                      43
0
                                      44
0
                                      45
0
                                      47
0
                                      48
741
                                      50
165
                                      51
247
                                      52
0
                                      53
494
                                      54
0