February 2011

Regulatory Impact Analysis:

National Emission Standards for Hazardous Air Pollutants for Industrial,
Commercial, and Institutional Boilers and Process Heaters

U.S. Environmental Protection Agency

Office of Air Quality Planning and Standards (OAQPS)

Air Economics Group

Risk and Benefits Group

Air Quality Modeling Group

Research Triangle Park, NC 27711

Regulatory Impact Analysis:

National Emission Standards for Hazardous Air Pollutants for Industrial,
Commercial, and Institutional Boilers and Process Heaters

February 2011

U.S. Environmental Protection Agency

Office of Air Quality Planning and Standards (OAQPS)

Air Economics Group

Risk and Benefits Group

Air Quality Modeling Group

Research Triangle Park, NC 27711

Contents

Section	Page

1	Introduction	1-1

1.1	Executive Summary	1-1

1.2	Organization of this Report	1-3

1.3	Section 1 References	1-6

2	Industry Profiles	2-1

2.1	Food Manufacturing	2-1

2.1.1	Introduction	2-1

2.1.2	Supply and Demand Characteristics	2-4

<IP_ADDRESS>	Goods and Services Used in Food Manufacturing	2-4

<IP_ADDRESS>	Energy	2-4

<IP_ADDRESS>	Uses and Consumers	2-7

2.1.3	Firm and Market Characteristics	2-7

<IP_ADDRESS>	Location	2-7

<IP_ADDRESS>	Production Capacity and Utilization	2-9

<IP_ADDRESS>	Employment	2-9

<IP_ADDRESS>	Plants and Capacity	2-10

<IP_ADDRESS>	Firm Characteristics	2-10

<IP_ADDRESS>	Size Distribution	2-12

<IP_ADDRESS>	Domestic Production	2-12

<IP_ADDRESS>	International Trade	2-12

<IP_ADDRESS>	Market Prices	2-16

2.2	Wood Product Manufacturing	2-16

2.2.1	Introduction	2-16

2.2.2	Supply and Demand Characteristics	2-20

<IP_ADDRESS>	Goods and Services Used in Wood Product Manufacturing	2-20

<IP_ADDRESS>	Uses and Consumers	2-22

2.2.3	Firm and Market Characteristics	2-24

<IP_ADDRESS>	Location	2-24

<IP_ADDRESS>	Production Capacity and Utilization	2-25

<IP_ADDRESS>	Employment	2-26

<IP_ADDRESS>	Plants and Capacity	2-26

<IP_ADDRESS>	Firm Characteristics	2-27

<IP_ADDRESS>	Size Distribution	2-27

<IP_ADDRESS>	Domestic Production	2-28

<IP_ADDRESS>	International Trade	2-28

<IP_ADDRESS>	Market Prices	2-31

2.3	Paper Manufacturing	2-33

2.3.1	Introduction	2-33

2.3.2	Supply and Demand Characteristics	2-37

<IP_ADDRESS>	Goods and Services Used in Paper Manufacturing	2-37

<IP_ADDRESS>	Uses and Consumers	2-42

2.3.3	Firm and Market Characteristics	2-43

<IP_ADDRESS>	Location	2-43

<IP_ADDRESS>	Production Capacity and Utilization	2-44

<IP_ADDRESS>	Employment	2-44

<IP_ADDRESS>	Plants and Capacity	2-45

<IP_ADDRESS>	Firm Characteristics	2-45

<IP_ADDRESS>	Size Distribution	2-47

<IP_ADDRESS>	Domestic Production	2-48

<IP_ADDRESS>	International Trade	2-49

<IP_ADDRESS>	Market Prices	2-49

2.4	Chemical Manufacturing	2-51

2.4.1	Introduction	2-51

2.4.2	Supply and Demand Characteristics	2-54

<IP_ADDRESS>	Goods and Services Used in Chemical Manufacturing	2-55

<IP_ADDRESS>	Uses and Consumers	2-55

2.4.3	Firm and Market Characteristics	2-58

<IP_ADDRESS>	Location	2-58

<IP_ADDRESS>	Production Capacity and Utilization	2-60

<IP_ADDRESS>	Employment	2-60

<IP_ADDRESS>	Plants and Capacity	2-60

<IP_ADDRESS>	Firm Characteristics	2-62

<IP_ADDRESS>	Size Distribution	2-64

<IP_ADDRESS>	Domestic Production	2-64

<IP_ADDRESS>	International Trade	2-64

<IP_ADDRESS>	Market Prices	2-64

2.5	Section 2 References	2-68

3	Engineering Cost Analysis	3-1

3.1	Major Sources	3-2

3.2	Area Sources	3-5

3.3	Section 3 References	3-6

4	Economic Impact Analysis	4-1

4.1	Partial Equilibrium Analysis (Multiple Markets)	4-1

4.1.1	Overview	4-1

4.1.2	Economic Impact Analysis Results	4-2

<IP_ADDRESS>	Market-Level Results	4-2

<IP_ADDRESS>	Social Cost Estimates Major Source Rule	4-3

<IP_ADDRESS>	Social Cost Estimates Area Source Rule	4-5

<IP_ADDRESS>	Job Effects	4-6

4.2	Section 4 References	4-14

5	Small Entity Analyses	5-1

5.1	Small Entity Screening Analysis	5-1

5.1.1	Small Businesses	5-1

<IP_ADDRESS>	Representative Small Business Analysis Using Census Statistics
of U.S. Businesses	5-1

<IP_ADDRESS>	Additional Small Business Analysis Using Sample of Small
Businesses Identified in Combustion Facility Survey	5-4

5.1.2	Small Governmental Jurisdictions and Not-for-Profit Enterprises
5-5

5.2	Final Regulatory Flexibility Analysis (FRFA): Major Sources	5-6

5.2.1	Need for Rule and Objectives	5-6

5.2.2	Summary of the Significant Issues raised by the Public Comments
and Agency Assessment	5-6

5.2.3	Description of and Estimate of the Number of Small entities to
Which the Rules Will Apply	5-7

5.2.4	Description of the Projected Reporting, Record keeping and Other
Compliance Requirements of the Rule	5-9

5.2.5	Description of the steps the Agency has Taken to Minimize the
Significant Economic Impact on Small Entities	5-11

5.3	Final Regulatory Flexibility Analysis (FRFA): Area Sources	5-12

5.3.1	Need for Rule and Objectives	5-12

5.3.2	Summary of the Significant Issues raised by the Public Comments
and Agency Assessment	5-12

5.3.3	Description of and Estimate of the Number of Small entities to
Which the Rules Will Apply	5-13

5.3.4	Description of the Projected Reporting, Record keeping and Other
Compliance Requirements of the Rule	5-15

5.3.5	Description of the steps the Agency has Taken to Minimize the
Significant Economic Impact on Small Entities	5-16

5.4	Section 5 References	5-16

6	Air Quality Modeling of Emissions Reductions	6-1

6.1	Synopsis	6-1

6.2	Photochemical Model Background	6-2

6.3	Model Domain and Grid Resolution	6-3

6.4	Emissions Input Data	6-4

6.4.1	2005 Baseline Emissions	6-4

6.4.2	Future Year Baseline Emissions	6-5

6.4.3	Future Year Sector Contribution Approach	6-7

6.5	Model Results	6-9

6.5.1	Impacts of Sector on Total Mercury Deposition	6-10

6.5.2	Impacts of Sector on Future Annual PM2.5 Levels	6-10

6.5.3	Impacts of Sector on Future 24-hour PM2.5 Levels	6-11

6.5.4	Impacts of Sector on Future Visibility Levels	6-11

6.5.5	Impacts of Sector on Future Ozone Levels	6-12

6.6	Section 6 References	6-12

7	Benefits of Emissions Reductions	7-1

7.1	Synopsis	7-1

7.2	Calculating Benefits	7-2

7.2.1	Methodology Improvements since Proposal	7-4

7.2.2	Benefits Analysis Approach for PM2.5 and Ozone	7-5

7.2.3	Health Impact Analysis (HIA)	7-6

7.2.4	Estimating PM2.5-related Premature Mortality	7-10

7.2.5	Economic Valuation of Health Impact	7-12

7.2.6	Calculating Boiler Sector-specific Benefit-per-ton Estimates	7-14

7.3	Health Benefits Results	7-20

7.4	Energy Disbenefits	7-34

7.4.1	Social Cost of Carbon and Greenhouse Gas Disbenefits	7-34

7.5	Unquantified or Nonmonetized Benefits	7-37

7.5.1	Other SO2 Benefits	7-37

7.5.2	Carbon Monoxide Benefits	7-39

7.5.3	Visibility Benefits	7-40

7.5.4	Ozone Vegetation Benefits	7-40

7.5.5	Direct HAP Benefits	7-40

<IP_ADDRESS>	Mercury	7-44

<IP_ADDRESS>	Hydrogen Chloride (HCl)	7-49

<IP_ADDRESS>	Chlorine Gas (Cl2)	7-50

<IP_ADDRESS>	Hydrogen Cyanide (HCN)	7-50

<IP_ADDRESS>	Hydrogen Fluoride (HF)	7-50

<IP_ADDRESS>	Toluene	7-50

<IP_ADDRESS>	Formaldehyde	7-51

<IP_ADDRESS>	Polycyclic Aromatic Hydrocarbons (PAHs)	7-53

<IP_ADDRESS>	Acetaldehyde	7-54

<IP_ADDRESS>	Nickel	7-55

<IP_ADDRESS>	Manganese	7-55

<IP_ADDRESS>	Dioxins (Chlorinated dibenzodioxins (CDDs)	7-56

<IP_ADDRESS>	Furans (Chlorinated dibenzofurans (CDFs))	7-57

<IP_ADDRESS>	Other Air Toxics	7-57

7.6	Limitations and Uncertainties	7-57

7.6.1	Monte Carlo Analysis	7-58

7.6.2	LML Assessment for PM2.5	7-59

7.6.3	Alternate Concentration-response Functions for PM Mortality	7-59

7.6.4	Alternate Concentration-response Functions for Ozone Mortality
7-60

7.6.5	Qualitative Assessment of Uncertainty and Other Analysis
Limitations	7-60

7.7	Section 7 References	7-62

8	Comparison of Monetized Benefits and Costs	8-1

8.1	Boiler MACT	8-1

8.2	Boiler Area Source Rule	8-1

8.3	Section 8 References	8-5

Appendixes

  TOC \t "AppHeading1,2"  A	OAQPS Multimarket Model to Assess the
Economic Impacts of Environmental Regulation	A-  PAGEREF _Toc285522848
\h  1

B	Detailed Economic Model Results by Sector	B-  PAGEREF _Toc285522849 \h
 1

List of Figures

Number	Page

2-1.	Distribution of Employment within Food Manufacturing (NAICS 311):
2006	2-3

2-2.	Distribution of Total Value of Shipments within Food Manufacturing
(NAICS 311): 2006	2-3

2-3.	Electric Power Use Trends in Food Manufacturing (NAICS 311):
1997–2005	2-7

2-4.	Establishment Concentration in Food Manufacturing (NAICS 311):
2002	2-8

2-5.	Capacity Utilization Trends in Food Manufacturing (NAICS 311)	2-9

2-6.	Employment Concentration in Food Manufacturing (NAICS 311): 2002
2-10

2-7.	Capacity Trends in Food Manufacturing (NAICS 311)	2-11

2-8.	Industrial Production Trends in Food Manufacturing (NAICS 311)
2-15

2-9.	International Trade Trends in Food Manufacturing (NAICS 311)	2-15

2-10.	Producer Price Trends in Food Manufacturing (NAICS 311)	2-16

2-11.	Distribution of Value of Shipments within Wood Product
Manufacturing (NAICS 322): 2007	2-19

2-12.	Distribution of Employment within Wood Product Manufacturing
(NAICS 322): 2007	2-20

2-13.	Electrical Power Use Trends in the Wood Product Manufacturing
Industry (NAICS 321): 1997–2005	2-24

2-14.	Establishment Concentration in the Wood Product Manufacturing
Industry (NAICS 321): 2002	2-26

2-15.	Capacity Utilization Trends in the Wood Product Manufacturing
Industry (NAICS 321)	2-27

2-16.	Employment Concentration in the Wood Product Manufacturing
Industry (NAICS 321): 2002	2-28

2-17.	Capacity Trends in the Wood Product Manufacturing Industry (NAICS
321)	2-29

2-18.	Industrial Production Trends in the Wood Product Manufacturing
Industry (NAICS 321): 1997–2009	2-32

2-19.	International Trade Trends in the Wood Product Manufacturing
Industry (NAICS 321)]	2-32

2-20.	Producer Price Trends in the Wood Product Manufacturing Industry
(NAICS 321)	2-33

2-21.	Distribution of Value of Shipments within Paper Manufacturing
(NAICS 322): 2007	2-36

2-22.	Distribution of Employment within Paper Manufacturing (NAICS 322):
2007	2-36

2-23.	Electrical Power Use Trends in the Paper Manufacturing Industry:
1997–2005	2-41

2-24.	Establishment Concentration in Paper Manufacturing Industry (NAICS
322): 2002	2-43

2-25.	Capacity Utilization Trends in the Paper Manufacturing Industry
(NAICS 322)	2-44

2-26.	Employment Concentration in the Paper Manufacturing Industry
(NAICS 322): 2002	2-45

2-27.	Capacity Trends in the Paper Manufacturing Industry (NAICS 322)
2-46

2-28.	Industrial Production Trends in the Paper Manufacturing Industry
(NAICS 322): 1997–2009	2-49

2-29.	International Trade Trends in the Paper Manufacturing Industry
(NAICS 322)	2-50

2-30.	Producer Price Trends in the Paper Manufacturing Industry (NAICS
222)	2-50

2-31.	Distribution of Employment within Chemical Manufacturing (NAICS
325): 2007	2-53

2-32.	Distribution of Total Value of Shipments within Chemical
Manufacturing (NAICS 325): 2007	2-53

2-33.	Electric Power Use Trends in Chemical Manufacturing (NAICS 325):
1997–2005	2-58

2-34.	Establishment Concentration in Chemical Manufacturing (NAICS 325):
2002	2-60

2-35.	Capacity Utilization Trends in Chemical Manufacturing (NAICS 325)
2-61

2-36.	Employment Concentration in Chemical Manufacturing (NAICS 325):
2002	2-61

2-37.	Capacity Trends in Chemical Manufacturing (NAICS 325)	2-62

2-38.	Industrial Production Trends in Chemical Manufacturing (NAICS 325)
2-66

2-39.	International Trade Trends in Chemical Manufacturing (NAICS 325)
2-67

2-40.	Producer Price Trends in Chemical Manufacturing (NAICS 325)	2-67

4-1.	Market-Level Changes by Source and Option	4-3

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

4-3.	Distribution of Total Surplus Changes by Sector: Area Sources	4-6

4-4.	Employment Impacts Using Morgenstern, Pizer, Shih (2002) (1,000
FTEs)	4-10

5-1.	Share of NAICS/Enterprise Employment Categories (<500 employees)
with Sales Tests Exceeding 3%	5-4

6-1.	Map of the photochemical modeling domains. The black outer box
denotes the 36 km national modeling domain; the red inner box is the 12
km western U.S. grid; and the blue inner box is the 12 km eastern U.S.
grid.	6-3

6-2.	Locations of boilers in the NEI point inventory for the future
baseline (2016)	6-9

7-1.	Total Monetized PM2.5 and Ozone Benefits for the Final Boiler MACT
and Boiler Area Source Rule in 2014	7-2

7-2.	Illustration of BenMAP Approach	7-7

7-3.	Data Inputs and Outputs for the BenMAP Model for a PM2.5 Analysis
7-8

7-4.	Change in Ambient PM2.5 Levels from SO2 Emissions from Point Source
Boilers	7-17

7-5.	Change in Ambient PM2.5 Levels from PM Emissions from Point Source
Boilers	7-18

7-6.	Change in Ambient PM2.5 Levels from SO2 Emissions from Non-point
Source Boilers	7-18

7-7.	Change in Ambient PM2.5 Levels from PM Emissions from Non-point
Source Boilers	7-19

7-8.	Breakdown of Monetized PM2.5 Health Benefits Estimates using
Mortality Function from Pope et al. (2002)	7-28

7-9.	Breakdown of Monetized Ozone Health Benefits Estimates using
Mortality Function from Bell et al. (2004)	7-29

7-10.	Total Monetized PM2.5 and Ozone Benefits Estimates for the Final
Boiler MACT and Boiler Area Source Rule in 2014	7-30

7-11.	Breakdown of Monetized PM2.5 Benefits Estimates by Precursor for
the Final Boiler MACT in 2014	7-31

7-12.	Breakdown of Monetized PM2.5 Benefits Estimates by Precursor for
the Final Boiler Area Source Rule in 2014	7-31

7-13.	Breakdown of Monetized PM2.5 Benefits Estimates by Subcategory for
the Final Boiler MACT in 2014	7-32

7-14.	Breakdown of Monetized PM2.5 Benefits Estimates by Subcategory for
the Final Boiler Area Source Rule in 2014	7-32

7-15.	Percentage of Population Exposed to Baseline Air Quality Levels
for Final Boiler MACT and Boiler Area Source Rule	7-33

7-16.	Cumulative Percentage of Population Exposed to Baseline Air
Quality Levels for Final Boiler MACT and Boiler Area Source Rule	7-34

7-17.	Estimated County Level Carcinogenic Risk from HAP exposure from
outdoor sources (2002 NATA)	7-42

7-18.	Estimated County Level Noncancer (Respiratory) Risk from HAP
exposure from outdoor sources (2002 NATA)	7-42

7-19.	Percentage Reduction in Total Mercury Deposition in the Eastern
U.S.	7-48

7-20.	Percentage Reduction in Total Mercury Deposition in the Western
U.S.	7-49

8-1.	Net Benefits for the Final Major and Area Source Boiler Rules at 3%
Discount Rate	8-4

8-2.	Net Benefits for the Final Major and Area Source Boiler Rules at 7%
Discount Rate	8-5

List of Tables

Number	Page

1-1.	Summary of the Monetized Benefits, Social Costs, and Net Benefits
for the Boiler MACT (Major Sources) in 2014 (millions of 2008$)	1-4

1-2.	Summary of the Monetized Benefits, Social Costs, and Net Benefits
for the Boiler Area Source Rule in 2014 (millions of 2008$)	1-5

2-1.	Key Statistics: Food Manufacturing (North American Industry
Classification System [NAICS] 311)	2-2

2-2.	Industry Data: Food Manufacturing (NAICS 311)	2-2

2-3.	Costs of Goods and Services Used in Food Manufacturing (NAICS 311)
($2007)	2-5

2-4.	Key Goods and Services Used in Food Manufacturing (NAICS 311)
($2007, millions)	2-5

2-5.	Energy Used in Food Manufacturing (NAICS 311)	2-6

2-6.	Demand by Sector: Food Manufacturing (NAICS 311) ($2007, millions)
2-8

2-7.	Top Publicly Held U.S. Food Companies: 2007	2-11

2-8.	Corporate Income and Profitability for Food Manufacturing (NAICS
311)	2-12

2-9.	Small Business Size Standards: Food Manufacturing (NAICS 311)	2-13

2-10.	Distribution of Economic Data by Enterprise Size: Food
Manufacturing (NAICS 311)	2-14

2-11.	Key Statistics: Wood Product Manufacturing (NAICS 321)	2-17

2-12.	Industry Data: Wood Product Manufacturing (NAICS 321)	2-17

2-13.	Costs of Goods and Services in Wood Product Manufacturing (NAICS
321) ($2007)	2-21

2-14.	Key Goods and Services Used in Wood Product Manufacturing (NAICS
321) ($2007, millions)	2-22

2-15.	Energy Used in Wood Product Manufacturing (NAICS 321)	2-23

2-16.	Demand by Sector: Wood Product Manufacturing (NAICS 321) ($2007,
millions)	2-25

2-17.	Largest U.S. Paper and Forest Products Companies: 2006	2-29

2-18.	Distribution of Economic Data by Enterprise Size: Wood Product
Manufacturing (NAICS 321)	2-30

2-19.	Small Business Size Standards: Wood Product Manufacturing (NAICS
321)	2-31

2-20.	Key Statistics: Paper Manufacturing (NAICS 322)	2-34

2-21.	Industry Data: Paper Manufacturing (NAICS 322)	2-34

2-22.	Costs of Goods and Services Used in the Paper Manufacturing
Industry (NAICS 322)	2-38

2-23.	Key Goods and Services Used in the Paper Manufacturing Industry
(NAICS 322) ($millions, $2007)	2-39

2-24.	Energy Used in Paper Manufacturing (NAICS 322)	2-40

2-25.	Estimated Energy Sources for the U.S. Pulp and Paper Industry	2-41

2-26.	Demand by Sector: Paper Manufacturing Industry (NAICS 322)
($millions, $2007)	2-42

2-27.	Largest U.S. Paper and Forest Products Companies: 2006	2-46

2-28.	Distribution of Economic Data by Enterprise Size: Paper
Manufacturing (NAICS 322)	2-47

2-29.	Small Business Size Standards: Paper Manufacturing (NAICS 322)
2-48

2-30.	Key Statistics: Chemical Manufacturing (NAICS 325)	2-52

2-31.	Industry Data: Chemical Manufacturing (NAICS 325)	2-52

2-32.	Key Goods and Services Used in Chemical Manufacturing (NAICS 325)
($2007, millions)	2-54

2-33.	Costs of Goods and Services Used in Chemical Manufacturing (NAICS
325) ($2007)	2-56

2-34.	Energy Used in Chemical Manufacturing (NAICS 325)	2-57

2-35.	Demand by Sector: Chemical Manufacturing (NAICS 325) ($2007
millions)	2-59

2-36.	Top Chemical Producers: 2007	2-63

2-37.	2007 Corporate Income and Profitability (NAICS 325)	2-63

2-38.	Small Business Size Standards: Chemical Manufacturing (NAICS 325)
2-65

2-39.	Distribution of Economic Data by Enterprise Size: Chemical
Manufacturing (NAICS 325)	2-66

3-1.	Summary of Capital and Annual Costs for New and Existing Major
Sources	3-3

3-2.	Summary of Annual Costs for New and Existing Area Sources	3-6

4-1.	Distribution of Social Costs Major Sources (billion, 2008$): 2014
4-4

4-2.	Distribution of Social Costs Area Sources (billion, 2008$): 2014
4-5

4-3.	Employment Impacts Using Morgenstern, Pizer, Shih (2002) (FTE)	4-9

4-4.	Cost Approach Jobs Impacts in FTEs	4-12

4-5.	Employment Impacts	4-13

4-6.	Aggregate Employment in FTEs	4-13

4-7.	Aggregate Employment Distributed to Regulated Entities and Others
in FTEs	4-14

5-1.	Affected Sectors and Size Standards	5-2

5-2.	Major Sources: Sales Tests Using Small Companies Identified in the
Combustion Survey	5-3

5-3.	Information Collection Effort for Facilities with Combustion Units:
Major Sources	5-8

5-4.	Estimated Affected Facilities Using 13 State Boiler Inspector
Inventory: Area Sources	5-14

6-1.	Geographic Elements of Domains Used in Photochemical Modeling	6-4

6-2.	Control Strategies and/or Growth Assumptions Included in the 2016
Projection	6-6

6-3.	Estimated Future Year (2016) Controllable Boiler Sector Emissions
6-8

7-1.	Human Health and Welfare Effects of Air Pollutants Affected	7-9

7-2.	Summary of Monetized Benefits Estimates for Final Boiler MACT in
2014 (millions of 2008$)	7-21

7-3.	Summary of Monetized Benefits Estimates for Final Boiler Area
Source Rule in 2014 (millions of 2008$)	7-21

7-4.	Summary of Estimated Reductions in Health Incidences from PM2.5 for
the Final Boiler MACT in 2014 (95th percentile confidence interval)
7-22

7-5.	Summary of Estimated Reductions in Health Incidences from PM2.5 for
the Final Boiler Area Source Rule in 2014 (95th percentile confidence
interval)	7-23

7-6.	Summary of Monetized Benefits Estimates from PM2.5 for the Final
Boiler MACT in 2014 (95th percentile confidence interval)	7-24

7-7.	Summary of Monetized Benefits Estimates from PM2.5 for the Final
Boiler Area Source Rule in 2014 (95th percentile confidence interval)
7-25

7-8.	Summary of Monetized Benefits Estimates from Ozone for the Final
Boiler MACT in 2014 (95th percentile confidence interval)	7-26

7-9.	Social Cost of Carbon (SCC) Estimates (per tonne of CO2) for 2014
7-36

7-10. Monetized SCC-Derived Disbenefits of CO2 Emission Increases in
2014 (millions of 2008$)	7-37

7-11.	Top HAPs by Mass from Boilers by Fuel Type	7-44

8-1.	Summary of the Monetized Benefits, Social Costs, and Net Benefits
for the Boiler MACT in 2014 (millions of 2008$)	8-2

8-2	Summary of the Monetized Benefits, Social Costs, and Net Benefits
for the Boiler Area Source Rule in 2014 (millions of 2008$)	8-3

Introduction

The U.S. Environmental Protection Agency (EPA) is promulgating two rules
for national emission standards for hazardous air pollutants (NESHAP)
for new and existing industrial, commercial, and institutional boilers
and process heaters. One rule requires all major sources to meet
hazardous air pollutant (HAP) emissions standards reflecting the
application of the maximum achievable control technology (MACT). In the
other rule, EPA is promulgating a NESHAP for two area source categories:
industrial boilers and institutional and commercial boilers. The
emission standards for controlling mercury and polycyclic organic matter
(POM) emissions are based on the MACT. The emission standards for
controlling other HAPs are based on EPA’s determination as to what
constitutes the generally available control technology (GACT) or
management practices. As part of the regulatory process, EPA is required
to develop a regulatory impact analysis (RIA). The RIA includes an
economic impact analysis (EIA) and a small entity impacts analysis and
documents the RIA methods and results.

Executive Summary

The key results of the RIA are as follows:

Engineering Cost Analysis: EPA estimates the major source NESHAP’s
total annualized costs will be $1.4 billion (2008$). For the area source
NESHAP, EPA estimates the total annualized costs will be $0.5 billion.

Market Analysis: Under the major source NESHAP, the Agency’s economic
model suggests the average national prices for industrial sectors could
be small (less than 0.01% higher). Average annual domestic production
may also fall by less than 0.01%. Because of higher domestic prices,
imports rise by less than 0.01% per year. 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%.

Social Cost Analysis: The estimated social cost of the major source rule
is just under $1.5 billion (2008$). The Agency’s economic model
suggests that industries are able to pass approximately $0.5 billion of
the rule’s costs to consumers (e.g., higher market prices). Domestic
industries’ surplus falls by $1.4 billion, while other countries on
net benefit from higher prices (a net increase in rest-of-the world
[ROW] surplus of less than $0.1 billion). Additional costs and fuel
savings for new and existing major sources that are not included in the
economic model represent a net benefit of $0.4 billion. The estimated
social cost of the area source rule is approximately $0.5 billion
(2008$). The Agency’s economic model suggests that industries are able
to pass approximately $0.2 billion of the rule’s costs to consumers.
Domestic industries’ surplus falls by $0.3 billion and the net
increase in ROW surplus is less than $0.1 billion. Additional costs and
fuel savings for unknown, existing, and new area sources not included in
the economic model results represent a net benefit of less than $0.1
billion.

−3100 to 6,500  employees, with a central estimate of +1,700 employees
for the major source NESHAP.   The estimated employment changes range
between −1,000 to 2,000  employees, with a central estimate of +500
employees for the area source NESHAP.

Small Entity Analyses: EPA performed a screening analysis for impacts on
small entities by comparing compliance costs to sales/revenues (e.g.,
sales and revenue tests). EPA’s analysis found the tests were
typically higher than 3% for small entities included in the screening
analysis. 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 (see Section 5).

Benefits Analysis:

The benefits from reducing some air pollutants have not been monetized
in this analysis, including reducing a combined 113,000 tons of carbon
monoxide, 30,000 tons of HCl, 830 tons of HF, 2,900 pounds of mercury,
3,000 tons of other metals, and 23 grams of dioxins/furans (TEQ) each
year. We assess the benefits of these emission reductions qualitatively
in this analysis.

We have monetized the benefits from reducing PM (as a surrogate for
metal HAP), as well as the co-benefits that result from the HAP
emissions reductions (e.g., the pollution control equipment for HCl also
reduces sulfur dioxide, a pre-cursor to PM2.5). Thus all monetized
benefits reported reflect improvements in ambient PM2.5 and ozone
concentrations. As such, although the monetized benefits likely
underestimate the total benefits, the extent of the underestimate is
unclear.

Using a 3% discount rate, we estimate the total monetized benefits of
the Boiler MACT to be $22 billion to $54 billion in the implementation
year (2014). Using a 7% discount rate, we estimate the total monetized
benefits of the Boiler MACT to be $20 billion to $49 billion in the
implementation year. Using alternate relationships between PM2.5 and
premature mortality supplied by experts, higher and lower benefits
estimates are plausible, but most of the expert-based estimates fall
between these estimates.

Using a 3% discount rate, we estimate the total monetized benefits of
the Boiler Area Source Rule to be $210 million to $520 million in the
implementation year (2014). Using a 7% discount rate, we estimate the
total monetized of the Boiler Area Source Rule to be $190 million to
$470 million in the implementation year.

Using a 3% discount rate, we estimate the total monetized benefits of
the combined Boiler MACT and Boiler Area Source Rule to be $22 billion
to $58 billion in the implementation year (2014). Using a 7% discount
rate, we estimate the total monetized benefits of the combined Boiler
MACT and Boiler Area Source Rule to be $20 billion to $50 billion in the
implementation year. All estimates are in 2008$.

rate. For the Boiler Area Source Rule, the net benefits are −$280
million to $30 million at a 3% discount rate for the benefits and
−$300 million to −$20 million at a 7% discount rate. These results
are shown in Tables 1-1 and 1-2.

Organization of this Report

The remainder of this report supports and details the methodology and
the results of the EIA:

Section 2 presents the affected industry profiles.

Section 3 describes the engineering cost analysis.

Section 4 describes the economic impact analysis.

Section 5 describes the small entity analyses.

Section 6 describes the air quality modeling performed by EPA.

Section 7 presents the benefits estimates.

Section 8 presents the net benefits.

Appendix A describes the multimarket model used in the economic
analysis.

Appendix B provides additional economic model result tables by sector.

Table 1-1.	Summary of the Monetized Benefits, Social Costs, and Net
Benefits for the Boiler MACT (Major Sources) in 2014 (millions of
2008$)a

	3% Discount Rate	7% Discount Rate

Selected

Total Monetized Benefitsb	$22,000	to	$54,000	$20,000	to	$49,000

Total Social Costs3	$1,500	1,500

Net Benefits	$20,500	to	$52,500	$18,500	to	$47,500

Non-monetized Benefits	112,000 tons of carbon monoxide

	30,000 tons of HCl

	820 tons of HF

	2,800 pounds of mercury

	2,700 tons of other metals

	23 grams of dioxins/furans (TEQ)

	Health effects from SO2 exposure

	Ecosystem effects

	Visibility impairment

Alternative

Total Monetized Benefitsb	$18,000	to	$43,000	$16,000	to	$39,000

Total Social Costsb	$1,900	$1,900

Net Benefits	$16,100	to	$41,100	$14,100	to	$37,100

Non-monetized Benefits	112,000 tons of carbon monoxide

	22,000 tons of HCl

	620 tons of HF

	2,400 pounds of mercury

	2,600 tons of other metals

	23 grams of dioxins/furans (TEQ)

	Health effects from SO2 exposure

	Ecosystem effects

 	Visibility impairment

a	All estimates are for the implementation year (2014), and are rounded
to two significant figures. These results include units anticipated to
come online and the lowest cost disposal assumption.

b	The total monetized benefits reflect the human health benefits
associated with reducing exposure to PM2.5 through reductions of
directly emitted PM2.5 and PM2.5 precursors such as SO2, as well as
reducing exposure to ozone through reductions of VOCs. It is important
to note that the monetized benefits include many but not all health
effects associated with PM2.5 exposure. Benefits are shown as a range
from Pope et al. (2002)  XE “Pope et al. (2002)”   to Laden et al.
(2006)  XE “Laden et al. (2006)”  . These models assume that all
fine particles, regardless of their chemical composition, are equally
potent in causing premature mortality because the scientific evidence is
not yet sufficient to allow differentiation of effect estimates by
particle type. These estimates include energy disbenefits associated
with the increased emissions from additional energy usage valued at $22
million for the selected option and $37 million for the alternative
option. Ozone benefits are valued at $3.6 to $15 million for both
options.

c	The methodology used to estimate social costs for one year in the
multimarket model using surplus changes results in the same social costs
for both discount rates.

Table 1-2.	Summary of the Monetized Benefits, Social Costs, and Net
Benefits for the Boiler Area Source Rule in 2014 (millions of 2008$)a

−$280	to	$30	−$300	to	−$20

Non-monetized Benefits	1,100 tons of carbon monoxide

	340 tons of HCl

	8 tons of HF

	90 pounds of mercury

	320 tons of other metals

	<1 gram of dioxins/furans (TEQ)

	Health effects from SO2 exposure

	Ecosystem effects

	Visibility impairment

Proposed MACT Approach: Alternative

Total Monetized Benefitsb	$200	to	$490	$180	to	$440

Total Social Costsc	$850	$850

Net Benefits	−$650	to	−$360	−$670	to	−$410

Non-monetized Benefits	1,100 tons of carbon monoxide

	340 tons of HCl

	8 tons of HF

	90 pounds of mercury

	320 tons of other metals

	<1 gram of dioxins/furans (TEQ)

	Health effects from SO2 exposure

	Ecosystem effects

 	Visibility impairment

a All estimates are for the implementation year (2014), and are rounded
to two significant figures. These results include units anticipated to
come online and the lowest cost disposal assumption.

b	The total monetized benefits reflect the human health benefits
associated with reducing exposure to PM2.5 through reductions of
directly emitted PM2.5 and PM2.5 precursors such as SO2. It is important
to note that the monetized benefits include many but not all health
effects associated with PM2.5 exposure. Benefits are shown as a range
from Pope et al. (2002)  XE “Pope et al. (2002)”   to Laden et al.
(2006)  XE “Laden et al. (2006)”  . These models assume that all
fine particles, regardless of their chemical composition, are equally
potent in causing premature mortality because the scientific evidence is
not yet sufficient to allow differentiation of effect estimates by
particle type. These estimates include energy disbenefits associated
with the increased emissions from additional energy usage valued at less
than $1 million.

c	The methodology used to estimate social costs for one year in the
multimarket model using surplus changes results in the same social costs
for both discount rates.

Section 1 References

Laden, F., J. Schwartz, F.E. Speizer, and D.W. Dockery. 2006.
“Reduction in Fine Particulate Air Pollution and Mortality.”
American Journal of Respiratory and Critical Care Medicine 173:667-672.

Pope, C.A., III, R.T. Burnett, M.J. Thun, E.E. Calle, D. Krewski, K.
Ito, and G.D. Thurston. 2002. “Lung Cancer, Cardiopulmonary Mortality,
and Long-term Exposure to Fine Particulate Air Pollution.” Journal of
the American Medical Association 287:1132-1141.

Industry Profiles

In this section, we provide an introduction selected industries that are
affected by the rules. The industries were selected based on high
facility population counts within 3-digit NAICs industries reported in
the combustion facility survey. The purpose is to give the reader a
general understanding of economic aspects and industry trends to provide
additional context for the economic impact analysis.

Food Manufacturing

Introduction

Food manufacturing involves the transformation of raw agricultural and
livestock products into processed food. Between 1997 and 2002, shipment
values stagnated, falling 0.38%, while the number of employees and
payroll increased 2.71% and 7.76%, respectively (Table 2-1). This trend
reversed between 2002 and 2006, as shipment values rose 4.77 % and
number of employees and payroll fell 5.94% and 3.28% respectively (Table
2-1). Shipments, payroll, and employment continued to increase between
2006 and 2007, but there was a notable drop in the number of
establishments between 2002 and 2007 (Table 2-1). As Table 2-2 shows,
payroll per employee grew 4.91% from 1997 to 2002 and continued to
increase, albeit at a slower rate of 2.83%, from 2002 to 2006. Between
2006 and 2007, the payroll per employee declined as the growth in
employees outpaced the increase in the annual payroll (Table 2-2).

The food manufacturing industry consists of nine different industry
groups, each distinguished by the livestock or agricultural products
used as raw materials for the processed food products as follows:

Animal Food Manufacturing (North American Industry Classification System
[NAICS] 3111)

Grain and Oilseed Milling (NAICS 3112)

Sugar and Confectionery Product Manufacturing (NAICS 3113)

Fruit and Vegetable Preserving and Specialty Food Manufacturing (NAICS
3114)

Dairy Product Manufacturing (NAICS 3115)

Animal Slaughtering and Processing (NAICS 3116)

Seafood Product Preparation and Packaging (3117)

Bakeries and Tortilla Manufacturing (NAICS 3118)

Table 2-1.	Key Statistics: Food Manufacturing (North American Industry
Classification System [NAICS] 311)

	1997	2002	2006	2007

Shipments ($2007, millions)	$528,928	$526,939	$552,075	$589,550

Payroll ($2007, millions)	$48,118	$51,852	$50,151	$50,467

Employees	1,466,956	1,506,781	1,417,274	1,466,683

Establishments	26,302	27,899	NA	22,055

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) xe “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)
xe “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 RTI International; using American
FactFinder; “Sector 00: All sectors: Core Business Statistics Series:
Comparative Statistics for the United States and the States (2007 NAICS
Basis): 2002 and 2007.” <http://factfinder.census.gov>; (January 4,
2010) xe “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
(2007 NAICS Basis)\: 2002 and 2007. <http\://factfinder.census.gov>
(January 4, 2010)” .

Table 2-2.	Industry Data: Food Manufacturing (NAICS 311)

Industry Data	1997	2002	2006	2007

Total shipments ($2007, millions)	$528,928	$526,939	$552,075	589,550

Shipments per establishment ($2007, thousands)	$20,110	$18,887	NA
$26,731

Average Shipments per employee ($2007)	$360,561	$349,712	$389,533
$401,961

Average Shipments per $ of payroll ($2007)	$10.99	$10.16	$11.01	$11.68

Average Annual payroll per employee ($2007)	$32,800.97	$34,412.12
$35,385.46	$34,409.00

Average Employees per establishment	56	54	NA	67

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) xe “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)
xe “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 RTI International; using American
FactFinder; “Sector 00: All sectors: Core Business Statistics Series:
Comparative Statistics for the United States and the States (2007 NAICS
Basis): 2002 and 2007.” <http://factfinder.census.gov>; (January 4,
2010) xe “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
(2007 NAICS Basis)\: 2002 and 2007. <http\://factfinder.census.gov>
(January 4, 2010)” .

In 2006, Animal Slaughtering and Processing made up the largest share of
both employment (33%) and the value of shipments (27%) in food
manufacturing (Figures 2-1 and 2-2).

Figure 2-1.	Distribution of Employment within Food Manufacturing
(NAICS 311): 2006

Source:	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) xe “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)” .

Figure 2-2.	Distribution of Total Value of Shipments within Food
Manufacturing (NAICS 311): 2006

Source:	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) xe “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)” .

Many major environmental regulations directly affect the food
manufacturing industry and/or other markets that provide key goods and
services to the industry (e.g., energy). RTI’s multimarket model is
specifically designed to analyze these types of regulations. The model
emphasizes the links among industrial sectors and provides policy makers
with new insights about the direct and indirect effects of a regulatory
program and the distribution of costs across the U.S. economy.

Supply and Demand Characteristics

Next, we provide a broad overview of the supply and demand sides of the
food 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 food manufacturing products.

Goods and Services Used in Food Manufacturing

In 2006, the cost of materials made up 57% of the value of shipments in
food production. Total employee compensation accounted for 12% of this
value, with half of that coming from production workers’ wages (Table
2-3).

The top 10 industry groups supplying inputs to food production accounted
for 84% of the total intermediate inputs to the industry, with the top
three industry groups (food products, animal products, and crop
products) accounting for over half of the total intermediate inputs
(Table 2-4). Electric power generation, transmission, and distribution
accounted for 2% of the total intermediate inputs, whereas boilers,
tanks, and shipping containers accounted for 1%.

Energy

The Department of Energy (DOE) classifies the entire food products
industry as an energy-intensive industry to model within its Industrial
Demand Module (DOE, 2008  XE “DOE, 2008”  ). In 2002, food
manufacturing accounted for 6.86% of the total fuel consumption by all
manufacturing industries (NAICS 311–339) and 19.24% of the
conventional boiler use fuel consumption by all manufacturing industries
(DOE, Energy Information Administration, 2007a  XE “DOE, Energy
Information Administration, 2007a”  ).

Table 2-3.	Costs of Goods and Services Used in Food Manufacturing
(NAICS 311) ($2007)

Industry Ratios	2005	Share	2006	Share

Total shipments ($millions)	$563,797	100%	$552,075	100%

Total compensation ($millions)	$64,909	12%	$64,027	12%

Annual payroll	$50,650	9%	$50,151	9%

Fringe benefits	$14,259	3%	$13,877	3%

Total employees	1,440,283

1,417,274

	Average compensation per employee	$45,067

$45,176

	Total production workers’ wages ($millions)	$33,983	6%	$33,670	6%

Total production workers	1,099,530

1,090,081

	Total production hours (thousands)	2,242,558

2,198,396

	Average production wages per hour	$15

$15

	Total cost of materials ($thousands)	$315,993	56%	$312,847	57%

Materials, parts, packaging	$286,895	51%	$284,028	51%

Purchased electricity	$4,513	1%	$4,787	1%

Purchased fuel	$5,136	1%	$5,398	1%

Other	$19,449	3%	$18,634	3%

Source:	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) xe “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)” .

Table 2-4.	Key Goods and Services Used in Food Manufacturing
(NAICS 311) ($2007, millions)

Sector	BEA Code	Food Products

Food products	3110	$91,518

Animal products	1120	$85,785

Crop products	1110	$43,109

Management of companies and enterprises	5500	$34,235

Wholesale trade	4200	$27,849

Converted paper products	3222	$18,782

Truck transportation	4840	$12,943

Plastics and rubber products	3260	$9,641

Electric power generation, transmission, and distribution	2211	$6,004

Boilers, tanks, and shipping containers	3324	$4,564

Total intermediate inputs	T005	$400,067

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  XE “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”  .

In both 2005 and 2006, purchased electricity and fuel each accounted for
1% of the total value of shipments in food manufacturing (Table 2-3). In
2002, total energy consumption totaled 1,116 TBTU, a 7% increase over
1998 (Table 2-5). Of this total fuel consumption, the largest share
(41.72%) was consumed for indirect uses including conventional boiler
use and combined heat and power (CHP) and/or cogeneration process (MECS
Table 5.2). Between 1997 and 2005, while the manufacturing sector as a
whole used less electricity, food manufacturing used more electricity
(Figure 2-3). From 2005 to 2006, the electricity consumption increased
by nearly 9% (Table 2-5).

Table 2-5.	Energy Used in Food Manufacturing (NAICS 311)

Fuel Type	1998	2002	2006

Net electricitya (million kWh)	62,457	67,521	73,440

Residual fuel oil (million bbl)	2	2	4

Distillate fuel oilb (million bbl)	3	3	3

Natural gasc (billion cu ft)	553	560	618

LPG and NGLd (million bbl)	1	1	1

Coal (million short tons)	6	8	7

Coke and breeze (million short tons)	*	*	*

Othere (trillion BTU)	97	90	107

Total (trillion BTU)	1,044	1,116	1,186

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.
2007a. “2002 Energy Consumption by Manufacturers—Data Tables.”
Tables 3.2 and N3.2. Washington, DC: DOE < HYPERLINK
"http://www.eia.doe.gov/emeu/mecs/mecs2002/data02/shelltables.html"
http://www.eia.doe.gov/emeu/mecs/mecs2002/data02/shelltables.html >  XE
“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>“
.

	U.S. Department of Energy, Energy Information Administration. 2009a.
“2006 Energy Consumption by Manufacturers—Data Tables.” Table 3.1.
Washington, DC: DOE.
<http://www.eia.doe.gov/emeu/mecs/mecs2006/2006tables.html>  XE “U.S.
Department of Energy, Energy Information Administration. 2009a. \”2006
Energy Consumption by Manufacturers—Data Tables.\” Table 3.1.
Washington, DC\: DOE.
<http\://www.eia.doe.gov/emeu/mecs/mecs2006/2006tables.html>“  .

Figure 2-3.	Electric Power Use Trends in Food Manufacturing
(NAICS 311): 1997–2005

Source:	Federal Reserve Board. 2009. “Industrial Production and
Capacity Utilization: Electric Power Use: Manufacturing and Mining.”
<http://www.federalreserve.gov/datadownload/>  XE “Federal Reserve
Board. 2008. \”Industrial Production and Capacity Utilization\:
Electric Power Use\: Manufacturing and Mining.\” Series ID\:
G17/KW/KW.GMF.S & G17/KW/KW.G311.S.
<http\://www.federalreserve.gov/datadownload/>“  .

Uses and Consumers

The majority of food manufacturing’s total commodity output (58%) is
sold for personal consumption. Of the sales for intermediate use, 42%
are sold back into the food manufacturing industry (Table 2-6).

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 food manufacturing establishments in
the United States, followed by New York and Texas (see Figure 2-4). In
addition, Pennsylvania, Illinois, Wisconsin, New Jersey, and Florida had
over 1,000 establishments in their states.

Table 2-6.	Demand by Sector: Food Manufacturing (NAICS 311) ($2007,
millions)

Sector	BEA Code	Food Products

Food manufacturing	3110	$91,518

Food services and drinking places	7220	$37,291

Animal production	1120	$15,870

General state and local government services	S007	$15,170

Retail trade	4A00	$13,985

Beverage manufacturing	3121	$11,703

Hospitals	6220	$9,539

Educational services	6100	$4,485

Nursing and residential care facilities	6230	$4,187

Social assistance	6240	$2,277

Total intermediate use	T001	$217,570

Personal consumption expenditures	F010	$301,748

Exports of goods and services	F040	$28,151

Imports of goods and services	F050	−$33,119

Total final uses (GDP)	T004	$299,470

Total commodity output	T007	$517,040

Source:	U.S. Bureau of Economic Analysis (BEA). 2008  XE “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 2-4.	Establishment Concentration in Food Manufacturing
(NAICS 311): 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)  XE “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 food manufacturing industry did not fall off
during the recession of 2001 as much as the manufacturing sector as a
whole (Figure 2-5). Food manufacturing’s capacity utilization has
remained higher than manufacturing as a whole and went above 85% in the
spring of 2008. The effects of the recent economic downturn have not
affected capacity utilization as sharply in the food industry relative
to the overall manufacturing sector (Figure 2-5).

Figure 2-5.	Capacity Utilization Trends in Food Manufacturing
(NAICS 311)

Source:	Federal Reserve Board. 2009. “Industrial Production and
Capacity Utilization: Capacity Utilization.”
<http://www.federalreserve.gov/datadownload/>  XE “Federal Reserve
Board. 2008. \”Industrial Production and Capacity Utilization\:
Capacity Utilization.\” Series ID\: G17/CAPUTL/CAPUTL.GMF.S &
G17/CAPUTL/CAPUTL.G311.S.
<http\://www.federalreserve.gov/datadownload/>“  .

Employment

The geographic distribution of employment in food manufacturing varies
substantially from the distribution of establishments. In 2002,
Arkansas, ranked thirty-first in number of establishments and had the
eighth most employees (53,844) because of its national high of 199
employees per establishment. New York, ranked second in number of
establishments, had only the tenth most employees (50,012). North
Carolina and Georgia also had greater than 50,000 employees, despite
having fewer than 600 establishments (Figure 2-6).

Figure 2-6.	Employment Concentration in Food Manufacturing (NAICS 311):
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)  XE “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

Production capacity in food manufacturing only grew 17.94% between 1997
and early 2008, a compound annual growth rate (CAGR) of 1.45%. This is
substantially less than the 42.50% growth for the manufacturing industry
as a whole (Figure 2-7).

Firm Characteristics

In fiscal year 2007, the top eight food manufacturing companies each had
greater than $10 billion in sales. These companies, however, are global,
many with a large portion of both sales and production coming from
operations outside of the United States (Table 2-7). The largest U.S.
food manufacturing company, Kraft Foods Inc., has 50.27% of its
long-lived assets located outside of the United States (Kraft Foods
Inc., 2008  XE “Kraft Foods Inc., 2008”  ).

Figure 2-7.	Capacity Trends in Food Manufacturing (NAICS 311)

Source:	Federal Reserve Board. 2009. “Industrial Production and
Capacity Utilization: Industrial Capacity.”
<http://www.federalreserve.gov/datadownload/>  XE “Federal Reserve
Board. 2008. \”Industrial Production and Capacity Utilization\:
Industrial Capacity.\” Series ID\: G17/CAP/CAP.GMF.S &
G17/CAP/CAP.G311.S. <http\://www.federalreserve.gov/datadownload/>“  .

Table 2-7.	Top Publicly Held U.S. Food Companies: 2007

	Sales ($millions)	% of Sales in North America

Kraft Foods Inc.	37,241	57.8%

Tyson Foods Inc.	26,900	90.0%

General Mills Inc.	12,442	82.9%

Sara Lee Corp.	12,278	53.8%

ConAgra Foods Inc.	12,028	89.2%

Smithfield Foods Inc.a	11,911	86.2%

Dean Foods Co.	11,822	>99.0%

Kellogg Co.a	11,776	66.1%

H.J. Heinz Co.	9,002	42.3%

Campbell Soup Co.	7,867	69.0%

a	Percentage of sales in the United States is actually percentage of
sales in North America.

Source:	Graves, T. 2008  XE “Graves, T. 2008”  . “Food and
Nonalcoholic Beverages.” Standard and Poor’s Industry Surveys.
176(25).

For the industry as a whole, the number of corporations as well as the
number of corporations with net income in the food manufacturing
industry grew between 2004 and 2005. Although the overall number of
companies continued to grow in 2006, the number of those with a positive
net income declined along with profit margins and total receipts (Table
2-8).

Table 2-8.	Corporate Income and Profitability for Food Manufacturing
(NAICS 311)

	2004	2005	2006

Number of corporations	14,408	14,956	16,146

Number of corporations with net income	6,541	7,503	7,333

Total receipts (thousands)	$502,149,944	$504,944,378	$484,193,319

Business receipts (thousands)	$477,906,423	$465,369,666	$459,884,663

Before-tax profit margin	5.27%	10.09%	7.43%

After-tax profit margin	3.74%	7.62%	5.11%

Source:	Internal Revenue Service, U.S. Department of Treasury. 2008a  XE
“Internal Revenue Service, U.S. Department of Treasury. 2008”  .
“Corporation Source Book: Data File 2005.”
<http://www.irs.gov/taxstats/article/0,,id=167415,00.html>; (January 14,
2009).

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 2-9.
Over 80% of the NAICS industries within the food manufacturing industry
use a cutoff of 500 employees. In 2002, enterprises with fewer than 500
employees accounted for 32% of employment and 23% of receipts within
food manufacturing (Table 2-10).

Domestic Production

Between 1997 and early 2008, overall manufacturing production grew
faster (34.88%) than the food manufacturing component (26.18%)
(Figure 2-8). The food manufacturing industry has been less volatile,
particularly during the recession of 2001 and the current economic
downturn.

International Trade

In 2006, the United States regained a trade surplus in food
manufacturing it had briefly lost during 2004 to 2005 (see Figure 2-9).
The trade surplus in 2007 was over $4 billion. Both exports and imports
have declined since their 2008 peak as a result of the global economic
recession.

Table 2-9.	Small Business Size Standards: Food Manufacturing (NAICS
311)

NAICS	Description	Employees

311111	Dog and Cat Food Manufacturing	500

311119	Other Animal Food Manufacturing	500

311211	Flour Milling	500

311212	Rice Milling	500

311213	Malt Manufacturing	500

311221	Wet Corn Milling	750

311222	Soybean Processing	500

311223	Other Oilseed Processing	1,000

311225	Fats and Oils Refining and Blending	1,000

311230	Breakfast Cereal Manufacturing	1,000

311311	Sugarcane Mills	500

311312	Cane Sugar Refining	750

311313	Beet Sugar Manufacturing	750

311320	Chocolate and Confectionery Manufacturing from Cacao Beans	500

311330	Confectionery Manufacturing from Purchased Chocolate	500

311340	Non-Chocolate Confectionery Manufacturing	500

311411	Frozen Fruit, Juice and Vegetable Manufacturing	500

311412	Frozen Specialty Food Manufacturing	500

311421	Fruit and Vegetable Canning3	3,500

311422	Specialty Canning	1,000

311423	Dried and Dehydrated Food Manufacturing	500

311511	Fluid Milk Manufacturing	500

311512	Creamery Butter Manufacturing	500

311513	Cheese Manufacturing	500

311514	Dry, Condensed, and Evaporated Dairy Product Manufacturing	500

311520	Ice Cream and Frozen Dessert Manufacturing	500

311611	Animal (except Poultry) Slaughtering	500

311612	Meat Processed from Carcasses	500

311613	Rendering and Meat By-product Processing	500

311615	Poultry Processing	500

311711	Seafood Canning	500

311712	Fresh and Frozen Seafood Processing	500

311811	Retail Bakeries	500

311812	Commercial Bakeries	500

311813	Frozen Cakes, Pies, and Other Pastries Manufacturing	500

311821	Cookie and Cracker Manufacturing	750

311822	Flour Mixes and Dough Manufacturing from Purchased Flour	500

(continued)

Table 2-9.	Small Business Size Standards: Food Manufacturing (NAICS 311)
(continued)

NAICS	Description	Employees

311823	Dry Pasta Manufacturing	500

311830	Tortilla Manufacturing	500

311911	Roasted Nuts and Peanut Butter Manufacturing	500

311919	Other Snack Food Manufacturing	500

311920	Coffee and Tea Manufacturing	500

311930	Flavoring Syrup and Concentrate Manufacturing	500

311941	Mayonnaise, Dressing and Other Prepared Sauce Manufacturing	500

311942	Spice and Extract Manufacturing	500

311991	Perishable Prepared Food Manufacturing	500

311999	All Other Miscellaneous Food Manufacturing	500

Source:	U.S. Small Business Administration (SBA). 2008  XE “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/sizestandardstopic
s/size/index.html>.

Table 2-10.	Distribution of Economic Data by Enterprise Size: Food
Manufacturing (NAICS 311)

Enterprises with:

Variable	Total	1 to 20 Employeesa	20 to 99 Employees	100 to 499
Employees	500 to 749 Employees	750 to 999 Employees	1,000 to 1,499
Employees

Firms	21,384	13,645	3,935	1,247	147	63	96

Establishments	25,698	13,719	4,254	1,951	370	211	319

Employment	1,443,766	85,850	156,158	218,041	67,104	30,099	72,262

Receipts ($millions)	$457,521	$12,665	$32,274	$56,661	$23,103	$10,007
$21,878

Receipts/firm ($thousands)	$21,395	$928	$8,202	$45,438	$157,163	$158,835
$227,898

Receipts/establishment ($thousands)	$17,804	$923	$7,587	$29,042	$62,440
$47,425	$68,584

Receipts/employment ($)	$316,894	$147,523	$206,678	$259,862	$344,286
$332,457	$302,762

a	Excludes Statistics of U.S. Businesses (SUSB) employment category for
zero employees. These entities only operated for a fraction of the year.

Source:	U.S. Census Bureau. 2008  XE “U.S. Census Bureau. 2008”  .
“Firm Size Data from the Statistics of U.S. Businesses: U.S. Detail
Employment Sizes: 2002.” < HYPERLINK
"http://www.census.gov/csd/susb/download_susb02.htm"
http://www.census.gov/csd/susb/download_susb02.htm >.

Figure 2-8.	Industrial Production Trends in Food Manufacturing
(NAICS 311)

Source:	Federal Reserve Board. 2008  XE “Federal Reserve Board.
2008”  . “Industrial Production and Capacity Utilization: Industrial
Production.” <http://www.federalreserve.gov/datadownload/>.

Figure 2-9.	International Trade Trends in Food Manufacturing
(NAICS 311)

Source:	U.S. International Trade Commission. 2008  XE “U.S.
International Trade Commission. 2009a”  . “U.S. Domestic Exports”
& “U.S. Imports for Consumption.”
<http://dataweb.usitc.gov/scripts/user_set.asp>.

Market Prices

Prices of goods in food manufacturing have moved generally in line with
prices in overall manufacturing (see Figure 2-10). Both indexes
increased over 31% since between early 2003 and early 2008, a CAGR of
5.13%. This rise was followed by a marked decline in recent years along
with the downward trend in prices throughout the economy.

Figure 2-10.	Producer Price Trends in Food Manufacturing (NAICS 311)

Source:	U.S. Department of Labor; Bureau of Labor Statistics. 2010  XE
“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>.

Wood Product Manufacturing

Introduction

According to a report by Standard & Poor’s (2008)  XE “Standard &
Poor’s (2008)”  , a number of factors are shaping the current
economic environment for wood products, including, but not limited to,
the housing slump, high input costs, low prices for lumber and other
building materials, and a weak dollar. Table 2-11 shows that revenues in
this industry are not entirely predictable, exhibiting a drop in
shipment revenue between 1997 and 2002 but a rise back to within $5
billion of the 1997 value in 2006 and a decline to within $14 billion of
the 2006 value in 2007.

Table 2-11.	Key Statistics: Wood Product Manufacturing (NAICS 321)

 	1997	2002	2006	2007

Shipments ($2007, millions)	$110,956	$102,721	$115,390	$101,879

Payroll ($2007, millions)	$17,959	$18,528	$18,623	$17,439

Employees	570,034	543,459	536,094	519,651

Establishments	17,367	17,255	NA	14,862

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)  XE “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)
 XE “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.” Accessed on December
27, 2009  XE “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.\” Accessed on December 27, 2009”  .

While total payroll dropped 3% over from 1997 to 2007, annual payroll
per employee rose 6.5% because of the decline in the number of employees
(Table 2-12). Shipments per employee grew 10.6% from 1997 to 2006 and
dropped 8.9% from 2006 to 2007 (Table 2-12).

Table 2-12.	Industry Data: Wood Product Manufacturing (NAICS 321)

Industry Data	1997	2002	2006	2007

Total shipments ($2007, millions)	$110,956	$102,721	$115,390	$101,879

Shipments per establishment ($thousands)	$25,613	$5,953	NA	$6,855

Average Shipments per employee ($2007)	$194,648	$189,014	$215,243
$196,053

Average Shipments per $ of payroll ($2007)	$6.18	$5.54	$6.20	$5.84

Average Annual payroll per employee ($2007)	$31,504	$34,093	$34,738
$33,558

Average Employees per establishment	33	31	NA	35

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)  XE “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)
 XE “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.” Accessed on December
27, 2009  XE “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.\” Accessed on December 27, 2009”  .

The U.S. Census Bureau categorizes this industry’s facilities into
three categories: “sawmills and wood preservation;” “veneer,
plywood, and engineered wood product manufacturing;” and “other wood
product manufacturing.” These are further divided into the following
types of facilities as defined by the Census Bureau:

Sawmills and Wood Preservation

Sawmills and Wood Preservation (NAICS 32111): This industry comprises
establishments primarily engaged in one or more of the following
manufacturing activities: (a) sawing dimension lumber, boards, beams,
timber, poles, ties, shingles, shakes, siding, and wood chips from logs
or bolts; (b) sawing round wood poles, pilings, and posts and treating
them with preservatives; and (c) treating wood sawed, planed, or shaped
in other establishments with creosote or other preservatives to prevent
decay and to protect against fire and insects. Sawmills may plane the
rough lumber that they make with a planning machine to achieve
smoothness and uniformity of size.

Veneer, Plywood, and Engineered Wood Product Manufacturing

Veneer, Plywood, and Engineered Wood Product Manufacturing (NAICS
32121): This industry comprises establishments primarily engaged in one
or more of the following manufacturing activities: (a) veneer and/or
plywood, (b) engineered wood members, and (c) reconstituted wood
products. This industry includes manufacturing plywood from veneer made
in the same establishment or from veneer made in other establishments,
and manufacturing plywood faced with non-wood materials, such as
plastics or metal.

Other Wood Product Manufacturing

Millwork (NAICS 32191): This industry comprises establishments primarily
engaged in manufacturing hardwood and softwood cut stock and dimension
stock (i.e., shapes); wood windows and wood doors; and other millwork
including wood flooring. Dimension stock or cut stock is defined as
lumber and worked wood products cut or shaped to specialized sizes.
These establishments generally use woodworking machinery, such as
jointers, planers, lathes, and routers to shape wood.

Wood Container and Pallet Manufacturing (NAICS 32192): This industry
comprises establishments primarily engaged in manufacturing wood
pallets, wood box shook, wood boxes, other wood containers, and wood
parts for pallets and containers.

All Other Wood Product Manufacturing (NAICS 32199): This industry
comprises establishments primarily engaged in manufacturing wood
products (except establishments operating sawmills and wood preservation
facilities; and establishments manufacturing veneer, plywood, engineered
wood products, millwork, wood containers, or pallets).

Figure 2-11 shows that the industry proportion of the value of shipments
for other wood product manufacturing (51%) was greater than the value of
shipments for sawmills and wood preservation (27%) and veneer, plywood,
and engineered wood products (22%). Figure 2-12 indicates that the
majority of employees in this industry fell under other wood products
(60%). Veneer, plywood, and engineered wood products had the same
percentage (20%) of employees as sawmills and wood preservation (20%),
even though it contributed to a lesser portion of the value of
shipments.

Figure 2-11.	Distribution of Value of Shipments within Wood Product
Manufacturing (NAICS 322): 2007

Source:	U.S. Census Bureau; generated by Kapur Energy and Environment;
“Sector 00: EC0700A1: All Sectors: Geographic Area Series:
Economy-Wide Key Statistics: 2007.” < HYPERLINK
"http://factfinder.census.gov" http://factfinder.census.gov >. Accessed
on December 27, 2009  XE “U.S. Census Bureau\; generated by Kapur
Energy and Environment\; \”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 2-12.	Distribution of Employment within Wood Product
Manufacturing (NAICS 322): 2007

Source:	U.S. Census Bureau; generated by Kapur Energy and Environment;
“Sector 00: EC0700A1: All Sectors: Geographic Area Series:
Economy-Wide Key Statistics: 2007” Release Date: 12/22/09.
<http://factfinder.census.gov>. Accessed on December 27, 2009  XE
“U.S. Census Bureau\; generated by Kapur Energy and Environment\;
\”Sector 00\: EC0700A1\: All Sectors\: Geographic Area Series\:
Economy-Wide Key Statistics\: 2007\” Release Date\: 12/22/09.
<http\://factfinder.census.gov>. Accessed on December 27, 2009”  .

Supply and Demand Characteristics

Next, we provide a broad overview of the supply and demand sides of the
wood product manufacturing industry. We emphasize the economic
interactions this industry has with other industries and people and
identify the key goods and services used by the industry and the major
uses and consumers wood products.

Goods and Services Used in Wood Product Manufacturing

In 2007, the cost of materials made up 59% of the total shipment value
of goods in the wood product manufacturing industry (Table 2-13). Total
compensation of employees represented 22% of the total value in 2007.
Both the number of total shipments and the number of employees in this
industry decreased between 2005 and 2007—the former by 14% and the
latter by 3%.

The top 10 industry groups supplying inputs to the wood product industry
accounted for 80% of the total intermediate inputs according to 2008
Bureau of Economic Analysis data (Table 2-14). The largest comes from
the wood product industry itself. This is quite understandable, since
the descriptions of the various industries within wood product
manufacturing imply that they supply each other with products in order
to add value and distribute their products to the broader market. The
top five inputs are rounded out by forestry and logging products,
wholesale trade, management of companies and enterprises, and truck
transportation, which together make up 70% of the total cost of input.

Table 2-13.	Costs of Goods and Services in Wood Product Manufacturing
(NAICS 321) ($2007)

Industry Ratios	2005	Share	2006	Share	2007	Share

Total shipments (millions) 	$118,705	100%	$115,390	100%	$102,002	100%

Total compensation (millions)	$23,327	20%	$23,306	20%	$22,513	22%

Annual payroll millions	$18,884	16%	$18,623	16%	$17,444	17%

Fringe benefits	$4,442	4%	$4,683	4%	$5,069	5%

Total employees	538,890

536,094

524,212

	Average compensation per employee 	$43,286

$43,473

$42,947

	Total production workers’ wages (millions)	$13,363	11%	$13,132	11%
$12,086	12%

Total production workers	431,569

432,315

417,471

	Total production hours (thousands)	911,332

887,613

837,074

	Average production wages per hour ($2007)	$15

$15

$14

	Total cost of materials (thousands)	$71,808	60%	$69,892	61%	$60,682	59%

Materials, parts, packaging	$65,319	55%	$63,499	55%	$54,462	53%

Purchased electricity	$1,530	1%	$1,625	1%	$1,446	1%

Purchased fuel 	$810	1%	$835	1%	$843	1%

Other 	$4,149	3%	$3,933	3%	$3,931	4%

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)  XE “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  XE “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”  .

<IP_ADDRESS>.1 Energy. The Department of Energy (DOE) categorizes wood
product manufacturing (NAICS 321) as a non-energy-intensive industry.
The 2008 Annual Energy Outlook predicts that the wood product industry
will be one of five (out of eight) non-energy-intensive industries
experiencing positive average growth of delivered energy consumption
between 2006 and 2030 (DOE, 2008 xe “DOE, 2008” ).

Table 2-14.	Key Goods and Services Used in Wood Product Manufacturing
(NAICS 321) ($2007, millions)

Description	BEA Commodity Code	Wood Products

Wood products	3210	$20,989

Forestry and logging products	1130	$18,914

Wholesale trade	4200	$5,417

Management of companies and enterprises	5500	$2,853

Truck transportation	4840	$2,542

Electric power generation, transmission, and distribution	2211	$1,388

Other fabricated metal products	332B	$1,310

Nonmetallic mineral products	3270	$1,110

Real estate	5310	$799

All other administrative and support services	561A	$748

Architectural and structural metal products	3323	$725

Rail transportation	4820	$723

Other inputs

$14,650

Total intermediate inputs	T005	$72,169

Source:	U.S. Bureau of Economic Analysis (BEA). 2008 xe “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.

Table 2-15 shows that total energy use between 1998 and 2002. Figure
2-13 shows that electrical power use decreased, since 2000.

Uses and Consumers

Table 2-16 shows that three of the top four consumers of wood products
are represented by the construction sector of the economy (NAICS 23).
New residential construction, new nonresidential construction, and
maintenance and repair construction consume 35% of the total commodity
output in this industry. The top 10 consumers of wood products make up
54% of the demand for wood products. Although many of the top consumers
deal with construction, repair, or real estate services, other types of
consumers, such as food services and drinking places, rail
transportation, plastics and rubber products manufacturing, and other,
use these products.

Table 2-15.	Energy Used in Wood Product Manufacturing (NAICS 321)

Fuel Type	1998	2002	2006

Net electricitya (million kWh)	21,170	20,985	26,723

Residual fuel oil (million bbl)	*	*	1

Distillate fuel oilb (million bbl)	2	2	3

Natural gasc (billion cu ft)	71	56	84

LPG and NGLd (million bbl)	1	1	1

Coal (million short tons)	*	*	Q

Coke and breeze (million short tons)	—	—	*

Othere (trillion BTU)	341	229	228

Total (trillion BTU)	504	375	445

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.

Q = Withheld because relative standard error is greater than 50%.

Sources:	U.S. Department of Energy, Energy Information Administration.
2007a  XE “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>. Washington, DC: DOE.

	U.S. Department of Energy, Energy Information Administration. 2007b  XE
“U.S. Department of Energy, Energy Information Administration.
2007b”  . “2006 Energy Consumption by Manufacturers—Data
Tables.” Tables 3.1. < HYPERLINK
"http://www.eia.doe.gov/emeu/mecs/mecs2006/2006tables.html"
http://www.eia.doe.gov/emeu/mecs/mecs2006/

2006tables.html >. [Source for 2006 numbers]

Figure 2-13.	Electrical Power Use Trends in the Wood Product
Manufacturing Industry (NAICS 321): 1997–2005

Source:	Federal Reserve Board. 2009  XE “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 section describes geographic, production, and market data. These
data provide the basis for further analysis, including regulatory
flexibility analyses, as well as a complete picture of the recent
historical trends of production and pricing.

Location

As Figure 2-14 illustrates, the states with the largest number of wood
product manufacturing establishments are dispersed throughout the
country, with a significant concentration of establishments in the
northeastern states. Other states with many establishments include
California, Texas, and North Carolina.

Table 2-16.	Demand by Sector: Wood Product Manufacturing (NAICS 321)
($2007, millions)

Sector	BEA Code	3210 Wood Products

New residential construction	2302	$19,997

New nonresidential construction	2301	$11,854

Furniture and related product manufacturing	3370	$8,197

Maintenance and repair construction	2303	$4,048

Motor vehicle body, trailer and parts manufacturing	336A	$2,516

Real estate	5310	$2,335

Food services and drinking places	7220	$2,307

Other miscellaneous manufacturing	3399	$1,311

Wholesale trade	4200	$1,284

Rail transportation	4820	$1,138

Retail trade	4A00	$1,047

Plastics and rubber products manufacturing	3260	$877

General state and local government use	S007	$3,116

Owner occupied dwelling	S008	$11,209

Private fixed investment	F020	$7,933

Exports of goods and services	F040	$3,978

Total final uses (gross domestic product [GDP])	T004	$3,719

Total commodity output	T007	$101,753

Source:	U.S. Bureau of Economic Analysis (BEA). 2008 xe “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.

Production Capacity and Utilization

Capacity utilization of the wood product manufacturing industry has been
experiencing capacity utilization increases and declines with more
extreme fluctuations than those of all manufacturing industries
combined. The decline in wood product manufacturing is similar to total
manufacturing between 1997 and 2002. However, capacity utilization in
total manufacturing, which peaked in 2006, started increasing at a
faster rate than wood product manufacturing, but decreased sharply after
its peak. Wood product manufacturing experienced its own rapid decrease
in capacity utilization between 2007 and 2009, though not at the same
rate as total manufacturing (Figure 2-15).

Figure 2-14.	Establishment Concentration in the Wood Product
Manufacturing Industry (NAICS 321): 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)  XE “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)”  .

Employment

California has the largest number of employees in the wood product
manufacturing industry with over 39,000 reported in the 2002 census
followed by over 32,000 in Oregon (Figure 2-16). The states with the
highest number of employees do not directly correlate with the states
with the highest number of establishments. States such as Indiana,
Georgia, Arkansas, and Oregon had fewer than 600 establishments, as
shown in Figure 2-14, but had more than 20,000 employees, whereas states
such as Ohio and New York had fewer than 20,000 employees but more than
600 establishments.

Plants and Capacity

While the capacity of the manufacturing sector has been growing
consistently since 1997, the wood product manufacturing industry has
experienced inconsistent growth. After a small amount of growth in
capacity between 1997 and 2001, the wood product manufacturing
industry’s capacity dipped between 2002 and 2005 but has been growing
at a slow rate since then though it started to dip again in 2008 and
2009 (Figure 2-17).

Figure 2-15.	Capacity Utilization Trends in the Wood Product
Manufacturing Industry (NAICS 321)

Source:	Federal Reserve Board. 2009  XE “Federal Reserve Board.
2009”  . “Industrial Production and Capacity Utilization: Capacity
Utilization.” <http://www.federalreserve.gov/datadownload/>

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 2-17). 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 xe
“Benwart, 2006” ). Although these numbers do not exclusively reflect
wood products, they do convey the market environment in which firms in
this sector compete.

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, small companies were the
recipients of the majority of receipts in 2002; 53% of receipts were
generated by companies with fewer than 500 employees (Table 2-18). The
number of employees in the small business cutoff is 500 employees for
all subindustries in the wood product manufacturing industry (Table
2-19).

Figure 2-16.	Employment Concentration in the Wood Product Manufacturing
Industry (NAICS 321): 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)  XE “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)”  .

Domestic Production

Similar to industry capacity rates, industry production rates for wood
product manufacturing have decreased since 2006 compared to the steady
increase in production for the manufacturing sector since 1997 (Figure
2-18). Similar to capacity utilization trends (Figure 2-16), the index
shows a faster rate of decline for wood products than the entire
manufacturing sector.

International Trade

Since 1997, the wood product manufacturing industry has contributed to
an increasing trade deficit (Figure 2-16). The value of imports has
fluctuated greatly since 1997; however, exports have remained fairly
constant, with seasonal changes, since 1997.

Figure 2-17.	Capacity Trends in the Wood Product Manufacturing Industry
(NAICS 321)

Source:	Federal Reserve Board. 2009. “Industrial Production and
Capacity Utilization: Industrial Capacity.”
<http://www.federalreserve.gov/datadownload/>.

Table 2-17.	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.

Source:	Benwart, S.J. 2006 xe “Benwart, S.J. 2006” . “Paper &
Forest Products.” Standard and Poor’s Industry Surveys. 176(28).

Table 2-18.	Distribution of Economic Data by Enterprise Size: Wood
Product Manufacturing (NAICS 321)

Enterprises with

Variable	Total	1 to 20 Employeesa	20 to 99 Employees	100 to 499
Employees	500 to 749 Employees	750 to 999 Employees	1,000 to 1,499
Employees

Firms	15,198	9,740	3,280	791	63	27	30

Establishments	17,052	9,758	3,482	1,271	166	91	133

Employment	534,011	65,423	132,612	118,910	19,784	11,944	18,533

Receipts ($thousands )	$88,649	$8,204	$18,276	$19,717	$3,192	$1,902
$3,118

Receipts/firm ($thousands)	$5,833	$842	$5,572	$24,927	$50,673	$70,453
$103,927

Receipts/establishment ($thousands)	$5,199	$841	$5,249	$15,513	$19,231
$20,904	$23,442

Receipts/employment ($)	$166,006	$125,393	$137,818	$165,814	$161,363
$159,262	$168,231

a	Excludes Statistics of U.S. Businesses (SUSB) employment category for
zero employees. These entities only operated for a fraction of the year.

Source:	U.S. Census Bureau. 2008  XE “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 2-19.	Small Business Size Standards: Wood Product Manufacturing
(NAICS 321)

NAICS	NAICS Description	Employees

321113	Sawmills	500

321114	Wood Preservation 	500

321211	Hardwood Veneer and Plywood Manufacturing	500

321212	Softwood Veneer and Plywood Manufacturing	500

321213	Engineered Wood Member (except Truss) Manufacturing	500

32121	Truss Manufacturing 	500

321219	Reconstituted Wood Product Manufacturing 	500

321911	Wood Window and Door Manufacturing	500

321912	Cut Stock, Resawing Lumber, and Planing	500

321918	Other Millwork (including Flooring) 	500

321920	Wood Container and Pallet Manufacturing	500

321991	Manufactured Home (Mobile Home) Manufacturing	500

321992	Prefabricated Wood Building Manufacturing	500

321999	All Other Miscellaneous Wood Product Manufacturing	500

Source:	U.S. Small Business Administration (SBA). 2008  XE “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/sizestandardstopic
s/size/index.html>.

Market Prices

Prices of goods in the wood product manufacturing industry have remained
roughly the same since 2005. The prices for the entire manufacturing
sector increased between 2003 and 2008 but have decreased since August
2008. Producer price indices (PPIs) show that producer prices for wood
products increased by 6% from 2004 to 2007 (Figure 2-20).

Figure 2-18.	Industrial Production Trends in the Wood Product
Manufacturing Industry (NAICS 321): 1997–2009

Source:	Federal Reserve Board. 2009. “Industrial Production and
Capacity Utilization: Industrial Production.”
<http://www.federalreserve.gov/datadownload/>.

Figure 2-19.	International Trade Trends in the Wood Product
Manufacturing Industry (NAICS 321)]

Source:	U.S. International Trade Commission. 2008  XE “U.S.
International Trade Commission. 2008”  . “U.S. Domestic Exports” &
“U.S. Imports for Consumption.”
<http://dataweb.usitc.gov/scripts/user_set.asp>.

Figure 2-20.	Producer Price Trends in the Wood Product Manufacturing
Industry (NAICS 321)

Source:	U.S. Bureau of Labor Statistics (BLS). 2009a  XE “U.S. Bureau
of Labor Statistics (BLS). 2009a”  . “Producer Price Index.”
Series ID: PCU321—321—& PCUOMFG—OMFG—.
<http://www.bls.gov/ppi/home.htm>. Accessed on January 8, 2010.

Paper Manufacturing

Introduction

The paper manufacturing subsector is an essential component of all
business operations worldwide. Broadly speaking, paper and paperboard
are manufactured by converting timber or other recycled material into
products such as printing and writing papers, newsprint, tissue, and
containerboard (Benwart, 2006 xe “Benwart, 2006” ). The subsector
has been experiencing a decline in shipments as of late. From 1997 to
2007, shipments in the industry declined 7%, and employment declined by
27% (Table 2-21). While total payroll dropped 26% over this time,
annual payroll per employee rose 2% from 1997 to 2007 because of the
decline in the number of employees (Table 2-20). Shipments per employee
grew 28% from 1997 to 2007, with much of that growth taking place
between 2002 and 2006 (Table 2-21).

Table 2-20.	Key Statistics: Paper Manufacturing (NAICS 322)

	1997	2002	2006	2007

Shipments ($2007, millions)	$188,496	$175,983	$174,887	$175,806

Payroll ($2007, millions)	$27,983	$24,561	$21,188	$20,804

Employees	574,274	489,367	414,049	416,886

Establishments	5,868	5,495	NA	4,803

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)  XE “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)
 XE “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.” Accessed on December
28, 2009  XE “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.\” Accessed on December 28, 2009”  . [Source for 2007 numbers]

Table 2-21.	Industry Data: Paper Manufacturing (NAICS 322)

Industry Data	1997	2002	2006	2007

Total shipments ($2007, millions)	$188,496	$175,983	$174,887	$175,806

Shipments per establishment ($2007, thousands)	$32,123	$32,026	NA
$36,603

Average Shipments per employee ($2007)	$328,233	$359,614	$422,381
$421,712

Average Shipments per $ of payroll ($2007)	$6.74	$7.17	$8.25	$8.45

Average Annual payroll per employee ($2007)	$48,727	$50,189	$51,174
$49,904

Average Employees per establishment	98	89	NA	87

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)  XE “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)
 XE “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 28, 2009  XE
“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 28, 2009”  .
[Source for 2007 numbers]

The U.S. Census Bureau categorizes this industry’s facilities into
two categories: pulp, paper, and paperboard manufacturing and converted
paper product manufacturing. These are further divided into the
following types of facilities as defined by the Census Bureau (2001)  XE
“Census Bureau (2001)”  :

Pulp, Paper, and Paperboard:

Pulp Mills (NAICS 32211): This industry comprises establishments
primarily engaged in manufacturing pulp without manufacturing paper or
paperboard. The pulp is made by separating the cellulose fibers from the
other impurities in wood or other materials, such as used or recycled
rags, linters, scrap paper, and straw.

Paper Mills (NAICS 32212): This industry comprises establishments
primarily engaged in manufacturing paper from pulp. These establishments
may manufacture or purchase pulp. In addition, the establishments may
convert the paper they make. The activity of making paper classifies an
establishment into this industry regardless of the output.

Paperboard Mills (NAICS 32213): This industry comprises establishments
primarily engaged in manufacturing paperboard from pulp. These
establishments may manufacture or purchase pulp. In addition, the
establishments may also convert the paperboard they make.

Converted Paper Products:

Paperboard Containers Manufacturing (NAICS 32221): This industry
comprises establishments primarily engaged in converting paperboard into
containers without manufacturing paperboard. These establishments use
corrugating, cutting, and shaping machinery to form paperboard into
containers. Products made by these establishments include boxes;
corrugated sheets, pads, and pallets; paper dishes; and fiber drums and
reels.

Paper Bag and Coated and Treated Paper Manufacturing (NAICS 32222): This
industry comprises establishments primarily engaged in one or more of
the following manufacturing activities: cutting and coating paper and
paperboard; cutting and laminating paper and paperboard and other
flexible materials (except plastics film to plastics film); bags or
multiwall bags or sacks of paper, metal foil, coated paper, or laminates
or coated combinations of paper and foil with plastics film; laminated
aluminum and other converted metal foils from purchased foils; and
surface coating paper or paperboard.

Stationary Product Manufacturing (NAICS 32223): This industry comprises
establishments primarily engaged in converting paper or paperboard into
products used for writing, filing, art work, and similar applications.

Other Converted Paper Products (NAICS 32229): This industry comprises
establishments primarily engaged in one of the following manufacturing
activities:

converting paper and paperboard into products (except containers, bags,
coated and treated paper and paperboard, and stationery products), or

converting pulp into pulp products, such as disposable diapers, or
molded pulp egg cartons, food trays, and dishes.

Figure 2-21 shows that the value of shipments for converted paper
products was 54% of the value of all paper products in 2007, while the
value of shipments for pulp, paper, and paperboard products was 46%.
Figure 2-22 indicates that 70% of industry employees worked in the
converted paper product category of the industry due to the labor
intensive aspects of those facilities.

Figure 2-21.	Distribution of Value of Shipments within Paper
Manufacturing (NAICS 322): 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 United States:
2007.” Accessed on December 28, 2009  XE “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 28, 2009”  .

Figure 2-22.	Distribution of Employment within Paper Manufacturing
(NAICS 322): 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 United States:
2007.” < HYPERLINK "http://factfinder.census.gov"
http://factfinder.census.gov >. Accessed on December 28, 2009  XE
“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.\” <http\://factfinder.census.gov>. Accessed on December
28, 2009”  .

Supply and Demand Characteristics

Next, we provide a broad overview of the supply and demand sides of the
paper manufacturing industry. We emphasize the economic interactions
this industry has with other industries and people and identify the key
goods and services used by the industry and the major uses and consumers
of paper manufacturing products.

Goods and Services Used in Paper Manufacturing

In 2007, the cost of materials made up 53% of the total shipment value
of goods in the paper manufacturing industry (Table 2-22). Total
compensation of employees represented 15% of the total value in 2007,
down from 17% in 2005. The total number of employees dropped by 2%,
between 2005 and 2007, while shipments increased by 3% in the same
period.

The top 10 industry groups supplying inputs to the paper manufacturing
subsector accounted for 70% of the total intermediate inputs according
to 2008 Bureau of Economic Analysis (BEA) data (Table 2-23). Inputs for
pulp, paper, and paperboard products are notably different from inputs
for converted paper products because the NAICS 3221 group represents the
initial step in the paper manufacturing process; thus, its inputs
include more raw resources such as wood products, forestry and logging
products, natural gas, and electricity. This becomes evident when
observing inputs for converted paper products: 49% of the cost of inputs
comes from pulp, paper, and paperboard products.

<IP_ADDRESS>.1 Energy. The Department of Energy (DOE) categorizes paper
manufacturing (NAICS 322) as an energy-intensive subsector. The 2008
Annual Energy Outlook predicts that the paper-producing subsector will
be one of four subsectors experiencing positive average growth of
delivered energy consumption between 2006 and 2030 (DOE, 2008  XE
“DOE, 2008”  ).

Energy generation from the recovery boiler is often insufficient for
total plant needs, so facilities augment recovery boilers with fossil
fuel–fired and wood waste–fired boilers (hogged fuel) to generate
steam and often electricity. Industry wide, the use of pulp wastes,
bark, and other papermaking residues supplies 58% of the energy
requirements of pulp and paper companies (EPA, 2002 xe “U.S. EPA,
2002” ).

Likewise, Table 2-24 shows that total energy use decreased between 1998
and 2006 by 14%. Figure 2-24 indicates that total electrical power use
changed sporadically between 2002 and 2004 but decreased consistently
and rapidly after 2004.

Table 2-22.	Costs of Goods and Services Used in the Paper Manufacturing
Industry (NAICS 322)

Variable	2005	Share	2006	Share	2007	Share

Total shipments ($2007, millions)	$171,477	100%	$174,887	100%	$176,018
100%

Total compensation ($2007, millions)	$28,846	17%	$27,791	16%	$27,150	15%

Annual payroll	$21,792	13%	$21,188	12%	$20,804	12%

Fringe benefits	$7,054	4%	$6,603	4%	$6,346	4%

Total employees	426,748

414,049

417,367

	Average compensation per employee	$67,596

$67,121

$65,051

	Total production workers wages ($2007, millions)	$14,965	9%	$14,689	8%
$14,190	8%

Total production workers	331,228

321,684

321,937

	Total production hours (thousands)	716,963

691,134

680,732

	Average production wages per hour	$21

$21

$21

	Total cost of materials ($2007, thousands)	$91,897	54%	$92,452	53%
$94,029	53%

Materials, parts, packaging	$77,494	45%	$78,202	45%	$79,984	45%

Purchase electricity	$3,788	2%	$3,841	2%	$3,780	2%

Purchased fuel ($2007)	$5,537	3%	$5,509	3%	$5,511	3%

Other	$5,078	3%	$4,901	3%	$4,755	3%

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)  XE “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.”
<http://factfinder.census.gov>. Accessed on December 28, 2009  XE
“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.\” <http\://factfinder.census.gov>. Accessed on December
28, 2009”  . [Source for 2007 numbers]

Table 2-23.	Key Goods and Services Used in the Paper Manufacturing
Industry (NAICS 322) ($millions, $2007)

Description	BEA Code	NAICS 3221

Pulp, Paper, and Paperboard	NAICS 3222

Converted Paper Products	Total

Pulp, paper, and paperboard	3221	$4,155	$30,448	$34,603

Wholesale trade	4200	$3,916	$6,356	$10,273

Management of companies and enterprises	5500	$3,154	$3,838	$6,993

Forestry and logging products	1130	$5,389	$0	$5,389

Basic chemicals	3251	$3,734	$263	$3,997

Electric power generation, transmission, and distribution	2211	$2,690
$913	$3,603

Wood products	3210	$3,450	$33	$3,484

Converted paper products	3222	$1,415	$1,745	$3,159

Natural gas distribution	2212	$2,680	$345	$3,026

Truck transportation	4840	$1,428	$1,571	$2,999

Total intermediate inputs	T005	$47,835	$62,690	$110,525

Source:	U.S. Bureau of Economic Analysis (BEA). 2008  XE “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.

Table 2-24.	Energy Used in Paper Manufacturing (NAICS 322)

Fuel Type	1998	2002	2006

Net electricitya (million kWh)	70,364	65,503	72,518

Residual fuel oil (million bbl)	24	16	15

Distillate fuel oilb (million bbl)	2	2	2

Natural gasc (billion cu ft)	570	490	461

LPG and NGLd (million bbl)	1	2	1

Coal (million short tons)	12	11	10

Coke and breeze (million short tons)	—	*	—

Othere (trillion BTU)	1,476	1,276	1,303

Total (trillion BTU)	2,744	2,361	2,354

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 (LPG) 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.
2007a  XE “U.S. Department of Energy, Energy Information
Administration. 2007”  . “2002 Energy Consumption by
Manufacturers—Data Tables.” Tables 3.2 and N3.2.
<http://www.eia.doe.gov/emeu/mecs/mecs2002/

data02/shelltables.html>. Washington, DC: DOE.

	U.S. Department of Energy, Energy Information Administration. 2007b  XE
“U.S. Department of Energy, Energy Information Administration.
2007b”  . “2006 Energy Consumption by Manufacturers—Data
Tables.” Table 3.1. < HYPERLINK
"http://www.eia.doe.gov/emeu/mecs/mecs2006/2006tables.html"
http://www.eia.doe.gov/emeu/mecs/mecs2006/

2006tables.html >. Accessed on December 27, 2009. [Source for 2006
numbers]

Over the last 25 years, the pulp and paper subsector has changed its
energy generation methods from fossil fuels to a greater use of
processes such as increases in the use of wood wastes in place of fuel
(Table 2-25). During the 1972–1999 period, the proportion of total
industry power generated from the combination of woodroom wastes, spent
liquor solids, and other self-generated methods increased from about 41%
to about 56%, while coal, fuel oil, and natural gas use decreased from
about 54% to about 36% (EPA, 2002 xe “U.S. EPA, 2002” ).

Figure 2-23.	Electrical Power Use Trends in the Paper Manufacturing
Industry: 1997–2005

Source:	Federal Reserve Board. 2009. “Industrial Production and
Capacity Utilization: Electric Power Use: Manufacturing and Mining.”
<http://www.federalreserve.gov/datadownload/> xe “Federal Reserve
Board. 2009b. Industrial Production and Capacity Utilization\: Electric
Power Use\: Manufacturing and Mining.
<http\://www.federalreserve.gov/datadownload/>“ .

Table 2-25.	Estimated Energy Sources for the U.S. Pulp and Paper
Industry

Energy Source	1972	1979	1990	1999

Purchased steam	5.4%	6.7%	7.3%	1.5%

Coal	9.8%	9.1%	13.7%	12.5%

Fuel oil	22.3%	19.1%	6.4%	6.3%

Natural gas	21.5%	17.8%	16.4%	17.6%

Other purchased energy	—	—	—	6.7%

Waste wood and wood chips (hogged fuel) and bark	6.6%	9.2%	15.4%	13.5%

Spent liquor solids	33.7%	37.3%	39.4%	40.3%

Other self-generated power	0.6%	0.8%	1.2%	1.6%

Source: 	U.S. Environmental Protection Agency. 2002  XE “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>.

Uses and Consumers

Products manufactured in the NAICS groups 3221 and 3222 have different,
but complementary, consumer profiles. NAICS 3221 supplies a significant
portion of NAICS 3222 demand (37% of total commodity output). Both
industries specialize in products with intermediate uses, with an
average of 92% of sales between the two going toward this purpose. NAICS
3222 has a very diverse assortment of subsector groups from which it
receives demand. Food manufacturing makes up 21% of the demand, making
members of this industry the largest consumer of converted paper
products (Table 2-26). Pulp, paper, and paperboard products have a
large trade deficit, while converted paper products have a very small
trade surplus.

Table 2-26.	Demand by Sector: Paper Manufacturing Industry (NAICS 322)
($millions, $2007)

Sector	BEA Code	3221

Pulp, Paper, and Paperboard	3222

−$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  XE “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)  XE “.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  XE “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)  XE “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 xe
“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  XE “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 xe “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 Employeesa	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  XE “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  XE “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/sizestandardstopic
s/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  XE “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  XE “U.S.
International Trade Commission. 2008b”  . “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  XE “U.S. Bureau
of Labor Statistics (BLS). 2009”  . “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)  XE “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)
 XE “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  XE
“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)  XE “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)
 XE “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  XE
“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: