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Economic and Environmental Benefits Analysis of the Final Meat and Poultry Products Rule

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Economic and Environmental Benefits Analysis of the Final Meat and Poultry Products Rule United States Office of Water (4303) EPA-821-R-04-010 Environmental Protection Washington, DC 20460 February 2004 Agency Economic and Environmental Benefits Analysis of the Final Meat and Poultry Products Rule Economic and Environmental Benefits Analysis of the Final Meat and Poultry Products Rule Michael O. Leavitt Administrator Benjamin H. Grumbles Acting Assistant Administrator, Office of Water Mary T. Smith Director, Engineering and Analysis Division Samantha Lewis Project Manager James Covington Economist Lynn Zipf Biologist Engineering and Analysis Division Office of Science and Technology U.S. Environmental Protection Agency Washington, D.C. 20460 February 2004 ACKNOWLEDGMENTS AND DISCLAIMER This document was prepared with the support of Eastern Research Group, Incorporated under Contract 68-C-01-073, and other contractors. Neither the United States government nor any of its employees, contractors, subcontractors, or other employees makes any warranty, expressed or implied, or assumes any legal liability or responsibility for any third party’s use of, or the results of such use of, any information, apparatus, product, or process discussed in this report, or represents that its use by such a third party would not infringe on privately owned rights. CONTENTS Page TABLES ......................................................................... viii FIGURES ......................................................................... xi INDEX OF ACRONYMS AND CHEMICAL FORMULAS .............................. xii EXECUTIVE SUMMARY ES.1 Background .........................................................ES-1 ES.2 Industry Overview ....................................................ES-1 ES.3 Data Sources ........................................................ES-2 ES.4 Economic Impact Methodology ..........................................ES-3 ES.5 Impacts ............................................................ES-6 ES.5.1 Regulatory Options .............................................ES-6 ES.5.2 Impacts ......................................................ES-8 ES.5.3 Small Business Impacts ........................................ES-10 ES.6 Environmental Assessment and Benefits..................................ES-10 ES.7 References .........................................................ES-12 CHAPTER 1 INTRODUCTION 1.1 Scope and Purpose ..................................................... 1-1 1.2 Report Organization.................................................... 1-2 1.3 References ........................................................... 1-7 CHAPTER 2 INDUSTRY PROFILE 2.1 Subcategorization...................................................... 2-2 2.2 Classification of Facilities by Size ........................................ 2-4 2.2.1 Production Thresholds Defining Small and Nonsmall Facilities ........... 2-4 2.2.2 Revised Production Threshold in Subcategory K ...................... 2-5 2.2.2.1 Economies of Scale.......................................... 2-5 2.2.2.2 Competition Between Poultry and Meat Sectors ................. 2-6 i CONTENTS (cont.) 2.3 Facility Level Information ............................................... 2-7 2.3.1 National Facility Counts .......................................... 2-7 2.3.2 Profile of Direct Discharging Facilities.................................. 2-12 2.3.2.1 Data Sources ........................................... 2-12 2.3.2.2 Revenues .............................................. 2-13 2.3.2.3 Employment............................................ 2-13 2.4 Company Level Information ............................................ 2-14 2.4.1 Type of Ownership ............................................. 2-15 2.4.2 Number of Sites per Company .................................... 2-16 2.4.3 Company Level Employment and Revenues ......................... 2-17 2.5 BSE and EPA’s Regulation of the MPP Industry ............................ 2-18 2.5.1 Background ................................................... 2-18 2.5.2 Expected Impact on the MPP Industries ............................. 2-18 2.5.2.1 Short-run Market Effect................................... 2-18 2.5.2.2 Longer-run Market Effect ................................. 2-21 2.5.3 Combined Effect of BSE and EPA’s Rule on the MPP Industry .......... 2-22 2.6 References .......................................................... 2-23 CHAPTER 3 ECONOMIC IMPACT METHODOLOGY 3.1 Background .......................................................... 3-1 3.2 Cost Annualization .................................................... 3-3 3.3 Facility Analysis ...................................................... 3-6 3.3.1 Sites with Detailed Questionnaire Data .............................. 3-6 3.3.1.1 Forecasting Methods and Assumptions ........................ 3-6 3.3.1.2 Baseline Conditions ....................................... 3-8 3.3.1.3 Adjustment of Facility Weights to Account for detailed Survey Nonresponse ............................................ 3-9 ii CONTENTS (cont.) 3.3.2 Sites without Detailed Questionnaire Data ........................... 3-10 3.3.2.1 Economic Impact Analysis Using Model Facilities ............. 3-10 3.3.2.2 Combining Detailed Survey Facility and Screener Survey Facility Costs ........................................... 3-13 3.4 Company Analysis .................................................... 3-14 3.4.1 Companies with Detailed Survey Data.............................. 3-14 3.4.1.1 Estimation of Company Costs .............................. 3-14 3.4.1.2 Closure Analysis ........................................ 3-15 3.4.1.3 Altman’s Z’- score ....................................... 3-16 3.4.2 Companies without Detailed Survey Data ........................... 3-17 3.5 MarketModel ....................................................... 3-17 3.5.1 Overview..................................................... 3-17 3.5.2 Revision to Trade Elasticities ..................................... 3-18 3.6 Direct Impacts ....................................................... 3-19 3.7 National Direct and Indirect Impacts...................................... 3-19 3.8 References .......................................................... 3-21 CHAPTER 4 POLLUTION CONTROL OPTIONS 4.1 Effluent Limitations Guidelines and Standards ............................... 4-1 4.2 Technology Options .................................................... 4-2 4.3 References ........................................................... 4-5 CHAPTER 5 ECONOMIC IMPACTS 5.1 National Costs ........................................................ 5-1 5.1.1 Costs for Nonsmall Facilities ...................................... 5-1 5.1.2 Costs for Small Facilities ......................................... 5-3 5.1.3 National Costs for Rule .......................................... 5-4 iii CONTENTS (cont.) 5.2 Economic Impacts on Existing Facilities (BAT) .............................. 5-5 5.2.1 Facility Analysis ................................................ 5-5 5.2.1.1 Nonsmall Facilities ....................................... 5-5 5.2.1.2 Small Facilities ......................................... 5-13 5.2.1.3 Mixed Processors........................................ 5-15 5.2.2 Company Analysis ............................................. 5-17 5.2.2.1 Closure Analysis ........................................ 5-18 5.2.2.2 Altman’s Z’-Score Analysis ............................... 5-18 5.2.2.3 Financial Ratio Analysis .................................. 5-22 5.2.3 Market Level Impacts ........................................... 5-26 5.2.3.1 Impacts on Domestic Prices and Quantities ................... 5-26 5.2.3.2 Foreign Trade Impacts .................................... 5-28 5.2.4 Community Impacts ............................................ 5-31 5.2.5 National Direct, Indirect, and Induced Impacts ....................... 5-31 5.3 Economic Impacts on New Sources (NSPS) ................................ 5-34 5.4 Summary of Final Option .............................................. 5-37 5.5 References .......................................................... 5-38 CHAPTER 6 SMALL BUSINESS ANALYSIS 6.1 Introduction .......................................................... 6-1 6.2 Initial Assessment ..................................................... 6-1 6.3 Small Business Identification and Profile ................................... 6-2 6.3.1 Classification .................................................. 6-2 6.3.1.1 Distinction Between Small Business Analysis and MPP ELG Definitions for “Small” .............................................. 6-3 6.3.1.2 Facilities in Subcategories A-D and K ........................ 6-3 6.3.1.3 Facilities in Subcategories F-I, J, and L ....................... 6-3 6.3.1.4 Revenue and Employment Data for Small Business Owned Facilities 6-4 6.4 Impacts from the Promulgated Rule on Facilities Owned by Small Businesses ...... 6-5 6.5 Regulatory Flexibility .................................................. 6-5 6.6 References ........................................................... 6-5 iv CONTENTS (cont.) CHAPTER 7 ENVIRONMENTAL IMPACTS AND POTENTIAL BENEFITS 7.1 MPP Pollutants ....................................................... 7-1 7.1.1 Nutrients ...................................................... 7-1 7.1.2 Organic matter ................................................ 7-2 7.1.3 Solids ........................................................ 7-2 7.1.4 Oil and Grease ................................................
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