Economic Analysis for the Pulp and Paper Production Neshaps Category
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Economic Analysis for the National Emission Standards for Hazardous Air Pollutants for Source Category: Pulp and Paper Production; Effluent Limitations Guidelines, Pretreatment Standards, and New Source Performance Standards: Pulp, Paper, and Paperboard Category—Phase 1 EPA Contract No. 68-C3-0302 October 27, 1997 Prepared for: U.S. Environmental Protection Agency Office of Air and Radiation Office of Air Quality Planning and Standards Innovative Strategies and Economics Group Research Triangle Park, NC 27711 and Office of Water Office of Science and Technology Engineering and Analysis Division Washington, DC 20460 CONTENTS Page TABLES ..................................................................... x FIGURES ................................................................... xvii CHAPTER ONE INTRODUCTION ........................................ 1-1 1.1 Scope and Purpose ................................................. 1-1 1.2 Report Organization ................................................ 1-2 1.3 Rulemaking History ................................................ 1-4 1.3.1 Integrated Rulemaking Effort by the Office of Air and the Office of Water ............................ 1-4 1.3.2 December 1993 Proposal ..................................... 1-5 1.3.3 Changes From Proposal ...................................... 1-6 1.3.3.1 Mills and Subcategories Considered ................... 1-6 1.3.3.2 Options ........................................ 1-7 1.3.3.3 Methodology .................................... 1-9 1.4 References ...................................................... 1-11 CHAPTER TWO INDUSTRY PROFILE ..................................... 2-1 2.1 Subcategories Regulated Under This Rule ................................ 2-2 2.2 Products and Markets ............................................... 2-4 2.2.1 Pulp, Paper, and Paperboard Shipments .......................... 2-4 2.2.2 Value of Pulp, Paper, and Paperboard Shipments ................... 2-7 2.2.3 Exports .................................................. 2-9 2.3 Facility-Level Information ........................................... 2-12 2.3.1 Geographic Distribution of Facilities ........................... 2-12 2.3.2 Facility Size ............................................. 2-12 2.3.2.1 Assets ........................................ 2-12 2.3.2.2 Employees ..................................... 2-18 i CONTENTS (continued) Page 2.3.3 Facility Age ............................................. 2-20 2.3.4 Capital Investment ......................................... 2-20 2.3.5 Level of Integration ........................................ 2-27 2.4 Company-Level Information ......................................... 2-29 2.4.1 Number of Facilities and Ownership ........................... 2-29 2.4.2 Small Business Entities ..................................... 2-32 2.4.3 Concentration Ratios ....................................... 2-32 2.5 Financial Patterns for the Industry 1985-1995 ............................ 2-33 2.6 International Competitiveness of the Pulp and Paper Industry ................. 2-40 2.6.1 Foreign Trade Statistics ..................................... 2-42 2.6.2 Global Competitiveness of U.S. Paper Industry ................... 2-45 2.7 Related Chemical Supplier Industries .................................. 2-46 2.8 References ...................................................... 2-47 CHAPTER THREE ECONOMIC IMPACT AND REGULATORY FLEXIBILITY ANALYSIS METHODOLOGY ................. 3-1 3.1 Compliance Cost Model ............................................. 3-2 3.2 Market Impact Analysis Methodology ................................... 3-3 3.3 Financial Impact Analysis Methodology ................................. 3-4 3.3.1 Closure Model ............................................. 3-4 3.3.1.1 Present Value of Forecasted Earnings ................. 3-4 3.3.1.2 Market Price Increase ............................ 3-11 3.3.1.3 Sample Closure Analysis ......................... 3-17 3.3.1.4 Baseline Closures ............................... 3-23 3.3.2 Associated Impacts ........................................ 3-24 3.3.3 Facility-Level Ratio Analysis ................................. 3-26 3.3.4 Company-Level Bankruptcy/Financial Ratio Analysis .............. 3-27 3.4 Regulatory Flexibility Analysis Methodology ............................. 3-28 3.5 References ...................................................... 3-28 ii CONTENTS (continued) Page CHAPTER FOUR BENEFITS AND ENVIRONMENTAL JUSTICE METHODOLOGY ........................................ 4-1 4.1 Air Benefits ...................................................... 4-1 4.1.1 Hazardous Air Pollutants ..................................... 4-2 4.1.2 Volatile Organic Compounds .................................. 4-2 4.1.3 Total Reduced Sulfur ....................................... 4-7 4.1.4 Other Criteria Air Pollutants .................................. 4-7 4.1.5 Limitations .............................................. 4-10 4.2 Water Benefits ................................................... 4-11 4.2.1 Revised Estimates of Baseline Pollutant Loadings ................. 4-11 4.2.2 Human Health Risk Assessment .............................. 4-14 4.2.3 Fish Consumption Advisory Analysis .......................... 4-17 4.2.4 Limitations and Uncertainties ................................ 4-17 4.3 Case Study Evaluation of Benefits ..................................... 4-19 4.3.1 Representativeness ........................................ 4-19 4.3.1.1 General Characteristics and New Case Studies ......... 4-19 4.3.1.2 Receiving Water Characteristics and Representativeness .. 4-20 4.3.2 Development of New Case Studies ............................. 4-22 4.3.3 Extrapolation to National Water Benefits ........................ 4-22 4.4 Present Values and Alternative Discount Rates ........................... 4-23 4.5 Environmental Justice .............................................. 4-24 4.6 References ...................................................... 4-25 CHAPTER FIVE REGULATORY ALTERNATIVES DESCRIPTION, COSTS, POLLUTANT REMOVALS AND COST-EFFECTIVENESS .................. 5-1 5.1 Air Pollution Control Compliance Components ............................ 5-1 5.1.1 Air Pollution Compliance Components—Description ................ 5-2 5.1.2 Air Pollution Compliance Control Costs ......................... 5-4 5.1.3 Air Emission Reductions and Cost Effectiveness .................. 5-14 iii CONTENTS (continued) Page 5.2 Water Pollution Compliance Components ............................... 5-14 5.2.1 Water Pollution Control Compliance Components—Description ................................... 5-14 5.2.2 Water Pollution Compliance Control Costs ...................... 5-16 5.2.3 Pollutant Removals and Cost-effectiveness of CWA Final Rule ........................................ 5-20 5.2.4 Sensitivity Analysis of Cost-effectiveness of CWA Final Rule ........................................ 5-24 5.3 Costs of Combined Proposed and Final Air and Final Water Requirements .............................................. 5-24 5.3.1 BAT/PSES Options ........................................ 5-24 5.3.2 Sensitivity Analysis—TCF .................................. 5-26 5.4 References ..................................................... 5-29 CHAPTER SIX ECONOMIC IMPACT RESULTS ........................... 6-1 6.1 New Source Performance Standards and Pretreatment Standards For New Sources .......................................... 6-2 6.1.1 Papergrade Sulfite .......................................... 6-2 6.1.2 Bleached Papergrade Kraft and Soda—Elemental Chlorine Free (ECF) Technology ............................... 6-2 6.1.3 Bleached Papergrade Kraft and Soda—Totally Chlorine Free (TCF) Technology ............................... 6-3 6.2 Industry-Level Impacts ............................................. 6-3 6.2.1 Company Failures .......................................... 6-3 6.2.1.1 CAA Requirements .............................. 6-5 6.2.1.2 CWA Requirements .............................. 6-5 6.2.1.3 Combined Final CAA (MACT I) and CWA (BAT/PSES) Requirements (Cluster Rule) ............. 6-6 6.2.1.4 Combined Cluster Rule and Proposed MACT II ......... 6-6 6.2.1.5 Ramifications of Company Bankruptcy ............... 6-6 6.2.2 Facility Closures and Related Direct Impacts ..................... 6-10 6.2.2.1 CAA Requirements ............................. 6-11 6.2.2.2 CWA Requirements ............................. 6-12 iv CONTENTS (continued) Page 6.2.2.3 Combined Final CAA (MACT I) and CWA (BAT/PSES) Requirements (Cluster Rule) ............ 6-16 6.2.2.4 Combined Cluster Rule and Proposed MACT II ........ 6-18 6.2.3 Price Increases ........................................... 6-18 6.2.3.1 CAA Requirements ............................. 6-21 6.2.3.2 CWA Requirements ............................. 6-21 6.2.3.3 Combined Final CAA (MACT I) and CWA (BAT/PSES) Requirements (Cluster Rule) ............ 6-22 6.2.3.4 Combined Cluster Rule and Proposed MACT II ........ 6-22 6.3 Regional Employment Impacts Based on Projected Closures ................. 6-22 6.3.1 CAA Requirements ........................................ 6-23 6.3.2 CWA Requirements ........................................ 6-26 6.3.3 Combined Final CAA (MACT I) and CW6 (BAT/PSES) Requirements (Cluster Rule) ....................... 6-26 6.3.4 Combined Cluster Rule and Proposed MACT II ................... 6-29 6.4 National-Level Employment and Output Impacts Based on Projected Closures