Economic Impact Analysis for the Nitric Acid Manufacturing NSPS
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Economic Impact Analysis for the Nitric Acid Manufacturing NSPS Final Report EPA-452/R-12-004 May 2012 Economic Impact Analysis for the Nitric Acid Manufacturing NSPS By: Kathy Heller RTI International, Inc. Research Triangle Park, North Carolina Prepared for: John L. Sorrels Health and Environmental Impacts Division Contract No. EP- W-11-029 U.S. Environmental Protection Agency Office of Air Quality Planning and Standards Health and Environmental Impacts Division Air Economics Group Research Triangle Park, NC May 2012 Economic Impacts of NSPS for Nitric Acid Final Report Prepared for Larry Sorrels U.S. Environmental Protection Agency Office of Air Quality Planning and Standards (OAQPS) Air Economics Group (MD-C439-02) Research Triangle Park, NC 27711 Prepared by Katherine Heller Brooks Depro Stephanie Norris Tony Lentz RTI International 3040 Cornwallis Road Research Triangle Park, NC 27709 RTI Project Number 0209897.004.094 _________________________________ RTI International is a trade name of Research Triangle Institute. CONTENTS Section Page 1 Background.........................................................................................................................1-1 2 Industry Profile ...................................................................................................................2-1 2.1 Supply of Nitric Acid ...............................................................................................2-1 2.1.1 Nitric Acid Production Process ...................................................................2-1 2.1.2 Product Types ...............................................................................................2-2 2.1.3 Materials and Costs of Production ..............................................................2-2 2.1.4 Nitric Acid and Materials Transportation ...................................................2-3 2.2 Demand for Nitric Acid ............................................................................................2-5 2.2.1 Nitric Acid Applications ..............................................................................2-5 2.2.2 Influential Factors ........................................................................................2-6 2.3 Market Characteristics ..............................................................................................2-7 2.3.1 Competition and Entry .................................................................................2-7 2.3.2 Concentration ...............................................................................................2-9 2.3.3 Price-Responsiveness of Supply and Demand ........................................ 2-11 2.4 Market Trends ........................................................................................................ 2-12 2.4.1 Derived Demand for Nitric Acid .............................................................. 2-12 2.4.2 International Trade in the Sectors that Consume Nitric Acid ................ 2-12 2.4.3 Industry Trends and Projections for Sectors Using Nitric Acid as an Input ...................................................................................................... 2-13 2.4.4 Projected Production of Nitric Acid......................................................... 2-14 2.5 Overview of Businesses Potentially Affected by the Rule ................................. 2-15 2.5.1 Parent Companies ...................................................................................... 2-15 2.5.2 Parent Company Sales and Employment ................................................. 2-19 2.6 References for Section 2 ....................................................................................... 2-21 3 Engineering Cost analysis .................................................................................................3-1 3.1 References for Section 3 ..........................................................................................4-8 iii 4 Economic Impacts on New Sources in the Nitric Acid Industry ....................................4-1 4.1 Modeling Approach to Estimating the Impacts on the Market for Nitric Acid ...........................................................................................................................4-1 4.2 Possible Impacts on Market for Nitric Acid ...........................................................4-4 4.3 Estimated Impacts on Markets for Products Using Nitric Acid as an Input .........4-5 4.5 Impacts on Small Entities of the NSPS Review of Nitric Acid for NOX on New Sources .............................................................................................................4-7 4.6 References for Section 4 ..........................................................................................4-8 5 Conclusions ........................................................................................................................5-1 Appendix A Industry Data and Projections for NAICS 32521 ..................................................A-1 iv LIST OF FIGURES Number Page 4-1 2010 Market for Nitric Acid ..............................................................................................4-2 4-2 Market Supply of Nitric Acid, including New Source ....................................................4-2 4-3 Increased Demand for Nitric Acid at Baseline.................................................................4-3 4-4 Market for Nitric Acid, With NSPS .................................................................................4-4 v LIST OF TABLES Number Page 2-1 Cost Comparisons for Labor and Materials across Several NAICS Codes....................2-4 2-2 Concentration Ratios for Sectors Using Nitric Acid as an Input, 2002 ....................... 2-10 2-3 Market Price-Elasticities of Supply and Demand ......................................................... 2-11 2-4 Exports of Sectors that Consume Nitric Acid (FAS Value, 10 3 $2009) ...................... 2-12 2-5 Imports for Consumption of Sectors that Consume Nitric Acid (Customs Value, 10 3 $2009) ........................................................................................................................ 2-13 2-6 Projected Nitric Acid Production ................................................................................... 2-15 2-7 Parent Companies with Facilities Potentially Covered Under the Rule ...................... 2-17 2-8 Annual Revenue and Employment Data for Each of the Parent Companies .............. 2-20 3-1 Normalized NOX Control Costs by Model Plant .............................................................3-1 3-2 Normalized SCR Costs by Model Plant for Modified or Reconstructed Sources .........3-2 3-3 Nitric Acid Production Growth .........................................................................................3-2 3-4 Annualized Control Costs for New Production Trains in 2017 ......................................3-3 3-5 Annualized Control Costs for Reconstructed or Modified Trains in 2016 ....................3-3 3-6 NOx Emission Reductions for All New, Modified, or Reconstructed Production Trains with SCR Control in 2017......................................................................................3-3 3-7 Incremental Costs in 5 th Year after Promulgation for All New Production Trains .......3-4 3-8 Incremental Costs in 5 th Year after Promulgation for All Modified or Reconstructed Production Trains ......................................................................................3-5 3-9 Total Incremental Cost Effectiveness in 5 th Year after Promulgation for All New, Reconstructed, and Modified Production Trains ..................................................3-5 4-1 Market Impacts of the Rule: Market for Nitric Acid .......................................................4-5 4-2 Estimated Impacts of Nitric Acid NSPS on Sectors Using Nitric Acid as an Input ....................................................................................................................................4-6 4-3 Employment and Revenue of Existing Small Entities .....................................................4-7 4-4 Cost-to-Sales Ratios for Model Small Firms Owning New 300 tpd and 1,000 tpd Plants ...................................................................................................................................4-8 vi SECTION 1 BACKGROUND New Source Performance Standards (NSPS), mandated under Section 111 of the Clean Air Act (CAA), are directly enforceable federal regulations issued for categories of sources that cause, or contribute significantly to, air pollution that may reasonably be anticipated to endanger public health or welfare. Section 111 of the CAA requires that NSPS reflect the “degree of emissions limitation achievable through application of the best system of emission reduction which (taking into account the cost of achieving such reduction and any non-air quality health and environmental impact and energy requirements) the Administrator determines has been adequately demonstrated.” This level of control is commonly referred to as best demonstrated technology (BDT). By requiring BDT for new, modified, and reconstructed sources, the NSPS program seeks to attain and maintain ambient air quality as the industrial infrastructure is modernized. Since 1970, the NSPS have been successful in achieving long-term emissions reductions in numerous industries by ensuring that cost-effective controls are installed on such sources. The Environmental