Economic Impact Analysis of the Proposed
Perchloroethylene Dry Cleaning Residual Risk
Standard
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EPA452/B-05-001
December 2005
Economic Impact Analysis of the Proposed Perchloroethylene Dry Cleaning Residual Risk Standard
U.S. Environmental Protection Agency
Office of Air Quality Planning and Standards
Air Quality Strategies and Standards Division
Research Triangle Park, NC
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Economic Impact Analysis of the Proposed Perchloroethylene Dry Cleaning
Residual Risk Standard
As part of its regulatory support role for Clean Air Act (CAA) programs, the Innovative
Strategies and Economics Group (ISEG) within the Office of Air Quality Planning and Standards
(OAQPS) analyzes the small entity and economic impacts of sector-specific and broad national
emission reduction strategies. Such analyses are in accordance with statutory requirements
(Section 317 of the Clean Air Act, and Small Business Regulatory Enforcement Fairness Act
(SBREFA)), and are also designed to provide useful information on the impacts of this proposed
standard on directly affected firms and on their consumers. This report provides an economic
impact analysis for the dry cleaning residual risk standard as applied to all of the sources affected
by this proposal: major source and area source dry cleaners. The area source dry cleaners
include co-residential facilities, which are of particular interest in this rulemaking given the
proximity of apartment residents to these sources and the risk exposure from perchloroethylene
(PCE) emissions they experience.
The analysis is a comparison of the annualized compliance costs to the annual revenues
for known and potentially affected firms. Cost and revenue data are in 2002 dollar terms. All
costs are annualized using a 7 percent interest rate. The analysis for major source owning firms
is a detailed firm-by-firm assessment given that there are only 15 major source dry cleaners in
the US affected by this proposal.1 The analysis for area source dry cleaners presumes that each
affected area source owning firm owns a single dry to dry cleaner. We believe this is a
reasonable assumption given data that will be shown later in this report. The analysis includes
calculation of impacts to co-residential area sources, and an analysis of the co-proposal option to
regulate such area sources according to New York State Dept. of Environmental Conservation
Part 232. The economic impacts focus on existing major and area sources, and is meant to
provide a "snapshot" of potential impacts to such sources in the fifth year after promulgation.
This type of estimate is consistent with the cost analyses upon which this report is based.
Economic impacts for new area sources are not estimated since insufficient data are available to
calculate such impacts.
Profile of Dry Cleaning Industry
Dry cleaners use PCE in a dry cleaning machine to clean all types of garments including
clothes, gloves, leather garments, blankets, and absorbent materials. There are approximately
28,000 PCE dry cleaning facilities in the United States. Of the 28,000 dry cleaners, 15 of the
facilities are major sources, and the remaining are area sources. Major source PCE dry cleaners
are those that emit 10 tons or more of PCE per year upon the compliance date of the 1993
1 The Agency is aware that two of these 15 dry cleaners have either ceased operations or are using a solvent
other than PCE.
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NESHAP. The 1993 dry cleaning NESHAP defines this as facilities that purchase more than
2,100 gallons of PCE per year (1,800 gallons per year if the facility uses transfer machines). The
15 major sources use approximately 2% of the total perchloroethylene (PCE) used in the dry
cleaning industry. Area sources are typically the common neighborhood commercial dry
cleaner. Area sources were divided into large or small in the 1993 NESHAP, with large area
sources defined as those facilities that use between 140 to 2,100 gallons of PCE per year (or 140
to 1,800 gallons per year if the facility uses transfer machines). Small area sources use less than
140 gallons per year. Some area sources are collocated in the same building with residences, hi
the 1993 NESHAP EPA did not specifically discuss these sources, but in this proposal we refer
to them as co-residential dry cleaners. A co-residential dry cleaning facility is located in a
building in which people reside. Co-residential facilities are located primarily in urban areas.
In general, PCE dry cleaning facilities can be classified into three types : commercial,
industrial, and leather. Commercial facilities typically clean household items such as suits,
dresses, coats, pants, comforters, curtains, and formalwear. Industrial dry cleaners clean heavily-
stained articles such as work gloves, uniforms, mechanics' overalls, mops, and shop rags.
Leather cleaners mostly clean household leather products like jackets and other leather clothing.
The 15 major sources include eight industrial facilities, five commercial facilities, and two
leather facilities. The five commercial facilities are each the central plant for a chain of retail
storefronts. Of the fifteen major source facilities, the four top PCE users are industrial facilities
cleaning some percentage of leather and heavy work gloves. These four facilities use 65% of the
total PCE of all the major sources. We do not expect any new source facilities constructed in the
future to be major sources. Based on the low emission rates of current PCE dry cleaning
machines and the typical business models used in the industrial and commercial dry cleaning
sectors, it is unlikely that any new sources that are constructed will emit PCE at major levels, or
that any existing area sources will become major sources due to business growth.
Dry cleaning machines can be classified into two types: transfer and dry-to-dry. Similar
to residential washing machines and dryers, transfer machines have a unit for washing/extracting
and another unit for drying. Following the wash cycle, PCE-laden articles are manually
transferred from the washer/extractor to the dryer. The transfer of wet fabrics is the predominant
source of PCE emissions in these systems. Dry-to-dry machines wash, extract, and dry the
articles in the same drum in a single machine, so the articles enter and exit the machine dry.
Because the transfer step is eliminated, dry-to-dry machines have much lower emissions than
transfer machines.
New transfer machines are effectively prohibited at major and area sources due to the
1993 NESHAP requirement that new dry cleaning systems eliminate any emissions of PCE
while transferring articles from the washer to the dryer. Therefore, transfer machines are no
longer sold. Existing transfer machines are becoming an increasingly smaller segment of the dry
cleaning population as these machines reach the end of their useful lives and are replaced by dry-
to-dry machines. There are approximately 200 transfer machines currently being used, all at area
sources.
The primary sources of PCE emissions from dry-to-dry machines are the drying cycle
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and fugitive emissions from the dry cleaning equipment (including equipment used to recycle
PCE and dispose of PCE-laden waste). Machines are designed to be either vented or non-vented
during the drying cycle. Approximately 200 dry cleaners (1 percent) use vented machines, and
the remaining facilities use the lower-polluting, non-vented machines. (The 1993 NESHAP
prohibits new dry cleaning machines at major and area sources that vent to the atmosphere while
the dry cleaning drum is rotating.) In vented machines, the majority of emissions from the
drying cycle are vented outside the building. In non-vented machines, dryer emissions are
released when the door is opened to remove garments. Currently, the largest sources of
emissions from dry cleaning are from equipment leaks, which come from leaking valves and
seals, and the loading and unloading of garments.
In the future, the only major sources that we expect to see are the existing facilities (ERG,
2004). Based on the low emission rates of current PCE dry cleaning machines and the typical
business models used in the industrial and commercial dry cleaning sectors, it is unlikely that
any new major sources will be constructed or that any existing area sources will become major
sources by the addition of new equipment. The typical business models for these facilities are
picking up clothes for processing within a couple hundred mile radius of the facility and not
across several states, this limits the amount of potential garments facilities can service. Most
new dry cleaning machines have fourth generation (dry-to-dry closed loop machines with
refrigerated condenser and carbon adsorber) emission controls. A typical new fourth generation
machine can clean 800 pounds of garments per gallon of PCE. A new or existing source would
need to clean 840 tons of clothes to exceed the major source threshold of 2,100 gallons [2,100
gallons * 800 Ib/gallon * 1 ton/2000 Ib = 840 tons].
No new commercial facilities are expected to be major sources. New area sources
allowed to install third generation machines (dry-to-dry closed loop with refrigerated condenser)
under the current requirements of the NESHAP, would need to clean 525 tons of clothes to
exceed the major source threshold of 2,100 gallons. This estimate is based on a typical
performance of a new third generation machine of 500 pounds per gallon of PCE [2,100 gallons
* 500 Ib/gallon * 1 ton/2000 Ib = 525 tons].
The largest commercial dry cleaning source, Bergmann's Inc., dry cleaned 390 tons of
garments in 2001. We do not anticipate that any facilities will clean as much as 525 tons of
garments per year. Several dry cleaning chains have thirty to sixty storefronts, but the logistics
of the commercial market make it uneconomical to clean clothes from a large network at a single
location. They divide up the drop shops to send their clothes to be processed at several plants
instead of one large plant. Therefore, it is also unlikely that a new facility in the commercial
sector using third or fourth generation machines would exceed the major source threshold. New
and existing commercial dry cleaning sources are and will be area sources.
Economic Impacts to Major Sources
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Background
There are 14 parent firms with major sources affected by the dry cleaning residual risk
standard. Of these firms, eight (or more than half) are small according to Small Business
Administration (SBA) size standard guidelines. The U.S. Small Business Administration's size
standards for small dry cleaning firms is $4 million in annual revenue (NAICS 812320, dry
cleaning and laundry services [except coin-operated]). It is expected that virtually of the firms
with affected area source dry cleaners will be found in NAICS 8 1 2320). Although firm specific
data is not available, U.S. Census average firm revenue data suggests almost all of the affected
firms could potentially be small. For example, 1997 data shows over 99 percent of firms in SIC
7216 (dry cleaning plants, except rug) may meet this threshold. Revenue data could not be found
for 4 of the 14 affected firms. All 4 of these firms are small according to the SBA guidelines.
The firm with the largest annual revenues among those that had available data is Jim Massey's
Cleaners & Laundry with $ 1 6.6 million in revenues in 2002 (the year for the cost data). All of
the firms have excellent credit ratings except for White Tower (which had a very good credit
rating).
As mentioned earlier, impacts in this analysis are calculated as annualized costs/annual
revenues for the affected firms. Annualized costs are estimated according to the equation listed
below:
CSR =-i
,
where
TACC = total annual compliance costs,
i = indexes the number of affected plants owned by company j,
n = number of affected plants, and
TRj = total revenue of ultimate parent company j .
We conducted a small entity-level analysis for ultimate parent companies that owns and operates
affected units that will be affected by air pollution reduction strategies. This approach uses
census data for average firm revenue by employment size for SIC 7216 (dry cleaning plants,
except rug cleaning) and NAICS 812320 (dry cleaning and laundry services [except coin-
operated]) and engineering cost estimates. Costs include enhanced LDAR along with the costs
of the other options, and do account for savings from reduced PCE use. As shown in Table 1,
these impacts are fairly low for the options examined in this analysis. Option 1 requires the
implementation of an enhanced LDAR program and the use of dry-to-dry machines that do not
vent to the atmosphere (i.e., closed loop) during any phase of the dry cleaning cycle.
Refrigerated condensers and carbon adsorbers (RC + CA) are required for all machines.
Enhanced LDAR + refrigerated condensers and carbon adsorbers is the proposed option for both
existing and new major source dry cleaners. Option 2 would require a PCE sensor lockout
system in addition to the requirements in Option 1 and is not the proposed option for major
source dry cleaners. Only ALAC, White Tower (not a small firm), and Leather Rich (also not a
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small firm) experience annual costs that are 1% of revenues or higher, and these impacts occur
under Option 2. In fact, there are many instances of cost savings for these firms under these
options. Two firms, Circle Environmental and Libra Industries, are expected to have cost
savings under each of these two options, hi these cases, the savings from reduced PCE usage
outweigh the costs from applying the options.
For the firms with annual costs of greater than 1% of sales, ALAC experiences the
greatest impact under any of the regulatory options (2.25% under Option 2). ALAC's three dry
cleaners vary in age from 25 to 29 years. This is well in excess of the 15 years that is typical for
industrial dry cleaning machines. It could be said that this regulatory option, if applied, may
encourage the firm to replace machines it was expected to replace in any event, especially if the
machines had not undergone any significant modifications or upgrades over their lifetimes. Thus,
it is possible that the costs of this option may not be the full amount estimated given that
equipment replacements may have to occur in a very short time. The potential for needed
equipment replacements unrelated to this residual risk proposal may be one reason why ALAC
intends to close its PCE dry cleaning operations in 2004. Thus, PCE emissions from these
ALAC facilities may be zero by the time the residual risk rule is implemented.
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Table 1. Economic Impacts for Major Source Dry Cleaners - Residual Risk Options
Parent Firms Affected,
Individually and by
Category
Industrial
ALAC Garment
Services
White Tower
Industrial Laundry
Libra Industries, Inc.
Circle Environmental
Complete Laundering
Services
Midwest Industrial
Laundry
Spic and Span , Inc
Leather
Leather Rich (Leather
Technologies?)
Acme Sponge &
Chamois Co.
Commercial
Bergmann's, Inc.
Total Revenues in
2002 for Each
Affected Firm
3,800,000
15,000,000
10,500,000
7,500,000
7,500,000
14,000,000
11,500,000
Is the Firm Small?
Yes
No
Yes
Yes
Yes
Yes
No
No
Yes
No
Total Annual Costs
foraRC+cCA +
Enhanced LDAR
(Option l)d
$(35,389)°
60,178
(41,429)
(35,810)
(11,551)
(3,869)
0
(2,161)
(3,347)
9,957
Total Annual Costs
for PCEb Analyzer-
Lockout + Option 1
Requirements
(Option 2)
$85,429
295,844
(21,032)
(32,106)
55,313
277
0
110,145
15,641
60,188
Cost/Sales for
Affected Firms
Option 1
-
0.40
-
-
-
-
0
-
-
0.087
Cost/Sales for Affected Firms
Option 2
2.25
1.92
-
-
Cannot Be Estimated
Cannot Be Estimated
0
1.47
0.11
0.52
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Jim Massey's
Cleaners & Laundry
Sam Meyer Formal
Wear
Quality Chinese
Laundry
Peerless Cleaners
16,600,000
15,000,000
3,800,000
No
No
Yes
Yes
(1,855)
12,019
3,522
10,201
20,612
37,618
10,285
35,233
-
0.080
Cannot Be
Estimated
0.268
0.12
0.251
Cannot Be Estimated
0.927
aRC = refrigerated condenser; CA = carbon adsorber;
b PCE= perchloroethlyene
c Values in parentheses are negative.
d Revenues are for 2002 - the year for which the costs are estimated.
Annual costs in the analysis = Annualized capital + MRR labor (where appropriate) + operating cost + PCE savings.
A "-" denoted a negative cost/sales value, which denotes a cost savings from applying the regulatory option. "Cannot Be Estimated" refers to
the lack of available revenue data for the firm. We presume that all firms for which no revenue data is available are small firms.
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Economic Impacts to Area Sources
Affected Entities
An affected dry cleaning area source has at least one dry cleaning machine (i.e., dry
cleaning is performed on-site) and uses PCE. As mentioned above, there are an estimated 27,800
area source dry cleaners in the country (ERG, 2005). 1,300 of these are located at co-residential
facilities. Most of these facilities are located in New York City and California. Most of these
machines (61 percent) will have refrigerated condensers and carbon adsorbers on them by 2006,
the year this rule will be promulgated. Of the remainder, 37 percent are expected to have
refrigerated condensers. The final 2 percent of affected dry cleaning machines are transfer or
vented machines. These are much older machines whose economic life on average will be at
least 13 years old by 2006.
Analysis Results
We made assessments of the economic and financial impacts of the rule using the ratio of
compliance costs to the value of sales (cost-to-sales ratio or CSR) using revenues and pollution
control expenditures as shown in the equation above. The analysis assessed the burden of the
rule by assuming the affected firms absorb all of the control costs, rather than pass them on to
consumers in the form of higher prices.
As shown in Table 2, average firm revenue in 1997 ranged from $187,000 to $30.9
million for firms in this industry. Although it is limited to the top 50 firms, the latest census data
for 2002 provides an average firm revenue estimate $13.8 million. Similar sales data by
employment ranges is not currently available.
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Table 2. Characteristics of Dry cleaning Ultimate Parent Companies in SIC 7216 (NAICS
812320) (Dry cleaning Plants, except Rug Cleaning)
Variable
Number of
Firms
Average
Number of
Establishments
1997 Data
2002
Data
<20
Employees
20-99
Employees
100-499
Employees
18,016 1,857 102
1
Average Firm $0.187
Revenue
(Smillion)
2
$0.888
7
$16.161
500 plus
Employees
4
89
Industry
Total
19,979
1
$30.943 $0.278
'
Top 50
Firms
50
21
$13.750
Options Analyzed
This report contains economic impacts estimated for area sources (large and small sized)
associated with two options: Option 1 - Enhanced Leak Detection and Repair (LDAR) and a
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prohibition on the use of existing transfer machines, and Option 2 - Secondary Control (adding
carbon adsorbers to refrigerated condensers) plus Option 1 requirements. Enhanced LDAR
requires the use of a hand-held halogenated hydrocarbon detector (HHD) for the leak detection
of all specified components of a dry cleaner. The capital cost for this option is the $250 cost of a
HHD. The maintenance costs of a HHD are limited to replacing a sensor in three years. With a
45 minute inspection time assumed, the total labor cost is $131 per year. The annualized cost of
the HHD and sensor replacement in three years, presuming the 7 percent interest rate mentioned
earlier in this report and a 10 year HHD life, is $36 + 14 = $50. Therefore, the annualized cost
of Option 1 per affected dry cleaning machine is $50 + 131 = $181 (2002$). It is assumed that
enhanced LDAR does not impose additional repair costs because the current NESHAP already
requires leak repair identified during the weekly or biweekly inspections for perceptible leaks.
For Option 2, it should be noted that many sources have secondary control already and
thus would incur no costs to meet this option. For these sources, the only regulatory cost they
incur is the enhanced LDAR requirement if they don't have such a program in place already (i.e.,
Option 1). Most of the cost for this option is for machines with refrigerated condensers to be
retrofitted wiht carbon adsorbers. Most machines purchased since 1996 are designed to be easily
retrofitted with carbon adsorbers. For pre-1996 machines, the cost to retrofit is higher. The
capital retrofit cost for 1996 machines and later is $5,500; pre-1996 machines capital retrofit cost
is about $12,000. The cost estimates assumed that half of the machines that must be retrofitted
with a carbon adsorber would fall in each age category.
For facilities with transfer or vented machines, it is necessary for them to buy a new dry
cleaning machine since it is technically infeasible to retrofit such machines with secondary
controls (NC DENR, 2001). The capital cost for a new machine with secondary controls is
$35,600 based on quotes from multiple vendors. This cost includes installation and reflects the
average size machine for area source facilities (40 pounds). The annualized capital cost of a
new machine is 35,600 * 0.1098 = $3,909, presuming a 7 percent interest rate and 15 year
economic life for a new machine. New transfer or vented machines were banned as a result of
the dry cleaning NESHAP that became final in 1993. Thus, the only transfer or vented
machines in operation today are those that were operating at the time this NESHAP became
final. Hence, these machines are at least 12 years old and are approaching the end of their
typical useful life (15 years).
For new area sources (large and small), the proposed rule would require implementation
of an enhanced LDAR program and the use of non-vented dry-to-dry machine with a RC and
CA. In addition, the proposed rule would prohibit the use of new PCE machines in co-residential
dry cleaning facilities.
Number of Sources Affected
Option 1 will apply to all existing area sources. The 7,400 facilities in the States of
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California, New York, Rhode Island, and Maine are already required to conduct the equivalent of
enhanced LDAR, thus there is no cost to them from meeting this requirement. Thus, the number
of sources affected by this requirement are 27,800 - 7,400 = 20,400. We estimate that the
number of these sources owned by small firms is 0.99 * 20,400 = 20,200.
These 7,400 facilities also require secondary controls for their dry cleaners, so they incur
no cost for meeting Option 2. Of the remaining 20,400 sources, 39 percent or 7,900 would need
to apply additional control to meet Option 2. 7,500 of these sources will be able to add
secondary control. The 200 sources with transfer machines, however, can not be retrofit with
the secondary control and will have to purchase a new machine to meet the Option 2
requirement.
Economic Impacts
Cost to Sales Analysis
Net annualized costs include the cost savings from the reduction in PCE usages. The
total price of PCE is $16.63 per gallon, based on an estimate of national average price per gallon,
an average site cleanup tax, and sales tax and shipping (ERG, 2005).
For Option 1, the 20,400 facilities are expected to incur a capital cost of $250 apiece for
the HHD, and a total annualized cost of $181. The reduction in PCE usage yields a cost savings
of $315 on average per machine, thus leading to a net annualized cost savings of $ 132. The net
annualized cost (a savings) is estimated at $-2,700,000. Given the cost savings and minimal
capital expenditure, there should be no significant economic impact to small business area
sources or other area source owning firms from compliance with this option.
For Option 2, 7,500 affected facilities will have to apply a secondary control. Half of
them are expected to be pre-1996 machines that will incur a capital cost of $12,000 and an
annualized cost of 12,000 * 0.1098 = $1,318. The other half will be post-1996 machines will
incur a capital cost of $5,500 and an annualized cost of 5,500 * 0.1098 = $604. Therefore, the
total annualized cost of Option 2 for the pre-1996 machines will be 3,750 * 1,318 = $4,943,000,
and 3,750 * 604 = $2,265,000 for the post-1996 machines. The 200 transfer and vented
machines will each incur on average a capital cost of $35,600 and an average annualized cost of
$3,909, which leads to a total annualized cost of 200 * 3,909 = $781,800. This total annualized
cost before reduced PCE usage is $7,989,800. With reduced PCE usage included from the
enhanced LDAR program and the lower PCE consumption associated with the ban on transfer
and vented machines, the net annualized cost is $7,100,000.
Economic impacts for Option 2 (Enhanced LDAR + secondary controls) are estimated
using the cost-to-sales approach listed in section 2 above. An estimate of average firm sales was
generated by taking the dry cleaner firm average sales of $278,000 found in Table 1, an estimate
in 1997$, and escalating it to 2002$ using the Gross Domestic Product (GDP) price deflator.
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The calculation is (GDP 2002/GDP 1997) *278,000. With GDP 2002 (January) = 103.568 and
GDP 1997 (January) = 95.054, the average estimated sales for dry cleaning firms is
(103.568/95.054) * 278,000 = $302,900.
To calculate cost to sales impacts, we come up with a weighted average annualized cost
for firms affected by this option since different types of machines are being affected. This
annualized cost estimate for the 7,500 that can apply secondary control to meet Option 2 is
(1,318 + 604)/2 = $961 -132 = $829. This estimate reflects the fact that half of the machines
that can put on secondary control have a higher cost for control than the other half. Hence, the
annualized cost per firm is the arithmetic average of the costs for each half. The $132 that is
subtracted from this average annualized cost per firm reflects the cost savings from meeting
Option 1, which is a part of the Option 2 requirements. The cost to sales estimate on average for
the firms that own these dry cleaning machines is 829/302,900 = 0.0027 or 0.27 percent. For
the 200 transfer and venting machines that will require replacement to meet Option 2
requirements, the cost to sales on average for the firms that own these dry cleaning machines is
3,909/302,900 = 1.29 percent.
Another substitution possibility that the Agency has included in its analyses but is not a
requirement of the proposal is an estimate of the impacts to co-residential facilities of a ban on
new PCE machines. This estimate presumes that dry cleaners who want to continue in that
business and desire to buy new dry cleaning machines will purchase machines that use
hydrocarbon (typically a petroleum) solvent. Existing PCE machines can continue to operate
indefinitely, but these machines can only be replaced by a non-PCE machine. This type of
solvent cleaner is becoming increasingly popular as new dry cleaning machine installations. A
recent report shows that in the San Francisco Bay Area, 75 percent of new dry cleaning machines
use hydrocarbon solvent (Bay Area AQMD, 2005).
The capital and annual costs associated with buying and operating hydrocarbon solvent
machines vary based on location. In this analysis, we estimate the impacts for new hydrocarbon
solvent machines installed in New York and those installed outside of New York. We make this
distinction based on two factors: 1) the large number of co-residential machines in New York
that would be affected by this requirement, and 2) the higher costs of installation and operation
of these dry cleaners in New York relative to the rest of the U.S. As part of this analysis, we
assume that a sprinkler system will be required along with all hydrocarbon solvent dry cleaners
in New York, and that 50 percent of all dry cleaners outside of New York will be required along
with hydrocarbon solvent dry cleaners. The capital cost for a hydrocarbon dry cleaner
incremental to the capital cost of a new PCE machine with secondary controls (i.e., a carbon
absorber) is $25,000; the annualized cost of the cleaner is $2,690 (based on a 7 percent interest
rate and a 15 year economic life). It is expected that a sprinkler system will be required for
hydrocarbon solvent dry cleaners in New York if they choose to install such cleaners, and our
analysis presumes that all such dry cleaners will need to install a sprinkler system. The capital
cost of a sprinker system is estimated at $20,000 in New York and at $15,000 outside of New
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York. Hydrocarbon solvent dry cleaners in New York only would also incur an additional
capital cost expense of $8,000 because of a special requirement that these machines would need
a special Mechanical Equipment Approval. It should be noted that the operating and
maintenance costs for hydrocarbon solvent machines is presumed to be identical to those for
PCE machines. All impacts for this substitution possibility are presented for the fifth year after
proposal of this regulation. Table 3 summarizes the number of co-residential facilities affected
and the costs of these new dry cleaners for this option that is not a requirement in this proposal:
Table 3 - Costs of New PCE Machine Ban for Substitution Possibility - Switch to New
Hydrocarbon Solvent Cleaners
Location
New York
Outside New
York-
Sprinkler
System
Required
Outside New
York-
Sprinkler
System Not
Required
Number
of
Facilities
Affected
in 5 Years
100
50
50
Capital Cost
Per Affected
Facility
Incremental
to New PCE
Machine
$25,000
$25,000
$25,000
Fire
Protection
Cost
(Sprinkler
System +
Additional
Certification)
$28,000
$15,000
0
Total Capital
Cost Per
Affected
Facility
$53,000
$40,000
$25,000
Annualized
Cost Per
Affected
Facility
$5,855
$4,427
$2,780
Economic impacts for this analysis are estimated using the cost-to-sales approach listed in
section 2 above. Using the average estimated sales for dry cleaning firms of $302,900 calculated
above, the annualized cost to sales is $5,855/302,900 =1.9 percent for the affected firms
(approximately 100) in New York, 4,427/302,900 = 1.5 percent for the approximately 50 firms
outside of New York that will require a sprinkler system along with a new hydrocarbon solvent
machine, and 2,780/302,900 = 0.9 percent for the approximately 50 firms outside of New York
that will not require a sprinkler system along with a new hydrocarbon solvent machine. Hence,
the range of small business impacts associated with this option for the affected co-residential area
sources is compliance costs of 0.9 to 1.9 percent of sales. The average economic impact for
these affected small businesses is compliance costs of (945,850/200)/302,900 =1.6 percent of
sales.
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It should be noted that the analysis for this substitution possibility may provide an
overestimate of economic impacts for dry cleaning firms in New York given that their average
revenue is likely to be higher than the national average used here. In addition, the estimate of 50
percent for the number of dry cleaning firms that will need a sprinkler system in order to operate a
hydrocarbon solvent machine may be an overestimate, hence leading to an overstatement of the
total costs associated with this substitution possibility.
The Agency is also co-proposing an option to regulate co-residential area sources
according to the requirements under New York State Dept. of Environmental Conservation Part
232. Under these requirements, all PCE using co-residential area sources are required to put on
enhanced LDAR, RC + CA, and a vapor barrier enclosure. The Agency has estimated that 242
co-residential area sources nationwide will have to put on controls to meet the requirements of
this option. Of these 242, 83 already have secondary controls (i.e., RC + CA) on them.
Estimates of the costs by number of affected source are available in the table below.
Table 4. Impacts of New York State Part 232 Requirements
Dry Cleaner
Machine Type
Transfer*
Vented
RC
RC + CA
Total:
Number of Affected
Facilities
2
2
79
159
242
Total Annualized Costs
(2002$)
N/A
$11,976
268,352
210,887
$491,215
Total Annualized Cost
per Facility
N/A
$5,988
3,396
1,326
N/A
* Transfer machines will be banned for all area sources, including co-residential ones, by another
requirement in the proposed rule.
To estimate the economic impacts of this option for co-residential area sources, we
calculated the annualized cost per facility as shown in the far right column of Table 4. Given the
average revenue of affected small dry cleaning firms is $302,900, that this estimate is applicable
to small dry cleaning firms owning affected co-residential sources under this option, and that 99
percent of the 242 affected facilities are owned by small firms (or 0.99 * 242 = 240), the
following impacts are estimated:
Small firms owning vented machines: 5,988/302,900 - 1.9 percent cost to sales
Small firms owning machines requiring RC: 3,396/302,900 =1.1 percent cost to sales
Small firms owning machines requiring RC + CA: 1,326/302,900 = 0.4 percent cost to sales
Hence, the range of small business impacts associated with this option for the affected co-
residential area sources is compliance costs of 0.4 to 1.9 percent of sales. The average economic
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impact for these affected small businesses is compliance costs of (491,215/240)7302,900 = 0.7
percent of sales.
Conclusions of Report
The Agency has concluded that there is not a significant impact to a substantial number of
small firms (or SISNOSE) associated with this proposal. This conclusion is based on a small
entity analysis for firms across the entire dry cleaning source category (major and area source
owning firms). For major sources, with each firm expected to experience cost savings annually
under the proposed option, there are no negative economic impacts expected to small firms under
this option. Under the proposed rule for all existing area sources, impacts for the affected small
or large firms are expected to be costs of less than 1 percent of sales for the great majority of
affected firms. Only those firms that will have to replace their current dry cleaning machines (i.e.,
the firms owing the 200 existing transfer and venting machines) will incur a higher impact (just
over 1 percent on average) and some small firms owning co-residential area sources (no more
than 200). The number of small firms owning dry cleaners that will incur more than 1 percent of
sales is only 1.4 percent of the total number of small firms [(0.99 *(400 + 150)727,800)) =
0.0014], and the transfer and venting machines that must be replaced are near the end of their
typical useful life currently and thus will face additional maintenance costs to continue operating
these machines or replace them with newer machines in any event. Based on these findings,
which includes the co-proposed option for co-residential area sources, the Agency has made its no
SISNOSE determination for this proposed rule.
References
Bay Area Air Quality Management District. Proposed Adoption of Regulation 2: Permits, Rule 5:
New Source Review of Toxic Air Contaminants. Staff Report. June 2005.
Eastern Research Group, memo to Rhea Jones, "Costs for All Area Dry Cleaner Sources." U.S.
Environmental Protection Agency. August 16,2005.
Eastern Research Group, memo to Rhea Jones, "Cost of NESHAP Revisions for New Co-
residential Perchloroethylene Dry Cleaning Facilities." U.S. Environmental Protection
Agency. October 5, 2005.
Eastern Research Group, memo to Rhea Jones, "Industry Trends of Major and Area Source Dry
Cleaners." U.S. Environmental Protection Agency. August 18, 2004.
U.S. Bureau of the Census. 2004. 2002 Economic Census: Personal and Laundry Services 2002.
EC02-811-02. Washington, DC: U.S. Department of Commerce, Economics and
Statistics Administration, U.S. Census Bureau.
U.S. Department of Commerce. Bureau of Economic Analysis. A Guide to the National Income
and Product Accounts of the United States (NIPA). Data found at
http://research.stlouisfed.org/fred2/data/GDPDEF.txt.
U.S. Small Business Administration. 2004. Firm Size Data: Statistics of U.S. Businesses and
Nonemployer Statistics, http://www.sba.gov/advo/stats/data.html. Last updated June 7th,
2004.
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United States Office of Air Quality Planning and Publication No. EPA
Environmental Protection Standards 452/B-05-001
Agency Air Quality Strategies and Standards December 2005
Division
Research Triangle Park, NC
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