INFLATION IMPACT STATEMENT
                                 FOR
                PORTABLE AIR COMPRESSOR REGULATION
Executive Order  11821 requires the preparation of an Inflation Impact Statement (IIS)
for all major standards and regulations or of major legislation. Attached is the IIS for
the Portable Air Compressor Regulation signed into law December 31, 1975 and published
in the Federal Register, January 14, 1976 (41FR2162).
            U.S. Environmental Protection Agency
                   Washington, D.C.  20460

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INFLATION IMPACT STATEMENT FOR NOISE EMISSION REGULATION
                 FOR PORTABLE AIR COMPRESSOR
1.   SUMMARY

    The establishment of a 76 dBA at 7 meters noise standard for newly

manufactured portable air compressors to be effective 24 months after

promulgation of the regulation (36 months for units exceeding 250 cfm)

gives rise to a  series of costs which would otherwise not be incurred

by the private and public sectors. To determine the magnitude and

potential impact of these costs,  the Office of Noise Abatement and

                                                      1  2
Control of the U. S. EPA sponsored two contract studies. '

    The studies examined the structure of the industry,  the estimated

cost of quieting air compressors by  type, the price elasticity of demand,

the capital and  annual costs of enforcement,  the impact of enforcement

on annual operating and maintenance costs and the impact of this regu-

lation on a number of economic  factors.

    The following conclusions were reached in these studies:

    A.  The aggregate list price of compressors may increase by 12. 3

        percent due to the imposition of the regulation.

    B.  The average price elasticity of demand is estimated at -0. 35

        for price increases of less than 20 percent.  Based on this,

        it is estimated that the first year reduction in unit sales  may

        be no more than 4. 3 percent.  It is anticipated that cost
 U. S. EPA, "A study to Determine the Economic Impact of Noise
 Emission Standards in the Construction Industry: Portable Air
 Compressors  Report, " June 1974.
p
 U. S. EPA, "Proposed New  Portable Air Compressor Regulation:
 Supplementary Economic Impact Analysis. "

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        increases experienced by manufacturers will be shifted to end

        users due to the industry supply curve that is highly elastic

        in the region of concern.

    C.  Increased annual aggregate purchase costs for end user indus-

        tries is estimated at $25.4 million, using list prices for the

        product. * First year user annualized depreciation and capital

        costs are estimated at $5.1 million.

    D.  The impact of the regulation on annual maintenance and operating

        costs is judged to be negligible.

2.  ECONOMIC IMPACT ESTIMATES

    A.  Incremental Costs of Compliance

            The respective effective dates for this regulation (24 months

        for  compressors under 250 cfm and 30 months for compressors

        over 250 cfm) permit compressor manufacturers to effect changes

        in design without undue hardships.   Changes can thus be incor-

        porated into the normal design cycle without incurring  undue

        costs of compliance.

            Included in the economic impact analysis of compressor

        noise control was an assessment of the expected average

        portable air compressor  list price increase due to imposition

        of the regulation.  A list  price increase of 11.2 percent is
* Normally,  discounts of approximately 25% of list price occur.  Assum-
  ing such a discount,  a purchase cost increase of the order of $19 million
  is a more realistic estimate.
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    estimated for compressors with air flow capacities of 250 cfm



    or less.  Compressors with capacities greater than 250 cfm



    may experience a list price increase of 13. 0 percent.  Con-



    sidering the 82 percent/ 18 percent market distribution of these



    two compressor groups,  an average overall compressor list



    price increase  of 12. 3 percent may result.



          The upper bound annual aggregate increase in purchase



    cost, based on  estimated 1977-1978 retail sales of $206 million



    and an estimated list price increase of 12. 3 percent,  that may



    result from this regulatory action is estimated to be $25.4



    million.



          Annualized user costs are  estimated not  to exceed $5. 1



    million.



          The impact of the regulation on annual maintenance and



    operating costs is judged to be negligible.



B.  Incidence of Increased Costs



          The structure of the air  compressor industry is such that



    production cost increases are expected to be completely passed



    forward to the  end consumer.



C.  Effect on Prices of Goods



          Imposition of the regulation may increase the retail list



    price of portable air compressors as follows:



       All gasoline compressors                12.1 percent



       Diesel compressors 250 cfm  and lower    9. 6 percent
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       Diesel compressors over 250 cfm        13. 0 percent



                         Average increase     12. 3 percent



D. Productivity Effects



   No significant unemployment is expected to occur as the result



   of the portable air compressor regulation.



E.  Indirect Effects - Foreign Trade



       Exports are approximately 10 percent of total sales, and no



   changes in export patterns are expected because of these noise



   regulations.  Imports make up approximately 7 percent of the



   market and no change is expected due to the standards  being prom-



   ulgated.



F.  Impact on Energy



         There is conflicting information with regard to increased



   fuel consumption that may be  caused by this regulation. Some



   members of the portable air compressor industry claim that



   fuel consumption will increase by 3  to 8 percent; however,  these



   members were unable to support their claims with factual data.



   Another manufacturer indicated that fuel consumption may actually



   decrease as a result of the use of more efficient fans to achieve



   fan noise reduction.  The agency attempted to determine experi-



   mentally whether fuel consumption was actually affected by the



   application of quieting technology compressors.  However, fuel
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       consumption differences (between a standard compressor and a




       quieted version of the same compressor) attributable to the




       quieting technology could not be separated  from those attributable




       to manufacturing tolerance variances.  In view of the foregoing,




       EPA is of the opinion that quiet portable air compressors use no




       more fuel than unquieted units.




3.  IMPACT ON INFLATION




    The annual aggregate increase in purchase cost, based on estimated




1977-1978 retail sales of $206 million and an estimated list price increase




of 12. 3 percent that may result from this regulatory action, is estimated




to be  $25. 4 million.




    First year user annualized costs are estimated at $5. 1 million.




    The macroeconomic  effect of these price increases is judged to be




negligible when compared with the current or projected GNP levels.




    The impact of the regulation on annual maintenance and operating




costs is judged to be negligible.




    Possible unit sales reduction resulting from increased prices are




estimated to be no greater than the following:




          Gasoline compressors                      4. 2 percent




          Diesel compressors under 250 cfm          3. 4 percent




          Diesel compressors over 250 cfm           4. 3 percent




                          Average reduction          4. 3 percent




4.  ENVIRONMENTAL IMPROVEMENTS




    It is  estimated that over 27. 4 million people are exposed to con-




struction site noise levels  in excess of Ldn 55, the level identified as






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protective of public health and welfare with an adequate margin of



safety.  Compliance with the regulation being promulgated is projected



to reduce the severity and extensiveness  of impact from construction



site noise by approximately  14. 7 percent from current levels;  con-



comitant regulation of truck noise to either 83 or 75 dBA at 50 feet,



for example, could provide total relief on the order of 37 to 46 percent,



respectively.  In terms of the acoustic energy contribution to  construc-



tion site noise,  compliance with the regulation will reduce the acoustic



energy contribution of portable air compressors to approximately 1



percent of the total site noise.  This will move the portable air com-



pressor from the second most predominant construction site noise



source to the 16th noisiest piece of construction equipment on a list



of 20 pieces of equipment typically used at construction sites. In terms



of the actual benefits from the regulation being promulgated, the regu-



lation will reduce the extensiveness and severity of impact on the



entire 27. 4 million people exposed to noise levies above 55 Ldn at



construction sites by 14. 7 percent.



5.  ALTERNATIVES CONSIDERED



Regulatory Alternatives



    The results  of studies performed to assess the health and welfare



and economic impacts associated with the various standard and effective



date options showed the following potential impacts:



    1.  list price increase ranging from 10 percent to 12.3 percent;



    2.  annual aggregate increase in purchase costs ranging from $25. 4



       million for 76 dBA level to $20. 3 million for a 78 dBA level;



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    3.  health and welfare benefits ranging from 14 percent to 14. 7




       percent reduction in noise impact on 27.4 million people exposed




       to construction site noise.




    A 76 dBA standard effective in 24 months for compressors with air




flow capacities less than or equal to 250 cfm,  and  in 30 months for




compressors with capacities greater than 250 cfm, combines the best




health and welfare benefit of 14. 7 percent noise impact reduction with




a potential maximum average list price increase of 12. 3 percent and




an annual aggregate increase in purchase cost of up to $25.4 million.




    More importantly,  however,  the 24 and 30 month effective dates for




the 76 dBA standard allow adequate lead time  to insure that no manu-




facturer will suffer undue hardship from loss  of sales  that might accrue




from an inability to produce compressors complying with the standard




if too short a lead time were established.




    Accordingly,  the following standard has been established for newly




manufactured portable air compressors:
Standard
76 dBA
Effective Date
75 to 250 cfm >250 cfm
24 months 30 months
Non-Regulatory Alternatives



    Comprehensive studies were performed to evaluate portable air com-



pressor noise emission levels requisite to protect the public health and



welfare, taking into account the magnitude and conditions of use, the



degree of noise reduction achievable through application of best avail-



able technology and the cost of compliance.  The results of these studies



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indicate that the regulation of portable air compressor noise is feasible.




Accordingly, no non-regulatory alternative was considered.




6.  IMPACT ON MATERIALS




    The impact of this regulation on the demand and supply of material is




expected to be considerably below the 3 percent annual consumption thres-




hold and is not expected to have significant impact on any scarce mater-




ials.




    It is hereby certified that the economic and inflationary impacts of




this proposed regulation have been carefully evaluated in accordance




with Executive Order 11821.
December 31,  1975                     **
                                    Acting Administrator
                                                               GPO 899-345

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