Economic Impact Analysis of the Final
Perchloroethylene Dry Cleaning Residual Risk
Standard
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EPA 452/R-06-005
July 2006
Economic Impact Analysis of the Perchloroethylene Dry Cleaning Residual Risk Standard
U.S. Environmental Protection Agency
Office of Air Quality Planning and Standards
Health and Environmental Impacts Division
Research Triangle Park, NC
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Economic Impact Analysis of the Perchloroethylene Dry Cleaning
Residual Risk Standard
As part of its regulatory support role for Clean Air Act (CAA) programs, the Air Benefits
and Costs Group (ABCG) 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 3 17
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 economic impact analysis for this rule is a comparison of the annualized compliance
costs to the annual revenues for known and potentially affected firms. Cost and revenue data are
in 2003 dollar terms. All costs employed in this analysis 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 12 major source dry cleaning facilities owned by 11 firms in the US
affected by this rule.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 also includes
calculation of economic impacts to co-residential area sources. 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 fifteenth year after proposal (the year in which full implementation of this
rule will occur). 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
The dry cleaning industry is one that is almost entirely made up of small firms that are
highly competitive. Most of these small firms have fewer than five employees. In fact, over half
of dry cleaners in California employ two or less full-time employees.2 The firms in this industry
are pricetakers - they have no influence on the price of their cleaning output. Dry cleaners use
' The Agency is aware that two dry cleaners subject to this rule at proposal have cither ceased operations or arc
using a solvent other than PCE.
" California Air Resources Board. California Dry Cleaning Industry Technical Assistance Report. February 2006.
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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 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. In 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 12 major sources include seven industrial facilities and five commercial facilities. The five
commercial facilities are each the central plant for a chain of retail storefronts. Of the twelve
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
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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
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 (or about 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 lb/gallon * 1 ton/2000 lb = 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 lb/gallon * 1 ton/2000 lb = 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
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and existing commercial dry cleaning sources are and will be area sources.
Economic Impacts to Major Sources
Background
There are 11 parent firms owning the 12 major sources affected by the dry cleaning residual risk
standard. Of these firms, six (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 for an ultimate parent company (NA1CS 812320, dry
cleaning and laundry services [except coin-operated]). It is expected that virtually of the firms with affected
major source dry cleaners will be found in NA1CS 812332 (industrial launderers). For this NA1CS code, the
SBA size standard is $12 million in annual revenue for an ultimate parent company. It is expected that
virtually of the firms with affected area source dry cleaners will be found in NA1CS 812320. 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.
For major sources, revenue data could not be found for 4 of the 11 affected firms. The firm with the
largest annual revenues among those that had available data is Jim Massey's Cleaners & Laundry with
$ 16.6 million in revenues in 2003 (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:
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 NA1CS
812320 (dry cleaning and laundry services [except coin-operated]) and engineering cost estimates. Costs
include enhanced LDAR, and do account for savings from reduced PCE use.
C \SR =	
' where
total annual compliance costs,
indexes the number of affected plants owned by company j,
number of affected plants, and
total revenue of ultimate parent company j.
UlACC
/
TACC
n
TRj
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The final rule requires major source dry cleaners, both existing and new, to implement 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. As shown in Table 1, the economic impacts are fairly limited to
the affected firms. In fact, there are instances of cost savings for these firms according to our analyses.
Six firms are expected to have cost savings. No firm is expected to have annualized compliance costs of
greater than 1 percent of its sales. In these cases, the savings from reduced PCE usage outweigh the costs
from applying controls associated with the rule.
Table 1. Economic Impacts for Major Source Dry Cleaners - Residual Risk Standard"
Parent firms Affected.
Individually and by
Category
Total Revenues in
2003 for Lach
Affected firm1'
Is the firm
Small?
Total Annualized
Costs for the Rule
(Enhanced LI)AR)C
Cost Sales for
Affected firms d
Industrial




White Tower
Industrial Laundry
15.000.000
No
(37.250)
-
Libra Industries. Inc.
10.500.000
Yes
(62.906)
-
Circle Environmental
No revenues found
Yes
(43.816)
-
Complete Laundering
Services
No revenues found
Yes
(24.666)
-
Midwest Industrial
Laundry
No revenues found
Yes
(9.424)
-
Spic and Span. Inc
7.500.000
No
0
0.0
Commercial




Bergmann's. Inc.
11.500.000
No
(1.666)
-
Jim Massey's
Cleaners & Laundry
16.600.000
No
(10.643)
-
Sam Meyer formal
Wear
15.000.000
No
8.377
0.056
Quality Chinese
Laundry
No revenues found
Yes
3.474
Cannot Be Estimated
Peerless Cleaners
3.800.000
Yes
8.409
0.22
'' Values in parentheses are negative.
'' Revenues are estimated tor 2003 based on application of the GDP priee deflator to 1997 Economic Census data. 2003 is the year for which the
costs are estimated.
' Annual costs in the analysis = Annualized capital - MRR labor (where appropriate) - operating cost - PCE savings.
d 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 State 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 of $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)







2002



1997 Data


Data
Variable
<20
Employees
20-99
Employees

100-499
Employees
500 plus
Employees
Industry
Total
Top 50
Firms
Number of
Firms
18.016
1.857

102
4
19.979
50
Average
Number of
Establishments
1
2

7
89
1
21
Average Firm
Revenue
(Smillion)
$0,187
$0,888

$16,161
$30,943
$0,278
$13,750
Options Analyzed
For existing area sources (large and small), the rule requires implementation of an
enhanced LDAR program and prohibition of the use of existing transfer machines. This
requirement and prohibition apply to all types of existing area sources, including co-residential
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sources. The use of all existing transfer machines is prohibited two years from the effective date
of the final rule by requiring owners and operators to eliminate any PCE emissions from clothing
transfer between the washer and dryer.
For new area sources (large and small), the rule would require implementation of an
enhanced LDAR program and the use of a non-vented dry-to-dry machine with a RC and CA.
These requirements do not apply to new co-residential sources. In addition, the rule would
phase-out the use of existing PCE machines in co-residential dry cleaning facilities over a 15
year period beginning in 2005 and ban new PCE machines in such locations.
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 $250 - the cost of the HHD. The maintenance costs of a HHD are limited to those
costs associated with 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 per affected dry
cleaning machine is $50 + 131 =$181 (2003$). It is assumed that enhanced LDAR does not
impose additional repair costs because the current NESHAP already requires leak repair during
the weekly or biweekly inspections for perceptible leaks.
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 of 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).
Number of Sources Affected
There are 7,400 dry cleaning facilities in the States of 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 existing area source 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. We base this estimate on
Census data mentioned earlier in this report indicating that roughly 99 percent of dry cleaning
businesses are small firms.
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These 7,400 facilities also require secondary controls for their dry cleaners, so they incur
no cost for meeting the final rule. Of the remaining 20,400 sources, 39 percent or 7,900 would
need to apply additional control to comply with the final rule. 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 rule
requirements.
( 7as/ to Sales Analysis
Net annualized costs include the annualized costs such as annualized capital and
operating maintenance and the cost savings from the reduction in PCE usage. 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 the existing area sources, 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 $3 15 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 the rule.
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 the rule 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 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 2003$ using the
Gross Domestic Product (GDP) price deflator. The calculation is (GDP 2003/GDP 1997)
*278,000. With GDP 2003 (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 use a weighted average annualized cost for firms
affected by the rule since different types of machines are being affected. This annualized cost
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estimate for the 7,500 that can apply secondary control to meet the requirement of the rule 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 the
rule requirements due to recovery of PCE. 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 the rule requirements, the
cost to sales on average for the firms that own these dry cleaning machines is 3,909/302,900 =
1.29 percent.
Co-residential Area Sources - Requirements and Impacts
For co-residential area sources, the final rule effectively prohibits new PCE machines in
residential buildings by requiring that owners or operators eliminate PCE emissions from dry
cleaning systems that are installed after December 21, 2005. This requirement applies to any
newly installed dry cleaning system that is located in a building with a residence, regardless of
whether the dry cleaning system is a newly fabricated system or one that is relocated from
another facility. In addition, the final rule revisions include a "sunset date" for the use of PCE at
currently operating co-residential sources: all existing PCE machines in co-residential facilities
are prohibited after December 21, 2020. This sunset date allows owners of existing co-
residential sources to operate their machines for their maximum estimated useful life, 15 years,
assuming they were first installed no later than the date of the proposed rule. We have concluded
that it is reasonable to establish the sunset date at that point to not prevent such owners from
recouping the cost of their investment in new machines. We also decided not to allow for a later
sunset date since on the date of our proposal owners were first placed on notice that we were
considering a sunset provision for co-residential sources. This sunset period, during which
existing machines will be required to comply with the same revised requirements that apply to
other existing area sources, will provide adequate time for source owners and operators to switch
to non-PCE equipment or move their PCE equipment to a non-residential location.
In the interim before the sunset date, existing co-residential sources are subject to the same
requirements that apply to all other existing area sources under the final rule revisions (i.e.,
enhanced LDAR and elimination of transfer machines).
Another substitution possibility that the Agency has included in its analyses 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,
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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 sprinkler system is estimated at $20,000 in New York and at $15,000 outside of New
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. 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 With a Switch to New Hydrocarbon Solvent
Cleaner Machines
Location
Number
of
Facilities
Affected
in 5 Years
Capital Cost
Per Affected
Facility
Incremental
to New PCE
Machine
Fire
Protection
Cost
(Sprinkler
System +
Additional
Certification)
Total
Capital
Cost Per
Affected
Facility
Annualized
Cost Per
Affected
Facility
New York
100
$25,000
$28,000
$53,000
$5,855
Outside New York -
Sprinkler System
Required
50
$25,000
$15,000
$40,000
$4,427
Outside New York -
Sprinkler System Not
Required
50
$25,000
0
$25,000
$2,780
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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.
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 has also examined an option to regulate co-residential area sources according
to the requirements under New York State Dept. of Environmental Conservation Part 232 in the
interim before sources replace their PCE machines to comply with the phase-out by December
21, 2020. 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 or use other means to meet
the requirements of this option. Of these 242, 83 already have secondary controls (i.e., RC + CA)
on them. Hence, 159 of these sources will have to apply the full set of secondary controls. All of
the 1,007 area sources in New York State already comply with the requirements of Part 232 since
this rule went into effect in 2003. Estimates of the costs by number of affected source are
available in the table below.
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Table 4. Impacts of New York State Part 232 Requirements Along with the Co-residential
Phase-Out Area Source Requirements
Dry Cleaner
Number of Affected
Total Annualized Costs
Total Annualized
Machine Type
Facilities/Firms
(2003$)
Cost per Facility
Transfer*
2
N/A
N/A
Vented (no
1
$10,415
$10,415
sprinkler system)



Vented (with a
1
$8,768
$8,768
sprinkler system)



RC (with no
40
312,920
7,823
sprinker system)



RC (with a sprinker
39
240,864
6,176
system)



RC + CA (with no
80
460,240
5,753
sprinkler system)



RC + CA (with a
79
324,374
4,106
sprinkler system)



Total:
242
$1,357,581
N/A
* Transfer machines will be banned for all area sources, including co-residential ones, by another
requirement in the rule.
To estimate the economic impacts of this option along with the phase-out requirement 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 with no sprinkler system owning vented machines: 10,415/302,900 = 3.4 percent
cost to sales
Small firms with a sprinkler system owning vented machines with a sprinkler system:
8,768/302,900 = 2.9 percent cost to sales
Small firms with no sprinkler system owning machines requiring RC : 7,823/302,900 =
2.6 percent cost to sales
Small firms with a sprinkler system owning machines requiring RC: 6,176/302,900 = 2.0 percent
cost to sales
Small firms with no sprinkler system owning machines requiring RC + CA: 5,753/302,900 = 1.9
percent cost to sales
Small firms with a sprinkler system owning machines requiring RC + CA: 4,106/302,900 = 1.4
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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 1.4 to 3.4 percent of sales. As seen from the
estimates above, 1 firm has compliance costs of more than 3 percent of sales, 81 firms have
compliance costs of more than 2 percent of sales, and all 240 firms affected by this option have
compliance costs of more than 1 percent of sales. The average economic impact for these
affected small businesses is compliance costs of (1,357,581/240)/302,900 = 1.9 percent of sales.
Based on these impacts relative to the whole dry cleaning source category, the Agency believes a
S1SNOSE would be likely if we chose this requirement as part of our final rule.
Conclusions of Report
The Agency has concluded that there is not a significant impact to a substantial number of
small firms (or S1SNOSE) associated with this rule. This conclusion is based on a small entity
analysis for firms across the entire dry cleaning source category (major and all area source
owning firms). For major sources, with each firm expected to experience cost savings annually,
there are no negative economic impacts expected to small firms under this option. Under the rule
provision for all existing area sources that are not co-residential, 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)/27,800)) =
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 requirements for co-residential area sources, the Agency has made a no
S1SNOSE determination for this 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. Found at
http://www.baaqmd.uov/pln/ruledev/reuulatory public hearinus.htm.
California Air Resources Board. California Dry Cleaning Industry Technical Assistance Report.
February 2006. Found at http://www.arb.ca.uov/toxics/drvclean/finaldrycleantechreport.pdf.
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.
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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 (N1PA). Data found at
http://research.stlouisfed.on>/fred2/data/GDPDEF.txt.
U.S. Small Business Administration. 2004. Firm Size Data: Statistics of U.S. Businesses and
Nonemployer Statistics, http://www.sba.uov/advo/stats/data. html. Last updated June 7th,
2004.
Addendum - Comparison of 2002 Dry Cleaning Revenue Data from Census with 1997 Data
In this addendum, we compare the average firm revenue data for the dry cleaning industry
defined as NA1CS 821320 from the 2002 Economic Census with the average firm revenue data
from the 1997 Economic Census that is used in this report. We conclude that the dry cleaning
small business impact estimates will be less if firm revenue data from the 2002 Economic Census
is used in place of revenues based on the 1997 Economic Census.
Table A-l: Comparison of 2002 Dry Cleaning Revenue Data from Census with 1997 Data
Variable
Unadjusted
Adjusted to 2003$
To Match Cost Year
Difference Between
Adjusted Average
Revenue Estimates
2002 Average
Revenue Per Dry
Cleaning Firm from
Census
$328,000
333,346
30,446(10%)
1997 Average
Revenue Per Dry
Cleaning Firm from
Census
278,000
302,900

Notes: The dry cleaning industry is defined as firms in NA1CS 812320 (Dry Cleaning Plants,
except Rug Cleaning).
Average revenue for dry cleaning firms is taken from the 2002 and 1997 Economic
Censuses, respectively. The $302,900 average firm revenue estimate is the value used in the dry
cleaning economic impact analysis. Given that we would use $333,346 as our revenue estimate
using 2002 Economic Census data, our firm revenue basis for our analysis will now be 10%
higher. Therefore, the economic impacts should be 10% lower using the newer data.
We use average firm revenue in the small business analysis since this is the only firm
revenue data that the Census reports; the Census does not report median revenue for firms for this
NA1CS code. Median revenue is typically what we use in small business analyses to report firm-
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level impacts.
While we do not have median firm revenue data, it is instructive to note that the average
revenue for dry cleaning firms with 20 employees or less in the 1997 Economic Census was
$178,000; the average firm revenue for dry cleaning firms with 20 employees or less from the
2002 Econ. Census was $242,000 (an increase of 36%). More than 90% of firms in this industry
are in this employee class according to both Economic Censuses.
We adjust the revenue values to 2003 dollars for that is the year compliance costs are
reported in. We adjust the revenues using the Gross Domestic Product (GDP) Deflator price
index. The adjustment from 2002 to 2003 is 1.0163, and the adjustment from 1997 to 2003 is
1.09.
We did not use the 2002 Economic Census average firm revenue for the entire dry
cleaning industry in the body of this report because this data was not available until early this
year.
Table A-2 provides the average annual revenue in 2002 for this dry cleaning NA1CS code
as prepared by the Census Bureau.
Table A-2. Average Annual Revenue for Drycleaning and Laundry Services (except coin-
operated): 2002
Average Annual
NAICS	Firms	Sales	Revenue
Code	Employment Size of Firm	(number) ($1,000)	($1,000)
812320 Drycleaning and laundry services
(except coin-operated)
All firms
23.656
$7,761,840
$328
Finns operated for the entire year
19.293
$7,266,878
$377
Fewer than 20 employees
17.384
$4,210,107
$242
20 to 99 employees
1.796
$2,141,963
$1,193
100 to 499 employees
107
$714,662
$6,679
500 employees or more
6
$200,146
$33,358
Finns not operated for the entire year
4.363
$494,962
$1 13
Source: U.S. Census Bureau. 2005. "Establishment and Firm Si/c: 2002 " 2002 Economic Census Other Services
(Except Public Administration) Subject Series: EC02-81SS-SZ. Washington. DC: Census Bureau. Table 5.
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United States	Office of Air Quality Planning and	Publication No. EPA
Environmental Protection	Standards	452/R-06-005
Agency	Health and Environmental Impacts	July 2006
Division
Research Triangle Park, NC
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