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Regulatory Impact Analysis for the Proposed
National Emission Standards for Hazardous Air
Pollutants: Ethylene Oxide Commercial
Sterilization and Fumigation Operations

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EPA-452/R-23-007
March 2023

Regulatory Impact Analysis for the Proposed National Emission Standards for Hazardous Air
Pollutants: Ethylene Oxide Commercial Sterilization and Fumigation Operations

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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CONTACT INFORMATION

This document was prepared by staff from the Office of Air and Radiation at the U.S.
Environmental Protection Agency. Questions related to this document should be addressed to the
Air Economics Group in the Office of Air Quality Planning and Standards, Research Triangle
Park, North Carolina 27711 (email: OAQPSeconomics@epa.gov).

ACKNOWLEDGEMENTS

We acknowledge the contributions of staff from the EPA's National Center for Environmental
Economics in the Office of Policy in preparing this analysis. We also acknowledge the
contributions of staff from RTI International in preparing the compliance costs for the regulatory
options analyzed in this document.

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TABLE OF CONTENTS

Table of Contents	v

List of Tables	vii

List of Figures	viii

1	Executive Summary	1-1

1.1	Background	1-1

1.2	Economic Basis for this Rulemaking	1-2

1.3	Legal Basis for this Rulemaking	1-2

1.4	Regulatory History and Recent Developments	1-4

1.5	Regulatory Options	1-6

1.5.1	Executive Order Requirements for Regulatory Impact Analysis	1-6

1.5.2	Process for Developing Proposed Rule	1-7

1.5.3	Regulatory Alternatives Analyzed in this RIA	1-9

1.6	Results	1-9

1.6.1	Cost and Emissions Impacts	1-10

1.6.2	Risk, Benefits, and Environmental Justice	1-11

1.6.3	Impacts on Small Entities	1-13

1.6.4	Economic Impacts	1-13

1.6.5	Summary of Results	1-14

1.7	Organization of this RIA	1-15

2	Industry Profile	2-1

2.1	Introduction	2-1

2.2	Ethylene Oxide Sterilization Background	2-1

2.3	Overview of Sterilization Process	2-4

2.4	Other Regulatory Background	2-6

2.4.1 Capacity Constraints	2-8

2.5	Overview of Medical Device Industry	2-9

2.5.1	Market Structure	2-9

2.5.2	Excise Tax Case Study	2-10

3	Engineering Cost Analysis	3-1

3.1	Introduction	3-1

3.2	Affected Facilities	3-1

3.3	Emissions Points	3-1

3.4	Baseline	3-2

3.5	Proposed Requirements	3-3

3.6	Engineering Costs	3-6

3.6.1 Summary Cost Tables	3-8

3.7	Emissions Reductions	3-13

3.8	Characterization of Uncertainty	3-13

4	Summary of Benefits and Environmental Justice Analysis	4-1

4.1	Introduction	4-1

4.2	Health Effects from Exposure to Ethylene Oxide	4-2

4.3	Air Toxics Screening Assessment	4-2

4.4	Risk Analysis	4-3

4.4.1 Limitations	4-5

4.5	Environmental Justice Analysis	4-5

4.5.1 Background	4-6

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4.5.2	Methods	4-6

4.5.3	Results	4-8

4.5.3.1	Baseline	4-8

4.5.3.2	Post-Control	4-12

4.5.4	Limitations	4-15

5	Economic Impacts	5-1

5.1	Introduction	5-1

5.2	Initial Regulatory Flexibility Analysis	5-1

5.2.1	Regulatory Flexibility Act Background	5-1

5.2.2	Reasons Why Action is Being Considered	5-2

5.2.3	Statement of Objectives and Legal Basis for Proposed Rule	5-2

5.2.4	Description and Estimate of Affected Small Entities	5-3

5.2.5	Compliance Cost Impact Estimates	5-8

5.2.6	Caveats and Limitations	5-13

5.2.7	Reporting, Recordkeeping, and Other Compliance Requirements	5-13

5.2.8	Related Federal Rules	5-14

5.2.9	Regulatory Flexibility Alternatives	5-15

5.3	Market Impacts	5-22

5.3.1	Supply Response to Regulation	5-23

5.3.2	Demand Response to Regulation	5-25

5.3.3	Illustrative Example	5-26

5.4	Employment Impacts	5-28

6	Net Benefits	6-1

6.1 Uncertainties	6-1

7	References	7-1

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LIST OF TABLES

Table 1-1. Estimated Costs and Emissions Reductions from 2023 to 2042 (Millions 2021$a)	1-11

Table 1-2. Summary of Benefits, Costs and Net Benefits for the Proposed Regulatory Options from 2023 to 2042
(Million 202 l$a)	1-15

Table 3-1. Baseline Subpart O Requirements	3-3

Table 3-2. Baseline Annual HAP Emissions from Subpart O Facilities	3-3

Table 3-3. Proposed Standards (Option 2)	3-5

Table 3-4. Engineering Costs and Number of Facilities Affected by Emissions Point or Cost Component across
Regulatory Options (millions of 2021$)	3-8

Table 3-5. Engineering Cost Summary (millions of 2021$)	3-9

Table 3-6. Option 1 Cost Impacts (millions of 2021$)	3-11

Table 3-7. Option 2 Cost Impacts (millions of 2021$) (Proposed)	3-12

Table 3-8. Option 3 Cost Impacts (millions of 2021$)	3-13

Table 4-1. Inhalation Cancer Risks for EtO Sterilization Facilities Under the Baseline and Proposed Option 2 4-4
Table 4-2. Baseline Demographic Summary: Proximity and Cancer Risk Greater than or Equal to 1-in-l million for
Populations Living Within 10 km of Facilities	4-9

Table 4-3. Baseline Demographic Summary: Proximity and Cancer Risk Greater than or Equal to 50-in-l million for
Populations Living Within 10 km of Facilities	4-10

Table 4-4. Baseline Demographic Summary: Proximity and Cancer Risk Greater than 100-in-l million for
Populations Living Within 10 km of Facilities	4-10

Table 4-5. Post-Control Demographic Summary: Cancer Risk Greater than or Equal to 1-in-l Million for
Populations Living Within 10 km of Facilities	4-12

Table 4-6. Post-Control Demographic Summary: Cancer Risk Greater than or Equal to 50-in-l Million for
Populations Living Within 10 km of Facilities	4-13

Table 4-7. Post-Control Demographic Summary: Cancer Risk Greater than 100-in-l Million for Populations Living
Within 10 km of Facilities	4-13

Table 5-1. Mean Option 2 Costs and Sales (2021$) by Entity Size	5-5

Table 5-2. Affected NAICS Codes and SBA Small Entity Size Standards	5-6

Table 5-3. Affected Parent Companies	5-6

Table 5-4. Summary of Option 1 Costs per Entity and Cost-to-Sales Ratios by Entity Size	5-9

Table 5-5. Summary of Option 2 Costs per Entity and Cost-to-Sales Ratios by Entity Size	5-9

Table 5-6. Summary of Option 3 Costs per Entity and Cost-to-Sales Ratios by Entity Size	5-10

Table 5-7. Cost-to-Sales Ratio Summary for Options 1, 2, and 3	5-11

Table 5-8. Number and Percent of Entities at Various Cost-to-Sales Levels	5-12

Table 5-9. Number and Percent of Facilities Affected at Various Cost-to-Sales Levels	5-12

Table 6-1. Summary of Benefits, Costs and Net Benefits for the Proposed Regulatory Options from 2023 to 2042
(Million 2021$ a)	6-1

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LIST OF FIGURES

Figure 5-1. Illustrative Example of Potential Impacts with Inelastic Supply and Demand

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1 EXECUTIVE SUMMARY

1.1 Background

The U.S. Environmental Protection Agency (EPA) is proposing amendments to the
National Emission Standards for Hazardous Air Pollutants (NESHAP) for Ethylene Oxide
Commercial Sterilization and Fumigation Operations (40 CFR Part 63, Subpart O). Ethylene
oxide (EtO) is one of 188 hazardous air pollutants regulated by the EPA. This document presents
the regulatory impact analysis (RIA) for this proposed rule.

Commercial sterilization and fumigation operations, or "commercial sterilizers", that are
impacted by this proposed rule use EtO, a flammable and colorless gas, to remove or reduce the
presence of bacteria, fungi, and viruses on a variety of products to decrease risks of infection to
users of these products. Affected facilities in this source category (subpart O) mostly sterilize
medical devices and medical equipment, since many of these products must meet high safety
standards before they can be made available to healthcare providers, patients, and other
consumers. Commercial sterilizers also use EtO to sterilize some types of food products such as
spices and other consumer products like cosmetics. Sterilization with EtO is primarily conducted
by facilities that specialize in sterilization (i.e., 'contract' sterilizers) rather than the
manufacturers of the products themselves, though some manufacturers perform sterilization with
EtO in-house.

This rule proposes amendments to the subpart O NESHAP requirements. The EPA is
proposing to require existing and new sources in the category to reduce emissions of EtO, a
hazardous air pollutant (HAP) that can cause adverse human health impacts on exposed
individuals, such as cancer. The EPA is proposing decisions concerning the risk and technology
review (RTR), including amendments pursuant to the technology review for certain point sources
and amendments pursuant to the risk review to specifically address EtO emissions from point
source and room air emissions from certain groups of facilities. The EPA is also proposing
amendments to correct and clarify regulatory provisions related to emissions during periods of
startup, shutdown, and malfunction (SSM), including removing general exemptions for periods
of SSM, adding work practice standards for periods of SSM where appropriate, and clarifying
regulatory provisions for certain vent control bypasses. Lastly, the EPA is proposing to revise

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monitoring and performance testing requirements and to add provisions for electronic reporting
of performance test results and reports, performance evaluation reports, and compliance reports.

1.2	Economic Basis for this Rulemaking

Regulation can be used to address market failures, which otherwise lead to a suboptimal
allocation of resources within the free market. Many environmental problems are classic
examples of "negative externalities", which arise when private entities do not internalize the full
opportunity cost of their production, and some of this opportunity cost is borne by members of
society who are neither consumers nor producers of the goods produced {i.e., they are
"external"). For example, the smoke from a factory may adversely affect the health of nearby
residents, soil quality, and visibility. Public goods such as air quality are valued by individuals
but suffer from a lack of property rights, so the value of good air quality tends to be unpriced in
the markets that generate air pollution. In such cases, markets fail to allocate resources efficiently
and regulatory intervention is needed to address the problem.

While recognizing that the socially optimal level of pollution is often not zero, EtO
emissions impose costs on society {e.g., cancer risks) that may not be reflected in the equilibrium
market prices for sterilization services. If emissions from sterilizers increase risks to human
health, some social costs will be borne not by the firm and its customers but rather imposed on
communities near the sterilization site and other individuals exposed to their EtO emissions.
Consequently, absent a regulation limiting EtO emissions and causing firms to internalize the
external costs of their operations, emissions will exceed the socially optimal level.

Aside from externalities, other major forms of market failure include market power and
inadequate or asymmetric information. Correcting market failures is one reason for regulation,
but it is not the only reason. Other potential justifications include improving the function of
government, correcting distributional inequity, or securing privacy or personal freedom.

1.3	Legal Basis for this Rulemaking

Section 112 of the Clean Air Act (CAA), which Congress modified as part of the 1990
CAA Amendments, provides the legal authority for this proposed rule. Section 112 of the CAA
establishes a two-stage process to develop standards for emissions of HAP from new and
existing stationary sources in various industries or sectors of the economy {i.e., source

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categories). Generally, the first stage involves establishing technology-based standards and the
second stage involves assessing whether additional standards are needed to address any
remaining risk associated with HAP emissions from the source category. This second stage is
referred to as the "residual risk review." In addition to the residual risk review, the CAA requires
the EPA to review standards set under CAA section 112 every 8 years and revise them as
necessary, taking into account any "developments in practices, processes, or control
technologies." This review is commonly referred to as the "technology review".

In the first stage of the CAA section 112 standard setting process, the EPA promulgates
technology-based standards under CAA section 112(d) for categories of sources identified as
emitting one or more of the HAP listed in CAA section 112(b). Sources of HAP emissions are
either major sources or area sources depending on the amount of HAP the source has the
potential to emit.1

Major sources are required to meet the levels of reduction achieved in practice by the
best-performing similar sources. CAA section 112(d)(2) states that the technology-based
NESHAP must reflect the maximum degree of HAP emissions reduction achievable after
considering cost, energy requirements, and non-air quality health and environmental impacts.
These standards are commonly referred to as maximum achievable control technology (MACT)
standards. MACT standards are based on emissions levels that are already being achieved by the
best-controlled and lowest-emitting existing sources in a source category or subcategory. CAA
section 112(d)(3) establishes a minimum stringency level for MACT standards, known as the
MACT "floor." For area sources, CAA section 112(d)(5) gives the EPA discretion to set
standards based on generally available control technologies or management practices (GACT) in
lieu of MACT standards. In certain instances, CAA section 112(h) states that the EPA may set
work practice standards in lieu of numerical emission standards.

The EPA must also consider control options that are more stringent than the MACT floor.
Standards more stringent than the floor are commonly referred to as beyond-the-floor (BTF)
standards. CAA section 112(d)(2) requires the EPA to determine whether the more stringent

1 "Major sources" are those that emit or have the potential to emit 10 tons per year (tpy) or more of a single HAP or
25 tpy or more of any combination of HAP. All other sources are "area sources."

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standards are achievable after considering the cost of achieving such standards, any non-air-
quality health and environmental impacts, and the energy requirements of additional control.

For major sources and any area source categories subject to MACT standards, the second
stage in the standard-setting process focuses on identifying and addressing any remaining (i.e.,
"residual") risk pursuant to CAA section 112(f) and concurrently conducting a technology
review pursuant to CAA section 112(d)(6). The EPA is required under CAA section 112(f)(2) to
evaluate residual risk within eight years after promulgating a NESHAP to determine whether
risks are acceptable and whether additional standards beyond the MACT standards are needed to
provide an ample margin of safety to protect public health or prevent adverse environmental
effects.2 For area sources subject to GACT standards, there is no requirement to address residual
risk, but technology reviews are required. Technology reviews assess developments in practices,
processes, or control technologies and revise the standards as necessary without regard to risk,
considering factors like cost and cost-effectiveness. The EPA is required to conduct a technology
review every eight years after a NESHAP is promulgated. Thus, the first review after a NESHAP
is promulgated is a residual risk and technology review (RTR) and the subsequent reviews are
just technology reviews.

The EPA is also required to address regulatory gaps (i.e., "gap-filling") when conducting
NESHAP reviews, meaning it must establish missing standards for listed HAP that are known to
be emitted from the source category (Louisiana Environmental Action Network (LEAN) v. EPA,
955 F.3d 1088 (D.C. Cir. 2020)). Any new MACT standards related to gap-filling must be
established under CAA sections 112(d)(2) and (d)(3), or, in specific circumstances, under CAA
sections 112(d)(4) or (h).

1.4 Regulatory History and Recent Developments

In the first step of the EtO sterilization process, products are placed in a chamber and
exposed to EtO gas at predetermined levels of temperature, humidity, pressure, and
concentration of EtO. Following the dwell period, EtO is evacuated from the chamber and the

2 If risks are unacceptable, the EPA must determine the emissions standards necessary to reduce risk to an

acceptable level without considering costs. In the second step of the approach, the EPA considers whether the
emissions standards provide an ample margin of safety to protect public health in consideration of all health
information as well as other relevant factors, including costs and economic impacts, technological feasibility, and
other factors relevant to each particular decision.

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sterilized items are then aerated to reduce the residual EtO on them. After aeration, the sterilized
items are typically moved to a shipping/warehouse area for storage until they are distributed. The
sterilization process and the equipment and emission control configuration vary across facilities.
The most common configuration includes a sterilization chamber, a separate aeration room, and
a chamber exhaust vent. Some facilities carry out sterilization and aeration in the same chamber.

The NESHAP for Ethylene Oxide Commercial Sterilization and Fumigation Operations
(40 CFR part 63 subpart O) was finalized in December 1994. The rule established MACT and
GACT standards for EtO emissions originating from sterilization chamber vents (SCV), chamber
exhaust vents3 (CEV), and aeration room vents (ARV),4 as well as requirements for compliance
and performance testing.

The original 1994 standards were stratified based on facility wide EtO usage levels (i.e.,
less than 1 ton per year, 1 to 10 tons per year, and 10 or greater tons per year). The NESHAP
established MACT standards for SCVs, CEVs, and ARVs at facilities that use 10 or more tpy of
EtO. For facilities using at least 1 tpy but less than 10 tpy of EtO, GACT standards were
established for SCVs and CEVs. Facilities using less than 1 tpy of EtO had reporting and
recordkeeping requirements but were not subject to any numerical emissions limits or work
practice standards. In 2001, the EPA suspended certain compliance deadlines and ultimately
removed the standards for CEVs due to safety concerns. The EPA completed a residual risk and
technology review for the NESHAP in 2006 and concluded, at that time, that no revisions to the
standards were necessary.

As explained, the EPA periodically reviews and updates NESHAPs to keep pace with
technological change in regulated sectors and ensure that risks are acceptable. Since the RTR for
this source category was already conducted in 2006, the EPA is only required to base the
revisions in this proposal on a technology review. However, the context for this proposal is
somewhat unique in that the EPA updated the Integrated Risk Information System (IRIS) value

3	The CEV evacuates EtO-laden air from the sterilization chamber when the chamber door is opened for product

unloading to reduce employee exposure to EtO.

4	Multiple control technologies were used by EtO sterilizers at the time the NESHAP was developed. Control

technologies for SCVs included: hydrolysis/Glygen absorber unit; packed bed scrubber (acid-water scrubber);
thermal oxidizer/flare; catalytic oxidizer; condenser/reclaimer; and a combination packed bed scrubber and gas-
solid reactor (dry bed reactor) system. Control technologies for CEVs included: packed bed scrubber; catalytic
oxidizer; gas-solid reactor; and a combination packed bed scrubber and gas-solid reactor. Control technologies
for ARVs included: acid-water scrubber, catalytic oxidizer, and gas-solid reactor.

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associated with EtO after the 2006 RTR.5 All else equal, the unit risk estimate for EtO is nearly
60 times higher than it was prior to the 2016 IRIS update. An update in the risk value of this
magnitude is not typical for regulated HAPs. Due to these circumstances, the EPA aims not only
to carry out the more routine aspects of a CAA section 112 technology review, but to reflect the
substantial development in the epidemiological evidence on EtO's health effects by considering
residual risk again under CAA section 112(f)(2).

At the same time, the EPA recognizes that EtO emissions are not the only public health
issue to consider in this proposed rulemaking due to the important role EtO plays in the provision
of safe and sterile medical devices. According to the U.S. Food and Drug Administration (FDA),
more than 20 billion medical devices used in the U.S. every year are sterilized with EtO,
accounting for approximately 50 percent of medical devices that require sterilization. The
industry profile in chapter 2 discusses the role of EtO in providing a significant amount of
healthcare products to the public and why it is often the only sterilization method than can be
used for a wide variety of common medical devices.

1.5 Regulatory Options

1.5.1 Executive Order Requirements for Regulatory Impact Analysis

Several statutes and executive orders (EO) apply analytical requirements to federal
rulemakings. This RIA presents several of the analyses required by these statutes and EOs, such
as EO 12866 and the Regulatory Flexibility Act (RFA). Below is a summary of the requirements
of EO 12866 and EO 13563 and the guidelines provided in the Office of Management and
Budget (OMB) Circular A-4.6

This proposed rule is an economically significant regulatory action as defined by EO
12866. In accordance with EO 12866 and EO 13563 and the guidelines of OMB Circular A-4,
this RIA analyzes the costs of complying with the requirements in this proposed rule for
regulated facilities. The EPA did not monetize the benefits associated with the proposed
requirements, but they are characterized qualitatively in chapter 4. OMB Circular A-4 requires
analysis of one potential regulatory control alternative more stringent than the proposed rule and

5	Additional information on the IRIS program is available here: https://www.epa.gov/iris.

6	Office of Management and Budget. (2003). Circular A-4: Regulatory Analysis. Found at

http://www.whitehouse.gov/omb/circulars/a004/a4.html.

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one less stringent than the proposed rule. This RIA evaluates the costs and certain other impacts
of a more stringent alternative and a less stringent alternative to the selected option in this
proposal.

1.5.2 Process for Developing Proposed Rule

The proposed changes to the subpart O NESHAP are based on the results of the risk
review and technology review, which identified the need to set standards for currently
unregulated sources of HAP in the sector (i.e., gap-filling), and the need for other minor updates
to improve the consistency of the rule with other EPA actions and increase the clarity of the rule.
The EPA is proposing numeric emission limits, operating limits, and management practices to
fill regulatory gaps under CAA sections 112(d)(2), (d)(3), and (d)(5) for EtO emissions from
certain emission sources and also is proposing standards under CAA section 112(f)(2) for certain
emission sources in order to ensure that the standards provide an ample margin of safety to
protect public health. The preamble contains a more thorough discussion of the gap-filling
analysis, risk review, and technology review conducted for this proposed rule, including the
range of technologies, practices, and other requirements considered and the EPA's reasoning for
ultimately choosing the standards being proposed.

The EPA first determined standards to propose for previously unregulated emission
sources under CAA section 112(d)(2), (d)(3), and (d)(5). The EPA is proposing to establish
standards for currently unregulated "room air emissions" and several point sources. Room air
emissions, or "fugitive emissions", are released from equipment used to inject EtO into
sterilization chambers and remove EtO from chambers, store EtO, and from air pollution control
devices. Room air emissions also include the residual EtO that comes off of sterilized products
within the facility both before and after the aeration process. The EPA is also proposing to
establish standards for point sources at facility usage levels that are currently unregulated,
including SCVs, ARVs, and CEVs at facilities where EtO usage is less than 1 tpy; ARVs and
CEVs at facilities where EtO usage is at least 1 tpy but less than 10 tpy; and CEVs at facilities
where EtO usage is at least 10 tpy.

Next, taking into account the risk reductions estimated to result from the standards being
proposed for previously unregulated sources described above, the EPA conducted a risk review
under CAA 112(f)(2). To address unacceptable remaining risk and ensure an ample margin of

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safety, the EPA is proposing health-based standards for SCVs, ARVs, and certain room area
emissions. The stringency of the proposed health-based standards varies based on a facility's
annual EtO usage. The usage groupings in the proposed standards are intended to address
emissions from facilities identified as high risk while mitigating the compliance burden for lower
risk facilities. The EPA is proposing health-based emission standards for SCVs at facilities
where EtO use is at least 40 tpy, SCVs at facilities where EtO use is at least 10 tpy but less than
40 tpy, SCVs at facilities where EtO use is at least 1 tpy but less than 10, and Group 2 room air
emissions at area source facilities where EtO use is at least 20 tpy.7 While the EPA was not
required to invoke CAA 112(f)(2) in this proposed review of the subpart O NESHAP, its use was
intended to target risk more efficiently than a set of standards based only on technology and gap-
filling, thus balancing risk and cost considerations.

The EPA then completed a technology review for the sector, taking into account the
requirements being proposed to fill regulatory gaps and address risk, pursuant to CAA section
112(d)(6). The goal of a technology review is to identify cost-effective developments in
practices, process, or controls of HAP for a source category. The technology review identified
improvements in control technology and emissions performance for SCVs at facilities where EtO
use is at least 10 tpy, SCVs at facilities where EtO use is at least 1 tpy but less than 10 tpy, and
ARVs at facilities where EtO use is at least 10 tpy. As part of this review, the EPA identified
more stringent emission standards that could be applied to these ARVs with minimal additional
economic impact. Therefore, additional technology-based standards are being proposed for
ARVs at facilities where EtO use is at least 10 tpy. The EPA is also co-proposing the same
requirements under (d)(6) that are being proposed under CAA 112(f)(2) for SCVs at facilities
where EtO use is at least 10 tpy and SCVs at facilities where EtO use at least 1 tpy but less than
10 tpy.

The EPA is also proposing revisions related to performance testing; monitoring,
reporting, and recordkeeping requirements; requirements during periods of startup, shutdown,
and malfunction (SSM); and other minor technical improvements. The EPA is proposing to

7 The EPA is proposing standards for two types of room air emissions. Group 1 and Group 2. Group 1 room air
emissions come from indoor EtO storage, EtO dispensing, vacuum pump operations, and pre-aeration handling
of sterilized material. Group 2 room air emissions are released during post-aeration handling of sterilized
material.

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require monitoring either with an EtO continuous emissions monitoring system (CEMS) or initial
and annual performance testing with continuous parameter monitoring. The proposed standards
and requirements are described in greater detail in the preamble.

1.5.3 Regulatory Alternatives Analyzed in this RIA

This RIA assesses impacts of the proposed standards and two regulatory alternatives. The
previous subsection describes all the standards and changes being proposed and is known as
option 2 in this analysis. Option 1 is the least stringent option analyzed and option 3 is the most
stringent option. Option 3 would require all affected facilities to comply with the most stringent
standards that are considered in the preamble to this proposal for all emissions points (SCVs,
ARVs, CEVs, and room air emissions), regardless of annual EtO usage. The health-based
standards and the subcategorization of sources based on EtO usage under the proposed option 2
reduce the compliance burden for many facilities because they would not be subject to the more
stringent standards applied under option 3. However, under option 2, a subset of facilities would
be subject to additional standards and would incur higher compliance costs than they would
under option 3. Option 2 reduces the collective compliance burden for the source category as a
whole relative to option 3 even though some facilities would face stricter and more costly
requirements. Under the least stringent option 1, almost all facilities in the source category would
be subject to GACT standards. The three alternatives are summarized below.

Option 1: Apply GACT standards to all currently unregulated emissions at area source
facilities. The current standards for regulated point sources would not be updated.

Option 2 (proposed): Apply GACT standards to all currently unregulated emissions at
area source facilities. Then, based on results of the post-control risk assessment, revise
established and newly proposed standards pursuant to CAA section 112(f)(2), considering
economic feasibility after risk has been determined to be acceptable.

Option 3: Revise established emission limitations and propose new limitations for all
currently unregulated emissions to the most stringent levels that are considered in the preamble.

1.6 Results

The impacts of regulatory actions are evaluated relative to a baseline that represents the
world without the regulatory action. The cost impacts of this proposed rule were estimated over a

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20-year timeframe from 2023 to 2042. The EPA chose a 20-year analytical time horizon to be
consistent with the equipment lifetimes of some of the capital components that would be required
to comply with the proposed rule (lifetimes are not consistent across all capital equipment). The
20-year timeframe was also chosen to capture lasting regulatory impacts while avoiding
uncertainties that would be introduced if a longer timeframe (e.g., 30 years) were used.
Throughout this document, the EPA focuses the analysis on the proposed requirements that result
in quantifiable compliance cost or emissions changes compared to the baseline. While this RIA
contains some qualitative discussion of the human health risks associated with exposure to EtO
emissions and a summary of the quantitative risk analysis conducted for this proposed rule, the
EPA was not able to monetize the benefits associated with the emissions reductions estimated to
result from this proposed rule.

The EPA identified 86 EtO sterilization facilities currently operating in the U.S., all of
which will be impacted by this proposed rule and incur costs. The EPA also potentially
identified, based on permits and responses to the December 2019 questionnaire and September
2021 ICR, 11 research facilities that conduct EtO sterilization, as defined under CAA 112(c)(7),
which are not part of the source category. There are two commercial facilities that have
announced plans to open and will be affected by the proposed rule, which brings the total
number of facilities incurring costs in this RIA to 88.

1.6.1 Cost and Emissions Impacts

Table 1-1 contains a summary of the estimated cost impacts and EtO emissions
reductions for the three options analyzed for this proposed rule. The EPA is proposing option 2,
while option 1 and option 3 represent the less and more stringent options analyzed in this RIA,
respectively. The present value (PV) of the estimated compliance costs from 2023 to 2042 for the
proposed option 2 is $640 million in 2021 dollars, discounted at a 7 percent rate. The equivalent
annualized value (EAV)8 of the costs for option 2 is $74 million, using a 7 percent discount rate.
Using a 3 percent discount rate, the PV and EAV of the cost impacts for option 2 are estimated to
be $784 million and $53 million, respectively.

8 The EAV represents a flow of constant annual values that, had they occurred in each year from 2023 to 2042,
would yield a sum equivalent to the present value.

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Table 1-1. Estimated Costs and Emissions Reductions from 2023 to 2042 (Millions 2021$a)

Option 1	Option 2 (proposed) Option 3

Capital Costs

$146

$220

$308

Total Annualized Costsb

$66

$68

$76

Discounted Present Value of Costs (3%)

$635

$784

$897

Equivalent Annualized Value (3%)

$43

$53

$60

Discounted Present Value of Costs (7%)

$513

$640

$746

Equivalent Annualized Value (7%)

$60

$74

$85

EtO Emissions Reductions (tpy)

15

19

20

a When necessary, dollar figures in this RIA have been converted to 2021$ using the annual GDP Implicit Price
Deflator from the U.S. Bureau of Economic Analysis (BEA) NIPA Table 1.1.9, found at
https://fred.stlouisfed.org/release/tables?rid=53&eid=41158.

b The total annualized costs are the sum of the annualized capital costs and other annual costs. The capital costs were
annualized over the lifetime of the equipment at a 7.75 percent interest rate.

For option 1, the PV and EAV of the estimated costs are $513 million and $60 million,
respectively, using a 7 percent discount rate. At a 3 percent discount rate, the PV and EAV of the
costs for option 1 are estimated to be $635 million and $43 million, respectively. For the more
stringent option 3, the PV and EAV of the estimated costs are $746 million and $85 million,
respectively, using a 7 percent discount rate. At a 3 percent discount rate, the PV and EAV of the
costs for option 3 are estimated to be $897 million and $60 million, respectively. For options 1,
2, and 3, the EPA estimated EtO emissions reductions of 15 tpy, 19 tpy, and 20 tpy, respectively.

1.6.2 Risk, Benefits, and Environmental Justice

This proposed rule is expected to reduce nationwide emissions of EtO from this source
category by 19 tons per year (tpy) under option 2. Option 1, the least stringent option, is
estimated to reduce EtO emissions from the source category by 15 tpy. The most stringent option
3 is estimated to reduce EtO emissions from the source category by 20 tpy. As mentioned, the
benefits associated with these emissions reductions are not monetized in this RIA. Nonetheless,
this RIA provides quantitative risk information.

The risk analysis conducted for this proposed rule focused on populations living within
10 km of the facilities with cancer risks greater than or equal to 1-in-l million, greater than or
equal to 50-in-l million, and greater than 100-in-l million. The analysis determined that under
the baseline, 78 facilities expose 5.3 million people to cancer risk greater than or equal to 1-in-l
million, 42 facilities expose 119,000 people to cancer risk greater than or equal to 50-in-l

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million, and 16 facilities expose 18,000 people to cancer risk greater than 100-in-l million. The
estimated incidence of cancer due to inhalation exposures from the source category is 0.9 excess
cancer cases per year under the baseline. When the proposed option 2 requirements are
implemented, an estimated 73 facilities would expose 1.1 million people to cancer risks greater
than or equal to 1-in-l million and 11 facilities would expose 1,368 people to cancer risks greater
than or equal to 50-in-l million. For the proposed option 2, the number of facilities with
estimated cancer risks greater than 100-in-l million falls to zero and the estimate of the
population exposed to cancer risks greater than 100-in-l million falls to zero people. The
estimated cancer incidence due to inhalation exposures is 0.1 excess cancer cases per year under
option 2, an 89 percent reduction compared to the baseline. Section 4.4 provides a brief
summary of the risk analysis methods and findings. See section II.F of the preamble for a
detailed description of the methods and section III.C for the risk analysis results.

The environmental justice analysis conducted for this proposed rule summarized the
demographics of populations living within 10 km of commercial sterilization facilities as well as
the demographics of populations living within 10 km of facilities with elevated cancer risks due
to emissions from sterilization facilities under the baseline and under the proposed option 2.
Under the baseline, the percentage of residents that are Hispanic or Latino is higher in census
blocks near EtO sterilizers compared to the nationwide Hispanic or Latino percentage of the
population. In areas characterized as having elevated cancer risk (i.e., >50-in-l million, >100-in-
1 million) due to emissions from sterilization facilities under the baseline, the percentage of
residents that are African American is high compared to the nationwide African American share
of the population. These findings indicate potential for environmental justice concerns under the
baseline.

Under the proposed option 2, the number of individuals exposed to elevated cancer risk
declines relative to the baseline for all demographics, including large reductions for African
American and Hispanic or Latino populations. Based on the estimated reductions in risk
exposure, the proposed rule is expected to significantly reduce the number of people in all
demographic groups exposed to risks greater than or equal to 1-in-l million, greater than or equal
to 50-in-l million, and greater than 100-in-l million relative to the baseline. However, the few
facilities with higher (though still considered acceptable) post-control risk are concentrated in
Puerto Rico, so a high share of the remaining individuals at higher risk (i.e., >50-in-l million)

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are Hispanic or Latino. While absolute risk declines significantly for Hispanic or Latino
individuals after implementing the proposed requirements, the distribution of the lower
remaining risk is more disproportionately concentrated among them compared to the baseline.

1.6.3	Impacts on Small Entities

Chapter 5 contains the Initial Regulatory Flexibility Analysis conducted for this proposed
rule. The small entity impact analysis identified potential for this proposed rule to have a
significant impact on a substantial number of small entities (SISNOSE). As such, the EPA did
not certify a 'no SISNOSE' determination for this proposal.

Out of the 88 facilities expected to incur costs to comply with the proposed requirements,
24 facilities, or about 27 percent of facilities, are owned by ultimate parent companies that are
classified as small entities based on the business size standards defined by the U.S. Small
Business Administration (SBA).9 There are 48 ultimate parent companies that own commercial
sterilization facilities affected by this proposal, as several parent companies own multiple
facilities. About 42 percent (20) of the 48 parent companies are small entities. There are 12 small
entities (60 percent of all affected small entities) with estimated cost-to-sales ratios of 3 percent
or greater under option 2.

1.6.4	Economic Impacts

The EPA was not able to model potential market impacts for this proposal. However,
section 5.3 qualitatively dicusses potential market impacts of this proposed rule, such as the
potential for sterilizers to raise prices of their services in response to regulation and how the
medical device supply chain may be impacted. EtO sterilization services are a critical input in the
provision of safe medical devices and there is uncertainty in how the proposal could potentially
affect the medical device supply chain.

This proposed rule has the potential to impose significant costs relative to sales for some
owners of affected facilities, particularly the owners that are small entities. Nonetheless, the
qualitative information gathered on the industry suggests that demand for EtO sterilization
services may be fairly inelastic, meaning demand may be insensitive to price changes and

9 U.S. Small Business Administration. (2022). Table of Small Business Size Standards. Found at
https://www.sba.gov/document/support-table-size-standards.

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potential price increases could have minimal impact on the equilibrium quantity of products
sterilized with EtO. Since demand for medical devices and healthcare services are generally
considered inelastic, demand for EtO sterilization services may also be inelastic given how
critical it is as an input for medical devices. Sterilization companies may be able to raise prices
and pass some of the regulatory costs associated with this proposal down the supply chain to
medical device manufacturers, hospitals, insurers, and end consumers. If able to pass on costs
through higher prices, affected companies could potentially continue to ensure stable supply of
medical devices while meeting the proposed regulatory requirements. If the costs of this
proposed rule are spread out among several sectors in the medical device supply chain, overall
market impacts could be minimal given the size of the medical device industry in the U.S.

Sterilization is generally a small input when considering the total costs of making and
providing medical devices and healthcare services. If sterilization providers are able pass on
regulatory costs by increasing the price of their services, effects on prices of devices and
healthcare may be limited because price changes for inputs that are small are less likely to have
large impacts on prices of end products (devices, healthcare services). While higher costs of
sterilization may not present significant problems for medical device manufacturers, limited
capacity in the EtO sterilization industry could still potentially disrupt the medical device supply
chain if there are not enough sterilization providers available to accommodate the amount of
devices that need to be sterilized with EtO. Capacity could be limited in the short run as firms
adjust operations to comply with the proposed requirements. If the capacity of the industry were
to potentially decline even temporarily due to the proposed rule, there could be increased risk of
shortages for some devices.

1.6.5 Summary of Results

Table 1-2 summarizes the costs, benefits, and net benefits of the three regulatory options
analyzed for this proposed rule.

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Table 1-2. Summary of Benefits, Costs and Net Benefits for the Proposed Regulatory
Options from 2023 to 2042 (Million 2021$a)	



Option 1

Option 2 (Proposed)

Option 3



3 Percent

7 Percent

3 Percent

7 Percent

3 Percent

7 Percent



PV EAV

PV EAV

PV EAV

PV EAV

PV EAV

PV EAV

Total
Monetized
Benefits'3

N/A

N/A

N/A

N/A

N/A

N/A

Total
Costs

$635 $43

$513 $60

$784 $53

$640 $74

$897 $60

$746 $85

Net
Benefits

N/A

N/A

N/A

N/A

N/A

N/A

Non-
monetized
Benefits

15 tpy of EtO
Health effects of reduced EtO
exposure

19 tpy of EtO
Health effects of reduced EtO
exposure

20 tpy of EtO
Health effects of reduced
EtO exposure

a When necessary, dollar figures in this RIA have been converted to 2021$ using the annual GDP Implicit Price
Deflator from the U.S. Bureau of Economic Analysis (BEA) NIPA Table 1.1.9, found at
https://fred.stlouisfed.org/release/tables?rid=53&eid=41158.

b While we expect that these avoided emissions will result in reductions in adverse human health effects, we have
determined that quantification of those benefits cannot be accomplished for this proposed rule. This is not to
imply that there are no benefits of the proposal; rather, it is a reflection of the difficulties in modeling the
health effects and monetizing the benefits of reducing HAP emissions from this source category with the data
currently available.

1.7 Organization of this RIA

The remainder of this document is organized as follows. Chapter 2 provides a profile of
the commercial EtO sterilization industry. Chapter 3 presents the engineering cost analysis.
Chapter 4 provides information on the health risks associated with EtO exposure and summaries
of the cancer risk analysis and environmental justice analysis conducted for this proposed rule.
Chapter 5 includes the small entity analysis and discusses economic impacts. Chapter 6
summarizes the net benefits and chapter 7 contains references.

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2 INDUSTRY PROFILE

2.1	Introduction

This chapter provides an overview of the use of ethylene oxide (EtO) in sterilization,
background on the commercial EtO sterilization industry, and the steps in the EtO sterilization
process. This section also provides information on the medical device industry. Although this
proposed rule will not affect medical device manufacturers directly, unless the manufacturer also
conducts sterilization using EtO, this industry profile would be incomplete without a
characterization of the medical device sector and its relationship with commercial sterilizers.
Sterilization is a key step in producing medical devices and medical device manufacturers are the
primary consumers of EtO sterilization services. Medical devices are required to be sterile before
they can be distributed in order to prevent disease transmission. The material in this chapter will
be used to inform the discussion of potential economic impacts of the regulatory requirements
being proposed for the EtO sterilization sector in section 5.3.

2.2	Ethylene Oxide Sterilization Background

Sterilization has been a key step in the medical device manufacturing process since the
discovery of the role of bacteria in disease and infection. Healthcare products, or medical
devices, are sterilized to reduce risks of infection from bacteria, fungi, and viruses. Terminal
sterilization, the process of sterilizing a product in its final packaging, is often an essential,
mandatory last step in the process of manufacturing healthcare products. Roughly 40 percent of
the more than 2 million medical devices listed in the Global Universal Device Identification
Database are sterilized before they reach end-users and patients (FDA 2019a).

Sterilization may be conducted 'in-house' by medical device manufacturers and hospitals
or contracted out to commercial sterilization facilities. Reliance on contract sterilizers has grown
significantly since the 1980s. A 2005 retrospective review of the Occupational Health and Safety
Administration's (OSHA) 1988 standards for occupational EtO exposure found that in-house
sterilization had become far less common since the OSHA standards were promulgated (OSHA
2005). Contract sterilizers currently handle most sterilized healthcare products on the market.

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This shift from in-house sterilization towards the use of contract sterilizers has been
attributed to their better overall efficacy, time savings, and cost advantages in complying with
regulations (GIPA 2017). Healthcare providers and manufacturers using an outside service can
reduce the number of workers exposed to EtO and thus reduce their liability as employers
(OSHA 2005). When a customer needs to use a variety of sterilization methods, using contract
sterilizers avoids the need to invest in multiple types of sterilization technologies (OSHA 2005).
Finally, many smaller medical technology companies are not familiar with the intricacies of the
various regulations that affect sterilization facilities.

EtO is a gas that has been used in sterilization since the 1930s and is currently used to
sterilize over 20 billion healthcare products per year in the U.S. (EOSA 2022). This represents
over 50 percent of healthcare products used annually in the U.S. (FDA 2022). EtO sterilization
grew rapidly in the U.S. and worldwide throughout the 20th century, particularly after the
Montreal Protocol's ban on chlorofluorocarbons (CFCs) in 1985. In countries that ratified the
Montreal Protocol, sterilization providers shifted from using CFCs toward EtO (OSHA 2005).
The 1980s and 1990s also saw a decline in the use of blends of EtO with either CO2 or
hydrochlorofluorocarbons (HCFCs) in favor of 100 percent pure EtO (GIPA 2017). Today,
hundreds of thousands of medical, pharmaceutical, hospital, and laboratory processes involve
equipment sterilized with EtO (EOSA 2022). Examples of key products that rely on EtO include
personal protective equipment, diagnostic testing kits, heart valves, pacemakers, surgical kits and
trays, stents, dialysis sets, gowns, drapes, ventilators, syringes, bandages, and catheters (FDA
2019a).

Most of the EtO consumed in the U.S. is used for purposes other than sterilization. The
majority of EtO is used as feedstock by the chemical industry or by manufacturers of products
such as adhesives, plastics, detergents, polyurethane foam, fumigants, and textiles (OSHA 2002).
EtO is commonly used to produce ethylene glycol, a chemical that is used to make antifreeze and
polyester (ATSDR 2022). One source estimates that less than one percent of the EtO used in the
U.S. is purposed for sterilization of healthcare products (EOSA 2022).

The primary customers of EtO sterilization businesses are pharmaceutical and
biotechnology companies, hospitals, medical and surgical clinics, academic and research
organizations, and food product manufacturers. In addition to medical and dental supplies, EtO is

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used to sterilize some spices and cosmetics. The American Spice Trade Association estimated
that 40 to 85 percent of spices produced in the U.S. each year are sterilized with EtO (ASTA
2009). Common spices like black pepper, oregano, and cinnamon are subject to natural
contamination from pathogens like Salmonella and E.coli. EtO is the industry's preferred
sterilant because it does not affect the color, texture, and flavor of spices (ASTA 2009). Spice
sterilization accounts for less than 10 percent of the EtO used for commercial sterilization
purposes in the U.S., with annual usage estimated at approximately 400 tons in the 2000s (ASTA
2009). Since most EtO sterilization is dedicated to medical devices, the remainder of this section
and the economic impacts section in chapter 5 focuses primarily on the role EtO plays in the
medical device supply chain.

EtO is the most common sterilization method for medical devices for several reasons. It
is the preferred sterilant for heat and moisture sensitive products because of its effectiveness at
relatively low temperatures and humidity levels (FDA 2019a). Less than 5 percent of devices,
mostly those made of metal, are sterilized with steam. Products made of heat-intolerant materials
like plastics or resins, products which cannot withstand moisture like wound dressings, and
products with hard-to-reach crevices (e.g., catheters) rely almost entirely on EtO (FDA 2019a;
CDC 2016). EtO can accommodate a wide variety of products and materials commonly found in
medical devices, including plastics, resins, adhesives, metals, glass, and biologies.

Many healthcare products cannot be sterilized by any other method than EtO because
they would be destroyed or rendered unusable. Medical devices require thorough sterilization but
often cannot withstand alternative sterilization methods such as radiation, moist heat, dry heat, or
other chemicals such as peracetic acid, chlorine dioxide, hydrogen peroxide, and nitrogen
dioxide (GIPA 2017). The sterilization method is selected to meet the individual needs of a
device or product according to its materials and design principles. At the same time, many
medical devices and pharmaceuticals are intentionally designed to be compatible with EtO
(GIPA 2017).

EtO is the preferred or exclusive sterilant for polymer resin-based products, single-use
medical devices, pharmaceutical agents, procedure kits, surgical trays, synthetic gowns, and
sealed combination drug devices like syringes and stents (Sterigenics 2019). Complex devices
and implantable devices are especially unlikely to be able to use a sterilization method other than

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EtO (EOS A 2018; GIPA 2017). The number and complexity of the components found in medical
and surgical kits are increasing over time. As such, these kits are increasingly likely to contain at
least one component unable to rely on sterilization methods other than EtO (GIPA 2017). Once a
medical device manufacturer has determined the appropriate sterilization modality and must
select a sterilization provider, important considerations include the availability and location of
the sterilizer, cost, and the volume of product needing sterilization (GIPA 2017).

2.3 Overview of Sterilization Process

The EtO sterilization process generally consists of pre-conditioning the load, air removal
from the sterilization chamber, EtO exposure, and nitrogen gas and air flushing, followed by
aeration. The rate of the microbial kill of the process depends on key parameters including time,
temperature, humidity, and EtO concentration. Since EtO is flammable, facilities must conduct
safety assessments for new processes to evaluate the probability of ignition in worst case and
single point failure scenarios (Sterigenics 2018).

Large sterilization chambers can accommodate loads the size of a shipping container, and
loads may be comprised of different types of products that share physical and chemical
characteristics. Parameters of the process are assigned to product groupings based on attributes
like packaging type, density, material composition, heat tolerance, sensitivity to pressure, and
chemical reaction to water vapor (Shintani 2017). The "validation" specifies these parameters.
New products can be added to the cycle for a given product group so long as they are no more
difficult to sterilize under the cycle conditions than the most challenging product in the group to
sterilize, which is identified in the validation.

Before the EtO process, products are placed in sterile barrier packaging where they
remain until reaching the end user. At the start of the process, a product load is pre-conditioned
to a certain temperature and moisture level. To prepare the sterilization chamber for gas
introduction, air is removed through a vacuum. When the desired pressure conditions have been
achieved, EtO is introduced and the product is exposed for a period, known as the dwell time.
Facilities receive EtO as a liquid and must vaporize it into a gas (Steris 2019). The EtO is then
evacuated from the chamber and the load is aerated to reduce the residual EtO on the product to
protect patient safety. The following is a more detailed characterization of the major phases of
EtO sterilization and their timing:

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1.	Preconditioning - the product load is configured and placed in an area under pre-
validated temperature and relative humidity conditions for several hours to several days
(FDA 2019a). Higher temperatures and moisture levels improve the kill rate of EtO
(Lambert 2013).

2.	Sterilization - the product load is transferred from the preconditioning area to the
sterilization chamber where a vacuum is used to attain desired pressure conditions and
customized levels of EtO gas, nitrogen gas, and steam are applied for 8 to 16 hours to
reach a certain EtO concentration level. This phase is comprised of several steps:

a.	Before EtO gas enters the chamber, vacuum is applied to remove air/oxygen and
nitrogen gas is injected because EtO is flammable at concentrations above 3
percent or 30,000 parts per million (MDDI2001). The amount of nitrogen
injected must increase to evacuate the air when the pressure is higher (Steris
2019b).

b.	After air/oxygen removal, EtO is diffused in the chamber until the desired
concentration is reached. During the dwell period, EtO disrupts the DNA of
microbial organisms via alkylation, rendering them unable to reproduce or
function properly (GIPA 2017). Steam is continuously supplied to replenish the
moisture lost through the vacuum (Steris 2019).

c.	After the dwell period, most of the EtO must be removed via vacuum cycles and
nitrogen washes before the chamber can be opened. More vacuum and nitrogen
wash cycles are needed for batches with higher peak EtO concentrations. Air is
then injected to equalize pressure in the chamber before it can be opened (Steris
2019b).

3.	Aeration - the product load is washed with heated air for 1 to 7 days to allow EtO
residues and byproducts like ethylene glycol to dissipate. The length of this phase is an
important cost factor that varies based on the ease of aerating the product load, peak EtO
concentration during the exposure phase, and the product's intended use. Some facilities
carry out aeration in a separate chamber and others may conduct sterilization and aeration
in one chamber (Shintani 2017). Air injections may be supplemented with nitrogen
and/or carbon dioxide gases to speed the aeration process (GIPA 2017). The product is

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market ready when EtO residues have been reduced to the acceptable level specified in

the validation.

The EtO process is tailored to each product or group of products to consistently deliver
the level of sterility needed. Sterilization facilities conduct extensive testing to identify the
correct levels of the key parameters that determine a cycle's efficacy, including temperature,
humidity, pressure, exposure time, and EtO gas concentration (GIPA 2017). EtO concentration is
the most important element because it must reach a certain level for sterility to be achieved but
also must be balanced with the maximum allowable EtO residuals on the product (FDA 2019a).
In addition to the physical configuration of the load, a cycle's EtO concentration and exposure
time depend on the nature and complexity of the products being sterilized, including their
materials, porosity, surface area, density, volume, residue requirements, and sensitivity to other
parameters in the process.

The microbial kill rate of EtO increases at higher temperatures. If products can withstand
higher temperatures, this can reduce dwell/exposure and aeration times and reduce EtO residuals
on the product. Relative humidity also impacts exposure time because water vapor increases
material porosity. EtO can penetrate both the product and the cell walls of microbial organisms
more easily in high moisture conditions (Dvorak 2015). Vacuums are used to displace air from
the EtO chamber to prevent combustion, though some products cannot withstand low pressure
conditions. A deeper vacuum and thus a lower pressure environment are associated with better
efficiency during pre-exposure air removal, exposure, and post-exposure EtO removal (MDDI
1998). When more shallow vacuums are applied for pressure sensitive loads, more nitrogen
washes and aeration time are needed to complete the cycle (MDDI 1998).

2.4 Other Regulatory Background

In addition to the EPA's NESHAP for the sector, EtO sterilization facilities are also
regulated by the EPA's Office of Chemical Safety and Pollution Prevention, other federal
agencies including FDA and OSHA (29 CFR 1910.1047), and various state and local
governments.

Sterilization procedures for most medical devices are reviewed and validated by the FDA
before they can be made available on the market. Some medical devices require a 501(k)

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clearance and/or Pre-Market Approval (PMA). The FDA regulates the outcome of a sterilization
process, though it does not regulate commercial sterilization facilities directly aside from some
reporting requirements discussed below.

To validate the efficacy of a sterilization procedure for a medical device, manufacturers
work with commercial sterilization facilities and follow data intensive protocols designed to
demonstrate consistent, reproducible sterility. Devices are classified into one of three regulatory
classes (I, II, and III) based on risk (e.g., internal vs. external use) and the level of control needed
to ensure the safety and effectiveness of the device. It must be proved that the probability of
viable microorganisms on a product has been reduced to an acceptable risk level, which is known
as the Sterility Assurance Level (FDA 2019b). The FDA also dictates the acceptable amount of
EtO residue that can remain on different types of products after sterilization, since certain levels
of exposure can cause adverse health effects.

Sterilization facilities themselves are required to submit Establishment Inspection
Reports (EIRs) to the FDA describing their site's features, equipment, and process monitors. The
EIR also must detail how key variables are controlled in each phase of a cycle, which for EtO
includes humidity, gas concentration, degassing, aeration, pressure, exposure time, and
temperature (FDA 2014).

When a device manufacturer changes its sterilization facility, method, or cycle
parameters, it often needs to submit a supplement to its original premarket submission for the
FDA to review and approve (FDA 2019c). If sterilization facilities close, the supply chain for
medical devices can be impacted because completing the revalidation for a single product can
potentially take months before the product can be switched to a new sterilization site. Validating
a different modality of sterilization, if feasible, requires more extensive testing and
documentation. For devices requiring revalidations, manufacturers may lose revenue and incur
costs related to testing, data collection, and documentation requirements. In some cases,
changing the sterilization method could potentially prompt a manufacturer to undertake a design
reconfiguration for the medical device (EOSA 2018).

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2.4.1 Capacity Constraints

The FDA has noted that any reductions in the capacity of the commercial EtO
sterilization industry can increase the likelihood of shortages for some medical devices, since
most EtO sterilization facilities operate continuously at near full capacity with few breaks and
most manufacturers cannot use any alternative methods to substitute for EtO (FDA 2019a). The
FDA has identified supply chain risks for some EtO-dependent medical devices, such as some
types of feeding tubes and catheters, due to lack of spare capacity in the EtO sterilization sector
to absorb additional throughput. The FDA has also noted the potential for supply chain issues for
spices if capacity declines in the commercial EtO sterilization industry. The EPA is taking
comment on whether facilities affected by this proposed rule would need to close temporarily to
complete upgrades.

As discussed, the ability to shift away from EtO is constrained by device compatibility
factors, lacking availability and industrial scale for alternative modalities, and other costs
associated with switching modalities such as higher prices, location and transportation issues,
and the revalidation process (FDA 2019a). FDA outreach to manufacturers of devices that were
deemed at risk for shortages indicated that all the firms' shortage mitigation plans involved either
switching the EtO sterilization site to a different location or distributing other unaffected devices
to replace the ones affected by the shortage, while none of the firms planned to respond by using
an alternative method of sterilization (FDA 2019a). The FDA highlighted higher risks of
shortages for implantable devices and products used in surgical procedures due to their sterility
requirements.

In response to concerns regarding risk of shortages of some devices that rely on EtO, the
FDA is working with private companies to increase innovation in alternative sterilization
technologies that might in the future be able to accommodate EtO-reliant products once the
technologies are proven to be effective and scalable. It should be noted, however, that there are
no alternative sterilization methods for a substantial portion of medical devices and alternative
modalities for highly EtO-dependent products are unlikely to be available in the near future. As
mentioned, when device manufacturers change sterilization sites, methods, or process parameters
(e.g., peak EtO concentration), some products need approval from the FDA (FDA 2019c). There
may be efforts to facilitate and speed the process for completing revalidations to reduce supply

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chain risks if device manufacturers need to switch sterilization sites or if sterilizers lower the
amount of EtO used in their cycles to comply with emission reduction requirements.

2.5 Overview of Medical Device Industry

The medical device industry is primarily engaged in manufacturing medical, surgical,
ophthalmic, and veterinary instruments. Examples include syringes, hypodermic needles,
anesthesia apparatus, blood transfusion equipment, catheters, surgical clamps, and medical
thermometers. The medical device industry has grown in volume and diversity to accommodate a
growing population, longer life expectancies, and increasing demand for surgical procedures and
pharmaceuticals. Expenditures on medical devices in the U.S. have grown from about $86 billion
in 2000 to $153 billion in 2010 and nearly reached $200 billion in 2019 (Donahoe 2021). Census
Bureau data indicate that about 5 to 6 percent of total annual healthcare spending in the U.S.
between 1989 and 2019 was consistently spent on medical devices (Donahoe 2021). The roughly
$200 billion spent on medical devices in the U.S. in 2019 accounted for 5.2 percent of total
healthcare expenditures that year.

2.5.1 Market Structure

The medical device industry is composed of a large number of relatively small companies
and a small number of very large, well-diversified companies. These larger firms tend to have
more market power, face less competition, and see bigger profit margins. A 2015 study found
that the top 1 percent of firms by asset holdings held about 80 percent of the industry's total
assets in 2012, so the industry is highly concentrated (CRS 2015).

From 2009 to 2019, prices for medical devices in the U.S. grew more slowly than both
the overall Consumer Price Index and the Medical Consumer Price Index, which would tend to
indicate that the industry as a whole is competitive (Donahoe 2021). Market dynamics in the
medical device industry vary by product type. The market for the more simple and ubiquitous
products such as surgical gloves and wound dressings is highly competitive and producers
generally have low profit margins. Simple devices must be made in high volumes under secure
long-term contracts with large buyers like hospital chains for producers to break even (Medpac
2017). More sophisticated medical devices such as pacemakers and implantables tend to earn
higher profits but firms must overcome higher barriers to entry in those markets, including

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significant research and development costs, regulatory hurdles, and patents (Medpac 2017).

Small and mid-size companies tend to concentrate their efforts on the more niche devices (CRS
2015).

2.5.2 Excise Tax Case Study

A 2015 Congressional Research Service (CRS) report estimated how the supply of
medical devices responded to an excise tax, finding that a tax of 2.3 percent caused a relatively
small decrease in medical device output of 0.2 percent. The findings of this report may be
informative for the purposes of this analysis because excise taxes and regulation both act as costs
for an industry and presumably could have the same impact on market behavior so long as the
regulatory costs imposed are equal to the value of the tax.

The CRS attributed the small effect of the excise tax on the supply of medical devices to
insensitive demand for medical devices and the small size of the tax. The CRS concluded that the
tax was unlikely to result in profit losses for the industry, including small and midsized firms,
because medical device companies can pass a large share of the tax on to consumers. The CRS
reached this conclusion based on evidence that the demand for medical devices does not fall
much when prices rise.

The report highlighted several nuances in the medical device market that may be relevant
to our characterization of potential market impacts of regulating the commercial sterilization
sector. First, they note the high degree of concentration in the medical device industry. As
mentioned above, a small number of large companies in the medical device industry likely hold
market power, which could indicate that they may be able to resist price increases to some
degree from sterilization companies looking to pass regulatory costs on to firms they contract
with. Nonetheless, EtO sterilization is also fairly concentrated among a few big firms who may
hold market power, so the degree to which regulated commercial sterilizers might be able to pass
costs on to medical device manufacturers is uncertain and likely varies depending on the market
share held by the sterilizer and by the device manufacturer they are negotiating with. Many
devices cannot switch to sterilization methods other than EtO, which could also increase the
ability of EtO sterilization firms to pass regulatory costs on to device manufacturers that cannot
easily use a different method with lower costs.

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The report also suggested that despite the high degree of concentration in the medical
device industry, their ability to fully pass on the entire burden of a tax may have been limited by
the presence of large intermediaries with purchasing power (e.g., large hospital chains, insurers,
the federal government). This dynamic in the medical device supply chain is potentially relevant
in analyzing how regulatory impacts on commercial EtO sterilizers may trickle down to
downstream sectors. Collectively, the different aspects of the CRS's characterization of the
medical device industry indicate that there is uncertainty regarding the degree affected EtO
sterilization firms may be able to pass regulatory costs down the supply chain. The share of
regulatory costs passed on to intermediate or end users will depend on the mix of market power
held by medical device makers and the purchasers of sterilized devices. It is plausible that costs
could be spread across several parties, including the sterilizers themselves, medical device
manufacturers, hospitals, insurance companies, and end consumers. For a broader discussion of
the potential supply and demand responses to this regulatory action, please see section 5.3.

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3 ENGINEERING COST ANALYSIS

3.1	Introduction

This section explains how the compliance costs associated with this proposed rule were
estimated. The costs and emission reductions of the three options were assessed relative to a
regulatory baseline that represents the status quo. The costs were estimated by multiplying
facility and source counts by engineering cost estimates for the various requirements proposed in
the rule. The engineering costs are also tailored to the configurations for many facilities.
Assumed configurations were also applied for some facilities.

3.2	Affected Facilities

The EPA estimated costs for 88 commercial EtO sterilization facilities, including the 86
active facilities currently affected by subpart O and two planned facilities that are assumed to
start operating before the proposed compliance deadline. Based on actual EtO usage data, 49
facilities use at least 10 tpy of EtO, 19 facilities use at least 1 tpy but less than 10 tpy of EtO, and
20 facilities use less than 1 tpy of EtO. Additionally, for purposes of the Group 2 room air
emissions standards, there are 43 facilities that use less than 20 tpy and 45 that use at least 20 tpy
of EtO. Finally, for purposes of the health-based SCV standards, there are 38 facilities that use at
least 40 tpy of EtO, 11 facilities that use at least 10 tpy but less than 40 tpy of EtO, and 39
facilities that use less than 10 tpy of EtO. It was assumed that all these facilities would continue
to operate and be affected by the proposed rule throughout the 20-year analytical timeframe from
2023 to 2042. Beyond the two planned facilities included in the analysis, the EPA did not
estimate compliance costs for any other new sources that may become affected by this proposed
rule in the future.

3.3	Emissions Points

The original subpart O NESHAP promulgated in 1994 addressed EtO emissions
originating from three emission points: the sterilization chamber vent (SCV), aeration room vent
(ARV), and chamber exhaust vent (CEV). The SCV evacuates EtO from the sterilization
chamber following sterilization and any subsequent gas washes. The ARV evacuates EtO-laden
air from the aeration chamber. The CEV evacuates EtO-laden air from the sterilization chamber

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after the chamber door is opened for product unloading to reduce employee exposure to EtO.

This rule establishes standards and proposes revisions to several of the current emissions
standards for SCVs, ARVs, and CEVs.

This proposed rule also establishes emissions standards for room air emissions, which
were not regulated under the original 1994 NESHAP or the 2006 RTR. Room air emissions, also
known as fugitive emissions, come from sources and processes such as EtO storage and
dispensing, handling of sterilized product, and air pollution control devices (APCDs). For
purposes of this proposal, room air emissions sources include: indoor EtO storage, EtO
dispensing, vacuum pump operation, pre-aeration handling of sterilized material, post-aeration
handling of sterilized material, and the non-oxidizer APCD area. The EPA is proposing
standards for two types of room air emissions, Group 1 and Group 2. Group 1 room air emissions
come from indoor EtO storage, EtO dispensing, vacuum pump operation, and pre-aeration
handling of sterilized material. Group 2 room air emissions are released during post-aeration
handling of sterilized material.

3.4 Baseline

The impacts of regulatory actions are evaluated relative to a baseline that represents the
world without the regulatory action. This RIA presents incremental impacts of the proposed
amendments to the subpart O NESHAP relative to the baseline. The analysis focuses on the
proposed requirements that result in quantifiable compliance cost or emissions changes
compared to the baseline. The EPA assumed each facility achieved emissions control sufficient
to meet the current standards and estimated the emissions reductions and cost of the proposed
requirements relative to this baseline. Table 3-1 contains the baseline regulatory requirements in
the subpart O NESHAP.

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Table 3-1. Baseline Subpart O Requirements

Existing and new sources
subcategory

Sterilization
chamber vent (SCV)

Aeration room vent
(ARV)

Chamber exhaust
vent (CEV)a

Sources using 10 tons or more
of EtO in any consecutive 12-
month period

Sources using 1 ton or more of
EtO but less than 10 tons of
EtO in any consecutive 12-
month period

Sources using less than 1 ton of
EtO in any consecutive 12-
month period

99% emission
reduction

99% emission
reduction

Recordkeeping

1 ppm maximum outlet
concentration or 99%
emission reduction

No control

Recordkeeping

No control

No control

Recordkeeping

1 The CEV emission source was included in the original standard but was later eliminated in 2001.

Table 3-2 shows annual HAP emissions from the source category under the baseline.
Baseline emissions of EtO from the 86 subpart O facilities are estimated to be 23 tons per year

(tpy).

Table 3-2. Baseline Annual HAP Emissions from Subpart O Facilities	

HAP	Emissions (tpy)	Number of Facilities

Ethylene Oxide	23	86

Propylene Oxide	0.7	7

3.5 Proposed Requirements

The EPA is proposing emission standards to fill regulatory gaps under CAA section
112(d)(2), (3), and (5) and proposing risk-based standards under CAA section 112(f)(2) to ensure
that risks are acceptable and provide an ample margin of safety to protect public health. The EPA
is also proposing changes to startup, shutdown, and malfunction (SSM) provisions; monitoring,
recordkeeping, and reporting requirements; and performance testing requirements.

To begin, for the following emissions sources that are currently unregulated, the EPA is
proposing to set standards under CAA sections 112(d)(2) and (3), or (d)(5): SCV, ARV, and
CEV at facilities where EtO use is less than 1 tpy, ARV and CEV at facilities where EtO use is at
least 1 tpy but less than 10 tpy, CEV at facilities where EtO use is at least 10 tpy, and two types
of room air emissions. Room air emission sources are grouped into activities that occur prior to
aeration (Group 1) and activities that occur after aeration (Group 2). MACT standards are being

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proposed for the two groups of room air emissions at major sources and GACT standards are
being proposed for the two groups of room air emissions at area sources.

To address unacceptable remaining risk and ensure an ample margin of safety, the EPA is
proposing health-based standards for SCVs, ARVs, and certain room area emissions. The
stringency of the proposed health-based standards varies based on a facility's annual EtO usage.
The usage groupings in the proposed standards are intended to address emissions from facilities
identified as high risk while mitigating the compliance burden for lower risk facilities. The EPA
is proposing health-based emission standards for SCVs at facilities where EtO use is at least 40
tpy, SCVs at facilities where EtO use is at least 10 tpy but less than 40 tpy, SCVs at facilities
where EtO use is at least 1 tpy but less than 10, and Group 2 room air emissions at area source
facilities where EtO use is at least 20 tpy.

Finally, the technology review identified more stringent emission standards that could be
applied to ARVs at facilities where EtO use is at least 10 tpy with minimal additional economic
impact. The EPA is also co-proposing the same requirements under (d)(6) that are being
proposed under CAA 112(f)(2) for SCVs at facilities where EtO use is at least 10 tpy and SCVs
at facilities where EtO use at least 1 tpy but less than 10 tpy.

Table 3-3 lists the proposed standards for currently unregulated sources and the standards
being proposed to address unacceptable remaining risk and provide an ample margin of safety.

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Table 3-3. Proposed Standards (Option 2)

Emission
source

Existing
or new?

EtO use

Standards

CAA section

SCV

Existing
and new

At least 10 tpy

99.94% emission reduction

112(f)(2) and
(d)(6)

At least 1 but less
than 10 tpy

99.8% emission reduction

112(f)(2) and
(d)(6)

Less than 1 tpy

99% emission reduction

112(d)(5)

ARV

Existing

At least 10 tpy

99.6% emission reduction

112(d)(6)

At least 1 but less
than 10 tpy

99% emission reduction

112(d)(5)

Less than 1 tpy

99% emission reduction

112(d)(5)

New

At least 10 tpy

99.9% emission reduction

112(d)(6)

At least 1 but less
than 10 tpy

99% emission reduction

112(d)(5)

Less than 1 tpy

99% emission reduction

CEV

Existing
and new

At least 10 tpy

3.2E-4 lb/hr

112(d)(2) and (3)

At least 1 but less
than 10 tpy

99% emission reduction

112(d)(5)

Less than 1 tpy

99% emission reduction

112(d)(5)

Group 1
room air
emissions at
major sources

Existing
and new

N/A

1.3E-3 lb/hr

112(d)(2) and (3)

Group 1
room air
emissions at
area sources

Existing
and new

N/A

1.3E-3 lb/hr

112(d)(5)

Group 2
room air
emissions at
major sources

Existing
and new

N/A

2.8E-3 lb/hr

112(d)(2) and (3)

Group 2
room air
emissions at
area sources

Existing

At least 20 tpy

2.8E-3 lb/hr

112(f)(2)

Less than 20 tpy

Follow either the Cycle Calculation
Approach or the Bioburden/Biological
Indicator Approach to achieve sterility
assurance in accordance with ISO
11135:2014 and ISO 14161:2009

112(d)(5)

New

N/A

2.8E-3 lb/hr

112(d)(5)

The EPA is also proposing revisions related to performance testing; monitoring,
reporting, and recordkeeping requirements; requirements during periods of startup, shutdown,
and malfunction (SSM); and other minor technical improvements. The EPA is proposing to
require monitoring either with an EtO continuous emissions monitoring system (CEMS) or initial
and annual performance testing with continuous parameter monitoring.

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The standards described above represent option 2. This RIA also assesses costs for the
less stringent option 1 and more stringent option 3. The regulatory alternatives are summarized
below.

Option 1: Apply GACT standards to all currently unregulated emissions at area source
facilities. The current standards for regulated point sources would not be updated.

Option 2 (proposed): Apply GACT standards to all currently unregulated emissions at
area source facilities. Then, based on results of the post-control risk assessment, revise
established and newly proposed standards pursuant to CAA section 112(f)(2), considering
economic feasibility after risk has been determined to be acceptable.

Option 3: Revise established emission limitations and propose new limitations for all
currently unregulated emissions to the most stringent levels that are considered in the preamble.

3.6 Engineering Costs

A key component of the total costs estimated for this proposal is the cost to implement
the room air emissions requirements to meet the MACT limits under option 1 and/or the health-
based standards under option 2. Affected facilities must install a permanent total enclosure (PTE)
and/or solid or gas reactor systems to comply with the room air emissions requirements. A
second major component is the cost to install, operate, and maintain solid or gas reactor systems
to meet the MACT limits and/or health-based standards for the sterilization chamber vent (SCV),
aeration room vent (ARV), and chamber exhaust vent (CEV). Another key cost is associated
with the monitoring and testing requirements, which includes capital and annual costs associated
with a continuous emissions monitoring system (CEMS) or the recurring costs associated with
performance testing, depending on the facility. Other cost items include the one-time costs to
complete cycle revalidations and the annual costs associated with recordkeeping and reporting.

The engineering costs estimated for the different requirements and the number of
facilities affected by those requirements across the three regulatory options are presented in
Table 3-4. The 'total annualized costs' are the sum of the annualized capital costs and other
annual costs (e.g., operating and maintenance costs, recordkeeping and reporting costs). The
EPA also included the total costs to complete cycle revalidations in the total annualized costs,
even though these costs are only expected to be incurred once in Year 1. This was done to

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simplify the presentation by providing one consistent total annualized cost estimate for each
regulatory option, since the total annualized costs would be different in Year 1 than in Years 2-
20 due to the one-time costs. The revalidation costs are not considered capital costs, so they
should not be annualized and spread out over the time horizon. Including the Year 1 one-time
costs in the total annualized cost figure yields a more conservative, or higher, estimate.
Nonetheless, since the revalidation costs are relatively small, the total annualized costs for Year
1 are only slightly higher than for Years 2-20. To see how the costs vary across the years in the
analytical timeframe (2023 to 2042), see Table 3-6 through Table 3-8.

Annualization of capital costs involves establishing an annual "payment" sufficient to
finance the investment over the expected lifetime of the equipment or loan period. This payment
is typically referred to as the "capital recovery cost." To obtain annualized capital costs, a capital
recovery factor is applied to capital costs. The capital recovery factor is based on the lifetime of
the capital equipment as well as the interest rate. To annualize the capital costs, the EPA
assumed a 7.75 percent interest rate,10 a 20-year lifetime for a permanent total enclosure (PTE), a
20-year lifetime for a gas or solid reactor system, and a 10-year lifetime for the CEMS capital.

The room air emissions requirements are the most costly aspect of the proposal to
implement. The costs associated with the gas/solid reactors account for the largest share of the
capital and annualized costs for the sector under all three regulatory options.

For most of the cost components in Table 3-4, the option 3 costs are the highest and the
option 1 costs are the lowest. The recordkeeping and reporting costs as well as the monitoring
and testing costs are the same across all three options. The PTE costs are generally driving the
higher costs of option 3 compared to the proposed option 2. Under option 1, costs are lower than
the proposed option mainly because fewer facilities would need PTE and gas/solid reactors to
comply compared to the proposed option 2. However, the cycle revalidation costs are highest
under option 1. This is because option 1 would require all facilities to complete cycle
revalidations (as opposed to imposing an emission limit) while option 2 would only require
revalidations for facilities where annual EtO use is less than 20 tpy and option 3 would not
require them for any facilities.

10 The 7.75 percent interest rate was obtained from https://fred.stlouisfed.org/series/PRIME on February 10, 2023.

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Table 3-4. Engineering Costs and Number of Facilities Affected by Emissions Point or Cost
Component across Regulatory Options (millions of 2021$)	



Option 1

Option 2

Option 3



(less stringent)

(Proposed)

(more stringent)

Permanent Total Enclosure







Facilities Affected

24

26

47

Capital Costs

$43.8

$65.8

$142.9

Annual O&M Costs

$0.2

$0.4

$1.0

Total Annualized Costs

$4.6

$7.0

$15.3

Gas/Solid Reactors







Facilities Affected

58

57

62

Capital Costs

$82.1

$133.9

$144.8

Annual O&M Costs

$13.6

$19.0

$20.2

Total Annualized Costs

$21.8

$32.4

$34.7

Monitoring and Testing







Facilities Affected

87

87

87

Capital Costs

$19.9

$19.9

$19.9

Annual O&M Costs

$8.2

$8.2

$8.2

Total Annualized Costs

$11.2

$11.2

$11.2

Recordkeeping and Reporting







Facilities Affected

88

88

88

Total One-time Costs

$6.5

$6.5

$6.5

Annual O&M Costs

$8.6

$8.6

$8.6

Total Annualized Costs

$15.2

$15.2

$15.2

Cycle Revalidations







Facilities Affected

84

41

0

Total One-time Costs

$13.1

$2.5

$0.0

TOTAL COSTS







Facilities Affected

88

88

88

Capital Costs

$145.8

$219.6

$307.6

Annual O&M Costs

$30.7

$36.3

$38.1

One-time Costs

$19.6

$9.0

$6.5

Total Annualized Costs

$65.8

$68.2

$76.3

Total annualized costs include annualized capital costs, annual operating and maintenance costs, and one-time costs.

Additional information about the development of the cost estimates and assumptions can
be found in the Proposal Technical Support Document: Review of Unregulated Emissions, CAA
Section 112(d)(6) Technology Review, and CAA Section 112(f) Risk Assessment for the Ethylene
Oxide Emissions Standards for Sterilization Facilities NESHAP, in the docket.

3.6.1 Summary Cost Tables

Table 3-5 shows a summary of the costs of the proposed rule by option. To obtain total
annualized costs, a capital recovery factor is applied to capital costs, which then are summed
with other annual costs (e.g., operating and maintenance costs). The capital recovery factor is
based on the assumed lifetime of the capital equipment and the interest rate.

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The capital cost for option 1, the least stringent option analyzed, is estimated to be $146
million in 2021 dollars. The total annualized costs for option 1 are estimated to be $66 million.
The capital cost for option 2, the proposed option, is estimated to be $220 million. The total
annualized costs for option 2 are estimated to be $68 million. The capital cost for option 3, the
most stringent option analyzed, is estimated to be $308 million. The total annualized costs for
option 3 are estimated to be $76 million.

Table 3-5. Engineering Cost Summary (millions of 2021$)



Capital

Annualized

Annual O&M

One-time

Total Annualized



Cost

Capital Costa

Costs

Annual Costs b

Costc

Option 1

$146

$16

$31

$20

$66

Option 2











(Proposed)

$220

$23

$36

$9

$68

Option 3

$308

$32

$38

$7

$76

a Capital costs were annualized over the lifetime of the equipment at a 5% rate. The EPA assumed a 20-year lifetime
for the capital costs of PTE, a 20-year lifetime for a gas/solid reactor, and a 10-year lifetime for CEMS.

b These are non-capital costs incurred one time in Year 1.

c Total annualized costs equal the sum of annualized capital costs, annual operating and maintenance costs, and one-
time annual costs.

As part of fulfilling the analytical requirements of EO 12866, the EPA presents estimates
of the present value (PV) of the costs over the period 2023 to 2042. Costs are in 2021 dollars and
discounted to 2023 at 3 percent and 7 percent discount rates per direction in OMB Circular A-4.
The EPA also presents the equivalent annualized value (EAV) at 3 percent and 7 percent
discount rates. The EAV takes the "lumpy" stream of costs (i.e., different costs in different
years) and converts them into a single value that, if paid each year from 2023 to 2042, would
equal the original stream of values in present value terms. In other words, a sum of constant
EAVs across time periods in present value terms yields the total present value {i.e., the total
discounted stream of costs).11

11 The equivalent annualization procedure value takes the "lumpy" stream of costs (i.e., different costs in different
years) and converts them into a single value that, if paid each year would equal the original stream of values in
present value terms. In other words, the sum of EAVs across time periods in present value terms yields the
present value (i.e., the total discounted stream of costs). The EPA also often presents "annualized" costs in its
RIAs, which are used by engineers to determine a series of equal annual payments across years over a time
period that fully finances a capital project. To obtain total annualized costs, a capital recovery factor is applied
to capital costs, which then are summed with other annual costs (e.g., maintenance costs). The capital recovery
factor is based on the assumed lifetime of the capital equipment and the interest rate. Annualized costs can
differ from equivalent annualized costs when the lifetime of the capital equipment differs from the length of

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Table 3-6 through Table 3-8 show the capital costs, annual costs, and total annualized
costs for each year in the analytic timeframe, in addition to the total PV and EAV of the costs
over 2023 to 2042 in 2021 dollars. The PV of the costs for option 1 is estimated to be $635
million at a 3 percent discount rate. The PV of the costs for option 1 is estimated to be $513
million at a 7 percent discount rate. The EAV of the option 1 costs is estimated to be $43 million
at a 3 percent discount rate and $60 million at a 7 percent discount rate. For the proposed option
2, the PV of the costs is estimated to be $784 million at a 3 percent discount rate and $640
million at a 7 percent discount rate. The EAV of the option 2 costs is estimated to be $53 million
and $74 million at 3 percent and 7 percent discount rates, respectively. Finally, for option 3, the
PV of the costs is estimated to be $897 million at a 3 percent discount rate and $746 million at a
7 percent discount rate. The EAV of the option 3 costs is estimated to be $60 million and $85
million at 3 percent and 7 percent discount rates, respectively.

the analytical time horizon or if the interest rate used to annualize the capital costs differs from the discount
rate used to obtain the PV. Annualized compliance costs are used in comparison with parent company annual
revenues to obtain cost-to-sales ratios for use in small business screening analyses.

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Table 3-6. Option 1 Cost Impacts (millions of 2021$)



Capital Costs

Annual Costs
(undiscounted)

Discounted Costs
(3%)

Discounted Costs
(7%)

2023

$146

$50

$196

$196

2024



$31

$30

$29

2025



$31

$29

$27

2026



$31

$28

$25

2027



$31

$27

$23

2028



$31

$26

$22

2029



$31

$26

$20

2030



$31

$25

$19

2031



$31

$24

$18

2032



$31

$24

$17

2033



$31

$23

$16

2034



$31

$22

$15

2035



$31

$22

$14

2036



$31

$21

$13

2037



$31

$20

$12

2038



$31

$20

$11

2039



$31

$19

$10

2040



$31

$19

$10

2041



$31

$18

$9

2042



$31

$17

$8





PV

EAV

$635
$43

$513
$60

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Table 3-7. Option 2 Cost Impacts (millions of 2021$) (Proposed)



Capital Costs

Annual Costs
(undiscounted)

Discounted Costs
(3%)

Discounted Costs
(7%)

2023

$220

$45

$265

$265

2024



$36

$35

$34

2025



$36

$34

$32

2026



$36

$33

$30

2027



$36

$32

$28

2028



$36

$31

$26

2029



$36

$30

$24

2030



$36

$29

$23

2031



$36

$29

$21

2032



$36

$28

$20

2033



$36

$27

$18

2034



$36

$26

$17

2035



$36

$25

$16

2036



$36

$25

$15

2037



$36

$24

$14

2038



$36

$23

$13

2039



$36

$23

$12

2040



$36

$22

$11

2041



$36

$21

$11

2042



$36

$21

$10





PV

EAV

$784
$53

$640
$74

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Table 3-8. Option 3 Cost Impacts (millions of 2021$)



Capital Costs

Annual Costs
(undiscounted)

Discounted Costs
(3%)

Discounted Costs
(7%)

2023

$308

$45

$352

$352

2024



$38

$37

$36

2025



$38

$36

$33

2026



$38

$35

$31

2027



$38

$34

$29

2028



$38

$33

$27

2029



$38

$32

$25

2030



$38

$31

$24

2031



$38

$30

$22

2032



$38

$29

$21

2033



$38

$28

$19

2034



$38

$27

$18

2035



$38

$27

$17

2036



$38

$26

$16

2037



$38

$25

$15

2038



$38

$24

$14

2039



$38

$24

$13

2040



$38

$23

$12

2041



$38

$22

$11

2042



$38

$22

$11





PV

EAV

$897
$60

$746
$85

3.7	Emissions Reductions

The baseline emissions for the commercial sterilization source category are the emissions
that are occurring under the current subpart O requirements for the 86 active facilities. The
baseline annual emissions are 23 tpy of EtO. For options 1, 2, and 3, the EPA estimated EtO
emissions reductions of 15 tpy, 19 tpy, and 20 tpy, respectively.

3.8	Characterization of Uncertainty

The cost estimates are subject to several sources of uncertainty. This analysis includes
many data sources as inputs, including source counts, equipment and labor costs, and
assumptions regarding the current state of the EtO sterilization industry and how individual
facilities carry out their operations, the future state of the industry, and the future state of the

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world (e.g., regulations, technology, economic activity, and human behavior). There is also
uncertainty about the specific components of the engineering costs, such as the costs of the
equipment and labor required to comply with the proposal and how the costs might change over
time. Facilities may comply with the proposed requirements through alternative methods that
were not accounted for in the cost memo. Additionally, the EPA was not able to determine how
the compliance measures might affect capacity at facilities, or whether and how long facilities
would need to close to complete upgrades and thus lose revenue during that time. Each of the
inputs and assumptions used are uncertain to some degree and generate uncertainty in the overall
cost estimates. When the uncertainties from each stage of the analysis are compounded, even
small uncertainties can have large effects on the total cost estimates.

This proposal may not impact all locations with EtO sterilizers equally, in part due to
differences in state and local policies such as consent orders in locations like Illinois and
Georgia.12 In addition, the baseline may not reflect all voluntary actions firms may take to reduce
EtO emissions. By not fully accounting for state and local requirements and voluntary actions in
the baseline, this analysis may overestimate the costs of the proposal. This analysis assumes that
compliance will start in 2023 and that upfront capital costs will be incurred in 2023, and this is
likely not the case. This is a conservative assumption given the compliance schedule being
proposed, which stipulates an 18-month period after the rule is finalized before compliance is
necessary for many of the requirements. The cost impacts were estimated out to 2042 and more
uncertainty is introduced when impacts are estimated this far into the future.

The total number of facilities subject to the action could change. The EPA only estimated
costs for existing facilities, but new facilities may be constructed and become subject to the
requirements. Facilities may modify or upgrade in ways that affect the number of the various
emissions points impacted by this proposed rule (e.g., adding a sterilization chamber or aeration
room). They may alter their EtO usage and thus become subject to different requirements.
Additionally, new control technology may become available in the future at lower cost, and the
EPA is unable to predict exactly how industry will comply with the proposed rules in the future.

12 For more information, see https://www.fda.gov/medical-devices/general-hospital-devices-and-supplies/ethylene-
oxide-sterilization-facility-updates.

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There may be an opportunity cost associated with the installation of environmental
controls (for purposes of mitigating the emission of pollutants) that is not reflected in the
compliance costs included in chapter 3. If environmental investment displaces investment in
productive capital, the difference between the rate of return on the marginal investment (which is
discretionary in nature) displaced by the mandatory environmental investment is a measure of
the opportunity cost of the environmental requirement to the regulated entity. To the extent that
any opportunity costs are not included in the control costs, the compliance costs for this proposed
action may be underestimated.

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4 SUMMARY OF BENEFITS AND ENVIRONMENTAL JUSTICE ANALYSIS

4.1 Introduction

This section provides a qualitative discussion of the health risks associated with exposure
to EtO, a summary of the nationwide risks associated with EtO emissions from the commercial
sterilization source category that is subject to this proposed rule, a summary of the risk analysis
for the proposed rule, and a summary of the environmental justice implications assessed for this
proposed rule.

This proposed rule is expected to reduce nationwide emissions of EtO from this source
category by 19 tons per year (tpy) under option 2. Option 1, the least stringent option, is
estimated to reduce EtO emissions from the source category by 15 tpy. The most stringent option
3 is estimated to reduce EtO emissions from the source category by 20 tpy.

Due to methodology and data limitations, the EPA was not able to monetize the health
benefits of the reductions in EtO emissions in this analysis. This does not imply that there are no
benefits associated with the EtO emission reductions estimated for this proposed rule.
Monetization of the benefits of reductions in cancer incidences would require several important
inputs, including central estimates of cancer risks, estimates of exposure to EtO, estimates of the
value of an avoided case of cancer (fatal and non-fatal, and specific to the type of cancer), and
increases in secondary emissions resulting from increased electricity usage associated with
emission controls and process changes. The EPA does not have estimates of the willingness-to-
pay for avoided cancer cases but continues to work on developing such values for use in
regulatory analysis and welcomes comment on potential methods that should be considered.
Instead, this section provides a qualitative discussion of the health effects associated with EtO
exposure and a summary of the cancer risks estimated for the source category under the baseline
and regulatory options.

The EPA discusses capacity constraints in the commercial EtO sterilization industry and
concerns about potential shortages of EtO-reliant medical devices if capacity were further
constrained in previous chapters of this RIA. If the capacity of the industry were to decline
further due to the compliance measures in this proposed rule, there could be increased risk of
shortages for some devices and potential for impacts on patients that need those devices (i.e.,

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negative benefits). The EPA was not able to estimate potential capacity impacts, shortages, or
possible health impacts resulting from potential shortages in this analysis.

4.2	Health Effects from Exposure to Ethylene Oxide

The Department of Health and Human Services and the International Agency for
Research on Cancer have classified EtO as a known human carcinogen. The EPA has concluded
that EtO is carcinogenic to humans by the inhalation route of exposure. Evidence in humans
indicates that exposure to EtO increases the risk of lymphoid cancer (including non-Hodgkin
lymphoma, myeloma, and lymphocytic leukemia) and, for females, breast cancer (U.S. EPA
2016). Noncancer health endpoints affected by chronic exposure to EtO include irritation of the
eyes, skin, nose, throat, and lungs, and damage to the brain and nervous system. There is also
some evidence linking EtO exposure to reproductive effects (U.S. EPA 2018). EtO is a mutagen,
meaning it acts directly on DNA and causes chromosome damage. Children may be particularly
susceptible to the harmful effects of mutagenic substances (U.S. EPA 2005).

4.3	Air Toxics Screening Assessment

Since the 2006 RTR of the EtO commercial sterilization and fumigation NESHAP, which
did not update the original requirements promulgated in 1994, the EPA has gained a better
understanding of the risks associated with EtO emissions. In 2016, the EPA released its updated
IRIS value for EtO, which indicated that cancer risks from EtO emissions were significantly
higher than characterized in the prior 1985 assessment. Subsequently, the National Air Toxics
Assessment (NATA) released in August 2018, as well as its replacement, the Air Toxics
Screening Assessment (or 2017 AirToxScreen) released in March 2022, identified EtO emissions
as an important risk driver in several areas across the country.

Based on the 2017 AirToxScreen, EPA estimates that 123 census tracts nationwide,
which contain approximately 520,000 people, have increased cancer risks greater than or equal
to 100 in a million. Of these, over half of the census tracts containing approximately 310,000
people have cancer risks driven by EtO emissions from sterilizers or the chemical sector. The
average national cancer risk is about 30 in a million.

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4.4 Risk Analysis

This section summarizes the results of the risk analysis conducted for this proposed rule.
The EPA estimated cancer risk for each census block within 50 km of every EtO sterilization
facility under the baseline and under the proposed option. For each facility, the EPA calculates
the Maximum Individual Risk (MIR) as the cancer risk associated with a continuous lifetime (24
hours per day, 7 days per week, 52 weeks per year, 70 years) exposure to the maximum
concentration at the centroid of each census block. Individual cancer risk is calculated by
multiplying the estimated lifetime exposure to the ambient concentration of each emitted HAP
(in micrograms per cubic meter) by the corresponding unit risk estimate (URE) for each HAP.
The URE is an upper-bound (i.e., conservative) estimate of an individual's incremental risk of
contracting cancer over a lifetime of exposure to a concentration of 1 microgram of the pollutant
per cubic meter of air ([j,g/m3). The MIR is the highest individual lifetime cancer risk estimated
for any census block within 50 km of a facility.

In addition to calculating the MIR for the census blocks around each facility, the EPA
characterizes cancer risks for the source category as a whole by summing the number of
individuals residing in census blocks within 50 km of the facilities whose estimated risk falls
within specified ranges. The EPA also estimates annual cancer incidence by multiplying the
estimated lifetime cancer risk for each census block by the number of people residing in the
block, summing results for all the census blocks, and then dividing this result by a 70-year
lifetime. See the preamble for further explanation of the methods used to conduct the risk
assessment.13

The risk assessment was conducted for the 86 facilities in the commercial sterilization
source category that are currently operating and 11 research and development facilities for a total
of 97 facilities.14 Table 4-1 shows the results of the chronic inhalation cancer risk analysis for

13	In the preamble, see section II.F (How do we estimate risk posed by the source category?), section III.C (What are

the results of the risk assessment and analyses?), and section III.D (What are our proposed decisions regarding
risk acceptability, ample margin of safety, and adverse environmental effect?).

14	The EPA analyzed risk for 11 EtO sterilization research facilities even though these facilities are not directly

affected by the proposed requirements and thus will not incur costs or reduce emissions. They were included to
obtain a more comprehensive and conservative estimate of risks. None of the 11 research facilities were
identified as driving elevated cancer risks greater than 100-in-l million. Thus, excluding them would only
minimally change the overarching conclusions of the risk analysis. Additionally, there are two facilities planning
to open (which will be affected by the proposal) that were not included in the risk analysis due to lack of data.
Excluding these facilities may bias the risk estimates downward.

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these facilities based on actual (as opposed to allowable) emissions under the pre-proposal
baseline and under option 2. The maximum lifetime individual cancer risk (MIR) posed by the
facilities assessed is estimated to be 6,000-in-l million under the baseline, with EtO emissions
from post-aeration handling of sterilized material and sterilization chamber vents identified as
the major contributors to the risk. The total estimated cancer incidence is 0.9 excess cancer cases
per year under the baseline. The analysis identified 16 facilities with estimated maximum cancer
risk greater than 100-in-l million under the baseline (located in: Puerto Rico-4 facilities,
Tennessee-2 facilities, Virginia, Massachusetts, Colorado, Nebraska, Oklahoma, Florida, Utah,
Missouri, New Jersey, and Texas), and 6 of these facilities have estimated cancer risk greater
than 1,000-in-l million (located in: Puerto Rico-2 facilities, Tennessee-2 facilities, Utah, and
Missouri). The estimated population exposed to lifetime cancer risks greater than 100-in-l
million is 18,000 under the baseline, and an estimated 900 people are exposed to cancer risks
between 1,000-in-l million and the maximum of 6,000-in-l million. The estimated population
exposed to cancer risks greater than or equal to 1-in-l million living within 50 km of a facility is
approximately 8.3 million under the baseline.

Table 4-1. Inhalation Cancer Risks for EtO Sterilization Facilities Under the Baseline and
Proposed Option 2	

„ ..	Proposed

Baseline	„ .

Facilities





Number of Facilities Modeled in Risk Assessment

97

97

Cancer Risks





Maximum Individual Lifetime Cancer Risk (in 1
million)

6,000

100

Number of Facilities with Maximum Individual Lifetime





Cancer Risk:





Greater than 1,000-in-l million

6

0

Greater than to 100-in-l million

16

0

Population Exposure





Number of People Exposed to Maximum Cancer Risk:





Greater than 1,000-in-l million

900

0

Greater than 100-in-l million

18,000

0

Greater than or equal to 1-in-l million

8,300,000

1,260,000

Cancer Incidence (excess cancer cases per year)

0.9

0.1

Table 4-1 also shows the risk estimates when the proposed requirements are
implemented. Option 2 is estimated to reduce the cancer MIR from 6,000-in-l million under the
baseline to 100-in-l million. The total estimated cancer incidence from the facilities assessed is

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0.1 excess cancer cases per year under option 2, an 89 percent reduction from the baseline
estimate. No facilities would have estimated risk greater than 100-in-l million, compared to 16
facilities under the baseline. The estimate of the population exposed to lifetime cancer risks
greater than 100-in-l million falls from 18,000 under the baseline to zero people under option 2.
Risks that exceed the 100-in-l million threshold are generally considered unacceptable, so the
proposed rule is expected to reduce risk to acceptable levels. The estimate of the population
exposed to cancer risks greater than or equal to 1-in-l million living within 50 km of a facility is
1.26 million under option 2, down from 8.3 million under the baseline.

4.4.1 Limitations

Uncertainty and the potential for bias are inherent in all risk assessments, including those
performed for this proposal. Although uncertainty exists, the EPA believes the approach, which
uses conservative tools and assumptions, ensures that our decisions protect health and the
environment as EPA's 2005 Guidelines for Carcinogen Risk Assessment state that "the primary
goal of EPA actions is protection of human health; accordingly, as an Agency policy, risk
assessment procedures, including default options that are used in the absence of scientific data to
the contrary, should be health protective" (the EPA's 2005 Guidelines for Carcinogen Risk
Assessment, page 1-7). Section II.F.7 of the preamble for this rulemaking details the
uncertainties in the emissions datasets, dispersion modeling, inhalation exposure estimates, and
dose-response relationships. Another uncertainty to note is that the EPA was unable to assess
risk for any EtO sterilization facilities planning to open in the future which may be affected by
this proposed rule.

4.5 Environmental Justice Analysis

For this proposed rulemaking, the EPA conducted a proximity-based and risk-based
environmental justice (EJ) analysis to assess the distribution of risk associated with exposure to
EtO emissions from the commercial sterilization source category. The EJ analysis characterizes
risk under baseline conditions and under the proposed requirements. This section offers a
summary of the EJ analysis—a more detailed discussion of the methods and results is available
in the preamble for this proposed rule.

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4.5.1	Background

EO 12898 (59 FR 7629; February 16, 1994) and EO 14008 (86 FR 7619; January 27,
2021) establish federal executive policy on environmental justice. EO 12898's main provision
directs federal agencies, to the greatest extent practicable and permitted by law, to make
environmental justice part of their mission by identifying and addressing, as appropriate,
disproportionately high and adverse human health or environmental effects of their programs,
policies, and activities on minority populations and low-income populations in the U.S.

The EPA defines environmental justice as the fair treatment and meaningful involvement
of all people regardless of race, color, national origin, or income with respect to the
development, implementation, and enforcement of environmental laws, regulations, and
policies.15 In general, the determination of whether a disproportionate impact exists is ultimately
a policy judgment which, while informed by analysis, is the responsibility of the decision-maker.
The environmental justice analysis assesses differences in anticipated impacts across population
groups of concern for both the baseline and regulatory options, using the best available
information (both quantitative and qualitative) to inform the decision-maker and the public. The
baseline analysis describes the current (pre-control) distribution of risk and exposures,
identifying potential disparities while the policy analysis describes the distribution of risk and
exposures after a control strategy or policy requirement has been applied (post-control),
identifying how potential disparities change in response to the rulemaking.

A regulatory action may involve potential environmental justice concerns by: (1) creating
new disproportionate impacts on minority populations, low-income populations, and/or
Indigenous peoples; (2) exacerbating existing disproportionate impacts on minority populations,
low-income populations, and/or Indigenous peoples; or (3) presenting opportunities to address
existing disproportionate impacts on minority populations, low-income populations, and/or
Indigenous peoples through the action under development.

4.5.2	Methods

The EPA quantitatively evaluated the proximity of EtO sterilization facilities to
potentially disadvantaged populations, and evaluated whether certain demographics are

15 For more information, see https://www.epa.gov/environmentaljustice.

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disproportionately represented in areas near higher risk EtO sterilization facilities under baseline
conditions and after the proposed requirements are implemented.

EtO is considered a "local" pollutant, meaning emissions carry greater risk for
individuals who live or spend significant time near the emissions sources. Demographic
proximity analyses characterize the distance of vulnerable populations to environmental hazards
as a proxy for exposure and the potential for adverse health impacts that may occur at a local
scale due to economic activity at a given location.

The EPA conducted a proximity-based analysis for populations living within 10 km of all
EtO sterilization facilities, as well as a risk-based analysis for populations living within 10 km of
EtO sterilization facilities which have estimated facility-wide cancer risks greater than or equal
to 1 -in-1 million, greater than or equal to 50-in-l million, and greater than 100-in-l million. The
EPA provides the percent of the population in various demographics for these areas, including by
poverty level, race, ethnicity, linguistic isolation, and educational attainment.

The analysis identified all census blocks within a 10 km radius of the location of each
facility, and then linked each block with census-based demographic data. The total population
within a specific radius around each facility is the sum of the population for every census block
within that specified radius, based on each block's population provided by the 2010 decennial
Census. Statistics on block group level race, ethnicity, education level, poverty status, and
linguistic isolation were obtained from the Census' American Community Survey (ACS) 5-year
averages for 2015-2019.

The risk-based environmental justice analysis provides the demographics for populations
living within 10 km of sterilization facilities with estimated cancer risk greater than 100-in-l
million, greater than or equal to 50-in-l million, and greater than or equal to 1-in-l million under
a baseline emissions scenario and under a post-control scenario to see how risks for various
populations change due to the proposal. The analysis evaluates whether the distribution of
baseline risk is similar to what might be expected based on national average demographics and
whether the distribution of risks changes after implementing the proposed requirements.

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4.5.3 Results

4.5.3.1 Baseline

Tables 4-2, 4-3, and 4-4 show the total population and the population percentages for
each demographic group for the following: the nationwide population, the total population living
within 10 km of EtO sterilization facilities, and the population living within 10 km of EtO
sterilization facilities with cancer risks greater than or equal to 1-in-l million, greater than or
equal to 50-in-l million, and greater than 100-in-l million. A total of 19.4 million people live
within 10 km of the 9716 EtO sterilization facilities analyzed. The analysis indicates that under
the baseline, emissions from the facilities expose a total of 5.3 million people to cancer risk
greater than or equal to 1-in-l million around 78 facilities; 119,000 people to risk greater than or
equal to 50-in-l million around 42 facilities; and 18,000 people to risk greater than 100-in-l
million around 16 facilities.

16 The EJ analysis included research facilities that will not be directly affected by or incur costs due to this proposed
rule. While most of this RIA focuses on the 88 facilities that will incur incremental costs due to the proposed
requirements, the 97 EtO sterilization facilities assessed in the EJ analysis includes 11 research facilities and the
86 active subpart O facilities. The two planned facilities that are expected to be impacted by this proposal are not
included in the EJ analysis. The inclusion of the research facilities is not expected to materially impact the main
conclusions of the EJ analysis.

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Table 4-2. Baseline Demographic Summary: Proximity and Cancer Risk Greater than or
Equal to 1-in-l million for Populations Living Within 10 km of Facilities	

Demographic Group

Nationwide

Total Population Population with Risk
within 10 km of >l-in-l million within 10
EtO facilities km of EtO facilities

Total Population

328,000,000

19,400,000

5,300,000

Number of Facilities

-

97

78





Race and Ethnicity



White (non-Hispanic)

60%

40%

40%

African American

12%

13%

15%

Native American

0.7%

0.3%

0.3%

Hispanic or Latino (white and nonwhite)

19%

34%

38%

Other and Multiracial

8%

13%

7%





Income



Below Poverty Level

13%

14%

16%

Above Poverty Level

87%

86%

84%





Education



Over 25 and without a High School Diploma

12%

15%

18%

Over 25 and with a High School Diploma

88%

85%

82%





Linguistic Isolation



Linguistically Isolated

5%

10%

11%

The results of the baseline proximity analysis indicate that the percent of the population
that is Hispanic or Latino living within 10 km of any of the 97 EtO sterilization facilities is
higher than the national average (34 percent versus 19 percent). This is driven largely by seven
facilities in Puerto Rico, where 99 percent of the 658,000 people living in census blocks within
10 km of facilities are Hispanic or Latino. The proportions of other demographic groups living
within 10 km of sterilization facilities are relatively similar to the national averages, although
some differences exist. The percentage of the population living within 10 km of commercial
sterilization facilities is higher than the national averages for the following demographics: Other
and Multiracial, over 25 without a high school diploma, and linguistically isolated.17 However,
the higher percentage characterized as linguistically isolated compared to the national average is
largely driven by the facilities in Puerto Rico, where an average of 67 percent of the population
is linguistically isolated.

17 Linguistic isolation is defined as "a household in which all members age 14 years and over speak a non-English
language and also speak English less than "very well" (have difficulty with English)".

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Table 4-3. Baseline Demographic Summary: Proximity and Cancer Risk Greater than or
Equal to 50-in-l million for Populations Living Within 10 km of Facilities	

Demographic Group

Nationwide

Total Population Population with Risk
within 10 km of >50-in-l million within
EtO facilities 10 km of EtO facilities

Total Population

328,000,000

19,400,000

119,000

Number of Facilities

-

97

42





Race and Ethnicity



White (non-Hispanic)

60%

40%

33%

African American

12%

13%

45%

Native American

0.7%

0.3%

0.1%

Hispanic or Latino (white and nonwhite)

19%

34%

19%

Other and Multiracial

8%

13%

3%





Income



Below Poverty Level

13%

14%

22%

Above Poverty Level

87%

86%

78%





Education



Over 25 and without a High School Diploma

12%

15%

17%

Over 25 and with a High School Diploma

88%

85%

83%





Linguistic Isolation



Linguistically Isolated

5%

10%

7%

Table 4-4. Baseline Demographic Summary: Proximity and Cancer Risk Greater than 100-
in-1 million for Populations Living Within 10 km of Facilities	

Demographic Group

Nationwide

Total Population Population with Risk
within 10 km of >100-in-l million within
EtO facilities 10 km of EtO facilities

Total Population

328,000,000

19,400,000

18,000

Number of Facilities

-

97

16





Race and Ethnicity



White (non-Hispanic)

60%

40%

45%

African American

12%

13%

34%

Native American

0.7%

0.3%

0.1%

Hispanic or Latino (white and nonwhite)

19%

34%

18%

Other and Multiracial

8%

13%

3%





Income



Below Poverty Level

13%

14%

23%

Above Poverty Level

87%

86%

77%





Education



Over 25 and without a High School Diploma

12%

16%

16%

Over 25 and with a High School Diploma

88%

85%

84%





Linguistic Isolation



Linguistically Isolated

5%

10%

10%

The baseline risk-based analysis summarizes the demographics of populations living
within 10 km of facilities with estimated cancer risks greater than or equal to 1-in-l million
(Table 4-2), greater than or equal to 50-in-l million (Table 4-3), and greater than 100-in-l
million (Table 4-4). The demographics of the population with estimated cancer risks greater than
or equal to 1-in-l million under the baseline are very similar to the total population within 10 km

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of all facilities. The percent of the population that is Hispanic or Latino (38 percent versus 19
percent nationally) and linguistically isolated (11 percent versus 5 percent nationally) are higher
than the nationwide averages but similar to the percentages for the total population within 10 km
of all facilities. In contrast, the demographic groups disproportionately represented in areas with
higher baseline cancer risk are African Americans (45 percent African American in areas with
risk greater than or equal to 50-in-l million and 34 percent in areas with risk above 100-in-l
million, versus 12 percent nationwide) and those living below the poverty level (23 percent in
areas with risk above 100-in-l million versus 13 percent nationally). The much higher percent of
African Americans with baseline cancer risk greater than or equal to 50-in-l million (45 percent)
compared to the national average percent African American (12 percent) is driven mostly by
seven facilities that have African American population percentages living within 10 km that are
two to eight times greater than the national average. Similarly, the high percent of African
Americans with baseline cancer risk greater than 100-in-l million (34 percent compared to 12
percent nationally) is driven mostly by three facilities that have African American percentages
living within 10 km that are 2.5 to eight times greater than the national average.

The proximity analysis indicates that the share of the population that is African American
living within 10 km of all 97 facilities is 13 percent (only marginally higher than the 12 percent
national average), while the baseline risk-based analysis shows much higher percentages (45
percent African American in areas with baseline cancer risk greater than or equal to 50-in-l
million). The contrast between the proximity and baseline risk results for African Americans
indicates that they are not over-represented in areas around all the sterilization facilities, but they
are over-represented in areas near the higher risk facilities. In other words, the higher risk
facilities appear to be concentrated in areas with higher shares of African American residents
(and to a lesser degree where the percent living in poverty is higher), even though the average to
lower risk facilities do not show this siting pattern.

In summary, the baseline proximity analysis indicates that the percentage of residents that
are Hispanic or Latino living near commercial sterilization facilities is higher than would be
expected compared to the nation as a whole. The baseline risk-based demographic analysis,
which focuses on locations with cancer risk greater than or equal to 1-in-l million, greater than
or equal to 50-in-l million, and greater than 100-in-l million, suggests that African Americans

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are disproportionately represented in areas with higher risk sterilization facilities. These results
indicate potential for EJ concerns under baseline conditions.

4.5.3.2 Post-Control

To evaluate how this proposal would affect the distribution of risks compared to the
baseline, the EPA conducted a post-control risk-based demographic analysis for option 2. Tables
4-5, 4-6, and 4-7 show the results of the analysis for populations living within 10 km of a facility
and with cancer risks greater than or equal 1-in-l million, greater than or equal to 50-in-l
million, and greater than 100-in-l million after implementing the proposed standards. The results
indicate the proposed standards would reduce the number of individuals within 10 km of a
facility with cancer risk greater than or equal to 1-in-l million from 5.3 million to 1.15 million,
reduce the number of individuals within 10 km of a facility with risk greater than or equal to 50-
in-l million from 119,000 to 1,400 people, and reduce the number of individuals within 10 km of
a facility with risk greater than 100-in-l million from 18,000 to 0 people.

Table 4-5. Post-Control Demographic Summary: Cancer Risk Greater than or Equal to 1-
in-1 Million for Populations Living Within 10 km of Facilities	





Population with Risk >l-in-l million within

Demographic Group

Nationwide

10 km of EtO facilities





Baseline

Post-Control1

Total Population

328,000,000

5,300,000

1,150,000

Number of Facilities



78

73





Race and Ethnicity



White (non-Hispanic)

60%

40%

38%

African American

12%

15%

18%

Native American

0.7%

0.3%

0.4%

Hispanic or Latino (white and nonwhite)

19%

38%

37%

Other and Multiracial

8%

7%

7%





Income



Below Poverty Level

13%

16%

16%

Above Poverty Level

87%

84%

84%





Education



Over 25 and without a High School Diploma

12%

18%

16%

Over 25 and with a High School Diploma

88%

82%

84%





Linguistic Isolation



Linguistically Isolated

5%

11%

9%

1 The proposed Group 1 room air emission standards were not included in the risk assessment, so number of
facilities and total population exposed post-control may be lower.

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Table 4-6. Post-Control Demographic Summary: Cancer Risk Greater than or Equal to 50-
in-1 Million for Populations Living Within 10 km of Facilities	





Population with Risk >50-in-l million within

Demographic Group

Nationwide

10 km of EtO facilities





Baseline

Post Control1

Total Population

328,000,000

119,000

1,400

Number of Facilities



42

11





Race and Ethnicity



White (non-Hispanic)

60%

33%

15%

African American

12%

45%

10%

Native American

0.7%

0.1%

0.3%

Hispanic or Latino (white and nonwhite)

19%

19%

72%

Other and Multiracial

8%

3%

3%





Income



Below Poverty Level

13%

22%

26%

Above Poverty Level

87%

78%

74%





Education



Over 25 and without a High School Diploma

12%

17%

20%

Over 25 and with a High School Diploma

88%

83%

80%





Linguistic Isolation



Linguistically Isolated

5%

7%

21%

1 The proposed Group 1 room air emission standards were not included in the risk assessment, so number of
facilities and total population exposed post-control may be lower.

Table 4-7. Post-Control Demographic Summary: Cancer Risk Greater than 100-in-l

Million for Populations Living Within 10 km of Facilities	

Population with Risk >100-in-l million within
Demographic Group	Nationwide	facilities

Baseline	Post Control

Total Population

328,000,000

18,000

0

Number of Facilities



16

0





Race and Ethnicity



White (non-Hispanic)

60%

45%

-

African American

12%

34%

-

Native American

0.7%

0.1%

-

Hispanic or Latino (white and nonwhite)

19%

18%

-

Other and Multiracial

8%

3%

-





Income



Below Poverty Level

13%

23%

-

Above Poverty Level

87%

77%

-





Education



Over 25 and without a High School Diploma

12%

16%

-

Over 25 and with a High School Diploma

88%

84%

-





Linguistic Isolation



Linguistically Isolated

5%

10%

-

The baseline and post-control demographics are similar for populations in census blocks
within 10 km of facilities with estimated cancer risks greater than or equal to 1-in-l million
(Table 4-5). Under the proposed option, there are no facilities or individuals with estimated risks

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greater than 100-in-l million (Table 4-7), so there are no disproportionately represented
demographics at this risk level post-control. Therefore, the proposed requirements are expected
to mitigate the potential EJ concerns that were present under the baseline at the greater than 100-
in-l million risk level. Risks that exceed the 100-in-l million threshold are generally considered
unacceptable, so the proposed rule is expected to reduce risk to acceptable levels for all
demographics.

After implementing the proposed standards, the percentage and number of African
Americans with cancer risks greater than equal to 50-in-l million are significantly reduced and
they are no longer disproportionately represented in areas with higher risk facilities, as was the
case under the baseline. The percent of the population that is African American in areas with
cancer risk greater than or equal to 50-in-l million fell from 45 percent under the baseline to 10
percent after implementing the proposed controls (Table 4-6). However, the post-control
percentage of residents that are Hispanic or Latino in areas with cancer risks greater than or
equal to 50-in-l million increased to 72 percent (compared to 19 percent under the baseline),
driven mostly by three facilities in Puerto Rico with this post-control risk level. Nonetheless, the
number of Hispanic or Latino individuals exposed to risks greater than or equal to 50-in-l
million fell to 1,000 people, an 80 percent decline relative to the baseline. Similarly, the
percentage of the population below the poverty level and linguistically isolated in areas with risk
greater than or equal to 50-in-l million increased from the baseline, though the number of
individuals in these demographics with risk greater than or equal to 50-in-l million decreased
significantly post-control. It is important to note that while the distribution of the post-control
risks that are greater than or equal to 50-in-l million is more disproportionately concentrated
among these demographics, this risk level is still generally considered acceptable.

Based on the estimated declines in the number of individuals exposed to elevated cancer
risks, the proposed rule is expected to mitigate potential EJ concerns relative to the baseline. The
post-control risk-based demographics indicate that the proposed option 2 would significantly
reduce the number of people in all demographic groups, including vulnerable populations,
exposed to cancer risks greater than or equal to 1-in-l million, greater than or equal to 50-in-l
million, and greater than 100-in-l million. The proposal reduces the number of people with risks
greater than 100-in-l million from 18,000 to 0, so there are no over-represented demographics
post-control and the EJ concerns that were present under the baseline at this risk level appear to

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dissipate. However, the proportion of the population exposed to higher risks after implementing
the proposed requirements increases for several demographics (Hispanic or Latino, living below
the poverty level, and linguistically isolated). The percentage of the population that is Hispanic
or Latino with cancer risk greater than or equal to 50-in-l million increased compared to the
baseline because many of the facilities with this level of remaining risk are in Puerto Rico.

4.5.4 Limitations

This analysis is subject to several limitations and uncertainties. First, there may be flaws
in the underlying demographic data. Second, this analysis is subject to many of the same sources
of uncertainty as the risk analysis summarized in section 4.4.1, such as the uncertainties
associated with the baseline emissions estimates, post-control emissions reductions, and the risk
modeling parameters and assumptions. The analysis also does not account for the variation in
exposure risk for different individuals or the variability in risk over space in areas within 10 km
of EtO sterilization facilities. The analysis does not account for potential differences in
underlying susceptibility, vulnerability, or risk factors across different population demographics
in proximity to sterilization facilities affected by this proposed rule. Finally, the analysis assumes
that demographic characteristics of the nation and in areas near sterilization facilities will not
change in the future, but the EPA is unable to predict how demographics might shift after the
source category has complied with a final rule. Disparities may exist that were not identified in
this analysis.

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5 ECONOMIC IMPACTS

5.1	Introduction

This proposed rule is a significant action under section (3)(f)(l) of Executive Order
12866. The presentation of the compliance cost estimates in chapter 3 does not speak directly to
potential economic and distributional impacts of the proposed rule, which may be important
consequences to consider. This chapter contains the small entity analysis conducted for this
proposal and qualitative discussions of potential market and employment impacts.

5.2	Initial Regulatory Flexibility Analysis

This section presents the Initial Regulatory Flexibility Analysis (IRFA) for this proposed
rule. This section describes the methods used to perform the small entity screening conducted for
this proposal and the results of the screening. A small entity screening is used to determine
whether a regulatory action may have a significant economic impact on a substantial number of
small entities (SISNOSE). Thresholds for what constitutes 'significant' for economic impacts
and 'substantial' for the number of small entities are outlined in guidance prepared for the
Regulatory Flexibility Act (RFA) as amended by the Small Business Regulatory Enforcement
Fairness Act (SBREFA).

The EPA did not certify a 'no SISNOSE' determination for this proposal as the small
entity screening analysis identified potential for significant cost impacts on a substantial share of
the small entities affected by this proposed rule. When a 'no SISNOSE' determination cannot be
certified, the agency responsible for issuing the regulation in question must complete an IRFA.
This section describes the IRFA conducted for this proposed rule, including summaries of the
EPA's small entity outreach and other efforts to reduce impacts on small businesses.

5.2.1 Regulatory Flexibility Act Background

The Regulatory Flexibility Act (RFA; 5 U.S.C.§ 601 et seq.), as amended by the Small
Business Regulatory Enforcement Fairness Act (Public Law No. 104-121), provides that
whenever an agency is required to publish a general notice of proposed rulemaking, it must
prepare and make available an initial regulatory flexibility analysis (IRFA), unless it certifies that

5-1

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the proposed rule, if promulgated, will not have a significant economic impact on a substantial
number of small entities (5 U.S.C. § 605[b]). Small entities include small businesses, small
organizations, and small governmental jurisdictions. An IRFA describes the economic impact of
the proposed rule on small entities and any significant alternatives to the proposed rule that
would accomplish the objectives of the rule while minimizing significant economic impacts on
small entities. Pursuant to section 603 of the RFA, the EPA prepared an IRFA that examines the
impact of the proposed rule on small entities along with regulatory alternatives that could
minimize that impact.

5.2.2	Reasons Why Action is Being Considered

This industry is regulated by the EPA because pollutants emitted from EtO sterilization
and fumigation facilities are considered to cause or contribute significantly to air pollution that
may reasonably be anticipated to endanger public health. This action is being proposed to
comply with CAA section 112 requirements, which direct the EPA to complete periodic reviews
of NESHAPs following initial promulgation. The proposed requirements are being considered to
address unacceptable health risks linked to emissions from subpart O facilities and to provide an
ample margin of safety to protect public health.

5.2.3	Statement of Objectives and Legal Basis for Proposed Rule

The EPA is required under CAA section 112(d) to establish emission standards for each
category or subcategory of major and area sources of HAPs listed for regulation in section
112(b). These standards are applicable to new or existing sources of HAPs and require the
maximum degree of emission reduction. The EPA is required to review these standards set under
CAA section 112 every eight years following their promulgation and revise them as necessary,
taking into account any "developments in practices, processes, or control technologies." This
review is known as the technology review. It has been over 25 years since the initial NESHAP
for this source category was promulgated in 1994 and roughly 15 years since the last technology
review. As such, this proposal is overdue. This proposal also establishes standards for currently
unregulated sources of EtO emissions at subpart O facilities under CAA section 112(d), such as
fugitive emissions. The decision in Louisiana Environmental Action Network v. EPA, 955 F.3d
1088 (D.C. Cir. 2020) concluded that the EPA is required to address regulatory gaps (i.e., "gap-

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filling") when conducting NESHAP reviews. Finally, the EPA determined that a risk review was
warranted (despite not being required) due to the updated unit risk estimate associated with EtO,
which is significantly higher than it was during the last review of this NESHAP in 2006.
Therefore, the EPA is proposing requirements under CAA section 112(f) to address unacceptable
health risk attributed to emissions from subpart O facilities and to provide an ample margin of
safety to protect public health.

5.2.4 Description and Estimate of Affected Small Entities

The Regulatory Flexibility Act (RFA) describes small entities as "small businesses,"
"small governments," and "small organizations" (5 USC 601). The proposed amendments being
considered by the EPA in this action are expected to affect a variety of businesses, including
small businesses, but would not affect any small governments or small organizations. The
"business" is defined as the owner company, rather than the facility. In an IRFA, the EPA
evaluates affected entities at the highest level of business ownership, or the ultimate parent
company level. The analysis uses the size of the ultimate parent company to determine the
resources it has available to comply with the rule.

The EPA used several sources of information to develop the list of commercial
sterilization facilities that may be impacted by this proposed rule. The EPA began with the
facility list used during the previous RTR and supplemented that with facilities in the 2017
National Emissions Inventory (NEI), as well as facilities identified using the Office of
Enforcement and Compliance Assurance's Enforcement and Compliance History Online tool.18
The EPA reviewed available federal, state, and local data to determine whether any of these
facilities had closed or ceased using EtO for sterilization purposes. EPA regional offices were
asked to identify any commercial sterilization facilities that were missed. Additionally, the
December 2019 Section 114 questionnaire and the September 2021 Information Collection
Request (ICR) asked parent companies to provide information on any commercial sterilization
facilities they owned that had not already been identified.

To conduct a small entity screening, the EPA first identifies the ultimate parent
companies that own affected facilities, and obtains those companies' most recent annual

18 https://echo.epa.gov

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revenues, number of employees, and North American Industrial Classification System (NAICS)
code using the Dun & Bradstreet Hoover's online database.19 SBA size standards are defined for
each NAICS code based on either annual revenues or employees. To determine whether an entity
is small, the EPA identifies the size standard corresponding to the NAICS code of the ultimate
parent company and compares the company's annual revenues (or employees) to the standards.
To assess potential impacts on small entities, the EPA calculates cost-to-sales ratios, which
compare facility-level annualized compliance costs aggregated to the ultimate parent company
level to annual sales revenues of the ultimate parent company. This metric for evaluating impacts
is known as the "sales test" and is consistent with guidance published by the SBA's Office of
Advocacy.20

The EPA identified 97 EtO sterilization facilities currently operating in the U.S., 86 of
which will be impacted by this proposed rule and incur costs. There are 11 active facilities that
will not be affected by the proposed rule because they are purposed solely for conducting
research. The EPA knows of two planned facilities that are expected to start operating before the
proposed compliance deadline, so the total number of affected facilities is 88.

There are 48 ultimate parent companies that own the 88 commercial sterilization facilities
affected by this proposal, as several parent companies own multiple facilities. About 42 percent
(20) of the 48 parent companies are small entities. Out of the 88 facilities expected to incur costs
to comply with the proposal, 24 facilities, or about 27 percent of facilities, are owned by ultimate
parent companies that are small entities based on the business size standards defined by the U.S.
Small Business Administration (SBA).21

See Table 5-1 for average entity-level annualized cost estimates for the proposed option 2
and annual sales by entity size. The average annualized cost of the proposed option 2 is about $1
million for small entities and about $1.7 million for large entities. Average annual sales for the
20 small entities is $41 million while the 28 large businesses have average annual sales of $15.7
billion.

19 Dun & Bradstreet, Inc. (2022). D&B Hoovers. Retrieved from https://app.dnbhoovers.coin/.

211 U.S. SBA, Office of Advocacy. (2017). A Guide for Government Agencies: How to Comply with the Regulatory
Flexibility Act. Retrieved from https://advocacy.sba.gOv/2017/08/31/a-guide-for-government-agencies-how-to-
comply-with-the-regulatory-flexibility-act/.

21 U.S. Small Business Administration. (2022). Table of Small Business Size Standards. Found at
https://www.sba.gov/document/support-table-size-standards.

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Table 5-1. Mean Option 2 Costs and Sales (2021$) by Entity Size

Entity
Size

Number of
Affected
Entities

Percent of
Affected
Entities

Number of
Affected
Facilities

Percent of
Affected
Facilities

Mean
Annualized Cost
(millions)3

Mean Annual
Sales
(millions)

Small

20

42%

24

27%

$1.0

$41

Large

28

58%

64

73%

$1.7

$15,665

All

48

100%

88

100%

$1.4

$9,155

a Annualized costs are summed across facilities owned by an entity.

Table 5-2 shows the NAICS codes for the ultimate parent companies that own facilities
affected by this proposed rule. The table also contains the SBA size standards for the affected
NAICS codes. The table shows a wide variety of industries, although most of the companies
affected (31 out of 48, or 65 percent) have medical equipment- or health service-related NAICS
codes. The industry with the highest number of companies and facilities affected by this
proposed rule is NAICS 339112, 'Surgical and Medical Instrument Manufacturing', with 17
affected parent companies and 24 affected facilities. The second most common NAICS code is
423450, 'Medical, Dental, and Hospital Equipment and Supplies Merchant Wholesalers', with 6
affected parent companies and 13 affected facilities.

Table 5-3 lists the entities affected by this proposed rule and includes their NAICS code,
number of facilities owned, and whether they are a small entity.

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Table 5-2. Affected NAICS Codes and SBA Small Entity Size Standards

2019



Small Entity

Small

Parent



NAICS
Code

NAICS Description

Standard:
Receipts

Entity
Standard:

Companies
Affected

Facilities
Affected



(million $)

Employees



339112

Surgical and Medical Instrument Manufacturing



1,000

17

24

423450

Medical, Dental, and Hospital Equipment and



200

f.

13

Supplies Merchant Wholesalers



U

561990

All Other Support Services

12



4

13

339113

Surgical Appliance and Supplies Manufacturing



750

2

2

621999

All Other Miscellaneous Ambulatory Health Care
Services

16.5



2

7

325412

Pharmaceutical Preparation Manufacturing
Research and Development in the Physical,



1,250

2

3

541715

Engineering, and Life Sciences (except
Nanotechnology and Biotechnology)



1,000

2

2

333244

Printing Machinery and Equipment Manufacturing



750

1

3

541380

Testing Laboratories

16.5



1

1

332994

Small Arms, Ordnance, and Ordnance Accessories



1,000



1

Manufacturing



1

622110

General Medical and Surgical Hospitals

41.5



1

1

621511

Medical Laboratories

35



1

1

315220

Men's and Boys' Cut and Sew Apparel



750

1

1

Manufacturing





311942

Spice and Extract Manufacturing



500

1

3

812990

All Other Personal Services

8



1

8

424210

Drugs and Druggists' Sundries Merchant
Wholesalers



250

1

1

811219

Other Electronic and Precision Equipment Repair

22



1

1

and Maintenance





541611

Administrative Management and General

16.5



i

1

Management Consulting Services



1

551112

Offices of Other Holding Companies

22



1

1

525910

Open-End Investment Funds

35



1

1

Table 5-3. Affected Parent Companies

Ultimate Parent Company

NAICS
Code

Annual
Revenues
(millions)

Employees

Small
Business

Affected
Facilities

3M Company
Abbott Laboratories
Alcon AG

Andersen Scientific Inc

Applied Medical Corporation

Arthrex, Inc.

Aso Corporation

B. Braun of America Inc.

Baxter International Inc.

Becton, Dickinson and Company

Blue Line Sterilization Services LLC

339112
325412
525910
811219
339112

339112

339113
339112
339112
339112
561990

32,180
34,610
6,830
0.26
700
620
47
960
11,670
17,120
1.4

95,000
109,000
23,655
2

4,319
1,200
240
4,099
50,000
72,063
6

No
No
No
Yes
No
No
Yes
No
No
No
Yes

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Ultimate Parent Company

NAICS
Code

Annual
Revenues
(millions)

Employees

Small
Business

Affected
Facilities

Bon Secours Mercy Health, Inc.

622110

9,970

19,000

No

1

Boston Scientific Corporation

339112

9,910

38,000

No

3

Boulder BioMed, LLC

423450

2.6

12

Yes

1

Cardinal Health, Inc.

424210

152,920

30,000

No

1

Chatham Corporation

333244

69

400

Yes

3

Cook Group Incorporated

339112

1,610

12,000

No

1

Cosmed Group, Inc.

561990

11

94

Yes

2

Deroyal Industries, Inc.

339112

412

2,000

No

1

DF World of Spices GmbH

551112

580

3,268

No

1

Dynatec Scientific Laboratories

541380

3.7

35

Yes

1

Edwards Lifesciences Corp

339113

4,390

13,000

No

1

Elite Spice, Inc.

311942

110

600

No

3

Eto Sterilization Inc.

332994

2.5

11

Yes

1

Johnson & Johnson

325412

82,580

136,400

No

1

Jorgensen Laboratories, Inc.

423450

14

35

Yes

1

Lemco Enterprises, Inc.

561990

1.0

9

Yes

1

Life Science Outsourcing, Inc.

339112

20

80

Yes

1

Lifenet Health

339112

376

500

Yes

1

Livanova PLC

339112

930

1,325

No

1

Medline Industries, LP

339112

7,750

25,000

No

1

Medtronic Public Limited Company

621999

30,120

102,662

No

5

Midwest Sterilization Corporation

621999

13

100

Yes

2

North American Science Associates, LLC

541715

102

533

Yes

1

Owens & Minor, Inc.

423450

8,480

18,800

No

8

Parter Medical Products, Inc.

423450

39

160

Yes

1

Professional Contract Sterilization, Inc.

339112

2.9

10

Yes

1

Puerto Rico Hospital Supply, Inc.

423450

51

150

Yes

1

Robert Busse & Co., Inc.

423450

93

280

No

1

Sotera Health LLC

561990

446

1,950

No

9

Steris Public Limited Company

812990

3,030

12,359

No

8

Steritec Inc.

621511

3.5

13

Yes

1

Steri-Tech, Inc.

315220

1.7

38

Yes

1

Stryker Corporation

339112

14,350

43,042

No

1

Terumo Corporation

339112

5,790

26,482

No

2

The Jackson Laboratory

541715

441

2,100

No

1

Torque Medical Holdings, LLC

541611

18

91

No

1

Trinity Sterile, Inc.

339112

59

117

Yes

1

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5.2.5 Compliance Cost Impact Estimates

The EPA uses a "sales test" as the impact methodology in small entity analyses for
rulemakings as opposed to a "profits test", in which annualized compliance costs are calculated
as a share of profits. This is consistent with EPA guidance on the Small Business Regulatory
Enforcement Fairness Act and guidance from the SBA's Office of Advocacy, which suggests
that cost as a percentage of total revenues is a suitable metric for evaluating cost impacts on
small entities relative to large entities.22 This is because revenues or sales data are commonly
available for entities impacted by regulators and profits data are often private or misrepresent
true profits earned by firms after accounting and tax considerations.

The EPA calculated cost-to-sales ratios (CSRs) by first estimating the total annualized
compliance cost for each affected entity using a 7.75 percent interest rate to annualize capital
costs over the lifetime of the equipment and summing the annualized capital costs with other
annual costs such as operating and maintenance costs. The EPA summed the annualized
compliance costs for each facility owned by an affected entity and divided the costs by the
company's annual sales to obtain the cost-to-sales ratio. Small entities incurring annualized
compliance costs less than 1 percent of sales are not expected to experience significant economic
impacts due to the proposed rule. Small entities with costs between 1 and 3 percent, or greater
than 3 percent, may potentially experience significant economic impacts.

Tables 5-4 through 5-6 show the number of entities, and the mean annualized costs per
entity, mean cost-to-sales ratio, median cost-to-sales ratio, minimum cost-to-sales ratio, and
maximum cost-to-sales ratio by entity size for the three regulatory options. The 20 small entities
represent 42 percent of total affected entities. For the least stringent option (option 1), the
average annualized cost per entity for small entities is about $0.9 million in 2021 dollars,
compared to $1.7 million for large entities. On average, small entities are estimated to experience
a 16 percent cost-to-sales ratio for option 1, compared to an average of 0.2 percent for large
entities and about 7 percent for all entities. The highest cost-sales-ratio estimated is 68 percent.

22 U.S. SBA, Office of Advocacy. (2012). A Guide for Government Agencies, How to Comply with the Regulatory
Flexibility Act, Implementing the President's Small Business Agenda and Executive Order 13272, May 2012.
Found at https://www.sba.gov/sites/default/files/rfaguide_0512_0.pdf.

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Table 5-4. Summary of Option 1 Costs per Entity and Cost-to-Sales Ratios by Entity Size

Entity
Size

Number of
Affected
Entities

Percent of
Affected
Entities

Mean Annualized
Cost per Entity
(mill 2021$)

Mean
CSR

Median
CSR

Min CSR

Max
CSR

Small

20

42%

$0.9

16%

8.1%

0%

68%

Large

28

58%

$1.7

0.2%

0%

0%

1.8%

All

48

100%

$1.4

6.9%

0.4%

0%

68%

The average, median, and maximum cost-to-sales ratios are higher for the proposed
option 2 (Table 5-5). The average annualized cost of option 2 per entity for small entities is about
$1 million in 2021 dollars, compared to $1.7 million for large entities. On average, small entities
are estimated to experience a 19 percent cost-to-sales ratio for option 2, compared to an average
of 0.3 percent for large entities and about 8 percent for all entities. The highest cost-sales-ratio
estimated for an entity is 68 percent. Option 3 has the highest average cost-to-sales ratios (Table
5-6). The average annualized cost of option 3 per entity for small entities is about $1 million in
2021 dollars, compared to $2 million for large entities. On average, small entities are estimated
to experience a 21 percent cost-to-sales ratio for option 3, compared to an average of 0.4 percent
for large entities and about 9 percent for all entities. The highest cost-sales-ratio under option 3 is
estimated to be 114 percent.

Table 5-5. Summary of Option 2 Costs per Entity and Cost-to-Sales Ratios by Entity Size

Entity
Size

Number of
Affected
Entities

Percent of
Affected
Entities

Mean Annualized
Cost per Entity
(mill 2021$)

Mean
CSR

Median
CSR

Min
CSR

Max
CSR

Small

20

42%

$1.0

19%

7.3%

0%

68%

Large

28

58%

$1.7

0.3%

0%

0%

3.9%

All

48

100%

$1.4

7.9%

0.3%

0%

68%

Large entities incur most of the total costs estimated for the proposed option and they
incur higher total annualized costs per entity on average than small entities. However, when
estimated costs are examined relative to revenues, large entities are much less impacted by the
proposed rule than small entities. For all three regulatory options, the average cost-to-sales ratio
for small entities is significantly higher than for large entities. This is driven by differences in
revenues—average entity-level annual revenues are over $15 billion for large entities and about

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$41 million for small entities (Table 5-1). For option 2, the average cost-to-sales ratio for small
entities is about 60 times higher than for large entities.

Table 5-6. Summary of Option 3 Costs per Entity and Cost-to-Sales Ratios by Entity Size

Entity
Size

Number of
Affected
Entities

Percent of
Affected
Entities

Mean Annualized
Cost per Entity
(mill 2021$)

Mean
CSR

Median
CSR

Min
CSR

Max CSR

Small

20

42%

$1.0

21%

7.5%

0.1%

114%

Large

28

58%

$2.0

0.4%

0%

0%

4.1%

All

48

100%

$1.6

8.9%

0.4%

0%

114%

See Table 5-7 for a summary of the number and percent of businesses (and small
businesses) that meet or exceed the 1 and 3 percent cost-to-sales ratio thresholds for each of the
three regulatory options. Under the proposed option 2, 17 out of 20 parent companies identified
as small entities (85 percent) are estimated to incur annualized costs greater than 1 percent of
annual revenues. Twelve out of 20 small entities (60 percent) are estimated to incur annualized
costs greater than 3 percent of annual revenues. The 12 small entities with 3 percent or greater
cost-to-sales ratios under option 2 collectively own 16 facilities.

Under the less stringent option 1,17 out of 20 parent companies identified as small
entities (85 percent) are estimated to incur annualized costs greater than 1 percent of annual
revenues. Twelve out of 20 small entities (60 percent) are estimated to incur annualized costs
greater than 3 percent of annual revenues. The 12 small entities with 3 percent or greater cost-to-
sales ratios under option 1 collectively own 16 facilities.

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Table 5-7. Cost-to-Sales Ratio Summary for Options 1, 2, and 3

Capital Cost . .. , „ ,
(Million 2021$) Cost

Entities with 1%
or greater Cost-to-
Sales

Entities with 3% or
greater Cost-to-
Sales

All Entities (n=48, Facilities=88)







Option 1 $146

$66

19 (40%)

12 (25%)

Option 2 $220

$68

20 (42%)

13 (27%)

Option 3 $308

$76

21 (44%)

13 (27%)

Small Entities (n=20, Facilities=24)

Option 1 $44
Option 2 $71
Option 3 $84

$17
$20
$21

17 (85%)

17	(85%)

18	(90%)

12 (60%)
12 (60%)
12 (60%)

Under the more stringent option 3, 18 out of 20 parent companies identified as small
entities (90 percent) are estimated to incur annualized costs greater than 1 percent of annual
revenues. Twelve out of 20 small entities (60 percent) are estimated to incur annualized costs
greater than 3 percent of annual revenues. Those 12 small entities with 3 percent or greater cost-
to-sales ratios under option 3 collectively own 16 facilities.

The results of this small entity screening indicate potential for a significant share of the
small entities affected by this proposed rule to incur high costs relative to their revenues. Large
entities affected by the proposed rule have much lower cost-to-sales ratios. For option 1, all the
entities with cost-to-sales ratios above 3 percent are small entities. Under option 2 and option 3,
there are 12 small entities and one large entity with cost-to-sales ratios above 3 percent. Across
the options, there are five to six small entities and two large entities with cost-to-sales ratios
above 1 percent but lower than 3 percent. See Table 5-8 through Table 5-9 for further breakdown
of the number and percent of entities (and facilities) affected at various cost-to-sales thresholds.

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Table 5-8. Number and Percent of Entities at Various Cost-to-Sales Levels

Capital
Cost





Cost-to-Sales Ratios



Cost

Less than

1% to

3% to

5% to

Greater

1%

3%

5%

10%

than 10%

All Entities (n=48)













Option 1 $146

$66

29 (60%)

7 (15%)

2 (4%)

0 (0%)

10 (21%)

Option 2 $220

$68

28 (58%)

7 (15%)

3 (6%)

0 (0%)

10 (21%)

Option 3 $308

$76

27 (56%)

8 (17%)

3 (6%)

0 (0%)

10 (21%)

Small Entities (n=20)













Option 1 $44

$17

3 (15%)

5 (25%)

2 (10%)

0 (0%)

10 (50%)

Option 2 $71

$20

3 (15%)

5 (25%)

2 (10%)

0 (0%)

10 (50%)

Option 3 $84

$21

2 (10%)

6 (30%)

2 (10%)

0 (0%)

10 (50%)

Table 5-9. Number and Percent of Facilities Affected at Various Cost-to-Sales Levels

Capital
Cost





Cost-to-Sales Ratios



Cost

Less than

1% to

3% to

5% to

Greater

1%

3%

5%

10%

than 10%

Facilities owned by All Entities (n=88)











Option 1 $146

$66

57 (65%)

15 (17%)

4 (5%)

0 (0%)

12 (14%)

Option 2 $220

$68

54 (61%)

15 (17%)

7 (8%)

0 (0%)

12 (14%)

Option 3 $308

$76

53 (60%)

16 (18%)

7 (8%)

0 (0%)

12 (14%)

Facilities owned by Small Entities (n=24)









Option 1 $44

$17

3 (13%)

5 (21%)

4 (17%)

0 (0%)

12 (50%)

Option 2 $71

$20

3 (13%)

5 (21%)

4 (17%)

0 (0%)

12 (50%)

Option 3 $84

$21

2 (8%)

6 (25%)

4 (17%)

0 (0%)

12 (50%)

Regulatory costs can disproportionately impact small entities for several reasons, even
when larger firms incur higher absolute costs. In addition to potentially holding more market
power, larger companies may be better positioned financially than small businesses to invest in
proven compliance mechanisms, obtain financing for upgrades, or conduct research and
development needed to innovate and identify more efficient compliance methods. Small firms
have fewer units of production to spread compliance costs over. In some situations, larger firms
may also have the advantage of being closer to meeting a more stringent new standard under
baseline conditions.

While the EPA cannot anticipate outcomes for any particular facility or parent company,
the number of firms and the size distribution of affected firms in the EtO sterilization sector
could be affected by this proposed rule. Impacted facilities will vary in cost structure, company

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size in terms of revenue and employees, access to financing opportunities, and the type and range
of products they sterilize.

5.2.6	Caveats and Limitations

The cost-to-sales ratios estimated in this analysis may be overstated or understated
depending on the accuracy of the information in the underlying data on parent company
ownership and parent company revenues in addition to the accuracy of the facility-level
engineering costs. The uncertainties associated with the cost estimates are discussed in section
3.8.

While a "sales test" can provide some insight as to the economic impact of an action such
as this one, it assumes that the impacts of a regulation are solely incident on a directly affected
firm (therefore, no impact to consumers of the affected product), or solely incident on consumers
of output directly affected by this action (therefore, no impact to companies that are producers of
the affected product). Thus, an analysis such as this one is best viewed as providing insight on a
polar example of economic impacts: maximum impact to directly affected companies. A "sales
test" analysis does not consider shifts in supply and demand curves to reflect intermediate
economic outcomes.

5.2.7	Reporting, Recordkeeping, and Other Compliance Requirements

The EPA is proposing amendments that affect reporting, recordkeeping, and other
compliance requirements in subpart O. The requirements are mandatory for all operators of
facilities subject to the standards. Section 114 of the CAA (42 U.S.C. 7414) authorizes the EPA
to establish recordkeeping and reporting requirements. The EPA and delegated permitting
authorities use the information in operators' reports and records to ensure compliance with the
standards and identify facilities, records, or processes that may need inspection.

This proposed rule changes the notification, performance testing, and reporting and
recordkeeping requirements for several emission sources at affected commercial sterilization
facilities (e.g., SCV, ARV, CEV, and room air emissions). The proposed amendments also
require electronic reporting, remove the SSM exemption, and impose other revisions that affect
reporting and recordkeeping.

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This proposed rule requires industry respondents to provide one-time and periodic
notifications, including initial notification, notification of performance tests, and notification of
compliance status. Respondents are also required to submit electronic reports documenting
compliance and performance test results, including details on any compliance issues.
Notifications and responses are required on a quarterly, semiannual, annual, or one-time basis
depending on the facility and type of response. Operators are required to keep documentation of
the supporting information included in these notifications and reports.

The industry recordkeeping and reporting burden of this proposed rule is associated with
reviewing the proposed requirements, gathering relevant information, conducting initial
performance tests and periodic performance tests if necessary, installing and maintaining
emissions monitors, developing systems to process and maintain information, writing and
submitting notifications and reports, and training personnel in compliance and use of the
information systems. The average annual recordkeeping and reporting burden (averaged over the
first three years after the compliance date) for the 87 responding facilities subject to subpart O is
estimated to be approximately $11.5 million in cost23 ($2019) and approximately 87,000 in labor
hours per year on average for the first three years. The annual public reporting and recordkeeping
burden is estimated to average approximately 20,000 hours per year for the first three years.
Burden is defined at 5 CFR 1320.3(b).

Due to technical aspects of EtO sterilization operations and the types of control
equipment required by the proposal, the recordkeeping and reporting requirements are the same
for both small and large entities. The EPA considers these to be the minimum requirements
needed to ensure compliance and, therefore, cannot reduce them further for small entities.

5.2.8 Related Federal Rules

EtO sterilization is also regulated by the EPA under the NESHAP for Hospital Sterilizers.
The NESHAP for the hospital sterilizers was developed under the Urban Air Toxics Strategy24
and covers EtO used to sterilize medical equipment at all hospitals nationwide. The Hospital
Sterilizers NESHAP was finalized in December 2007 (72 FR 73611). Hospital sterilizers are not

23	The reporting and recordkeeping cost burden estimate includes capital, labor, and other operating and

maintenance costs.

24	64 FR 387065

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covered under the commercial EtO sterilization source category (Subpart O). In addition, the
EPA's Office of Pesticide Programs within the Office of Chemical Safety and Pollution
Prevention (OCSPP) regulates the distribution, sale and use of all pesticides (insecticides,
herbicides, rodenticides, disinfectants, and sanitizers) in the U.S. and establishes maximum
levels for pesticide residues in food. EtO has antimicrobial uses, for medical device sterilization,
and is also a conventional pesticide used to treat spices.

Aside from the EPA, several other Federal agencies regulate commercial sterilization
facilities:

•	The Food and Drug Administration (FDA) validates sterilization processes for medical
devices. FDA regulations in 21 CFR (Food and Drugs) refer to voluntary consensus
standards that describe how to develop the validation cycles for EtO, gamma, and e-beam
sterilization for medical devices. The standards that FDA refers to include ISO
11135:2014, ISO 10993-7:2008(R)2012, ISO 11137, and ISO 13485:2016. Furthermore,
the FDA defines quality management system requirements for medical devices and the
acceptable EtO residual levels for sterilized products. Spice fumigation is regulated under
the Food Safety Modernization Act at 21 CFR Part 117.

•	The Occupational Health and Safety Administration (OSHA) sets permissible worker
exposure limits to EtO within sterilization facilities at 29 CFR §1910.1047.

•	The Department of Transportation regulates the drums used to transport EtO at 49 CFR
§173.323.

5.2.9 Regulatory Flexibility Alternatives

Pursuant to sections 603 and 609(b) of the RFA, the EPA prepared an initial regulatory
flexibility analysis (IRFA) for the proposed rule and convened a Small Business Advocacy
Review (SBAR) Panel to obtain recommendations from small entity representatives (SERs) that
would potentially be subject to the proposed rule.

The SBAR Panel reviewed the information provided by the EPA to the SERs and the
SERs' oral and written comments from the pre-panel outreach and panel outreach. The Panel's
review identified several significant alternatives for consideration by the Administrator of the
EPA which accomplish the stated objectives of the CAA and minimize any significant economic

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impact of the proposed rule on small entities. The significant issues and alternatives identified by
the Panel are summarized below. A copy of the full SBAR Panel Report is available in the
docket.

Format of the Standards. As described in the preamble, the EPA is proposing emission
reduction requirements for SCVs and ARVs at all facilities, as well as CEVs at facilities where
EtO use is less than 10 tpy. The Panel recommended that EPA review the technical and
economic feasibility of the emission reduction requirements under consideration. The EPA
determined that the proposed emission reduction requirements are technically and economically
feasible. The EPA is soliciting comment on all proposed standards.

The EPA is also proposing emission rate standards for CEVs at facilities where EtO use
is at least 10 tpy, as well as room air emissions for all facilities. For emission reduction
requirements, the EPA is soliciting comment on whether to adopt equivalent emission rate
standards and, if so, how those equivalent emission rates should be calculated. The Panel
recommended that the EPA consider an outlet EtO concentration that correlates with the
increased emission reduction standards. The Panel also recommended that the EPA consider
regulatory alternatives based on process changes that lower EtO concentration in downstream,
post-sterilization, and post-aeration areas. The EPA has considered concentration standards but is
unable to justify them due to the potential for dilution of the emission stream as a means of
compliance (i.e., no emission reduction). The only way to mitigate this problem is to also set a
limit on the volumetric flow rate of the emission stream. As explained in section III of the
preamble, if both the volumetric flow rate and EtO concentration are restricted, there are at least
two potential outcomes. One outcome is that a facility could keep the volume of the enclosure
constant but restrict the number of air changes per hour. This could potentially result in an
increase in EtO concentration within the enclosure. In order to maintain personnel safety,
significant upgrades and changes may need to be made, which could require significant costs.
Another possible outcome is that the facility could keep the number of air changes per hour
constant but restrict the volume of the enclosure. Both of these outcomes could result in a
reduced capacity to sterilize medical products, which could further impact the facilities and the
supply chains that rely on them. The EPA is only proposing limits on both the volumetric flow
rate and EtO concentration for two facilities because it is necessary to reduce risk to acceptable
levels and because the EPA is unable to justify a lower emission rate standard due to limitations

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of current EtO measurement technology. However, the EPA is taking comment on this approach
(Comment C-33 in the preamble).

Room Air Emissions. The Panel recommended that the EPA review the post-aeration
room areas for shipping and warehouse and clearly define the activities, per the EPA's obligation
to set standards for unregulated emissions at major sources (LEAN v. EPA, 955 F.3d 1088 (D.C.
Cir. 2020)). As described in the preamble to the proposal,25 the EPA is proposing to define
emissions from post-aeration handling of sterilized material as "Group 2 room air emissions".

As described in the preamble, the EPA is proposing to require facilities to operate areas
with room air emissions in accordance with the PTE requirements of EPA Method 204 of
appendix M to 40 CFR part 51 where those emissions are subject to an emission limit. The EPA
believes this is necessary to ensure complete capture of EtO emissions from this source and, in
turn, compliance with the proposed standard. The Panel recommended that the EPA confirm the
status of facilities with respect to whether they have implemented or are implementing capture
and control for room air emissions. The Panel also recommended that the EPA continue to
observe those facilities that either implemented or are in the process of implementing Method
204 to identify any potential issues with compliance, as well as potential remedies to those
issues. The EPA has identified at least four facilities that have demonstrated compliance with
Method 204, indicating that this is technically feasible for the source category. The EPA
continues to monitor these facilities but has not observed any issues significant enough to
indicate that implementation of Method 204 is infeasible.

As part of the September 2021 ICR, the EPA requested information on stand-alone
warehouses. These are facilities where sterilized product may be sent after it leaves the
sterilization facility. The Panel recommended that the EPA clearly explain future intended
actions related to reduction of EtO emissions at offsite shipping and warehouse facilities. The
EPA is not proposing requirements for these facilities as part of this action. However, the EPA
plans to evaluate the data received and determine what requirements these facilities should be
subject to, if any.

Subcategorization. The Panel recommended that the EPA explore potential
subcategories that would minimize cost burden to small businesses while also minimizing risk to

25 See preamble section III. A

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nearby populations as appropriate. As described in the preamble to this proposal, the EPA is
proposing to establish different requirements for Group 2 room air emissions at existing area
source facilities depending on annual EtO use. For existing area source facilities where EtO use
is at least 20 tpy (as well as major source facilities), the EPA is proposing to limit Group 2 room
air emissions to 2.8E-3 lb/hr. To ensure complete capture of EtO emissions from this source and,
in turn, compliance with the proposed standard, the EPA is proposing to require each of these
facilities to operate areas with Group 2 room air emissions in accordance with the PTE
requirements of EPA Method 204 of appendix M to 40 CFR part 51. For Group 2 room air
emissions at existing area source facilities where EtO use is less than 20 tpy, the EPA is
proposing to require these facilities to follow either the Cycle Calculation Approach or the
Bioburden / Biological Indicator Approach to achieve sterility assurance in accordance with ISO
11135:2014 and ISO 14161:2009. The EPA had considered, but was unable to justify, applying
the emission rate limit to all existing Group 2 room air emissions at area source facilities. This is
because the cost to sales ratio would exceed five percent for six companies, all of which are
small entities. However, for Group 2 room air emissions at existing area source facilities where
EtO use is at least 20 tpy, the EPA believes that the emission rate limit is necessary to reduce risk
to acceptable levels.

The Panel also recommended that the EPA investigate whether subcategories based on
class, size, or type could be developed based on observed differences in downstream room air
concentration. However, the EPA has not found any correlation between room air concentration
and either the risk that a facility poses or whether it is owned by a small entity. Therefore, the
EPA did not find that subcategorization based on room air concentration would reduce impacts
on small businesses.

Compliance Timeframe. As discussed in the preamble to this proposal,26 the EPA is
proposing an 18-month compliance timeframe for all existing source standards. The Panel
recommended that the EPA highlight the availability of a 1-year extension of the compliance
date if the source demonstrates to the state permitting authority or the EPA determines that an
extension is necessary for the installation of controls (Section 112(i)(3(B) of the CAA). In
addition, the Panel recommended that, should a 1-year extension under 112(i)(3) be granted, the

26 See preamble section III.H

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EPA also take comment on how to complement other available statutory compliance flexibilities
that may be necessary to maintain adequate sterilization capacity to protect public health. The
EPA acknowledges that there are several factors that either support or undermine the justification
for an expedited compliance timeframe for existing sources. In order to implement the capture
and emission reduction systems necessary to comply with the proposed requirements, facilities
will need to cease operations for a certain period of time in order to implement these systems.
However, an expedited compliance timeframe could result in more facilities needing to cease
operations simultaneously. This means that increased coordination would be needed to ensure
that the supply of medical devices is not adversely impacted. The EPA also recognizes the health
risks that this source category currently poses and that the risks of EtO exposure have been made
known for some time. In addition, a significant portion of the industry is already operating the
types of capture and control systems that we anticipate will be needed to comply with the
proposed standards. The EPA is soliciting comment on this compliance timeframe (Comment C-
77 in the preamble).

The Panel also recommended that the EPA consult with the FDA to understand the
impact to the supply of medical equipment that could occur if all EtO sterilization facilities are
concurrently making significant upgrades to their air pollution control techniques and will
potentially have simultaneous periods of shutdown. As discussed in preamble, the EPA has had
discussions with FDA regarding the potential impacts of this proposal on commercial
sterilization facilities. These discussions highlighted concerns regarding the potential impact on
the availability of certain medical devices, including those that are (1) experiencing or at risk of
experiencing a shortage, (2) in high demand as a result of the COVID-19 pandemic, (3) used in
pediatric services, and/or (4) sterilized exclusively at a particular facility.

Other Items. The Panel recommended that the EPA consider GACT standards for area
sources to the maximum extent possible and take comment on GACT standards for area sources.
As described in the preamble to this proposal,27 the EPA is proposing GACT standards for all
unregulated emissions from area source facilities. The EPA believes that this is appropriate
because (1) a significant portion of the area source facilities are owned by small entities, (2)
companies could experience significant economic burden if MACT standards are imposed, (3)

27 See preamble section III.D

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the EPA is trying to minimize disruptions to the supply of medical devices, and (4) the EPA is
proposing revisions to certain standards based on an assessment of the post-control risks under
CAA section 112(f)(2).

The Panel recommended that the EPA explore regulatory alternatives that will incentivize
lower EtO usage. As previously mentioned, the EPA is proposing emission rate standards for
CEVs at facilities where EtO use is at least 10 tpy, as well as room air emissions for all facilities.
For emission reduction requirements, the EPA is soliciting comment on whether to adopt
equivalent emission rate standards and, if so, how those equivalent emission rates should be
calculated. In addition, for existing Group 2 room air emissions at area source facilities where
EtO use is less than 20 tpy, the EPA is proposing a BMP that would these facilities to follow
either the Cycle Calculation Approach or the Bioburden / Biological Indicator Approach to
achieve sterility assurance in accordance with ISO 11135:2014 and ISO 14161:2009. The EPA
believes that emission rate standards incentivize lower EtO usage because a facility would be
less likely to need significant modifications in order to demonstrate compliance, considering
current EtO measurement technology. In addition, the approaches listed in the BMP use
approximately 50 percent less EtO than less conservative approaches, such as the Half Cycle
Approach.

As discussed in the preamble to this proposal,28 the EPA is proposing a compliance
alternative for combined emission streams. Specifically, the EPA is proposing that if any of the
composite streams is subject to an emission reduction standard, then the emission reduction
standard for the combined stream is equal to the most stringent emission reduction standard for
the composite streams. In addition, if any of the composite streams are subject to an emission
rate standard, then the emission rate standard for the combined stream is equal to the sum of the
emission rate standards for the composite streams. The EPA is soliciting comment on this
proposed compliance alternative (Comment C-75 in the preamble). The Panel recommended that
the EPA propose a compliance alternative for operators to route a portion of or all EtO exhaust
streams to a common stack and monitor for direct EtO emissions, with specific EtO emission
concentration limits. The Panel further recommended that the EPA:

28 See preamble section III.G.3.d

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•	Specifically solicit comments on what provisions of the current rule and proposed rule
should be covered by this alternative and how reporting and recordkeeping could be
streamlined,

•	Solicit comment on the appropriate way to set an EtO emission concentration limit, and
whether the concentration limit should be set as a site-specific limit based on the
particular circumstances of a facility, and

•	Solicit comment on the technical and economic factors that would drive a firm to adopt
this alternative.

In developing this proposed rule, the EPA has observed that many companies have
implemented a wide variety of emission stream combinations. Therefore, this compliance
alternative was designed to be independent of the emission stream types (e.g., SCV, room air)
that are included in a combined emission stream. The EPA believes that this compliance
alternative will streamline performance testing, which would further streamline recordkeeping
and reporting requirements. As previously discussed, the EPA has considered concentration
standards but is unable to justify them.

The Panel recommended that the EPA take comment on proximity requirements for new
sources as described in the final report. The Panel also recommended that the EPA request
comment on whether a proximity restriction could or should substitute for emission control
requirements for new or existing sources elsewhere in the proposal. As described in the
preamble, the proposed emission standards for new sources are at least as stringent as those
being proposed for existing sources. Therefore, the EPA does not believe it is necessary to solicit
comment on proximity requirements.

The Panel recommended that the EPA consider changes that a facility has made to
comply with OSHA standards when proposing updates to the rule. As part of both the December
2019 Questionnaire and the September 2021 ICR, the EPA collected data on facility
characteristics that would need to be properly managed to comply with OSHA standards,
including room air changes per hour, temperature, and EtO concentration (from both personnel
badges and gas chromatograph monitoring).

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The EPA will prepare a Small Entity Compliance Guide to help small entities comply
with this rule when it is finalized. As required by section 604 of the RFA, the EPA will prepare a
final regulatory flexibility analysis (FRF A) for this action as part of the final rule. The FRFA
will address the issues raised by public comments on the IRFA.

5.3 Market Impacts

This section discusses potential supply and demand responses to the regulatory costs
imposed on facilities in the EtO sterilization industry affected by this proposed rule. Sterilization
services are inputs to the supply chain that delivers healthcare services to institutions and
individuals. There is uncertainty in how the proposed rule could potentially affect the medical
device supply chain. This discussion of potential economic impacts is guided by the general
assumption that the supply chain can be loosely characterized starting with the commercial EtO
sterilizers, whose services are used as inputs by medical device manufacturers, whose devices
are generally purchased by hospitals and other healthcare providers, whose services are then sold
to end consumers and paid for in varying shares by the patients themselves, the federal
government, and insurers.

The price and quantity effects of any regulatory costs as well as how the cost burden is
potentially divided between the directly regulated sector, intermediate goods and services in the
supply chain that use the regulated good as an input, and end consumers are driven by supply and
demand in these respective markets and represented in the slopes of those supply and demand
curves. Economists use elasticities, or the percentage change in quantity supplied (or demanded)
divided by the percentage change in price, to measure the responsiveness of producers and
consumers to price changes.

All else equal, commercial EtO sterilizers would likely offer to sterilize more products
when the price of their services rises. The price elasticity of supply measures how much the
supply of EtO sterilization capacity responds to changes in the price of EtO sterilization services.
If sterilizers have significant flexibility to increase (decrease) the amount of product they
sterilize when the price of their services rises (falls), the supply of EtO sterilization is considered
elastic. In contrast, if the amount of product sterilized with EtO only changes by small amounts
when the price rises, the supply of EtO sterilization is considered relatively inelastic. In the case
of a price increase, supply changes may be more constrained in the short run if firms need time

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to adjust operations and increase production capacity. On the demand side, customers would
generally be expected to purchase fewer products sterilized with EtO when the price to sterilize
those products rises. Several factors influence how sensitive consumers are to price changes. If
consumers can easily switch from one good or service to another because there are many close
substitutes, demand tends to be more elastic. The more elastic the supply and inelastic the
demand, the smaller the effect of a price change on the market equilibrium quantity.

Nonetheless, economic theory suggests that consumers will bear a higher share of welfare losses
when supply is more responsive to price changes than demand.

Regulatory costs can be represented as an upward shift in the supply curve for the
regulated industry, but further information is needed to determine the degree to which that shift
results in a higher equilibrium price and/or lower equilibrium quantity as well as who bears the
impacts (e.g., the regulated industry, its customers, indirectly affected markets). Any regulatory-
induced price impacts on sterilization services, or indirect price impacts on medical devices and
healthcare services, will depend on several factors beyond the elasticity of demand and supply in
these markets, including elasticities of substitution, and whether market power and/or purchasing
power is present in these various stages of the supply chain.

Sterilization is generally a small input when considering the total costs of making and
providing medical devices and healthcare services. If sterilization providers are able pass on
regulatory costs by increasing the price of their services, effects on prices of devices and
healthcare may be limited because price changes for inputs that are small are less likely to have
large impacts on prices of end products (devices, healthcare services). While higher costs of
sterilization may not present significant problems for medical device manufacturers, limited
capacity in the EtO sterilization industry could still potentially disrupt the medical device supply
chain if there are not enough sterilization providers available to accommodate the amount of
devices that need to be sterilized with EtO. Capacity could be limited in the short run as firms
adjust operations to comply with the proposed requirements and complete product revalidations.

5.3.1 Supply Response to Regulation

To date, there have been no previous studies describing how the EtO sterilization industry
reacts to regulation. However, given what is known about the industry, there is reason to believe
that supply is inelastic and a portion of the regulatory costs could potentially be passed forward

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in the price of sterilized products. The EtO sterilization industry is a mix of small and large
companies and facilities that sterilize a wide of range of medical devices. Larger companies and
facilities, as well as companies and facilities of any size that sterilize more sophisticated devices
such as pacemakers, may exert more market power and be able to pass on regulatory costs to
some degree. On the other hand, smaller companies and facilities or companies and facilities of
any size that sterilize more common medical devices such as syringes may be characterized as
competitive and price takers, which means one firm cannot influence the price of sterilization
services. As a result, these companies and facilities may not be able pass on as much of their
regulatory costs to intermediate or end users. As the cost to conduct sterilization increases due to
regulation, profits for these companies and facilities would decrease, which may induce some to
exit the market.

As discussed in section 5.2.5, the small entities affected by this proposed rule are
expected to incur much higher costs relative to their revenues, potentially leading to a higher risk
of market exit for small firms. Large entities account for a higher share of industry output of
sterilized devices and are estimated to incur much lower impacts from the proposed rule
compared to small firms when comparing their costs relative to revenues. Consequently,
potential effects on industry capacity may be more limited under a scenario where firm exit is
limited to small companies, though the industry would become more concentrated.

Given the capacity constraints in the commercial EtO sterilization industry and the costs
associated with switching sterilization sites for a device (see Chapter 2), device manufacturers
may have limited opportunity to shop around and find sterilizers offering lower prices should
their usual provider raise prices due to regulatory costs. However, in the healthcare market there
are some large medical device manufacturing firms and large buyers of sterilized medical
supplies and equipment such as hospitals, the federal government, and insurance companies that
can exert market power. Buyers with market power can potentially resist cost passthrough. For
example, large medical device firms may hold bargaining power and be able to resist cost
passthrough (i.e., higher sterilization prices) from the commercial EtO sterilizers. Alternatively,
they may accept higher sterilization prices and then try to pass those increased costs on to their
customers. It is also possible that the ability of device makers to pass on higher sterilization costs
may be limited by purchasing power of large intermediaries like insurers, the government, and
large hospital networks. High-volume, long-term contracts between sterilizers and device

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manufacturers, or between device manufacturers and hospitals, may limit cost passthrough or
serve as partial barriers that prevent any one sector in the supply chain from incurring all of the
increased costs from additional regulations of the EtO sterilization industry.

5.3.2 Demand Response to Regulation

Since demand for medical devices and healthcare services are generally considered
inelastic, demand for EtO sterilization services may also be inelastic given how critical it is as an
input. Ellis et al. 2017 estimate demand elasticities for healthcare services between 2008 and
2014, estimating an elasticity of -0.44 for healthcare services overall. This is relatively close to
other estimates in the literature such as Scoggins and Weinberg's (2017) range of -0.31 to -0.15
and the RAND Health Insurance Experiment estimate of -0.2 (Aron-Dine et al. 2013). A 2006
review of econometric studies found the elasticity of demand for healthcare to be around -0.2 in
many cases (Liu and Collet 2006). A demand elasticity of -0.2 suggests that a 10 percent increase
in the price of healthcare will lead to an approximately 2 percent reduction in the quantity of
healthcare demanded. There is relatively less empirical work on the elasticity of supply in the
healthcare industry.

Medical devices are generally not final goods but inputs into delivering health care to
consumers. For example, a consumer does not typically purchase a pacemaker from the
manufacturer, but instead, purchases the procedure that implants the device in the chest, which
includes services such as the time of a surgeon or specialist and the medical devices necessary to
perform the procedure, (e.g., catheter, wires, surgical blades). Because sterilization is a necessity
and sterilization using EtO has high market share and limited substitutes, the price of EtO
sterilization services may increase. Given the relative low elasticity of demand for sterilized
health products, cost increases may be passed from sterilizers to medical device manufacturers to
hospitals and end-use consumers. However, any price effects transmitted to end-use consumers
are likely to be small. Sterilization is a small input when considering the total costs of making
and providing medical devices and healthcare services, and price changes for small inputs are
less likely to have large impacts on prices of end products. However, potential price changes
experienced by end-use consumers of healthcare services would likely vary by service category
and their insurance coverage.

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The demand for a good that is an input into the provision of a final consumer service
depends, in part, on the degree to which that input can be substituted for other inputs. Demand is
less elastic for products with fewer substitutes. The qualitative discussion in section 2.2 on the
limited availability of substitute sterilization technologies {i.e., the substitution elasticity between
EtO and other sterilization methods is likely to be very small) suggests that demand for EtO
sterilization may be relatively inelastic. Quantity demanded is less responsive to changes in price
when demand is inelastic. In addition, the substitution elasticity between medical devices
sterilized with EtO and other medical devices not sterilized with EtO is also likely to be very
small based on the information presented in section 2.2 highlighting the share of devices reliant
on EtO sterilization and the prevalence of healthcare products that are made of materials that can
only tolerate sterilization using EtO.

5.3.3 Illustrative Example

Figure 5-1 illustrates the case of increased regulatory costs where both supply and
demand are relatively inelastic, but demand is more inelastic than supply. In Figure 5-1, Qe
represents the pre-regulation quantity of sterilized products demanded and supplied at price Pe.
After a rule is promulgated, Qr represents the post-regulation quantity of sterilized products that
would be purchased when costs from the regulation are incurred. As shown in Figure 5-1, the
consumers of sterilized products pay a higher proportion of the increased cost (Pdr - Pe) than the
commercial EtO sterilizers (Pe - Psr). In this case, consumers are absorbing more of the
increased costs from a regulation. While illustrative, there are reasons to expect that consumers
{e.g., device makers, intermediaries, end-user patients) may pay a high share of the increased
costs. Many consumers are insured, and even though premiums could eventually increase, the
cost of sterilized devices used for medical care or in procedures that are deemed necessary
should be covered by insurance. Insurers may pass on a small increase in price {i.e., co-pay).
Even if consumers absorb a high share of the regulatory costs, the EPA does not expect large
increases in prices of devices and healthcare since sterilization is represents a small share of the
total costs involved in producing medical devices and providing healthcare services.

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p

s

p

DR

P

Regulatory Costs

E

P,

SR

D

QrQe

q

Figure 5-1. Illustrative Example of Potential Impacts with Inelastic Supply and Demand

National engineering compliance cost estimates are often used to approximate the social
cost of a rule. However, in cases where the engineering costs of compliance are used to estimate
social cost, the burden of the regulation is typically measured as falling solely on the affected
producers, who experience a profit loss exactly equal to these compliance cost estimates. Thus,
the entire economic welfare loss is a change in producer surplus with no assumed change in
consumer surplus because no changes in price and consumption are estimated. This is typically
referred to as a "full-cost absorption" scenario in which all factors of production are assumed to
be fixed and firms are unable to adjust their output levels when faced with additional costs. In
contrast, this illustrative example builds on the engineering cost analysis, draws on sterilization
and healthcare industry information, and incorporates economic theory related to producer and
consumer behavior to characterize potential changes in market conditions under simplified
hypothetical circumstances.

This illustrative example should not be considered a formal estimate of the market
impacts of this proposed rule. The EPA is missing many of the parameters (e.g., prices,
quantities, elasticities) needed to truly investigate potential market impacts, and the values and

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parameters that have some basis in the literature are not specific to the EtO sterilization market
or the products sterilized with EtO.

5.4 Employment Impacts

This section presents a qualitative overview of the various ways that environmental
regulation can affect employment. Regulation can affect employment via its effect on output by
changing the marginal cost of production, and by affecting the relative proportions of labor and
capital used by regulated firms {i.e., the labor intensity of production). Standard neoclassical
theory alone does not point to a definitive net effect of regulation on labor demand at regulated
firms. Employment impacts of environmental regulations are generally composed of a mix of
potential declines and gains in different areas of the economy {e.g., the directly regulated sector,
upstream and downstream sectors, and the pollution abatement sector) over time.

Labor markets respond to regulation in complex ways and regulatory employment
impacts can vary across occupations, regions, and industries. The response depends on the
elasticities of demand and supply for labor and for the goods or services produced by the
regulated industry, as well as in response to other labor market conditions {e.g., wage stickiness,
long-term unemployment). Isolating regulatory impacts on employment is a challenge, as they
are difficult to disentangle from impacts caused by a wide variety of ongoing, concurrent
economic changes. The EPA continues to explore the relevant theoretical and empirical literature
and to seek public comments in order to ensure that the way the EPA characterizes the
employment effects of its regulations is reasonable and informative.

Environmental regulation "typically affects the distribution of employment among
industries rather than the general employment level" (Arrow et al. 1996). Even if impacts are
small after long-run market adjustments to full employment, many regulatory actions have
transitional effects in the short run (OMB 2015). These movements of workers in and out of jobs
in response to environmental regulation are potentially important and of interest to policymakers.
Transitional job losses have consequences for workers that operate in declining industries or
occupations, have limited capacity to migrate, or reside in communities or regions with high
unemployment rates.

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As indicated by the market impacts discussion in section 5.3, the proposed requirements
may cause shifts in the prices and supply of sterilization services, although any shifts are
expected to be small. The demand for EtO sterilization services is likely to be inelastic. As a
result, demand for labor among commercial EtO sterilizers and associated industries is unlikely
to change to a large degree but might experience adjustments as there may be compliance-related
labor needed for the manufacture, installation, operation, and maintenance of equipment
associated with permanent total enclosures and continuous emissions monitoring systems, as
examples. In addition, there may be changes in employment due to effects on output from
directly regulated sterilization companies and sectors that use their services. If the cost of
conducting EtO sterilization increases sufficiently as a result of this action, then net revenues of
directly regulated firms and indirectly affected medical device manufacturing firms may fall and
employment at these firms may potentially decline. However, as explained, the EPA expects any
potential market and employment impacts to be relatively small.

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6 NET BENEFITS

The net benefits of the proposed amendments to the subpart O NESHAP for EtO
commercial sterilization and fumigation facilities are shown in Table 6-1. Since the EPA
estimated costs but was unable to monetize the health benefits of this proposed rule, the net
benefits are negative.

Table 6-1. Summary of Benefits, Costs and Net Benefits for the Proposed Regulatory
Options from 2023 to 2042 (Million 2021$ a)	



Option 1

3 Percent 7 Percent

Option 2 (Proposed)

3 Percent 7 Percent

Option 3

3 Percent 7 Percent



PV EAV

PV EAV

PV EAV

PV EAV

PV EAV

PV EAV

Total
Monetized
Benefits'3

N/A

N/A

N/A

N/A

N/A

N/A

Total
Costs

$635 $43

$513 $60

$784 $53

$640 $74

$897 $60

$746 $85

Net
Benefits

N/A

N/A

N/A

N/A

N/A

N/A

Non-
monetized
Benefits

15 tpy of EtO
Health effects of reduced EtO
exposure

19 tpy of EtO
Health effects of reduced EtO
exposure

20 tpy of EtO
Health effects of reduced
EtO exposure

a When necessary, dollar figures in this RIA have been converted to 2021$ using the annual GDP Implicit Price
Deflator from the U.S. Bureau of Economic Analysis (BEA) NIPA Table 1.1.9, found at
https://fred.stlouisfed.org/release/tables?rid=53&eid=41158.

b While we expect that these avoided emissions will result in reductions in adverse human health effects, we have
determined that quantification of those benefits cannot be accomplished for this proposed rule. This is not to
imply that there are no benefits of the proposal; rather, it is a reflection of the difficulties in modeling the
health effects and monetizing the benefits of reducing HAP emissions from this source category with the data
currently available.

6.1 Uncertainties

The results of this analysis are subject to many sources of uncertainty. This analysis
includes many data sources as inputs, including source counts, equipment and labor costs, and
assumptions regarding the current state of the EtO sterilization industry and how individual
facilities carry out their operations, the future state of the industry, and the future state of the
world (e.g., regulations, technology, economic activity, and human behavior). There is also
uncertainty about the specific components of the engineering costs, such as the costs of the
equipment and labor required to comply with the proposal and how the costs might change over
time. The EPA only estimated costs for existing facilities, but new facilities may be constructed

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and become subject to the requirements. Facilities may modify or upgrade in ways that affect the
number of the various emissions points impacted by this proposed rule (e.g., adding a
sterilization chamber or aeration room). They may alter their EtO usage and thus become subject
to different requirements. Additionally, new control technology may become available in the
future at lower cost.

This proposal may not impact all locations with EtO sterilizers equally, in part due to
differences in state and local policies such as consent orders in locations like Illinois and
Georgia.29 Additionally, these discussions and analyses are subject to various types of uncertainty
regarding input parameters and assumptions.

The risk results and environmental justice analysis are subject to several sources of
uncertainty. First, there is uncertainty in the baseline emissions dataset and the modeling
conducted to estimate the emissions reductions due to the proposal. There is also uncertainty
associated with the inputs and assumptions used in the dispersion modeling, the inhalation
exposure estimates, and the dose-response relationships.

29 For more information, see https://www.fda.gov/medical-devices/general-hospital-devices-and-supplies/ethylene-
oxide-sterilization-facility-updates.

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United States	Office of Air Quality Planning and Standards	Publication No. EPA-452/R-23-007

Environmental Protection	Health and Environmental Impacts Division	March 2023

Agency	Research Triangle Park, NC

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