Economic Impact Analysis Of The Proposed Taconite Iron Ore NESHAP, Final Report.
This report evaluates the economic impacts associated with the National Emissions Standard for Hazardous Air Pollutants (NESHAP) for the Taconite Iron Ore production source category. Taconite processing involves separating and concentrating iron ore as well as creating and indurating (hardening) pellets. The U.S. taconite industry consists of 8 companies owning 8 mining operations in a few U.S. counties in Minnesota and Michigan.
The proposed rule is estimated to cost approximately $7 million (in 2000 dollars). This cost is distributed among consumers (mainly steel mills) who may buy less and/or spend more on taconite iron ore as a result of the NESHAP, and on producers, including: merchant taconite producers that sell their output on the market, integrated iron and steel plants that produce and consume the taconite captively within the plant, steel producers that use electric arc furnace (EAF) technology instead of taconite, and foreign producers. Consumers incur $3.4 million of the total social costs, merchant producers incur approximately $0.7 million in costs, and integrated iron and steel producers incur approximately $5 million in costs. The EAF producers and foreign producers enjoy a net gain in revenues of $1.2 million and $0.7 million, respectively. Prices and production levels in the taconite iron ore market and the steel market (that uses iron ore) show minimal change. Steel producers using EAF technology do not use taconite and are projected to increase their output by a small amount in response to the slight increase in the price of steel mill products.
While the market overall shows minimal impacts, the financial stability of the firms operating in this market is very uncertain. In the past few years more than 27 companies in the industry have declared bankruptcy, several facilities have closed, and EAF technology has secured a growing share of the market. The costs of this regulation on taconite firms, however, represents less than one percent of baseline sales revenues, and typically less than three percent of baseline profits.
Because the industry is highly geographically concentrated in Minnesota and Michigan, this report also presents an analysis of impacts on the region using the IMPLAN model. We estimate that as the industries that interact with the taconite industry (such as construction and earth moving equipment industries) react to the changes in the taconite market, and as household incomes are reduced as a result of changes in all the various industries in the region, the impact of the regulation will add approximately $4 million in economic cost to the region. This represents approximately 2/10ths of one percent of total sales in those counties.
|Economic impacts; Social costs; Clean Air Act|
|Office of Air and Radiation|
|Office of Air Quality Planning and Standards|
|Air Quality Strategies and Standards Division|
|Economic Impact Assessment|