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(1) Identification of the person requesting the hearing and his interest in the proceeding;

(2) A statement of any objections to the tentative determination; and

(3) A statement of the issues which such person proposes to raise for consideration at such hearing.

(b) Grant or denial of hearing; notification. Whenever (1) the Administrator has received a written request satisfying the requirements of paragraph (a) of this section which presents genuine issues as to the effect on the smelter of the requirement for use of constant controls, or (2) the Administrator determines in his discretion that a hearing is necessary or appropriate the Administrator shall give written notice of his determination to each person requesting such hearing and the smelter owner, and shall provide public notice of his determination in accordance with §57.803(b). If the Administrator determines that a request filed under paragraph (a) of this section does not comply with the requirements of paragraph (a) or does not present genuine issues, he shall be given written notice of his decision to deny a hearing to the person requesting the hearing.

(c) Form of notice of hearing. Each notice of hearing disseminated under paragraph (b) of this section shall contain:

(1) A statement of the time and place of the hearing;

(2) A statement identifying the place at which the official record on the application for waiver is located, the hours during which it will be open for public inspection, and the documents contained in the record as of the date of the notice of hearing;

(3) The due date for filing a written request to participate in the hearing under paragraph (d) of this section;

(4) The due date for making written submissions under 57.805; and

(5) The name, address, and office telephone number of the hearing Clerk for the hearing.

(d) Request to participate in hearing. Each person desiring to participate in any hearing granted under this section, including any person requesting such a hearing, shall file a written request to participate with the Hearing Clerk by the deadline set forth in the notice of hearing. The request shall include:

(1) A brief statement of the interest of the person in the proceeding;

(2) A brief outline of the points to be addressed;

(3) An estimate of the time required; and

(4) If the request is submitted by an organization, a nonbinding list of the persons to take part in the presentation. As soon as practicable, but in no event later than two weeks before the scheduled date of the hearing, the Hearing Clerk shall make available to the public and shall mail to each person who asked to participate in the hearing a hearing schedule.

(e) Effect of denial of or absence of request for hearing. If no request for a hearing is made under this section, or if all such requests are denied under paragraph (b) of this section, the tentative determination issued under §57.803 shall be treated procedurally as if it were a recommended decision issued under §57.811(b)(2), except that for purposes of §§57.812 and 57.813 the term “hearing participant” shall be construed to mean the smelter owner and any person who submitted comments under §57.803(e)(4).

§ 57.805 Submission of written comments on tentative determination.
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(a) Main comments. Each person who has filed a request to particpate in the hearing shall file with the Hearing Clerk no later than 30 days before the scheduled start of the hearing (or such other date as may be set forth in the notice of hearing) any comments which he has on the request for waiver and EPA's tentative determination, based on information which is or reasonably could have been available to that person at the time.

(b) Reply comments. Not later than two weeks after a full transcript of the hearing becomes available (or such other date as may be set forth in the notice of hearing), each person who has filed a request to participate in the hearing shall file with the Hearing Clerk any comments he may have on:

(1) Written comments submitted by other participants pursuant to paragraph (a) of this section;

(2) Written comments submitted in response to the notice of hearing;

(3) Material in the hearing record; and

(4) Material which was not and could not reasonably have been available prior to the deadline for submission of main comments under paragraph (a) of this section.

(c) Form of comments. All comments should be submitted in quadruplicate and shall include any affidavits, studies, tests or other materials relied upon for making any factual statements in the comments.

(d) Use of comments. (1) Written comments filed under this section shall constitute the bulk of the evidence submitted at the hearing. Oral statements at the hearing should be brief, and restricted either to points that could not have been made in written comments, or to emphasizing points which are made in the comments, but which the participant believes can be more forcefully urged in the hearing context.

(2) Notwithstanding the foregoing, within two weeks prior to either deadline specified by paragraph (a) of this section for the filing of main comments, any person who has filed a request to participate in the hearing may file a request with the Presiding Officer to submit all or part of his main comments orally at the hearing in lieu of submitting written comments. The Presiding Officer shall, within one week, grant such request if he finds that such person will be prejudiced if he is required to submit such comments in written form.

§ 57.806 Presiding Officer.
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(a) Assignment of Presiding Officer. (1) The Administrator shall, as soon as practicable after the granting of a request for hearing under §57.803, request that the Chief Administrative Law Judge assign an Administrative Law Judge as Presiding Officer. The Chief Administrative Law Judge shall thereupon make the assignment.

(2) If the parties to the hearing waive their right to have the Agency or an Administrative Law Judge preside at the hearing, the Administrator shall appoint an EPA employee who is an attorney to serve as presiding officer.

(b) Powers and duties of Presiding Officer. It shall be the duty of the Presiding Officer to conduct a fair and impartial hearing, assure that the facts are fully elicited, and avoid delay. The Presiding Officer shall have authority to:

(1) Chair and conduct administrative hearings held under this subpart;

(2) Administer oaths and affirmations;

(3) Receive relevant evidence: Provided, that the administrative record, as defined in §57.814, shall be received in evidence;

(4) Consider and rule upon motions, dispose of procedural requests, and issue all necessary orders;

(5) Hold conferences for the settlement or simplification of the issues or the expediting of the proceedings; and

(6) Do all other acts and take all measures necessary for the maintenance of order and for the efficient, fair and impartial conduct of proceedings under this subpart.

[50 FR 6448, Feb. 15, 1985, as amended at 57 FR 5328, Feb. 13, 1992]

§ 57.807 Hearing.
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(a) Composition of hearing panel. The Presiding Officer shall preside at the hearing held under this subpart. An EPA panel shall also take part in the hearing. In general, the membership of the panel shall consist of EPA employees having special expertise in areas related to the issues to be addressed at the hearing, including economists and engineers. For this reason, the membership of the panel may change as different issues are presented for discussion.

(b) Additional hearing participants. Either before or during the hearing, the Presiding Officer, after consultation with the panel, may request that a person not then scheduled to participate in the hearing (including an EPA employee or a person identified by any scheduled hearing participant as having knowledge concerning the issues raised for discussion at the hearing) make a presentation or make himself available for cross-examination at the hearing.

(c) Questioning of hearing participants. The panel members may question any person participating in the hearing. Cross-examination by persons other than panel members shall not be permitted at this stage of the proceeding except where the Presiding Officer determines, after consultation with the panel, that circumstances compel such cross-examination. However, persons in the hearing audience, including other hearing participants, may submit written questions to the Presiding Officer for the Presiding Officer to ask the participants, and the Presiding Officer may, after consultation with the panel, and in his sole discretion, ask these questions.

(d) Submission of additional material. Participants in the hearing shall submit for the hearing record such additional material as the hearing panel may request within 10 days following the close of the hearing, or such other period of time as is ordered by the Presiding Officer. Participants may also submit additional information for the hearing record on their own accord within 10 days after the close of the hearing.

(e) Transcript. A verbatim transcript shall be made of the hearing.

§ 57.808 Opportunity for cross-examination.
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(a) Request for cross-examination. After the close of the panel hearing conducted under this part, any participant in that hearing may submit a written request for cross-examination. The request shall be received by EPA within one week after a full transcript of the hearing becomes available and shall specify:

(1) The disputed issue(s) of material fact as to which cross-examination is requested. This shall include an explanation of why the questions at issue are factual, rather than of an analytical or policy nature; the extent to which they are in dispute in the light of the record made thus far, and the extent to which and why they can reasonably be considered material to the decision on the application for a waiver; and

(2) The person(s) the participant desires to cross-examine, and an estimate of the time necessary. This shall include a statement as to why the cross-examination requested can be expected to result in full and true disclosure resolving the issue of material fact involved.

(b) Order granting or denying request for cross-examination. As expeditiously as practicable after receipt of all requests for cross-examination under paragraph (a) of this section, the Presiding Officer, after consultation with the hearing panel, shall issue an order either granting or denying each such request, which shall be disseminated to all persons requesting cross-examination and all persons to be cross-examined. If any request for cross-examination is granted, the order shall specify:

(1) The issues as to which cross-examination is granted;

(2) The persons to be cross-examined on each issue;

(3) The persons allowed to conduct cross-examination;

(4) Time limits for the examination of witnesses; and

(5) The date, time and place of the supplementary hearing at which cross-examination shall take place. In issuing this ruling, the Presiding Officer may determine that one or more participants have the same or similar interests and that to prevent unduly repetitious cross-examination, they should be required to choose a single representative for purposes of cross-examination. In such a case, the order shall simply assign time for cross-examination by that single representative without identifying the representative further.

(c) Supplementary hearing. The Presiding Officer and at least one member of the original hearing panel shall preside at the supplementary hearing. During the course of the hearing, the Presiding Officer shall have authority to modify any order issued under paragraph (b) of this section. A verbatim transcript shall be made of this hearing.

(d) Alternatives to cross-examination. (1) No later than the time set for requesting cross-examination, a hearing participant may request that alternative methods of clarifying the record (such as the submittal of additional written information) be used in lieu of or in addition to cross-examination. The Presiding Officer shall issue an order granting or denying such request at the time he issues (or would have issued) an order under paragraph (b) of this section. If the request is granted, the order shall specify the alternative provided and any other relevant information (e.g., the due date for submitting written information).

(2) In passing on any request for cross-examination submitted under paragraph (a) of this section, the Presiding Officer may, as a precondition to ruling on the merits of such request, require that alternative means of clarifying the record be used whether or not a request to do so has been made under the preceding paragraph. The person requesting cross-examination shall have one week to comment on the results of utilizing such alternative means, following which the Presiding Officer, as soon as practicable, shall issue an order granting or denying such person's request for cross-examination.

§ 57.809 Ex parte communications.
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(a) General. (1) No interested person outside the Agency or member of the Agency trial staff shall make or knowingly cause to be made to any member of the decisional body an ex parte communication relevant to the merits of the proceedings.

(2) No member of the decisional body shall make or knowingly cause to be made to any interested person outside the Agency or member of the Agency trial staff an ex parte communication relevant to the merits of the proceedings.

(b) Effect of receipt of ex parte communication. (1) A member of the decisional body who receives or who makes or knowingly causes to be made a communication prohibited by this subsection shall place in the record all written communications or memoranda stating the substance of all oral communications together with all written responses and memoranda stating the substance of all responses.

(2) Upon receipt by any member of the decisionmaking body of an ex parte communication knowingly made or knowingly caused to be made by a party or representative of a party in violation of this section, the person presiding at the stage of the hearing then in progress may, to the extent consistent with justice and the policy of the Clean Air Act, require the party to show cause why its claim or interest in the proceedings should not be dismissed, denied, disregarded, or otherwise adversely affected on account of such violation.

(c) Definitions. For purposes of this section, the following definitions shall apply:

(1) Agency trial staff means those Agency employees, whether temporary or permanent, who have been designated by the Agency as available to investigate, litigate, and present the evidence arguments and position of the Agency in the evidentiary hearing or non-adversary panel hearing. Appearance as a witness does not necessarily require a person to be designated as a member of the Agency trial staff;

(2) Decisional body means any Agency employee who is or may be reasonably expected to be involved in the decisional process of the proceeding including the Administrator, Presiding Officer, the Regional Administrator (if he does not designate himself as a member of the Agency trial staff), and any of their staff participating in the decisional process. In the case of a non-adversary panel hearing, the decisional body shall also include the panel members whether or not permanently employed by the Agency;

(3) Ex parte communication means any communication, written or oral, relating to the merits of the proceeding between the decisional body and an interested person outside the Agency or the Agency trial staff which was not originally filed or stated in the administrative record or in the hearing. Ex parte communications do not include:

(i) Communications between Agency employees other than between the Agency trial staff and the member of the decisional body;

(ii) Discussions between the decisional body and either:

(A) Interested persons outside the Agency, or;

(B) The Agency trial staff if all parties have received prior written notice of such proposed communications and have been given the opportunity to be present and participate therein.

(4) Interested person outside the Agency includes the smelter owner, any person who filed written comments in the proceeding, any person who requested the hearing, any person who requested to participate or intervene in the hearing, any participant or party in the hearing and any other interested person not employed by the Agency at the time of the communications, and the attorney of record for such persons.

[50 FR 6448, Feb. 15, 1985, as amended at 57 FR 5328, Feb. 13, 1992]

§ 57.810 Filing of briefs, proposed findings, and proposed recommendations.
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Unless otherwise ordered by the Presiding Officer, each hearing participant may, within 20 days after reply comments are submitted under §57.805(b), or if a supplementary hearing for the purpose of cross-examination has been held under §57.808(c), within 20 days after the transcript of such supplemental hearing becomes available or if alternative methods of clarifying the record have been used under §57.808(d), within 20 days after the alternative methods have been employed, file with the Hearing Clerk and serve upon all other hearing participants proposed findings and proposed recommendations to replace in whole or in part the findings and recommendations contained in the tentative determination. Any such person may also file, at the same time, a brief in support of his proposals, together with references to relevant pages of transcript and to relevant exhibits. Within 10 days thereafter each participant may file a reply brief concerning alternative proposals. Oral argument may be held at the discretion of the Presiding Officer on motion of any hearing participant or sua sponte.

§ 57.811 Recommended decision.
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As soon as practicable after the conclusion of the hearing, one or more responsible employees of the Agency shall evaluate the record for preparation of a recommended decision and shall prepare and file a recommended decision with the Hearing Clerk. The employee(s) preparing the decision will generally be members of the hearing panel and may include the Presiding Officer. Such employee(s) may consult with and receive assistance from any member of the hearing panel in drafting a recommended decision and may also delegate the preparation of the recommended decision to the panel or to any member or members of it. This decision shall contain the same elements as the tentative determination. After the recommended decision has been filed, the Hearing Clerk shall serve a copy of such decision on each hearing participant and upon the Administrator.

§ 57.812 Appeal from or review of recommended decision.
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(a) Exceptions. (1) Within 20 days after service of the recommended decision, any hearing participant may take exception to any matter set forth in such decision or to any adverse order or ruling of the Presiding Officer prior to or during the hearing to which such participant objected, and may appeal such exceptions to the Administrator by filing them in writing with the Hearing Clerk. Such exceptions shall contain alternative findings and recommendations, together with references to the relevant pages of the record and recommended decision. A copy of each document taking exception to the recommended decision shall be served upon every other hearing participant. Within the same period of time each party filing exceptions shall file with the Administrator and shall serve upon all hearing participants a brief concerning each of the exceptions being appealed. Each brief shall include page references to the relevant portions of the record and to the recommended decision.

(2) Within 10 days of the service of exceptions and briefs under paragraph (a)(1) of this section, any hearing participant may file and serve a reply brief responding to exceptions or arguments raised by any other hearing participant together with references to the relevant portions of the record, recommended decision, or opposing brief. Reply briefs shall not, however, raise additional exceptions.

(b) Sua sponte review by the Administrator. Whenever the Administrator determines sua sponte to review a recommended decision, notice of such intention shall be served upon the parties by the Hearing Clerk within 30 days after the date of service of the recommended decision. Such notice shall include a statement of issues to be briefed by the hearing participants and a time schedule for the service and filing of briefs.

(c) Scope of appeal or review. The appeal of the recommended decision shall be limited to the issues raised by the appellant, except when the Administrator determines that additional issues should be briefed or argued. If the Administrator determines that briefing or argument of additional issues is warranted, all hearing participants shall be given reasonable written notice of such determination to permit preparation of adequate argument.

(d) Argument before the Administrator. The Administrator may, upon request by a party or sua sponte, set a matter for oral argument. The time and place for such oral argument shall be assigned after giving consideration to the convenience of the parties.

§ 57.813 Final decision.
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(a) After review. As soon as practicable after all appeal or other review proceedings have been completed, the Administrator shall issue his final decision. Such a final decision shall include the same elements as the recommended decision, as well as any additional reasons supporting his decisions on exceptions filed by hearing participants. The final decision may accept or reject all or part of the recommended decision. The Administrator may consult with the Presiding Officer, members of the hearing panel or any other EPA employee in preparing his final decision. The Hearing Clerk shall file a copy of the decision on all hearing participants.

(b) In the absence of review. If no party appeals a recommended decision to the Administrator and if the Administrator does not review it sua sponte, he shall be deemed to have adopted the recommended decision as the final decision of the Agency upon the expiration of the time for filing any exceptions under §57.812(a).

(c) Timing of judicial review. For purposes of judicial review, final Agency action on a request for a waiver of the interim requirement that each NSO provide for the use of constant controls shall not occur until EPA approves or disapproves the issuance of an NSO to the source requesting such a waiver.

§ 57.814 Administrative record.
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(a) Establishment of record. (1) Upon receipt of request for a waiver, an administrative record for that request shall be established, and a Record and Hearing Clerk appointed to supervise the filing of documents in the record and to carry out all other duties assigned to him under this subpart.

(2) All material required to be included in the record shall be added to the record as soon as feasible after its receipt by EPA. All material in the record shall be appropriately indexed. The Hearing Clerk shall make appropriate arrangements to allow members of the public to copy all nonconfidential record materials during normal EPA business hours.

(3) Confidential record material shall be indexed under paragraph (a)(2). Confidential record material shall, however, be physically maintained in a separate location from public record material.

(4) Confidential record material shall consist of the following:

(i) Any material submitted pursuant to §57.802 for which a proper claim of confidentiality has been made under section 114(c) of the Act and 40 CFR part 2; and

(ii) The Staff Computational Anaylsis prepared under §57.803

(b) Record for issuing tentative determination. The administrative record for issuing the tentative determination required by §57.803 shall consist of the material submitted under §57.802 and any additional materials supporting the tentative determination.

(c) Record for acting on requests for cross-examination. The administrative record for acting on requests for cross-examination under §57.808 shall consist of the record for issuing the tentative determination, all comments timely submitted under §§57.803(e)(4) and 57.805, the transcript of the hearing, and any additional material timely submitted under §57.807(d).

(d) Record for preparation of recommended decision. The administrative record for preparation of the recommended decision required by §57.811 shall consist of the record for acting on request for cross-examination, the transcript of any supplementary hearing held under §57.808(c), any materials timely submitted in lieu of or in addition to cross-examination under §57.808(d), and all briefs, proposed findings of fact and proposed recommendations timely submitted under §57.810.

(e) Record for issuance of final decision. (1) Where no hearing has been held, the administrative record for issuance of the Administrator's final decision shall consist of the record for issuing the tentative determination, any comments timely submitted under §57.803(e)(4), any briefs or reply briefs timely submitted under §57.812 (a) through (c), and the transcript of any oral argument granted under §57.812(d).

(2) Where a hearing has been held, the administrative record for issuance of the Administrator's final decision shall consist of the record of preparation of the recommended decision, any briefs or reply briefs submitted under §57.812 (a) through (c), and the transcript of any oral argument granted under §57.812(d).

§ 57.815 State notification.
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The Administrator shall give notice of the final decision in writing to the air pollution control agency of the State in which the smelter is located.

§ 57.816 Effect of negative recommendation.
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No waiver of the interim requirement for the use of constant controls shall be granted by the Administrator or a State unless the Administrator or a State first takes into account the Administrator's report, findings, and recommendations as to whether the use of constant controls would be so costly as to necessitate permanent or prolonged temporary cessations of operation of the smelter.

Appendix A to Part 57—Primary Nonferrous Smelter Order (NSO) Application
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Instructions

1. General Instructions

1.1 Purpose of the Application

1.2 NSO Financial Tests

1.3 Confidentiality

2. NSO Financial Reporting Overview

2.1 Revenue and Cost Assignment

2.2 Transfer Prices on Affiliated Party Transactions

2.3 Forecasting Requirements

2.4 EPA Furnished Forecast Data

2.5 Applicant Generated Forecasts

2.6 Weighted Average Cost of Capital for Nonferrous Metal Producers

2.7 Horizon Value

2.8 Data Entry

2.9 Use of Schedules

2.10 Use of Exhibits

Detailed Instructions for Each Schedule

A.1 Historical Revenue Data

A.2 Historical Cost Data

A.3 Historical Profit and Loss Summary

A.4 Historical Capital Investment Summary

B.1 Pre-Control Revenue Forecast

B.2 Pre-Control Cost Forecast

B.3 Pre-Control Forecast Profit and Loss Summary

B.4 Constant Controls Revenue Forecast

B.5 Constant Controls Cost Forecast

B.6 Constant Controls Forecast Profit and Loss Summary for the Profit Protection Test

B.7 Profit Protection Test

C.1 Constant Controls Forecast Profit and Loss Summary for the Rate of Return Test

C.2 Constant Controls Sustaining Capital Investment Forecast

C.3 Historical Capital Investment in Constant Dollars

C.4 Rate of Return Test

C.5 Horizon Value of Cash Flows for the Rate of Return Test

D.1 Interim Controls Revenue Forecast

D.2 Interim Controls Cost Forecast

D.3 Interim Controls Forecast Profit and Loss Summary

D.4 Interim Controls Sustaining Capital Investment Forecast

D.5 Cash Proceeds from Liquidation

D.6 Permanent Waiver from Interim Controls Test

D.7 Horizon Value of Cash Flows for the Interim Controls Test

1. General Instructions

1.1 Purpose of the application. This application provides financial reporting schedules and the accompanying instructions for EPA's determination of eligibility for a nonferrous smelter order (NSO), and for a waiver of the interim constant controls requirement of an NSO. Although the determination of eligiblity for an NSO is prequisite for the determination of a waiver, appendix A, as a matter of convenience to applicants, includes both the NSO and waiver tests and reporting schedules.

In order to support an NSO eligibility determination, the applicant must submit operating and financial data as specified by the schedules included in this application. Specific instructions for completing each schedule are provided in subsequent sections of the instructions. In general, applicants must provide:

(a) Annual income statements, balance sheets and supporting data covering the five most recent fiscal years for the smelter for which the NSO requested.

(b) Forecasts of operating revenues, operating costs, net income from operations and capital investments for the firm's smelter operations subject to this application, on the basis of anticipated smelter operations without any sulfur dioxide air pollution control facilities that have not been installed as of the NSO application date.

(c) Forecasts of operating revenues, operating costs, net income from operations and capital investments for the firm's smelter operations subject to this application, on the basis of anticipated smelter operations with expected additional sulfur dioxide control facilities required to comply with the smelter's SIP emission limitation.

(d) For smelters applying for a waiver of interim constant controls, forecasts of operating revenues, operating costs, and capital investments for the firm's smelter operations prepared on the basis of two alternative assumptions: (1) Installation of additional pollution control facilities required to comply with interim constant control requirements, no installation of any additional SO2 controls that the smelter would otherwise be required to install but for the issuance of an NSO, and closure of the smelter after January 1, 1988; and (2) installation of additional pollution control facilities required to comply with interim constant control requirements, installation of any additional SO2 controls required to comply with the smelter's SIP emission limitation by January 2, 1988, and continued operation of the smelter after January 1, 1988.

1.2 NSO financial tests. EPA will use separate tests to determine eligibility for an NSO and to evaluate applications for a waiver of the interim constant control requirement. The two tests for NSO eligibility employ a present value approach for determining the reasonable availability of constant control technology that will enable an applicant to achieve full compliance with its SIP sulfur dioxide emission limitation. The tests for the waiver of the interim constant control requirements employ variable costing and discounted cash flow standards for evaluating an applicant's economic capability to implement those requirements.

1.2.1 NSO Eligibility Tests. Each applicant must establish that the system of production and/or constant control technology that will enable the smelter to achieve full compliance with its SIP SO2 emission limitation standard is not reasonably available. An applicant will determine financial eligibility for an NSO by passing at least one of the following two tests.

(a) Profit Protection Test. The smelter will experience a reduction in pre-tax profits of 50 percent or more after undertaking the required installation of constant controls.

(b) Rate of Return Test. The smelter will earn a rate of return on historical net investment, expressed in constant dollars, below the industry average cost of capital after undertaking the required installation of constant controls.

1.2.2 Temporary Waiver from Interim Controls. Applicants that do not have an existing constant control system or whose constant controls are not sufficient when in operation and optimally maintained to treat all strong streams in accordance with subpart C, may apply for a waiver of the requirements of subpart C with respect to any interim constant controls not already installed. Applicants will be eligible for a temporary waiver of the requirement for interim constant controls not already installed, if they can establish pursuant to the procedures in this application that the imposition of such control requirements would economically necessitate closure of the smelter facility for a period of one year or longer. The economic justification for a non-permanent closure under this temporary waiver test is defined as a situation in which the smelter's projected operating revenues for one or more years during which the NSO is in effect are inadequate to cover variable operating costs anticipated after installing the required interim control technology. Temporary waivers will be granted for only the period of time over which applicants can establish an inability by the firm to cover its variable operating costs. Interim control waiver requests based on the smelter's projected inability to earn adequate income after installation of interim pollution control equipment will be subject to the permanent waiver test.

1.2.3 Permanent Waiver from Interim Controls. Applicants that do not have an existing constant control system or whose constant controls are not sufficient when in operation and optimally maintained to treat all strong streams in accordance with subpart C, may apply for a waiver of the requirements of subpart C with respect to any interim constant controls not already installed. Applicants will be eligible for a permanent waiver of the requirement for interim constant controls not already installed, if they can establish pursuant to the procedures in this application that an imposition of such control requirements would necessitate permanent closure of the smelter. Economic justification for a permanent closure is defined as a situation in which the present value of future cash flows anticipated from the smelter after installing the required interim control technology is less than the smelter's current salvage value under an orderly plan of liquidation. Future cash flows are determined under two alternative assumptions. The higher present value of cash flows computed under these assumptions is then compared to salvage value.

1.2.4 EPA Contact for NSO Inquiries. Inquiries concerning this portion of the requirements for NSO application should be addressed to Laxmi M. Kesari, Environmental Protection Agency, EN 341, 1200 Pennsylvania Ave., NW., Washington, DC 20460.

1.2.5 Certification. The NSO Certification Statement must be signed by an authorized officer of the applicant firm.

1.3 Confidentiality. Applicants may request that information contained in this application be treated as confidential. Agency regulations concerning claims of confidentiality of business information are contained in 40 CFR part 2, subpart B (41 FR 36902 et seq., September 1, 1976, as amended by 43 FR 39997 et seq., September 8, 1978). The regulations provide that a business may, if it desires, assert a business confidentiality claim covering part or all of the information furnished to EPA. The claim must be made at the same time the applicable information is submitted. The manner of asserting such claims is specified in 40 CFR 2.203(b). Information covered by such a claim will be handled by the Agency in accordance with procedures set forth in the subpart B regulations. EPA will not disclose information on a business that has made a claim of confidentiality, except to the extent of and in accordance with 40 CFR part 2, subpart B. However, if no claim of confidentiality is made when information is furnished to EPA, the information may be made available to the public without notice to the business.

2. NSO Financial Reporting Overview

2.1 Revenue and Cost Assignment. The amounts assigned to operations of the smelter subject to this NSO application should include (1) revenues and costs directly attributable to the smelter's operating activities and (2) indirect operating costs shared with other segments of the firm to the extent that a specific causal and beneficial relationship can be identified for the allocation of such costs to the smelter. Do not allocate revenues and costs associated with central administrative activities for which specifc causal and beneficial relationships to the activities of the smelter cannot be established. Nonallocable items include, but are not restricted to, amounts such as dividend and interest income on centrally administered portfolio investments, central corporate administrative office expenses and, except for schedules supporting the Profit Protection Test, interest on long-term debt financing arrangements. Provide a detailed explanation of amounts classified as nontraceable on a separate schedule and attach as part of Exhibit B.

2.2 Transfer Prices on Affiliated Part Transactions. Certain transactions by the smelter subject to an NSO application may reflect sales to or purchases from “affiliated” customers or suppliers with whom the smelter has a common bond of ownership and/or managerial control. In preparing this application, affiliated party transactions shall be defined as transactions with any entity that the firm, or its owners, controls directly or indirectly either through an ownership of 10 percent or more of the entity's voting interests or through an exercise of managerial responsibility. Applicants must attach as part of Exhibit B supporting schedules explaining the pricing policies established on affiliated party transactions incorporated in the financial reporting schedules.

Prices on inter-segment material and product transfers within a firm, or on external purchases from and sales to other affiliated suppliers and customers, may differ from the prices on comparable transactions with unaffiliated suppliers and customers. In this event, applicants also must present in the Exhibit B supporting schedules and incorporate in the NSO financial reporting schedules appropriate adjustments for restating affiliated party transactions. Affiliated party transactions must be restated at either (a) equivalent prices on comparable transactions with unaffiliated parties if such price quotations can be obtained or (b) prices that provide the selling entity with a normal profit margin above its cost of sales if a meaningful comparison with unaffiliated transaction prices cannot be established.

A “normal” profit margin is defined as the gross operating profit per dollar of operating revenue that will provide an average after-tax rate of return on permanent capital (total assets less current liabilities). This average rate of return is defined differently for the historical and forecast periods. The applicant must use a rate of return of 8.0 percent for the historical period. This figure is based on a historoical average earned rate of return for the nonferrous metals industry.1 EPA may update this figure periodically. The updates will be available in the rulemaking docket or from the INFORMATION CONTACT noted in the Federal Register. For the forecast period, the applicant must use a rate of return equal to the current weighted average cost of capital for the nonferrous metals industry, as computed in Section 2.6.

1The derivation of this figure is explained in two memoranda to EPA (Item Nos. II-A-1 and IV-A-6a in EPA Docket No. A-82-35).

Forecast smelting charges for integrated smelters can be computed from forecast market smelting charges. Integrated copper smelters may use as the basis of their forecast revenues the forecast copper smelting charges provided by EPA, adjusted as described in Section 2.4.1. An applicant may submit other forecasts, providing the forecast methodology is in accordance with the guidelines in Section 2.5 and fully documented as part of Exhibit B.

2.3 Forecasting Requirements. NSO applicants must provide the Agency with financial forecasts in Schedules B.1 through B.6 and C.1 through C.2. Applicants requesting either a temporary or permanent waiver from interim constant control requirements also must provide an additional set of financial forecasts in Schedules D.1 through D.4.

2.3.1 Forecast Period. The forecast period must include at least two full years following completion and startup of the required pollution control system. The forecast period shall be from 1984 through 1990 for an NSO application filed in 1984. If an application is filed in a later year, the 1984 through 1990 period should be adjusted accordingly. All references in this appendix to the period 1984 through 1990 should be interpreted accordingly.

2.3.2 Forecast Adjustment by Control Case. Some line items that have the same title in several schedules may contain different information because they are based on different assumptions regarding pollution controls. Production interruptions or curtailments due to the installation of pollution control facilities may require adjustmens to certain revenue and cost estimates in the repective control cases. For example, production curtailments associated with supplementary control systems may be the basis for the pre-control case, yet are eliminated when constant controls replace supplementary control systems in the constant controls case. The application of pollution control techniques that involve process changes in the smelter's operations (e.g., conversion to flash smelting) also may require specific forecasts by applications of associated impacts on incremental operating revenues and costs.

2.3.3 Nominal Dollar Basis. Applicants must make their financial forecasts in terms of nominal dollars. Forecasts of selected parameters provided by EPA will furnish quidelines to an applicant in preparing the required cost and revenue estimates. In particular, copper smelting charges provided in nominal-dollar terms must be used dierctly by the applicant as given; i.e., the stipulated charge estimates should not be inflated.

2.3.4 Tolling Service Equivalent Basis. Applicants must express all revenue forecasts on a tolling service equivalent basis. Thus, forecast revenues are computed as the product of the forecast quantity of processed concentrate, the forecast average product grade of the concentrate (the percent of metal in the concentrate), and the forecast smelting charge. Smelters that are not tolling smelters and that do not use the copper smelting charges provided by EPA (as described in Section 2.4.1) can forecast a smelting charge from forecast product grade of the concentrate, percent recovery, and product and concentrate prices. The forecast prices and derivation of the smelting charge must be in accordance with the guidelines in Section 2.5, and the methodology must be fully documented in Exhibit B.

2.4 EPA Furnished Forecast Data. In making projection for the period 1984 through 1990, applicants must, except as noted below, use the indices provided by EPA. The table below presents yearly values for each index (expressed as annual percentage rates of change) to be used by smelters applying for an NSO before January 1, 1985. If forecasts are needed for 1991 and EPA has not provided new forecasts, applicants should use the Data Resources, Inc. forecasts for 1991 (Docket Item No. IV-A-6c) and the average of CRU's forecasts for 1989 and 1990 (expressed in 1991 dollars).



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1984 1985 1986 1987 1988 1989 1990
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Copper smelting charge \1\ (cents per pound)............ 14.5 14.6 16.0 15.3 15.3 15.5 15.4
Annual Percentage Rates of Change
Wages................................................... 5.0 5.7 5.8 6.1 6.4 6.7 7.0
Energy prices:
Electricity......................................... 7.0 8.8 8.1 8.3 7.1 4.9 5.5
Natural gas......................................... 3.6 5.7 9.3 8.7 9.2 8.0 8.4
Coal................................................ 5.1 7.0 8.9 9.0 9.7 9.7 9.7
Fuel oil............................................ 1.6 4.2 7.7 6.8 9.8 9.5 9.9
GNP price deflator...................................... 4.8 5.0 5.0 5.2 5.8 5.8 5.9
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\1\ Reference charge for calculating smelter-specific copper smelting charges as described in Section 2.4.1.



2.4.1 Copper smelting charge. EPA will supply a forecast of reference copper smelting charges. These charges, which are f.o.b. U.S. mine, are based on an estimate of export smelting charges and on the differential value of copper in the U.S. and the world market. They must be used in forecasting unaffiliated party revenues for the period following the expiration of existing contracts and in forecasting affiliated party revenues for the entire forecast period. The applicant may submit its own smelting charge forecast for the post-contract period, provided that such forecast is in accordance with the guidelines in Section 2.5 and fully documented and substantiated as part of Exhibit B.

The EPA forecast export charge represents the world market copper smelting charge with copper valued at the London Metal Exchange (LME) copper price. This charge serves as the reference charge for the applicant copper smelter in calculating its smelting charges. Applicant copper smelters must derive their smelting charges from this world market charge as described in paragraph (a) below.

The applicant may adjust the derived smelter-specific smelting charge to account for other factors, provided the adjustments are fully documented as part of Exhibit B. An example of such a factor is the unit deduction for metallurgical losses in smelting. Adjustment for this factor is discussed in paragraph (b) below.

(a) The derivation of a smelter-specific smelting charge from the world market charge is based on assumptions regarding transportation costs and the U.S. producer-world copper price differential. The EPA forecast export charge is the forecast smelting charge available at a Japanese smelter, with copper valued at the London Metal Exchange copper price. The charge includes no freight costs, which must be paid by the mine. A U.S. smelter determines its smelting charge to a mine by meeting the combined world market smelting charge, adjusted to reflect copper valued at the U.S. producer price, and the transportation charge from the mine to the Japanese smelter. This combined price is the highest that a mine is willing to pay for smelting.

The smelter's net smelting charge is equal to the combined world smelting charge, adjusted to the U.S. producer price for copper (i.e., the export forecast charge plus the U.S. producer price premium), and the transportation cost between the mine and a Far East smelter, minus the cost of transporting the concentrate between the mine and the applicant smelter.

The applicant smelter's net smelting charge for concentrate from an individual mine is computed by first adding the U.S. producer Price-LME world price differential to the EPA-supplied forecast. The cost of transporting copper from the U.S. mine to the Far East is then added to this figure. The net smelting charge is obtained by subtracting from this total the cost of transporting copper from the mine to the applicant smelter. In making these calculations, an applicant must supply (and fully document in Exhibit B), the freight cost between the mine and the Far East and between the mine and the smelter. This freight cost must be converted to nominal dollars of the respective forecast years by applying the GNP percentage price change forecasts supplied by EPA or smelter-provided forecasts of transportation price changes. The smelter-provided forecasts of transportation price changes must comply with guidelines regarding such forecasts in Section 2.5.

An applicant must use a 3 cent per pound U.S. producer price premium (relative to the LME price) in calculating the smelter's net smelting charge. The applicant may substitute its own forecasts of the U.S. producer price premium if it can substantiate such forecasts in accordance with the guidelines in Section 2.5 regarding applicant-provided smelting charge forecasts of principal products. All supporting documentation for such applicant-supplied forecasts must be supplied in Exhibit B. Any updates of the producer price premium will be available in the rulemaking docket or from the INFORMATION CONTACT noted in the Federal Register.

The following two representative examples illustrate this methodology for making the transportation and U. S. producer price premium adjustment.

(1) The applicant smelter, located in Arizona, obtains concentrate from an adjacent mine. The freight charge from mine to smelter is zero. The mine is willing to pay the applicant smelter an amount no higher than the sum of the world market smelting charge (adjusted for the copper value differential) and the transportation cost of shipping copper from the mine to the Far East. This combined cost is the net charge received by the applicant smelter. If the export smelting charge is 12 cents per pound and the freight cost between the mine and the Far East is 13 cents per pound, the applicant smelter would calculate a net smelting charge equal to 28 cents: 12 cents plus 3 cents (for the U.S. producer price premium) plus 13 cents (for the freight cost between the mine and the Far East). (continued)