-------
and crushed stone industries. The cost-effectiveness ratios appearing in
Tables 11 through 15 are simply the total annualized costs divided by the
estimated amount of particulate collected per year.
S-29
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A.3 ECONOMIC IMPACTS
A.3.1 Introduction and Summary
In order to further analyze the potential economic impacts of NSPS
controls upon the portable plant segments of the crushed stone and sand
and gravel industries, a Discounted Cash Flow (DCF) model was developed.
This model has been used to estimate the financial status or profitability
of portable plant operations, both before and after the aodition of NSPS
controls.
The model has recognized several major variations in the methods of
operation chosen by various firms within the industry. For this reason
separate analyses have been completed under different assumptions regarding:
• • Portable plant capacity
• [Average hours of operation per year
• Level of portable plant mobility, i.e., mobility among quarries
alone, or both mobility among and within various quarry sites.
In the discussion which follows, those plants which typically move
within the quarry (in order to minimize the distance between the primary
crusher and newly blasted rock) are said to "follow the highwall", while
those which remain stationary within each quarry are denoted as "no highwall".
Sand and gravel plants were not examined under the "follow the highwall"
option since this mode of operation is not used by such plants.
The results of the DCF analysis are summarized in Table 16. For
those cases where the potential new investment is Tabled F (feasible), the
economic feasibility of the investment will be unaffected by NSPS controls.
Where NF (not feasible) is noted, the investment may not be made if the plant
is to operate under the parameters specified. Where A (ambiguous) is noted,
the DCF analysis has yielded '"borderline" potential impacts for reasons
discussed below. All assumptions made and steps taken in arriving at these
conclusions are detailed in the sections which follow.
A.3.2 Methodology
The findings noted above have been derived through the application of
a Discounted Cash Flow (DCF) model, constructed to reflect the financial
situation of a given portable crushed stone or sand and gravel plant which
S-30
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may be purchased and operated in the future. The basic distinctions between
fixed and portable operations have been considered in the development of
this model. These distinctions include variations in equipment life, annual
hours of operation, investment requirements, markets served, and the costs
associated with the NSPS controls.
TABLE 16
SUMMARY .OF DCF RESULTS FOR PORTABLE PLANTS
Crushed Stone
Sand and Gravel
Plant
Capacity
Mg/hr tph
68
135
270
540
75
150
300
600
Operating
Hours
(hours/year)
1250
1600
1250
1600
1250
1600
1250
1600
Uncon-
trolled
NF
NF
NF
A
A
F
F
F
With NSPS
No
Highwall
NF
NF
NF
NF
NF
A
F
F
Controls
Follow
Highwall
NF
NF
NF
NF
NF
NF
F
F
Uncon-
trolled
NF
NF
NF
A
A
F
F .
F
With NSPS Controls
No-
High wall
NF
NF
NF
NF
NF
A
F
F
Key: F - economically feasible
NF - not economically feasible
A - ambiguous (investment not necessarily precluded)
All plants for which the DCF analysis has been applied have been assumed
to function within a scenario defined by the following conditions:
s The plant will operate as a separate business entity or "profit
center",
S-31
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• The pass through of control costs to the consumers of the products
of new portable plants'is, to some extent, limited by competition
of existing portable plants which will not be affected by the NSPS
to the same degree,
• Individual plants may choose to operate either 1250 hours/year or
"1600 hours/year,
• Individual plants may choose to remain stationary within each
quarry (i.e., not follow the highwall) or move about within the
quarry (i.e., follow the highwall),
•' The planning horizon for potential investors in portable plants
is 10 years.
The assumption that the new portable plant will operate as a separate
business entity implies that the plant will not at any time be dependent
upon, or supported by revenues generated by other business activities of the
investing firm. It is implied therefore, that debt incurred through the
initial investment, and all other expenses associated with the plant's
operation will be paid only through those revenues generated by the new plant
itself. This assumption may reflect a conservative point-of-view for vertically
integrated or multi-plant firms; however, the assumption is plausible for
horizontally integrated firms having a single processing plant.
The condition that the pass through of control costs to the consumers
of portable plant products, will be limited by competition from existing
portable plants (which will not be affected by NSPS), reflects the reality
that portable plants typically compete with other portable plants, since
the ability of a plant to locate near the site of an impending job, is the
key to lowering customer transport costs and thus securing orders for crushed
stone and sand and gravel. For stationary plants it has been projected that,
due to the replacement of old plants by new (NSPS) plants, 25 percent of the
cost of pollution control will be passed through every four years (see
Section 8.4.2). Recognizing that the competition among portable plants is
potentially greater, and thus the cost pass through ability lower, it has
been assumed that portable plant operators will require twice as much time
(i.e., eight years) to pass through 25 percent of pollution control costs.
In the DCF analysis this level is reached by way of pass through increments
of 6.25 percent every two years. This assumption is conservative in that for
those sections of the country where competition is less intense, product
prices may be increased sooner to reflect additional costs.
S-32
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The DCF analysis detailed in Section A.3.3 has been constructed in such
a way that the operational peculiarities of individual portable plant opera-
tors are considered. For example, it has been noted that the preferences of
individual operators vary, especially with regard to the hours of operation
per year and the movement of plants within individual quarries. -Therefore,
in an attempt to differentiate impacts for each of these modes of operation,
each model plant has been individually examined assuming 1250 and 1600
operating hours per year, as well as preference for moving within individual
quarries (i.e., following the highwall) or remaining stationary within each
quarry (i.e., no highwall). It should be noted that the preference for
within quarry mobility will entail higher pollution control costs due to the
need to dismantle and set up control equipment more often.
The investment planning horizon of 10 years has been selected based upon
the 10 year normal useful life of portable plants. The 10 year life has been
supported by representatives of the industry.30
The cash flows considered by the DCF model are:
• Earnings after tax,
• Depreciation of plant and rolling stock,
• Depreciation of pollution control equipment,
• Working capital recovery,
e The salvage value of plant and rolling stock, and
• Payback of debt.
Earnings after tax have been determined after consideration of all oper-
ating costs, depreciation expenses, interest expenses, overhead, and pollution
control costs. In the determination of earnings after tax the availability
of depletion allowances and investment tax credits, have been recognized.
Regarding depreciation, plant and rolling stock have been depreciated (straight-
line) over their respective useful lives. Pollution control equipment has
been depreciated over five years to a zero salvage value. It has also been
assumed that working capital requirements are funded out of equity and that
all plant and rolling stock is sold at salvage value after 10 years. Each of
these items is discussed in greater detail in the following section.
S-33
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A.3.2.1 Critical Elements. In the estimation of the potential impacts
of NSPS controls, numerous data elements have been assembled and evaluated to
allow their incorporation into the DCF model. In the descriptions listed
below each of the critical elements is identified and discussed in terms of
its use in the model. Sources of data pertinent to each critical element are
listed in Section A.3.2.2.
With regard to operating hours per year, individual firms contactedSO
indicated a variety of preferences, however most tended toward two levels,
1250 and 1600 hours per year. Although the actual hours per year is heavily
dependent upon the weather, these two figures have been identified as target
levels. The number of operating hours per year is perhaps the most critical
data element since it is the prime determinant of net revenues generated by
each plant, in this high fixed cost, low profit margin industry. In the DCF
model all production is assumed to be sold and thus there is no net change in
the inventories of the model plant.
Concerning product prices, distinctions between crushed stone and sand
and gravel have been made. The values employed in the DCF model are $3.25/ton
for crushed stone and $2.86/ton for sand and gravel. The price of crushed stone
was noted by two industry representatives and the price of sand and gravel
was derived from the crushed stone price, based upon Bureau of Mines31*32
data indicating that for recent years the price of sand and gravel has
approached 88 percent of that for crushed stone.
Based upon the $3.25/ton price of crushed stone, operating costs (exclu-
ding depletion, depreciation, interest and overhead) have been identified
based on discussion with industry representatives, as $2.10/ton. Operating
costs for sand and gravel plants have been estimated by applying the ratio of
operating cost/price for crushed stone ($2.10/$3.25), to the price of sand
and gravel, to estimate sand and gravel operating costs of $1.85/ton.
The validity of the $2.10 and $1.85/ton operating cost levels for
i
crushed stone and sand and gravel portable plants, respectively, has been
supported through the determination of the pre-control Internal Rates of
Return (IRR) for those plants faced by these costs. Such rates have been
calculated and are summarized in Table 17.
S-34
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TABLE 17
INTERNAL RATES OF RETURN FOR PORTABLE CRUSHED STONE
AND SAND AND GRAVEL PLANTS
(Pre-Pollution Control)
Plant Capacity
(Mg./hr) (tph)
68
135
270
540
75
150
300
600
Operating Hours
(hours/year)
1250
1600
1250
1600
1250
1600
1250
1600
Crushed
Stone
io.°o%
10.1%
14.0%
14.2%
18.2%
20.9%
25.6%
Sand and
Gravel
<9.9%
9.9%
10.2%
14.3%
14.5%
18.4%
21.4%
The IRR percentages in Tabie 17 appear to be reasonable. In light of
current returns on other forms of long-term investment. Had the pre-control
rates been higher than those actually calculated, the understatement of
operating costs could be a suspected cause. On the other hand, if the
pre-control rates were estimated to be lower than those of Table 17, the
overstatement of operating costs/ton might have been suspected.
Depreciation of plant equipment has been taken as straight-line over
its 10 year life. Depreciation of rolling stock has been taken as straight-
line over a seven year life in order to take full advantage of the investment
tax credit. Depreciation of pollution control equipment has been taken as
straight-line over five years to a zero salvage value. Investment tax credit
is also available, and is taken on pollution control equipment using a 5-year
rapid amortization writeoff.
Debt terms for plant, rolling stock, and pollution control equipment
have been assumed to be five years at a 15 percent interest rate. Industry
contacts have noted that the availability of debt financing at terms better
than those noted, would be uncommon. It should be noted that the results of
the DCF model are not sensitive to variation of the interest rate.
The financing of portable equipment in terms of debt/equity has been
observed to range from 0 percent to 100 percent, dependent upon the prefer-
ences and abilities of individual firms. For purpose of the DCF model a
S-35
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ratio of 50/50 is employed. The use of this ratio has been judged realistic
by industry representatives. It should be noted that the results of the
DCF model are not sensitive to variation in the debt/equity ratio over the
0 to 100 percent range.
With regard to overhead expenses of portable plant operations, industry
sources have indicated that for a 270 Mg/hr (300 tph) portable plant'such
costs would be about $.25/ton for each ton of crushed stone produced. For
the 540 Mg/hr (600 tph) plants this figure has been reduced to $.22/ton due,
for the most part, to economies of scale. These figures have been employed
for both crushed stone and sand and gravel plants.
Pollution control costs for purposes of the DCF analysis, have been
grouped into four basic classes:
t Excess moving costs,
• Annual Cost of operation and maintenance,
t Depreciation, and
• Interest on borrowed capital used to purchase and install pollution
control equipment.
The inclusion of excess moving costs account for those added costs incurred
due to the need to dismantle, move and set up the pollution control system
each time the portable'plant is moved, regardless of whether the move is
within the quarry or to another quarry. The costs associated with these
activities are summarized in Table 6, while their inclusion into the DCF
model is described in Section A.3.3. Regarding the number of moves made by
the typical portable plant, industry sources have indicated that the typical
portable plant moves to a different quarry, on average, four times each
year.30 For those plants which prefer to follow the highwall, an average
of 24 such within-quarry moves might be made. Sand and gravel plants, on
the other hand, do not often move within the gravel pit, since very little
blasting is done.
The annual cost category represents the annual total of pollution control
costs incurred by each mo-del plant. .The costs summarized under this heading
include annual maintenance and operating costs, utilities, filter replacement,
dust disposal costs, property taxes, insurance, and administrative expenses.
Depreciation of pollution control equipment is taken over a 5 year useful
life, with a zero salvage value. For those plants which choose to follow the
S-36
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highwall, the cost of a small crane (needed to facilitate dismantling and
reconnecting of pollutions-control equipment) has been added to the plant
costs, and is thus depreciated over ten years. (Plant investment costs are
summarized in Section A.3.2.3.)
Interest on the pollution control equipment for each plant has been
determined by calculating the annual interest-principal repayment schedule
according to the debt terms described above.
Depletion expenses have been determined for each model plant, under the
assumption that the quarry site is leased rather than owned by the portable
plant operator. Under these circumstances the operator is entitled to a
depletion allowance according to a depletion base defined as:
Depletion base = price/ton - royalty/ton.
Industry representatives have noted that royalties paid by portable plant
operators are typically 5 percent of the sale price per ton. In the DCF
model the annual depletion allowance is calculated as:
Depletion = depletion base x annual output x % depletion.
The Internal Revenue Code allows percentage depletion for both crushed stone
and sand and gravel minerals of five percent. Two limitations to the use of
percent depletion are:
• The maximum depletion claimed in any year cannot exceed one-half of
that year's earnings before tax, and
• Depletion is subject to minimum tax as a tax preference item.
These limitations have been included, where appropriate, in the year-by-
year calculations of the DCF model. The assumption that the owner must pay
royalties represents a conservative point of view, since this slightly
reduces the available depletion base.
Regarding the Federal tax rate, the marginal tax rate can "vary up to a
maximum of 46 percent of earnings before tax and after depletion. In the DCF
model it is assumed that taxable income of the firm, resulting from other
activities, is sufficiently greater than $100,000 annually, and thus the tax
rate employed is 46 percent. State taxes are assumed to be 5 percent of
earnings before tax since this is the most common state tax rate.
S-37
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Working capital or capital required to finance accounts receivable and
inventories have been considered in the DCF models. Industry contacts30
have noted that both accounts receivable and inventories each require -
capital financing on the level of 15 percent of sales, giving total working
capital requirements of 30 percent of sales. In the DCF models it has been
assumed that working capital is financed from equity and that all working
capital is recovered after the tenth year.
Salvage values of plant and rolling stock have been considered in the
DCF model as cash inflows resulting from their sale in the tenth year. The
salvage values have been determined through industry contacts as well as
inspection of the used equipment markets as defined by industry trade jour-
nals. 33 The'salvage value factors used in the DCF model are 36 percent for
plant and equipment and 16 percent for rolling stock.
The model assumes that firms will take maximum advantage of the invest-
ment tax credit. It is recognized that the credit cannot exceed 10 percent
of the investment and may not be carried forward more than seven years.
A.3.2.2 Sources of Data. Sources of data used in the DCF analysis are
noted in Table 18.
A.3.2.3. Plant Investment. Estimates of the costs of new portable
crushed stone and sand and gravel plants were assembled after discussion with
both the manufacturers of portable plants34 and firms who use portable
equipment in their quarrying activities. On the basis of these discussions
the investment levels noted in Table 19 were developed and used in the DCF
model. In those instances where a small crane is purchased, in order to
maintain within-quarry mobility, the cost of such a crane is assumed to be
$80,000.
Plant and equipment investment for the 270 Mg/hr (300 tph) sand and
gravel plant was determined by noting the difference in equipment require-
ments (and thus costs) between the 270 Mg/hr (300 tph) crushed stone model
plant and the sand and gravel model plant of the same capacity. Plant and
equipment investments for the 68, 135 and 540 Mg/hr (75, 150 and 600 tph)
plants were estimated through the .6 power capacity rule.
S-38
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TABLE 18
SOURCES OF DATA
Source
Data Element
Operating Hours/Year
Product Prices
Operating Costs
Depreciation
Debt Terms
Debt/Equity
Overhead
Pollution Control Costs
Moves/Year
Depletion
Tax Rates
Investment Tax Credit
Working Capital
Salvage Values
Plant Investment
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S-39
-------
TABLE 19
REQUIRED INVESTMENT FOR NEW PORTABLE CRUSHED STONE
AND SAND AND GRAVEL PLANTS
($l,000's 1979)
Plant Capacity
Mg/hr) (tph)
Crushed Stone
PI ant .and Rolling
Equipment Stock
Total
Invest-
ment
Sand and Gravel
Plant and
Equipment
Rolling Total
Stock Invest-
ment
68
135
270
540
75
150
300
600
305
462
700
1061
217
330
500
758
522
792
1200
1819
213
323
490
743
218
330
500
758
431
653
990
1501
A.3.3 Discounted Cash Flow (DCF) Analysis. Table .20 presents an
example of the data sheets which were developed for each model plant under
the previously discussed scenarios regarding operating hours and plant
movements. The example presented in Table 20 is that for the 270 Mg/hr
(300 tph) crushed stone plant which operates at 1,600 hours per year and
prefers to maintain its mobility within the quarry (i.e., follow the highwall),
In this case the total investment required (excluding pollution control) is
$1,748,000 represented by:
Plant
Small Crane
Rolling Stock
Working Capital
Total Investment
Cost
$700,000
80,000
500,000
468,000
$1,748,000
Source of Funds
50% debt, 50% equity
-do-
-do-
100% equity
S-40
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S-41
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Since the plant, crane and rolling stock are financed 50/50 debt/equity,
and working capital from equity alone, the total investment from equity
is 51,108,000.
The steps summarized below detail how the discounted cash flows for the
ten year life of this plant were determined. The derivation of individual
values are explained in Section A.3.2.1.
• Row 1, Revenue, was determined by multiplying operating hours per
year (1,600) by the capacity per hour (300 tph) and the price per
ton for crushed stone ($3.25).
• Row 2, Operating Costs: Plant and Rolling Stock, has been esti-
mated by multiplying operating hours per year (1,600) by the
'. capacity per hour (300 tph) and the operating costs per ton
($2.10). In addition $8,000/ year was included as the operating
costs for the small crane.
t Row 3, Depreciation: Plant, was derived by subtracting from the
total investment in plant ($700,000 + $80,000), the estimated
salvage value at 36 percent ($281,000) and calculating the annual
depreciation charge for each of the 10 years.
• Row 4, Depreciation: Rolling Stock, was determined by subtracting
from the investment ($500,000) its salvage value of 16 percent
(580,000) and calculating the annual depreciation charge for each
of seven years. For years 8, 9 and 10, the model assumes the fully
depreciated rolling stock requires increased maintenance and so
operating costs have been increased by $60,000 (i.e. the value of
annual depreciation) for those years (Row 2).
• Row 5, Interest: Plant and Rolling Stock for each year has been
determined by calculating the annual interest-principal repayment
schedule based on the terms of a five year loan of $640,000 at 15
percent.
t Row 6, Overhead, has been determined by multiplying the operating
hours per year (1,600) by the capacity per hour (300 tph) and the
estimated overhead costs per ton ($.25).
. Row 8, Excess Moving Costs: Pollution Control have been estimated
based upon the data summarized in Table 6 regarding the cost of
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moving the control system. Based upon an estimated 24 mcves/yesr
within the quarry, 4 moves/year among quarries, labor costs for
control system dismantling and set up of $1,440/move and average
transportation costs of $5,120 for moves to different quarries, the
annual excess moving costs have been determined to be $61,000-.
Row 9, Annual Cost: Pollution Control was obtained by summing the
following annual direct cost components (Table 13); annual 0 &M costs
utilities, filter replacement, dust disposal, and taxes, insurance
and administration. , ~
Row 10, Depreciation: Pollution Control, was determined by assuming
the total installed capital costs ($203,6£0) of Table 13 will be
depreciated to zero salvage value over five years.
Row 11, Interest: Pollution Control, was. determined through the
interest-principal repayment schedule for a loan of ($203,600) for
five years at 15 percent.
Row 13, Pass-through, was determined based on the assumptions
regarding the gradual pass-through of pollution control costs to
the consumers of crushed stone and sand and gravel (see Section
A.3.2). More specifically, the DCF model assumes that the follow-
ing percentages ,.of the total costs of pollution control will be
passed to consumers in the form of higher prices:
- Years 1 and 2 = 0 percent
- Years 3 and 4 =6.25 percent
- Years 5 and 6 = 12.50 percent
- Years 7 and 8 = 18.75 percent
- Years 9 and 10 = 25.00 percent
While in reality the pass through of control costs will increase
the yearly revenues, the arithmetic of Table 20 is based upon
the deduction of the pass through amounts from total costs.
Row 16, Depletion, has been estimated for each year by multiplying
the depletion base ($3.08), the calculation of which is described
in Section A.3.2.1, by the capacity per hour, operating hours per
year, and the five percent depletion allowance. Following this
procedure has yielded a maximum annual depletion of $73,000.
However, Federal tax laws prohibit the claiming of depletion allow-
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ances in excess of one-half of earnings before tax. In the case
presented in Table 20 the plant cannot claim full depletion
until the fifth year of operation.
Row-18, Federal Tax Liability, has been calculated on the basis of
a marginal tax rate of 46 percent.
Row 19, Investment Tax Credit, has been calculated or, the assump-
tion that the firm will attempt to apply the full credit available,
.which in this case is $148,000 (i.e., 10 percent of the total
investment of $1,483,600 including pollution control). Current tax
laws dictate that credit may be taken on the first $25,000 of
earnings before tax and after depletion, plus a percentage of
earnings above this amount. Presently the tax laws allow credit
for 60 percent of earnings above the $25,000 level in 1979, and 70
and 80 percent for 1980 and 1981, respectively. For 1982 and all
following years the percentage is 90 percent.
Row 21, Adjustment: Minimum Tax. Since the previously discussed
depletion allowance is a "tax preference item" the tax law calls
for the payment of a minimum tax if the amount of the firm's
Federal tax (row 20) is less than the depletion claimed (row 16).
For those years which this is so, an adjustment of the year's
depletion must be made in order to define a "minimum tax base" (• ow
22). This adjustment is taken as the years Federal tax (row 20)
unless that tax is less than $10,000 in which case the adjustment
is $10,000 according to the Internal Revenue Code.
Row 22, Minimum Tax Base, was determined by subtracting the adjust-
ment (row 21) from the year's depletion (row 16).
Row 23, Minimum Tax, was determined by applying the minimum tax
rate of 15 percent, to each year's minimum tax base (row 22).
Row 24, Total Federal Tax, was derived through the addition of each
year's minimum tax (row 23) and Federal tax (row 20).
Row 25, State Tax, was determined through the application of the
most common state tax rate (5 percent) to each year's earnings
before income tax (row 15).
Row 26, Total Tax, shows the amount of Federal and state taxes
payable for a particular year.
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Row 27, Earnings After Tax, forms the first item in the cash flow
calculations (Rows 27 through 37).
Rows 28, 29, and 30, entail the "adding back" of various deprecia-
tion amounts into the annual cash flows of the portable plant.
Row 32, Working Capital Recovery, was added to the final year's
cash flow to reflect the recovery of equity capital previously
sunk in accounts receivable and inventories.
Row 33, Salvage Value, was added to the tenth year's cash flow to
reflect cash gene -ated from the sale of the ten year old portable
plant. The calculation of this salvage value was noted previously
in Section A.3.2.1.
Row 34, Principal Repayment: Plant and Rolling Stock, was deducted
from each of the first five year's cash flows since one-half of the
investment in pi ant and rolling stock has been financed through
debt over five years at 15 percent.
Row 35, Principal Repayment: Pollution Control, was also deducted
from the cash flows of years one through five since the investment
in pollution control equipment has been financed completely, through
debt over five years at 15 percent.
Row 38, Discount Factor. In order to account for the fact that
cash flows to be received during the near future are "more valuable"
to the firm than those to be generated in the later years, all cash
flows have been discounted to their present value. The discount
factors have been determined on the basis of a cost of equity of 15
percent. The cost of equity has been used since the DCF'analysis
detailed above has accounted for the repayment of all loans (i.e.,
debt) used to support the portable plant's operation.
Row 39, Discounted Cash Flow. When the cash flows of each year are
discounted to their present value and summarized a value of $828,000
is derived. It is this value which is compared to the original
investment from equity ($1,108,000) to allow the further calcula-
tion of the Internal Rate of Return (IRR) as described below.
A.3.4 Conclusions
A.3.4.1 Internal Rates of Return* IP an effort to gain greater insight
into the specific economic impacts upon those plants examined, the Internal
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Rate of Return (IRR) for each plant was determined. Such a rate is defined,
in each instance, as that rate of return which equates the present value of
future cash flows with the value of the initial required investment from
equity. Therefore, according to this definition, the feasibility of indivi-
dual investments is judged by whether or not the IRR is greater than the
cost of equity (and thus economically attractive) or less than the cost of
equity (and thus not attractive). Based on discussions with industry repre-
sentatives, the cost of equity was assigned a value of 15 percent per year.
A.3.4.2 Feasibility Definitions. Once each IRR was identified it
became necessary to establish boundaries or "cut-off" points so that eco-
nomically feasible and non-feasible investments might be more clearly dis-
tinguished. While in the strictest sense, such a cut-off point should be
the cost of equity, a middle range of "ambiguous" results has been selected.
The need for such a range is based upon the reality that the economic envi-
ronment of all portable plants is not, and will not be identical. Recognizing
this reality, the values for a number of parameters chosen in the above DCF
analysis have reflected conditions which would be faced by a small number of
plants in the extreme. Recognition of the use of such conservative assumptions
is crucial in the interpretation of the DCF results (Table 16) since, in
reality, many plants will not face conditions of such an unfavorable nature.
Specific examples of the use of conservative assumptions made in this
analysis include:
• Operating hours per year - it is quite possible that the plants in
question can or will operate for a number of years during the 10-year
span at rates higher than 1,250 hours per year,
• Prices - control costs may be passed to the consumer at a rate much
higher than that assumed, especially in those areas of less strict
competition,
• Debt terms - some firms, especially those with well established
credit lines, may be able to obtain bank financing at less than 15
percent, or over periods longer than 5 years.
For these reasons a range of ambiguity of 12 to 15 percent IRR has been
selected, and for the purpose of Table 16, NSPS controls for those plants
S-46
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whose post-control IRR is greater than 15 percent are identified as "econo-
mically feasible", while those below 12 percent are said to be "not economi-
cally feasible". For a specific plant whose internal rate of return, as
calculated by the method employed here, .falls within the 12 to 15 percent
range (termed "ambiguous"), an investment decision will have to be made
after careful revaluation of prevailing process, market and economic condi-
tions.
A.3.4.3 Adaptation of Portable Plants to NSPS Control. In general, the
implications of the results of the DCF analysis summarized by Table 16 are
that the profitability of those new plants who desire to operate at relatively
low hours per year and/or maintain within quarry mobility will be adversely
affected. With specific regard to crushed stone, it appears that the new 270
Mg/hr (300tph) portable plants may be forced to operate at a greater number
of hours each year and limit the number of within quarry moves made.
However, it should be noted that for those new plants which can operate at
levels above 1,250 hours per year and also pass a greater portion of
control costs to consumers of crushed stone, profitability will be main-
tained. Since sand and gravel plants ordinarily do not move within gravel
pits, the new 270 Mg/hr (300 tph) portable plants which will maintain
profitability will be those which either operate at a higher level of hours
each year, or can increase the price of their products enough to cover the
increased costs of pollution control.
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REFERENCES
1. Letter and attachments from Brown, Howard, _Iowa Manufacturing Company,
to Viconovic, George, GCA/Technology Division. June 18, 1979. Data
on portable and stationary plants in the crushed stone and sand and
gravel industries.
2. Telecon. Hart, Michael, Colorado Sand and Gravel Association with
Viconovic, George, GCA/Technology Division. June 13, 1979.
Portable plants in the sand and gravel industry.
3. Telecon. Davidson, Edward, National Sand and Gravel Association with
Viconovic, George, GCA/Technology Division. June 13, 1979.
Portable plants in the sand and gravel industry.
4 Telecon. Hoover, Earl, United States Bureau of Mines with Viconovic,
4. Telecon. noo^, GCA/f echnol Qgy Division. june 8, 1979. Portable
plants in the crushed stone industry.
5. Telecon. Renninger, Frederick, National Crushed Stone Association
with Viconovic, George, GCA/Technology Division. June 13,
1979. Portable plants in the crushed stone industry.
6. Telecon. Pressler, J., United States Bureau of Mines with Viconovic,
George, GCA/Technology Division. June 8, 1979. Portable
plants in the gypsum industry.
7. Telecon. Messinger, Arthur, United States Bureau of o
Viconovic, George, GCA/Technology Division. June 8, 1979.
Portable plants in the pumice industry.
8 Telecon. Ampian, S., United States Bureau of Mines with Viconovic,
8. Telecon. gjjjj; GC^Technol0gy D1v1s1on. June 11, 1979. Portable
plants in the clays industry.
9. Telecon. Brown, Howard, Iowa Manufacturing Company with Viconovic,
George, GCA/Technology Division. June 11, 1979. Portable
plant industry data.
10. Telecon. Brown, Howard, Iowa Manufacturing Company with Viconovic,
George, GCA/Technology Division. June 15, 1979. Industry
data.
11. Telecon. Hart, Michael , Colorado Sand .and Gravel Association with
Viconovic, George, GCA/Technology Division. June 18, 1979.
Industry data.
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15,
22,
23,
24,
Telecon. Olson-, DeTv Gifford-Hill Company with Viconovic, George,
GCA/Technology Division. June 28, 1979. Industry data.
Cole, Richard, Flintkote Company with Harnett, William,
Gu,A/ Technology Division. November 8, 1979. Portable
plant operating and movement data.
12,
13. Telecon,
14. Telecon.
Brown, Howard, Iowa Manufacturing Company with Viconovic
George, GCA/Technology Division. June 21, 1979. Portable
and stationary plant sales data.
U.S. Bureau of Mines Mineral Commodity Summaries 1979. Washington
B.C., U.S. Department of the Interior, 1979. 190 p.
16. Telecon,
17. Telecon,
Cole, Richard, Flintkote Company with Viconovic, George,
GCA/Technology Division. June 13, 1979 and June 14,
1979. Portable plant cost and movement data.
Olson, Del, Giffor-Hill company with Viconovic. George,
GCA/Technology Division, June 15, -1979. Portable plant
cost and movement data.
19. Telecon,
20. Telecon,
18. Telecon. Hart, Michael, Colorado Sand and Gravel Association with
Viconovic, George, GCA/Technology Division. June 17,
1979. Portable plant movement data.
Lahu, Peter, Speer Construction with Viconovic, George,
GCA/Technology Division. July 17, 1979. Portable plant
operating and movement data.
Ellis, Oscar, Moline Consumers Company with Viconovic,
George, GCA/Technology Division. July 18, 1979. Portable
plant operating and movement data.
21. Telecon. Hart, Michael, Colorado Sand and Gravel Association, with
Viconovic,'George, GCA/Technology Division. July 19,
1979. Portable plant operating and movement data.
Telecon. Ellis, Oscar, Moline Consumers Company with Harnett,
William, GCA/Technology Division. November 8, 1979.
Portable plant operating and movement data.
Letter and attachments from Schroeder, Philip N., M.C. Schroeder
Company to Viconovic, George, GCA/Technology Division. July 27, 1979
Baghouse cost data.
Letter and attachments from Meyer, Robert J., Joy Industrial
Equipment Company-Western Precipitation Division to Viconovic, George,
GCA/Technology Division. July 27, 1979. Baghouse cost data'.
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25. Telecon. Schroeder, Philip N., M.C._Schroeder Company with Viconovlc,
George, GCA/Technclogy Division. August 6, 1979. UuctworK
cost data.
26. Telecon. Hamlin, Robert, Hamlin Sheet Metal Company with Vlconovlc,
George, GCA/Technology Division. August 8, 1979. Ductwork
cost data.
27. PEDCo. Environmental Inc. Cost Analysis Manual for Standards
Support Document. Cincinnati, PEDCo. Environmental Inc., April 1979.
82 p.
28. Perry, Robert H. and Cecil H. Chilton. Chemical Engineers' Handbook.
New York, McGraw-Hill Book Company, 1973.
29. Memo from Brown, Howard, Iowa Manufacturing Company, to Goodwin,
Don EPA/OAQPS. March 1,1979. Data on portable plants and
stationary Plants in the crushed stone and sand and gravel industries.
30. Included among industry contacts are;
': Douglas E. Anderson, B.L. Anderson, Inc., Jedar Rapids, Iowa
Larry Hinton, Azrelli Construction, Inc., Kankakee, Illinois
Flovd Lillig, Iowa Manufacturing Company, Cedar Rapids, Iowa
William J. Paxson, Chief Engineer, Iowa Manufacturing Co.,
AlbertRRichardson! Gordon Quarries, Inc., Forrest City, Missouri-
Howard L. Slife, V.P., Cedar Rapids Aggregate Equipment Sales,
Iowa Manufacturing Co., Cedar Rapids, Iowa
• Robert Treager, Farmers Stone and Treager Quarries, Inc.,
lafi, Missouri
31 U.S. Bureau of Mines Mineral Commodity Profiles Stone. MCP-17. U.S.
Department of the Interior, Washington, D.C. July 19/8. p.10
32. Lr.S. Bureau of Mines. Mineral Commoidity Profiles. Sand and Gravel.
MCP-23. U.S. Department of the Interior. Washington, u.t.
September 1978. p.12
33. Highway and Heavy Construction. September 1979. p. 150-158.
24. Iowa Manufacturing Company. Cedar Rapids. Iowa
ig-
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TECHNICAL REPORT DATA
(nease read Instructions on the reverse before completing)
EPA-450/3-83-QQla
3. RECIPIENT'S ACCESSION MO.
I. TITLE AND SUBTITLE
Nonmetallic Mineral Processing Plants _
Background Information for Proposed Standards
5. REPORT DATE
April 1983
-ftp.
n%
6. PERFORMING ORGANIZATION CODE
)OR(S)
8. PERFORMING ORGANIZATION REPORT N'O.
IZATION NAME AND ADDRESS
Office of Air Quality Planning and Standards
U.S. Environmental Protection Agency
Research Triangle Park, North Carolina- 27711
10. PROGRAM ELEMENT NO.
11. CONTRACT/GRANT NO.
68-02-3057
12. SPONSORING AGENCY NAME AND ADDRESS
DAA for Air Quality Planning and Standards
Office of Air, Noise, and Radiation
U.S. Environmental Protection Agency
Research Triangle Park, North Carolina 27711
13. TYPE OF REPORT AND PERIOD COVERE-1
14. SPONSORING AGENCY CODE
EPA/200/04
Standards of performance for the control of emissions from nonmetallic mineral
processing plants are being proposed under the authority of Section 111 of the Clean
Air Act. These standards would apply to new, modified, or reconstructed facilities
at any nonmetallic mineral processing plant including crushers, grinding mills,
screens, bucket elevators, conveyor belt transfer points, bagging operations, storage
bins, and enclosed truck and railcar loading stations. This document contains
background information and environmental and economic impact assessments, as proposed
under 40 CFR Part 60, Subpart 000.
7.
KEY WORDS AND DOCUMENT ANALYSIS
DESCRIPTORS
b.lDENTIFIERS/OPEN ENDED TERMS
c. cos AT I ! ield/Group
Air pollution
Pollution control
Standards of performance
Nonmetallic mineral processing plants
Particulate emissions
Air Pollution Control
13B
8. DISTRIBUTION STATEMENT
Unlimited
19. SECURITY CLASS (This Report/
Unclassified
21. NO. OF PAGES
469
20. SECURITY CLASS (Thispage!
Unclassified
22. PRICE
EPA Form 2220-1 (Rev. 4-77)
PREVIOUS EDITION IS OBSOLETE
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