United States Office of Water EPA821-B-97-010
Environmental Protection (4303) January 1998
Agency
Economic Analysis and
Cost-Effectiveness
Analysis of Proposed
Effluent Limitations
Guidelines and
Standards for
Industrial Waste
Combustors
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ECONOMIC ANALYSIS AND COST-EFFECTIVENESS ANALYSIS OF
PROPOSED EFFLUENT LIMITATIONS GUIDELINES AND STANDARDS FOR
INDUSTRIAL WASTE COMBUSTORS
William Anderson, Economist
Engineering and Analysis Division
Office of Science and Technology
U.S. Environmental Protection Agency
Washington, DC 20460
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Acknowledgments
Credit must be given to the project manager Samantha Hopkins and to the rest of the IWC team (Charles White,
Patricia Harrigan, Richard Witt, and Kristen Strellec) for their professional manner, conscientious effort, and
contributions.
Credit must also be given to Abt Associates for their assistance and support in performing the underlying
economic analysis supporting the conclusions detailed in this report. Their study was performed under 68-C4-
0060. Particular thanks are given to Sha Hsing Min, Antje Siems, Randi Currier, Penny Schafer, and Rob
Sartain.
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Table of Contents
Chapter 1
Chapter 2
Chapter 3
Chapter 4
Chapter 5
Chapter 6
Chapter 7
Chapter 8
Chapter 9
References
Section 1
Section 2
Section 3
Section 4
Appendix A
Appendix B
Appendix C
Appendix D
Appendix E
Appendix F
Economic Analysis of Proposed Effluent Limitations Guidelines
and Standards for the Industrial Waste Combustors Industry
Introduction
Data Sources
Profile of the Industrial Waste Combustors Industry
Facility Impact Analysis
Firm-Level Impact Analysis
Foreign Trade Impacts
Community Impacts
Impacts on New Sources
Regulatory Flexibility Analysis
Cost-Effectiveness Analysis of Proposed Effluent Limitations Guidelines
and Standards for the Industrial Waste Combustors Industry
Introduction
Methodology
Cost-Effectiveness Results
Cost-Effectiveness Values for Previous Effluent Guidelines and Standards .
Industrial Waste Combustors Pollutants of Concern
Toxic Weighting Factors
POTW Pollutant Removal Efficiencies
Results of Cost-Effectiveness Analysis Evaluating
BPT Options as BAT Options
Pollutant Weighting Factors
Results of Cost-Effectiveness Analysis Using Pollutant Weighting Factors .
... 1.1
... 2.1
... 3.1
... 4.1
... 5.1
... 6.1
... 7.1
... 8.1
... 9.1
. Ref.l
. C-E 1.1
. C-E 2.1
. C-E 3.1
. C-E 4.1
C-E A. 1
C-E B.I
C-E C.I
C-E D. 1
. C-E E. 1
. C-E F.I
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Chapter 1
Introduction and Overview
1.0 Overview and Definitions
The Federal Water Pollution Control Act Amendments of 1972 established a comprehensive program
to "restore and maintain the chemical, physical, and biological integrity of the Nation's waters" (Section 101(a)).
To implement these amendments, the U.S. Environmental Protection Agency (EPA) issues effluent limitations
guidelines and standards for categories of industrial dischargers. By regulation, EPA establishes guidelines and
standards that represent:
• Best Practicable Control Technology Currently Available (BPT) These regulations apply to existing
industrial direct dischargers, and generally cover discharge of conventional pollutants.
• Best Available Technology Economically Achievable (BAT) These regulations apply to existing
industrial direct dischargers and the control of priority and non-conventional pollutant discharges.
• Best Conventional Pollutant Control Technology (BCD BCT regulations are an additional level of
control for direct dischargers beyond BPT for conventional pollutants.
• Pretreatment Standards for Existing Sources (PSES) These regulations apply to existing indirect
dischargers (i.e., facilities which introduce their discharges into Publicly Owned Treatment Works, or
POTWs). They generally cover discharge of toxic and non-conventional pollutants that pass through
the POTW or interfere with its operation. They are analogous to the BAT controls.
• New Source Performance Standards (NSPS) These regulations apply to new industrial direct
dischargers and cover all pollutant categories.
• Pretreatment Standards for New Sources (PSNS) These regulations apply to new indirect
dischargers and generally cover discharge of toxic and non-conventional pollutants that pass through the
POTW or interfere with its operation.
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This Economic Analysis (EA) assesses the economic impact of the proposed effluent limitation
guidelines and standards for the Industrial Waste Combustors Industry. This rulemaking proposes limitations
for Best Practicable Control Technology (BPT), Best Available Technology Economically Achievable (BAT),
Best Conventional Pollutant Control Technology (BCT), Pretreatment Standards for Existing Sources (PSES),
New Source Performance Standards (NSPS) and Pretreatment Standards for New Sources (PSNS).
The proposed Industrial Waste Combustors rule will apply to new and existing commercial facilities
that are engaged in the combustion of industrial waste (not medical waste, sewage sludge or municipal waste)
received as off-site transfers from other firms. Affected facilities include commercially-operating hazardous
waste combustors regulated as "incinerators" or "boilers and industrial furnaces" (BIFs) under the Resource
Conservation and Recovery Act (RCRA) as well as commercially-operating non-hazardous industrial waste
combustors. The proposed rule will not apply to facilities that burn only wastes received from off-site facilities
within the same corporate ownership (intracompany wastes) or facilities that only burn wastes generated on-site
(captive wastes). EPA believes the wastewater generated by Industrial Waste Combustor operations at most of
the captive and intracompany facilities that EPA has identified are already subject to national effluent limitations
or pretreatment standards based on the manufacturing operations at the facility.
The Agency identified thirteen facilities that would meet the criteria for inclusion in the rulemaking based
on responses to EPA's 1994 Waste Treatment Industry Phase II: Incinerators Screener Survey and Questionnaire.
Of these thirteen facilities, two facilities have either stopped accepting waste from off-site for combustion or have
closed their combustion operations, leaving eleven in-scope facilities. The Economic Analysis addresses the
eleven open facilities, including eight direct dischargers and three indirect dischargers, which employ
approximately 850 people and earned over $380 million in revenue in 1992.
1.1 Summary of the Proposed Rule
The proposed rule includes BPT, BAT, BCT, PSES, NSPS and PSNS regulations. These are discussed
below.
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Best Practicable Control Technology (BPT)
EPA proposes to establish BPT effluent limitations guidelines to control conventional, priority, and non-
conventional pollutants. The technology basis for BPT is primary precipitation, solid-liquid separation,
secondary precipitation, solid-liquid separation, and sand filtration. The BPT limitations are based upon two
stages of chemical precipitation, each at different pH levels, each followed by some form of separation and sludge
dewatering. The first stage of chemical precipitation is preceded by chromium reduction, when necessary. The
different pH levels would be selected so as to optimize the removal of metals from Industrial Waste Combustor
wastewater.
Best Available Technology Economically Achievable (BAT)
EPA proposes to establish BAT effluent limitations guidelines based upon the same technologies
proposed for BPT.
Best Conventional Pollutant Control Technology (BCT)
EPA proposes to establish BCT effluent limitations guidelines for Total Suspended Solids (TSS)
equivalent to the proposed BPT limitations for TSS.
New Source Performance Standards (NSPS)
EPA proposes to establish NSPS limitations equivalent to the proposed BPT/BCT/BAT effluent
limitations.
Pretreatment Standards for Existing Sources (PSES)
EPA proposes to establish PSES effluent limitations with a technology basis of primary precipitation,
solid-liquid separation, secondary precipitation and solid-liquid separation.
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Pretreatment Standards for New Sources (PSNS)
EPA proposes to establish PSNS effluent limitations equivalent to the proposed PSES effluent
limitations.
1.2 Selection of the Proposed Regulatory Options
EPA evaluated two regulatory options, as follows:
• Option A Chemical Precipitation (pH=8.5 to 9)
Liquid/Solid Separation
Sludge Dewatering
Second Stage Chemical Precipitation (pH=3)
Liquid/Solid Separation
Sludge Dewatering
• Option B Option A + Sand Filtration
To determine the technology basis and performance level for the proposed regulations, EPA developed
a database consisting of daily effluent data collected from: the Detailed Monitoring Questionnaire, the 1994
Waste Treatment Industry Phase II: Incinerators Questionnaire, facility NPDES permits, facility POTW permits,
and the EPA wastewater sampling program.
Selection of the Proposed BPT Option
The Industrial Waste Combustors receive for thermal treatment large quantities of hazardous and
non-hazardous industrial waste that result in discharges of a significant quantity of pollutants. The EPA
estimates that 291,000 pounds per year of TSS and metals are currently being discharged directly or indirectly
to the nations waters.
Section 304(b)(l)(A) requires EPA to identify effluent reductions attainable through the application of
"best practicable control technology currently available for classes and categories of point sources." The Senate
Report for the 1972 amendments to the CWA explained how EPA must establish BPT effluent reduction levels.
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Generally, EPA determines BPT effluent levels based upon the average of the best existing performances by
plants of various sizes, ages, and unit processes within each industrial category or subcategory. In industrial
categories where present practices are uniformly inadequate, however, EPA may determine that BPT requires
higher levels of control than any currently in place if the technology to achieve those levels can be practicably
applied.
In addition, CWA Section 304(b)(l)(B) requires a cost reasonableness assessment for BPT limitations.
In determining BPT limitations, EPA must consider the total cost of treatment technologies in relation to the
effluent benefits achieved by such technology. This inquiry does not limit EPA's broad discretion to adopt BPT
limitations that are achievable with available technology unless the required additional reductions are "wholly
out of proportion to the costs of achieving such marginal level of reduction." Moreover, the inquiry does not
require the Agency to quantify benefits in monetary terms.
In balancing costs against the benefits of effluent reduction, EPA considers the volume and nature of
expected discharges after application of BPT, the general environmental effects of pollutants, and the cost and
economic impacts of the required level of pollution control. In developing guidelines, the Act does not require
or permit consideration of water quality problems attributable to particular point sources, or water quality
improvements in particular bodies of water. Therefore, EPA has not considered these factors in developing the
proposed limitations.
EPA concluded that the wastewater treatment performance of the facilities it surveyed was, with very
limited exceptions, inadequate and that only two facilities are using best practicable, currently available
technology. Moreover, EPA only found a significant number of pollutants at "treatable levels" at one of the
facilities. Thus, the proposed BPT effluent limitations will be based on data from this one treatment system only.
The inadequate pollutant removal performance observed generally for discharging Industrial Waste
Combustor (IWC) facilities is not unexpected. As pointed out previously, these facilities are burning highly
variable wastes that, in many cases, are process residuals and sludges from other point source categories. EPA's
review of permit limitations for the direct dischargers shows that, in most cases, the dischargers are subject to
"best professional judgment" concentration limitations which were developed from guidelines for facilities
treating and discharging much more specific waste streams.
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The Agency proposes BPT limitations for nine pollutants. EPA selected Option B for the Industrial
Waste Combustors. These limitations were developed based on an engineering evaluation of the average level
of pollutant reduction achieved through application of the best demonstrated methods to control the discharges
of the regulated pollutants.
EPA's decision to base BPT limitations on Option B treatment reflects primarily an evaluation of three
factors: the degree of effluent reduction attainable, the total cost of the proposed treatment technologies in relation
to the effluent reductions achieved, and potential non-water quality benefits. In assessing BPT, EPA considered
the age, size, process, other engineering factors, and non-water quality impacts pertinent to the facilities treating
wastes in this subcategory. No basis could be found for identifying different BPT limitations based on age, size,
process or other engineering factors. Neither the age nor the size of the Industrial Waste Combustor facility will
significantly affect either the character or treatability of the wastes or the cost of treatment. Further, the treatment
process and engineering aspects of the technologies considered have a relatively insignificant effect because in
most cases they represent fine tuning or add-ons to treatment technology already in use. These factors
consequently did not weigh heavily in the development of these guidelines. For a service industry whose service
is thermal treatment, the most pertinent factors for establishing the limitations are costs of treatment, the level
of effluent reductions obtainable, and non-water quality effects.
Generally, for purposes of defining BPT effluent limitations, EPA looks at the performance of the best
operated treatment system and calculates limitations from some level of average performance of these "best"
facilities. For example, in the BPT limitations for the OCPSF Category, EPA identified "best" facilities on a
BOD performance criteria of achieving a 95 percent BOD removal or a BOD effluent level of 40 mg/1. (52 FR
42535, November 5, 1987). For this industry, as previously explained, EPA concluded that treatment
performance is, in all but two cases, inadequate. Without two stages of precipitation at different pH levels, metal
removal levels are uniformly inadequate across the industry. Also, if a substantial number of pollutants were not
found in "treatable levels" for a particular facility during an EPA sampling episode, EPA obviously could not use
data from that facility to develop BPT performance levels. Consequently, BPT performance levels are based on
data from the one well-operated system using two stages for metals precipitation at different pH levels that was
sampled by EPA.
The demonstrated effluent reductions attainable through the Option B control technology represent the
BPT performance attainable through the application of demonstrated treatment measures currently in operation
in this industry. The Agency selected BPT limitations based on the performance of the Option B treatment
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system for the following reasons. First, these removals are demonstrated by a facility and can readily be applied
to all facilities. The adoption of this level of control would represent a significant reduction in pollutants
discharged into the environment (from 181,000 to 54,000 pounds of TSS and metals). Second, the Agency
assessed the total cost of water pollution controls likely to be incurred for Option B in relation to the effluent
reduction benefits and determined these costs were economically reasonable.
The Agency proposes to reject Option A because EPA concluded that not using sand filtration as the final
treatment step is not the best practicable treatment technology currently in operation for the industry.
Consequently, effluent levels associated with this treatment option would not represent BPT performance levels.
Also, Option A was rejected because the greater removals obtained through addition of sand filtration at Option
B were obtained at a relatively insignificant increase in costs over Option A.
Selection of the Proposed BCT Option
In developing BCT limits, EPA considered whether there are technologies that achieve greater removals
of conventional pollutants than proposed for BPT, and whether those technologies are cost-reasonable according
to the BCT Cost Test. EPA identified no technologies that can achieve greater removals of conventional
pollutants than proposed for BPT that are also cost-reasonable under the BCT Cost Test, and accordingly EPA
proposes BCT effluent limitations equal to the proposed BPT effluent limitations guidelines and standards.
Selection of the Proposed BAT Option
EPA proposes BAT effluent limitations for the Industrial Waste Combustors based on the same
technologies selected for BPT. The proposed BAT effluent limitations would control identified priority and
non-conventional pollutants discharged from facilities.
EPA has not identified any more stringent treatment technology option which it considered to represent
BAT level of control applicable to facilities in this industry.
Determination of New Source Performance Standards
Under Section 306 of the Act, new industrial direct dischargers must comply with standards which reflect
the greatest degree of effluent reduction achievable through application of the best available demonstrated control
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technologies. Congress envisioned that new treatment systems could meet tighter controls than existing sources
because of the opportunity to incorporate the most efficient processes and treatment systems into plant design.
Therefore, Congress directed EPA to consider the best demonstrated process changes, in-plant controls, operating
methods and end-of-pipe treatment technologies that reduce pollution to the maximum extent feasible.
EPA proposes NSPS that would control the same conventional, priority, and non-conventional pollutants
proposed for control by the BPT effluent limitations. The technologies used to control pollutants at existing
facilities are fully applicable to new facilities. Furthermore, EPA has not identified any technologies or
combinations of technologies that are demonstrated for new sources that are different from those used to establish
BPT/BCT/BAT for existing sources. Therefore, EPA proposes NSPS limitations that are identical to those
proposed for BPT/BCT/BAT.
Pretreatment Standards for Existing Sources
Indirect dischargers in the Industrial Waste Combustors Industry, like the direct dischargers, accept for
treatment wastes containing many priority and non-conventional pollutants. As in the case of direct dischargers,
indirect dischargers may be expected to discharge many of these non-combustible, low-volatility pollutants to
POTWs at significant mass and concentration levels. EPA estimates that indirect dischargers annually discharge
approximately 110 thousand pounds of TSS and metals to POTWs.
Section 307(b) of the Act requires EPA to promulgate pretreatment standards to prevent pass-through
of pollutants from POTWs to waters of the U.S. or to prevent pollutants from interfering with the operation of
POTWs. EPA is establishing PSES for this industry to prevent pass-through of the same pollutants controlled
by BAT from POTWs to waters of the U.S.
1.3 Structure of the Economic Analysis
This EA describes both the methodology employed to assess impacts of the proposed rule and the results
of the analyses. The overall structure of the impact analysis is summarized in Figure 1-1. The two main inputs
to the analysis are: 1) data on industry baseline financial and operating conditions, and 2) projected costs of
complying with the proposed rule. The industry baseline financial and operating data are based principally on
the 1994 Waste Treatment Industry Phase II: Incinerators Questionnaire (hereafter referred to as the
questionnaire) conducted under the authority of Section 308 of the Clean Water Act.
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Figure 1-1
Economic Impact Analysis of the Incinerator Industry
Effluent Limitations Guidelines: Analytic Components
Waste Treatment Industry
Phase II: Incinerators
Facility Survey for
1991-1992
Compliance Capital
& Operating Costs
Secondary Source Economic i
and Financial Data r
Economic Models
Cash Flow
Analysis:
Facility
and line
closure
Compliance
Cost Share
of Revenue
Analysis:
Financial
Stress
Short
of Closure
Facility
Impacts
Community
Impacts
Foreign
Trade
Impacts
Small
Business
Impacts
New
Source
Impacts
Labor
Requirements
Impacts
Firm
Impacts
j_ | Data Inputs
Key Analytical Components
: Analytical Outputs
Eleven of the thirteen facilities expected to be affected by the Industrial Waste Combustors rule received
and completed the detailed questionnaire, and an additional two facilities completed brief screener surveys. The
questionnaire asked for balance sheet and income statement information, as well as quantitative and qualitative
information regarding each facility's dependence on market sectors, types of customers and business activity.
Facilities were asked to characterize the competition they faced in various markets. The questionnaire also
gathered data regarding facility liquidation value, cost of capital and the facility's owning firm. EPA
supplemented data obtained from the questionnaire with secondary sources, including trade literature and public
filings.
hi addition to baseline facility data, the second major type of data input to the analysis is the technical
estimate of costs associated with compliance with the regulatory options. EPA developed these estimates based
on engineering analysis of the in-scope facilities. The cost estimates were incorporated into the economic impact
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analysis by adding an annualized capital cost of compliance to the estimated annual operating and maintenance
costs of compliance to yield a single, total annualized compliance cost.
EPA used baseline financial data and estimated annualized compliance costs to calculate baseline and
post-compliance cash flows at the level of the entire facility as well as for waste treatment operations alone.
Facilities that convert from non-negative to negative facility-level cash flows as a result of incurring compliance
costs are considered closures associated with the regulation. EPA also calculated the ratio of compliance costs
to revenue as a secondary measure of financial stress short of closure.
The Economic Analysis builds from the facility-level cash flow analysis, the results from which then
drive the other components of the EA (see Figure 1-1). The firm-level impact analysis evaluates the effect of
facility-level compliance costs on the parent firm. The community impact analysis examines how employment
losses due to projected facility closures affect not only the people that were employed by the facility but also the
communities to which these people belong. IWC closures might conceivably influence the U.S. trade balance by
decreasing export-related activity and increasing imports.
EPA also examined the proposed guideline to determine if it would create barriers to entry. If existing
firms were to gain a significant financial advantage over new firms in complying with the guideline, then the
guideline might deter new entrants and reduce market competition.
Finally, EPA assessed the regulatory impact on small businesses, in accordance with the requirements
of the Regulatory Flexibility Act. The key methodological component of this analysis was the identification of
small businesses. EPA used small business thresholds provided by the Small Business Administration, which
defines small businesses by firm-level employment or revenues, depending on the industry. In the Regulatory
Flexibility Analysis, EPA applied these thresholds and found no small businesses among the thirteen in-scope
facilities.
1.5 Organization of the Economic Analysis Report
The remaining parts of the Economic Analysis are organized as follows. Chapter 2 describes the data
sources consulted for this EA. Chapter 3 profiles the Industrial Waste Combustors Industry and examines the
economic and financial structure and performance of its markets. Following the background material in Chapters
2 and 3, Chapter 4 details the methodology used to estimate facility impacts and presents the results. Chapters
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5 through 9 connect the results of the facility impact analysis to potential collateral effects on firms, foreign trade,
communities, new entrants and small businesses. Chapter 10 presents the water quality-related benefits
associated with achievement of the proposed rule.
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Chapter 2
Data Sources
2.0 Introduction
This chapter describes the primary and secondary sources that provided economic and financial data used
to assess the expected economic impact of the Industrial Waste Combustors rule.
2.1 Primary Source Data
EPA, under the authority of CWA Section 308, sent out the Waste Treatment Industry Phase II:
Incinerators 1992 Screener Survey (OMB Approval Number: 2040-0162) and the 1994 Waste Treatment
Industry Phase II: Incinerators Questionnaire (OMB Approval Number: 2040-0167). These survey efforts
covered all thirteen (including the two which have either stopped accepting waste from off-site for combustion
or have closed their combustion operations) of the facilities EPA currently proposes to regulate with the Industrial
Waste Combustors rule. The questionnaire obtained 1991 and 1992 information on the technical and financial
characteristics of facilities to estimate how facilities would be affected by an effluent guideline.
The technical data obtained by the questionnaire include information on facility operating processes that
use water, the quantities of water and pollutants discharged by the various processes, the treatment systems that
are currently in place for managing discharge of pollutants and other data. These data provided the basis for
estimating treatment system and process change costs for complying with various rule options. The estimated
technical costs for compliance in turn yielded estimates of the capital and operating costs of treatment systems
and any production costs or savings that would accompany installation and operation of a treatment system. For
a detailed description of the technical data obtained by the questionnaire and the related engineering and cost
analyses leading to estimates of technical compliance costs, see the Technical Development Document.
The questionnaire also obtained a variety of financial data from the facilities. These data include: two
years (1991-1992) of income statements and balance sheets at the facility and firm levels; selected financial data
for incinerator and waste treatment operations; estimated value of facility assets and liabilities in liquidation;
borrowing costs; employment at the level of the facility as well as by type of operation, and characterizations of
market structure. Some respondents attached annual reports or equivalent supporting documents. The financial
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data obtained in the questionnaire provided the basis for assessing how facilities and product lines are likely to
be affected financially by effluent guidelines.
In addition to the questionnaire, EPA obtained facility- and firm-specific data from Form 10-K
submissions to the Securities and Exchange Commission and from company press releases and profiles on the
internet.
EPA received detailed financial data from eleven of the thirteen in-scope facilities, including nine of the
eleven currently open facilities expected to be included in the Industrial Waste Combustors rule. An earlier
screener survey provided additional, less detailed data for the remaining two open, in-scope facilities.
2.2 Secondary Source Data
In addition to enabling numerous analytical tools in the economic analyses in this document, secondary
source data helped to characterize and update background economic and financial conditions in the national
economy and in the Industrial Waste Combustors Industry. For example, secondary source data were used to
track the numerous consolidations and facility closures since administering the questionnaire. Secondary source
data also contributed significantly to the firm-level analysis and to the characterization of future prospects.
Secondary sources used in the analysis include:
• 1987 to 1992 U.S. Industrial Outlooks, published by the Department of Commerce, which supplied
information for Chapter 3.
• Small business thresholds, by 4-digit industry group from the Small Business Administration, used in
the Regulatory Flexibility Analysis and in the preliminary statistical analyses.
• Industry sources and trade publications (especially El Digest and The Hazardous Waste Consultant),
which contributed to the incinerators profile presented in Chapter 3 and to the facility and firm-level
impact analyses.
• Regional Multipliers: A User Handbook for the Regional Input-Output Modeling System (RIMS II)
2nd Edition, published by the Bureau of Economic Analysis, provided regional multipliers.
• Financial databases, including Robert Morris Associates' Annual Statement Studies, Dun & Bradstreet's
Million Dollar Directory and the Dun & Bradstreet company database. These sources provided
diagnostic financial ratios and firm-level income statement and balance sheet values, as well as
supplementary identification data.
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• The FY 1997 Economic Report of the President provided Producer Price Index series.
• County Business Patterns, published by U.S. Bureau of Census
• Canadian News Wire
• Market Guide "Company Snapshots"
The contributions of these sources to each component of the Economic Analysis are discussed in detail
within the corresponding chapters.
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Chapter 3
Profile of the Industrial Waste Combustors Industry
3.1 Introduction
Though still young, the Industrial Waste Combustors1 Industry has progressed from rapid growth in its
inception to overcapacity during the early- and mid-90s to a period of increasing financial stability that appears
to be emerging from recent consolidations. This chapter presents a brief economic profile of the entire
commercial waste combustion industry, then focuses upon the market segment to which the proposed Industrial
Waste Combustors effluent guidelines will likely apply. Because the industry continues to evolve, the profile also
compares the 1991-1992 period of the questionnaire to more recentyears and to the near-term future.
Since this chapter supports the economic analysis, it emphasizes economic characteristics that relate to
the industry's ability to absorb or pass-through compliance costs to customers. The most important
characteristics involve market risk:
1. The capital intensiveness of the production process and the long lead-times needed for facility
construction and permitting make it difficult for firms to respond quickly to exogenous market
shocks, such as unforeseen technological or regulatory developments.
2. Waste combustors potentially face considerable short term volatility in market demand, because
they depend closely upon client industries that respond strongly to business cycles. A
significant portion of waste combustor client industries also have access to close substitutes —
especially waste minimization.
However, management strategies apparently exist that can deal effectively with the special challenges
waste combustors face. While some members of the industry have suffered crippling financial setbacks in recent
years, others have managed to grow. Consolidation of waste combustor parent firms has reduced risk from
1 For the purposes of this economic analysis, "waste incinerators" or "waste combustors" will refer to the commercial
industrial waste incinerators, boilers and industrial furnaces subject to the proposed rule.
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market volatility, while an aggressive series of market entry and exit decisions by different types of waste
combustor facilities has responded to the emergent regulatory and technological environment.
Industry observers foresee little growth in the aggregate size of the market, as the total quantity of
hazardous wastes continues to decline in the United States. Although Canadian firms have acquired a number
of U.S. hazardous waste incinerators, and some U.S. facilities treat Canadian wastes, cross-border trade shows
no significant prospect of reversing the decline of hazardous waste volumes.
In response to regulatory developments and low growth prospects, cement kilns — one major component
of the hazardous waste combustion industry — have largely ceased burning hazardous wastes. This development
may help diminish the overcapacity and declining prices that have chronically challenged the financial health of
industry participants.
In short, the industry has responded in recent years to some of the risk issues inherent to the waste
treatment business and to the secular decline in aggregate market size. It remains to be seen what effect these
responses will have on the financial condition of in-scope facilities, but the perennially pessimistic forecasts that
have become the norm for the industry no longer seem viable. The 1996/1997 period finds commercial hazardous
waste combustors in very different economic and regulatory circumstances from market participants a year or two
earlier.
The following section defines relevant terms and explains the structure of the hazardous waste
combustion industry2. An overview of the entire industry follows, based on trade publications, EPA's Biennial
Reporting System, supporting documents for the proposed Industrial Waste Combustors rule and economic
census data. After the overview, the profile discusses likely economic prospects for the industry in the near future
and then focuses on the portion of hazardous waste combustion EPA expects will be required to comply with an
Industrial Waste Combustors rule. This section will draw from the incinerators questionnaire, publicly available
electronic databases and the sources previously cited. The chapter concludes by examining the time period
covered by the questionnaire — 1991 and 1992.
2 This profile concentrates on the hazardous waste portion of the Industrial Waste Combustors Industry to make use of
available secondary source data and to allow comparison with other EPA data sources.
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3.2 Industry Definitions
The Industrial Waste Combustors Industry includes facilities that provide a waste treatment or disposal
service by burning industrial and hazardous wastes. Some facilities use the generated heat energy to produce
some other commodity. Facilities that burn wastes without recovering heat energy as an input to some other
industrial application are called incinerators. Those facilities that use the heat of combustion as an input to some
other industrial production process are collectively known as boilers and industrial furnaces, or BIFs.
The industry can also be subdivided according to whether each facility provides waste combustion
services to other facilities or whether it burns wastes produced by other activities at the same site. Commercial
waste combustors offer services to off-site generators (sources) of wastes. For the purposes of this profile,
commercial waste combustors also include those incinerators and BIFs that accept on-site in addition to off-site
wastes. Facilities that burn only on-site wastes are non-commercial incinerators or BIFs. These are also known
as "captive" facilities.
These distinctions create four broad categories of waste combustors:
Facility accepts Facility accepts only
off-site wastes on-site wastes
Heat of combustion is an integral input
used to produce another commodity
Heat of combustion is not an input used
to produce another commodity
Commercial
BIF
Commercial
Incinerator
Non-Commercial
BIF
Non-Commercial
Incinerator
While the term "non-commercial" conventionally applies to combustors that receive only on-site wastes,
in a more substantive, economic sense, the term can refer to facilities that receive wastes only from within the
same firm. Sometimes, an incinerator can be located at a separate site from a generator, but functionally and
financially the two may be integrally linked as a single business enterprise. Conversely, "commercial" should
refer to facilities that receive wastes from other firms. Receiving off-site wastes is not necessarily sufficient to
qualify as commercial, if the combustor does not engage in "commerce" with another business enterprise in
receiving the waste for payment. For the purposes of this profile and the Economic Analysis, EPA uses the more
economically meaningful definition of commercial facilities as those facilities that accept wastes from other firms.
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The BIFs of particular relevance to this profile are two types of industrial furnaces — cement kilns and
light-weight aggregate kilns (LWAKs) — which bake ingredients at high temperatures to produce building
materials. The Industrial Waste Combustors Industry does not include facilities that only store, transport or blend
wastes with other materials (fuel blending) for combustion.
Incinerators burn a wide range of wastes, including those that have low energy content and those that
have a high hazardous content. BIFs can only burn a more limited range of wastes, tailored to the production
process in which they are integrated, but they can do so at a lower cost. A BIF's produced energy offsets
purchased energy and some of the combustion equipment is required in any case for the associated production
process. Thus, incinerators are generally more versatile, while BIFs are generally less costly.
The decision to send wastes to an off-site, commercial waste combustor as opposed to an on-site facility
depends largely upon the quantity of wastes generated. A manufacturer that produces a large quantity of wastes
can save transportation costs, reduce combustion cost variability, address liability concerns and/or utilize existing
equipment by combusting waste on-site, in a non-commercial incinerator or BIF. On the other hand, a site that
produces lesser quantities of wastes may not be able to recover the capital and operating costs of an on-site
incinerator or BIF, and might thus turn to a commercial waste combustor.
3.3 Overview of the Industrial Waste Combustors Market
The Industrial Waste Combustors Industry is a small and contracting industry that is becoming
increasingly integrated, both vertically and horizontally. After several decades of growth, the industry found itself
mired in overcapacity by the beginning of the 1990s, when the regulatory environment that had launched waste
combustion as a growth industry began to yield more complex, and sometimes adverse, effects on the size and
profitability of the market.
In 1984, EPA promulgated restrictions on how hazardous waste generators could dispose of their wastes.
Where generators had previously sent untreated waste to landfills, they now had to find alternative methods of
treating and disposing wastes.3 Combustion proved attractive because it often met the Best Demonstrated
Available Technology requirement of EPA's disposal restrictions and because combustion effectively destroyed
some organic wastes that other treatment methods could not manage as well.
3 See EPA's 1996 Hazardous Waste Combustors Rule Economic Analysis.
3-4
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Over time, however, regulation of wastes has encouraged generators to reduce their output of wastes in
the first place. Not only can waste minimization often cost less than alternative management methods, but some
waste minimization and pollution prevention techniques improve the technical and economic efficiency of the
production process. Generators found numerous ways to increase profits by reducing wastes.
At the same time, regulators and industry implemented CERCLA Superfund clean-ups more slowly than
anticipated. This compounded the waste combustors' over-estimate of how quickly the market would grow. The
overcapacity that followed, combined with high exit costs, set the stage for fierce price wars. Then, in 1991,
promulgation of the BIF rule (discussed below) led cement kilns and LWAKs to enter the market with their low-
cost combustion services.
Both incinerators and BIFs experienced severe financial stress during the resulting period of overcapacity
and declining prices. Currently, many incinerators and nearly all BIFs have exited the commercial hazardous
waste combustion market. However, it is not clear whether the industry's financial health will recover or continue
to decline in the future.
The remainder of this section examines the history and structure of the industry in greater detail, then
makes some observations about possible future directions.
Incineration Compared to Other Methods of Waste Management
Currently, a relatively small proportion of wastes generated in the U.S. is combusted. According to
EPA's Biennial Reporting System (BRS),4 incinerators and BIFs account for between 1 and 2 percent of
hazardous wastes disposed or treated, in total tons. In 1993, incinerators and BIFs received 1.7 million tons of
hazardous waste, out of a total of 234.9 million tons. However, incineration claims a more significant portion
of off-site hazardous waste management. Table 3-1 shows that incinerators and BIFs processed 17 percent of
hazardous wastes sent off-site in 1993, and that the 136 incinerators that received off-site wastes constituted
nearly a third of all facilities that received off-site transfers of hazardous wastes.
4 This section draws from EPA's Biennial RCRA Hazardous Waste Report, National Analysis for 1989, 1991 and 1993
data, published in 1993, 1994 and 1995, respectively.
3-5
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Table 3-1 Quantity of Hazardous Waste Managed by Off-Site Transfers
Management Method
All (excludes storage)
Landfill
Aqueous Treatment
Recovery (other than BIFs)
Boilers/Industrial Furnaces
Incineration
Other
Management Method
All (excludes storage)
Landfill
Aqueous Treatment
Recovery (other than BIFs)
Boilers/Industrial Furnaces
Incineration
Other
1989
1991
1993
Tons of Off-Site Haz. Wastes Per Year
7,962,585
2,103,280
897,037
1,270,136
443,239
360,482
2,888.411
7,690,516
1,228,710
1,067,672
1,355,425
533,868
452,235
3,052,606
8,309,165
1,732,070
801,003
990,013
920,579
487,576
3,377,924
Share of Off-Site Haz. Wastes
100.0%
26.4%
11.3%
16.0%
5.6%
4.5%
36.3%
100.0%
16.0%
13.9%
17.6%
6.9%
5.9%
39.7%
100.0%
20.8%
9.6%
11.9%
11.1%
5.9%
40.7%
1989
1991
1993
Facilities Receiving Off-Site Haz. Wastes
484
51
97
155
28
88
na
427
28
115
162
46
71
na
432
36
99
145
53
83
na
Share of Receiving Facilities
100.0%
10.5%
20.0%
32.0%
5.8%
18.2%
na
100.0%
6.6%
26.9%
37.9%
10.8%
16.6%
na
100.0%
8.3%
22.9%
33.6%
12.3%
19.2%
na
Source: Biennial RCRA Hazardous Waste Report, National Analyses for 1989, 1991 and 1993 data, published in 1993 and 1994.
The total quantity of wastes received by incinerators and BIFs may be higher than the numbers above, because some combustion may also receive on-
site wastes, which do not appear in this table. BRS excludes small generators.
The quantity of wastes combusted, whether off-site only or overall, has increased over the entire period
for which BRS data are available, even though the total quantity of hazardous wastes declined more than 20
percent between 1991 and 1993. While off-site transfers increased 8 percent over the same biennial period, off-
site transfers to waste incineration grew almost 43 percent, due mostly to BIFs entering the hazardous waste
combustion market in response to the "BIF rule."5
The consensus of industry observers, though, is that future data will likely show a decline in the absolute
quantity of wastes combusted, especially by BIFs. Not only has the total quantity of wastes continued to decline,
but the cement kilns that entered the hazardous waste market under the BIF rule have reversed their efforts in
response to diminished economic and regulatory prospects. Only one cement kiln has applied for and received
a final permit.6
How an overall decline in waste generation might affect the off-site combustor market share of the
hazardous waste market is less clear. Because on-site treatment depends so much on high flow rates of wastes,
5 See 56 F.R. 7134. The BIF rule went into effect on August 21, 1991, and led that year to 21 applications by cement kilns
to bum hazardous wastes under the rule.
6 Ash Grove Cement Company received a final permit in August 1996 (see Hazardous Waste Consultant,
November/December 1996). The upcoming March/April edition will update the status and intentions of other cement kilns,
but most or all have withdrawn plans to bum hazardous wastes.
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reductions in waste generation could conceivably increase off-site transfers, if on-site treatment prove less cost-
effective over time.
Differential Growth Within the Industrial Waste Combustors Industry
According to 1993 BRS data, incinerators managed 55 percent of hazardous wastes entering the
combustion market. However, Table 3-1 shows that, in the off-site treatment and disposal segment of the market,
BIFs dominated, accounting for almost 66 percent of the 1.4 million tons of hazardous wastes combusted off-site
in 1993. Figure 3-1 illustrates the distribution of hazardous wastes among the major components of the
combustion market
Figure 3-1. Hazardous Waste Combustion
1993 Shares by Management Method
As noted in the previous section,
BIFs made these gains after the 1991
promulgation of the BIF rule. The BIF rule
allowed cement kilns and LWAKs that
already combusted hazardous wastes to
apply for interim status and increase their
combustion of hazardous wastes pending a
final permit.
Cement kilns and LWAKs
immediately entered the market to take
advantage of their lower costs per unit of hazardous waste combusted, compared to incinerators. These kilns
enjoyed lower costs because:
On-Site BIF Combustion
Off-Site BIF Combustion
Incinerator waste was considered a hazardous waste, while, at the time, kiln dust was not. Kiln dust
could either be incorporated into the cement product or disposed of at a lower cost than incinerator
waste.7
Cement kilns could convert some of their existing equipment and facilities to burn hazardous waste,
rather than building anew.
7 U.S. Environmental Protection Agency, Report to Congress on Cement Kiln Dust, 1993, p. 9-10.
3-7
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• Some capital and operating costs of waste combustion are shared with another product. In other words,
the cost of waste combustion at a cement kiln is supported both by the price charged to waste generators
and by the price charged to cement customers. Incinerators must recover their costs from charges to
waste generators alone.
Cement kilns also have a very high capacity because their production process is highly energy intensive.
Other regulatory differences may also have smaller differential effects on the incinerators and BIFs, but the net
result was that, in 1992, kilns could accept hazardous wastes for combustion at about 25 percent to 50 percent
of the prices charged by incinerators.8 Since then, other regulatory developments have reduced or negated some
of these advantages for BIFs. In particular:
• The proposed Hazardous Waste Identification Rule (HWIR) may allow some incinerator ash to be
handled as non-hazardous waste.
• Heightened foreign competition in the
cement market requires tight cost control in
the production process.9
• Vertical integration in the incinerator
industry means that incinerators are more
often burning sludge from other waste
treatment or disposal facilities owned by
the same firm. This arrangement reduces
500,000 -x
Figure 3-2. Commercial Hazardous Wastes
Capacity and Utilization in 1993
2,000,000 -
a 1,500,000 -
a
S3 1,000,000 -
incinerator demand volatility and shares
some of the incinerators' costs with other
facilities in an integrated hazardous waste
treatment and disposal program.
g
D
Incinerators
Capacity
BIFs
Actual
The combination of this erosion of BIF cost advantages with a contracting market and public opposition
to new permits has yielded a commercial (off-site) hazardous waste combustion market currently dominated by
8 Hazardous Waste Consultant, March 1992.
9Hazardous Waste Consultant, March 1995. Also, Southdown Inc.'s Form 10-K for fiscal year ending 12/31/95 indicated
that the cement import share of U.S. consumption rose from 4 percent in 1982 to 20 percent in 1987, due partly to business
cycle effects. Major low-priced sources included Mexico, Japan and Venezuela.
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incinerators. Only one commercial BIF has a final permit to burn hazardous waste, and no applications are
pending.
Growth and Capacity Utilization
Demand for hazardous waste combustion is unusually difficult to forecast, when compared to many other
markets, because demand depends very heavily upon regulatory events and technological innovations across a
wide range of industries. That is, market forecasters need not only to guess changes in environmental regulations
that apply to hazardous waste combustion, but they also need to forecast environmental regulations on client
industries that send wastes to combustors. Similarly, waste treatment and reduction technology in client
industries has at least as much impact on waste combustors as combustion technology. Finally, while many
industries that are linked to primary industries are pro-cyclical and vary with the general state of the national
economy, there is no intrinsic reason to expect the demand for off-site waste treatment (as opposed to all types
of waste treatment) to vary either directly or indirectly with aggregate economic output.
While chemical manufactures generated two-thirds of combusted hazardous wastes in 1991, over 97
percent of those wastes were combusted on-site.10 Off-site wastes came from a more evenly distributed array of
industries.
The serious over-capacity problems that hazardous waste combustors have experienced for most of this
decade follow from the difficulties in forecasting their market. By 1993, practical capacity among incinerators
exceeded the actual amount of hazardous wastes combusted by 115 percent, while BIF practical capacities
exceeded combustion volumes by over 40 percent (see Figure 3-2).n Practical capacity measures the actual
operating potential of the facility, as opposed to the permitted capacity.
The Hazardous Waste Consultant, a trade journal, conducts an annual survey of hazardous waste
treatment, storage and disposal facilities that offers another perspective on anticipated and actual growth in the
industry. This survey asks respondents to indicate the current status of their facility operations and permitting
10 Based on a BRS analysis in the HWCR Economic Analysis, SIC 28 accounted for at least 65 percent of routinely
generated, primary wastes. The percentage of combusted hazardous wastes treated on-site is derived from the Biennial
RCRA Hazardous Waste Report, National Analysis (1994), based on 1991 data.
11 El Digest, June 1994. For incinerators, 1994 practical capacity is used instead of 1993, for which the requisite value
was not available. However, capacity among incinerators has not been as variable as in the BIF segment.
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activities. Table 3-2 shows some selected data for the period from 1990 to 1995. Figures 3-3 and 3-4 present
these data graphically for incinerators and BIFs, respectively.
Table 3-2. Status of Hazardous Waste Incinerators and Cement Kilns
Incinerators
Completions or Permits Approved
New Proposals
Delays and Setbacks
Abandonments
Closures or Permit Denials
Cement and Aggregate Kilns
Completions or Permits Approved
New Proposals
Delays and Setbacks
Abandonments
Closures or Permit Denials
1990
2
4
20
12
6
1990
2
7
7
1
0
1991
4
5
22
6
2
1991
0
21
8
5
0
1992
na
na
na
na
na
1992
na
na
na
na
na
1993
5
0
9
9
1
1993
1
0
1
8
9
1994
5
0
9
6
2
1994
0
0
0
2
7
1995
1
0
7
4
2
1995
0
0
1
3
2
Figure 3-3
Status of Incinerator Projects
Source: Hazardous Waste Consultant
Mixed practice that explicitly includes an incinerator are counted as incinerators. Expansion was counted as a separate incinerator, for purposes of
status.
New kiln permits in 1990 include one new Part B permit and one court decision upholding a previously issued permit.
New proposals for cement kilns in 1991 are currently combustors of toxic wastes and applied for "interim" status under the BIF rule.
The value for delays and setbacks among kilns in 1991 is the number of pending permits from prior years.
Kiln data in 1991 may include approvals and completions with current, and similarly closures and denials with abandonments. Source does not
elaborate.
Three new incinerators reported in 1994 were actually projected to open prior to 1994 and appear in 1994 numbers due to delays.
The sole incinerator startup in the 1995 report will accept explosives only.
At the beginning of the decade, a large number of incinerator closures and project abandonments reflected
the overcapacity problems facing the industry as a result of rapid growth in the 1980s. Industry participants cited
permitting delays, rigorous state-level siting
criteria, lawsuits and public opposition as major
obstacles. During 1990, six incinerators closed
and twelve proposed incinerators were
abandoned. However, the same year saw two
new cement kilns permitted and new proposals
for seven more.12
The largest surge in new kiln proposals
took place in the following year, because of the
BIF rule. A total of 21 cement kilns and
LWAKs applied for interim status. Incinerators
now faced low-priced competition from these
1990
1991
1992
1993
1994
1995
111 Completions/Approvals
P] Abandonments
I | New Proposals
I Closures/Denials
* Negative numbers denote abandonments, closures and permit denials
12 Hazardous Waste Consultant, March 1992. Dixie Cement Co. received a Part B permit, while United Cement's
previously issued permit was upheld in court.
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BIFs, in addition to continued public opposition and permitting delays. These delays included not only slower-
than-expected processing of incinerator permits, but also slower implementation of RCRA and CERCLA
provisions in client industries that were expected to yield greater hazardous waste streams for off-site combustion.
Regulatory difficulties also challenged BIFs. A year after filing for interim status, cement kilns and
LWAKs were required by the BIF rule to conduct a test burn and complete a "certification of compliance." Some
BIFs had underestimated how difficult and time-consuming this process would be. Compounding the problem,
some states would not allow the air pollution clearances the kilns needed to conduct test burns.13By 1993, neither
incinerators nor BIFs were submitting any new proposals at all. From 1993 to 1995, 18 cement kilns and
LWAKs either closed entirely, ceased accepting hazardous wastes and/or received permit denials. In most cases,
BIFs gave up plans to enter the hazardous waste market because of anticipated regulatory changes, tepid growth
in the market and sustained public opposition. Eleven incinerators received permits and/or completed
construction during the same period, but the lack
of new proposals eventually caught up to the
stock of projects in process. Only one of the
eleven incinerator additions occurred in 1995,
and this facility processed explosives
exclusively.
Future Prospects
Despite the inherent difficulty of
forecasting the commercial hazardous waste
combustion market, the data show several
unequivocal trends.
Figure 3-4
Status of Cement Kiln Projects
i— '
^-ft
'a10
tn
c*-l
o .
S3 S
.0
^-
1990
1991
1992
1993
1994
1995
••3 Completions/Approvals | | New Proposals
[ I Abandonments | Closures/Denials
* Negative numbers denote abandonments, closures and permit denials. In 1992, 21
new proposals are applications for interim status under the BIF rule by kilns that
already bum toxic waste.
The first is that the recent collapse of cement kiln and LWAK activity in this market will not continue,
for the simple reason that there is only one participant left. That facility — Ash Grove Cement Company —
recently acquired a final BIF permit. To date, it is the only one to do so.
^Hazardous Waste Consultant, March 1992.
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Second, the industry will clearly be more heavily concentrated, as major players continue to buy former
competitors. Consolidation makes strategic sense, from a theoretical perspective, because of the high entry and
exit costs. Uncertainty in market demand exposes individual facilities to a high risk of being unable to finance
their substantial sunk costs. However, large firms that control a number of different stages in the waste treatment,
storage and disposal process, employing a range of technologies, can better hedge against shifts in preferred waste
management methods in response to unexpected regulatory developments or unforeseeable technological changes
in client industries.
Consolidation is also the theoretically expected response to the fierce price competition that characterized
the 1990s. In fact, with the exit of most BIFs from the commercial hazardous waste combustion market and with
the ongoing reduction of capacity (often after an acquisition), two of the three most important reasons cited by
industry participants for depressed prices are greatly ameliorated: overcapacity and competition between cement
kilns and incinerators.14 In 1994, El Digest reported that commercial incinerator utilization rates had rebounded
to 70 percent, and consolidations, conversions and closures have continued strongly since then.15
Significant obstacles clearly remain. Waste minimization continues to threaten the total size of the
market. However, the previous discussion of BRS data noted that even in the face of declining aggregate volumes
of hazardous waste, commercially incinerated quantities could nevertheless rise. Public opposition to new permits
continues, but this is less of an issue since the industry is more interested in consolidating ownership and closing
excess capacity than applying for new permits. The Hazardous Waste Identification Rule could drastically reduce
the quantity of wastes designated as hazardous. On the other hand, some industry observers think that HWIR
might increase the flow of hazardous wastes to commercial combustors because the rule could allow generators
to close and clean up their sites that currently remain open because of high post-closure costs.16
While no one forecasts a financial boom, the elements appear to be in place to reverse some of the severe
stresses to date. High entry and exit barriers plus horizontal and vertical integration make a recipe for economic
empowerment. Major players expect market demand to stabilize or grow slightly. Finally, a growing number
of states have adopted differential fees for disposing of wastes — fees that favor combustion over land disposal.
u El Digest, June 1994.
15 Cited in the HWCR EIA, page 2-14.
16 El Digest, January 1996.
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3.4 In-Scope Facilities
In 1994, EPA received data from thirteen Industrial Waste Combustors relevant to the rule, including
detailed data from eleven. This section of the profile examines the questionnaire data as well as other, secondary
source data for these facilities. The questionnaire requested data for the 1991 and 1992 fiscal years.
Three firms account for approximately 62 percent of in-scope facility revenue. The diversity of these
three firms reflects the diversity of the in-scope facilities in general. They include a large, international chemical
and pharmaceutical manufacturer, a cement manufacturer and a waste management firm. Nine firms, have
revenue shares of between 5 and 10 percent.
Market Structure and Size
While the choice of combustion over alternative methods of managing wastes may respond sensitively
to economic and regulatory events, the financial health of in-scope facilities does not share the volatility
characteristic of combustion quantities. In addition to the fact that a few large firms dominate a market of
relatively atomistic customers, commercial hazardous waste combustion tends to be a relatively small part of all
the activities at the in-scope facilities and the firms that own them.
The 9 facilities with detailed survey data (2 facilities were not given detailed surveys) employ 1,776
persons (full-time equivalent), but the facilities report that only half of these (850) are directly related to
incinerator operations. Survey respondents associate 65 percent of their total assets with hazardous waste
combustion.
Including non-incineration as well as incineration-related activity, the largest facility in terms of asset
size accounted for 15.1 percent of all assets at in-scope facilities, while the largest employer accounted for 15.9
percent of employment in the industry. Some sites that are relatively small in terms of assets have a high share
of employment. Relative employment size does not correlate well with relative asset size.
The column titled "Self-Reported Market Share" presents responses to a question about each facility's
volume of combusted wastes as a share of the total volume of wastes generated within the geographic area the
respondent serves. Because the question is worded imprecisely in the questionnaire, responses should be
interpreted as rough estimates of the scale of competitor activity, as perceived by respondents.
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Five facilities received wastes from as far as Puerto Rico or Canada. While no facility identified Mexico
as a waste source, that fact alone does not exclude the possibility of receiving wastes from a Mexican generator
that is closer than some other source areas, such as the U.S. or Canada. Trade publications, however, indicate
that Mexico is a fairly small source of wastes combusted in the U.S.
Since 1992, the industry has consolidated under fewer parent firms, and many of the in-scope facilities
have ceased hazardous waste combustion. In the questionnaire, two respondents identified themselves as
"independently owned." However, as of the beginning of 1997, every one of the in-scope respondents belonged
to a multi-site firm.17
Most of the discussion of current conditions in the in-scope industry will be presented at the level of the
firm, because of the consolidations. The ability of facilities to finance compliance costs should be seen in the
context of parent corporation financial health and market strategies. Information regarding firms come from two
trade journals — El Digest andHazardous Waste Consultant — in addition to the following sources: Form 10-
Ks, attachments to questionnaire responses, facility and parent firm press releases, Canadian News Wire and the
"Market Guide Company Snapshot."
The largest firm in the sample owns three facilities that earned approximately one-third of all revenues
earned by the thirteen respondents in the period of analysis. The firm claims that it faces insignificant
monopsonistic power, having several thousand customers, none of which account for more than 5 percent of
revenues.
Consolidation among suppliers in the commercial hazardous waste combustion market appears to have
augmented the market power of suppliers asymmetrically, compared to customers. The expectation by industry
observers that prices will recover from their recent declines supports the implications of the structural
developments in the market.
The largest employer in the sample accounts for more than one out of seven employees among in-scope
facilities that provided detailed questionnaire responses. This firm sold its non-hazardous solid waste operations
and at the same time purchased a hazardous waste incinerator from a U. S. firm that exited the industry. The new
17 While it is probable that some of this difference may arise from the ambiguous interpretation of the question's term
"independently owned," EPA has identified the pattern of consolidation on a facility-by-facility basis from secondary sources.
3-14
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owner plans to cease the facility's hazardous waste combustion and use it to pre-process material for another
incinerator bought in the same transaction.
One firm that represents the experience of cement kilns owns two in-scope facilities and has recently
exited the hazardous waste combustion market, along with all but one of its colleagues in the cement industry.
Although cement kilns have chosen to exit the hazardous waste combustion market, their ability to support
compliance costs appear to be greater now than during the questionnaire period.
Questionnaire responses identify other incinerators and BIFs as the primary source of competition. Only
one respondent identified a landfill as a major competitor in the respondent's market. When asked to estimate
their own market shares and the market shares associated with selected other entities in the same market, these
self-reported market shares ranged from 3 to 50 percent, with a revenue-weighted mean of 5 percent.
Financial Condition
The financial performance of in-scope facilities varies widely between facilities as well as over time.
This instability applies to both the questionnaire and current periods, making generalizations and comparisons
difficult. Revenues are currently increasing for the in-scope firms for which financial data were available from
public sources, and corporate Form 10-Ks indicate less financial stress in recent years than they did in the
questionnaire period. Directly comparable data are scarce, though, and so this section will present some summary
facility data from 1991/92 and then select highlights from available financial news regarding the recent
performance of firms that own in-scope facilities.
Return on assets is a more stable measure of profitability than return on equity, which can be and
frequently is manipulated through debt-equity management. Return on assets averaged 11.57 percent in 1991
and 18.37 percent the following year. Both of these are healthy values, but they exclude two facilities that
changed ownership during the period and were not able to provide complete data.
Management Strategies
Hazardous waste combustors have responded to the financial stress of the 1980's and 1990's by
integrating both horizontally and vertically, resulting in the industry structure described earlier in this chapter.
3-15
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These firms continue to pursue a strategy of reducing market risk by mixing asset types and closing particularly
volatile facilities.
One firm that exemplifies the current strategies describes itself as a "one source service provider" with
over a dozen facilities in 1996. Its acquisitions have sought to integrate vertically rather than horizontally, closing
some duplicative capacity while maintaining facilities that diversified its capabilities.
However, the firm has not completely eliminated its access to the capacity it has closed. Recognizing
the variability in market demand, this firm created a "ready" status where "incineration can begin quickly when
market demand warrants."18 This kind of flexible capacity is a strategy that has helped a number of industries
retain market share during periods of peak demand without incurring high costs of idle capacity during periods
of lower demand.
The same illustrative firm also developed an interesting strategy of accumulating wastes for periodic
rather than continuous incineration. Therefore, facilities can operate at economically and technically efficient
flow rates even if the total quantity of wastes varies widely from one month or year to the next.
3.5 Representativeness of the Questionnaire Period
At the time of the questionnaire, EPA selected 1991 and 1992 as the years for which respondents would
report economic and financial data. These were the most recent complete data available at the time, and no other
years are more representative of the industry than the selected years.
The reason for this is two-fold. First, the Industrial Waste Combustors Industry has undergone a
continuous progression of changes from the 1980's to the present. The most recent data resemble the current state
of the industry more than any prior year of data. This is not true of all industry questionnaires; industries that
exhibit a cyclical pattern of performance may be better represented by selecting a specific segment of the business
cycle rather than the most recent year.
Another consequence of the monotonic pattern of the industry's development is that a brief period is more
accurate than a broad period of analysis. Unlike a cyclical industry, where gathering data over several years can
18 From a Form 10-K filing with the Securities and Exchange Commission.
3-16
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allow averaging over a business cycle, an industry undergoing continuous change in one direction over a long
period of time is not expected to return to conditions present at any point in the past. Therefore averaging over
a greater period of time includes increasingly irrelevant data. EPA's choice of two years rather than more
provides a snapshot that is less "contaminated" by conditions at an earlier period that the industry had left behind.
Choosing two years rather than one allows some accommodation of random shocks not associated with time and
also allows EPA to recognize and analytically accommodate facilities that began or ceased operations immediately
before or after a particular year of data.
The period selected does capture characteristics of the industry that followed some significant
consolidations, though significant further acquisitions have continued in intervening years. However, even current
data are not likely to reflect the impact of other management strategies described above relating to capacity
control. Any trends in profitability due to increasing integration since the questionnaire years probably would
not be statistically distinguishable from the profitability data gathered, because of the extremely high variability
of observed data. The standard deviation of observed return on assets across the relevant facilities, for instance,
is over 1.05 (105 percent) — far overwhelming any change in observed return on assets ratios one could
reasonably expect between the questionnaire years and the present.19
In summary, the questionnaire period probably represents the current economic and financial condition
of the industry better than any other period that could have been selected at the time. Current quantitative
measures of financial performance are likely to be statistically indistinguishable from measures calculated on
questionnaire data. However, the industry has undergone some important changes since the questionnaire.
Integration has continued, with Canadian-ownership increasing its presence in the hazardous waste market. The
industry has introduced some management strategies aimed at reducing the risk of demand fluctuations.
19 This 1.05 value is not the same as the observational standard deviation from which a confidence interval can be directly
calculated. However, combined with the small number of observations, the variation in profitability presented does indicate
the difficulty of determining statistically significant changes.
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Chapter 4
Facility Impact Analysis
4.0 Introduction
The facility-level economic impact analysis assesses how the proposed Industrial Waste Combustors rule
would affect individual facilities, as opposed to the firms that own them. While facilities are geographically
contiguous entities, a firm might own more than one facility, at various locations. The next chapter assesses firm-
level impacts, but this chapter provides the basis for estimating the extent of facility closures and associated
production and employment losses that may result from the rule.
This analysis draws largely from facility data obtained from EPA's 1994 Waste Treatment Industry
Phase II: Incinerators Questionnaire. Engineering analysis of technical questionnaire and other data generated
estimates of facility costs of complying with each regulatory option. In this chapter, EPA uses economic and
financial responses from the questionnaire to evaluate the impact of compliance costs on the financial condition
of facilities.
Based on this analysis, EPA finds that the proposed incinerator rule is economically achievable and will
not subject affected facilities to unmanageable or unreasonable financial or economic burdens.
The major sections of this chapter explain the methodology behind each component of the facility impact
analysis and present the results. EPA applied two kinds of financial tests:
• After-Tax Cash Flow Test. This test examines whether a facility loses money on a cash basis. If a
facility's cash flow is negative when averaged over the period of analysis, then the facility's management
and ownership are determined to experience unmanageable or unreasonable financial or economic
burdens.
• Compliance Cost Share of Revenue. This test examines whether a facility's estimated compliance costs
amount to more than 5 percent of revenue, in which case the facility would be determined to experience
unmanageable or unreasonable financial or economic burdens.
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EPA applied the cash flow test to all eleven facilities that returned detailed questionnaires. Two
additional facilities that are expected to incur costs under the Industrial Waste Combustors rule did not submit
the detailed financial data necessary for the cash flow test, so EPA conducted only the compliance cost share of
revenue test for these two facilities.
4.1 Compliance Costs
EPA technical analysis yielded estimates of how much each facility would need to spend to comply with
each regulatory option.20 The estimated expenditures were comprised of an operating and maintenance costs
component, which recurs annually, and a one-time capital cost of compliance component. In order to perform
the economic impact tests, EPA combined the two cost components into a single annualized cost. When the
annualized cost is properly calculated, the facility should be indifferent between a) incurring the annualized cost
every year, and b) incurring a capital cost plus operating and maintenance cost the first year and then only
operating and maintenance costs each subsequent year.
EPA conducted the facility impact analysis on an after-tax basis because after-tax cash flow is the
portion of cash flow that the facility can use to meet regulatory compliance costs. It is also a commonly used
indicator of the ongoing viability of business enterprises. In this analysis, EPA calculated after-tax annualized
costs (ATCAm) as follows:
= ATCOM
where
ATCAm = After-tax, annualized cost of compliance
ATCOM = After-tax operating and maintenance cost of compliance
ATCCAm = After-tax, annualized capital cost of compliance
The only adjustment needed to calculate ATCOM from technical estimates of operating and maintenance
costs is to subtract the offsetting benefit the facility would experience from reduced taxes. EPA used a marginal
20 See Development Document for Proposed Effluent Limitations Guidelines and Standards for Industrial Waste
Combustors, EPA-821-R-97-011
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corporate tax rate of 34 percent, which implied that for every dollar of operating and maintenance compliance
costs, before taxes, the facility would lose 66 cents in after-tax profit. Therefore,
ATCOM = (1-T) x COM
where
ATCOM = After-tax operating and maintenance cost of compliance
COM = Operating and maintenance cost of compliance (pre-tax)
T = Marginal corporate tax rate (34% in this analysis)
The technical estimates of capital costs of compliance need to be annualized as well as adjusted for taxes.
EPA annualized capital costs by amortizing them over 15 years, using a discount rate of 7 percent. The 15 year
time period conforms with EPA practice and reflects a technical estimate of the useful life of the relevant kinds
of capital. The 7 percent discount rate — also OMB's measure of the social opportunity cost of capital (see
Executive Order #12866) — represents a reasonable estimate of the real, after-tax cost of capital for a typical
facility using both equity and debt financing.21 EPA showed, in developing the Industrial Waste Combustors rule
impact methodology, that annualized compliance costs are only modestly sensitive to large variations in the
discount rate.
To calculate offsetting tax benefits, EPA used straight-line depreciation over 15 years — the estimated
useful lifetime of the relevant capital goods. Therefore, the facility applies l/15th of the capital cost of
compliance to each year's income calculations for tax purposes. Current tax codes allow businesses to use
straight-line depreciation or a Modified Accelerated Cost Recovery (MACRS) depreciation schedule.22 EPA
chose the straight-line method for this analysis because it is the simpler and more conservative method.
The annualized, after-tax capital cost of compliance is calculated as follows:
21 EPA performed a sensitivity test in the Metal Products and Machinery Phase 1 proposed effluent guidelines economic
analysis to show that annualized costs are quite insensitive to discount rates over a reasonable range. In a review of prior
economic impact analyses, the Office of Water similarly found that the use of OMB's 7% rate is probably preferable to
collecting facility-specific measures of costs of capital because of the burdensome data requirements and the practically
insignificant analytical benefits associated with alternatives. (See "Review of Data Gathering and Methodology Issues for
Effluent Guideline Economic Impact Analyses (Draft)," August 1996.)
22 The "15-Year" class of depreciable properly includes "municipal wastewater treatment plants" and other properly with
a class life of 20 to 25 years. 1992 U.S. Master Tax Guide, Commerce Clearing House, Inc., 1991.
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ATCr, = xCr - —XT
C'A™1 ! /! . A-t C +
where
ATCC Am = After-tax, annualized capital cost of compliance
Cc = Capital cost of compliance
r = Discount rate (7% in this analysis)
t = Amortization period (15 years)
T = Corporate tax rate (34%)
In the above formula, the first expression on the right-hand side is the annualized equivalent of the lump
sum capital cost, Cc. The second expression is the offsetting benefit in the form of reduced taxes. Each year,
the taxable income is reduced by 1/15 the total capital cost of compliance. The tax associated with that
depreciation is T times the depreciation.
Substituting numeric values into the above formulas, the calculation of annualized, after-tax compliance
costs becomes:
= 0.66xCOM + (0.1098xCc - >
ATCAm = After-tax, annualized cost of compliance
Cc = Capital cost of compliance
COM = Operating and maintenance cost of compliance
ATCAm is the compliance cost subtracted from baseline cash flow in the after-tax cash flow test, and it is also
the value compared to total revenue in the compliance cost share of revenue test.
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Offsetting Revenue Increases
While some facilities might offset a portion of compliance costs by passing them through to customers
in the form of higher prices, EPA used the conservative assumption in this analysis of zero cost pass-through.
Since EPA finds that no facilities would bear unmanageable impacts in the zero cost pass-through case, it follows
that none would bear unmanageable impacts under any other cost pass-through assumption.
Some facilities might also substitute non-hazardous for hazardous waste or change from in-scope
combustion activities to alternative waste treatment techniques. The current facility impact analysis excludes
these dynamic, long-run responses that can mitigate the financial impact of effluent guidelines.
Aggregate compliance costs for the selected options are shown in Table 4-1 below.
Table 4-1. Total Costs of Proposed Regulatory Options
Proposed Options
BPT/BCT/BAT=
Option B
PSES=Option A
Sites
8
o
J
Total Capital Costs
(Mil 1992$)
6.346
2.090
Total O&M Costs
(Mil 1992$)
1.255
0.529
Total Post-tax Annualized
Costs (Mil 1992$)
1.381
0.531
4.2 After-Tax Cash Flow Test (Severe Impacts)
The after-tax cash flow test is conducted both in the baseline case and post-compliance case as an
indicator of severe impacts. If a facility's baseline cash flow is not negative, but, after incurring estimated
compliance costs, the facility's cash flow becomes negative, then EPA would determine that facility to experience
unmanageable or unreasonable financial or economic burdens as a result of the proposed rule and the facility
will likely close. If, on the other hand, a facility exhibits negative cash flow before the adoption of an Industrial
Waste Combustors rule, then the negative cash flow must be attributed to some prior cause.
EPA conducted the after-tax cash flow test once using facility-wide income statement values and again
using revenues, costs and expenses specifically associated with waste treatment operations. The former analysis
measures the impact of alternative regulatory options on the financial health of the affected business entity. The
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second analysis yields additional insight into how management may perceive the impact the Industrial Waste
Combustors rule has on the mix of operations within a facility.
Methodology
The after-tax cash flow test involves calculating, for each sample facility, the average after-tax cash flow
(ATCF) over the years for which income statement data were obtained in the questionnaire. The calculations are
as follows:
1. Express all income statement values for a sample facility as a two-year average, in 1992 constant dollars.
based on the Producer Price Index for finished goods (PPD. The PPI is the appropriate deflator because
waste combustion services are purchased primarily by commodity producers late in the production
process. The questionnaire requested financial data for 1991 and 1992, and most facilities reported
values for each of these years. However, a few facilities were not in operation in one or more of these
years, or accounting procedures changed during the period in a way that precluded responding for one
of the years. For these facilities, the average is the properly deflated value for the year for which the
respondent reported data.
2. Compute facility-level after-tax cash flow in 1992 dollars for each year of data. After-Tax Cash Flow
(ATCF) was computed as follows:
ATCF = (1-T)(R-CT+D)
where
ATCF
R
C
D
T
After-tax cash flow
Total revenue (1991-1992 average)
Total costs and expenses (1991-1992 average)
Depreciation expense (1991-1992 average)
Average tax rate, calculated by dividing average reported income taxes by
average earnings before taxes
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3. Repeat using revenue and costs specific to waste treatment operations.23 In this iteration, the relevant
revenue is the revenue from waste treatment, as reported in the questionnaire responses. While costs
were reported specifically for waste treatment, overhead expenses — including sales, general and
administrative, and depreciation expenses — were allocated to waste treatment in proportion to costs.
The calculation of after-tax cash flow becomes:
= O-T^-CC+coxrj+coxD]
where
= After-tax cash flow, waste treatment operations alone
R^ = Waste treatment revenue (1991 -1992 average)
C^ = Waste treatment costs (1991-1992 average)
COH = Facility overhead expenses (1991-1992 average), including sales, G&A,
interest and depreciation
D = Depreciation expense (1991-1992 average)
5) = Share of facility costs attributable to waste treatment, recycling/recovery,
and/or disposal operations, calculated by dividing total waste treatment costs
by the sum of waste treatment costs, costs of goods sold for products
manufactured, and cost of other goods and services sold
T = Average tax rate, calculated by dividing average reported income taxes by
average earnings before taxes
Calculate post-compliance cash flows. The above calculations yielded baseline after-tax cash flows,
based on questionnaire responses. EPA estimated post-compliance cash flows by subtracting after-tax,
annualized compliance costs from baseline cash flows. Thus,
ATCFpc = ATCF -
23 The cash flow test can be further narrowed to target combustion operations alone, using the same methodology described
here, but substituting combustion response values for waste treatment response values. EPA performed this alternative
analysis and found no difference in results.
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where
ATCF
ATC
Am
Post-compliance after-tax cash flow
Post-compliance after-tax cash flow, waste treatment operations alone
After-tax, annualized cost of compliance
Results
Excluding the two closed facilities, EPA applied the after-tax cash flow test to nine facilities for which
detailed data were available and usable and found none that would experience negative cash flows as a result of
any of the regulatory options considered. Detailed facility data were not available for two facilities. Of the nine
facilities subjected to the after-tax cash flow test, six submitted data to support an analysis of cash flow from
waste treatment operations alone as well as an analysis of facility-wide cash flow. Table 4-2 presents a summary
of these results.
Table 4-2 shows that EPA applied the after-tax cash flow test to six facilities based on waste treatment
operations, alone. Out of these facilities, one indirect discharger exhibited negative after-tax cash flow post-
compliance case but not in the baseline. Therefore, this facility's waste treatment operations are estimated to
close post-compliance or otherwise experience severe impacts.
Table 4-2. Summary of After-Tax Cash Flow Test Results
Facility Type
All Facilities
Cash flow < 0
Direct Dischargers
Cash flow < 0
Indirect Dischargers
Cash flow < 0
Waste Treatment Operations
Baseline
6
0
5
0
;
0
Post-Compliance
6
1
5
0
;
i
All Facility Operations
Baseline
9
0
7
0
2
0
Post-Compliance
9
0
7
0
2
0
No
Data
2
—
;
—
;
—
When the after-tax cash flow test is performed on revenues and costs from all activities at each facility,
all nine open facilities with detailed financial data have positive after-tax cash flow both in the baseline and post-
compliance cases. Therefore, there are no estimated facility closures due to the rule.
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4.3 Compliance Cost Share of Revenue Test (Moderate Impacts)
In addition to the after-tax cash flow test, EPA also conducted a compliance cost share of revenue
analysis that offers perspectives on economic impacts that cash flow analysis cannot offer. In this test, annualized
compliance costs (C^ calculated in the usual way are expressed as a ratio to revenues. Compliance costs that
amount to less than 5 percent of revenues are judged to cause moderate adverse impacts short of closure, though
ratios greater than 5 percent should not be interpreted as necessarily unachievable. EPA has frequently used this
standard in the past to measure the financial impact of compliance costs.
EPA performed the compliance cost share of revenue test once using facility-wide revenues and again
using revenues specifically associated with waste treatment operations. As in the cash flow test, the facility-level
analysis provides the best assessment of economic achievability for the regulated business entity.
Since this test requires less detailed data, EPA was able to include all eleven open facilities in the share
of revenue test, even though two of these facilities submitted only a screener survey. However, the two screener
surveys contained only sufficient data to compare compliance costs to waste treatment revenue, and not to overall
facility revenue. Compliance costs amounted to less than 2.4 percent of facility revenues in every case analyzed.
Table 4-3 summarizes the results.
Table 4-3. Summary of Compliance Cost Share of Revenue Test Results
Facility Type
All Facilities
Share > 5%
Direct Dischargers
Share > 5%
Indirect Dischargers
Share > 5%
Waste Treatment Operations
;;
2
8
0
3
2
All Facility Operations*
9
0
7
0
2
0
* 2 facilities submitted insufficient data for this test.
When compliance costs are expressed as a share of waste treatment revenues alone, some high ratios
appear, due to exceptionally low waste treatment revenues reported by some respondents. One site, for instance,
reported that revenues from waste treatment comprised only 0.02 percent of facility revenues.
Low revenue responses can occur when the waste treatment operations are not intended to generate
revenue alone. The previously mentioned site, for instance, is a cement manufacturer. From an economist's
perspective, the relevant revenue for a compliance costs share of revenue test would include the portion of cement
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manufacturing revenue attributable to waste combustion. Combustion fees measure only a small part of the
financial benefit that the facility gains from waste treatment operations. In this case, the compliance cost share
of revenue test could exorbitantly exaggerate the actual, economic burden of compliance costs at the waste
treatment level.
Low reported waste treatment revenues may also reflect a difference in opinion between what EPA
considers waste treatment operations, for the purposes of the regulation, and what the respondent to the economic
and financial portion of the questionnaire considered to be waste treatment. If so, these exceptionally high ratios
should be viewed as anomalous observations that do not accurately reflect the ratio of costs incurred under a
regulation by a set of operations to the revenues earned by those same regulated operations.
In spite of the anomalously high values for some sites, the weighted average compliance cost share of
waste treatment revenue ranges from 0.48 percent 1.07 percent. Viewed together with the facility-level results,
the compliance cost share of revenue test suggests that waste treatment line operations at 4 out of 18 analyzed
sites might exhibit high compliance cost to revenue ratios. However, none of the facilities are likely to experience
financial stress as a consequence.
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Chapter 5
Firm-Level Impact Analysis
The firm level analysis evaluates the effects of regulatory compliance on firms owning one or more
affected Industrial Waste Combustor facilities. It also serves to identify impacts not captured in the facility level
analysis. For example, some companies might be too weak financially to undertake the investment in the required
effluent treatment, even though the investment might seem financially feasible at the facility level. Such
circumstances can exist at companies owning more than one facility subject to regulation.
The firm-level analysis assesses the impacts of compliance costs at all facilities owned by the firm.
These impacts are assessed using ratio analysis, which employs two indicators of financial viability: the rate of
return on assets (ROA) and the interest coverage ratio (ICR). ROA is a measure of the profitability of a
company's capital assets. It is computed as the earnings before interest and taxes minus taxes divided by total
assets. ICR is a measure of the financial leverage of a company. It is computed as the earnings before interest and
taxes divided by interest expense.
Two firms each own three affected Industrial Waste Combustor facilities and are subjected to the ratio
analysis.24 The first step is to calculate the baseline ROA and ICR for each company absent the proposed rule.
The post-compliance analysis then calculates the ratios after the projected investment in wastewater treatment
equipment and the associated compliance costs. One firm experiences no measurable effect as the result of
compliance with the proposed rule. Neither the ROA nor the ICR changes between the baseline and
postcompliance analysis. The second firm experiences an insignificant decline in ROA and a minor decline in
ICR. The decline in ICR, while significant in percentage terms, is an artifact of the firm's extremely low level
of debt. As a result, the two firms are found to be not significantly impacted by the proposed rule.
24 In order to protect confidential business information, specific numbers from the ratio analyses cannot be provided.
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Chapter 6
Foreign Trade Impacts
To the extent that effluent guidelines change the total production costs of domestic businesses without
similarly affecting production costs for foreign competitors, regulation may affect the national balance of trade.
Furthermore, if compliance costs cause facility closures, domestic and foreign facilities would compete to replace,
in whole or in part, the sales associated with the closing facility.
However, based on questionnaire responses and the profile analysis, EPA finds foreign trade in the
Industrial Waste Combustors Industry to be practically non-existent, due to legal and economic restrictions on
the transport of wastes across national borders. Therefore, even though Canadian firms have purchased some
U.S. hazardous waste incinerators recently, and some U.S. facilities receive some wastes from Canadian sources,
these transactions will have no appreciable effect on the trade balance. EPA finds that the proposed rule will not
have a significant adverse impact of foreign trade.
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Chapter 7
Community Impacts
The community impact analysis builds from the facility impact analysis to determine if facility closures
might adversely affect the general public welfare. EPA assesses community impacts by estimating the expected
change in employment in communities with Industrial Waste Combustors that are affected by the proposed rule.
Possible community employment effects include the employment losses in the facilities that are expected to close
because of the regulation and the related employment losses in other businesses in the affected community. In
addition to these estimated employment losses, employment may increase as a result of facilities' operation of
treatment systems for regulatory compliance. It should be noted that job gains will mitigate community
employment losses only if they occur in the same communities in which facility closures occur.
The proposed rule is estimated to result in the post-compliance closure of the waste burning operations
of one facility. The post-compliance closure results in the direct loss of 27 Full-Time Equivalent (FTE) positions.
Secondary employment impacts are estimated based on multipliers that relate the change in employment in a
directly affected industry to aggregate employment effects in linked industries and consumer businesses whose
employment is affected by changes in the earnings and expenditures of the employees in the directly and indirectly
affected industries. The Bureau of Economic Analysis calculates appropriate multipliers estimated by its Regional
Input-Output Modeling System (RIMS).25 Multiplying the RIMS state-specific multiplier of 5.334 to the 27 direct
FTE losses leads to an estimated community impact of 144 total FTE losses as the result of the proposed rule.
The county in which the closure is projected to occur has a current employment of 173,242 FTEs dispersed
among 9,922 establishments.26 The direct and secondary job losses represent 0.08 percent of current employment
in the affected county.
The FTE losses are mitigated by the job gains associated with the operation of control equipment which
are estimated to be 9 FTEs nationally. The secondary and indirect effects can be estimated at the national level
by using the average multiplier of 4.049, resulting in an estimate of 36 total FTE gains associated with the
pollution control equipment.
25 The "direct-effect multiplier" measures the "total change in number of jobs in all row industries for each additional job
in the industry corresponding to the entry." Source: Regional Multipliers: A User Handbook/or the Regional Input-Output
Modeling System (RIMS II) 2nd Edition, Bureau of Economic Analysis, May 1992.
26U.S. Bureau of the Census, County Business Patterns 1994, U.S. Government Printing Office, Washington, DC, 1996.
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Chapter 8
Impacts on New Sources
The proposed rule includes limitations that will apply to new discharging sources within the Industrial
Waste Combustors Industry. EPA examined the impact of these regulations for new dischargers to determine
if they would impose an undue economic and financial burden on new sources seeking to enter the industry.
In general, EPA finds that, when new and existing sources face the same discharge limitations, new
sources will be able to comply with those limitations at the same or lower costs than those incurred by existing
sources. Engineering analysis indicates that the cost of installing pollution control systems during new
construction is generally less than the cost of retrofitting existing facilities. Thus, a finding that discharge
limitations are economically achievable by existing facilities also means that those same discharge limitations
will be economically achievable to new facilities.
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Chapter 9
Regulatory Flexibility Analysis
Since none of the facilities in the analysis are owned by small businesses under the Small Business
Administration (SBA) definition, EPA has concluded that the proposed rule, if adopted, would not have a
significant economic impact on a substantial number of small entities.
In evaluating the small business status of each facility, EPA used SBA standards for testing the status
of the parent of each facility. These standards specify a revenue or employment threshold for each SIC code,
below which the firm is considered a small business.
EPA obtained SIC codes for parent firms from SEC filings of the firms themselves. When an SIC code
was not cited, EPA used an SIC code of 3241 for known cement manufacturers and an SIC code of 4953 for
known refuse companies. The remaining firms were associated with SIC codes through a search of EPA's Facility
Index System (FINDS). Within the database, Dun & Bradstreet SIC assignments were given preference; in their
absence, the analysis used the RCRA SIC assignment.
Some firms could not be assigned to a single SIC. In these cases, the threshold is a two-part value
comprised of both the highest employment threshold and revenue threshold over all the SIC codes that apply to
the firm. If firm-level revenues or employment failed to exceed the relevant threshold, the facility would be
categorized as a small business.
One site is a very large conglomerate. Instead of examining all the SIC codes that actually apply to the
parent firm, the thresholds used are the highest employment and revenue thresholds among all industries.
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Chapter 10
Summary Environmental Assessment
10.1 Introduction
This chapter quantifies the water quality-related benefits associated with achievement of the proposed
BPT/BCT/BAT and PSES effluent limitations for Industrial Waste Combustors (IWCs). Based on site-specific
analyses of current conditions and changes in discharges associated with the proposal, the Agency estimated
instream pollutant concentrations for 17 priority and nonconventional pollutants from direct and indirect
discharges using stream dilution modeling. The potential impacts and benefits to aquatic life are projected by
comparing the modeled instream pollutant concentrations to published EPA aquatic life criteria guidance or to
toxic effect levels. Potential adverse human health effects and benefits are projected by: (1) comparing estimated
instream concentrations to health-based water quality toxic effect levels or criteria; and (2) estimating the
potential reduction of carcinogenic risk and noncarcinogenic hazard (systemic) from consuming contaminated
fish or drinking water. Upper-bound individual cancer risks, population risks, and systemic hazards are estimated
using modeled instream pollutant concentrations and standard EPA assumptions. Modeled pollutant
concentrations in fish and drinking water are used to estimate cancer risk and systemic hazards among the general
population, sport anglers and their families, and subsistence anglers and their families. EPA used the findings
from the analyses of reduced occurrence of instream pollutant concentrations in excess of both aquatic life and
human health criteria or toxic effect levels to assess improvements in recreational fishing habitats that are
impacted by IWC wastewater discharges (ecological benefits). These improvements in aquatic habitats are then
expected to improve the quality and value of recreational fishing opportunities.
Potential inhibition of operations at publicly owned treatment works (POTW) and sewage sludge
contamination (here defined as a sludge concentration in excess of that permitting land application or surface
disposal of sewage sludge) are also evaluated based on current and proposed pretreatment levels. Inhibition of
POTW operations is estimated by comparing modeled POTW influent concentrations to available inhibition
levels. Contamination of sewage sludge is estimated by comparing projected pollutant concentrations in sewage
sludge to available EPA regulatory standards for land application and surface disposal of sewage sludge.
Economic productivity benefits are estimated on the basis of the incremental quantity of sludge that, as a result
of reduced pollutant discharges to POTWs, meets criteria for the generally less expensive disposal method,
namely land application and surface disposal. In addition, the potential fate and toxicity of pollutants of concern
associated with IWC wastewater are evaluated based on known characteristics of each chemical.
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These analyses are performed for discharges of the eleven commercial Industrial Waste Combustors
(eight direct dischargers and three indirect dischargers) identified as within the scope of this regulation. The
following sections provide the results of these analyses, organized by the type of discharge (direct and indirect).
10.2 Comparison of Instream Concentrations with Ambient Water Quality Criteria
(AWQC)/Impacts at POTWs
The water quality modeling results for 8 direct IWC facilities discharging 17 pollutants (metals) to 8
receiving streams indicate that at current discharge levels, instream concentrations of 3 pollutants are projected
to exceed acute aquatic life criteria or toxic effect levels in one of the 8 receiving streams (12 percent). Instream
concentrations of 8 pollutants are projected to exceed chronic aquatic life criteria or toxic effect levels in 50
percent (4 of the total 8) of the receiving streams. The proposed BAT regulatory option will reduce acute aquatic
life excursions from three pollutants to two pollutants. The regulatory option will also reduce the chronic aquatic
life excursions from eight pollutants to seven pollutants in the four receiving streams. Additionally, at current
discharge levels, instream concentrations of two pollutants (using a target risk of 10"6 (1E-6) for carcinogens) are
projected to exceed human health criteria or toxic effect levels (developed for consumption of water and
organisms) in 50 percent (4 of the total 8) of the receiving streams. The instream concentration of one pollutant
(using a target risk of 10"6 (1E-6) for carcinogens) is projected to exceed the human health criteria or toxic effect
levels (developed for organisms consumption only) in 25 percent (2 of the total 8) receiving streams. The
proposed BAT regulatory option will eliminate human health criteria or toxic effect level (developed for
consumption of water and organisms) excursions by one pollutant, but four receiving streams are still impacted.
Human health criteria or toxic effect level (developed for organisms consumption only) excursions are eliminated
in one of the two impacted receiving streams at the proposed BAT regulatory option. Under the proposed BAT
regulatory option, pollutant loadings are reduced 29 percent.
Modeling results for 3 indirect IWC facilities that discharge 17 pollutants (metals) to 3 POTWs located
on 3 receiving streams indicate that at current discharge levels no instream pollutant concentrations are expected
to exceed acute aquatic life criteria or toxic effect levels. The instream concentration of one pollutant is projected
to exceed chronic aquatic life criteria or toxic effect levels in 33 percent (1 of the total 3) receiving streams. The
proposed pretreatment regulatory option will eliminate this chronic aquatic life excursion. Additionally, at current
discharge levels, the instream concentration of one pollutant is projected to exceed both human health criteria or
toxic effect levels (developed for consumption of water and organisms) and human health criteria or toxic effect
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levels (developed for organisms consumption only) in one receiving stream. Projected excursions are eliminated
by the proposed pretreatment regulatory option. Pollutant loadings are reduced 97 percent.
In addition, POTW inhibition problems and sludge contamination problems are projected only at current
discharge levels. Inhibition problems are projected to occur at 33 percent (1 of the 3) of the POTWs from the
discharge of one pollutant. The proposed pretreatment regulatory option eliminates any inhibition problem.
Sludge contamination is projected to occur at 67 percent (2 of the 3) of the POTWs due to the discharge of three
pollutants. The proposed pretreatment regulatory option will also eliminate sludge contamination problems.
10.3 Human Health Risks and Benefits
The excess annual cancer cases at current discharge levels and, therefore, at proposed BAT and proposed
pretreatment discharge levels are projected to be far less than 0.5 for all populations evaluated from the ingestion
of contaminated fish and drinking water for both direct and indirect IWC wastewater discharges. A monetary
value of this benefit to society is, therefore, not projected. Systemic toxicant effects are projected from fish
consumption for both direct and indirect discharges. For direct discharges, systemic effects are projected to result
from the discharge of three pollutants to three receiving streams at current discharge levels. An estimated
population of 705 subsistence anglers and their families are projected to be affected. At the proposed BAT
regulatory option, systemic toxicity is limited to one pollutant in one receiving stream with 373 subsistence
anglers and their families remaining exposed; a 47 percent reduction. For indirect discharges, systemic toxicant
effects are projected at current discharge levels due to the discharge of two pollutants to one receiving stream.
An estimated population of 249 subsistence anglers and their families are projected to be affected. No systemic
toxicant effects are projected at proposed pretreatment discharge levels. Monetary values for the reduction of
systemic toxic effects cannot currently be estimated.
10.4 Ecological Benefits
Potential ecological benefits of the proposed rule, based on improvements in recreational fishing habitats,
are projected for only indirect IWC wastewater discharges, because the proposed rule is not projected to
completely eliminate instream concentrations in excess of aquatic life and human health ambient water quality
criteria (AWQC) in any stream receiving wastewater discharge from direct discharge IWC facilities. For indirect
discharges, concentrations in excess of AWQC are projected to be eliminated at one receiving stream as a result
of the proposed pretreatment regulatory option. The monetary value of improved recreational fishing opportunity
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is estimated by first calculating the baseline value of the receiving stream using a value per person day of
recreational fishing, and the number of person-days fished on the receiving stream. The value of improving water
quality in this fishery, based on the increase in value to anglers of achieving contaminant-free fishing, is then
calculated. The resulting estimate of the increase in value of recreational fishing to anglers on the improved
receiving stream is $78,600 to $281,000 (1992 dollars).
The estimated benefit of improved recreational fishery opportunities is only a limited measure of the
value to society of the improvements in aquatic habitats expected to result from the proposed rule. Additional
benefits, which could not be quantified in this assessment, include increased assimilation capacity of the receiving
stream, protection of terrestrial wildlife and birds that consume aquatic organisms, maintenance of an
aesthetically pleasing environment, and improvements to other recreational activities such as swimming, water
skiing, boating, and wildlife observation. Such activities contribute to the support of local and State economies.
10.5 Economic Productivity Benefits
Potential economic productivity benefits, based on reduced sewage sludge contamination and sewage
sludge disposal costs, are projected at one POTW that will meet land application pollutant concentration limits
as a result of the proposed rule. Savings in disposal cost are estimated at $7,400 (1992 dollars). In addition, two
POTWs (1 additional) are expected to accrue a modest benefit through reduced record-keeping requirements and
exemption from certain sewage sludge management practices. A monetary value for these modest benefits cannot
currently be estimated.
10.6 Pollutant Fate and Toxicity
EPA identified 21 pollutants of concern (10 priority pollutants, 4 conventional/classical pollutant
parameters, and 7 nonconventional pollutants) in waste streams from IWC facilities. Seventeen (17) of these
pollutants (all metals) are evaluated to assess their potential fate and toxicity based on known characteristics of
each chemical.
Most of the 17 pollutants have at least one known toxic effect. Based on available physical-chemical
properties and aquatic life and human health toxicity data for these pollutants, 10 exhibit moderate to high
toxicity to aquatic life; 3 are classified as known or probable human carcinogens; 13 are human systemic
toxicants; 13 have drinking water values; and 10 are designated by EPA as priority pollutants. In terms of
10-4
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projected partitioning, 4 have a moderate to high potential to bioaccumulate in aquatic biota, potentially
accumulating in the food chain and causing increased risk to higher trophic level organisms and to exposed human
populations via consumption offish and shellfish. All of the modeled pollutants are metals, which in general are
not applicable to evaluation based on volatility and adsorption to solids. It is assumed that all of the metals have
a high potential to adsorb to solids.
The impacts of the four conventional/classical pollutants are not evaluated when modeling the effect of
the proposed rule on receiving stream water quality and POTW operations or when evaluating the potential fate
and toxicity of discharged pollutants. These pollutants are total suspended solids (TSS), chemical oxygen
demand (COD), total dissolved solids (TDS), and total organic carbon (TOC). The discharge of these pollutants
can have adverse effects on human health and the environment. For example, habitat degradation can result from
increased suspended particulate matter that reduces light penetration, and thus primary productivity, or from
accumulation of sludge particles that alter benthic spawning grounds and feeding habitats. High COD levels can
deplete oxygen concentrations, which can result in mortality or other adverse effects on fish. High TOC levels
may interfere with water quality by causing taste and odor problems and mortality in fish.
10.7 Documented Environmental Impacts
The Environmental Assessment27 also summarizes documented environmental impacts on aquatic life,
human health, POTW operations, and receiving stream water quality. The summaries are based on a review of
published literature abstracts, State 304(1) Short Lists, State Fishing Advisories, and contact with State
environmental agencies. Two direct discharging IWC facilities and two POTWs receiving the discharge from
2 IWC facilities are identified by States as being point sources causing water quality problems and are included
on their 304(1) Short List. State contacts indicate that of the two direct facilities, one is no longer in operation
and the other is currently in compliance with its permit limits and is no longer a source of impairment. Both of
the POTWs listed are also currently in compliance for the listed pollutants. In addition, two IWC facilities are
located on water bodies with State-issued fish consumption advisories. However, the advisories are based on
dioxins, which are not proposed for regulation for the IWC industry.
27 See Environmental Assessment of Proposed Effluent Limitations Guidelines and Standards for Industrial Waste
Combustors, EPA 821-B-97-009.
10-5
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COST-EFFECTIVENESS ANALYSIS OF PROPOSED EFFLUENT
LIMITATIONS GUIDELINES AND STANDARDS FOR
INDUSTRIAL WASTE COMBUSTORS
William Anderson, Economist
Engineering and Analysis Division
Office of Science and Technology
U.S. Environmental Protection Agency
Washington, DC 20460
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Acknowledgments
Credit must be given to the project manager Samantha Hopkins and to the rest of the IWC team (Charles
White, Patricia Harrigan, Richard Witt, and Kristen Strellec) for their professional manner, conscientious
effort, and contributions.
Credit must also be given to Abt Associates for their assistance and support in performing the underlying
economic analysis supporting the conclusions detailed in this report. Their study was performed under 68-
C4-0060. Particular thanks are given to Sha Hsing Min, Antje Siems, Randi Currier, Penny Schafer, and Rob
Sartain.
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Table of Contents
Section 1
Introduction C-E 1.1
Section 2
Section 3
Methodology
C-E 2.1
Section 4
2.1 Overview C-E 2.1
2.2 Pollution Control Options C-E 2.3
2.3 Calculation of Pollutant Removals C-E 2.4
2.4 Annualized Costs for Each Control Option C-E 2.4
2.5 Calculation of Incremental Cost-Effectiveness Values C-E 2.5
2.6 Comparisons of Cost-Effectiveness Values C-E 2.6
Cost-Effectiveness Results C-E 3.1
3.1 Cost-Reasonableness Analysis for Direct Dischargers C-E 3.1
3.2 Cost-Effectiveness Analysis for Indirect Dischargers C-E 3.3
Cost-Effectiveness Values for Previous Effluent Guidelines and Standards C-E 4.1
Appendix A Industrial Waste Combustors Pollutants of Concern C-E A. 1
Appendix B Toxic Weighting Factors C-E B. 1
Appendix C POTW Pollutant Removal Efficiencies C-E C. 1
Appendix D Results of Cost-Effectiveness Analysis Evaluating
BPT Options as BAT Options C-E D. 1
Appendix E Pollutant Weighting Factors C-E E. 1
Appendix F Results of Cost-Effectiveness Analysis Using Pollutant Weighting Factors C-E F. 1
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Section 1
Introduction
This cost-effectiveness analysis supports the proposed effluent limitations guidelines and standards for
the Industrial Waste Combustors Industry. The report assesses the cost-reasonableness of two Best Practicable
Technology (BPT) regulatory options for direct dischargers, which discharge effluent directly to navigable waters
of the United States. It also assesses two regulatory options of Pretreatment Standards for Existing Sources
(PSES) for indirect dischargers, which discharge effluent to publicly-owned treatment works (POTWs).
Cost-effectiveness analysis is used in the development of effluent limitation guidelines to evaluate the
relative efficiency of alternative regulatory options. It is also used to compare the efficiency of a proposed
regulation with the efficiency of previous regulations. Cost-effectiveness is defined as the incremental annual cost
(in 1981 constant dollars) per incremental toxic-weighted pound of pollutant removed. This definition includes
the following concepts:
Toxic-Weighted Removals
Because pollutants differ in their toxicity, the reductions in pollutant
discharges, or pollutant removals, are adjusted for toxicity by
multiplying the estimated removal quantity for each pollutant by a
normalizing weight, called a Toxic Weighting Factor (TWF). The
TWF for each pollutant measures its toxicity relative to copper, with
more toxic pollutants having higher TWFs.
Annual Costs
The cost-effectiveness analysis uses the estimated annual costs of
complying with the alternative regulatory options. The annual costs
include annual expenses for operating and maintaining compliance
equipment and for meeting monitoring requirements, and an annual
allowance for the capital outlays for pollution prevention and
treatment systems needed for compliance. These costs are calculated
on a pre-tax basis (i.e., without any adjustment for tax treatment of
capital outlays and operating expenses). In addition, the annual
allowance for capital outlays is calculated using a discount rate of 7
percent. Finally, the compliance costs are calculated in 1981 dollars
C-E 1-1
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to facilitate a comparison of cost-effectiveness values for regulations
developed at different times for different industries.
Incremental Calculations The incremental values that are calculated for a given option are the
change in total annual compliance costs and the change in removals
from the next less stringent option, or the baseline if there is no less
stringent option, where regulatory options are ranked by increasing
levels of toxic-weighted removals. Thus, the cost-effectiveness values
for a given option are relative to another option, or, for the least
stringent option, to the baseline.
The result of the cost-effectiveness calculation represents the unit cost of removing the next pound-
equivalent of pollutants. Cost-effectiveness is strictly a relative measure used for comparative purposes. This
analysis does not provide an absolute scale by which a particular cost-effectiveness value can be assigned a
qualitative judgment. Because cost-effectiveness values are calculated using normalized pound-equivalent
removed, the cost-effectiveness value for a given option may be compared with the values of other options being
considered for a given regulation; because cost-effectiveness values are always expressed in constant 1981
dollars, they may be compared with values calculated for other industries or past regulations.28
Although not required by the Clean Water Act, cost-effectiveness analysis is a useful tool for evaluating
options for the removal of toxic pollutants. It is not intended to analyze the removal of conventional pollutants,
however, such as oil and grease, biochemical oxygen demand and total suspended solids. Removals of these
pollutants are not included in the cost-effectiveness calculation.
In this report, EPA presents a measure referred to as cost-reasonableness in the assessment of BPT
limitations as required under CWA Section 304(b)(l)(B). Cost-reasonableness is the ratio of costs to raw (non-
normalized) pounds removed by each option.
The remaining parts of this report are organized as follows. Section 2 defines cost-effectiveness,
discusses the cost-effectiveness methodology and describes the relevant regulatory options of the proposed rule.
28 For several reasons, cost-effectiveness ratios between regulations are not exactly comparable. For example, TWFs are
revised over time to incorporate updated toxicological data, the costs may not be evaluated consistently on a pre-tax or after
tax basis, and the opportunity cost of capital may vary. Therefore, comparisons between options of a given regulation are
more reliable than comparisons between regulations.
C-E 1-2
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Section 3 presents the findings of the separate analyses for direct dischargers and indirect dischargers. Section
4 compares the cost-effectiveness of the proposed regulation with the cost-effectiveness values calculated for
previously promulgated rules. In addition, the report includes six appendices. Appendix A lists the pollutants of
concern and their CAS numbers. Appendix B gives the Toxic Weighting Factor (TWF) for each pollutant.
Appendix C contains the Publicly Owned Treatment Work (POTW) removal efficiencies used in this analysis.
POTW removal efficiencies are the percentage of each pollutant that a typical POTW is expected to remove from
indirect facility discharges. Appendix D presents a supporting cost-effectiveness analysis in dollars per pound-
equivalent of the BPT options. Appendix E contains an alternative set of weighting factors, Pollutant Weighting
Factors (PWFs), for normalizing pollutant removals according to toxicity. The PWFs are based on a different
analytical convention than TWFs. The results of the cost-effectiveness analysis using the PWFs are contained
in Appendix F.
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Section 2
Methodology
2.1 Overview
Section 2 defines cost-effectiveness, describes the steps taken in the cost-effectiveness analysis, and
characterizes the regulatory options considered in this analysis.
In developing effluent limitations guidelines, EPA uses cost-effectiveness calculations to compare the
efficiency of alternative regulatory options in removing pollutants. Cost-effectiveness is defined as the
incremental annual cost of a pollution control option in an industry or industry subcategory per incremental
pollutant removal. The increments are calculated relative to another option or, for the least stringent option, to
existing treatment. Pollutant removals are measured in copper-based "pounds-equivalent." The cost-effectiveness
value, therefore, represents the unit cost of removing the next pound-equivalent of pollutant.
Three factors are of particular importance in cost-effectiveness calculations: (1) the normalization of
pounds of pollutant removed to copper-based pounds-equivalent; (2) the incremental nature of cost-
effectiveness; and (3) the fact that cost-effectiveness results are used for comparison purposes rather than on an
absolute basis. First, the analysis is based on removals of pounds-equivalent — a term used to describe a pound
of pollutant weighted by its toxicity relative to copper. These weights are known as toxic weighting factors.
Copper is used as the standard pollutant for developing toxic weighting factors because it is a toxic metal
commonly released in and removed from industrial effluent. The use of pounds-equivalent reflects the fact that
some pollutants are more toxic than others. By expressing pollutant removals in common terms, the removals
can be summed across pollutants to give a meaningful basis for comparing cost-effectiveness results among
alternative regulatory options or different regulations.
Second, cost-effectiveness analysis is done on an incremental basis to compare the incremental, or
marginal, cost and removals of one control option to another control option or to existing treatment. To determine
incremental cost-effectiveness, the regulatory options are ranked in increasing order of stringency, where
stringency is the aggregate pollutant removals, measured in pounds-equivalent. If two or more options remove
equal amounts of pollutants, these options are then ranked in increasing order of cost. After the options are
ranked, incremental costs and removals are calculated between each option and the next less stringent option.
Incremental values for the least stringent option are calculated relative to existing treatment.
C-E2-1
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Third, no absolute scales exist for judging cost-effectiveness values. The values are considered high or
low only within a given context, for example when compared to other regulatory options or when compared to
effluent limitations guidelines for other industries.
Cost-effectiveness analysis involves a number of steps, which may be summarized as follows:
• Determine the relevant wastewater pollutants;
Estimate the relative toxic weights of priority and other pollutants;
• Define the pollution control approaches;
Calculate pollutant removals for each control option;
• Determine the annualized cost of each control option;
Rank the control options by increasing stringency and cost;
• Calculate incremental cost-effectiveness values; and
Compare cost-effectiveness values.
These steps are discussed below.
Pollutant Discharges Considered in the Cost-Effectiveness Analysis
Some of the factors considered in selecting pollutants for regulation include toxicity, frequency of
occurrence, and the amount of a pollutant in the waste stream. Twenty-one pollutants were identified as pollutants
of concern. These pollutants were detected at treatable levels in the untreated wastewater stream (see Appendix
A). Of the twenty-one identified pollutants, ten are proposed for regulation under BPT/BCT/BAT and nine are
proposed for regulation under PSES. The eleven pollutants not proposed for regulation will nevertheless be
considered in this analysis because they serve as indicators for the regulated pollutants and are removed by the
proposed control options without imposing additional costs. The cost-effectiveness analysis of the proposed
Industrial Waste Combustors effluent limitations guidelines is therefore based on all twenty-one pollutants of
concern.
Relative Toxic Weights of Pollutants
Cost-effectiveness analyses account for differences in toxicity among the regulated pollutants by using
toxic weighting factors (TWFs). Relatively more toxic pollutants have higher TWFs. These factors are necessary
because different pollutants have different potential effects on human and aquatic life. For example, a pound of
C-E 2-2
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nickel (TWF=0.036) in an effluent stream has significantly less potential effects than a pound of cadmium
(TWF=5.16). The toxic weighting factors are used to calculate the toxic pound-equivalent unit — a standardized
measure of toxicity.
In the majority of cases, toxic weighting factors are derived from both chronic freshwater aquatic criteria
(or toxic effect levels) and human health criteria (or toxic effect levels) established for the consumption of fish.
These factors are then standardized by relating them to copper. The resulting toxic weighting factors for each
pollutant of concern are provided in Appendix B. Table 2-1 shows some examples of the effects of different
aquatic and human health criteria on weighting factors.
Table 2-1. Weighting Factors Based on Copper Freshwater Chronic Criteria
Pollutant
Copper**
Hexavalent
Chromium
Nickel
Cadmium
Benzene
Human
Health
Criteria*
( g/1)
--
3,400
4,600
170
12
Aquatic
Chronic
Criteria
( g/1)
12.0
11.0
160.0
1.1
265.0
Weighting Calculation
5.6/12.0
5.6/3,400 + 5.6/11
5.6/4,600 + 5.6/160
5.6/170 + 5.6/1.1
5.6/12 + 5.6/265
Toxic Weighting
Factor
0.467
0.511
0.036
5.120
0.488
Criteria are maximum contamination thresholds. Using the above calculation, the greater the values for the criteria used,
the lower the toxic weighting factor. Units for criteria are micrograms of pollutant per liter of water.
* Based on ingestion of 6.5 grams offish per day.
** While the water quality criterion for copper has been revised (to 12.0 g/1), the cost-effectiveness analysis uses the old
criterion (5.6 g/1) to facilitate comparisons with cost-effectiveness values for other effluent limitations guidelines. The
revised higher criteria for copper results in a toxic weighting factor for copper not equal to 1.0 but equal to 0.467.
Source: Environmental Protection Agency
As indicated in Table 2-1, the toxic weighting factor is the sum of two criteria-weighted ratios: the "old"
copper criterion divided by the human health criterion for the particular pollutant, and the "old" copper criterion
divided by the aquatic chronic criterion. For example, using the values reported in Table 2-1, 10.96 pounds of
copper pose the same relative hazard in surface waters as one pound of cadmium, since cadmium has a toxic
weight 10.96 times (5.12/0.467 = 10.96) as large as the toxic weight of copper.
C-E 2-3
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2.2 Pollution Control Options
This section summarizes two BPT, two BAT, and two PSES options that EPA considered. The BPT and
BAT options would apply to direct dischargers, while the PSES options would apply to indirect dischargers.
2.2.1 BPT Technology Options
The two currently available treatment systems for which the EPA assessed performance for BPT are:
Option A: Primary Precipitation, Solid-Liquid Separation, Secondary Precipitation, and Solid-Liquid
Separation. Under Option A, BPT limitations would be based upon two stages of chemical precipitation,
each followed by some form of separation and sludge dewatering. The pH's used for chemical
precipitation would vary to promote optimal removal of metals because different metals are preferentially
removed at different pH levels. In addition, the first stage of chemical precipitation is preceded by
chromium reduction, when necessary. In some cases, BPT limitations would require the current
treatment technologies in place to be improved by use of increased quantities of treatment chemicals and
additional chemical precipitation/sludge dewatering systems.
Option B: Primary Precipitation, Solid-Liquid Separation, Secondary Precipitation, Solid-Liquid
Separation, and Sand Filtration. The second option evaluated for BPT for Industrial Waste Combustor
facilities would be based on the same technology as Option A with the addition of sand filtration at the
end of the treatment train.
2.2.2 BAT Technology Options
The evaluated BAT options for the Industrial Waste Combustors are based on the same
technologies selected for BPT.
2.2.3 PSES Technology Options
Indirectly discharging Industrial Waste Combustors generate wastewaters with similar pollutant
characteristics to direct discharging facilities. Hence, the same treatment technologies and regulatory options —
Option A and Option B — discussed previously for BPT and BAT were considered applicable to PSES.
C-E 2-4
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2.3 Calculation of Pollutant Removals
EPA calculated the reduction in at-stream pollutant loadings to the receiving water body for each control
option. End-of-pipe and at-stream pollutant removals may differ because a portion of the end-of-pipe loadings
for indirect dischargers may be removed by a POTW before entering the receiving water body. As a result, the
at-stream removal of pollutants due to PSES regulations are generally less than end-of-pipe removals.
The following example may help to clarify how at-stream pollutant removals are calculated for indirect
dischargers: If a facility discharges 100 pounds of cadmium in its waste water to a POTW and the POTW has
a removal efficiency for cadmium of 40 percent, then the POTW removes 40 pounds of cadmium. The cadmium
discharged to surface waters is only 60 pounds. If a regulation results in a reduction of cadmium in the facility's
waste water to 30 pounds, then the POTW removes 12 of the 30 pounds it receives from the facility, and the
amount discharged to surface waters is 18 pounds. As a result, the reduction in discharges to surface waters is
42 pounds, although the reduction in facility discharges to the POTW is 70 pounds. In general, at-stream loadings
for facilities that discharge to a POTW are calculated by multiplying end-of-pipe loadings by (1 - POTW removal
efficiency). The cost-effectiveness calculations in this analysis reflect the fact that the actual reduction of pollutant
discharge to surface waters is not 70 pounds (the change in the amount discharged to the POTW), but 42 pounds
(= 60 - 18), the change in the amount ultimately discharged to surface waters.
2.4 Annualized Costs for Each Control Option
Full details of the methods used to estimate the costs of complying with the regulatory options can be
found in the Technical Development Document and the Economic Analysis Report. A brief summary of the
compliance cost analysis is provided below.
Two categories of compliance costs are included in the cost-effectiveness analysis: (1) capital costs,
including costs for equipment, retrofitting and upgrading control technology, permit modification, and land; and
(2) operating, maintenance, and monitoring costs. Although operating, maintenance, and monitoring costs occur
annually, capital costs are a one-time "lump sum" cost. To express the capital costs on a annual basis, capital
costs were annualized over the expected useful life of the capital equipment, 15 years, at a discount rate of 7
percent. Total annualized costs are the sum of annualized capital costs and the annual operating, maintenance and
C-E 2-5
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monitoring costs. The cost-effectiveness analysis presented in the main body of this report uses pre-tax costs as
the basis for its calculations.
The engineering analysis yielded compliance costs estimates in 1992 dollars, the base year of the
Industrial Waste Combustors Industry regulatory analysis. To increase the consistency of these cost-effectiveness
values with those of other promulgated rules, the compliance costs used in the cost-effectiveness analysis were
deflated from 1992 to 1981 dollars using Engineering News Record's Construction Cost Index (CCI). This
adjustment factor is:
1981 CCI 3535
Adjustment factor = = = 0.709
1992 CCI 4985
BPT compliance costs are presented in 1996 dollars in addition to the 1992 base year dollars.
Compliance costs used in the cost-effectiveness analysis were inflated from 1992 to 1996 dollars using the
Engineering News Record's Construction Cost Index (CCI). This adjustment factor is:
. ,. , , , , 1996 CCI 5620 - 10_
Adjustment factor = = = 1.127
1992 CCI 4985
2.5 Calculation of Incremental Cost-Effectiveness Values
Options were ranked in order of increased stringency, measured in aggregate removals of pounds-
equivalent of pollutants. After the options had been ranked, incremental cost-effectiveness values were calculated.
Cost-effectiveness values were calculated separately for indirect and direct dischargers. For each discharger
category, the cost-effectiveness value of a particular option was calculated as the incremental annual cost of that
option divided by the incremental pounds-equivalent removed by that option. Algebraically, this equation is:
ATC, - ATC, ,
,
CE. = - k-
PEk -
CEk = Cost-effectiveness of Option k;
ATCk = Total annualized compliance cost under Option k; and
PEk = Removals in pounds-equivalent under Option k.
C-E 2-6
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The numerator of the equation is the incremental cost in moving from Option k-1 to Option k. Similarly,
the denominator is the incremental removals associated with the move from Option k-1 to Option k. Thus, cost-
effectiveness values are measured in dollars per pound-equivalent of pollutant removed. When k corresponds
to the least stringent option (k = 1), the incremental costs and removals are the increments in moving from the
baseline case to Option k.
2.6 Comparisons of Cost-Effectiveness Values
Two types of comparisons are typically done using cost-effectiveness values. First, the cost-effectiveness
values for the alternative regulatory options and technologies under consideration may be compared among
themselves to identify which options offer relatively higher or lower cost-effectiveness in achieving pollutant
reductions. Second, the average cost-effectiveness of regulatory options can be used to assess the cost-
effectiveness of controls relative to previously promulgated effluent limitations guidelines for other industries.
C-E 2-7
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Section 3
Cost-Effectiveness Results
3.1 Cost-Reasonableness Analysis for Direct Dischargers
CWA Section 304(b)(l)(B) requires a cost-reasonableness assessment for BPT limitations. In
determining BPT limitations, EPA must consider the total cost of treatment technologies in relation to the
effluent reduction benefits achieved by such technology. This inquiry does not limit EPA's broad discretion
to adopt BPT limitations that are achievable with available technology unless the required additional
reductions are wholly out of proportion to the costs of achieving such marginal level of reduction.
Tables 3-1 summarizes the BPT regulatory options applicable to direct dischargers. The regulatory
options are listed in order of increasing stringency on the basis of estimated pollutant removals. Annualized
compliance costs are shown in 1992 and 1996 dollars. Pollutant removals include total suspended solids and
metals removals, and are reported on an unweighted basis. Since BPT options consider the removal of
conventional pollutants in addition to toxics, no pound-equivalent removals are calculated. As a result, the
cost-measure of an option is expressed in dollars per pound for BPT options, not dollars per pound-
equivalent, and the resulting value is referred to as cost-reasonableness, not cost-effectiveness. In addition,
costs are conventionally presented in nominal dollars, not in 1981 dollars. BPT options are also not
considered incrementally to each other. Therefore, the cost-reasonableness value presented in Table 3-1 is an
average, not an incremental, value.
Table 3-1 shows that Option A achieves 93,441 pounds of removals, at an annual cost of $1.74
million (1992 dollars). The average cost-reasonableness of Option A in 1996 dollars is estimated to be
approximately $21 per pound removed.
Table 3-1. National Estimates of Industrial Waste Combustors Costs and Pollutant Removals,
Direct Dischargers (BPT)
Regulatory Option
Option A
Option B
Annualized Cost, Smillions
1992 Dollars
1.74
1.95
1996 Dollars
1.96
2.20
Pollutant
Removals
Raw Pounds
93,441
126,434
Average Cost-
Reasonableness
($1996/lb)*
21
17
Source: Environmental Protection Agency
*Rounded to the nearest dollar.
C-E3-1
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Option B, the proposed option, achieves 126,434 pounds of removals, at an annual cost of $1.95
million (1992 dollars). The estimated average cost-reasonableness of Option B in 1996 dollars is
approximately $17 per pound removed.
EPA considers the cost-reasonableness values of Option B to be acceptable; it has the lower cost-
reasonableness of the two options. Stepping from Option A to Option B increases total removals by more
than 35 percent while increasing annual compliance costs by only 13 percent.
On the basis of this analysis, EPA determines that the proposed Option B is cost-reasonable, and
that the cost-reasonableness of the two considered regulatory options supports the choice of Option B as the
proposed BPT option for direct dischargers.
3.2 Cost-Effectiveness Analysis for Indirect Dischargers
Tables 3-4 and 3-5 summarize the cost-effectiveness analysis results for the PSES regulatory options
applicable to indirect dischargers. Annual compliance costs are shown in both 1992 and 1981 dollars, and
pollutant removals are reported in both unweighted and toxic-weighted pounds. The regulatory options are
listed in order of increasing stringency, measured by toxic-weighed pollutant removals.
Table 3-4. National Estimates of Industrial Waste Combustors Annualized Costs and Pollutant
Removals, Indirect Dischargers (PSES)
Regulatory Option
Option A
Option B
Annualized Cost, Smillions
1992 dollars
0.76
0.80
1981 dollars
0.54
0.57
Pollutant Removals
Raw Pounds
10,650
10,726
Pounds-Equivalent
6,349
6,405
Source: US Environmental Protection Agency
Table 3-5. National Estimates of Industrial Waste Combustors Incremental Costs,
Removals and Cost-Effectiveness, Indirect Dischargers (PSES)
Regulatory
Option
Option A
Option B
Incremental Cost
($ millions, 1981)
0.54
0.03
Incremental Removals
(Ibs-eq)
6,349
56
Cost-Effectiveness
($/lb-eq)
85
509
Source: US Environmental Protection Agency
*Rounded to the nearest dollar.
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As shown in Tables 3-4 and 3-5, Option A achieves 10,650 pounds of toxic pollutant removals on an
unweighted basis and 6,349 pounds-equivalent on a toxic-weighted basis, at a cost of $0.54 million (1981
dollars). Since Option A is the least stringent option, in terms of pollutant removals, the cost-effectiveness of
this option is the same as its average cost per pound-equivalent removed, $85.
The next more stringent option, Option B, is estimated to achieve 10,726 pounds of toxic pollutant
removals on an unweighted basis and 6,405 pounds-equivalent on a toxic-weighted basis, which is a 56
pounds-equivalent increment over Option A. With an estimated annual compliance cost of $0.57 million
($1981), or $30,000 more than Option A, Option B's cost effectiveness is estimated to be $509 per
pound-equivalent of pollutant removed.
EPA considers the cost-effectiveness value of Option A to be adequate in the context of regulatory
alternatives. However, stepping beyond Option A to Option B is deemed not cost-effective for indirect
dischargers. On the basis of this analysis, EPA determined that the proposed option, Option A, is cost-
effective. The cost-effectiveness analysis supports the choice of Option A as the proposed PSES regulatory
option for indirect dischargers.
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Section 4
Cost-Effectiveness Values for Previous Effluent Guidelines and Standards
Tables 4-1 and 4-2 present, for indirect and direct dischargers, respectively, the baseline and post-
compliance pollutant loadings and resulting cost-effectiveness values that were calculated for previous
regulations. The values for the proposed Industrial Waste Combustors regulatory options are also listed in
these tables. All cost-effectiveness values are presented in 1981 dollars and are based on Toxic Weighting
Factors normalized to copper.
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Table 4-1. Industry Comparison of Cost-Effectiveness Values for Indirect Dischargers
Toxic and Nonconventional Pollutants Only, Copper Based Weights (1981 Dollars)*
Industry
Aluminum Forming
Battery Manufacturing
Can Making
Coal Mining***
Coil Coating
Copper Forming
Centralized Waste Treatment ^
(co-proposal)
- Regulatory Option 1
- Regulatory Option 2
Electronics I
Electronics II
Foundries
Industrial Waste Combustors
Inorganic Chemicals I
Inorganic Chemicals II
Iron & Steel
Leather Tanning
Metal Finishing
Metal Products & Machinery I ^
Nonferrous Metals Forming
Nonferrous Metals Mfg I
Nonferrous Metals Mfg II
Organic Chemicals, Plastics...
Pesticide Manufacturing (1993)
Pesticide Formulating, Packaging.. ^
Pharmaceuticals ^
Plastic. Molding & Forming
Porcelain Enameling
Pulp & Paper
Pounds Equivalent
Currently Discharged
(To Surface Waters)
(OOO's)
1,602
1,152
252
N/A
2,503
934
689
689
75
260
2,136
6.5
3,971
4,760
5,599
16,830
11,680
1,115
189
3,187
38
5,210
257
33,748
340
N/A
1,565
9,539
Pounds Equivalent
Remaining at Selected Option
(To Surface Waters)
(OOO's)
18
5
5
N/A
10
4
330
328
35
24
18
0.2
3,004
6
1,404
1,899
755
234
5
19
0.41
72
19
<1
63
N/A
96
103
Cost Effectiveness
of Selected Option
Beyond BPT
($/lb-eq. removed)
155
15
38
N/A**
10
10
70
110
14
14
116
85
9
<1
6
111
10
127
90
15
12
34
18
1
1
N/A
14
65
Although toxic weighting factors for priority pollutants varied across these rules, this table reflects the cost-effectiveness at the time of
regulation.
N/A: Pretreatment Standards not promulgated, or no incremental costs will be incurred.
Reflects costs and removals of both air and water pollutants
Proposed rule.
C-E 4-2
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Table 4-2. Industry Comparison of Cost-Effectiveness Values for Direct Dischargers
Toxic and Nonconventional Pollutants Only, Copper Based Weights (1981 Dollars)*
Industry
Aluminum Forming
Battery Manufacturing
Can Making
Coal Mining
Coastal Oil and Gas f
- Produced Water
- Drilling Waste
-TWC*
Coil Coating
Copper Forming
Centralized Waste Treatment ^
(co-proposal)
- Regulatory Option 1
- Regulatory Option 2
Electronics I
Electronics II
Foundries
Industrial Waste Combustors
Inorganic Chemicals I
Inorganic Chemicals II
Iron & Steel
Leather Tanning
Metal Finishing
Metal Products & Machinery I ^
Nonferrous Metals Forming
Nonferrous Metals Mfg I
Nonferrous Metals Mfg II
Offshore Oil and Gas**1
Organic Chemicals, Plastics...
Pesticide Manufacturing (1993)
Pharmaceuticals ^
Plastics Molding & Forming
Porcelain Enameling
Petroleum Refining
Pulp & Paper
Textile Mills
Pounds Equivalent
Currently Discharged
(To Surface Waters)
(OOO's)
1,340
4,126
12
BAT=BPT
5,998
7
2
2,289
70
3,372
3,372
9
NA
2,308
BAT=BPT
32,503
605
40,746
259
3,305
140
34
6,653
1,004
3,808
54,225
2,461
208
44
1,086
BAT=BPT
61,713
BAT=BPT
Pounds Equivalent
Remaining at Selected Option
(To Surface Waters)
(OOO's)
90
5
0.2
BAT=BPT
506
0
0
9
8
1,267
1,271
3
NA
39
BAT=BPT
1,290
27
1,040
112
3,268
70
2
313
12
2,328
9,735
371
4
41
63
BAT=BPT
2,628
BAT=BPT
Cost Effectiveness
of Selected Option
Beyond BPT
($/lb-eq. removed)
121
2
10
BAT=BPT
3
292
200
49
27
5
7
404
NA
84
BAT=BPT
<1
6
2
BAT=BPT
12
50
69
4
6
33
5
15
1
BAT=BPT
6
BAT=BPT
39
BAT=BPT
**
t
Although toxic weighting factors for priority pollutants varied across these rules, this table reflects the cost-effectiveness
at the time of regulation.
Produced water only, for produced sand and drilling fluids and drill cuttings, BAT=BPT.
Proposed rule.
Treatment, workover, and completion fluids.
C-E 4-3
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Appendix A
Industrial Waste Combustors Pollutants of Concern
Name
CAS Number
CONVENTIONAL AND NONCONVENTIONAL POLLUTANTS
Chemical Oxygen Demand (COD) None
Total Dissolved Solids None
Total Organic Carbon None
Total Suspended Solids* None
METALS
Aluminum
Antimony
Arsenic*
Boron
Cadmium*
Chromium*
Copper*
Iron
Lead*
Manganese
Mercury*
Molybdenum
Selenium
Silver*
Tin
Titanium*
Zinc
7429905
7440360
7440382
7440428
7440439
7440473
7440508
7439896
7439921
7439965
7439976
7439987
7782492
7440224
7440315
7440326
7440666
*Regulated Pollutants (TSS under BPT/BCT only)
C-EA-1
-------
Appendix B
Toxic Weighting Factors
Name
Toxic Weighting Factor
CONVENTIONAL AND NONCONVENTIONAL POLLUTANTS
Chemical Oxygen Demand (COD) 0.00000
Total Dissolved Solids 0.00000
Total Organic Carbon 0.00000
Total Suspended Solids* 0.00000
METALS
Aluminum
Antimony
Arsenic*
Boron
Cadmium*
Chromium*
Copper*
Iron
Lead*
Manganese
Mercury*
Molybdenum
Selenium
Silver*
Tin
Titanium*
Zinc
0.06400
0.19000
4.00000
0.18000
5.20000
0.02700
0.47000
0.00560
1.80000
0.01400
500.00000
0.20000
1.10000
47.00000
0.30000
0.02900
0.05100
*Regulated Pollutants (TSS under BPT/BCT only)
C-EB-1
-------
Appendix C
POTW Pollutant Removal Efficiencies
Name POTW Removal Efficiency %
CONVENTIONAL AND NONCONVENTIONAL POLLUTANTS
Chemical Oxygen Demand (COD) 0.00
Total Dissolved Solids 0.00
Total Organic Carbon 0.00
Total Suspended Solids* 0.00
METALS
Aluminum 17.00
Antimony 67.00
Arsenic* 66.00
Boron 70.00
Cadmium* 90.00
Chromium* 82.00
Copper* 90.00
Iron 84.00
Lead* 85.00
Manganese 41.00
Mercury* 90.00
Molybdenum 38.00
Selenium 36.00
Silver* 59.00
Tin 44.00
Titanium* 79.00
Zinc 81.00
*Regulated Pollutants (TSS under BPT/BCT only)
C-EC-1
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Appendix D
Results of Cost-Effectiveness Analysis Evaluating
BPT Options as BAT Options
In addition to estimating the cost-reasonableness of the BPT regulatory options under consideration,
EPA also evaluated the BPT options under BAT criteria and estimated their incidental toxic removals and
cost-effectiveness. Tables D-l and D-2 summarize the results of this analysis. Annual compliance costs are
shown in 1992 dollars, as reported in the Economic Analysis, and in 1981 dollars. Pollutant removals are
reported on both an unweighted and toxic-weighted basis. The regulatory options are listed in order of
increasing stringency on the basis of the estimated toxic-weighted pollutant removals. Table D-l shows
absolute costs and removals, while Table D-2 presents incremental costs, removals and cost-effectiveness.
As shown in Table D-l, Option A achieves 5,752 pounds of removals on an unweighted basis and
18,581 pounds-equivalent of removals on a toxic-weighted basis. Annual costs are $1.23 million (1981
dollars). Since Option A is the least stringent option, it is compared to the baseline, and the incremental costs
and removals shown in Table 3-3 for this option are the same as the total costs and removals. The resulting
cost-effectiveness is $66 per pound-equivalent.
Table D-l. National Estimates of Industrial Waste Combustors Annualized Costs and Pollutant Removals,
Direct Dischargers (BAT)
Regulatory Option
Option A
Option B
Annualized Cost, Smillions
1992 dollars
1.74
1.95
1981 dollars
1.23
1.38
Pollutant Removals
Raw Pounds
5,752
6,767
Pounds-Equivalent
18,581
21,265
Source: Environmental Protection Agency
Table D-2. National Estimates of Industrial Waste Combustors Incremental Costs, Removals and
Cost-Effectiveness, Direct Dischargers (BAT)
Regulatory
Option
Option A
Option B
Incremental Cost
($ millions, 1981)
1.23
0.15
Incremental Removals
(Ibs-eq)
18,581
2,684
Cost-Effectiveness
($/lb-eq)*
66
57
Source: Environmental Protection Agency
*Rounded to the nearest dollar.
C-ED-1
-------
The more stringent option, Option B, achieves 21,265 pounds-equivalent of toxic-weighted removals
— an increment of 2,684 pounds-equivalent over Option A — at an annual cost of $1.38 million (1981
dollars) — an increment of $0.15 million. Thus, the cost-effectiveness of Option B is estimated to be $57 per
pound-equivalent.
The results presented above show that even though Option B is a BPT regulatory option its cost-
effectiveness of $57 also meets BAT criteria. The significant incidental toxic removals achieved by BPT
Option B and its cost-effectiveness when evaluated under BAT criteria further support the choice of Option B
as the proposed regulatory option.
C-E D-2
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Appendix E
Pollutant Weighting Factors
Name
Pollutant Weighting Factor
CONVENTIONAL AND NONCONVENTIONAL POLLUTANTS
Chemical Oxygen Demand (COD) 0.00000
Total Dissolved Solids 0.00000
Total Organic Carbon 0.00000
Total Suspended Solids* 0.00000
METALS
Aluminum
Antimony
Arsenic*
Boron
Cadmium*
Chromium*
Copper*
Iron
Lead*
Manganese
Mercury*
Molybdenum
Selenium
Silver*
Tin
Titanium*
Zinc
0.01100
0.07200
57.00000
0.03200
0.91000
0.00480
0.08300
0.00100
0.31000
0.01000
83.00000
0.03600
0.20000
8.30000
0.05400
0.00520
0.00910
*Regulated Pollutants (TSS under BPT/BCT only)
C-EE-1
-------
Appendix F
Results of Cost-Effectiveness Analysis Using Pollutant Weighting Factors
F.I Alternative Toxic Weighting Factors
EPA also performed the cost-effectiveness analysis with an alternative set of toxic weighting factors
called Pollutant Weighting Factors (PWFs). Appendix E listed these weighting factors; this appendix
presents the results of the additional analysis.
PWFs are derived from either chronic aquatic life criteria (or toxic effect levels) or human health
criteria (or toxic effect levels) established for the consumption of water and fish. For carcinogenic
substances, the human health risk level is 106, rather than 105 in the case of TWFs. In contrast to TWFs,
PWFs are not related to a benchmark pollutant. PWFs are derived by taking the reciprocal of the more
stringent (smaller value) of the aquatic life or human health criteria or toxic effect levels.
While the cost-effectiveness values calculated with PWFs cannot be compared to cost-effectiveness
values calculated with TWFs for previous regulations, they do permit comparisons between options in the
current effluent guideline analysis. In this regard, the PWF-based cost-effectiveness analysis supports the
findings described in Section 3.
F.2 Cost-Effectiveness Analysis for Direct Dischargers
Since pollutant removals for BPT regulatory options are reported on an unweighted basis, cost-
reasonableness results for BPT options using PWFs will be identical to those using TWFs (presented in
Section 3).
F.3 Cost-Effectiveness Analysis for Indirect Dischargers
Tables F-l and F-2 summarize the cost-effectiveness analysis results for the PSES regulatory options
applicable to indirect dischargers. Annual compliance costs are shown in both 1992 and 1981 dollars, and
pollutant removals are reported in both unweighted and toxic-weighted pounds. The regulatory options are
listed in order of increasing stringency, measured by toxic-weighed pollutant removals.
C-EF-1
-------
Table F-l. National Estimates of Industrial Waste Combustors Annualized Costs and Pollutant
Removals, Indirect Dischargers (PSES)
Regulatory Option
Option A
Option B
Annualized Cost, Smillions
1992 dollars
0.76
0.80
1981 dollars
0.54
0.57
Pollutant Removals
Raw Pounds
10,650
10,726
Pounds-Equivalent
23,844
23,862
Source: US Environmental Protection Agency
Table F-2. National Estimates of Industrial Waste Combustors Incremental Costs,
Removals and Cost-Effectiveness, Indirect Dischargers (PSES)
Regulatory
Option
Option A
Option B
Incremental Cost
($ millions, 1981)
0.54
0.03
Incremental Removals
(Ibs-eq)
23,844
18
Cost-Effectiveness
($/lb-eq) Option 2
23
1,584
Source: US Environmental Protection Agency
*Rounded to the nearest dollar.
As shown in Tables F-l and F-2, Option A achieves 10,650 pounds of toxic pollutant removals on
an unweighted basis and 23,844 pounds-equivalent on a toxic-weighted basis, at a cost of $0.54 million
(1981 dollars). Since Option A is the least stringent option, in terms of pollutant removals, the cost-
effectiveness of this option is the same as its average cost per pound-equivalent removed, $23.
The next more stringent option, Option B, is estimated to achieve 10,726 pounds of toxic pollutant
removals on an unweighted basis and 23,862 pounds-equivalent on a toxic-weighted basis, which is an 18
pounds-equivalent increment over Option A. With an estimated annual compliance cost of $0.57 million
($1981), or $30,000 more than Option A, Option B's cost effectiveness is estimated to be $1,584 per
pound-equivalent of pollutant removed.
As in the PSES analysis using TWFs, EPA considers the cost-effectiveness value of Option A to be
adequate in the context of regulatory alternatives.
C-E F-2
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