Re-evaluation of the Economic Impact Analysis of
Effluent Limitations Guidelines for
the Organic Chemicals, Plastics, and Synthetic Fibers Industry
Engineering and Analysis Division
Office of Science and Technology
Office of Water
U.S. Environmental Protection Agency
Washington, DC 20460
May 1993
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ACKNOWLEDGEMENTS
This report was prepared for the Economic and Statistical Analysis Branch of the
Office of Water's Engineering and Analysis Division. Economic analysis support was
provided by Abt Associates Inc., under EPA Contract Number 68-CO-0080.
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PREFACE
This report summarizes the effects that revised compliance cost estimates have on the
economic impact analysis (FJA) of effluent limitations guidelines for the Organic Chemicals,
Plastics, and Synthetic Fibers (OCPSF) Industry. The original FJA was prepared for the OCPSF
rule which was promulgated in November 1987. The primary purpose of revisiting the
economic impact analysis is to determine if, in light of the compliance cost revisions, the
OCPSF rule remains economically achievable. The analyses and results in this report cover:
• BAT and PSES rules as promulgated in 1987;
• Corrections to the cost estimates for particular plants ("the revised baseline");
• Revisions made in proposed amendments to the 1987 rule identified in a Federal Register
notice on December 6, 1991 (56 FR 63897) and further explained in a notice on January
21, 1992 (57 FR 2238);
• Revisions identified in a Federal Register notice in December 1, 1992 (57 FR 56883).
• Revisions to reflect updated plant information obtained in EPA's April 1991 telephone
survey of plants that, according to the OCPSF database, did not have end-of-pipe
biological treatment.
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TABLE OF CONTENTS
A. Background „ . . . , 1
B. Changes in Compliance Cost Estimates 2
C. Plant Impact Analysis
D. Cost-Effectiveness Analysis 13
E. Regulatory Flexibility Analysis 18
F. Overall Summary and Conclusions
Appendix A Calculation of Costs and Impacts Used in the Preamble
20
22
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A. Background
In November 1987, the U.S. Environmental Protection Agency (EPA) promulgated
effluent limitations guidelines for the OCPSF manufacturing point source category. Certain
portions of the OCPSF regulation were remanded to EPA for further rulemaking proceedings
by the U.S. Court of Appeals for the Fifth Circuit. One consequence of these actions is that the
costs for particular control technologies were revised. The Chemicals Branch of the Office of
Water's Engineering and Analysis Division is responsible for developing revised compliance cost
estimates. The Economic and Statistical Analysis Branch (ESAB) in the Engineering and
Analysis Division is responsible for re-evaluating all elements of the EIA carried out in support
of the 1987 OCPSF rulemaking to determine if the selected control options remain economically
achievable given the compliance cost revisions. Abt Associates assisted ESAB in re-evaluating
the economic impact analysis for the OCPSF effluent limitations guidelines.
ESAB considers a re-evaluation of the EIA to be important because revisions to the
compliance cost estimates, if sufficiently different, could substantially alter the results of the
economic impact analyses that were conducted as part of the promulgated effluent limitations
guidelines for the OCPSF industry (EPA 440/2/87-007). Three types of analyses were
undertaken as part of this project:
• a revised plant impact analysis;
• a revised regulatory flexibility analysis (RFA); and
• a revised cost-effectiveness (CE) analysis.
The plant impact analysis is used as the primary basis for evaluating economic
achievability. The regulatory flexibility analysis provides information with which to determine
if small plants are disproportionately affected by the revised cost estimates. The cost-
effectiveness analysis provides information for (1) determining if the selected option remains the
most cost-effective in reducing pollutant discharges; and (2) comparing the cost-effectiveness
($/amount of pollutant removed) of the selected control option to other effluent limitations
guidelines promulgated by the Agency.
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B. Changes in Compliance Cost Estimates
Four types of compliance cost changes are included in this analysis. The first type of
cost change covers revisions and corrections that were made after the 1987 rule was
promulgated. These changes were not incorporated in the EIA conducted for the 1987 OCPSF
rule, but are evaluated here as a Revised Baseline. The second change relates to the re-estimate
of compliance costs for in-plant biological treatment as ordered by the federal court. Costs for
three control options designed to meet the court-ordered remand (Options 1, 2 and 3) were
evaluated in an economic impact analysis conducted in support of the December 1991 proposal
(subsequently revised hi January 1992). The economic impact analysis of these options was
published in Re-evaluation of the Economic Impact Analysis of Effluent Limitations Guidelines
for the Organic Chemicals, Plastics, and Synthetic Fibers Industry Using Revised Compliance
Costs (EPA 440/l-91/009b). The selected BAT and PSES options from the December 1991
proposal are presented throughout this report for comparative purposes.1 The third cost revision
included in this analysis reflects the decision not to establish pretreatment standards for two
pollutants (phenol and 2,4-dimethylphenol). The fourth change relates to a reallocation of plants
among both subcategories and discharge status. As a result of a 1991 survey of OCPSF facilities
that did not report biological treatment, the number of subcategory J plants increases from 23
(reported hi the analysis of the 1987 Rule) to 47 plants for the Final Rule. In addition, fourteen
plants previously identified as direct dischargers are now considered indirect dischargers hi this
analysis for the Final Rule.2 The net result of theses changes is referred to as the Final Rule.
The revised economic impact analysis reported below used the EIA of the 1987 OCPSF
rule as a baseline. From that point, the impact analysis examines the effects of the cost
revisions and corrections (Revised Baseline) in combination with two iterations of biological
treatment cost re-estimates: 1) those associated with the December 1991 proposal and 2) those
associated with the Final Rule. Such an analysis facilitates consistent comparisons of the impacts
of the Final Rule to previously published analyses that accompanied the 1987 rule and the
December 1991 proposal.
1 The economic analysis for the December 1991 proposal was revised in January 1992. The results presented
in this document reflect the January 1992 revisions, but are referred to as the results for the December 1991
proposal. '
2 Of the 14 plants altering discharge status as a result of the 1991 survey, one plant is a zero discharger of
toxics and is projected to incur no costs and is therefore not retained in the economic impact analysis.
Consequently, the analyses of the Final Rule reflect a reduction (from the rule as promulgated in 1987) in the
number of direct dischargers of 14 and an increase in the number of indirect dischargers of 13 plants.
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B.I Revised Baseline r*- >
The Engineering and Analysis Division revised and corrected compliance cost estimates
for particular plants. These cost revisions reflect the addition of steam stripping and chemical
precipitation upgrades as well as correction of some errors (such as inaccurate wastewater flow
and treatment technologies). The revised BAT Option H-B included changes for 23 out of 289
direct dischargers. The revised PSES Option IV-B included changes for 51 out of 365 indirect
dischargers. & .-'-
** P* v .-,••--
il%>?^
B.2 December 1991 Proposal for Remanded Portions of the 1987 OCPSF Rule
The Agency recosted in-plant biological treatment to account for greater residence times
(approximately 3 to 17 days depending upon plant-specific parameters). Increasing the residence
time of the biological treatment system also expands the land requirements. The costs reported
for the December 1991 proposal are cumulative; they include the cost revisions attributed to the
Revised Baseline. A total of 45 direct dischargers and 250 indirect dischargers incur cost
changes under the December 1991 proposal. The results contained in this report reflect minor
revisions made and January 1992 following the December 1991 Federal Register Notice.
B.3 Final Rule
The economic analysis of effluent limitations guidelines for the Final Rule took into
consideration three incremental changes from the Revised Baseline: the remanded portions of
the 1987 rule (addressed by the December 1991 proposal), the decision not to regulate phenol
and 2,4-dimethylphenol in the final PSES, and the updated subcategory and discharge status
information. Indirect dischargers with no regulated organic pollutants amenable to in-plant
biological treatment other than phenol and 2,4-dimethylphenol are no longer assumed to install
in-plant biological treatment. For such plants, the associated treatment costs and the removal
of nonregulated organics (amenable to in-plant biological treatment) are now zero. For facilities
with other regulated organics removed by in-plant biological treatment, however, the cost of in-
plant biological treatment is reduced to reflect the shorter detention time needed for treatment
of the remaining regulated organic pollutants. In such cases where detention time is shortened,
the removal of phenol and 2,4-dimethylphenol is assumed to be zero.
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As mentioned above, certain plants are reallocated among subcategories and discharge
status as a result of a 1991 survey of OCPSF facilities that did not report biological treatment.
The number of subcategory J plants increases from 23 (reported in the analysis of the 1987 Rule)
to 47 plants for the Final Rule. In addition, 13 of 14 plants previously identified as direct
dischargers are now considered indirect dischargers in this analysis for the Final Rule. The
remaining one plant incurs no PSES costs and is thus not included in this analysis for the Final
Rule.
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C. Plant Impact Analysis
• "-*.!'
The plant impact analysis is conducted separately for direct and indirect dischargers.3
Several measures are used to summarize the impact of the regulations on OCPSF plants. They
include: total annualized cost of the selected option, number of plants expected to close, number
of product lines expected to close, number of plants with significant sales or profit impacts, and
expected job losses (associated with closures). Additional information regarding the calculation
of impact measures, and their significance can be found in the EIA prepared for the 1987
OCPSF rule (EPA 440/2/87-007).
Total Incremental Annualized Costs
The costs subject to revision in this analysis are the costs of controlling priority
pollutants. These costs are incremental to the cost of removing conventional pollutants, such
as biological oxygen demand (BOD) and total suspended solids (TSS), from the wastestream.
Tables 1 and 2 present costs for direct and joint dischargers. (Throughout this report, the costs
(and impacts) for joint dischargers are reported along with direct dischargers.) Tables 3 and 4
present costs for indirect dischargers. All cost estimates in the body of this report are presented
in 1982 dollars, which minimizes possible bias (of updating costs to the current year) during
comparisons with financial plant-level information collected at that time. Slightly fewer plants
than the number with compliance cost estimates are analyzed for impact measures because some
plants did not provide sufficient financial information with which to calculate impacts.
3 Compliance costs for joint dischargers include the costs to control both their direct and indirect wastewater
discharges under the selected control options (BAT II-B for direct discharges and PSES IV-B for indirect
discharges). In this analysis, the results for joint dischargers are reported with the results for direct dischargers.
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Plant and Product Line Closures
A closure is expected where the liquidation value of the plant exceeds the present value
of cash flow minus annualized compliance costs. The entire plant is expected to close if the
OCPSF employment is 80 percent or more of total plant employment. Otherwise the plant is
expected to remain open but the OCPSF product line is projected to close.
Profit or Sales Impacts
Even if a plant is not expected to incur a plant or product line closure, it may still incur
a significant adverse impact due to compliance costs. Adverse impacts on both profit and sales
measures are included in the economic impact model. If post-compliance plant profitability falls
below the lowest decile of the industry segment or compliance costs exceed 5 percent of sales,
then the impact is considered significant.
Employment Reduction
Employment losses are expected at plants where the cost of compliance results in a plant
or product line closure. In plants where less than 80 percent of the employees work on OCPSF
product lines, a closure is assumed to affect only the OCPSF product lines. The employment
reduction of a product line closure is, therefore, equal to the plant's OCPSF employment.
However, in plants where 80 percent or more of the employees work on OCPSF product lines,
a closure is assumed to affect the entire facility and the employment reduction is equal to total
plant employment.
The percentage reduction in employment is calculated using the total OCPSF employment
for all plants considered in the plant level economic impact analysis. Total OCPSF employment
does not include plant workers who work on non-OCPSF product lines. Employment reductions
associated with controls for both direct and indirect dischargers are compared to total OCPSF
employment of 180,739.
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C.I Plant Impact Analysis Results
Two types of comparisons are made between the impacts of the OCPSF rule as
promulgated and the impacts of the rule including the cost revisions:
• the absolute change in the impact measure (e.g., the number of direct discharging
plants expected to close rises from a to b); and
• the change in the percentage of the industry subject to a specific impact (e.g., the
percentage of all direct dischargers that are expected to close rises from x to y
percent).
Both types of measures are considered when comparing the impacts of the revisions to the
impacts of the OCPSF rule as promulgated. The results are summarized in Tables 1 and 2 for
direct dischargers and in Tables 3 and 4 for indirect dischargers.
C.2 Revised Baseline: Revisions and Corrections:
Direct and Joint Dischargers
As explained in Section B.I, compliance costs for 23 of the 289 direct dischargers were
revised between the 1987 OCPSF promulgation and the December 1991 proposal. The total
annualized cost of the revised BAT option increased by $2.0 million (less than 1 percent) to
$208.0 million. There are no incremental impacts associated with these cost changes.
Consequently, the change in compliance costs would not alter the findings of the EIA of the rule
as promulgated.
C.3 December 1991 Proposal for Remanded Portions of the 1987 OCPSF Rule:
Direct and Joint Dischargers
For the 288 direct and joint dischargers with cost information, the compliance costs
associated with the December 1991 proposal total $215.8 million. This is a $9.8 million (5
percent) increase over the cost of the rule as promulgated in 1987. The cost of the December
1991 proposal is significantly less than that of other control options evaluated but not selected
for the 1987 promulgated rule.
There is one incremental product line closure associated with this cost increase. Under
the December 1991 proposal, costs increased for specific plants but did not trigger their impact
measures' thresholds (37 cases) or the costs increased for plants that were previously projected
to incur an economic impact (8 cases). One plant changed from a profit/sales impact to a
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product line closure and another product line closure was removed from the analysis. The total
number of closures, therefore, does not change.
C.4 Final Rule:
Direct and Joint Dischargers
As mentioned above, the incremental change made for the Final Rule involved revisions
to cost estimates of in-plant biological treatment. In addition, as a result of a 1991 survey of
direct dischargers without biological treatment, 24 plants switched from subcategory I to
subcategory J status, and 14 plants previously considered direct dischargers have been changed
to indirect discharger status. For the Final Rule, these plants are presented in the analysis of
indirect dischargers. The annualized compliance costs of the Final Rule are $210.5 million, a
$4.5 million increase over the cost of the rule as promulgated in 1987 and a $5.3 million
reduction from the December 1991 proposal. While the total annualized costs increased by 2
percent over the 1987 promulgated rule, there are five fewer plant and product line closures and
154 fewer jobs lost.
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Table 1
Summary of Economic Impact Analyses
Direct and Joint Dischargers
Impact Measure
Plants Analyzed/Plants Costed
Total Annualized Cost
(1982 $, millions)
Plant Closures
(% of direct discharging plants)
Product Line Closures
(% of direct discharging plants)
Profit or Sales Impacts
(% of direct discharging plants)
Employment Reduction
(% of total OCPSF employment)
Promulgated
BAT Option
283/289
$206.0
11
(3.8%)
9
(3.1%)
17
(5.9%)
1,359
(0.8%)
Revised
Baseline
283/289
$208.0
11
(3.8%)
9
(3.1%)
17
(5.9%)
1,359
(0.8%)
December
1991
Proposal
282/288
$215.8
11
(3.8%)
9
(3.1%)
16
(5.6)
1,735
(1.0%)
Final Rule*
269/275
$210.5
8
(2.9%)
6
(2.2%)
16
(5.8%)
1,194
(0.7%)
1 The discharge status for 14 plants has been changed from direct to indirect for the final rule following a 1991 survey
of direct dischargers without biological treatment; one of the 14 incurs no PSES costs and is not included in the analysis
of indirect dischargers.
Table 2
Incremental Changes of Final Rule
Direct and Joint Dischargers
Impact Measure
Plants Analyzed/Plants Costed
Total Annualized Cost
(1982 $, millions)
Plant Closures
(% of direct discharging plants)
Product Line Closures
(% of direct discharging plants)
Profit or Sales Impacts
(% of direct discharging plants)
Employment Reduction
(% of Total OCPSF employment)
Promulgated
BAT Option
283/289
$206.0
11
(3.8%)
9
(3.1%)
17
(5.9%)
1,359
(0.8%)
Final Rule
269/275
$210.5
8
(2.9%)
6
(2.2%)
16
(5.8%)
1,194
(0.7%)
Incremental
Change
-14/-14
$4.5
-3
(-1.0%)
_2
(-1.0%)
-1
(-0.4%)
-165
(>-0.1%)
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C.5 Revised Baseline: Revisions and Corrections:
Indirect Dischargers
Compliance costs for 51 of the 365 indirect dischargers were revised between the 1987
OCPSF promulgation and the December 1991 proposal. The total annualized cost increased by
$7.9 million (4 percent), from $182.7 million to $190.6 million. The cost revisions result in
one additional product line closure, 3 additional sales/profit impacts, and an additional
employment reduction of 19 workers. Across the base of 365 plants, such changes do not
change the findings of the economic impact analysis of the rule as promulgated.
C.6 December 1991 Proposal for Remanded Portions of the 1987 OCPSF Rule:
Indirect Dischargers
For the 365 indirect dischargers with cost information, compliance costs increased from
$182.7 (as promulgated in 1987) to $233.0 million under the December 1991 proposal - an
increase of $50.3 million (28 percent). Unlike the cost revisions for direct dischargers, plant
impacts increase under the December 1991 proposal. The number of plant and product line
closures rises from 52 for the rule as promulgated to 56, an increase of 2 plants and 2 product
lines. The number of profit/sales impacts also increases, from 63 to 66. The employment
reduction associated with these closures increases from 2,190 (1.2 percent of total OCPSF
employment) to 3,396 (1.9 percent of total OCPSF employment) under the December 1991
proposal.
C.7 Final Rule:
Indirect Dischargers
PSES compliance costs increased from $182.7 (as promulgated) to $226.5 million under
the Final Rule. This is a $43.8 million (24 percent) increase in compliance costs compared to
the 1987 Rule and a reduction of $6.5 million from the December 1991 proposal. Cost
estimates for in-plant biological treatment changed for 204 indirect dischargers (including 14
plants changing discharge status). The revised cost of controls for indirect dischargers remains
less than any other control option evaluated in the EIA for the 1987 promulgated rule.
All three types of plant-level impacts (plant closures, product line closures, and
profit/sales impacts) increase from the levels estimated for the 1987 OCPSF rule, due in part
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to the additional 14 plants now considered indirect dis^hairigers. feie number of plant and
product line closures rises from 52 for the rule as promulgated to 60 (from 14 percent of the
indirect dischargers analyzed to 16 percent). Two of these additional closures result from the
shift of two projected closures from direct to indirect status, and thus are not attributable to the
cost increase of the Final Rule. The number of profit/sales impacts also increases, from 63 (17
percent) to 66 (18 percent). For the rule as promulgated, 32 percent of the indirect dischargers
were expected to incur some type of significant impact. For the Final Rule, this measure rises
slightly to 33 percent. The OCPSF employment reduction associated with the Final Rule is 0.4
percent greater than the 1987 rule, rising from 2,190 for the 1987 rule to 2,946 (1.6 percent of
total OCPSF employment) for the Final Rule.
Table 3
Summary of Economic Impact Analyses
Indirect Dischargers
Impact Measure
Plants Analyzed/Plants Costed
Total Annualized Cost
(1982 $, millions)
Plant Closures
(% of direct discharging plants)
Product Line Closures
(% of direct discharging plants)
Profit or Sales Impacts
(% of direct discharging plants)
Employment Reduction
(% of total OCPSF employment)
Promulgated
PSES Option
362/365
$182.7
25
(6.8%)
27
(7.4%)
63
(17.3%)
2,190
(1.2%)
Revised
Baseline
362/365
$190.6
25
(6.8%)
28
(7.7%)
66
(18.1%)
2,209
(1.2%)
December
1991
Proposal
362/365
$233.0
27
(7.4%)
29
(7.9%)
66
(18.1%)
3,396
(1.9%)
Final Rule
375/378
$226.5
30
(7.9%)
30
(7.9%)
66
(17.5%)
2,946
(1.6%)
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Table 4
Incremental Changes of Final Rule
Indirect Dischargers
Impact Measure
Plants Analyzed/Plants Costed
Total Annualized Cost
(1982 $, millions)
Plant Closures
(% of indirect discharging plants)
Product Line Closures
(% of indirect discharging plants)
Profit or Sales Impacts
(% of indirect discharging plants)
Employment Reduction
(% of Total OCPSF employment)
Promulgated
PSES Option
362/365
$182.7
25
(6.8%)
27
(7.4%)
63
(17.3%)
2,190
(1.2%)
Final Rule
375/378
$226.5
30
(7.9%)
30
(7.9%)
66
(17.9%)
2,946
(1.6%)
Incremental
Change
+ 13/+13
$43.8
5
(1.3%)
3
(0.8%)
3
(0.8%)
756
(0.4%)
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D. Cost-Effectiveness Analysis
The revised cost-effectiveness (CE) analysis can be used to determine:
• if the selected option remains the most cost-effective manner by which to achieve
the reduction in pollutant discharges; and
• the relative cost-effectiveness ($/amount of pollutant removed) of the selected
control option, compared to other effluent limitations guidelines promulgated by
the Agency.
Typically, a cost-effectiveness value, expressed as the cost of treatment (in 1981 dollars)
per pound-equivalent of pollutant removed, is calculated separately for BAT and PSES controls.
The revised CE analysis follows the same methodology to calculate CE values for each control
option evaluated. The CE analysis includes only plants with both cost information and pollutant
removal information. Pollutant removals are aggregated using toxic weighting factors developed
by the Standards and Applied Science Division (formerly the Assessment and Watershed
Protection Division). Compliance costs are converted to 1981 dollars using the Engineering
News Record's Construction Cost Index for 1981 and 1982.4
This analysis includes both revised compliance costs and revised pollutant removals of
the BAT and PSES control options being evaluated. The cost revisions are explained in Section
B of this report. The pollutant removals reflect the decision not to establish pretreatment
standards for phenol and 2,4-dimethylphenol which affects certain indirect dischargers and one
joint discharger. For the cost-effectiveness analysis of PSES, removals of phenol and 2,4-
dimethylphenol are assumed to be zero, even if in-plant biological treatment is assumed to be
installed for removal of other PSES regulated pollutants. The incidental removal of other
organic compounds (for which PSES standards are not proposed) by in-plant biological treatment
is either:
• eliminated (where phenol or 2,4-dimethylphenol were previously the only PSES regulated
pollutants for which in-plant biological treatment was needed) or
• reduced (where the wastestream contains other pollutants regulated under PSES for which
in-plant biological treatment is assumed).
4 ENR's CCI 1981/ENR's CCI 1982 = 3535/3825 = 0.924.
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D.I Cost-Effectiveness Analysis Results
Direct Dischargers:
The CE value for the selected BAT option for the 1987 OCPSF rule was $4.23/lb-eq.
removed ($ 1981).5 This is calculated as the cost of BAT controls for all plants with pollutant
removal information ($203.9 million x .924) divided by the total pollutant removals (44,489,543
Ib-eq.) for those plants. Table 5 presents the CE values for the re-evaluation of BAT options.
The CE value for the Revised Baseline increases by less than 1 percent from the value for the
selected BAT option as promulgated to $4.27/lb-eq. removed. The CE value for the Final Rule
is $3.98/lb-eq. removed, an 8 percent decrease from the selected BAT option. Because other
BAT options evaluated for the 1987 OCPSF rule were costlier (BAT H-A and BAT V) or
removed less pollutant loading from OCPSF wastestreams, the Final Rule remains a cost-
effective BAT control. BAT controls are also relatively cost-effective when compared to the CE
values for other effluent limitations guidelines (Table 6).
Table 5
Cost-Effectiveness Values for BAT Options
Promulgated BAT Option
Revised Baseline
December 1991 Proposal
Final Rule
Annuali zed Cost
for Plants with
Removals
(1982 $MM/year)
203.9
205.8
213.6
208.3
Annualized Cost
for Plants with
Removals
(1981 $MM/year)
188.4
190.2
197.4
192.5
Pollutant
Removals
(Ib-eq.)
44,489,543
44,489,543
44,489,543
48,376,293
Cost-
Effectiveness
Value
($/lb-eq.
removed)
4.23
4.27
4.44
3.98
5 The CE value for the selected BAT option was reported in the Cost-Effectiveness Analysis that supported
the 1987 OCPSF Rule as $4.58/lb-equivalent removed. The difference is attributable to the adjustment of control
costs to 1981 dollars. The actual value, calculated as $203.9 million * .924 / 44,489,543 Ib eq. removed =
$4.23/lb-eq. removed, is used in this analysis to compare CE values of revised BAT options to the CE value of the
selected option of the rule as promulgated.
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Table 6
Industry Comparison of Cost Effectiveness for
Direct Dischargers
(Toxic and Nonconventional Pollutants Only)
Copper Based Weights
(1981 Dollars)
Aluminum Forming
Battery Manufacturing
Canmaking
Coal Mining
Coil Coating
Copper Forming
Electronics I
Electronics n
Foundries
Inorganic Chemicals I
Inorganic Chemicals n
Iron & Steel
Leather Tanning
Metal Finishing
Nonferrous Metals Forming
Nonferrous Metals Mfg I
Nonferrous Metals Mfg n
OCPSF*
Pesticides
Pharmaceuticals
Plastics Molding & Forming
Porcelain Enameling
Petroleum Refining
Pulp & Paper**
Textile Mills
Pounds Equivalent
Currently Discharged
(OOP's')
1,340
4,126
12
BAT=BPT
2,289
70
9
NA
2,308
32,503
605
40,746
259
3,305
34
6,653
1,004
54,225
2,461
208
44
1,086
BAT=BPT
1,330
BAT=BPT
Pounds Equivalent
Remaining at
Selected Option
(OOP's)
Cost
Effectiveness
Selected Option(s)
f$/lb-ea. removed^
90
5
0.2
BAT=BPT
9
8
3
NA
39
1,290
27
1,040
112
3,268
2
313
12
9,735
371
4
41
63
BAT=BPT
748
BAT=BPT
121
2
10
BAT=BPT
49
27
404
NA
84
<1
6
2
BAT=BPT
12
69
4
6
5
15
1
BAT=BPT
6
BAT=BPT
18
BAT=BPT
* Reflects costs and removals for water pollutants and some air pollutants.
** PCB control for Deink subcategory only.
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Indirect Dischargers:
The CE value for the selected PSES option for the 1987 OCPSF rule was $31.13/lb-
eq. removed (1981 dollars).6 This is calculated as the cost of PSES controls for all plants
with pollutant removal information ($173.1 million x .924) divided by the total pollutant
removals (5,138,182 Ib-eq.) for those plants. Table 7 presents the CE values for the re-
evaluation of PSES at several stages in the rulemaking. Including the additional plants that
switched to indirect discharge status, the annual cost used to calculate the CE value for the
Final Rule is $5.6 million lower than that of the December 1991 proposal due, in part, to the
decision not to establish PSES standards for phenol and 2,4-dimethylphenol (which results in
a change in the assumed treatment technology for certain plants -- in-plant biological
treatment may be either unnecessary or the detention time may be reduced). Pollutant
removals, however, decrease only slightly; the decrease in removals attributable to the
removal of two pollutants from the list of regulated pollutants under PSES is offset by the
additional removals of the plants that switched discharge status.
Under the Final Rule, the CE value increases to $39.05/lb-eq. removed, a 25 percent
increase above the CE value for the 1987 PSES option. Because other PSES options
evaluated for the 1987 OCPSF rule were more costly (PSES IV-A and PSES VH) or
removed less pollutant loading from OCPSF wastestreams, the Final Rule remains the most
cost-effective PSES control. PSES controls are also relatively cost-effective when compared
to the CE values for other effluent limitations guidelines (Table 8).
Table 7
Cost-Effectiveness Values for PSES Options
Promulgated PSES
Option
Revised Baseline
December 1991 Proposal
Final Rule
Annuali zed Cost
for Plants with
Removals
(1982 $ MM/year)
173.1
181.0
223.2
217.1
Annuali zed Cost
for Plants with
Removals
(1981 $ MM/year)
159.9
167.2
206.2
200.6
Pollutant
Removals
(Ib-eq.)
5,138,182
5,138,182
5,138,182
5,136,762
Cost-
Effectiveness
Value
($/lb-eq.
removed)
31.13
32.55
40.14
39.05
6 The CE value for the selected PSES option was reported as $33.69/lb-eq. removed. The difference is
attributable to the adjustment of control costs to 1981 dollars. The actual value, calculated as $173.1 million * .924
/ 5,138,182 Ib eq. removed = $31.13/lb-eq. removed, is used in this analysis to compare CE values of revised
options to the CE value of the selected PSES option of the rule as promulgated.
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Tables
Industry Comparison of Cost Effectiveness for
Indirect Dischargers
(Toxic and Nonconventional Pollutants Only)
Copper Based Weights
(1981 Dollars)
Pounds Equivalent
Currently Discharged
(To Surface Waters)
(OOP's)
Pounds Equivalent
Remaining at
Selected Option
(To Surface Waters)
(OOP's)
Cost
Effectiveness
Selected Option(s)
Beyond BPT*
($/lb-eq. removed)
Aluminum Forming 1,602
Battery Manufacturing 1,152
Can Making 252
Coal Mining** N/A
Coil Coating 2,503
Copper Forming 34
Electronics I 75
Electronics H 260
Foundries 2,136
Inorganic Chemicals I 3,971
Inorganic Chemicals II 4,760
Iron & Steel 5,599
Leather Tanning 16,830
Metal Finishing 11,680
Nonferrous Mtls Forming 189
Nonferrous Metals Mfg I 3,187
Nonferrous Metals Mfg H 38
OCPSF*** 5,210
Pesticides 9,522
Pharmaceuticals 340
Plast. Molding&Forming N/A
Porcelain Enameling 1,565
Pulp & Paper N/A
18
5
5
N/A
10
4
35
24
18
3,004
6
1,404
1,899
755
5
19
0.41
72
162
63
N/A
96
N/A
155
15
38
N/A*
10
10
14
14
116
9
<1
6
111
10
90
15
12
34
3
1
N/A
14
N/A
* N/A: Pretreatment Standards not promulgated, or no incremental costs will be incurred.
** Industry has no known or expected indirect dischargers.
*** Reflects costs and removals for water pollutants and some air pollutants.
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E. Regulatory Flexibility Analysis
A Regulatory Flexibility Analysis (RFA) allows the Agency and other reviewers to
specifically address the burden of regulatory actions on small business entities. In the case
of the effluent limitations guidelines for the OCPSF industry, the RFA examined whether
small plants (as defined by annual organic chemical production thresholds of 5, 10, and 15
million pounds) were disproportionately affected by the regulations. Regulatory relief for
small entities must also be balanced against greater pollutant discharges that would result
from relaxed or no controls. The RFA is conducted separately for direct and indirect
dischargers.
As a result of the original RFA, BAT controls more stringent than BPT were not
required for small (5 million pounds or less of annual production) direct dischargers. Small
indirect dischargers were required to comply with PSES controls to remove priority
pollutants.
E.I Regulatory Flexibility Analysis Results
The RFA for this re-evaluation is limited to evaluating the effects of cost changes on
small indirect dischargers since the impacts on small direct dischargers do not increase.
Table 9 summarizes the impacts on small indirect dischargers for the OCPSF rule as
promulgated in 1987 and the Final Rule. For the selected option under the OCPSF rule as
promulgated in 1987, 65 of the 106 small indirect dischargers (61 percent) sustained
significant impacts, which include closures and sales or profit impacts. Under the Final
Rule, 5 additional small plants are significantly affected primarily because 1) 4 small plants
(among the fourteen plants that switch discharge status) are anticipated to be adversely
affected (those are not actual additional impacts, but simply reflect plants already projected to
be adversely affected as direct dischargers which have now switched to indirect discharge
status) and 2) the cost estimate increase of biological treatment results in one additional
impact among smaller indirect dischargers. However, most of the $43.8 million cost
increase associated with the Final PSES Rule is incurred by larger facilities (those with
greater than 5 million pounds of production).
When compared to the impacts on small direct dischargers (for whom less stringent
regulatory requirements were promulgated), a number of other differences are evident. Most
significant is that while the percentage of small indirect discharging plants adversely affected
rises slightly from 61 to 63 percent due to the revisions hi the Final Rule, that result is well
below the 77 percent of small direct discharging plants adversely affected. In addition,
18
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controls for small indirect dischargers remove a far greater amount of pollutants (618,927 Ib-
eq.) than do controls for small (exempted) direct dischargers (71,274 lb-eq.). Expanding the
exemption from small direct dischargers to include small indirect dischargers would increase
the amount of pollutant discharges exempted by almost tenfold.
In summary, plant impacts on small indirect dischargers under the Final Rule are not
significantly different than the impacts evaluated for the selected PSES option in the original
RFA. Under the Final Rule, the impacts remain less severe for small indirect dischargers
than for the small directs and the amount of pollutant removals possible for small indirect
dischargers is far greater than for small directs. An exemption would permit a large amount
of potential removals to be discharged untreated. The results of the revised RFA do not
indicate that a change in the RFA findings is warranted.
Table 9
Comparison of Impacts for Small Indirect Dischargers and
Direct Dischargers Exempted from BAT Controls
Impact Measure
Total Plants Under Threshold
Closures
Sales/Profit Impacts
Small Plants Affected
(as % of Small Plants)
% of Production Under Threshold
% of Pollutant Removals Excluded from
Controls
Indirect Dischargers
< 5 MM Ibs Production
Impacts of
1987 Rule
106
27
38
65
(61%)
0.3%
12%
Impacts of
Final Rule
112
31
39
70
<63%)
0.3%
12%
Direct Dischargers
< 5 MM Ibs Production
Given Relief from BAT Controls
Impacts of
1987 Rule
19
9
6
15
(79%)
0.02%
0.1%
Impacts of
Final Rule
13
5
5
10
(77%)
0.01%
0.1%
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F. Overall Summary and Conclusions
After extensive review and comparison of the economic impact analyses, the Agency
has concluded that the cost revisions incorporated into the analyses reported above do not
significantly alter the findings of economic achievability for the OCPSF effluent limitations
guidelines. Cost revisions did not change the conclusions of the economic impact analysis
for direct or indirect dischargers.
In addition, controls for both direct and indirect dischargers remain among the most
cost-effective rules when compared to other effluent limitations guidelines promulgated by
the Agency. Finally, the revised regulatory flexibility analysis revealed no change for direct
dischargers and only a small increase in the percentage of small indirect dischargers that
were substantially affected.
While BAT compliance costs increased by 2 percent (for 275 plants compared with
289 in the analysis of the 1987 Rule), there are 3 fewer plant closures, 3 fewer product line
closures and 165 fewer jobs lost (due primarily to the change in discharge status of 14
plants). The cost-effectiveness value for BAT options decreases by 6 percent but does not
affect the relative cost-effectiveness of the BAT option when compared to other effluent
limitations guidelines. Controls for direct discharging OCPSF plants rank in the lowest third
of CE values (Table 6).
PSES compliance costs increased annualized costs by 24 percent. As a result of the
change in costs and the revised discharge status of several plants, an additional 11 plants
sustained significant adverse impacts (i.e., closures or profit/sales impacts) under the Final
Rule. Plant closures increased from 25 to 30. Product line closures rose from 27 to 30.
Profit or sales impacts increased from 63 to 66. In total, the percentage of indirect
dischargers adversely affected rises from 32 percent to 33 percent. The expected
employment reduction from closures increased from 2,190 to 2,946 workers. Such changes
do not alter the original finding that PSES controls are economically achievable.
Because of the reallocation of 14 plants in the analysis from direct discharge status to
indirect discharge status, it is also useful to examine the costs and impacts of BAT and PSES
combined. This presents a more accurate overall depiction of the effects of the Final Rule
compared to the rule as promulgated in 1987 since some of the changes in results for BAT
and PSES, viewed separately, result from the change in discharge status for 14 plants, rather
than actual changes in plant level impacts. Under such an analysis, the total costs of the
Final Rule are 12 percent higher than at promulgation in 1987. The number of plants
affected by closure, product line closure or profit/sales impact under both BAT and PSES is
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virtually unchanged, increasing slightly from 152 plants (23.2 percent) to 156 plants (23.9
percent). Due to closures, 591 more job losses are anticipated under the Final Rule which is
equivalent to 0.3 percent of industry employment. Accounting for the shift in discharge
status, the plant-level economic impact results remain relatively unchanged from the rule at
promulgation and the finding of economic achievability for PSES and BAT are unchanged.
The cost-effectiveness result for PSES controls ($39.05/lb-eq. removed, 1981 $)
remains well within the range of other promulgated rules (Table 8). Furthermore, no other
PSES control option evaluated for the 1987 OCPSF rule would have removed as much or
more pollutants at the same or lower cost. Consequently, the changes in compliance costs
for indirect discharging plants do not affect the findings of the original CE analysis.
The regulatory flexibility analysis found that the revisions did not disproportionately
affect small (5 million pounds or less of annual production) indirect dischargers. While the
percentage of small indirect dischargers affected increased from 61 to 63 percent as a result
of the cost revisions under PSES, this does not approach the percentage of small direct
dischargers projected to be adversely affected by the Final Rule (77 percent) and which were
granted an exemption from BAT controls. Another consideration in the RFA is that an
exemption from PSES controls for small plants would result in considerable uncontrolled
discharge of pollutants. The possible pollutant removals of small direct dischargers
exempted account for 0.1 percent of all direct discharges, whereas the possible pollutant
removals of small indirect dischargers account for approximately 12 percent of all indirect
discharges (even considering the fact that two pollutants are no longer regulated). The
change in compliance costs for PSES plants do not alter the original findings that alternative
regulatory controls are warranted for small direct dischargers but not for small indirect
dischargers.
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Appendix A
Calculation of Costs and Impacts Used in the Preamble
The costs reported in the preamble to the Final Rule differ in two respects from the
compliance costs reported in the body of this report.7 First, the preamble costs are reported
in 1986 dollars, whereas costs in this report are reported in 1982 dollars. The preamble
costs were escalated to 1986 dollars to facilitate comparison with the 1987 OCPSF preamble,
which also escalated the 1982 dollars used to perform the impact analyses to 1986 dollars for
preamble presentation. Second, the preamble reports impact measures for BAT options after
removing costs and impacts associated with small direct dischargers (those with less than 5
million pounds annual organic chemical production) as a result of the original regulatory
flexibility analysis. This appendix facilitates the comparison of impact measures reported in
the preamble of the OCPSF rule as promulgated.
In Tables A-l and A-2, compliance costs used in this EIA (1982 dollars) are indexed
to 1986 dollars using Engineering News Record's Construction Cost Index (CCI) for the
relevant years. The inflation factor for 1986 is calculated as follows:
1986 CCI/1982 CCI = 4295/3825 = 1.123
The compliance costs associated with small direct dischargers were removed prior to
indexing the compliance costs for BAT options presented in Table A-l. The other impact
measures in Table A-l (e.g., closures and employment losses) were also adjusted to remove
the impacts associated with the incremental cost of BAT for small directs. Indexed costs for
PSES options are presented in Table A-2; all other impact measures are identical to those
summarized in the body of this report.
7 While the final OCPSF rule has not been published as of the date of this report, the reference here is to
the preamble to that final rule, based on EPA's draft of the Federal Register notice.
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Table A-l
Costs and Impacts Used in the Preamble
Direct Dischargers
(Excluding Costs and Impacts Associated with 19 Small Plants)
1986 Dollars
Impact Measure
Plants Costed
Total Annualized Cost
(1986 $, millions)
Plant Closures
(% of direct discharging plants)
Product Line Closures
(% of direct discharging plants)
Profit or Sales Impacts
(% of direct discharging plants)
Employment Reduction
(% of Total OCPSF employment)
Promulgated
BAT Option
270
$234.2
5
(1.7%)
6
(2.1%)
11
(3.8%)
1,197
(0.7%)
Revised
Basel ine~
270
$226.9
5
(1.7%)
6
(2.1%)
11
(3.8%)
1,197
(0.7%)
December
1991
Proposal
270
$235.8
5
(1.7%)
7
(2.6%)
10
(3.7%)
1,585
(0.9%)
Final Rule
262
$231.1
4
(1.5%)
5
(1.8%)
11
(4.0%)
1,060
(0.6%)
Table A-2
Costs and Impacts Used in the Preamble
Indirect Dischargers
1986 Dollars
Impact Measure
Plants Costed
Total Annualized Cost
(1986 $, millions)
Plant Closures
(% of indirect discharging plants)
Product Line Closures
(% of indirect discharging plants)
Profit or Sales Impacts
(% of indirect discharging plants)
Employment Reduction
(% of Total OCPSF employment)
Promulgated
PSES Option
365
$204.3
25
(6.8%)
27
(7.4%)
63
(17.3%)
2,190
(1.2%)
Revised
Baseline
365
$214.0
25
(6.8%)
28
(7.7%)
66
(18.1%)
2,209
(1.2%)
December
1991
Proposal
365
$261.7
27
(7.4%)
29
(7.9%)
66
(18.4%)
3,396
(1.9%)
Final Rule
378
$254.4
30
(7.9%)
30
(7.9%)
66
(17.5%)
2,946
(1.6%)
23
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