&EPA
United States
Environmental Protection
Agency
Office Of Water
(4303), -
EPA821-R-95-001
January 1995
Economic Impact Analysis Of
Proposed Effluent Limitations
Guidelines And Standards
For The Centralized
Waste Treatment Industry
V
QUANTITY
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Economic Impact Analysis of
Proposed Effluent Limitations Guidelines and Standards for
the Centralized Waste Treatment Industry
Susan M. Burns, Economist
Economic and Statistical Analysis Branch
Engineering and Analysis Division
Office of Science and Technology
U.S. Environmental Protection Agency
Washington, DC 20460
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ACKNOWLEDGEMENTS
The most credit must be given to Debra DiCianna for her knowledge, experience,
cooperation, and leadership as project officer, and to the whole Centralized Waste
Treatment team for their professional manner, conscientious effort, and contributions.
Credit must also be given to Research Triangle Institute for their assistance and
support in performing the underlying economic analysis supporting the conclusions
detailed in this report Their study was performed under Contract 68-C8-0084, and under
subcontracts to SAIC under contracts 68-CO-0035 and 68-C4-0046. Particular thanks are
given to Katherine Heller, Robert Cushman, Tyler Fox, and Craig Randall.
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CONTENTS
Chapter
Page
Executive Summary xiii
Introduction 1-1
1.1 Background 1-1
1.2 Description of the Regulated Industry 1-2
1.3 The Proposed CWT Effluent Limitations Guidelines and Standards 1-3
1.4 Scope of Analysis 1-4
Data Sources 2-1
2.1 Data from the Waste Treatment Industry Questionnaire 2-1
2.1.1 Data Modifications and Corrections 2-3
2.2 Data Sources for Demand Characterization 2-7
2.3 Data Sources for Market Characterization 2-8
2.4 Data Sources Used for Company Analysis 2-8
2.5 References 2-11
Profile of the CWT Industry 3-1
3.1 Demand for CWT Services 3-1
3.1.1 Industries Demanding CWT Services 3-2
3.1.2 Trends in the Demand for CWT Services 3-8
3.2 Empirical Evidence of Trends in CWT Demand 3-10
3.2.1 Evidence from the TRI 3-11
3.2.2 Other Evidence of Trends in Demand for CWT Services 3-11
3.3 Supply of CWT Services 3-13
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CONTENTS (continued)
Chapter
Page
3.4 Description of Suppliers 3-14
3.4.1 Commercial Status 3-14
3.4.2 Industry Classification by SIC Code 3-18
3.4.3 Location of CWT Facilities 3-18
3.4.4 Facility Size 3-21
3.4.5 Production of Waste-Based Products 3-22
3.4.6 Facilities Permitted under RCRA 3-23
3.5 Baseline Facility Conditions 3-23
3.5.1 Baseline Quantities of Waste Treated 3-24
3.5.2 Baseline Costs of CWT Operations 3-24
3.5.3 Baseline Total Costs for CWT Facilities 3-26
3.5.4 Baseline Revenues for CWT Operations 3-27
3.5.5 Baseline Total Revenues for CWT Facilities 3-27
3.5.6 Baseline Profitability of CWT Facilities 3-28
3.6 Baseline Conditions for Non-Commercial Facilities 3-30
3.7 Baseline Market Conditions 3-31
3.7.1 Defining Regional Markets 3-31
3.7.2 Defining Markets for Specific CWT Services 3-34
3.7.3 Market Structure 3-36
3.7.4 Substitutes for CWT Services 3-37
3.7.5 Baseline Market Prices and Quantities of CWT Services 3-37
3.8 Company Financial Profile 3-40
3.8.1 Size Distribution 3-41
3.8.2 Legal Form of Ownership 3-43
3.8.3 Vertical and/or Horizontal Integration 3-46
3.9 References 3-50
IV
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CONTENTS (continued)
Chapter
Page
4 Descriptions and Costs of the CWT Control Options 4-1
4.1 Control Options Considered for Each S ubcategory of the CWT Industry 4-1
4.1.1 Subcategory A: Metals Subcategory 4-1
4.1.2 Subcategory B: Oils Subcategory 4-2
4.1.3 Subcategory C: Organics Subcategory 4-4
4.2 Costs of Controls 4-4
4.2.1 Annualization of the Land, Capital, and RCRA-Modification
Compliance Costs 4-5
4.2.2 Compliance Costs for the Control Options 4-7
4.2.3 Compliance Costs Associated with RCRA Permit Modification and
Monitoring and Recordkeeping 4-10
4.2.4 Compliance Costs of Combined Regulatory Options 4-10
4.3 References 4-12
5 Market Analysis Methodology 5-1
5.1 Introduction 5-1
5.2 Overview of the Analytic Methodology 5-2
5.3 Modeling Market and Facility Impacts 5-3
5.3.1 Defining the Markets for CWT Services 5-4
5.3.2 Baseline Facility Equilibrium Conditions 5-5
5.3.3 Adjustments in Response to the Variable Costs of Complying with
the Effluent Limitations Guidelines and Standards 5-7
5.4 Outputs of the Market Model 5-11
5.4.1 Changes in Market Prices and Quantities 5-11
5.4.2 Changes in Facility Profitability 5-11
5.4.3 Inputs into the Company-Level Analysis 5-12
5.4.4 Inputs into the Community Impacts Analysis 5-12
5.5 References 5-13
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CONTENTS (continued)
Chapter
Page
6 Company Analysis Methodology 6-1
6.1 Owners' Responses 6-1
6.2 Financial Impacts of the Regulation , 6-4
6.2.1 Changes in the Capital Structure and Cost of Capital 6-5
6.2.2 Changes in Financial Viability 6-10
6.3 References • 6-12
7 Market Impacts of the CWT Effluent Limitations Guidelines and Standards.—7-1
7.1 Company Responses to the Costs of Compliance 7-1
7.2 Measures of Impacts 7-2
7.3 Results of the Market Analysis 7-3
7.3.1 Market Impacts 7-4
7.3.2 Facility Impacts 7-6
7.3.3 Employment Impacts 7-7
7.3.4 Inputs to the Company-Level Analysis 7-9
8 Company Impact Analysis 8-1
8.1 Analytic Approach 8-1
8.2 Analytic Procedure 8-2
8.2.1 Changes in the Cost of Capital 8-3
8.2.2 Bankruptcy Analysis 8-6
8.3 Results 8-8
8.4 Conclusions 8-9
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CONTENTS (continued)
Chapter
Page
9 Small Business Impacts 9-1
9.1 Methodology 9-1
9.2 Results 9-2
9.2.1 Impact of BPT/BAT Regulations on Direct Dischargers 9-2
9.2.2 Impact of PSES Regulations on Indirect Dischargers 9-2
9.3 Mitigating Measures 9-2
9.4 References 9-3
10 Community Impacts Analysis................................ ... ...........................—10-1
10.1 Direct Employment Changes 10-1
10.1.1 Facility-Specific Changes in Employment Resulting from Market
Adjustments 10-2
10.1.2 Labor Requirements of the Controls 10-3
10.2 Community Employment Effects 10-3
10.3 Measuring the Significance of Community Employment Impacts 10-5
10.4 Including the Labor Requirements of the Controls 10-6
10.5 Conclusions 10-7
10.6 References 10-7
11 International Trade Effects 11-1
11.1 Restrictions on International Shipments of Hazardous Waste 11-1
11.1.1 Exports of Hazardous Waste 11-1
11.1.2 Imports of Hazardous Waste 11-1
11.2 Trends in International Shipment of Hazardous Waste 11-2
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CONTENTS (continued)
Chapter
Page
11.3 Conclusions 11-2
11.4 References 11-2
12 Impacts on New Sources .—.—................................. 12-1
12.1 New Sources 12-1
12.2 NSPS 12-2
12.3 PSNS 12-2
Appendix A: Copy of Part B of the Waste Treatment Industry Questionnaire A-l
Appendix B: Sources of Company Financial Data
.B-l
Appendix C: SIC Code Definitions ----------------------------------------------------------------------------- ...... C-l
Appendix D: Detailed Demand Elasticity Discussion
Appendix E: Detailed Market Model Discussion [[[ E-l
Appendix F: Detailed Market Model Results ............... . ------- . .............................. .............F-l
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FIGURES
Number
Page
3-1 Centralized Waste Treatment Processes Affected by This Regulation 3-15
3-2 Regional Markets Defined for This Analysis 3-33
3-3 1989 Size Distribution of Potentially Affected Companies 3-42
3-4 Share of Companies by Form of Ownership 3-45
3-5 Chain of Ownership 3-47
3-6 Share of Total Receipts Represented by Nonwaste Treatment 3-49
5-1 Effects of Compliance on Oligopolistic Company 5-6
5-2 With-Regulation Equilibrium Price and Quantity of a CWT Service 5-8
5-3 With-Regulation Price and Quantity in a CWT Market that is a Regional
Monopoly 5-10
6-1 Characterization of Owner Responses to Regulatory Actions 6-3
6-2 Marginal Cost of Capital Schedule 6-8
8-1 Projected Share of Compliance Capital Costs by Type of Financing for
Companies Owning at least One Indirect Discharging CWT Facility 8-4
8-2 Projected Share of Compliance Capital Costs by Type of Financing for
Companies Owning at least One Direct Discharging CWT Facility 8-5
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TABLES
Number
Page
2-1 Sources of Company-Level Financial Information 2-10
3-1 Waste Generation by SIC Code, by Treatment Location 3-3
3-2 The 25 Industries (by Four-Digit SIC Code) with the Largest TRI Total
Releases and Transfers, 1989 • • 3-7
3-3 LDRs 3-9
3-4 CWT Facilities by Subcategory and CWT Service 3-13
3-5 Commercial Status of CWT Facilities 3-16
3-6 SIC Codes Describing CWT Facilities' Primary Operations 3-19
3-7 Number of Facilities Performing Various CWT Services 3-20
3-8 Facility Size Categories Based on Quantity of Wastewater Treated, by
Discharge Category
.3-21
3-9 Size Distribution of CWT Facilities by Number of CWT Employees 3-22
3-10 Facilities Producing Marketable Waste-Based Products 3-23
3-11 Quantity of Waste Treated by Facility Category 3-25
3-12 Baseline Waste Treatment Cost ($106) 3-26
3-13 Baseline Total Costs at CWT Facilities 3-27
3-14 Baseline Treatment Revenues at CWT Facilities 3-28
3-15 Baseline Total Revenues at CWT Facilities 3-29
3-16 Baseline EBT at Commercial CWT Facilities 3-30
3-17 Number of Facilities Offering CWT Service by Region 3-35
3-18 Baseline Market Prices and Quantities of CWT Services 3-38
3-19 Size Distribution of Potentially Affected Companies 3-42
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TABLES (continued)
Number
Page
3-20 Average Size of CWT Facilities by Company Size Category 3-43
3-21 Distribution of Ownership Type by Company Size Category 3-45
3-22 Primary SIC Codes for Companies that Own CWT Facilities 3-48
4-1 Metals Subcategory Compliance Costs (103 $1989) 4-8
4-2 Oils Subcategory Compliance Costs (103 $1989) 4-9
4-3 Organics Subcategory Compliance Costs (103 $1989) 4-9
4-4 RCRA Modification and Monitoring Costs (103 $1989) 4-10
4-5 Compliance Costs for the Proposed Regulatory Options (103 $1989) 4-11
7-1 Market Impacts of BPT/BAT and PSES Controls 7-4
7-2 Profitability Impacts by Discharge Status 7-7
7-3 Employment Impacts 7-8
8-1 Company Count by Types of Dischargers Owned 8-3
8-2 Calculations Used to Construct With-Regulation Financial Statements 8-7
10-1 Changes in CWT Employment Resulting from Market Adjustments at CWT
Facilities 10-3
10-2 Direct-Effect Regional Multipliers for States in which CWT Facilities are
Located 10-4
10-3 Changes in Community Employment Resulting from Market Adjustments at
CWT Facilities 10-5
10-4 Percentage Change in Community Employment 10-6
10-5 Comparing Market Changes in Employment with Labor Requirements of
Controls 10-7
XI
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EXECUTIVE SUMMARY
INTRODUCTION
This report estimates the economic and financial effects of compliance with the proposed
effluent limitations guidelines and standards for the Centralized Waste Treatment (CWT)
industry. The Environmental Protection Agency (EPA) has measured these impacts in terms of
changes in facility profitability and changes in market prices of CWT services and quantities of
waste treated at CWT facilities in six geographic regions. EPA has also examined impacts on
companies owning CWT facilities, including an examination of the impacts on small companies.
Community impacts, international trade impacts, and effects on new CWT facilities are also
discussed. In addition, EPA conducted an analysis of the cost-effectiveness of the regulatory
options, which was published separately in a report entitled, "Cost-Effectiveness of Proposed
Effluent Limitations Guidelines and Standards for the Centralized Waste Treatment Industry."
The effluent limitations guidelines and standards will directly impact the costs and
pollutant discharges of direct and indirect CWT dischargers. Table 1 shows the total annualized
cost of complying with the two alternative proposed effluent limitations guidelines and
standards, including the estimated costs of modifying RCRA permits and performing required
monitoring and recordkeeping. Regulatory Option 1 is estimated to have a total annualized cost
of $46.4 million, and Regulatory Option 2 is estimated to have a total annualized cost of $72.5
million.
TABLE 1. TOTAL ANNUALIZED COSTS (106 $1989)
Option
Option 1
Option 2
EFT/BAT
13.415
20.601
PSES
32.951
51.907
Total
46.367
72.509
This analysis is conducted to assess the economic achievability of the proposed
regulation. It estimates the following changes in economic and financial variables resulting from
complying with the effluent limitations guidelines and standards for the CWT industry:
• Market variables: changes in prices for CWT services and quantities of waste treated
in CWT processes of waste treatment services
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• Facility variables: changes in revenues, costs, profits, the quantity of waste treated,
and employment
• Company variables: changes in the likelihood of bankruptcy
• Community variables: changes in community employment
EPA based this projection of economic impacts on the responses to the questionnaire
distributed to CWT facilities by EPA under the authority of Section 308 of the Clean Water Act
(CWA). EPA sent the questionnaire, requesting both technical and economic information, to a
census of 452 facilities. Responses to the census indicate that an estimated 85 facilities accepted
waste from off-site for treatment in 1989. Seventy-two of those facilities discharge CWT
wastewater either directly to a water body or to a publicly-owned treatment works (POTW).
EPA has determined that these discharging facilities may be subject to cost increases as a result
of the proposed effluent Limitations guidelines and standards.
Based on the census, the 72 facilities were costed for complying with the regulation. Of
these, 16 are direct dischargers and 56 discharge to a POTW. The Best Practicable Control
Technology currently available (BPT)/Best Available Technology economically achievable
(BAT) and Pretreatment Standards for Existing Sources (PSES) regulations are proposed for
three subcategories based on technical differences exhibited between the subcategories:
Subcategory A includes treatment or recovery of metal-bearing waste. Subcategory B applies to
treatment and recovery of oily wastes, and Subcategory C applies to treatment or recovery of
organic wastes. EPA concluded that 30 percent of all facilities treat wastes in more than one
Subcategory. Based on the information collected in the questionnaire, no economic
considerations were significant for subcategorization.
OVERVIEW OF THE INDUSTRY
In 1990, 85 CWT facilities accepted waste from off-site sources for treatment. The wastes
sent to CWT facilities may be highly concentrated and/or variable. They may include sludges,
tank bottoms, products that do not meet required manufacturing specifications, process residuals,
or wastes generated from remediation operations. Baseline conditions in the CWT industry are
summarized in Table 2. Of 58 companies owning CWT facilities, 57 had adequate data for
analysis of impacts. Of these, six companies were found to be likely to incur bankruptcy at
baseline.
Of the 85 facilities managing these wastes, 55 facilities are not owned by a waste
generator but accept waste on a strictly commercial basis, managing it for a fee. Fourteen are
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non-commercial, exclusively captive facilities accepting waste from off-site for treatment only
TABLE 2. BASELINE CONDITIONS IN THE CWT INDUSTRY
Companies Owning CWT Facilities
Number of Companies Number of Facilities
Small Companies (sales < $6 million)
All Others (sales > $6 million)
13
44
13
72
Likelihood of Company Bankruptcy at Baseline3
Likely
Indeterminate
Unlikely
Small Companies
1
3
8
All Other Companies
5
13
18
Total
6
16
26
12
36
48
Baseline Market Conditions
CWT Service
Average Price
($1989/gallon)b
Total Quantity
(103 gallons)
Metal Recovery
Oil Recovery
Metal Treatment
Oil Treatment
Organics Treatment
2.85
0.28
0.28
0.35
0.32
72,822
142,397
399,158
62,404
84,070
Bankruptcy prediction is based on Z-score and Z"-score. Nine companies had insufficient data to compute these
scores.
b Average price is the quantity-weighted average of prices in all relevant regional markets.
Source: Waste Treatment Industry Questionnaire
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from facilities under the same ownership. The remaining 16 are mixed commercial/non-
commercial facilities. They manage their own company's wastes and accept some waste from
other sources for a fee. For purposes of this analysis, the 16 mixed facilities were assigned to
either the commercial or non-commercial category, based on the predominant type of treatment.
One of the 16, facilities was classified as non-commercial and the other 15 were classified as
commercial. Thus, the analysis estimates impacts on 70 commercial and 15 non-commercial
CWT facilities.
In the management of off-site wastes, CWT facilities generate wastewater containing
pollutants such as cyanide, arsenic, hexavalent chromium, lead, mercury, and organic compounds
including benzene and pentachlorophenol. Sixteen facilities directly discharge their wastewater
to surface waters, 56 to POTWs. The remaining 13 dispose of waste residuals by other means,
such as underground injection, evaporation, or off-site treatment. When wastes are directly
discharged to surface waters they contribute to elevated concentrations of pollutants reducing the
quality of the services provided by these water resources. When discharged to POTWs the
wastewater increases the cost of treatment at the POTWs. If the POTW fails to completely treat
the wastewater received from CWT facilities, it may result in the POTWs' discharging excessive
amounts of pollutants to surface waters, causing degradation in the receiving waters.
The toxicity of the wastes accepted and the baseline level of treatment at CWT facilities
has resulted in CWT facilities discharging high concentrations of some pollutants either into
surface water or to POTWs. Four CWT facilities are included on state 304(1) Short Lists, and
eight POTWs, receiving discharges from 13 CWT facilities, are on state 304(1) Short Lists. In
addition, four POTWs have experienced permit violations or partial failure of treatment due to
discharges from CWT facilities. Thus, development of effluent limitations guidelines and
standards for the CWT industry is critical.
Baseline conditions for the companies owning CWT facilities and the markets for CWT
services are shown in Table 2. The companies that own CWT facilities range from large, multi-
facility manufacturing companies to small companies that own only a single facility. The 85
CWT facilities are owned by 59 separate entities: 58 companies and the Federal government.
Sufficient data are available to assess company-level impacts for 57 of the companies owning
CWT facilities. Of these 57 companies, 13 are small businesses (i.e., companies with less than
$6 million in annual revenues). Obviously, the ability of companies to continue to support
unprofitable operations will depend on company size, as well as baseline financial status.
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The demand for CWT services arose because environmental regulations such as
regulations promulgated under the Resource Conservation and Recovery Act (RCRA) and
effluent limitations guidelines and standards promulgated under the CWA required increasingly
specialized and effective treatment of wastes. Many generators, rather than developing the
capability to completely treat their wastes on-site, found it economic to send their wastes to off-
site waste treatment specialists such as CWT facilities. All types of manufacturing and service
industries, located nationwide, are consumers of CWT services. However, because most wastes
being sent to CWT facilities are bulky and heavy, markets for CWT services are generally
regional in nature. Each regional market for a type of CWT service is characterized by relatively
large numbers of demanders and relatively small numbers of suppliers. Each CWT facility
knows its competitors and makes its business decisions taking into account its rivals' behavior.
A few regional markets have only one CWT facility supplying an individual type of service
within that region. Thus, the markets for CWT services are modeled as regional oligopolies or
monopolies. Thus, they may have more flexibility in modifying their prices in response to
changes in their costs, as compared to perfectly competitive markets.
ANALYTIC METHODOLOGY
Standard economic and financial analysis methods are used to assess the economic effects
of the guidelines and standards. These methods incorporate an integrated view of CWT
facilities, the companies that own these facilities, the markets the facilities serve, and the
communities where they are located.
CWT facilities are divided into commercial and non-commercial categories. Different
approaches are used to assess the impacts on commercial and non-commercial CWT facilities.
Commercial CWT facilities are individually characterized based on the quantity of each type of
waste treatment service they provide, their revenues and costs, employment, market share for
each type of service provided, ownership, releases, and location (the community where they are
located and the regional market they serve).
Costs of CWT facilities include variable costs (that vary with the quantity of CWT
services provided) and fixed costs. Per-gallon variable costs are assumed constant to the
capacity output rate. Revenues from CWT operations are estimated by multiplying the market
price of the CWT service by the quantity of waste treated in the CWT service. Most CWT
facilities also have revenues from other sources, which are treated as exogenous.
The demand for commercial CWT services is characterized based on the responsiveness
of quantity demanded to price. CWT services are intermediate goods, demanded because they
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are inputs to production of other goods and services. The sensitivity of quantity demanded to
price for an intermediate good depends on the demand characteristics (elasticity) of the good or
service it is used to produce, the share of manufacturing costs represented by CWT costs, and the
availability of substitutes for CWT services. Overall, the change in quantity demanded for CWT
services is assumed here to be approximately proportional to any price change (e.g., a one
percent increase in the price of a CWT service is expected to reduce the quantity demanded for
the service by about one percent).
This characterization of facilities, companies and markets is incorporated in a model that
uses the engineering estimates of the costs of compliance with the effluent limitations guidelines
and standards to project impacts on facilities, companies, markets and communities. Each CWT
facility faced with higher costs of providing CWT services may find it profitable to reduce the
quantity of waste it treats. This decision is simultaneously modeled for all facilities within a
regional market, to develop consistent estimates of the facility and market impacts. Changes in
the quantity of CWT services offered result in changes in the inputs used to produce these
services (most importantly, labor). The economic impact analysis (EIA) thus projects changes in
employment at CWT facilities. Changes in facility revenues and costs result in changes in the
revenues and costs of the companies owning the facilities, and thus changes in company profits.
Increased borrowing and changes in the assets owned by the companies, together with changes in
profits, result in changes in overall company financial health. The EIA projects changes in the
likelihood of company bankruptcy as a result of the effluent limitations guidelines and standards.
These effects are separately calculated for small businesses. Changes in employment are
specified by location to determine the community impacts.
Typically, facility-level impacts may include facility closures. The Agency has elected
not to estimate facility closures in this analysis, because companies owning CWT facilities have
historically demonstrated a willingness to allow them to operate for a period of time while they
are losing money. EPA has estimated that about 25 percent of the commercial CWT facilities
were unprofitable during the late 1980s. Several others were only marginally profitable (e.g.,
had profits less than $20,000). Most of the unprofitable facilities were still in operation three
years after the census, and several of them had become profitable. Several reasons may explain
why unprofitable facilities remain in operation rather than being closed by their owners. First,
thirty of the 70 commercial CWT facilities receive some of the off-site waste they treat from
other facilities under the same ownership. These facilities perform a service to the rest of their
company, and are unlikely to close even if their commercial operations are unprofitable, although
they may curtail commercial operations if they do not cover costs. Second, most of the CWT
facilities are regulated under RCRA. Closure of a RCRA facility requires that the site be cleaned
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up, which in some cases would entail expensive long-term remediation. Owners may find it
profitable in the short run to keep unprofitable facilities in operation rather than incurring the
costs of "clean-closing" the facility. Finally, the rapidly changing demand conditions in the
industry may cause owners to keep facilities open because they expect that, once the facility
adjusts its operations to correspond to new demand conditions, it will become profitable. For
these reasons, the Agency is not conducting a traditional facility closure analysis for the CWT
industry. Company-level impacts may be a better indicator of economic achievability, as they
measure the resources available to achieve compliance. Facility-level changes in revenues and
costs are computed as inputs to the company level analysis, and changes in facility profitability
are noted, but EPA has not estimated facility closures.
For non-commercial CWT facilities a simpler approach is used. All of the compliance
costs are assumed to be passed on to the parent company and company revenues do not change.
This is because these non-commercial CWT facilities are generally cost centers for their
companies; frequently they do not explicitly receive revenues for their services. They exist to
perform a service for the rest of the company and are not expected to be "profitable" as a unit.
Thus, no change in the quantity of CWT wastes treated are projected for these facilities nor are
market effects analyzed for the products of the parent company, since the share of waste
treatment costs in the marketed products are minimal. Instead, the Agency assumes that costs or
controls on non-commercial CWT facilities are passed along to the parent company. Thus, the
company-level impact analysis includes impacts on the owners of both commercial and non-
commercial CWT facilities.
RESULTS OF THE EIA
Results may be reported at the facility, company, market, or community level. All
facilities are either direct or indirect dischargers. Most companies own either facilities that are
direct dischargers or indirect dischargers, although two companies own both direct and indirect
discharging facilities. The economic and financial impacts of the proposed regulatory options
are estimated assuming that both the BPT/BAT controls and the PSES controls are imposed.
Market-level impacts are the combined result of both types of dischargers' simultaneously
complying with the regulation. Because markets for CWT services combine facilities that are
direct dischargers and facilities that are indirect dischargers, it is not possible to break the
market-level impacts into impacts of BPT/BAT and impacts of PSES.
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Market Impacts
Within each region, markets for overall types of treatment such as metals recovery or
metals treatment may be further subdivided into smaller markets on the basis of the per-gallon
cost of treatment. The price changes and quantity changes projected at the regional and service
level with each option are combined into an overall national value for five broad CWT service
categories. The results are shown in Table 3. In all cases the prices of these services would
increase and the quantity would be expected to fall. Thus, one of the results if EPA promulgates
the guidelines and standards as proposed would be a reduction in the absolute quantity of wastes
commercially treated in addition, of course, to the improvement in treatment. These market-level
adjustments in quantity are reflected in the reduction in the quantity of services provided by
individual commercial CWT facilities.
TABLE 3. MARKET IMPACTS OF THE REGULATORY OPTIONS
Market
Metals Recovery
Oils Recovery
Metals Treatment
Oils Treatment
Organics Treatment
Option
Percentage
Change in
Price
2.64
8.64
26.74
28.86
34.92
1
Percentage
Change in
Quantity
-3.02
-11.00
-20.12
-15.14
-16.69
Option
Percentage
Change in
Price
2.64
41.76
26.74
35.31
34.92
2
Percentage
Change in
Quantity
-3.02
-65.40
-20.12
-35.44
-16.69
In some cases, with less waste being managed by these facilities, facility closure may
even be expected. However, as noted above, unprofitable facilities tend to remain in operation in
this industry, so the analysis does not predict facility closures. Nine CWT facilities are predicted
to become unprofitable if Regulatory Option 1 is enacted as proposed; ten facilities are predicted
to become unprofitable under Regulatory Option 2. If demanders of waste management services
have fewer substitutes for CWT services than assumed here, then prices would increase more
than projected here, quantities would fall less, and the facility and company level impacts would
be smaller. Under Option 1, price increases would range from 3 to 35 percent, while quantities
of waste treated would decrease by between 3 percent and 20 percent. Under Option 2, price
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increases would range from 3 to 42 percent, while quantity decreases would range from 3 percent
to 65 percent. Thus, on average, the market adjustments resulting from the regulatory options are
projected to result in significant changes in the markets for CWT services.
Company Impacts
Company impacts of the proposed regulatory options are measured by changes in the
likelihood of bankruptcy for affected companies owning CWT facilities. The analysis computes
a company score that indicates whether the company is likely to become bankrupt, unlikely to
become bankrupt, or if the company's finances are such that the company's score falls into an
indeterminate range. Company scores were computed at baseline and under each proposed
regulatory option. As shown in Table 4, four additional companies are identified as likely to
become bankrupt under Regulatory Option 1, and three additional companies are identified as
likely to become bankrupt under Regulatory Option 2. This compares with six companies that
were likely to become bankrupt at baseline. Of the four additional companies identified as likely
to incur bankruptcy under Regulatory Option 1, three are small companies; under Regulatory
Option 2, there would be a net increase of one small company likely to become bankrupt. Thus,
the Agency estimates that only three or four additional companies would experience significant
impacts under the proposed regulatory options. The Agency has therefore determined, based on
this analysis, that the regulatory options are economically achievable.
TABLE 4. COMPANY IMPACTS OF THE REGULATORY OPTIONS
Likelihood of
Bankruptcy
Increase in the number of
companies identified as
likely to be bankrupt
Option 1
Small
Companies Others
3 1
Option 2
Small
Total Companies Others
4 1 2
Total
3
Community Impacts
Overall, the communities in which CWT facilities are located are expected to experience
fairly small, and generally positive, increases in employment as a result of the alternative
Regulatory Options. In addition to the employment changes estimated for facilities becoming
unprofitable under Options 1 and 2, other changes in employment may occur as facilities make
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other changes in operations. These changes in employment may be positive for CWT facilities
made better off by the regulation (for example, zero dischargers or facilities with the controls
already in place), or they may be negative for facilities becoming less profitable but not moving
from profitable to unprofitable. Nationwide, facilities becoming unprofitable would reduce their
employment by 62 employees under Regulatory Option 1 and by 75 employees under Regulatory
Option 2. Combined with market-related increases and decreases in employment at other
facilities, the total market-related reduction in employment under Regulatory Option 1 is
estimated to be 378 employees. Under Regulatory Option 2, the national market-related
reduction in employees is estimated to be 501 employees.
Market-related adjustments in employment at each CWT facility are used, together with
regional direct employment multipliers, to estimate total changes in employment in the
communities in which the CWT facilities are located. The analysis shows that these changes in
employment that result from market adjustments cause insignificant changes in employment in
the communities in which the CWT facilities are located. In addition, these market-related
changes in employment must be compared to the changes in employment estimated to be
required for operation and maintenance of the controls to assess the likely overall effects of the
regulatory options on employment and community well-being. Under Regulatory Option 1, EPA
estimates that the labor requirements of the controls would result in an additional 710 employees.
Regulatory Option 2 would require an additional 735 employees. Netting employment gains and
losses, overall employment is projected to increase by 332 employees under Regulatory Option 1
and by 234 employees under Regulatory Option 2. Thus, we expect community-level impacts to
be small and generally positive.
Foreign Trade Impacts
The EIA does not project any foreign trade impacts as a result of the effluent limitations
guidelines and standards. Most of the affected CWT facilities treat waste that is considered
hazardous under RCRA. Shipment of hazardous waste across the national borders for treatment
in the United States is virtually nonexistent; consequently trade effects would be insignificant.
Small Company Impacts
The Agency examined the relative severity of impacts on small entities, specifically small
companies, owning CWT facilities. Small companies are defined as those having sales less than
$6 million, which is the Small Business Administration definition of a small business for SIC
code 4953, Refuse Systems. This is the SIC code that most CWT facilities listed in their census
responses. Thirteen companies are small according to this definition. To determine whether the
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impacts on small companies are "significant," EPA compared the impacts of the regulatory
alternatives on the likelihood of company bankruptcy for small companies and others. As shown
in Tables 4 and 5, of four additional companies predicted as "likely" to incur bankruptcy under
Regulatory Option 1, three are small. Of three additional companies likely to incur bankruptcy
as a result of Option 2, one is small. Thus, under Regulatory Option 1, small companies would
incur relatively larger impacts than large companies according to this measure, but under
Regulatory Option 2, small companies would not incur relatively larger impacts.
Overall, EPA estimates that, while companies in all size categories would incur impacts,
small companies may experience impacts that would be somewhat greater relative to those
incurred by larger companies. The Agency has considered the following mitigating measures to
reduce the impacts on small companies:
1. The regulation is in the form of an effluent limitation rather than requiring specific
capital equipment or operating changes. This would allow each company the
maximum flexibility in deciding how to achieve the limitations.
2. The Agency considered less stringent control options for each subcategory. However,
given the concentration and toxicity of the wastes treated at CWT facilities, the
Agency chose to propose more stringent control options.
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CHAPTER 1
INTRODUCTION
This report analyzes the economic and financial impacts projected to result from effluent
limitations guidelines and standards controlling discharges from centralized waste treatment
(CWT) facilities. This report provides a brief overview of the CWT industry and summarizes the
methods used to analyze the impacts of the regulations on the industry. The estimated impacts
include changes in the prices and quantities of CWT services, changes in the profitability of
CWT facilities, and changes in the profitability of companies owning CWT facilities.
1.1 BACKGROUND
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 the Act, the Environmental Protection
Agency (EPA or the Agency) promulgates effluent limitations guidelines and standards. EPA is
developing a regulation to limit the discharge of pollutants into navigable waters of the United
States and into publicly-owned treatment works (POTWs) by existing and new facilities that
serve as centralized industrial waste treatment centers. The proposed regulation would establish
effluent limitations guidelines for direct dischargers based on the following treatment
technologies: "best practicable control technology currently available (BPT)," "best
conventional pollutant control technology (BCT)," and "best available technology economically
achievable (BAT)." New source performance standards (NSPS) are based on "best demonstrated
technology." The proposed regulation would also establish pretreatment standards for new and
existing indirect dischargers.
The CWT industry includes facilities that receive waste from off-site for treatment. The
proposed regulation covers three subcategories of the CWT industry:
• Metals Subcategory: facilities that accept metal-bearing waste from off-site for
treatment or recovery
• Oils Subcategory: facilities that accept oily waste from off-site for treatment or
recovery
• Organics Subcategory: facilities that accept organic waste from off-site for treatment or
recovery
The effluent limitations guidelines and standards are intended to cover discharges
generated during the treatment of industrial hazardous and non-hazardous waste received from
off-site facilities by tanker truck, trailer/roll-off bins, drums, barge, or other forms of shipment.
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Wastes transferred by pipeline are not included in the regulation. These guidelines apply only to
the waste recovery and treatment processes listed above and do not apply to thermal destruction,
incineration, stabilization, fuel blending, or solvent recovery of industrial wastes received from
off-site.
1.2 DESCRIPTION OF THE REGULATED INDUSTRY
Nearly all production activities and many consumption activities result in the generation
of wastes, which must then be treated and disposed of in a safe and legal manner. CWT facilities
accept these wastes from off-site for treatment or recovery. Industrial wastes generated by
manufacturing and service industries (both hazardous wastes and non-hazardous wastes) may be
treated and disposed of at the location where they are generated (on-site waste management), or
they may be sent off-site to a CWT facility for treatment. The CWT industry is believed to have
grown as a result of the increasingly stringent environmental regulations promulgated under the
Resource Conservation and Recovery Act (RCRA) and the Clean Water Act (CWA). Generators
of industrial waste that chose not to develop the specialized waste treatment capabilities required
to treat highly concentrated or toxic waste on-site chose instead to send such waste to CWT
facilities, thus generating the demand for CWT services. Many waste generators do some initial
treatment of their waste on-site; thus, the waste sent to CWT facilities for treatment includes still
bottoms, treatment residuals, products that do not meet specifications, and other highly
concentrated wastes.
CWT facilities generally fall into one of three categories, based on their relationship to
the facilities generating the waste they treat: commercial, non-commercial, and mixed
commercial/ non-commercial. Commercial CWT facilities are specialists in waste treatment.
They accept waste from generators that are not part of their company and earn the majority of
their revenues from waste treatment and/or recovery services. Non-commercial CWT facilities
accept off-site waste only from other facilities within their company. They are facilities within a
vertically integrated company, producing a service that is an input to the production of other
goods and/or services the company produces. Mixed commercial/non-commercial facilities
accept waste from within their own company and also from generators that are unrelated to them.
For purposes of this report, the mixed commercial/non-commercial facilities have been assigned
either commercial or non-commercial status based on which type of treatment predominates.
Seventy facilities are considered commercial, and 15 are considered non-commercial.
Nearly all facilities that treat waste also generate waste; for example, the treatment of
wastewater generates sludge that must be treated and disposed of. Similarly, the recovery of
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metals, oils, or organics may generate wastewater which then must be treated. In addition, some
CWT facilities are also manufacturing facilities, and their manufacturing activities generate
waste they may treat on-site. Thus, some facilities have some wastes that are subject to the CWT
effluent limitations guidelines and standards and some that are not.
1.3 THE PROPOSED CWT EFFLUENT LIMITATIONS GUIDELINES AND
STANDARDS
The effluent limitations guidelines and standards if promulgated as proposed will increase
the cost of aqueous liquid waste, sludge, and/or wastewater treatment for all facilities that accept
waste from off-site for treatment and that discharge water from waste management processes
within the scope of this regulation (in scope) either directly or indirectly to surface water. Direct
dischargers must comply with by National Pollutant Discharge Elimination System (NPDES)
permits; indirect dischargers discharge their wastewater to a POTW, and their effluent must
comply with pretreatment characteristics set by the POTW.
The Agency is proposing two regulatory options that combine controls on the three
subcategories of the CWT industry:
• Metals Subcategory
• Oils Subcategory
• Organics Subcategory
Two regulatory options are being proposed for the Oils Subcategory. The Agency is co-
proposing two options because while Oils Option 2 results in poor control for the pollutants of
concern it is extremely cost-effective. Oils Option 3, by contrast, would effectively control
pollutant discharges but is extremely expensive. The Agency will re-examine the Oils
Subcategory options based on comments received during proposal and its continuing analyses to
determine which option will be promulgated.
The combined regulatory options proposed by the Agency and analyzed in this report are
the following:
EPA Regulatory Option 1: This regulatory option combines the following control
options:
Metals 3: selective metals precipitation, pressure filtration, secondary
precipitation, solid-liquid separation, and tertiary precipitation.
Oils 2: ultrafiltration.
Organics 1: equalization, air-stripping, biological treatment, and multi-media
filtration.
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EPA Regulatory Option 2: This regulatory option combines the following control
options:
Metals 3: selective metals precipitation, pressure filtration, secondary
precipitation, solid-liquid separation, and tertiary precipitation.
Oils 3:
ultrafiltration, carbon adsorption, and reverse osmosis.
Organics 1: equalization, air-stripping, biological treatment, and multi-media
filtration.
The increased costs incurred by affected facilities would include capital costs of
purchasing and installing additional wastewater treatment equipment, annual operating and
maintenance costs, and the costs of treating and disposing of additional wastewater treatment
sludge that is generated as a result of the higher standard of treatment.
1.4 SCOPE OF ANALYSIS
The CWT facilities are located throughout the country and differ from one another in
size, customers, and the services they perform. EPA conducted a census of the facilities believed
to be subject to the effluent limitations guidelines and standards in the 1991 Waste Treatment
Industry Questionnaire. The questionnaire included two sections—Part A, a technical section,
and Part B, an economic and financial section. This study used information from this
questionnaire to characterize the affected facilities.
Eighty-five facilities have been identified as CWT facilities, but only 72 facilities would
be subject to the regulation because they discharge directly to surface water or indirectly to
POTWs. This report analyzes the impacts of the estimated costs of the effluent limitations
guidelines and standards on the markets for waste treatment, the facilities performing waste
treatment, and the companies owning those facilities. In addition, we discuss community
impacts for the communities in which the facilities are located, potential impacts on foreign
trade, and impacts on small businesses.
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CHAPTER 2
DATA SOURCES
The principal source of data for the CWT industry is a questionnaire conducted by EPA
during 1991. This questionnaire, the 1991 Waste Treatment Industry Questionnaire,1 collected
data under the authority of Section 308 of the CWA from 452 facilities that the Agency had
identified as possible CWT facilities. Of the 452 facilities from which data were collected, the
Agency determined that 363 did not treat or recover materials from industrial waste received
from off-site. Of the 89 facilities that did treat or recover materials from industrial waste
received from off-site, four received all of the off-site waste via pipeline. EPA has preliminarily
concluded that pipeline wastes differ qualitatively from other CWT wastes and should not be
regulated in the same manner. Consequently, the guidelines and standards are not proposed to
apply to such facilities. The remaining 85 facilities were determined as appropriate for
consideration in this regulation.
The 1991 Waste Treatment Industry Questionnaire (henceforth be referred to as "the
questionnaire") collected both technical data and economic and financial data on the CWT
facilities. The questionnaire data formed the basis for all of the technical and economic analyses
performed in support of the development of the effluent limitations guidelines and standards and
were supplemented by data collected during site visits, in telephone conversations with the
facilities, and from publicly available sources.
2.1 DATA FROM THE WASTE TREATMENT INDUSTRY QUESTIONNAIRE
To gather information on which to base the effluent limitations guidelines and standards,
EPA conducted a questionnaire of facilities that it preliminarily considers within the scope of the
industry it was reviewing for guidelines and standards. This questionnaire collected information
on the quantities and types of waste managed, the processes used to manage the waste, and the
facilities' and companies' economic and financial status. The questionnaire data provided a very
detailed portrait of operations at CWT facilities. This chapter examines questionnaire results and
provides a baseline portrait of CWT facilities. The questionnaire sent to CWT facilities
comprised two parts. Part A, including sections A through L, collected data about the facility's
technical operations. Part B, including sections M through O, collected economic and financial
information about the facility and its owners. Appendix A includes a copy of the economic and
financial section of the questionnaire.
The technical data, collected in Part A of the questionnaire, includes the following:
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• the type of waste accepted for treatment;
• the industrial waste management processes used;
• the quantity, treatment, and disposal of wastewater generated during industrial waste
management;
• available analytical monitoring data on wastewater treatment;
• the degree of co-treatment (treatment of centralized waste treatment wastewater with
wastewater from other industrial operations at the facility); and
• the extent of wastewater recycling and/or reuse at the facility.
Part B of the questionnaire comprised three sections. Section M of the questionnaire
requested information about the company owning the CWT facility. The responses to these
questions enabled the Agency to assess impacts of the regulation on the immediate owner
company. These data also were used to identify the ultimate parent company of CWT facilities
for which most of the company-level impacts analysis was conducted. Section N asked for data
on facility operations, including revenues and costs, assets, liquidation value, closure costs,
employment, and RCRA permitting status. These data were used to characterize the facility's
unit costs, total costs, revenues, and profits and to assess the applicability of RCRA permit
modification costs associated with the effluent limitations guidelines and standards. Section O
requested information about the facility's wastewater treatment operations, including the location
of customers, the commercial status of their operations, and prices charged.
Economic and financial data collected in Part B of the questionnaire includes the
following:
• the costs and revenues received by the facility in each of three years for various types of
waste treatment;
• other costs and revenues associated with non-waste management operations at the
facility;
• prices for treatment of various types of wastewater;
• the share of wastewater received from off-site facilities owned by the same company
and from those facilities owned by different companies, and the share generated on-site;
and
• financial variables for the company owning the facility.
The questionnaire responses were carefully reviewed for completeness and consistency.
Virtually every facility was contacted to verify and clarify questionnaire responses or to gather
additional data. In the course of these quality control activities, the Agency identified several
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types of discrepancies in the data provided in the questionnaire that required correction.
Generally, these discrepancies were inconsistencies between the responses given in Part A of the
questionnaire and those given in Part B of the questionnaire. The Agency, after examining
responses and talking with CWT facility contacts, would modify the Part B responses so that
they would be consistent with the Part A responses.
2.1.1 Data Modifications and Corrections
The data collected in the economic and financial section of the questionnaire formed the
basis for the economic impact analysis (ElA) model used for commercial facilities and the
company-level impact analysis used to assess impacts on all parent companies, including those
owning non-commercial facilities. The questionnaire data provide very detailed information
about the CWT facilities' and companies' economic and financial status. Nevertheless, some
modifications were necessary to make the facility-level survey data correspond to facilities'
technical (Part A) responses, and to organize the data so that it represented the correct baseline
for the regulation. Generally, facilities provided technical data on their operations in 1989.
Several types of adjustments were made to the data to yield the baseline data used for the
analysis.
2.1.1.1 Matching the Economic and Financial Data with the Technical Data
The Agency's decision to make the economic data consistent with the technical survey
data resulted in two main types of adjustments.
First, for several facilities the technical data did not represent 1989 operations. Three
years of economic and financial data were provided, but only one year of technical data was
collected. Several facilities, however, provided data on technical operations in 1990 and one
provided technical data for 1991. Care was taken that the economic and financial data
corresponded temporally as closely as possible to the technical data; the nearest corresponding
year's economic data were used.
Second, some facilities' reported waste management revenues and costs and waste
management quantities did not match. That is, they reported performing waste management
operations for which there were no revenues or costs and vice versa. The reason for these
discrepancies, in general, was twofold. Different people filled out the technical and economic
sections of the questionnaire. Generally the plant manager filled out the technical section, while
the accountant filled out the economic section. These two individuals might regard their
operations differently. For example, for facilities performing recovery operations, the technical
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plant manager would record those quantities as "waste recovery" quantities, but the accountant
might regard them as "manufacture of a product" and report the revenues and costs as revenues
and costs from the sale of products manufactured on-site. Another difficulty arose because the
accountants usually had to estimate the share of waste management costs and revenues
associated with each process because most facilities' accounting systems were not set up to track
costs and revenues that way. Instead, most facilities' accounting systems combine all revenues
and costs from CWT operations. Thus, they had to make assumptions in responding to the
questionnaire about the share of revenues and costs that came from each waste treatment
operation. In consultation with the facilities, EPA adjusted the economic and financial responses
to reflect their technical responses. In all, 20 facilities' economic and financial data were
adjusted to correspond to their technical data. Of these adjustments, the two most common were
the following:
• Ten facilities had a recovery operation on-site but reported no revenues. Seven of these
reported all their revenues and costs under wastewater treatment. The costs were
broken out based on quantity shares, and the revenues were estimated based on the
price of the service times the quantity treated. Two facilities reported their oils
recovery costs and revenues under other nonaqueous treatment. These costs were
simply moved to oils recovery. One facility reported metals recovery revenues and
costs as deriving from the sale of a product manufactured on-site. Again, these
revenues were moved to metals recovery.
• Five facilities reported revenues for wastewater treatment, but the technical data
indicated that the facilities did not accept wastewater from off-site. The wastewater
revenues were added to'revenues for recovery processes, which the technical data
indicated the facilities did do commercially.
Other discrepancies that were corrected included the following:
• Based on their technical questionnaire responses, four facilities reported no wastewater
treatment revenues, but accepted wastewater from off-site. For these facilities,
wastewater treatment revenues were estimated by multiplying the price for the service
times the quantity treated, and the estimated amount was subtracted from other entries,
either other waste treatment revenues or overall other revenues.
• A facility performing metals recovery or oils recovery combined the costs of treating
the wastewater generated by the recovery process with the costs of recovery. Thus, the
facility reported a quantity of waste accepted for oils recovery and reported revenues
and costs associated with that operation. The oils recovery process generated
wastewater that was subsequently treated, but no costs were reported for aqueous liquid
waste, sludge, or wastewater treatment. In these cases, the costs were broken out for
oils recovery costs and revenues using quantity shares.
• A facility reported only total waste treatment costs and revenues without assigning
them to specific waste treatment operations. The costs were broken out based on
quantity shares, and the revenues were estimated by multiplying the price of the service
times the quantity treated.
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In every case where facility economic and financial responses required adjustment to
correspond to their technical responses, the basic strategy was to stay as close to the reported
revenues and costs as possible. Thus, when possible, the adjustments were made within the
waste treatment revenues and costs sections so that the total waste treatment revenues and costs
remained unchanged. When this was not possible, the change was made so that the total facility
revenues and costs remained unchanged.
2.1.1.2 Facilities That Did Not Respond to the Economic and Financial Section of the
Questionnaire
Five facilities failed to respond to the economic and financial section of the questionnaire,
although they had completed and returned the technical section of their questionnaire. For these
facilities, revenues and costs of waste treatment operations were estimated. Because no other
information was available about these facilities' finances, the total facility revenues and costs
were assumed to be equal to their estimated waste treatment revenues and costs. In other words,
other revenues and other costs at those facilities were assumed to be zero. Fortunately, a
question in the technical questionnaire allowed us to identify which of these facilities were
commercial and which were non-commercial.
For these five facilities, revenues were estimated by multiplying the price of the services
they offer times the quantities treated in those operations and summing them up. Costs were
estimated in two separate ways. For wastewater treatment, costs were estimated using a simple
log-linear regression equation that estimated unit treatment costs as a function of volume treated:
In(unitcost) = a + b • ln(TQwwr) (2.1)
where;
unit cost = variable costs per gallon treated and
TQwWT = total quantity of waste treated in metals treatment, oils treatment, or
organics treatment.
This equation was estimated using data for the facilities that did wastewater treatment and that
responded to the economic and financial section of the questionnaire. The estimated coefficients
are:
In(unitcost) = 6.377081 - 0.53634 • ln(TQwwr)-
(2.2)
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Thus, total wastewater treatment costs were estimated by first estimating the unit cost of
wastewater treatment, then multiplying that number times the quantity treated:
TCwwr = unit cost • TQwwr
(2.3)
where;
TCwwr = total costs of wastewater treatment.
For metals recovery and oils recovery, data limitations precluded using the same
approach to estimate costs for facilities without data. Instead, costs were estimated based on the
median unit costs of those treatment operations for facilities responding to the economic and
financial section of the questionnaire. For recovery operations, total variable costs were
estimated by multiplying this median unit cost times the quantity treated at the facility:
(2.4)
= (median unit cost)MR • QMR and
TVCoR = (median unit cost)oR • QOR,
where;
TVC
Q
MR
OR
total variable costs,
quantity treated,
metals recovery, and
oils recovery.
2.1.1.3 Adjusting Facility Responses to Analysis Base Year
Computations for this report were initially conducted in 1990 dollars. The data from the
CWT questionnaire corresponded to several years, ranging from 1987 to 1991. For consistency,
all the data were adjusted to 1990 dollars using cost indexes based on the producers price index
(PPI) for all commodities. These 1990 dollar estimates were used for modeling the economic
impacts of the proposed regulatory options. For this report, the results of these analyses were
then adjusted to 1989 dollars, using a cost index based on the PPIs for 1989 and 1990.
The cost index for a given year is the ratio of the two PPIs:
Cost index for 1989: PPIi989/PPIi990 = (112.2)7(116.3) = 0.964746
(2.5)
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The cost index is multiplied by the dollar values given in 1990 dollars to yield the same dollar
values in 1989 dollars:
$1989 = 0.964746 • $1990
(2.6)
2.2 DATA SOURCES FOR DEMAND CHARACTERIZATION
Normally, demand for a good or service can be characterized using publicly-available
information collected by the Department of Commerce. However, Department of Commerce
data are not very useful in analyzing the demand for CWT services. The data are generally
collected and reported by Standard Industrial Classification (SIC) code and CWT services fall
within SIC 4953, Refuse Systems. However, the vast majority of data reported under this SIC
code refer to municipal waste management services such as trash collection and municipal
landfill services. The determinants and characteristics of demand for municipal waste
management services are very different from those for industrial demand for CWT services.
Thus, estimates of demand based on these data would be misleading.
A major source of information available about demanders of CWT services is the
National Survey of Hazardous Waste Generators (GENSUR).2 EPA's Office of Solid Waste and
Emergency Response conducted the GENSUR in 1988 to collect 1986 data from a sample of
hazardous waste generators. The survey provides a detailed portrait of the types of facilities
generating wastes in 1986, the types of waste generated, and the locations where those wastes
were managed. Waste sent off-site for management, according to the GENSUR, includes waste
sent to CWT facilities. However, the GENSUR is limited to RCRA-regulated wastes and
includes wastes sent off-site for disposal in non-CWT processes, such as landfills and
incinerators. Obviously, because these data refer to waste management operations in 1986, the
pattern may be somewhat different than the pattern of demand obtained in 1991 when the Waste
Treatment Industry Questionnaire was conducted. Nevertheless, the GENSUR is a detailed
source of data about the demand for off-site waste management services from which inferences
can be drawn about the demand for CWT services.
Other data useful in characterizing demand for CWT services come from the Toxics
Release Inventory (TRI),3 which requires manufacturing facilities to report releases of certain
chemicals under Section 313 of the Emergency Planning and Community Right-to-Know Act of
1986. TRI releases are reported annually, and the data are publicly available. One type of
release reported is off-site transfer. However, because only a subset of facilities are required to
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report releases, and only releases of some types of chemicals are reported, the data again do not
correspond exactly to the demand for CWT services.
These sources of data are not sufficiently specific to be used for mathematically
estimating the properties of CWT demand. They do, however, provide a basis for making
assumptions about the characteristics of demand for CWT services.
2.3 DATA SOURCES FOR MARKET CHARACTERIZATION
Data used to characterize the markets for CWT services come mainly from the 1991
Waste Treatment Industry Questionnaire. In the questionnaire, facilities were asked the location
of their customers. The majority of facilities indicated that their customers were located within
their state or within a few adjacent states. Based on this information, markets for CWT services
were characterized as regional rather than national.
Price information was solicited from facilities for treatment of various types of waste.
These data, combined with data on the per-gallon cost of treating various types of waste, were
used to select prices for the markets for CWT services. These prices were verified by contacting
several CWT facilities to ask if the prices were reasonable based on their experience.
2.4 DATA SOURCES USED FOR COMPANY ANALYSIS
Estimation of the economic impacts of proposed regulatory options on the ultimate parent
companies of CWT facilities is a focal point of this EIA. Section M of Part B of the 1991
questionnaire of CWT facilities requested selected financial variables from the income
statements and balance sheets of the immediate corporate parents of CWT facilities. The Agency
believes, however, that both the financial health of CWT owners at baseline and the relative
ability of these owners to incur the costs of complying with the proposed guidelines can be
satisfactorily evaluated only at the highest level of ownership. Because many CWT facilities
have several intermediate levels of ownership in their corporate hierarchy, the 1991
questionnaire did not provide the data required for proper analysis of the economic impacts to the
ultimate parent companies of many facilities that responded to the questionnaire. A number of
data sources were used to obtain—and in some cases to construct—the financial data needed to
include the ultimate parent companies of these facilities in the analysis of company-level profile
and impacts analysis presented in this report.
Only 43 of the 57 potentially affected parent companies are also the immediate owners of
CWT facilities. For these 43 companies the necessary data were taken directly from the
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questionnaire, where available, or, where specific data were omitted from the questionnaire, the
data were estimated using the best information provided, appropriate Dun & Bradstreet's
(D&B's) industry median benchmarks and common size financial ratios. Two other facilities
included copies of parent company annual reports with their questionnaire responses, despite
intermediate levels of ownership. Detailed financial statements from a published source4 are
available for an additional four companies. Dollar values were converted from current year
values to $1989 values using the PPI for the appropriate years as described in Section 2.1.1.3.
Table 2-1 shows the frequency for which each of these sources was used, the number of
companies (and associated facilities) identified through each source, and the types of company
financial data available from each source. Table 2-1 also shows the availability of company-
level financial data varied for CWT parent companies in companies of different sales size
categories.
For the remaining eight companies for which financial statements are not publicly
available, this analysis used published estimates of the companies' annual sales revenues5'6'7 in
combination with data from D&B's Industry Norms and Key Business Ratios^ to construct
representative financial statements. Industry Norms and Key Business Ratios reports common-
size financial statements and financial ratios by SIC code and aggregates financial data for all
companies within an SIC code rather than reporting data for any individual company. Common-
size financial statements include a representative (or average) income statement where all values
are expressed as a percentage of total revenues and a representative balance sheet where all
values are expressed as a percentage of total assets. Key financial ratios reported as quartile
values representing above-average (upper quartile), average (median), and below-average (lower
quartile) performance are also reported for each SIC code. All eight companies for which
representative financial statements were constructed were assumed to be performing at an
average level for companies in their respective SIC codes. Table B-l (see Appendix B) outlines
the specific calculations undertaken to estimate the baseline financial data that were constructed
for these eight companies.
The financial data used to profile company financial status in this report are all presented
in $1989 and in most cases reflect company activities in 1989. In a few cases, where the
technical data provided by the CWT facilities were for a different year, or where the Agency
learned of CWT facilities changing hands between 1989 and the time of this analysis, company
financial data for the most appropriate year were used.
In addition, SIC 4953 represents companies involved in solid waste disposal, sewage
treatment and disposal, and other waste treatment processes not directly affected by the CWT
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TABLE 2-1. SOURCES OF COMPANY-LEVEL FINANCIAL INFORMATION
Distribution of Companies by
Company Size
(Annual Receipts in $106/year)
$0to $6 to $30 to Over Total
Name of Data Source $6 $30 $340 $340 Companies
1991 Waste Treatment Industry 12 12 6 13 43
Questionnaire
Company Annual Reports 2 2
Moody' s Industrial Manual 1 3 4
Ward's Business Directory of 1 1
U.S. Private and Public
Companies*
American Business Information 111 3
Online3
Dun & Bradstreet's America's 1124
Corporate Families and
International Affiliates3
Subtotal: Companies and 13 14 9 21 57
Facilities Included in Company
Analysis
Companies Excluded 1
Facilities Excluded Owned by
Companies Included
Government Facilities Excluded
Subtotal: Companies and 1
Facilities Excluded from
' Company Analysis
Total 58
Total Type of
Facilities Data
61 Partial
Financial
Statements
2 Complete
Financial
Statements
10 Complete
Financial
Statements
2 Annual
Sales or
Total Assets
3 Annual
Sales Range
4 Annual
Sales
82 , Sufficient
Data
1 No
Company
Data
1 Inaccurate
Data
1 Data Not
Applicable
3 Insufficient
Financial
Data
85
aCompany financial data were constructed using available data on company sales and benchmark ratios for the
companies' SIC code from Dun & Bradstreet's Industry Norms and Key Business Ratios. 1992-1993. New York:
Dun & Bradstreet.
Source: Dun & Bradstreet. 1990. Who Owns Whom? New York: Dun & Bradstreet.
2-10
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guidelines. Table B-2 (see Appendix B) lists the common-size financial ratios used to construct
baseline financial statements for companies for which financial data for the ultimate parent
companies were not available from the questionnaire and for which complete financial
statements were not available from other published sources.
As explained in Chapter 6 of this report, this analysis evaluates the debt capacity of
potentially affected companies by comparing the company's debt to total assets ratio with an
industry-specific benchmark ratio, reported in D&B's Industry Norms and Key Business Ratios.
Table B-3 (see Appendix B) reports the benchmark lower quartile debt ratio of each appropriate
industry (identified by SIC) for which benchmarks are available. This ratio is used as an
industry-specific "prudent level of debt." It is used to assist the Agency in projecting how CWT
parent companies hi different industries will choose to finance their capital costs of compliance
with the regulation. Where a specific industry's benchmark is not available, we used the
benchmark reported for SIC 4953 Refuse Systems.
It should be noted that the companies that responded to the questionnaire are generally
much larger on average than those used to compute the benchmark ratios reported in Tables B-3
and B-4 (see Appendix B). It is possible that using an industry benchmark financial ratio that
reflects the financial conditions of companies that are generally smaller than those to be affected
by the regulation may not be equally appropriate for companies of all sizes. If larger companies
are generally able to tolerate more (or less) new debt with a given ratio of debt to total assets than
are smaller companies, then the projections of company financial decisions resulting from the
proposed regulation may be less accurate for larger companies. Unfortunately, industry financial
ratio benchmarks are not separately available for firms of different sizes.
2.5 REFERENCES
1. U.S. EPA. 1991 Waste Treatment Industry Questionnaire. Appendix A of this report
contains a copy of Part B, Economic and Financial Information.
2. U. S. EPA. 1986 National Survey of Hazardous Waste Generators.
3. U. S. EPA. Toxics Release Inventory. Data for 1989 and 1990.
4. Moody's Investor Service. Moody's Industrial Manual. New York, NY. 1990-1992.
5. Ward's Business Directory of U.S. Private and Public Companies. 1994. Washington,
DC: Gale Research, Inc.
6. American Business Information Online.
2-11
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7. Dun & Bradstreet. America's Corporate Families and International Affiliates.
8. Dun & Bradstreet. Industry Norms and Key Business Ratios. New York: Dun&
Bradstreet. 1992-1993.
2-12
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CHAPTERS
PROFILE OF THE CWT INDUSTRY
This chapter profiles the CWT industry by describing the baseline conditions
characterizing the demand for CWT services, facilities supplying CWT services, the companies
that own CWT facilities, and the markets for CWT services. The baseline represents the
conditions in the CWT industry in the absence of the regulation. Thus, baseline conditions form
the basis for comparison with the projected conditions for these entities if the regulation is
promulgated as proposed.
In 1989, 85 CWT facilities accepted waste from off-site sources for treatment or
recovery. The wastes sent to CWT facilities tend to be concentrated and difficult to treat; they
include process residuals, process wastewater, and process wastewater treatment residuals such
as treatment sludges. The toxicity of wastes accepted and the baseline level of treatment at CWT
facilities have resulted in CWT facilities discharging high concentrations of some pollutants
either into surface water or to POTWs. Four CWT facilities are included on state 304(1) Short
Lists, and eight POTWs, receiving discharges from 13 CWT facilities, are on state 304(1) Short
Lists. In addition, four POTWs violated their permits or experienced partial failure of their
treatment systems due to discharges from CWT facilities. Thus, development of effluent
limitations guidelines and standards for this industry is critical.
CWT facilities are specialists in waste treatment. In developing the proposed guidelines
and standards EPA looked at facilities that accept waste on a commercial basis and those that
accept waste on a non-commercial basis. Fifty-five CWT facilities are not owned by a generator
but accept waste on a strictly commercial basis, managing it for a fee. Fourteen are non-
commercial, exclusively captive facilities accepting waste from off-site for treatment only from
facilities under the same ownership. The remaining 16 are mixed commercial/non-commercial
facilities. They manage wastes from their own company and also accept some waste from other
companies for a fee. The commercial CWT operations and also the commercial portion of the
mixed CWT facilities constitute the supply of marketed CWT services. For purposes of this
report, one mixed facility has been classified as non-commercial because most of its operations
are non-commercial. The other are classified as commercial. Demand for these services comes
from waste generators that do not have the capability to completely treat the waste they generate
on-site.
3.1 DEMAND FOR CWT SERVICES
Producing goods and services almost always involves the simultaneous production of
waste materials. During the process of manufacturing goods or providing services, the material
3-1
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inputs that are not embodied in the products become waste. Environmental regulations require
that these wastes, once generated, be treated and disposed of in accordance with existing
environmental regulatory requirements.
The demand for waste management services arises from the generation of waste as a by-
product of manufacturing or other production activities. This means that the demand for CWT
services is derived from and depends on the demand for the goods and services whose production
generates the waste. For example, the higher the demand for plastics, the greater the quantity of
plastics produced, and, in turn, the greater the quantity of by-products of plastic manufacturing
that must be treated and disposed of.
Producers generating waste have three choices when they determine how to treat the
waste properly. First, they may invest in capital equipment and hire labor to manage the waste
on-site, that is, at the same site where it is generated. For large volumes of waste, this is often
the least expensive way to manage the waste because producers can avoid the cost of
transporting it Some generators may choose to treat waste on-site, believing that it will help
them control their ultimate liability under environmental laws. Alternatively, producers may
choose to partially treat waste on-site initially and then to send it off-site for ultimate treatment
and disposal; this choice is referred to as on-site/off-site in this report. Finally, producers may
choose to send waste they generate directly to a CWT facility, a method that is called off-site
waste management.
The producers of waste who choose either the on-site/off-site or the off-site method
create the demand for CWT services. The proposed guidelines and standards under analysis
apply to all facilities accepting waste from off-site for treatment or recovery.
3.1.1 Industries Demanding CWT Services
Data from the 1986 GENSUR can be used to characterize the generators of hazardous
waste by industry and to profile the types of waste generated. This extensive survey database
gives the most detailed information on the generation of waste available. The survey was
designed to collect information on the generation of wastes defined as hazardous under Subtitle
C of RCRA. This pattern of generation by industry may not correspond to the generation pattern
for the customers of CWT facilities; some overall patterns, however, may be instructive.
Table 3-1 shows SIC codes and the quantities of waste those industries generate and
ultimately send off-site for treatment and/or disposal. This is the portion of total waste generated
3-2
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TABLE 3-1. WASTE GENERATION BY SIC CODE, BY TREATMENT LOCATION
Treatment
Location
Off-site
Only
Off-site
SIC Code
2816
2821
3851
2813
3484
2869
2911
2833
2879
3644
4931
3317
4953
3714
3721
3471
3600
5983
2819
3661
2899
3441
4463
3312
3452
3679
3585
3728
3479
1311
5171
All Other SICs
Total
Waste
Generated
(tons)
4,198,360
338,895
317,196
274,265
194,606
111,740
34,804
22,124
17,629
17,316
15,350
10,786
9,730
8,295
6,411
5,356
5,153
3,562
3,396
2,483
2,445
2,431
2,209
2,078
1,990
1,417
1,289
1,207
1,108
1,085
1,054
57,649
5,673,415
Waste Sent
Off-site
(tons)
4,198,360
338,895
317,22
61,390
194,606
111,362
34,297
22,124
17,629
17,316
15,350
10,785
9,730
3,198
6,411
5,351
4,993
3,562
3,396
2,483
2,445
2,431
2,209
2,078
1,990
1,417
1,289
1,201
1,788
1,085
1,054
57,174
5,454,624
Number of
Generators
1
2
1
1
5
8
16
2
2
1
9
4
22
6
6
29
14
7
5
7
14
9
1
6
15
14
2
49
5
4
21
(continued)
3-3
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TABLE 3-1. WASTE GENERATION BY SIC CODE, BY TREATMENT LOCATION
(CONTINUED)
Treatment
Location SIC Code
On-site, 2869
then 2821
Off-site 3674
3361
3714
2611
2819
3312
2865
2911
3429
3585
2800
3700
9511
3711
3471
4953
3573
3321
3679
3479
2899
3815
3291
2842
3721
2834
3691
3079
3341
3713
2879
Waste
Generated
(tons)
16,100,674
9,931,763
8,783,661
4,965,664
3,591,398
3,188,994
2,605,011
2,537,440
2,519,416
2,387,776
2,262,126
2,068,145
1,732,106
1,501,000
1,455,716
1,212,814
1,036,473
927,822
911,257
834,056
832,700
694,320
668,738
641,671
632,525
628,075
568,805
522,677
414,308
408,101
379,711
365,328
311,688
Waste Sent
Off-site
(tons)
11,741,505
9,900,916
3,127,594
4,286
898,172
3,188,993
1,110,378
708,845
1,992,492
980,080
68,289
21,218
69,671
1,501,000
1,455,724
809,628
128,464
876,900
37,981
25,723
822,616
628,999
322,484
969
4,301
628,075
577,979
522,565
21,535
15,330
376,229
2,557
32,940
Number of
Generators
165
71
151
5
123
8
40
78
31
132
51
32
41
1
13
66
352
49
63
11
256
133
93
5
16
13
59
53
27
156
43
3
46
(continued)
3-4
-------
TABLE 3-1. WASTE GENERATION BY SIC CODE, BY TREATMENT LOCATION
(CONTINUED)
Treatment
Location SIC Code
On-site, 3548
then 3678
Off-site 3531
3639
7391
3316
3452
7535
3497
3592
3552
3351
3825
3317
2542
All Other SIC codes
On and Off Total
Total Waste in 1986
Waste
Generated
(tons)
197,799
'187,311
187,264
186,263
174,996
172,206
165,401
156,994
152,485
135,143
134,162
132,213
115,536
108,293
105,750
2,430,930
83,600,788
650,028,569
Waste Sent
Off-site
(tons)
60
187,296
1,675
186,263
11,615
171,159
148,061
2,060
152,485
16,645
434
4,752
113,172
57,208
42
2,221,970
45,279,340
50,733,964
Number of
Generators
1
34
8
4
125
13
40
1
2
6
15
22
10
36
2
Source: U.S. EPA. National Survey of Hazardous Waste Generators, 1987. GB Booklet, Waste Characterization.
1987.
3-5
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in 1986 that was managed at CWT facilities or waste disposal facilities. Two types of treatment
locations are specified: Off-site Only and On-site/Off-site. As explained earlier, wastes that,
once generated, are sent directly to an off-site treatment facility are called Off-site Only. Wastes
generated and treated initially on-site, then sent off-site for additional treatment or disposal, are
called On-site/Off-site.
Clearly, a wide variety of manufacturing industries generate waste. The industries
generating waste in 1986 are listed in Table 3-1 by their SIC codes. A list of the definitions for
SIC codes is provided in Appendix C. The most frequently appearing SIC codes are those in the
2800s (chemicals manufacturing) and the 3400s (fabricated metal products). Industrial organic
chemicals not elsewhere classified (2869) sends the greatest quantity of waste off-site, followed
by plastics and resins (2821). The SIC code with the most generators is plating and polishing
(3471). Other industries with many generators include electric services (4911), electronic
components (3679), and semiconductors (3674).
Additional evidence for this pattern is shown in Table 3-2, which summarizes pollutant
releases reported in the 1989 TRI including off-site transfers of waste. As with the GENSUR
data, the pattern of waste releases reported in Table 3-2 may not correspond to the pattern of
demand for CWT facilities, because the TRI only reports releases of certain chemicals from a
subset of industries. However, Table 3-2 shows that in 1989 a broad spectrum of industries
reported sending waste off-site for management.
The pattern of waste generation and off-site treatment revealed in Tables 3-1 and 3-2 may
indicate the industries demanding CWT services; the quantities, however, may not be an accurate
reflection of the quantities of waste managed by affected CWT facilities in 1989. The CWT
proposed regulation applies only to facilities that accept waste from off-site for treatment or
recovery. The quantities of waste shown in Tables 3-1 and 3-2 include wastes sent off-site for
types of management not covered by this regulation, such as incineration or landfill disposal.
Thus, the quantities shown may overstate a given industry's demand for affected CWT services.
At the same tune, because centralized waste treatment of non-hazardous wastes is also covered
by the guidelines and standards, the quantities shown in Table 3-1 may understate a given
industry's demand for affected CWT services. Finally, the overall quantity of waste generated
surely changed from 1986 to 1989. But the general pattern, that many manufacturing and service
industries in the U.S. demand the services of CWT facilities for treatment of some of the waste
they generate, is certainly still true.
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TABLE 3-2. THE 25 INDUSTRIES (BY FOUR-DIGIT SIC CODE) WITH THE
LARGEST TRI TOTAL RELEASES AND TRANSFERS, 1989
SIC Code
2869
3339
3312
2816
2819
2873
3331
2911
2821
3711
2611
2834
2813
2621
2851
3321
3861
3714
3079
3089
3411
2874
2511
2865
2631
Number
of
Facilities
305
23
143
39
285
64
8
170
322
59
31
131
142
139
598
135
62
367
344
321
190
27
212
76
61
Number
of
Releases
2,390
108
1,103
192
1,010
263
77
2,315
1,875
818
223
442
212
592
3,452
559
343
1,259
923
111
869
110
976
617
260
Total Releases
and Transfers
(tons)
163,610
99,312
89,826
89,616
78,160
65,595
45,606
36,844
35,082
32,808
31,001
29,358
28,227
27,536
24,675
24,408
23,845
23,630
23,244
21,252
20,680
20,473
20,214
19,960
19,311
Share of
Off-site
Transfers
0.1036
0.0145
0.3976
0.0652
0.1297
0.0013
0.0001
0.0782
0.3634
0.1005
0.0432
0.3179
0.9667
0.1093
0.5716
0.3108
0.3028
0.2311
0.1338
0.0682
0.0868
0.0036
0.0255
0.1807
0.0321
Off-site
Transfers
(tons)
16,950
1,440
35,714
5,843
10,138
86
4
2,881
12,748
3,297
1,340
9,332
27,287
3,010
14,104
7,586
7,220
5,461
3,110
1,450
1,795
74
516
3,607
620
Source: U.S. EPA. Toxics in the Community: The 1989 Toxics Release Inventory Report. September 1991.
Table 3-31.
3-7
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The share of all waste treated or disposed of off-site is generally very small. As shown in
Table 3-1, of 650 million tons of RCRA-regulated hazardous waste generated in 1986, only
51 million tons were sent off-site. Thus, the vast majority of the volume of RCRA hazardous
waste generated in 1986 was treated and disposed of on-site and is outside the scope of this
analysis. This is typical of waste treatment patterns. To avoid transportation costs, the largest
volume wastes are treated on-site. Waste that is sent off-site for treatment tends to be relatively
low in volume although it may be highly toxic. Waste that is sent off-site without initial
treatment may be too concentrated for treatment in on-site treatment operations. Typically,
waste that is sent off-site for treatment after initial on-site treatment is highly concentrated and
difficult to treat. The wastestreams accepted by CWT facilities are the most concentrated and
variable of any analyzed during development of effluent limitations guidelines and standards.
3.1.2 Trends in the Demand for CWT Services
The data described above reflect demand for total off-site hazardous waste treatment
services in 1986. They demonstrate that the demanders of CWT services are diverse and include
most manufacturing and many service sectors. This pattern is true for non-hazardous waste as
well. The overall quantity of CWT services demanded and the pattern of off-site waste
treatment, however, have probably changed since 1986. The late 1980s were a period of
transition for the waste treatment industry, particularly the RCRA hazardous waste industry.
Several regulatory and policy changes combined to change the framework for waste generation
and treatment.
3.1.2.1 The Land Disposal Restrictions (LDR)
Regulations authorized by the Hazardous and Solid Waste Amendments to RCRA and
promulgated by EPA since 1986 prohibit the land disposal of hazardous waste unless hazardous
chemicals and characteristics have been removed, reduced, or stabilized to the greatest extent
possible or unless EPA determines on a site-specific basis that there will be no migration of
hazardous constituents from the land disposal unit. Wastes categorized as hazardous under
RCRA were grouped into four groups reflecting their relative danger when land disposed. These
groups are referred to as "California list wastes," "First Third wastes," "Second Third wastes,"
and 'Third Third wastes."
California list wastes, prohibited from land disposal after July 8, 1987, included liquid
hazardous wastes with a pH less than 2.0, liquid hazardous wastes containing PCBs, or aqueous
mixtures containing certain concentrations of halogenated organic compounds. First third wastes
include wastes that are not wastewater identified by certain RCRA codes, such as wastewater
3-8
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treatment sludges, bottom sediment sludges from wood preserving, and distillation sludges and
still bottoms from the production of various organic compounds. Second third wastes include
wastewaters characterized by the same RCRA codes for which nonwastewaters were listed in the
first third, as well as spent cyanide solutions, and many other RCRA codes. Third Third wastes
include nearly all remaining liquid and sludge hazardous wastes. (Table 3-3 shows the dates
LDRs were imposed for each kind of waste.)
TABLE 3-3. LDRs
Wastes Restricted
Date After Which Land Disposal Was Restricted
"California" Wastes
First Third (most hazardous)
Second Third
Third Third
July 1987
August 1988
June 1990
May 1991
Overall, the LDR (or "land ban") has changed the pattern of hazardous waste treatment,
increasing the amount of treatment prior to disposal. In addition, smaller quantities of some
types of waste will be land-disposed (waste that must be thermally treated, for example), while
greater quantities of other wastes will be land-disposed (such as wastewater treatment sludges,
which must now be mixed with stabilizing agents). The average per-unit costs of waste
treatment have increased.
3.1.2.2 The Toxicity Characteristic Leachate Procedure Test
In addition to the LDR, the introduction of the toxicity characteristic leachate procedure
test (TCLP) to determine if a waste is toxic under RCRA changed the classification of many
wastes from non-hazardous to hazardous. Since September 1990, facilities have been required to
use this test rather than the extraction procedure (EP) leaching test to determine whether wastes
are hazardous. The most notable distinction between the tests is that the EP test estimates the
leaching of metals only, while the TCLP also estimates the leaching of organic compounds.
Many organic chemicals will ultimately be added to the characteristic list of RCRA hazardous
wastes as a result of this rule change. At the same time that the TCLP was adopted, maximum
concentration limits were established for 26 additional contaminants. Facilities managing these
3-9
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wastes must now have a RCRA permit. Thus, the TCLP increases the demand for RCRA-
permitted CWT services relative to other, non-RCRA-permitted types of waste treatment.
3.1.2.3 Pollution Prevention
Another recent policy change is a greatly increased emphasis on the part of EPA and state
agencies on pollution prevention. Generators are encouraged to modify their processes, improve
their housekeeping, increase their reuse and recycling of production by-products, and generally
reduce the amount of waste that they release to the environment. A part of this emphasis has
been the required reporting of toxic chemicals released to the environment in the annual TRI.
Because this information is made publicly-available, companies have an incentive to reduce their
releases. Many facilities have found cost-effective ways to modify their operations and decrease
the quantity of waste they generate for a given level of production of their primary good or
service. This trend has, other things equal, reduced the demand for CWT services. The EPA is
presently drafting a new hazardous waste minimization strategy that may combine one or more
of the following policy options:
• voluntary commitments from industry to reduce waste streams of concern,
• enforcement actions using supplemental environmental projects, and/or
• publication of a list of large quantity generators.
When finalized, this strategy may promote additional reductions in the quantity of hazardous
waste being sent to CWT facilities for treatment or recovery.
3.1.2.4 Changes in the Level of Economic Activity
As discussed at the beginning of this section, the demand for CWT services depends on
and is derived from the demand for the goods and services whose production generates waste.
The quantities of waste generated in 1986 (shown in Table 3-1), the quantity of waste sent off-
site by TRI facilities in 1989 (shown in Table 3-2), and the quantities of waste managed at CWT
facilities in 1989 all reflect the levels of economic activity occurring during those years. As the
level of economic activity changes over time, other things held equal, the level of waste
generated and the demand for CWT services will change accordingly.
3.2 EMPIRICAL EVIDENCE OF TRENDS IN CWT DEMAND
To assess the overall trend in the demand for CWT services, EPA would need a time-
series database giving several years' data about the quantity of waste sent off-site for treatment
each year. Unfortunately, no database corresponds exactly to the data needed. No national data
source provides time-series information about the quantity of RCRA-regulated waste sent off-site
3-10
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for treatment. Because of the lack of detailed national time-series data on hazardous waste
generation and treatment, quantifying the overall trend in demand for CWT services over the past
five years is impossible. On the one hand, the increasingly stringent regulation of releases of
pollution to the environment has increased the quantity of waste being managed by specialists
(CWT facilities) for a given total quantity of waste generated. On the other hand, the emphasis
on pollution prevention has decreased the total quantity of waste generated for a given level of
production and may have resulted in a decreased demand for CWT services.
3.2.1 Evidence from the TRI
The TRI does provide a time series of data on releases of materials, but the materials are
chemicals of concern rather than wastes. However, many of the TRI chemicals, if discarded, are
RCRA-regulated hazardous wastes. Thus, the TRI database does provide information from
which inferences may be drawn about the quantities of waste being generated.
A recent study done for EPA's Office of Pollution Prevention and Toxics assesses the
changes in reported TRI releases and transfers between 1989 and 1990.' This study collected
data from a sample of TRI-reporting facilities to attempt to quantify the changes in releases and
transfers reported in TRI between 1989 and 1990 and to assess the contribution of "real" changes
in releases as opposed to "paper" changes in releases. Real changes in releases represent actual
changes in the physical quantities of a chemical sent off-site. Paper changes, on the other hand,
represent changes in reported quantities of chemicals released that are not actual changes in
physical releases but occur because of changes in measurement or data errors.
A sample of facilities drawn from the population of facilities in two-digit SIC codes
between 20 and 39 that reported releases in the TRI in both 1989 and 1990 was contacted to
clarify their responses. Based on results of these conversations, the target population reported a
15.4 percent decrease in TRI releases and transfers between 1989 and 1990. Of the 15 percent,
approximately half (6.9 percentage points) is attributed to source reduction. The rest is attributed
to measurement changes, changes in production, and other factors. Based on these results, it
appears likely that, overall, the demand for CWT services may be declining.
3.2.2 Other Evidence of Trends in Demand for CWT Services
Anecdotal evidence abounds that indicates a declining rate of waste generation for a
given level of production, especially for hazardous wastes. This decline may indicate declining
demand for CWT services. Numerous case studies have been performed documenting pollution
prevention activities and the resulting decreases in quantities of waste being generated. For
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example, Motorola, in conjunction with two U.S. Department of Energy laboratories, developed
a no-clean soldering process for circuit board production that eliminates all solvent cleaning,
eliminates the use of chlorofluorocarbons (CFCs), speeds up production, decreases energy use,
reduces production costs, and produces reliable hardware.2 Additionally, in a recent assessment
of pollution prevention in the chemicals industry for INFORM, Dorfman, Muir, and Miller cite
dozens of examples of companies making changes to production processes, inputs, or products to
reduce their waste generation. DuPont, for example, reduced solvent waste at their Deepwater,
New Jersey, Chambers Works plant by approximately 40 million pounds per year. Most of their
pollution prevention activities involve in-process recycling. The company estimates that these
activities save DuPont $3.75 million each year. Dow Chemical's Pittsburgh, California plant
modified their inputs and production processes and reduced their waste generation by
approximately 12 million pounds per year.3
A recent article in the Wall Street Journal stated that, contrary to concerns in the late
1980s, hazardous waste disposal capacity seems abundant. "Existing dumps have about 50 years
of capacity left... Licensed hazardous waste incinerators ran at 74 percent of capacity in 1990 ...
Hazardous waste disposal capacity went from a feared shortage to an actual glut in part because
companies ... facing rising disposal costs and potential cleanup liability, overhauled production
methods to reduce waste volume."4 A recently published article in World Wastes5 describes
deteriorating market conditions in the market for hazardous waste landfill disposal. While some
of the factors involved apply specifically to landfills, others such as pollution prevention would
affect the market for CWT services as well.
For all of the reasons cited above, it is probable that the pattern and total volume of CWT
services demanded in 1989 (the base year for the CWT analysis) are very different from those
reported in the GENSUR database or TRI. No data sources reflect CWT demand in 1989 and
1990; the data used in this analysis, although out of date, are the best available.
A recent industry outlook study6 (the Lorenz study) cited by the U.S. Department of
Commerce in U.S. Industrial Outlook 19941 describes hazardous waste management as a
maturing industry. The recession of the early 1990s, coupled with pollution prevention, has
resulted in fierce competition between companies with considerable consolidation through
acquisition. These consultants expect the following trends to continue:
• from pollution control to pollution prevention,
• from physical waste management practices to chemical ones, and
• from undifferentiated waste management techniques to waste-specific technologies
targeting specific wastestreams.
3-12
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The Lorenz study notes that the trend toward pollution prevention is expected to reduce the
demand for CWT services, other things being equal, while the trend toward specialization and
sophistication may favor CWT providers. These consultants expect the demand to be "more
sensitive to public passions, regulation, and economic swings." The study projects that industrial
spending for off-site services (including CWT facility) will grow by less than 2.5 percent from
1991 through 1995.
3.3 SUPPLY OF CWT SERVICES
CWT services are defined as waste treatment services performed at waste treatment
facilities that accept waste from off-site for treatment. The industry has been divided into three
subcategories—metals, oils, and organics—based on the types of waste treated or recovered.
Thus, the Metals Subcategory includes facilities offering metals treatment or metals recovery,
and the Oils Subcategory includes facilities offering oils treatment or oils recovery. The
Organics Subcategory includes facilities offering organics treatment or recovery. Table 3-4
shows the numbers of facilities in each industry Subcategory offering each type of waste
treatment or recovery service. Many CWT facilities offer more than one of the above services
and thus fall under more than one industry Subcategory.
TABLE 3-4. CWT FACILITIES BY SUBCATEGORY AND CWT SERVICE3
Subcategory
Metals
Total in Metals Subcategory
Oils
Total in Oils Subcategory
Organics
CWT Service
Recovery
Treatment
Recovery
Treatment
Treatment
Number of Facilities
9
52
56
29
15
32
22
aBecause many CWT facilities fall under more than one subcategory, the numbers in this table do not add to the
total number, 85 facilities, in the CWT industry. Similarly, because most facilities performing metals or oils
recovery also perform treatment, the total number of facilities in those categories does not equal the sum of
facilities performing recovery and treatment.
Source: U.S. EPA. Summary Information for the Centralized Waste Treatment Industry. Computer file.
December 1, 1993.
3-13
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Facilities performing wastewater treatment of wastewater received from off-site will be
affected by this regulation; they will probably have to install or upgrade treatment operations. In
addition, metals and oils recovery processes generate wastewater that is affected by the effluent
limitations guidelines and standards, as do various maintenance activities involving waste
received from off-site. Figure 3-1 depicts the relationships between affected CWT processes.
CWT facilities differ widely from one another in terms of their size, the types of waste
management services they offer, and their profitability. They differ in terms of their ownership
type and the financial health of the companies owning them. This section profiles the suppliers
of centralized waste management services.
3.4 DESCRIPTION OF SUPPLIERS
CWT facilities accept waste from off-site for treatment (i.e., they treat waste that was
generated at other facilities). The generating facility may or may not be owned by the same
company as the CWT facility. Suppliers are characterized by commercial status and types of
services performed, SIC code, location, size, products produced, and RCRA permit status.
3.4.1 Commercial Status
CWT facilities have a variety of relationships with the facilities generating the waste they
treat. In terms of these relationships, CWT facilities fall into three main categories:
• commercial: facilities that accept waste only from off-site generators not under the
same ownership as their facility
• non-commercial: facilities that accept waste only from off-site generators under the
same ownership as their facility
• mixed commercial and non-commercial: facilities that treat waste generated by other
facilities under the same ownership as their facility and also accept waste from off-site
generators not owned by the same company
Information about commercial status is available from several parts of the 1991 Waste
Treatment Industry Questionnaire. (For a copy of the economics part of the questionnaire,
including sections M, N, and O, see Appendix A.) In Question A35 in the technical section of
the questionnaire, facilities were asked about their overall commercial status. In Section N in the
economics section of the questionnaire, facilities were asked to list their commercial waste
treatment revenues and costs separately from their non-commercial: commercial revenues in
Questions N27 through N29 and non-commercial revenues in Questions N30 through N32.
Purely non-commercial facilities reported their costs in Questions N30 through N32, while
3-14
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3-15
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commercial and mixed facilities reported their costs in Questions N27 through N29. Thus, the
part of the questionnaire where the facility reports its costs and revenues indicates its commercial
status. Finally, in Section O, facilities were asked in Question O4 to report the quantities of
aqueous liquid waste, sludge, and wastewater they treat that is received from off-site facilities not
under the same ownership, that is received from off-site facilities under the same ownership, and
that is generated on-site.
Information from Sections N and O forms the primary basis for determining a facility's
commercial status. When no data were available, or when the data in Sections N and O
conflicted, information from Question A35 was used. Table 3-5 provides the commercial status
of the 85 CWT facilities. The characterization of facilities' commercial status in this report
refers only to the operations subject to the effluent limitations guidelines and standards.
Facilities classified in this analysis as purely commercial may conduct some unaffected
operations on a non-commercial basis. Similarly, facilities classified as purely non-commercial
in this analysis may conduct some unaffected operations on a commercial basis.
TABLE 3-5. COMMERCIAL STATUS OF CWT FACILITIES
Commercial Status
Number of Facilities
Commercial
Non-commercial
70
15
Source: U.S. EPA. 1991 Waste Treatment Industry Questionnaire.
Sixteen facilities indicated in their questionnaire responses that they offer waste
management services on both a commercial and a non-commercial basis. For purposes of this
report, one of the mixed facilities has been categorized as non-commercial, because the vast
majority of its operations are non-commercial. The other 15 facilities are included in the
commercial category.
Commercial CWT facilities are specialists in waste treatment; some may have other
activities. They offer one or more waste treatment services on a commercial basis and accept
waste from customers that are not part of the same company. They compete with other
commercial CWT facilities offering the same services. Based on data in the technical and
economic section of the questionnaire, 70 CWT facilities are commercial.
3-16
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Of the 85 facilities in the CWT industry, 14 of the 15 non-commercial facilities accept
waste only from other facilities owned by the same company. Non-commercial waste treatment
facilities are typically located at manufacturing sites and manage waste generated on-site as well
as waste generated by manufacturing operations at other sites owned by the same company.
Because of the potentially large liabilities associated with hazardous waste, companies
sometimes choose to manage their waste internally rather than employ commercial waste
management services. To take advantage of economies of scale in waste management
operations, they may choose to centralize their waste management operations. For such
facilities, managing waste generated by off-site facilities under the same ownership is frequently
regarded as a "cost of doing business." Thus, non-commercial CWT facilities are generally cost
centers for the companies owning them. They perform a service that acts as an input to the
primary production activities of the owner companies. Like other centralized divisions within
companies, such as the legal or accounting divisions, the CWT division performs a service to the
rest of the company. The facilities may receive revenues directly for the treatment services
(usually at a lower price than would be charged by a commercial treater), or they may be
reimbursed for expenses.
One additional facility is included in the non-commercial category: Pearl Harbor Naval
Base. The majority of the waste they manage is generated on the base; they offer some
commercial treatment as a service to their community but do not operate on a for-profit basis.
Therefore, they are included in the non-commercial category for a total of 15 facilities.
For purposes of the EIA, it was assumed that non-commercial CWT facilities make no
changes in their CWT operations and pass all the costs of complying with the regulation through
to their parent company. Impacts on purely non-commercial facilities were thus analyzed at the
parent company level. This approach reflects a simplifying assumption that all non-commercial
facilities follow the pattern described above. Using this assumption estimates the maximum
impact of the guidelines and standards on the owners of non-commercial facilities.
Thus, 70 of the 85 CWT facilities are classified as commercial and are therefore included
in the market analysis. The rest are non-commercial, and the types and quantities of CWT
services that they provide to their corporate parents are assumed to be unaffected by price and
quantity changes in the commercial markets for CWT services.
3-17
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3.4.2 Industry Classification by SIC Code
In the questionnaire, facilities were asked to report the SIC code that best represents the
facility's main operation. Table 3-6 shows the SIC codes reported by respondents. Appendix C
provides a list of four-digit SIC codes included with the questionnaire forms that were sent to the
facilities. The responses give one indication of the relative importance of CWT operations at the
facility. No SIC code properly describes CWT services. Facilities listing 4953, Refuse Systems,
as their SIC code are indicating that they are primarily waste treaters. Of the 85 CWT facilities,
60 reported 4953 as the SIC code that best described facility operations. SIC code 4953 is
Refuse Systems, which is primarily for municipal waste disposal services.
Facilities listing other SIC codes are indicating that they are primarily manufacturing
facilities that also do some waste management. Three facilities reported 2869, Organic
Chemicals not elsewhere classified, and four additional facilities reported other SIC codes in the
2800s, indicating that they are chemicals manufacturers. Four facilities reported SICs in the
3300s, indicating that they are primary metals manufacturing facilities.
Therefore, a majority of the facilities expected to be affected by the effluent limitations
guidelines and standards are primarily waste management facilities. The rest, although they have
CWT services on-site, are primarily manufacturing or service facilities.
The questionnaire also asked facilities if they perform manufacturing operations at the
CWT facility. The response to this question gives another indication of the relative importance
of CWT services at the facility. Of the 85 CWT facilities in the industry, 25 reported having
manufacturing operations on-site and 60 reported that they do not. Of the 60 facilities
reporting 4953 as their SIC code, 55 of them reported that they do not have manufacturing on-
site. This provides additional evidence that facilities reporting 4953 as their SIC code tend to
be specialized in CWT services, while facilities reporting other SIC codes tend to have
manufacturing on-site, in addition to CWT activities.
3.4.3 Location of CWT Facilities
The 85 CWT facilities are located in 29 states. The states with the highest number of
waste management facilities are California, with nine, and Michigan, Ohio, Texas, and
Washington with seven each. Table 3-7 shows the number of facilities located in each state.
Because not all CWT facilities offer the same set of services, facilities located near one another
may not be in the same markets. Likewise, a CWT facility may compete with facilities located a
longer distance away if the services offered are similar.
3-18
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TABLE 3-6. SIC CODES DESCRIBING CWT FACILITIES' PRIMARY
OPERATIONS
SIC Code Reported
2819
2821
2834
2869
2879
2911
3312
3321
3341
3356
3483
3499
3523
3633
3679
3724
3761
4226
4953
5090
5170
5171
9661
9711
Total
Number of Facilities
1
1
1
3
1
1
1
1
1
1
1
1
1
1
1
1
1
1
60
1
1
1
1
1
85
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TABLE 3-7. NUMBER OF FACILITIES PERFORMING VARIOUS CWT SERVICES
State
Alabama
California
Connecticut
Georgia
Hawaii
Iowa
Illinois
Indiana
Kentucky
Louisiana
Maryland
Michigan
Minnesota
North Carolina
Nebraska
Nevada
New Jersey
New York
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
Tennessee
Texas
Virginia
Washington
West Virginia
Total
Number of Facilities
1
9
6
2
1
2
5
2
1
1
1
7
1
1
1
1
4
3
7
2
1
5
1
1
3
7
1
7
1
85
3-20
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3.4.4 Facility Size
Facility size may be defined in terms of total quantity of waste treated, total revenues and
costs, or number of employees. We examined facility size using all these criteria. First, we
considered the total quantity of wastewater and sludge discharged. CWT facilities may:
• discharge wastewater, treated or untreated, directly to surface water (direct
dischargers);
• discharge wastewater, treated or untreated, indirectly to the sewer system, thence to a
POTW (indirect dischargers); or
• not discharge their wastewater at all (zero dischargers).
Zero discharge facilities may dispose of their wastewater by pumping it down underground
injection wells, evaporating it, applying it to land, selling it or recycling it, or sending it off-site
to another CWT facility for treatment. Table 3-8 shows the quantities of wastewater treated by
facility size category and discharge category.
TABLE 3-8. FACILITY SIZE CATEGORIES BASED ON QUANTITY OF
WASTEWATER TREATED, BY DISCHARGE CATEGORY
Quantity of Wastewater Treated
Direct Dischargers
1 gallon to 30 million gallons
30 million to 100 million gallons
100 million to 1 billion gallons
Over 1 billion gallons
Total
Indirect Dischargers
1 gallon to 5 million gallons
5 million to 10 million gallons
10 million to 100 million gallons
Over 100 million gallons
Total
Zero Dischargers
1 gallon to 5 million gallons
5 million to 10 million gallons
10 million to 100 million gallons
Over 100 million gallons
Total
Number of Facilities
5
4
4
3
16
19
12
22
3
56
17
0
6
0
23
Percentage
31.2
25.0
25.0
18.8
100.0
33.9
21.4
39.3
5.4
100.0
73.9
0.0
26.1
0.0
100.0
Note: Discharge categories do not sum to 85 facilities because six indirect dischargers and four direct dischargers
also dispose of some of their wastewater in a zero discharge manner.
Source: U.S. EPA. Summary Information for the Centralized Waste Treatment Industry. Computer file.
December 1, 1993. ,
3-21
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Facility size may also be defined in terms of employment. The Agency is interested in
facility-level employment because, if production falls at a facility as a result of a regulation,
some share of the people employed there may become unemployed. This reduction in
employment may be magnified throughout the community as facilities that produce goods and
services previously demanded by the now unemployed residents experience decreased demand
for their goods and services. Table 3-9 shows the number of CWT facilities with various
numbers of employees in their CWT operations. The numbers shown in Table 3-9 represent full-
time equivalent employees, computed by summing the number of full- and part-time hours
worked in CWT operations and dividing by 2,000. Employment in CWT operations ranged from
1 employee to 218 employees in 1989. Fifty-two percent of facilities had fewer than 20
employees in CWT operations in 1989.
TABLE 3-9. SIZE DISTRIBUTION OF CWT FACILITIES BY NUMBER OF CWT
EMPLOYEES3
Total Number of Employees
Ito9
10 to 19
20 to 29
30 to 49
50 to 100
More than 100
Total
Number of Facilities
24
15
14
8
10
4
75
Percentage
32.0
20.0
18.7
10.7
13.3
5.3
100.0
aNumber of facilities not providing data = 10.
3.4.5 Production of Waste-Based Products
In the process of treating waste, some CWT facilities produce marketable waste-based
products. Table 3-10 shows the number of facilities producing recovered metals and recovered
oils. Facilities in this category are simultaneously producing two products: a CWT waste
treatment service and a waste-derived product. Estimated revenues received from the sale of
recovered products are regarded as off-setting some of the cost of treatment. Thus, for the
recovery processes, the average variable cost of the process is defined as:
AVC = (TVC-Rr)/Q,
(3.1)
3-22
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where;
TVC = total variable cost of treatment,
Rr = estimated revenue from sale of recovered product r, and
Q = quantity treated.
TABLE 3-10. FACILITIES PRODUCING MARKETABLE WASTE-BASED
PRODUCTS
Product
Number of Facilities
Recovered Metals
Recovered Oils
9
27
Source: U.S. EPA. Summary Information for the Centralized Waste Treatment Industry. Computer file.
December 1, 1993.
3.4.6 Facilities Permitted under RCRA
Another difference between CWT facilities is whether they manage hazardous wastes in
operations that are permitted under RCRA. Of the 85 CWT facilities, 48 do not have a RCRA
Part B permit, and 37 have a RCRA Part B permit. This distinction is important in part because
of what it indicates about the types of wastes the facilities manage and the types of operations
they have on-site. All facilities treating hazardous waste are required to have a RCRA permit.
Facilities engaged in recycling and recovery operations, such as metals recovery and oils
recovery, may or may not have a RCRA permit. Recycling operations are exempt under RCRA;
however, if a facility stores waste prior to treating it, it is required to have a permit.
Of direct concern for estimating the impacts of the proposed rule is the fact that facilities
having RCRA permits are required to file a modification of their permits whenever their
operations change (e.g., when new waste management equipment is installed). Thus, in addition
to the costs of purchasing, installing, and operating additional capital equipment to comply with
the effluent limitations guidelines and standards, RCRA-permitted facilities will incur the
expense of modifying their RCRA permit to reflect these changes.
3.5 BASELINE FACILITY CONDITIONS
As described above, there are 85 facilities in the CWT industry and analyzed in this
report. Of these, 70 are commercial and 15 are non-commercial. In this analysis, the Agency
3-23
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accepts the definition of "facility" used by responding CWT facilities. In some cases, the facility
is defined as only the waste management part of a plant site. In other cases, the facility is
defined as encompassing the entire plant site, including non-CWT operations.
3.5.1 Baseline Quantities of Waste Treated
Table 3-11 shows baseline quantities of waste treated by commercial status and by type
of treatment in 1989. These data reflect facility questionnaire responses relating to the on-site
waste treatment processes:
• treatment of, or treatment and recovery of, metals from metal-bearing waste,
• treatment of, or treatment and recovery of, oils from oil-bearing waste, and
• treatment of, or treatment and recovery of, organics from organic-bearing waste.
The largest number of facilities and the largest quantities are related to metals treatment
and metals recovery. Six hundred eighty-nine million gallons of waste are accepted from off-site
into metals treatment, and 631 million gallons are accepted from off-site into metals recovery
operations. Fifty-six of 85 CWT facilities offer metals treatment or recovery.
Within the various commercial status categories, the highest mean quantities (average
quantities per facility) are accepted by commercial facilities. Commercial facilities accept the
largest mean quantities of waste managed in metals treatment (21.5 million gallons), organics
treatment (5.7 million gallons), and oils recovery (5.2 million gallons). Commercial facilities
also accept the largest mean quantities of off-site waste per facility into oils treatment (5.9
million gallons) and metals recovery (78.7 million gallons). This last quantity is highly
influenced by one facility that accepts 534 million gallons of off-site waste into metals recovery.
The next highest facility quantity is 50.5 million gallons. Obviously, that one very large quantity
skews the distribution.
Non-commercial facilities accept waste from off-site for a variety of reasons, including a
desire to use excess capacity and to know exactly how wastes generated by their company are
managed. The total quantities and mean quantities accepted from off-site are generally fairly
small for non-commercial facilities.
3.5.2 Baseline Costs of CWT Operations
Table 3-12 shows a.frequency distribution for the cost of treating waste in 1989 dollars.
The proposed effluent limitations guidelines and standards if adopted are expected to increase the
cost of treating waste at most CWT facilities; this cost increase, in turn, will increase the cost of
3-24
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TABLE 3-11. QUANTITY OF WASTE TREATED BY FACILITY CATEGORY
Baseline Quantities of Waste Accepted, by Commercial Status (103 gal)
Wastewater from Off-site
(Sums Hazardous and Non-hazardous)
Total Total
Total Metal- Total Organics-
Off-site Bearing Oily Bearing
Wastewater Wastewater Wastewater Wastewater
All CWT Facilities (85)
Total waste accepted 890,732 688,997 72,529 132,206
Mean quantity 12,202 11,113 3,817 5,085
Minimum quantity 1144
Maximum quantity 162,290 137,509 16,875 24,781
Number of facilities 73 62 19 26
Facilities Accepting Off-site Waste on a Commercial Basis (70)
Total waste accepted 777,099 614,164 52,844 102,033
Mean quantity 13,171 11,811 4,351 4,858
Minimum quantity 9 7 134
Maximum quantity 162,290 137,509 16,875 24,781
Number of facilities 59 52 14 21
Facilities Accepting Off-site Waste on a Non-commercial Basis (15)
Total waste accepted 113,633 74,833 11,617 30,183
Mean quantity 8,117 7,483 2,323 6,037
Minimum quantity 114 27,587
Maximum quantity 77,600 68,650 6,750 15,923
Number of facilities 14 10 5 5
Waste Accepted for
Recovery
Metals Oils
Recovery Recovery
630,518 150,225
70,058 5,180
91 21
533,598 20,804
9 28
629,793 142398
78,724 5274
91 21
533,598 20,804
8 27
725 7,827
725 3,913
725 627
725 7,200
1 2
Source: U.S. EPA. Summary Information for the Centralized Waste Treatment Industry. Computer file
OVERALL.WK3. December 1, 1993.
recovery processes because those processes generate wastewater and sludge that must also be
treated. These baseline waste treatment cost figures form a basis for comparing the costs of
compliance, described in Chapter 5. Baseline in-scope waste treatment costs range from $3,087
to $62.2 million per facility and total $227 million across all 85 CWT facilities. They average
$2.5 million per facility over all CWT facilities, $2.6 million per facility for commercial
3-25
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TABLE 3-12. BASELINE WASTE TREATMENT COST ($106)a
Waste Treatment Cost
(106$1989)
Less than 0.1
0.1 to 0.5
0.5 to 1
Ito2
2 to 10
over 10
Total
Number of Facilities
12
13
17
20
16
4
82
Percentage
14.6
15.9
20.7
24.4
19.5
4.9
100.0
aNumber of facilities not providing data = 3
facilities, and $5.5 million per facility for non-commercial facilities. (Waste treatment costs for
non-commercial facilities generally include costs of treating CWT and non-CWT wastes.)
As shown in Table 3-12, 12 of the 82 facilities reporting baseline waste treatment costs
have costs less than $100,000. Forty-two facilities have costs less than $1 million. Twenty
facilities report costs between $1 million and $2 million. Only four facilities report waste
treatment costs exceeding $10 million.
3.5.3 Baseline Total Costs for CWT Facilities
Total costs at CWT facilities reflect greater variability than treatment costs for the CWT
process because the total costs include costs for other non-CWT operations. Overall, costs total
over $8 billion and range from $32,600 to almost $2.0 billion. Thus, overall, CWT costs
represent only about 3 percent of total costs at affected CWT facilities. At commercial facilities,
total costs range from $32,600 to $62.4 million and sum to $587 million. At non-commercial
facilities, total costs range from $309 million to nearly $2.0 billion and sum to $5.7 billion.
Table 3-13 shows a frequency distribution of total costs at CWT facilities. Only 15
facilities report total costs less than $2 million, as opposed to 62 facilities reporting in-scope
waste treatment costs less than $2 million. Twenty-nine facilities report total costs exceeding
$10 million, including 13 with total costs exceeding $50 million. For many facilities, waste
treatment costs represent a fairly large share of total costs. For others, especially those with large
manufacturing operations on-site, the cost of CWT operations is only a very small share of their
total costs.
3-26
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TABLE 3-13. BASELINE TOTAL COSTS AT CWT FACILITIES3
Total Cost
(106 $1989)
Less than 2
2 to 5
5 to 10
10 to 50
over 50
Total
Number of Facilities
15
20
18
16
13
82
Percentage
18.3
24.4
22.0
19.5
15.8
100.0
aNumber of facilities not providing data = 3
3.5.4 Baseline Revenues for CWT Operations
Treatment revenues for commercial CWT facilities, as described above, were estimated
by multiplying market price times quantity so that the market model and facility model are
consistent with one another. If estimated treatment revenues exceeded reported treatment
revenues, the amount of the discrepancy was subtracted from "other revenues" so that the total
facility revenues remained as reported. Similarly, if estimated treatment revenues were less than
reported treatment revenues, the amount of the discrepancy was added to "other revenues."
Treatment revenues at non-commercial facilities, if any, were left as reported. Because CWT
operations at non-commercial facilities are generally treated as cost centers, some non-
commercial CWT facilities do not report any treatment revenues.
Treatment revenues at CWT facilities range from zero at some non-commercial facilities
to $187 million and sum to $473 million. For commercial facilities, treatment revenues range
from $6,300 to $187 million and sum to $361 million. At non-commercial facilities, reported
treatment revenues range from zero to $20.2 million and sum to $31.3 million. Table 3-14 shows
a frequency distribution for treatment revenues at CWT facilities.
3.5.5 Baseline Total Revenues for CWT Facilities
Like total costs, total revenues reflect all the operations at CWT facilities, including non-
CWT operations. Thus, they reflect greater variability than do CWT revenues. At baseline, total
revenues at CWT facilities range from zero at some non-commercial facilities to almost
$2.1 billion and sum to nearly $9.1 billion. At commercial facilities, total revenues are smaller
than at non-commercial facilities, because they reflect mainly CWT revenues while non-
3-27
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TABLE 3-14. BASELINE TREATMENT REVENUES AT CWT FACILITIES3
Treatment Revenues
(106 $1989)
Less than 0.1
0.1 to 1
Ito2
2 to 5
5 to 10
over 10
Total
Number of Facilities
10
23
16
14
11
8
82
Percentage
12.2
28.0
19.5
17.1
13.4
9.8
100.0
aNumber of facilities not providing data = 3
commercial facilities frequently have substantial revenues from non-CWT operations. At
commercial facilities, total revenues range from $46,000 to $187 million and sum to $755
million. At non-commercial facilities, total revenues range from zero to $2.0 billion and sum to
$6.5 billion. Table 3-15 shows a frequency distribution of baseline total revenues at CWT
facilities.
3.5.6 Baseline Profitability of CWT Facilities
The profit measure used in this analysis is Earnings Before Taxes, or EBT. This measure
equals operating profit minus interest and depreciation; that is, it is EBIT, Earnings Before
Interest and Taxes, minus interest. Profitability is not a relevant measure for non-commercial
facilities, which are assumed to be treated as cost centers by their companies. Cost centers are
not expected to make a profit, any more than a centralized accounting or legal department is
expected to make a profit. Thus, they are not included in the facility-level profitability
assessment presented here. The Agency assumes that impacts associated with compliance costs
for non-commercial facilities will be incurred at the company level. Thus, a company-level
financial analysis is performed for them, including an examination of the impacts on company
profits.
3-28
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TABLE 3-15. BASELINE TOTAL REVENUES AT CWT FACILITIES3
Total Revenues
(106 $1989)
Less than 1
Ito5
5 to 10
10 to 50
50 to 1,000
over 1,000
Total
Number of Facilities
11
23
15
19
10
4
82
Percentage
13.4
28.0
18.3
23.2
12.2
4.9
100.0
aNumber of facilities not providing data = 3
Baseline profits at commercial CWT facilities range from -$7.6 million to $310 million
and average $7.5 million. Table 3-15 shows a frequency distribution of CWT facility profits
measured by EBT.
As Table 3-16 shows, 22 of 70 facilities that offer at least a part of their CWT services on
a commercial basis were unprofitable in 1989. Economic theory predicts that facilities expected
to remain unprofitable will be closed by their owners. The Agency contacted many of the
unprofitable facilities to determine their status in 1993.8 Of 18 facilities contacted, all but two
were still in operation. Two additional facilities stated that they expected they might have to
close. Of the rest, nine had become profitable and five, though still unprofitable, expected to
continue in operation. Of the five unprofitable but still operating facilities, four were doing
better and expected eventually to become profitable. The remaining facility indicated that it was
staying open because of ongoing cleanup operations that would make closure costs extremely
high.
Several factors may explain why unprofitable CWT facilities remain open. CWT facility
owners may decide to allow unprofitable RCRA-permitted facilities to remain open because the
costs of closing them are so high. If the owner believes that the facility can be made profitable
eventually, keeping it open is the best choice. In addition, some of the smaller companies
owning CWT facilities have ownership structures that encourage the owners to receive
compensation in the form of salaries as opposed to profits. This makes the CWT facility's costs
appear higher and profits lower than they would under other ownership structures. As noted
3-29
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TABLE 3-16. BASELINE EBT AT COMMERCIAL CWT FACILITIES
Baseline EBT
(10« $1989)
Less than 0
0 to 0.5
0.5 to 2.0
2 to 10
over 10
Total
Number of Facilities
22
18
14
13
3
70
Percentage
31.4
25.7
20.0
18.6
4.3
100.0
above, 15 facilities that accept some waste from facilities owned by the same company are
classified as commercial. Five such facilities were unprofitable in 1989. One possible
explanation for these commercial facilities' remaining in operation when unprofitable may be
that under current accounting practices, costs of waste treatment are attributed to the CWT
facility, while revenues and profits associated with manufacturing the goods whose production
generates the non-commercial off-site waste at those facilities are attributed to the manufacturing
facilities. This makes CWT operations appear unprofitable or as hindering the company's
profitability. The fact that they remained in operation may indicate that the owner companies
recognize that these facilities are not as unprofitable to the company as current accounting
practices make them appear. Total cost accounting would more clearly assign costs to the
processes where they originate.
Facilities indicated that the late 1980s were a period of considerable upheaval in the
waste management business, as environmental laws evolved and pollution prevention became
more widespread. Facility owners had refrained from closing unprofitable facilities, instead
allowing them time to adjust to market changes and become profitable again. Therefore, the
Agency decided not to model the baseline as if the unprofitable facilities would close. Rather,
EPA retained all 85 of the CWT facilities identified in 1989. Even the facilities that have in fact
closed since the questionnaire were included in the analysis, under the assumption that capacity
at other similar facilities had increased to treat the waste that those facilities had treated.
3.6 BASELINE CONDITIONS FOR NON-COMMERCIAL FACILITIES
Fourteen facilities indicated that their CWT operations accepted off-site waste only from
facilities owned by the same company as their CWT facility. One additional facility that accepts
3-30
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some waste from off-site commercially is being considered non-commercial for this report,
because it is owned by the Federal government.
The companies owning non-commercial CWT facilities represent a variety of industrial
sectors, including aircraft, defense technologies, agricultural chemicals, Pharmaceuticals,
recreation, oil refining, construction, and fabricated metals. The non-commercial CWT facilities
include one doing metals recovery, nine doing metals treatment, four each doing oil treatment
and organics treatment, and two doing oils recovery. They treat 72 million gallons of metal-
bearing waste, 9 million gallons of oily waste, and 30 million gallons of organic waste. They
accept 725,000 gallons of waste into metals recovery and nearly 8 million gallons of waste into
oils recovery. Overall, their facilities range widely in the quantity of waste accepted from off-
site: some facilities accept less than 10,000 gallons per year, and one very large facility accounts
for 69 of the 72 million gallons of metal-bearing waste accepted from off-site. Many of the
facilities also treat waste generated on-site.
Non-commercial CWT operations typically are treated as a cost center for the company
and may or may not receive explicit revenues or cross-charges in return for their services. Most
frequently, the facilities reported that the facility performed its CWT services "at cost" so that
revenues from treatment exactly equaled cost. Other facilities reported receiving no revenue for
their services. Total cost accounting, which attributes to a production process all the costs
associated with that process, would trace the waste treatment costs back to the production
processes where the waste was generated. This approach would encourage pollution prevention
by providing accurate cost signals to managers. Most companies, however, have made very little
progress in adapting their accounting systems to this approach.
Because non-commercial CWT facilities are generally regarded by their owner
companies as providing a service to the rest of the company, the analysis does not assess impacts
at the facility level for them. Rather, the analysis assumes that added costs associated with
complying with the effluent limitations guidelines and standards will be borne by the company as
a whole. The impacts on non-commercial facilities are therefore assessed at the company level.
3.7 BASELINE MARKET CONDITIONS
Questionnaire data and information gathered in follow-up conversations with facilities
and during site visits at several facilities were used to characterize the markets for CWT services.
3.7.1 Defining Regional Markets
For modeling the impacts of the regulation on markets for CWT services, this study
divided the contiguous United States into six regional CWT markets. In their questionnaire
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responses, the facilities indicated that, in general, their customers are located within their own
state or in a few adjacent states. Of 70 commercial facilities, 58 indicate that their customers are
within their state and a few adjacent states. Even for the 12 facilities stating that their customers
are located nationwide, some of their customers may in fact be local. This pattern is consistent
with predictions of economic geography or "location theory," which state that heavy, bulky, or
fragile materials or materials otherwise difficult to transport will be traded in localized markets.9
Wastewater and concentrated oily or metal-bearing wastes are extremely heavy and bulky.
Generators therefore want to transport waste as short a distance as possible for treatment and are
likely to choose a local CWT facility rather than one located a long distance away.
As discussed previously, CWT facilities are widely distributed across the country; for
modeling purposes, the contiguous 48 states were divided into six regions:
• Northeast: CT, DE, MA, MD, ME, NH, NJ, NY, PA, RI, VT
• Southeast: AL, FL, GA, KY, MS, NC, SC, TN, VA, WV
• Upper Midwest: IA, IL, IN, MN, MI, NB, ND, OH, SD, WI
• Lower Midwest: AR, KS, LA, MS, OK, TX
• Northwest: WA, OR, ED, MT, WY
• Southwest: AZ, CA, CO, NM, NV, UT
The map in Figure 3-2, which outlines the regions, shows varying numbers of affected CWT
facilities within each region. Each of these facilities performs one or more CWT services.
This definition of regional markets is a simplification of actual markets. Obviously,
facilities located along the borders of the "regions" designated in this study may compete with
facilities in adjoining regions in addition to competing with facilities in their own regions. We
modeled the regions as if they were independent; however, we recognize that the presence of
other facilities offering the same CWT services in nearby regions does affect the structure of the
region's markets for CWT services.
In reality, there are exceptions to the regional pattern: highly specialized types of waste
treatment services such as precious metals recovery are offered by only a few facilities
nationwide. Markets for these services may be national. In general, however, markets for CWT
services are regional.
3-32
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(0
I
to
(0
IE
•a
o
I
Q
I
ra
"Hi
o
QC
CO
I
O)
il
3-33
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3.7.2 Defining Markets for Specific CWT Services
In the market model, facilities are identified as offering one or more of five broad
categories of CWT services:
• metals recovery,
• oils recovery,
• treatment of metal-bearing waste,
• treatment of oily waste, and
• treatment of organic waste.
The first two types of CWT services may result in the production of a salable product; they also
result in the generation of wastewater. Under the general category of wastewater treatment,
facilities may treat any or all of the following: metal-bearing wastewater, oily wastewater, or
organics-bearing wastewater. These three types of wastewater treatment require different
treatment processes and have different prices. Thus, these services are traded in separate
markets.
As noted above, within the broad types of treatment, there exists considerable variation
depending on the specific characteristics of the wastes being treated. Wastes with differing
characteristics may require more treatment chemicals, for example, or more steps in the
treatment process, although the basic overall type of treatment is the same. To reflect the
complexity of these markets, each overall type of treatment or recovery may be broken into as
many as three submarkets, based on the per-gallon cost of treatment. This is based on the
assumption that different per-gallon costs of treatment reflect the different treatments required by
differing waste characteristics. Thus, facilities with similar per-gallon treatment costs are
assumed to be treating similar wastes. The modeling approach assumes that each facility treats
waste of a single type within each broad treatment category with a uniform per-gallon cost of
treatment. This modeling approach is a simplification; in fact, different batches of wastes treated
at a single facility vary in type and therefore in cost of treatment. As modeled, each facility
offers at most only a single cost-level of each broad treatment category. Data did not permit
further detail in the delineation of the types of CWT services offered and their associated costs at
each facility.
As the markets are defined, the number of facilities competing in each market varies
considerably. Table 3-17 presents the number of facilities offering each type of CWT service by
region.
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TABLE 3-17. NUMBER OF FACILITIES OFFERING CWT SERVICE BY REGION
Market/Process
Number of Facilities
Northeast
High-Cost Metals Recovery
Low-Cost Metals Recovery
High-Cost Oils Recovery
Low-Cost Oils Recovery
High-Cost Metals Treatment
Low-Cost Metals Treatment
Oils Treatment
Organics Treatment
Northwest
High-Cost Oils Recovery
Low-Cost Oils Recovery
Low-Cost Metals Treatment
Oils Treatment
Organics Treatment
Southeast
Metals Recovery
High-Cost Oils Recovery
Med-Cost Oils Recovery
Low-Cost Oils Recovery
Metals Treatment
Oils Treatment
Organics Treatment
Southwest
High-Cost Metals Recovery
Low-Cost Metals Recovery
Oils Recovery
High-Cost Metals Treatment
19
1
1
3
2
2
12
2
7
6
1
3
5
2
2
8
1
1
3
1
3
3
3
10
1
2
1
5
(continued)
3-35
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TABLE 3-17. NUMBER OF FACILITIES OFFERING CWT SERVICE BY REGION
(CONTINUED)
Market/Process
Number of Facilities
Southwest (continued)
I .o\v-Cost Metals Treatment
Oils Treatment
Organics Treatment
Lower Midwest
\ ligh-Cost Metals Recovery
High-Cost Oils Recovery
High Cost Metals Treatment
Low Cost Metals Treatment
Oils Treatment
High-Cost Organics Treatment
Low-Cost Organics Treatment
Upper Midwest
High-Cost Metals Recovery
Low-Cost Oils Recovery
Higher-Cost Oils Recovery
Highest-Cost Oils Recovery
High-Cost Metals Treatment
Med-Cost Metals Treatment
Low-Cost Metals Treatment
Oils Treatment
Organics Treatment
10
4
3
1
9
1
1
2
6
1
1
5
21
2
5
5
2
1
2
12
5
4
3.7.3 Market Structure
Based on the data presented in Table 3-17, the markets for CWT services are not
perfectly competitive. Competitive markets are characterized by large numbers of suppliers,
none of which are able to exert substantial market power. CWT markets as this study defines
them have few participants. The participants in those markets will probably be able to exert
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considerable influence on the outcomes of market negotiations. That is, they have some degree
of monopoly power in those markets. Again, contacts with facilities during site visits and
follow-up phone calls to verify questionnaire information indicated that facilities are generally
aware of their competitors and make their business decisions after considering their competitors'
behavior and likely responses. This type of market behavior is consistent with oligopoly, a
market comprising a fairly small number of competitors in which the competitors are aware of
and consider their rivals' behavior in forming their decisions related to price and quantity. For
these reasons we modeled the regional markets for CWT services as oligopolistic. Chapter 5 and
Appendix E provide more detailed descriptions of the modeling methodology. In some markets
in some regions, only one facility offers the service, so these were treated as regional
monopolies.
3.7.4 Substitutes for CWT Services
The existence of substitutes for CWT services influences the responsiveness of the
demand for CWT services to changes in their price. Non-CWT facilities also produce goods and
services that may be substitutes for the goods and services produced by CWT facilities. For
example, waste-generating facilities may decide to construct treatment units on-site; thus on-site
waste treatment would be substituted for centralized waste treatment. Underground injection
wells, and other types of waste management that are not regulated under these effluent
limitations guidelines and standards, may be substituted for regulated types of centralized waste
treatment. In most of these cases, the non-CWT goods and services are not perfect substitutes for
the goods and services produced by CWT facilities. Nevertheless, when the cost of CWT-
produced commodities increases, some consumers of these goods and services may choose to
substitute the other goods and services, which are now relatively cheaper.
The increased cost of waste treatment may also induce some demanders of CWT services
to choose another type of substitution. They may modify their processes, essentially substituting
additional capital equipment, materials, and labor for waste treatment. In other words, some
generators may employ pollution prevention to reduce their demand for CWT services. This
type of substitution would result in smaller quantities of waste being generated per unit of the
primary product produced.
3.7.5 Baseline Market Prices and Quantities of CWT Services
Table 3-18 shows the baseline market prices and quantities of CWT services as defined
by our model. As described above, facilities offering CWT services within a region were
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TABLE 3-18. BASELINE MARKET PRICES AND QUANTITIES OF CWT SERVICES
Market/Process
Northeast
High-Cost Metals Recovery
Low-Cost Metals Recovery
High-Cost Oils Recovery
Low-Cost Oils Recovery
High-Cost Metals Treatment
Low-Cost Metals Treatment
Oils Treatment
Organics Treatment
Northwest
High-Cost Oils Recovery
Low-Cost Oils Recovery
Metals Treatment
Oils Treatment
Organics Treatment
Southeast
Metals Recovery
High-Cost Oils Recovery
Low-Cost Oils Recovery
Metals Treatment
Oils Treatment
Organics Treatment
Southwest
High-Cost Metals Recovery
Low-Cost Metals Recovery
Market Price
($1989/gallon)
$89.93
$3.03
$0.65
$0.16
$1.30
$0.30
$0.27
$0.37
$17.53
$0.24
$0.89
$0.15
$0.15
$6.11
$0.14
$0.05
$0.23
$0.23
$0.21
$2.70
$0.25
Market Quantity
(103 gallons)
14
61,698
9,771
14,615
1,477
226,573
18,254
53,625
500
13,451
17,443
190
627
2,442
7,058
330
79,106
11,580
15,059
605
7,279
(continued)
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TABLE 3-18. BASELINE MARKET PRICES AND QUANTITIES OF CWT SERVICES
(CONTINUED)
Market/Process
Southwest (continued)
Oils Recovery
High-Cost Metals Treatment
Low-Cost Metals Treatment
Oils Treatment
Organics Treatment
Lower Midwest
Metals Recovery
Oils Recovery
High Cost Metals Treatment
Low Cost Metals Treatment
5
Oils Treatment
High-Cost Organics Treatment
Low-Cost Organics Treatment
Upper Midwest
Metals Recovery
High-Cost Oils Recovery
Medium-Cost Oils Recovery
Low-Cost Oils Recovery
High-Cost Metals Treatment
Medium-Cost Metals Treatment
Low-Cost Metals Treatment
Oils Treatment
Organics Treatment
Market Price
($1989/gaUon)
$0.46
$1.23
$0.08
$0.57
$1.70
$0.87
$0.07
$1.09
$0.09
$0.14
$1.87
$0.16
$12.32
$0.83
$0.28
$0.11
$4.70
$0.68
$0.21
$0.15
$0.21
Market Quantity
(103 gallons)
5,705
2,887
43,026
22,467
837
773
8,074
1,605
118,248
2,275
124
13,124
94
674
35,006
47,213
2,749
2,509
131,585
7,638
674
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into markets according to the type of service offered and the cost of treatment. For each
maiket. a baseline price must be determined. In practice, some facilities price each batch treated
based on laboratory tests on the waste in the batch, but the model abstracts from this practice and
Assumes that all batches treated by a facility are similar and would have a single price. Prices for
OYT services vary between being just equal to the highest per-gallon cost experienced by
facilities in a market and being equal to approximately three times the highest per-gallon cost in
the market. Where the price falls in that range depends on the demand elasticity assumed for the
market and on information from the questionnaire. The selected prices were verified by
contacting several facilities to see if they were reasonable.10 The baseline market quantities are
the summed facility quantities as reported in the technical part of the questionnaire.
3.8 COMPANY FINANCIAL PROFILE
New effluent limitations guidelines and standards for CWT facilities will potentially
affect the companies that own the regulated facilities. The CWT facilities described in
Section 3.4 are the location for physical changes in treatment processes. They are the sites with
plant buildings and equipment where inputs (materials, energy, and labor) are combined to
produce outputs (waste treatment services, recovered metals, organics or oils, residuals).
Companies that own the CWT facilities are legal business entities that have the capacity to
conduct business transactions and make business decisions that affect the facility.
The population of potentially affected companies is described using three characteristics:
• company size expressed in annual receipts,
• legal form of ownership (sole proprietorship, partnership, corporation), and
• degree of vertical and/or horizontal integration.
Each characteristic influences the effect of any regulatory action on companies and the method
for conducting the company-level analysis.
Potentially affected companies include entities owning facilities that accept waste from
off-site for treatment in CWT processes and that generate wastewater in their waste treatment
process. These facilities are classified as indirect, direct, or zero dischargers. In the 1991 Waste
Treatment Industry Questionnaire, EPA requested three years of financial data regarding the
immediate corporate parents of each of the 85 facilities discussed in Section 3.4. Frequently,
however, the immediate owners of CWT facilities are in turn subsidiaries of larger companies
that generate much of the waste that they receive from off-site. The Agency has determined that
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the appropriate context for assessing the potential impact of the regulation is at the highest level
of corporate ownership.
Only 58 companies are at the ultimate level of corporate ownership; they own the 84
private-sector CWT facilities. The eighty-fifth facility discussed in Section 3.2 is a government-
owned facility administered by the U.S. Navy. The baseline financial profile presented in this
section is based on data collected for 57 of the 58 companies identified as owners of 82 of the 84
private-sector CWT facilities. Accurate facility-level economic data are not available for one
facility that has changed hands since the time of the questionnaire. The facility was purchased
by a company owning three other CWT facilities. The baseline profile of CWT activities
undertaken by this company includes operations performed at its other three CWT facilities but
excludes activities undertaken by the facility for which data are not available. Another
potentially affected company was excluded entirely from this analysis because the only CWT
facility that it owns did not respond to the financial section of the CWT questionnaire, and no
data on the company are publicly available. Discussion of the government-owned facility is also
omitted from this section.
3.8.1 Size Distribution
The first characteristic by which companies are described is company size expressed in
company sales revenues or company annual receipts. Company size is likely to be a factor in the
distribution of the regulatory action's financial impacts, and grouping the companies by size
facilitates the analysis of small business impacts. Furthermore, reporting the distribution of
impacts by size category helps ensure that sensitive, proprietary data are not revealed for an
individual company.
Potentially affected companies range in size from approximately $772,000 to over $47
billion in annual receipts. Table 3-19 shows the size distribution of potentially affected
companies by annual receipts.
Companies in the largest receipts category account for over 99 percent of total receipts
for potentially affected companies. Figure 3-3 shows the size distribution of potentially affected
companies in percentage terms. The 48 smallest companies account for less than 10 percent of
total annual receipts. Conversely, the nine largest potentially affected companies account for
more than 90 percent of total annual receipts.
Table 3-20 shows the average size of CWT facilities (measured as total annual receipts)
owned by companies in each size category, the average number of CWT facilities owned by
3-41
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TABLE 3-19. SIZE DISTRIBUTION OF POTENTIALLY AFFECTED COMPANIES
1989 Annual
Receipts Category
($106 1989)
<6
6-30
30 - 340
Over 340
Total
Number
of
Companies
13
14
9
21
57
Total Annual
Receipts
($106 1989)
37.0
198.6
1,209.3
177,076.7
178,521.6
Average Receipts
per Company
($106 1989)*
2.9
14.2
134.4
8,432.3
3,132.0
Computed by dividing total annual receipts by the number of companies.
Sources: U.S. EPA. 1991 Waste Treatment Industry Questionnaire.
Moody's Investor Service, Inc. Moody's Industrial Manual. 1992. New York, Moody's Investor
Service, Inc.
Company Annual Reports.
Business America Online. Omaha, NE, American Business Information. 1993-1994.
Figure 3-3. 1989 Size Distribution of Potentially Affected Companies
100% i
f 80% H
o
E
§ 60%
40% -
I 20%
Q.
B
•
0%
20%
40%
60%
80%
100%
Percentage of Companies
3-42
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TABLE 3-20. AVERAGE SIZE OF CWT FACILITIES BY COMPANY SIZE
CATEGORY
Company Size in
1989 Annual
Receipts
($106 1989)
Average Size Average
of CWT Facilities Number of CWT
in 1989 Facilities Owned
($1061989) in 1989
Average CWT Facility
Receipts as Percentage of
Average Company
Receipts in 1989 (%)
<6
6-30
30 - 340
Over 340
2.6
10.5
22.7
255.6
1.00
1.21
2.00
1.62
91.58%
74.32%
16.90%
3.03%
Sources: U.S. EPA. 1991 Waste Treatment Industry Questionnaire.
Moody's Investor Service, Inc. Moody's Industrial Manual. 1992. New York, Moody's Investor
Service, Inc.
Company Annual Reports.
Business America Online. Omaha, NE, American Business Information. 1993-1994.
companies within each size category, and the ratio of average CWT facility sales to average
company sales for each size category. Larger companies generally own more and larger CWT
facilities than smaller companies, although companies in the third size category, with annual
receipts between $30 million and $340 million, own two CWT facilities on average, as opposed
to 1.62, the average number of CWT facilities owned by companies grossing more than $340
million annually. CWT facility receipts as a share of total company receipts decrease
geometrically from an average of over 91 percent for the smallest companies to just under 3
percent collectively for companies grossing more than $340 million annually.
3.8.2 Legal Form of Ownership
The legal form of ownership affects the cost of capital, availability of capital, and
effective tax rate faced by the company and is one of three basic types: sole proprietorship,
partnership, and corporation. Corporations may be further subdivided between those that have
publicly-traded stock and those that do not. The latter may include Subchapter S corporations,
closely-held corporations, and wholly-owned subsidiaries. (Corporations that meet certain size
restrictions contained in the Internal Revenue Code may be set up as Subchapter S corporations.
S corporations are taxed as proprietorships or partnerships but receive many of the benefits of the
corporate form of organization [e.g., limited liability]). Many of the CWT facilities potentially
affected by the proposed effluent guidelines and standards are owned by companies that are
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wholly-owned subsidiaries of other larger companies. To best assess the relative impact of the
proposed regulation on companies that own CWT facilities, the Agency decided to ignore
intermediate levels of ownership within potentially affected corporate families and to focus
instead on the economic impacts on the ultimate corporate parent. For this reason, if a company
that owns a CWT facility is a wholly-owned subsidiary of a publicly-traded company, its legal
form of ownership is considered in this analysis to be that of a publicly-traded company, even
though common stock for its immediate corporate parent is not available to the public.
Figure 3-4 shows the distribution of ultimate parent companies by legal form of ownership, and
Table 3-21 shows how this distribution varies by company size category.
Approximately 21 percent of the potentially affected companies in this analysis are
privately-owned companies. This ownership category includes both sole proprietorships and
partnerships. A sole proprietorship consists of one individual who contributes all of the equity
capital, takes all of the risks, makes the decisions, and takes the profits or absorbs the losses.
Legally the individual and the proprietorship are the same entity. A partnership is an association
of two or more persons to operate a business.
Partnerships and proprietorships are similar in several ways. First, all tax liabilities are
passed through to the individual who owns the company and are reflected on individual tax
returns. Second, the individual owner is fully liable for all debts and obligations of the
company.1l When a lender lends money to a proprietorship or partnership, the owner's signature
obligates him or her personally and all of his/her assets. A lender's assessment of the likelihood
of repayment based on the company and personal financial status of the borrower is considered
legal and sound lending practice because they are legally one-and-the-same. The inseparability
of the company and the individual complicates the assessment of credit availability and terms.
Credit might be available to a financially distressed "company" if the financial status of the
individual is strong enough to compensate. Alternatively, credit might be unavailable to a
financially healthy "company" if the financial status of the individual is sufficiently weak.
Corporations comprise approximately 79 percent of the potentially affected companies in
this analysis, and slightly more than half of the corporations have publicly-traded stock. Unlike a
partnership or proprietorship, a corporation is a legal entity separate and apart from its owners or
founders. Owners receive financial gains from profits and bear financial losses in proportion to
their investment in the corporation. Analysis of credit availability to a corporation must
recognize at least two features of corporations. First, they have the legal ability to raise needed
3-44
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Figure 3-4. Share of Companies by Form of Ownership
Private Ownership
Publicly Traded
42%
Close Corporation
26%
Subchapter S
Corporation
11%
TABLE 3-21. DISTRIBUTION OF OWNERSHIP TYPE BY COMPANY SIZE
CATEGORY
Company Size in 1989 Annual Receipts
($106)
Ownership Type
Publicly-Traded
Proprietorship and Partnership
Closely-Held Corporation
Subchapter S Corporation
<6
0
7
3
3
6-30
2
4
6
2
30-340
3
1
5
0
Over 340
19
0
1
1
Total
24
12
15
6
Sources: U.S. EPA. 1991 Waste Treatment Industry Questionnaire.
Dun and Bradstreet Who Owns Whom? New York, Dun and Bradstreet 1990.
Dun & Bradstreet. "America's Corporate Families and International Affiliates." 1993.
funds by issuing new stock. Second, institutional lenders (e.g., banks) to corporations generally
assess credit worthiness solely on the basis of the financial health of the corporation—not its
owners.
Another difference between corporations and partnerships or proprietorships is the
effective tax rate faced by each. Corporations (except Subchapter S corporations) are subject to a
3-45
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tax rate schedule that is different from the schedule faced by individuals. Furthermore, corporate
profits distributed to owners in the form of dividends are paid out of after-tax profits. Owners
must then pay personal income taxes on the dividends. Consequently, corporate profits
distributed as dividends are taxed twice. For this reason, owners of closely held corporations that
are involved in the daily operations of the company may choose to receive higher salaries in lieu
of receiving dividends. The incentive to distribute profits as salaries rather than dividends may
result in lower reported net income for the company.
Companies evaluated for this analysis include those owned directly by the
shareholders/owners and those owned by a "parent" company. As seen in Figure 3-5, the chain
of ownership may be as simple as one facility owned by one company or as complex as multiple
facilities owned by subsidiary companies. Where data are available, this analysis focuses on the
financial well-being of the ultimate corporate parents of potentially affected CWT facilities. It is
the view of the Agency that both the financial health of CWT facility owners at baseline and the
relative ability of individual companies to incur the costs of complying with the proposed
guidelines are best assessed and compared at the highest level of ownership.
3.83 Vertical and/or Horizontal Integration
Vertical integration is a potentially important dimension in company-level impact
analysis because the regulation could affect a vertically integrated company on several levels.
For example, the regulation may affect companies for whom waste treatment is not the
company's primary focus but rather is an input into the company's other production processes
such as chemical manufacturing. A regulation that increases the cost of waste treatment for
vertically integrated companies will also affect the cost of producing the primary products.
Table 3-22 shows the range of industries, by SIC code, represented by companies that own CWT
facilities. There is no "typical" corporate family structure of CWT facility owners. Fifteen of
the 57 potentially affected companies are single-facility companies with no other business than
the waste management activities offered at the regulated CWT facility. An additional 30
potentially affected companies only own a single CWT facility but have at least one other line of
business. Another 12 affected companies own two to four CWT facilities and in some cases
have other lines of business than waste management.
These larger companies with multiple CWT facilities may well be the wave of the future,
at least for companies involved in commercial CWT operations. Growth has been very slow in
demand for waste treatment services since 1989, which has caused increased competition among
companies involved in waste treatment. Many of the smaller companies offering commercial
3-46
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Figure 3-5. Chain of Ownership
Parent Company
Parent Company
i
Other Companies
or Legal Entities
1
Subsidiary
Company
(Direct Owner)
Parent Company
(Direct Owner)
Subsidiary
Company
(Direct Owner)
Facility
I
Facility
Facility
B
waste management services may be swept up in the general down-sizing and corporate
consolidation that beset the waste management industry during the 1980s. Well-managed
companies with better than average liquidity and strong balance sheets have been eager to
purchase companies with valuable control equipment or desirable market positions.12 The
Agency expects this trend to continue, because many of the market conditions that gave rise to it
are projected to continue.
Horizontal integration is also a potentially important dimension in company-level impact
analysis for either or both of two reasons:
• First, a diversified company could be indirectly as well as directly affected by the
regulation. For example, if a company is diversified in manufacturing pollution control
equipment, the regulation could indirectly and favorably affect it.
• Second, a diversified company may own facilities in unaffected industries. This type of
diversification would help to mitigate the financial impacts of the regulation.
3-47
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TABLE 3-22. PRIMARY SIC CODES FOR COMPANIES THAT OWN CWT
FACILITIES
SIC Code Description of the Industry
2819 Industrial Inorganic Chemicals, NEC
2834 Pharmaceutical Preparations
2869 Industrial Organic Chemicals, NEC
2879 Pesticides and Agricultural Chemicals, NEC
2911 Petroleum Refining
2992 Lubricating Oils and Greases
3312 Steel Works, Blast Furnaces (Including Coke Ovens), and Rolling Mills
3339 Primary Nonferrous Metals
3351 Copper Rolling and Drawing
3523 Farm Machinery and Equipment
3679 Electronic Components, NEC
3724 Aircraft Engines and Engine Parts
4011 Railroads, Line-Haul Operating
4226 Special Warehousing and Storage, NEC
4911 Electric Services
4953 Refuse Systems
5093 Scrap and Waste Materials
5169 Chemicals and Allied Products, NEC
5171 Petroleum Bulk Stations and Terminals
8999 Services, NEC
Sources: U.S. EPA. 1991 Waste Treatment Industry Questionnaire.
Standard Industrial Classification Manual, 1987.
3-48
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Figure 3-6 shows the share of total receipts from business activities other than waste treatment
for companies in each receipt size category. Companies in the two largest size categories receive
a vast majority of their revenues from activities other than waste treatment. Conversely,
companies in the two smallest size categories receive the majority of their revenues from waste
treatment. Of the 57 potentially affected companies included in the company-level analysis, only
13 offer their services on a non-commercial basis. All but two of these companies are in the
largest size category. There is also one company owning a non-commercial CWT facility in both
the second and the third largest size categories. Of the 13 companies owning a non-commercial
CWT facility, 11 own only one CWT facility. The CWT facility owned by each of these
companies serves the purpose of treating wastes generated at other facilities owned by the same
corporate parent in the process of manufacturing the goods and services that are their primary
lines of business. The other two companies owning non-commercially operating facilities each
own one commercial CWT facility and one non-commercial CWT facility. These companies use
one of their CWT facilities to treat the wastes generated at other facilities that they own, but they
also own a CWT facility that operates as a profit center for the company by accepting wastes for
treatment on a commercial basis from off-site waste generators that have no affiliation with the
parent company.
Figure 3-6. Share of Total Receipts Represented by Nonwaste Treatment
100% T
80% - -
§, 60% - -
o>
a 40% - -
20% - -
0%
8.42%
25.68%
83.10%
96.97%
* <•
".«-s "x
<6 6-30 30-340
1989 Annual Receipts ($106)
Note: Computed based on direct owner company data.
Source: EPA 1991 Waste Treatment Industry Questionnaire Data.
>340
3-49
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3.9 REFERENCES
1. Riley, G.J., J.L. Warren, and R.D. Baker. Assessment of Changes in Reported TRI
Releases and Transfers Between 1989 and 1990. Research Triangle Park, NC, Research
Triangle Institute. May 1993. 38 pp.
2. Motorola. No-Clean Solder Process. Distributed at the U.S. Department of Energy
Conference on Industrial Waste Reduction Program Review Conference, Santa Fe, NM,
May 17-20,1993.
3. Dorfman, M.H., R. Muir, and C. G. Miller. Environmental Dividends: Cutting More
Chemical Wastes. New York, INFORM, Inc. 1992. 263 pp.
4. Bailey, J. (1993, April 30). "Environment: Managing Waste." The Wall Street Journal.
5. Hanke, Jon. "Hazwaste Landfill Operators Face Difficult Times." World Wastes.
September 1994,pp.lO-ll.
6. Lorenz, William T. and Co., 1993 Update—Hazardous Waste Control Industry Outlook.
1993.
7. U.S. Department of Commerce. U.S. Industrial Outlook 1994. January, 1994.
8. RTI. Confidential memorandum from Sandra Curtis-Powell to U.S. Environmental
Protection Agency summarizing telephone communications. February 3, 1993.
9. Hoover, Edgar M. 1975. An Introduction to Regional Economics, 2d. Ed. New York,
Alfred A Knopf, Inc. pp. 49-51.
10. Confidential written communications with selected CWT facilities. October 1993.
11. Behrens, Robert H. 1985. Commercial Loan Officer's Handbook. Boston, Banker's
Publishing company.
12. Lorenz, William T. and Co., 1993 Update—Hazardous Waste Control Industry Outlook.
1993.
3-50
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CHAPTER 4
DESCRIPTIONS AND COSTS OF THE CWT CONTROL OPTIONS
EPA is proposing effluent limitations guidelines and standards to limit the discharge of
pollutants into navigable waters of the United States and into POTWs by new and existing
facilities that receive industrial waste from off-site for treatment or recovery. This chapter
describes the control options examined by the Agency for each subcategory of the CWT industry
(metals treatment or recovery, oils treatment or recovery, and organics treatment or recovery)
and describes the two combined regulatory options the Agency is proposing. In estimating the
costs of complying with the proposed control options, the Agency made the conservative
assumption that each facility treating wastes in a subcategory would require the full suite of the
technology on which the proposed limits are based, unless they already had these in place. In
fact, the facilities may select other means of compliance that prove to be less costly for them.
The Agency is proposing effluent limitations guidelines and standards for direct
dischargers based on the following technologies: BPT, BCT, and BAT. NSPS are based on
"best demonstrated technology." The Agency is also establishing pretreatment standards for new
(PSNS) and existing (PSES) indirect dischargers.
4.1 CONTROL OPTIONS CONSIDERED FOR EACH SUBCATEGORY OF THE
CWT INDUSTRY
The Agency developed several control options for each subcategory of the CWT industry.
These control options were evaluated, and recommended controls for BPT limitations were
selected. The proposed BAT controls are based on the technologies proposed for BPT. The
Agency is proposing to set NSPS equivalent to the proposed BPT effluent limitations. The
Agency is proposing to set PSES equivalent to the proposed BAT effluent limitations. The
proposed PSNS are set equivalent to proposed NSPS effluent limitations. See the technical
development document1 for more information. This section describes the control options
examined for each subcategory.
4.1.1 Subcategory A: Metals Subcategory
The Agency examined the following three control options to reduce the discharge of
pollutants from the Metals Subcategory of the CWT industry:
• Option 1: Chemical Precipitation, Solid-Liquid Separation, and Sludge Dewatering.
Under Option 1, BPT limitations would be based upon chemical precipitation with a
lime/caustic solution followed by some form of separation and sludge dewatering to
control the discharge of pollutants in wastewater. The data reviewed for this option
showed that settling/clarification followed by pressure filtration of sludge yields
4-1
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lime/caustic solution followed by some form of separation and sludge dewatering to
control the discharge of pollutants in wastewater. The data reviewed for this option
showed that settling/clarification followed by pressure filtration of sludge yields
removals equivalent to pressure filtration. 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 monitoring of batch processes. For
metals streams which contain concentrated cyanide complexes, BPT limitations under
Option 1 are based on alkaline chlorination at specific operating conditions prior to
metals treatment. Without treatment of cyanide streams prior to metals treatment,
metals removals are significantly reduced.
• Option 2: Selective Metals Precipitation, Pressure Filtration, Secondary Precipitation,
and Solid-Liquid Separation. The second option evaluated for BPT for CWT facilities
would be based on the use of numerous treatment tanks and personnel to handle
incoming waste streams, and use of greater quantities of caustic in the treatment
chemical mixture. (Caustic sludge is easier to recycle.) Option 2 is based on additional
tanks and personnel to segregate incoming waste streams and to monitor the batch
treatment processes to maximize the precipitation of specific metals in order to generate
a metal-rich filter cake. The metal-rich filter cake could possibly be sold to metal
smelters to incorporate into metal products. Like Option 1, for metals streams which
contain concentrated cyanide complexes, under Option 2, BPT limitations are also
based on alkaline chlorination at specific operating conditions prior to metals treatment.
• Option 3: Selective Metals Precipitation, Pressure Filtration, Secondary Precipitation,
Solid-Liquid Separation, and Tertiary Precipitation. The technology basis for Option 3
is the same as Option 2 except an additional precipitation step at the end of treatment is
added. For metals streams which contain concentrated cyanide complexes, like Options
1 and 2, for Option 3, alkaline chlorination at specific operating conditions would also
be the basis for BPT limitations.
The Agency is proposing to adopt BPT effluent limitations based on Option 3 for the
Metals Subcategory. These limitations were developed based on an engineering evaluation of
the average of the best demonstrated methods to control the discharges of the regulated pollutants
in this Subcategory. EPA's decision to base BPT limitations on Option 3 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.
4.1.2 Subcategory B: Oils Subcategory
The Agency examined four control options for reducing the discharge of pollutants by
CWT facilities in this Subcategory:
• Option 1: Emulsion-Breaking. Under Option 1, BPT limitations would be based on
present performance of emulsion-breaking processes using acid and heat to separate oil-
water emulsions. At present, most facilities have this technology in place unless less
stable oil-water mixtures are accepted for treatment. Stable oil-water emulsions requke
some emulsion-breaking treatment because gravity or flotation alone is inadequate to
break down the oil/water stream.
4-2
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• Option 2: Ultrafiltration. Under Option 2, BPT limitations would be based on the use
of ultrafiltration for treatment of less concentrated, stable oily waste receipts or for the
additional treatment of wastewater from the emulsion-breaking process.
• Option 3: Ultrafiltration, Carbon Adsorption, and Reverse Osmosis. The Option 3
BPT effluent limitations are based on the use of carbon adsorption and reverse osmosis
in addition to the Option 2 technology. The reverse osmosis unit removes metals
compounds found at significant levels for this subcategory. Inclusion of a carbon
adsorption unit is necessary in order to protect the reverse osmosis unit by filtering out
large particles which may damage the reverse osmosis unit or decrease membrane
performance.
• Option 4: Ultrafiltration, Carbon Adsorption, Reverse Osmosis, and Carbon
Adsorption. Option 4 is similar to Option 3 except for the additional carbon adsorption
unit for final effluent polishing.
The Agency is proposing BPT effluent limitations for the Oily Waste Subcategory based
on Option 3 as well as Option 2 treatment systems. EPA has preliminarily concluded that both
options represent BPT. The technologies are currently in use in the industry and the data
collected by the Agency show that the limitations are being achieved.
Among the options considered by the Agency, both Options 2 and 3 would provide for
significant reductions in regulated pollutants discharged into the environment over current
practice in the industry represented by Option 1. EPA is concerned about the cost of Option 3
because it is substantially more expensive than Option 2. The Agency is proposing Option 2
because it is a currently available and cost-effective treatment option. However, the BPT
pollutant removal performance required for a number of specific pollutants (particularly oil and
grease and metals) is less stringent than current BPT effluent limitations guidelines promulgated
for other industries. EPA has preliminarily concluded that, even though the cost of Option 3 is
significantly greater than Option 2 (based on installation, operation, and maintenance of reverse
osmosis equipment), the costs are not unreasonable given other factors.
Thus, this analysis examines the economic impacts of two combined regulatory options,
one which includes Option 2 and one which includes Option 3. EPA is asking for comment on
whether the benefits of Option 3 outweigh the high cost of the additional removal obtained
through reverse osmosis. The Agency is particularly interested in comments on the ancillary
effects of the less stringent Option 2 limitations. The Agency will conduct additional analyses of
both the costs and removals of the Oils Subcategory control options based on comments received
and information collected during a sampling episode in August of 1994, received too late for
incorporation into this analysis.
4-3
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4.1.3 Subcategory C: Organics Subcategory
The Agency evaluated the following two technology options to reduce the discharge of
pollutants from the Organics Subcategory of CWT facilities:
• Option 1: Equalization, Air-Stripping, Biological Treatment, and Multi-media
Filtration. BPT Option 1 effluent limitations are based on the following treatment
system: equalization, two air-strippers in series equipped with a carbon adsorption unit
for control of air emissions, biological treatment in the form of a sequential batch
reactor (which is operated on a batch basis), and finally multi-media filtration units for
control of solids.
• Option 2: Equalization, Air-Stripping, Biological Treatment, Multi-media Filtration,
and Carbon Adsorption. Option 2 is the same as Option 1 except for the addition of
carbon adsorption units.
The Agency is proposing to adopt BPT effluent limitations based on the Option 1
technology for the Organics Subcategory. The demonstrated effluent reductions attainable
through Option 1 control technology represent the best practicable performance attainable
through the application of currently available treatment measures.
4.2 COSTS OF CONTROLS
Based on the information received by EPA from the technical questionnaire, a detailed
monitoring questionnaire, and site visits, the Agency has estimated the costs of complying with
each control option described above. Costs of compliance fall into five broad categories:
• costs of capital equipment required, including installation costs;
• annual O&M costs, including costs of additional labor, energy, and materials;
• costs of additional land required, if any;
• costs of modifying the facility's RCRA permit, if any; and
• costs of monitoring controls and recordkeeping.
The O&M compliance costs will vary with the level of throughput at the facility and will
therefore increase the facility's variable costs of operating each process. These costs, on a per-
gallon treated basis, will increase the marginal costs and average variable costs of each CWT
process. They therefore represent the upward shift in the facility average variable cost curve,
which results in a decrease in market supply for each CWT service. The monitoring and
recordkeeping costs, although annual rather than lump-sum, are incurred on a facility-wide basis.
They increase the facilities' fixed costs, and affect the facility's overall profitability.
The capital, land, and RCRA-modification costs are one-time expenses. The lump-sum
expenditures are too large for most CWT facilities to finance out of current revenues; they will
4-4
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probably be paid for by equity or debt financing. These costs are annualized over the expected
life of the capital equipment (to represent the annual cost of financing the lump sum cost), and
these annualized costs, together with the monitoring and recordkeeping costs, will increase the
facility's fixed costs. These costs will affect the facility's overall profitability but will not affect
the average and marginal costs of producing each CWT service.
4.2.1 Annualization of the Land, Capital, and RCRA-Medification Compliance Costs
In annualizing the land, capital equipment, and RCRA costs associated with the
regulation, the Agency used the following formula:
where;
Ann. K Costs = K / (1 - ((1 + R)-20)/R) (4.1)
Ann. K costs = annualized cost of land, capital, and RCRA-modification,
K = lump-sum cost of land, capital, and RCRA-modification, and
R = company-specific real weighted average cost of capital.
The term "real weighted average cost of capital" (R in equation 4.1) reflects the fact that
in making investments, companies typically use two sources of funds: equity and debt. Each
source differs in its riskiness, its taxation, and its cost. Equity financing involves obtaining
additional funds from owners, either through the use of retained earnings (internal equity) or
through the issuance of additional stock (external equity). Debt involves obtaining additional
funds from lenders who are not owners; they include buyers of bonds, banks, or other lending
institutions. To estimate the true cost of capital to the company, one must include both the cost
of debt and the cost of equity.
The Agency requested facilities' discount rate (weighted average cost of capital) in the
questionnaire. Twenty-eight of the 58 companies provided responses; for the rest, the weighted
average cost of equity and (after tax) debt was estimated using the following formula:
where;
WACC
Wd
WACC = Wd(l-5)-Kd
weighted average cost of capital,
weighting factor on debt,
(4.2)
4-5
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W
= marginal effective state and federal corporate tax rate averaged for U.S.
companies,
= the cost of debt or interest rate,
= weighting factor on equity, and
= cost (required rate of return) on equity.
This formula implicitly assumes that investments in pollution control equipment are similar in
risk to other projects that the company is considering. In addition, the formula assumes that the
method of financing for control equipment is similar to other investments by the company.
To estimate the WACC, values for Kd and Ke were estimated. Marginal costs of capital,
not historical average costs are appropriate hurdle rates for new investments.2 However, data are
available only for historical values. The analysis estimates the cost of debt for companies
owning CWT facilities based on the average bond yields reported by Standard and Poors (S&P).3
Bond ratings indicate potential default risk. Assuming that companies owning CWT facilities
are in average financial condition at baseline, the Agency used yields for corporate industrial
bonds rated BBB. These yields ranged from 8.82 to 9.5 percent in 1992. For this analysis, EPA
uses the midpoint of the range, or 9.16 percent. Because debt interest is deductible for state and
federal corporate income tax purposes, the cost of debt has to be adjusted downward to account
for the tax savings. The Tax Foundation estimates that the effective marginal state and federal
tax rate averaged 30.3 percent in 1992.4 Applying this rate to the real costs of debt computed
above gives the after-tax debt costs for companies in the CWT industry: 6.38 percent.
Financial analysts use several methods to estimate the cost of equity capital. The Agency
selected the Capital Asset Pricing Model (CAPM) to estimate the cost of equity capital. The
CAPM is expressed in the following equation:
where;
Rf
B
(Rm — Rf)
Ke = Rf + 6(Rm-Rf)
the cost of equity capital,
the risk-free rate of return (long-term treasury bonds),
beta, a measure of the relative risk of the equity asset, and
the market risk premium.
(4.3)
4-6
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For the risk-free rate of return, this analysis used the average rate of return on long-term
treasure bonds, reported in the Survey of Current Business as averaging 7.52 percent.5 Ibbotson
and Associates estimate that the market risk premium (Rm - Rf) has averaged approximately 6
percent over the last 66 years.6 Beta values, however, are a measure of the relative riskiness of
the company and generally vary from company to company. Data are insufficient to estimate
company-specific beta values, however, so the average beta value for companies with bonds
rated BBB to B was used: 1.41.7
Next, the weighting factors were estimated and used to estimate the WACC equation.
The theoretically correct weights are the target rates rather than the historical weights. Financial
theory holds that each company has an optimal capital structure that maximizes the value of the
company by minimizing its cost of capital. However, estimating the target capital structure for
each potentially affected company is beyond the scope of this analysis. It was assumed that the
actual capital structure employed by companies approximates their target or optimal capital
structure and that companies are minimizing their cost of capital in the baseline. Furthermore, it
was assumed that book-value weights approximate market-value weights where market-value
weights are not available.8
4.2.2 Compliance Costs for the Control Options
The tables in this section show the total costs for each category of compliance costs.
Lump-sum land and capital costs are summed shown in the first column of each table. The
annualized land and capital costs, annualized based on company-specific weighted average cost
of capital values, are shown in the second column. These annualized land and capital costs are
intended to represent the annual costs associated with financing the land and capital expenditures
over 20 years. The third column shows the annual O&M costs associated with the regulation.
The fourth column sums the annualized land and capital costs with the annual O&M costs to give
total annualized cost.
4.2.2.1 Metals Subcategory Control Option Costs
Table 4-1 shows the total costs associated with the three Metals Subcategory control
options. Overall, 56 facilities incur costs resulting from the control options. Twelve of these are
direct dischargers and 44 are indirect dischargers. For facilities incurring costs under the Metals
control options, the lump-sum capital and land costs range from $11,400 to $940,000 under
Option 1; they range from $14,300 to $3.30 million under Option 2 and from $14,300 to $3.47
million under Option 3. Annual O&M costs range from $1,920 to $1.12 million under Option 1,
from $36,600 to $1.94 million under Option 2, and from $36,600 to $1.97 million under
4-7
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TABLE 4-1. METALS SUBCATEGORY COMPLIANCE COSTS (103 $1989)a
Total Capital
and Land
Costs
Annualized
Capital and
Land Costs
Annual
O&M
Costs
Total
Annualized
Costs
BPT/BAT Costs (12 facilities affected)
Option 1
Option 2
Option 3
PSES Costs (44 facilities affected)
Option 1
Option 2
Option 3
Total Costs (56 facilities affected)
Option 1
Option 2
Option 3
1,645
13,311
14,570
2,070
23,536
26,863
3,715
36,847
41,433
181
1,496
1,628
212
2,334
2,661
393
3,830
4,288
2,788
9,634
9,891
2,929
20,846
21,674
5,717
30,479
31,565
2,969
11,129
11,519
3,141
23,179
24,334
6,110
34,309
35,853
aNumbers may not add due to rounding.
Option 3. The average per-facility capital costs and O&M costs are higher for direct dischargers
than for indirect under all three options.
4.2.2.2 Oils Subcategory Control Option Costs
Thirty-four facilities incur compliance costs under the Oils Subcategory for Options 2, 3,
and 4. Option 1 represents present practice, so no costs are associated with it. The total
compliance costs are shown in Table 4-2. Lump-sum capital compliance costs range from
$36,700 to $559,000 under Option 2, from $66,300 to $2.36 million under Option 3, and from
$67,900 to $3.12 million under Option 4. Annual O&M compliance costs range from $9,270 to
$499,000 under Option 2, from $23,700 to $5.69 million under Option 3, and from $39,100 to
$6.67 million under Option 4. Again, the average facility compliance costs, both capital and land
and O&M, are higher for the direct dischargers than for the indirect dischargers.
4,2.2.3 Organics Subcategory Control Option Costs
Table 4-3 shows the total costs of complying with each of the two control options for the
Organics Subcategory. Nineteen facilities incur compliance costs under this Subcategory's
4-8
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TABLE 4-2. OILS SUBCATEGORY COMPLIANCE COSTS (103 $1989)a
BPT/BAT Costs (4 facilities affected)
Option 2
Option 3
Option 4
PSES Costs (30 facilities affected)
Option 2
Option 3
Option 4
Tota/ Cewfe (34 facilities affected)
Option 2
Option 3
Option 4
aNumbers may not add due to rounding.
Total Capital
and Land
Costs
967
3,628
4,598
3,976
12,271
14,547
4,942
15,899
19,145
Annualized
Capital and
Land Costs
85
314
396
401
1,252
1,485
485
1,567
1,882
TABLE 4-3. ORGANICS SUBCATEGORY COMPLIANCE
BPT/BAT Costs (6 facilities affected)
Option 1
Option 2
PSES Costs (13 facilities affected)
Option 1
Option 2
Total Costs (19 facilities affected)
Option 1
Option 2
Total Capital
and Land
Costs
791
1,242
10,450
10,865
11,241
12,107
Annualized
Capital and
Land Costs
75
116
1,066
1,111
1,141
1,226
Annual
O&M
Costs
734
7,690
9,066
2,233
20,337
24,397
2,967
28,028
33,463
Total
Annualized
Costs
819
8,005
9,462
2,634
21,590
25,883
3,452
29,594
35,345
COSTS (103 $1989)*
Annual
O&M
Costs
307
2,855
1,328
3,739
1,635
6,594
Total
Annualized
Costs
382
2,971
2,395
4,850
2,777
7,820
aNumbers may not add due to rounding.
4-9
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controls. Capital and land compliance costs range from $79,500 to $1.47 million under Option 1
and from $83,500 to $1.58 million under Option 2. O&M compliance costs range from $36,500
to $171,000 under Option 1 and from $63,100 to $1.05 million under Option 2. For most
categories of organics costs, the indirect dischargers incur higher costs on average than do the
direct dischargers.
4.23 Compliance Costs Associated with RCRA Permit Modification and Monitoring and
Recordkeeping
Table 4-4 summarizes the compliance costs associated with the two remaining categories
of costs: for facilities permitted under RCRA, monitoring and recordkeeping and modifying the
RCRA permit to reflect their additional treatment technologies associated with the subcategory
controls.
TABLE 4-4. RCRA MODIFICATION AND MONITORING COSTS (103 $1989)a
Total RCRA Annualized Annual Total
Modification RCRA Monitoring Annualized
Costs Costs Costs Costs
BPT/BAT Costs 420
(14 facilities affected by RCRA
costs, 16 by monitoring costs)
PSES Costs 1,410
(47 facilities affected by RCRA
costs, 56 by monitoring costs)
Total Costs 1,830
(61 facilities affected by RCRA
costs, 72 by monitoring costs)
45
150
195
651
3,438
4,089
696
3,589
4,284
aNumbers may not add due to rounding.
All 72 facilities incurring compliance costs are assumed to incur monitoring and record-
keeping costs. These costs range from $40,680 per year to $570,000 per year. Only 61 CWT
facilities have RCRA permits, according to questionnaire results and other information. The
costs of modifying their RCRA permits are estimated to be $30,000 per facility.
4.2.4 Compliance Costs of Combined Regulatory Options
The Agency is co-proposing two combinations of the control options described above:
• Regulatory Option 1: Metals 3, Oils 2, and Organics 1
tion 2: Metals 3, Oils 3, and Organics 1
4-10
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Table 4-5 summarizes the combined costs of these regulatory options. Of the 72
facilities, 70 facilities incur compliance costs under Regulatory Options 1 and 2. The other CWT
facilities have no costs under any subcategory, either because they are zero dischargers or
because they already met the requirements of the proposed standards and guidelines at baseline.
The remaining two facilities have no subcategory costs, but do incur monitoring.
TABLE 4-5. COMPLIANCE COSTS FOR THE PROPOSED REGULATORY
OPTIONS (103 $1989)a
BPT/BAT Costs (16 facilities affected)
Option 1
Option 2
PSES Costs (54 facilities affected)
Option 1
Option 2
Total Costs (70 facilities affected)
Option 1
Option 2
Total Capital
and Land
Costs
16,748
19,409
42,698
50,994
59,446
70,402
Annualized
Capital and
Land Costs
1,832
2,062
4,278
5,130
6,110
7,192
Annual
O&M
Costs
11,583
18,540
28,673
46,777
40,256
65,317
Total
Annualized
Costs
13,415
20,601
32,951
51,907
46,367
72,509
aNumbers may not add due to rounding.
Under Regulatory Option 1, capital and land compliance costs range from $30,000 to
$4.39 million. O&M compliance costs range from $40,680 to $2.16 million. Under Regulatory
Option 2, capital and land compliance costs range from $30,000 to $4.91 million, and O&M
compliance costs range from $40,680 to $6.59 million. Average per-facility compliance costs
are higher for direct dischargers than for indirect dischargers.
Total annualized costs for the BPT/BAT controls are $13.4 million under Regulatory
Option 1 and $19.4 million under Regulatory Option 2. For the PSES controls, total annualized
costs are $33.0 million under Regulatory Option 1 and $51.9 million under Regulatory Option 2.
Nationwide, total annualized costs are $46.4 million under Regulatory Option 1 and $72.5
million under Regulatory Option 2.
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Commercial CWT facilities incurring these costs will respond by changing their
production behavior. This will change market quantities and prices, which in turn will change
the revenues and production behavior of CWT facilities not incurring costs (because they are
zero-dischargers or already have the controls in effect). The following chapters describe the
methodologies used to assess the impacts of these costs on commercial CWT facilities and on
companies owning CWT facilities, including both commercial or non-commercial CWT
facilities.
43 REFERENCES
1. U.S. EPA. Development Document for Proposed Effluent Limitations Guidelines and
Standards for the Centralized Waste Treatment Industry. 1994.
2. Bowlin, O.D., J. D. Martin, and D. F. Scott. Guide to Financial Analysis. 2nd Ed. New
York, McGraw-Hill. 1990.
3. Standard & Poor's. Security Owner's Stock Guide. Vol. 47, No. 1. January 1993.
4. The Tax Foundation. Special Report. No. 18. March 1993.
5. U.S. Department of Commerce. Survey of Current Business. Volume 71, No. 9. 1991.
6. Ibbotson and Associates. SBBI1993 Yearbook, Chapter 6.
7. Value Line Investment Survey. June 11,1993.
8. Bowlin, O. D., J. D. Martin, and D. F. Scott. Guide to Financial Analysis. 2nd Ed. New
York, McGraw-Hill. 1990.
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CHAPTERS
MARKET ANALYSIS METHODOLOGY
As mentioned in Chapter 3, some facilities accept waste on a commercial basis; that is,
they accept waste from off-site facilities not under the same ownership as their facility and treat
it for a fee. Other facilities accept waste only from off-site facilities that are owned by the same
company as their facility; these are termed non-commercial facilities. Different approaches were
used to analyze the impacts on commercial and non-commercial facilities.
For the commercial facilities, a market model was used to estimate changes in market
prices, and market quantities of waste treated, facility revenues, costs, and profits. For the non-
commercial facilities, the CWT operations were treated as cost centers, and impacts were
assessed at the company level. This chapter describes the analytical approach used to assess the
impacts on commercial CWT activities. Chapter 6 describes the analytical approach used to
assess impacts on companies owning CWT facilities, including those owning non-commercial
facilities.
5.1 INTRODUCTION
The effluent limitations guidelines and standards will directly increase the costs and
reduce the pollutant discharges of CWT facilities that are direct or indirect dischargers. Faced
with increased costs resulting from the regulation, companies owning CWT facilities have two
basic choices:
• Comply with the regulation and incur the costs. This would entail the CWT facility's
adjusting its operations to maximize profits under the new market conditions that result
as all CWT facilities adjust to the regulation.
• Cease CWT operations. This could entail closing the facility or ceasing its CWT
operations so that the facility is no longer subject to the guidelines or standards.
Conventional economic reasoning argues that owner companies will make their decision based
on an assessment of the benefits and costs of the facility to the company. For commercial CWT
facilities, the benefits to the company are the total revenues received; costs to the company
include the payments made to the factors of production (labor, materials, etc.) plus the
opportunity costs of self-owned resources (e.g., the land and capital equipment). For non-
commercial facilities there is no observable measure of benefits to the company of having the
capacity to manage the wastes in a facility owned by the company. Clearly, however, companies
do weigh the benefits and costs of operating a CWT facility, and the benefits in this case may
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include lower expected future liability costs, more control over the costs and scheduling of
treatment, and certainty that treatment capacity exists for their wastes.
Overall, as long as generators have alternatives to commercial treatment (e.g., on-site
treatment, pollution prevention) the total quantity of CWT services traded may be expected to
fall as a result of the effluent limitations guidelines and standards. Changes in the costs of
treatment at commercial CWT facilities may be expected to result in an increase in the price of
CWT services and a decrease in the total quantity of CWT services sold. The changes in prices
and quantities will affect the revenue side of these facilities, and the changes in quantities and
costs will affect the cost side of CWT facilities. Facility profitability will change, and changes in
facility costs, revenues, and profits will cause changes in the costs, revenues, and profits of
companies owning CWT facilities. The market model estimates these changes and generates the
inputs for the company impacts, regulatory flexibility, and community impacts analyses.
5.2 OVERVIEW OF THE ANALYTIC METHODOLOGY
CWT facilities are divided into commercial and non-commercial. The commercial
facilities, which offer at least some of their CWT services commercially for a fee, are
characterized individually based on the quantity of each type of waste treatment service they
provide, their revenues and costs, employment, market share for each type of service provided,
ownership, releases, and location in terms of the community where they are located and the
regional market they serve. CWT services offered by non-commercial facilities do not affect the
market for CWT services; for the reasons outlined above, they are analyzed at the company level.
Analyses of company-level impacts are discussed in Chapter 6. This section describes the
market model used to analyze impacts on commercial CWT operations.
Costs of CWT facilities include those that vary with the quantity of CWT services
provided (variable costs) and those whose value is fixed. Per-gallon variable costs are assumed
constant to the capacity output rate. Revenues from CWT operations are estimated by
multiplying the market price of the CWT service by the quantity of waste treated in the CWT
service. Most CWT facilities also have revenues from other sources, which are treated as
exogenous.
The demand for CWT services is characterized based on the responsiveness of quantity
demanded to price. CWT services are intermediate goods, demanded because they are inputs to
production of other goods and services. The sensitivity of quantity demanded to price for an
intermediate good depends on the demand characteristics (elasticity) of the good or service it is
used to produce, the share of manufacturing costs represented by CWT costs, and the availability
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of substitutes for CWT services. The elasticity of demand for manufactured products varies
widely. CWT services costs as a share of manufacturing costs are generally quite small.
Substitutes for CWT services include other types of off-site waste management such as
underground injection or incineration, on-site treatment, or pollution prevention. Overall, the
change in quantity demanded for CWT services is assumed here to be approximately
proportional to any price change (e.g., a one percent increase in the price of a CWT service is
expected to reduce the quantity demanded for the service by about one percent). Appendix D
provides a more detailed discussion of the elasticity of demand for CWT services.
The markets for CWT services are regional. This market characterization is based on
responses to the 1991 Waste Treatment Industry Questionnaire and is consistent with the theory
of economic geography.l Each market has a relatively small number of suppliers and a relatively
large number of demanders. Thus the market structure is treated as being imperfectly
competitive, which implies that the competition each facility faces is limited to facilities in its
region so that all suppliers have a degree of market power.
This characterization of companies and markets is incorporated in a model that uses the
engineering estimates of the costs of compliance with the effluent limitations guidelines and
standards to project impacts on facilities, companies, markets, and communities. In general, each
CWT facility faced with higher costs of providing CWT services may find it economical to
reduce the quantity of waste it treats. Depending on the costs incurred and the decisions made by
other producers in a given CWT market, some CWT facilities may choose to increase the
quantity of waste they treat in some markets. These decisions are simultaneously modeled for all
facilities within a regional market to develop consistent estimates of the facility and market
impacts. Changes in the quantity of CWT services available would result in changes in the
inputs used to produce these services (most importantly labor). The Agency thus projects
changes in employment at CWT facilities. Changes in facility revenues and costs result in
changes in the revenues and costs of the companies owning the facilities and thus changes in
company profits. Estimation of company impacts is discussed in Chapter 6. Section 5.3
describes in more detail the methodology used to estimate market and facility impacts of the
effluent limitations guidelines and standards.
5.3 MODELING MARKET AND FACILITY IMPACTS
Market and facility impacts of the effluent limitations guidelines and standards were
estimated using an economic model that simulates market and facility responses to the costs of
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complying with the regulation. The model integrates market and facility responses, so that the
estimated changes in facility quantity, market quantity, and market price are consistent.
The Agency used a model that simulates facility interaction and attempts to estimate the
comparative static impact of complying with the controls. Comparative static models start with
the "before" or baseline state of the facilities and markets and, by simulating the responses of
facilities to their increased costs and the interactions of the facilities in the markets, estimates the
"after" or with-regulation state of the facilities and markets. No attempt is made to realistically
simulate the adjustment path from the baseline to the with-regulation state. Similarly, no attempt
is made to project other changes in CWT facilities' situations that could occur between now and
when the regulation is promulgated. Thus, the analysis strictly compares the conditions of CWT
facilities, companies, and markets without the regulation and with the regulation," rather than
presenting a true "before" and "after." The mathematical workings of the model are described in
detail hi Appendix E. This chapter provides an intuitive description of the model.
5.3.1 Defining the Markets for CWT Services
As discussed in Chapter 3, facilities supplying CWT services are divided into six regional
markets. Within each regional market, facilities may supply one or more of five general types of
CWT service:
• metals recovery,
• oils recovery,
• metals treatment,
• oils treatment, and/or
• organics treatment.
Within each region, the broad types of treatment or recovery are further subdivided into markets
based on the per-gallon cost of treatment. Each facility offers its services in only one cost
category per treatment type.
This arrangement reflects a simplifying assumption. Information obtained during site
visits and telephone conversations indicates that many facilities operate their CWT processes on
a batch basis. The characteristics of the waste being treated vary somewhat from batch to batch,
so the per-gallon cost of treatment and the price per gallon may also vary. Economic data
received from the questionnaire are not sufficiently detailed to enable the Agency to model each
transaction individually; therefore, as in virtually all modeling efforts a simplifying assumption
must be made. For the economic analysis, the Agency computed the per-gallon cost of treatment
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for each treatment type at each commercial facility by dividing total variable costs of that
treatment type (e.g., metals recovery) by the quantity of waste received commercially into metals
recovery. The model assumes that all waste treated in metals recovery at the facility has the
same per-gallon cost (and similarly for the other four broad treatment types). The division of
broad waste treatment types into several markets based on the per-unit cost of treatment reflects
the fact that wastes with similar characteristics will have similar costs of treatment. The analysis
assumes that the converse is also true. Thus, facilities with similar costs of treatment are
assumed to be treating similar wastes and using similar processes; their CWT services are
substitutes for the CWT services of other facilities in the same region with similar per-gallon
costs of providing that type of treatment.
In each regional market, only a small number of facilities offer each type of CWT
service. The number of facilities in a specific market (e.g., high-cost metals recovery) ranges
from one to ten. Markets in which only one facility is active are modeled as regional
monopolies. Markets in which a small number of facilities operate are modeled as regional
oligopolies. Oligopolistic markets are characterized by a small number of suppliers, each of
which is aware of his competitors' actions and is able to have some influence on the market
price.
5.3.2 Baseline Facility Equilibrium Conditions
Complying with the controls will impose capital and O&M costs on facilities with
affected CWT processes, as well as costs associated with modifying their RCRA permit if they
have one and costs of monitoring their operations to ensure compliance. These costs were
described in more detail in the previous chapter.
Of these categories of costs, only the O&M costs increase the operating costs of the CWT
processes. The CWT processes at each facility were assumed to be characterized by constant
average variable costs. That is, facility average variable cost curves were assumed to be
horizontal up to process capacity, at which point they become vertical. Process capacity was
based on data obtained from the questionnaire, detailed monitoring questionnaire, and site visits.
The curve labeled AVC = MC in Figure 5-1 depicts a facility average variable cost curve and
marginal cost curve at baseline for a CWT process. The average variable cost (AVC) curve for
this process at this CWT facility is shaped like a backwards "L." AVC is defined as the variable
cost per unit output (in this case, the variable cost per gallon treated). Marginal cost (MC) is the
additional cost incurred for treating an additional gallon of waste. Because the average variable
cost curve is constant, it is equal to the marginal cost curve. Facilities' profit-maximizing level
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Figure 5-1. Effects of Compliance on Oligopolistic Company
$/q
AVC' = MC1
AVC = MC
MR
q/t
Q
capacity
AVC = baseline average variable cost = (total variable cost) / quantity = average
per-gallon cost of treatment.
MC = baseline marginal cost = (change in variable cost) / (change in quantity) =
additional cost to treat one additional gallon.
AVC' = with-regulation AVC.
MC1 = with-regulation MC.
q* = equilibrium baseline quantity treated.
q*' = equilibrium with-regulation quantity treated.
of output (q*) is the quantity at which their MC (MC=AVC) equals their marginal revenue (MR).
MR is defined as the additional revenue received for treating an additional gallon of waste. The
facility's MR curve reflects both market demand and the production accounted for by other
producers in the market. It is derived from the facility's residual demand curve, which reflects
the demand for the treatment services of this CWT facility, after accounting for the production
decisions of the other CWT facilities in the market.
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5.3.3 Adjustments in Response to the Variable Costs of Complying with the Effluent
Limitations Guidelines and Standards
The O&M compliance costs increase the facility's average variable cost by the per-gallon
amount of the O&M compliance costs. This vertical shift is shown in the curve labeled
AVC = MC' in Figure 5-1. In response, facilities modify their production decisions (moving to a
quantity treated such as q*') to maximize the profitability of each CWT service given the new
costs they incur. In each CWT market, these adjustments result in a reduction in supply (see
Figure 5-2).
The interaction of the with-regulation supply curve, 82, and the market demand curve, D,
results in a higher with-regulation price, P2, and a lower with-regulation quantity, Q2, of CWT
services in that market. The specific decisions made by facilities in response to the change in
their variable costs of production depend in part on the structure of the markets in which they
interact. In this analysis, the markets were assumed to be regional, imperfectly competitive
(either oligopoly or monopoly) markets.
5.3.2.1 Oligopoly Markets
Oligopoly markets are characterized by relatively small numbers of facilities, each of
which is aware of its competitors and makes its production and market decisions based on its
expectation of what its competitors will do. A variety of rationales for forming these
expectations about competitors' responses are possible; in the economics literature, they are
referred to as "conjectural variations." The model employed by the Agency assumes a Cournot-
Nash rationale for forming expectations about competitors' behavior. According to that
rationale, each facility in a market determines its profit-maximizing quantity of output, assuming
that its competitors will not respond in a strategic manner; rather, they will also determine their
profit-maximizing level of output. An advantage of this modeling approach is that facility
expectations are self-fulfilling: all the facilities, deciding to maximize their profits, assume that
the other facilities will maximize their profits rather than behave strategically, thus producing the
market-equilibrium quantity of output. Thus, in a Cournot-Nash equilibrium, no supplier finds it
profitable to change its production once it discovers the choices actually made by the other
suppliers.
Operationally, the O&M compliance costs increase the average variable cost of
performing each affected CWT service for facilities that incur costs. Facilities, in response to
increased costs, adjust the quantity of the CWT service they provide so that the with-regulation
MC equals the with-regulation MR. The analytical model represents each market as a series of
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Figure 5-2. With-Regulation Equilibrium Price and Quantity of a CWT Service
Price of
CWT
Service
81
S2
D
Q1
Q2
Pi
Pa
Quantity of
CWT
Service
baseline market supply of CWT services.
with-regulation market supply of CWT services.
demand for CWT services.
baseline equilibrium quantity of waste treated by all CWT facilities in the
market.
with-regulation equilibrium quantity of waste treated.
baseline price of treatment.
with-regulation price of treatment.
linear equations, and individual equations represent each facility's supply of the CWT service,
market demand, and market supply. At baseline, the markets and facilities are all in equilibrium;
the O&M compliance costs throw the market out of equilibrium, and the model solves
simultaneously for the market price, facility quantities, and market quantity that characterize the
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new equilibrium. In finding the new equilibrium, the model constrains the solution so that
facilities cannot reduce their level of production of a CWT service by more than their baseline
quantity (CWT service quantities produced must be non-negative) and cannot increase their
CWT service production beyond their capacity output.
Facilities that supply a CWT service in a market but do not incur compliance costs will
choose to increase the quantity of waste they treat. Even facilities incurring costs may choose to
increase their quantity treated. Because the MR curve depends not only on market demand but
also on the quantity of market demand taken up by other suppliers in the market, changes in the
quantities produced by those other suppliers may shift the facility's residual demand and thus its
MR curve. Thus, some facilities may decide to increase the quantity of waste they treat, even if
they incur compliance costs. The market model described in Appendix E solves for the
equilibrium quantities of waste treated by each facility in each market, taking into account these
adjustments.
5,3.2.2 Monopoly Markets
As noted above, several of the CWT regional markets for particular CWT services were
characterized as regional monopolies. Facilities supplying CWT services in these markets do not
need to consider their competitors' responses to their actions. Rather, they simply determine the
quantity of CWT service production and the market price that maximize their profits. This
adjustment is shown in Figure 5-3. In Figure 5-3, the curve labeled D is the market (and facility)
demand curve. It shows the price paid for each gallon of waste treated. The MR curve shows
the additional revenue received for treating an additional gallon. The curve labeled AVC=MC is
the baseline average variable cost curve. As described above, AVC is defined as the per-gallon
cost of treatment, and MC is defined as the additional cost incurred to treat an additional gallon
of waste. Because AVC is constant, AVC and MC are equal. The curve labeled AVC2=MC2
shows the with-regulation AVC and MC. To maximize profits, monopolists choose to treat the
quantity at which the marginal revenue just equals the marginal cost. When his costs increase
due to the regulation, the monopolist chooses to reduce his output from Ql to Q2, at which
MR2=MC2- This new quantity of waste treatment can be sold at a price of ?2-
In choosing the new equilibrium price and quantity, the model constrains monopolists so
that facilities cannot reduce their level of production of a CWT service by more than their
baseline quantity (CWT service quantities produced must be non-negative) and cannot increase
their CWT service production beyond their capacity output. The only other constraint
monopolists face in making their decisions is the demand curve. If they want to sell more CWT
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Figure 5-3. With-Regulation Price and Quantity in a CWT Market that is a
Regional Monopoly
Price of
CWT
Service
AVCi =
AVC2
MC2
D
MR
Q1
Q2
Pi
P2
1
AVC2 = MC2
: AVC1 = MC1
Quantity of
CWT
''capacity Service
baseline AVC = baseline average per-gallon cost of treatment.
baseline MC = baseline additional cost to treat one additional gallon.
with-regulation AVC.
with-regulation MC.
market and facility demand; relates price to quantity treated.
additional revenue received for an additional gallon treated.
baseline equilibrium quantity of waste treated.
with-regulation equilibrium quantity of waste treated.
baseline equilibrium price of treatment.
with-regulation equilibrium price of treatment.
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services, they have to offer them at a lower price. In our analysis, the elasticities of the demand
curves faced by both oligopolistic and monopolistic producers of CWT services reflect the
presence of suppliers of similar CWT services in other regions. Thus, the elasticity of demand
assumed in these regional markets is somewhat higher than would be the case for national or
international oligopolies or monopolies.
5.4 OUTPUTS OF THE MARKET MODEL
The model solution estimates changes in market prices and quantities in each affected
market. In addition, for each commercial facility, the model estimates changes in the quantity of
each type of CWT waste they treat, changes in facility revenues and costs, and changes in facility
profits. Changes in waste treatment employment are estimated proportional to the changes in
quantity treated.
5.4.1 Changes in Market Prices and Quantities
In each of the individual markets for a CWT service, the market model estimates the
change in price and total quantity treated under each of the regulatory options. The model solves
simultaneously for changes in facility quantity and changes in market quantity so that the sum of
the estimated facility quantity changes equals the estimated market change in quantity.
5.4.2 Changes in Facility Profitability
Frequently, the assumption is made in economic modeling that facilities making negative
profits (whose revenues are less than their costs) will be closed. In the CWT industry, however,
this has not been the case recently. It appears that the criterion for closure is not current
profitability but expected future profitability. In 1989, according to data collected from the
questionnaire, 22 of the 85 facilities in the CWT industry were unprofitable.
To determine how to treat these facilities in the EIA, the Agency contacted 18 of them.
All but two were still in operation, and two others thought they might have to close. Of the rest,
nine had become profitable and four others, although still unprofitable, were doing better and
expected to continue in operation. The remaining facility, still unprofitable, expected to stay
open because of an ongoing clean-up operation that would render closure extremely costly.
Thus, one year's negative profits were not enough to cause facility owners to close them. In fact,
several years' negative profits did not necessarily result in facility closures.
The Agency believes, based on conversations with the facilities in the industry, that
facility profits in 1989 reflected a period of great change in the markets for CWT services,
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resulting from changes in regulations affecting them and their customers, pollution prevention
efforts that affected the demand for their services, and regional economic recessions in some
areas of the country. Owners of CWT services appear willing to allow their facilities time to
adjust their operations to conform to the changing conditions in the market. Thus, it is not
realistic to model the industry as closing facilities immediately when they become unprofitable.
Thus, the Agency measures and reports changes in facility profitability with the regulation in
place but does not project facility closures as such.
5.4.3 Inputs into the Company-Level Analysis
The economic achievability of the regulation is assessed based on the impacts incurred by
companies owing CWT facilities. To conduct this analysis, estimated facility-specific changes in
revenues and costs resulting from compliance were aggregated to the parent-company level.
These changes, predicted by the market model, serve as inputs into the analysis of company-level
impacts. Changes in facility revenues and costs result in changes in parent company revenues
and costs and thus in parent company profits. In addition, the acquisition of new capital
equipment and the financing arrangements estimated to be made for purchasing the capital
equipment result in changes in parent company assets and liabilities. These data were used to
estimate the impacts of compliance with the regulation on the parent companies owning CWT
facilities. The analytic methodology used to assess company-level impacts is discussed in
Chapter 6. In addition to the impacts incurred by parent companies owning commercial
facilities, the company-level analysis assesses impacts on parent companies owning non-
commercial facilities, which are assumed to pass all the costs of compliance through to their
parent company.
5.4.4 Inputs into the Community Impacts Analysis
Communities in which commercial CWT facilities are located may be affected because of
changes in employment that may occur at these facilities. Facilities may decide to increase or
decrease the quantity of waste they treat in response to the regulatory options. If they increase
the quantity of waste they treat, the labor needed to run their CWT operations is assumed to
increase proportionally. If they decrease the quantity of waste they treat, the labor needed to run
their CWT operations is assumed to decrease proportionally. Thus, the market model estimates
market-related changes in employment at each commercial CWT facility. Overall, while some
facilities are predicted to increase their employment, CWT facility employment is predicted to
fall because overall, the quantity of CWT treatment nationwide is predicted to fall.
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In addition to market-related changes in employment, the Agency has estimated changes
in CWT employment that will be needed to operate the controls associated with the effluent
limitations guidelines and standards. These changes in employment are larger than the overall
decrease in employment predicted by the market analysis. The two types of employment change
are combined to estimate changes in community employment associated with the regulation.
5.5 REFERENCES
1. Hoover, Edgar M. An Introduction to Regional Economics. 2nded. New York, Alfred
A. Knopf. 1975, pp. 49-51.
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CHAPTER 6
COMPANY ANALYSIS METHODOLOGY
The legal and financial responsibility for compliance with a regulatory action rests with
the owners of the CWT facility who must bear the financial consequences of their decisions.
Thus, an analysis of the company-level impacts in the context of EPA regulations involves
identifying and characterizing affected entities, assessing their response options and modeling or
characterizing the decision-making process, and analyzing the impacts of those decisions.
Chapter 3 of this report characterizes the affected entities according to relevant
characteristics including size and degree of horizontal and vertical integration. This chapter
presents the Agency's methods of assessing the impact to the CWT facility owners of the
proposed regulatory options. First, it identifies the owners' response options and characterizes
their decision-making process. It then describes the impact measures chosen by the Agency to
assess the company-level economic impacts and to illustrate the distribution of these impacts
across companies of different sizes. The chosen impact measures include potential changes in
the capital structure and cost of capital of affected companies and changes in the likelihood of
financial failure.
6.1 OWNERS' RESPONSES
In reality, CWT facility owners' response options to the impending regulation potentially
include the following:
• installing and operating pollution control equipment,
• discontinuing one or more regulated processes within CWT facilities that they own,
• closing or selling the facility,
• complying with the regulation via process and/or input substitution (versus control
equipment installation), and
• discontinuing the practice of accepting off-site waste for treatment in CWT processes.
This analysis assumes that the owners of an affected facility will pursue a course of action that
maximizes the value of the company, subject to uncertainties about actual costs of compliance
and the behavior of other companies.
The market model presented in Chapter 5 models facility and market impacts for
commercial facilities under the owners' first two options listed above. For the reasons described
in Section 5.4.2, EPA is assuming that owners will not decide to close or sell facilities as a result
of the regulation. Evaluating facility and market impacts under the remaining two options listed
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above requires detailed data on production costs and input prices; costs and revenues associated
with alternative services/products; and other owner motivations, such as legal and financial
liability concerns, and is beyond the scope of this analysis. Consequently, the company-level
analysis is based on the assumption that owners of commercial CWT facilities respond to the
regulation by installing and operating pollution control equipment or discontinuing selected
regulated processes within facilities that they own. The commercial facility-level responses,
presented in Chapter 7, must be aggregated across sibling facilities and used to assess the
economic impacts to the ultimate corporate owners of commercially operating CWT facilities.
The results of the company analysis are presented in Chapter 8.
For non-commercial CWT facilities a simpler approach is used. All of the compliance
costs are assumed to be passed on to the parent company and company revenues do not change.
This is because these non-commercial CWT facilities are generally cost centers for their
companies; frequently they do not explicitly receive revenues for their services. They exist to
perform a service for the rest of the company and are not expected to be "profitable" as a unit.
Thus, no change in the quantity of CWT wastes treated is projected for these facilities nor are
market effects analyzed for the products of the parent company, since the share of waste
treatment costs in the marketed products is generally too small to have much impact on overall
production costs of the marketed products. However, the company-level impacts analysis
includes these companies, so changes in their financial viability were evaluated.
As a result of the proposed regulations governing CWT services, companies will
potentially experience changes in the costs of providing waste treatment services as well as
changes in the revenues generated by providing these services. Both cost and revenue impacts
may be either positive or negative. The cost and revenue changes projected to result from
passage of each of the regulatory options considered in this report are anticipated to occur at the
facility level as a result of market adjustments explained in Chapter 5. Net changes in company
profitability are derived by summing facility cost and revenue changes across all commercial and
non-commercial facilities owned by each affected company. The net impact on a company's
profitability may be negative (cost increases exceed revenue increases) or positive (revenue
increases exceed cost increases).
Figure 6-1 characterizes owners' potential responses to regulatory actions. The shaded
areas represent decisions made at the facility-level that are used as inputs to the company-level
analysis. For this analysis companies are projected to implement the cost-minimizing
compliance option and continue to operate their facilities. As long as the company continues to
meet its debt obligations, operations will continue. Realistically, if the company cannot meet its
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Figure 6-1. Characterization of Owner Responses to Regulatory Actions
Identify
Cost-Minimizing
Compliance Option
P = Post-Regulatory Price
AVC = Average Variable Cost
DM = Market Value of Debt
DL = Liquidation Value
of Debt
Indicates that decision
was modeled in the
market analysis
CWT Process
.Closure
Implement
' Cost-Minimizing
Compliance Option
Implement Cost-
Minimizing
Compliance Option
and Continue
Operations
Can firm
cover its debt
obligations?
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interest payments or is in violation of its debt covenants, the company's creditors may take
control of the exit decision and forced exit may occur. If the market value of debt (DM) under
continued operations is greater than the liquidation value of debt (DL), creditors would probably
allow the facility to continue to operate. Under these conditions, creditors may renegotiate the
terms of debt. If, however, the DM under continued operations is less than DL, involuntary exit
will result and the facility will discontinue operations. Exit will likely take the form of
liquidation of assets or distressed sale of the facility. For this analysis the decision process is
simplified. All owners are assumed to implement the cost-minimizing compliance option and
continue to operate the facility. The increased likelihood of financial failure potentially caused
by these assumptions is presented in Chapter 8, but the financial impacts of creditor imposed exit
decisions are not modeled.
In the decision-making process modeled in this analysis, current owners of CWT
facilities are assumed to either implement the cost-minimizing compliance option and continue
to operate all services provided by the facility, discontinue unprofitable services yet continue to
operate the facility. These decisions are modeled in terms of their financial impact to parent
companies. The decision to continue to operate may be accompanied by a change in the cost of
capital, capital structure and financial viability of the company.
6.2 FINANCIAL IMPACTS OF THE REGULATION
The Agency evaluated changes in the financial status of companies owning CWT
facilities by first projecting the changes in the cost of capital and changes in capital structure for
potentially affected companies. Next, post-compliance balance sheets and income statements
that assume these changes in capital costs and structure were constructed for each company to
simulate with-regulation changes in company finances after the CWT market adjustments
described in Chapter 5 have been incurred. Then, the Agency calculates baseline and with-
regulation values of one of two composite indexes of financial health to indicate any change in
the likelihood of financial failure due to the regulation. For publicly-traded companies the
appropriate index is the Z-score, a multidiscriminant function that simultaneously considers
liquidity, asset management, debt management, profitability, and market value to assess the
company's potential for bankruptcy. For companies that are not publicly-traded, the Agency
uses a similar function called the Z"-score as a predictor of company-level financial distress.
The Z"-score function differs from the Z-score function in that no market-value parameter is
considered and the coefficients for the other four financial parameters are different.
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6.2.1 Changes in the Capital Structure and Cost of Capital
Investments in pollution control equipment required to comply with the regulation will
potentially reduce the debt capacity of the company, change its capital structure, and increase its
cost of capital. This section describes the framework used for projecting the impacts of the
regulation on the company's capital structure and its cost of capital. While the Agency does not
directly link changes in a company's capital structure or a given change in a company's cost of
capital to its ability to withstand the demands of the regulation, the Agency does project such
changes on a company-specific basis and recognizes that these changes are integral to analyses
determining the regulation's expected impact on companies' financial viability. This section
briefly describes how cost of capital changes were estimated for potentially affected companies.
Realistically, companies may use many strategies to raise required additional capital to
comply with a regulation of this kind. To objectively model the financing decisions of such a
wide variety of companies the following simplifying assumptions were made:
• Companies have access to capital from only three sources: debt, new internal equity
(current portion of retained earnings), and new external equity (the sale of new stock).
• The company's baseline capital structure is optimal, and new capital will be raised if
necessary to maintain this optimal capital structure.
• Companies are constrained in their debt financing to an industry-specific benchmark.
The lower quartile debt ratio for a company's SIC code represents the upper bound of
prudent debt financing. The portion of total with-regulation company value that is
financed with debt shall not exceed this threshold unless the company's baseline debt-
to-company value ratio already exceeds it.
• Companies with a baseline debt-to-company value ratio greater than the industry
benchmark use equity financing exclusively.
• The cost of debt (the interest rate at which individual companies may borrow) is not
projected to change due to the regulation.
• The cost of equity obtained through issuance of new stock is greater than the cost of
equity obtained through retained earnings.
• Companies retain 100 percent of their earnings unless data on dividends paid out are
available.
• For each one percent increase in the quantity of shares outstanding, the price of each
share decreases by 0.5 percent. This decrease in price is reflected in a corresponding
increase in the required return, or cost, of external equity.
• Companies use all of their available internal equity capital to finance the compliance
capital costs before issuing new external equity.
These assumptions will be reintroduced individually as the model is explained in greater detail.
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6.2.1.1 Changes in Company Value
In financial theory, the value of an investment is measured as the present value of its
future cash flows. The cash flows associated with an investment in pollution control equipment
are generally negative. Thus, pollution control investments tend to reduce the company's value.
("Reduce" here means reduce from what the firm's value would be if there were no legal
requirement to invest in pollution control equipment. However, the promulgation of a regulation
should trigger a reassessment of the value of an affected firm's facilities. Thus, if a regulation is
implemented, if the alternative to control equipment is facility shutdown, and if shutdown would
be very costly, then investment in pollution control equipment probably would increase the
firm's value.) Furthermore, pollution control investments generally reduce the debt capacity of
potentially affected companies by reducing the company's profitability and, thus, the overall
ability of the company to support debt service.1 The change in company value can be estimated
using the following equation:
AV = K + I(R - O)/(l+r)
(6.1)
where;
AV = the change in company value,
K = the installed capital costs of the regulation,
R = the change in the company's annual revenue stream,
O = the change in the company's annual operating cost cash flows, and
r = the company's weighted average cost of capital (WACC).
Companies may issue new debt or equity depending on the magnitude of the compliance
capital requirements relative to the value of the company's earnings. If an affected company has
no unused debt capacity and is making no other investments besides the investment in pollution
control equipment, it would be forced to retire existing debt in response to the regulation to
maintain its target capital structure. In practice, however, companies will likely be carrying out
other investment and financing programs along with the pollution control requirements. Rather
than retiring existing debt, the company would change its financing mix to issue more equity and
less debt than otherwise. If an affected company has unused debt capacity, it will potentially use
this capacity to finance the required investment in pollution control equipment. However, using
this debt capacity potentially displaces investment in other assets that increase the company's
value rather than decrease it.
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6.2.1.2 Capital Structure and the Marginal Cost of Capital
For this analysis, it was assumed that a company has access to capital from three sources:
debt, new internal equity (current portion of retained earnings), and new external equity. To
project the financing mix used for pollution control investments, EPA must make assumptions
regarding the company's capital structure policy, dividend policy, and the relative cost of capital
raised from each of the three sources.
Responses to the regulatory requirements hinge on the cost of new, or marginal, capital.
Thus, the relevant costs of capital are not historical; rather, they are the marginal costs of new
funds that must be raised to finance the control equipment. Capital structure theory holds that a
specific breakpoint exists in the company's marginal cost of capital (MCC) schedule as shown in
Figure 6-2. The point labeled "B" in the figure illustrates the increase in the company's WACC
when the company raises new external equity to meet its capital requirements while maintaining
an optimal capital structure.2 This breakpoint is referred to as the retained earnings breakpoint in
financial literature and is identified using the following equation:
where;
REB
RE
S
REB = RE/S
the retained earnings breakpoint,
the current year's retained earnings, and
the share of total company value represented by equity.
(6.2)
The breakpoint is based on several assumptions:
• The company's current capital structure is optimal, and new capital will be raised in
such a way as to maintain this optimal capital structure.
• New equity could come from one of two sources: the part of this year's profits that
management decides to retain (internal) or the sale of new stock (external).
• If the cost of equity obtained through retained earnings = ke, the cost of equity obtained
through the issuance of new stock is ke + flotation (transaction) costs.
The MCC schedule jumps at the point where the company must raise new external equity capital
to meet its investment requirements.
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Figure 6-2. Marginal Cost of Capital Schedule
WACC
B
Dollars of New Capital
6.2.1.3 Companies'Capacity for New Debt
Empirical evidence shows that capital structure can vary widely from the theoretical
optimum and yet have little impact on the value of the company.3 Thus, companies typically
focus on a "prudent" level of debt rather than on setting a precise optimal level. Brigham and
Gapenski define a prudent level of debt as one that captures most of the (tax) benefits of debt
financing yet keeps financial risk at a manageable level, ensures financing flexibility, and
maintains a favorable credit rating. For this analysis, it was assumed that the industry benchmark
reflecting the 75th percentile for the debt ratio (corresponding to the lower quartile debt ratio in
Table B-3) represents the upper bound of prudent debt financing. For example, the 75th
percentile debt ratio for SIC 4953 is 68 percent. Thus, it was assumed that companies in this SIC
code will seek to maintain a level of debt that is equal to or below 68 percent of the company's
with-regulation value. This assumption has several implications for modeling decisions
regarding the financing mix chosen to cover the compliance capital costs. First, it was assumed
that companies with a baseline debt-to-company value ratio greater than the industry benchmark
use equity financing exclusively. Second, this analysis assumed that a company's debt capacity,
the maximum amount of compliance capital costs that may be financed through debt is computed
based on the following formula:
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DM = [(D/V)LQ • (VB + AV)] - DB (6.3)
where;
DM = the maximum amount of new debt to finance compliance capital costs,
(D/V)LQ = the industry-specific lower quartile debt ratio,
VB = the baseline value of the company,
AV = the change in the value of the company because of regulation, and
DB = the baseline book value of long-term debt.
The baseline value of the company (VB) is computed as the sum of the market value of
equity (measured as average share price times average number of shares outstanding) and the
book value of long-term debt. Where data on share prices and number of shares outstanding are
inappropriate or unavailable, the value of equity is measured as total assets minus total liabilities.
Equation (6.3) defines the estimated maximum amount of new debt issued to cover the
compliance capital costs. However, a company may employ a level of new debt that is less than
DM in response to the regulation. In particular, where the company's baseline D/V ratio is less
than its industry's (D/V)LQ ratio, it was assumed that the company issues new debt up to a level
equivalent to its baseline D/V ratio times the installed capital cost. Thus the share of the
compliance capital costs financed through debt does not exceed the company's baseline D/V
ratio and may be less than the D/V ratio where the product of D/V and the compliance capital
costs exceed DM-
6.2.1.4 Internal vs. External Equity
Compliance capital costs that are not financed using debt are financed using internal or
external equity funds. Internal equity includes the current portion of the company's retained
earnings that are not distributed in the form of dividends to the owners (shareholders) of the
company. External equity refers to newly issued equity shares. This analysis assumed that the
company retains 100 percent of its earnings unless data on dividends paid out are available.
Because data on dividends are generally available only for large, publicly-traded companies, the
analysis implicitly assumed that private companies and small companies retain a larger share of
their earnings. This assumption is not unreasonable because companies that are not publicly-
traded and small companies, in particular, do not typically have a consistent dividend payout
policy. Thus, these companies are more likely to retain a larger share of their earnings when
faced with regulatory costs than are publicly-traded companies, because publicly-traded
companies are potentially concerned about the signal that a change in dividend policy sends to
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investors. This situation is particularly true, because the cost of new external equity is higher
than the cost of current retained earnings due to flotation costs (see Figure 6-2).
Flotation costs associated with new equity increase the effective cost of these funds. It
was assumed that flotation costs for new equity average approximately one percent.4 Because
new equity is more costly than retained earnings, this analysis assumed that companies use all of
their available internal equity capital to finance the compliance capital costs before issuing new
external equity. The projected share of capital costs financed through debt, retained earnings,
and new external equity for each regulatory option are presented in Chapter 8.
As companies raise larger and larger sums of capital during a given time period, the costs
of both debt and equity components may begin to rise, and as this occurs, the WACC also rises.
This increase in the cost of capital is shown as the upward-sloping portion (beyond the retained
earnings breakpoint) of the hypothetical marginal cost of capital schedule illustrated in
Figure 6-2. This upward-sloping cost curve reflects the assumption that investors' demand for
securities is downward sloping. An estimated elasticity of demand is required to project the
change in the cost of equity resulting from an increase in the number of shares issued. However,
estimating company-specific elasticities is beyond the scope of this analysis. This analysis
assumed that the price elasticity of demand for an individual company's securities is 0.5. In
other words, for each one percent increase in the quantity of shares outstanding, the price of each
share decreases by 0.5 percent. This decrease in price is reflected in a corresponding increase in
the required return, or cost, of equity.
Under the assumptions regarding capital structure policy, the share of debt in the
company's capital structure does not change appreciably. Consequently, EPA does not project a
change in the cost of debt due to the regulation. Using the baseline debt and equity weights
(which are assumed to be the company's target weights), the baseline cost of debt, and the with-
regulation cost of equity, EPA computed a with-regulation WACC for each regulatory option.
Because the economic impact of proposed regulatory options on individual companies' financial
viability depends less on companies' absolute costs of compliance than on their annualized costs
of compliance (relative to their respective baseline levels of financial health), projected changes
in companies' costs of capital are pivotal in projections of economic impacts of the regulatory
options.
6.2.2 Changes in Financial Viability
Financial ratio analysis provides a method of identifying changes in the financial viability
of affected companies that may be caused by the regulation. One of two possible functions was
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used to compute a composite index of financial well-being for each of the 57 companies included
in the company-level impact analysis. The choice of an appropriate function depended on
whether or not the company in question had publicly-traded stock. As explained earlier, for
publicly-traded companies the appropriate composite index is called the Z-score. The Z-score is
a multidiscriminant function used to assess bankruptcy potential developed specifically for
manufacturing companies. It simultaneously addresses liquidity, asset management, debt
management, profitability, and market value.
The function is given in the following equation:
Z = 1.2Xi + 1-4X2 + 3.3X3 + 0.6X4 + 0.999X5
(6.4)
where;
Z = overall index,
Xi = working capital/total assets,
X2 = retained earnings/total assets,
Xs = earnings before interest and taxes/total assets,
X4 = market value of equity/book value of total debt, and
Xs = sales/total assets.
The market value component (X4> uses stock price data. Consequently, the Z-score is only
applicable to companies with publicly-traded stock.
For companies that are not publicly-traded a modified function called the Z"-score was
used. The Z"-score function does not include a parameter for market value, and the coefficients
for each of its other parameters are different. The Z"-score function is given in the following
equation:
Z" = 6.56Xi + 3.26X2 + 6.72X3 + 1.05X4
(6.5)
where Z" is the overall index, Xi through Xs are as defined for Z above, and X4 is net worth to
total liabilities.
Taken individually, each of the ratios given above is higher for companies in good
financial condition and lower for companies in poor financial condition. Consequently, the
greater a company's bankruptcy potential, the lower its overall index score. For each of these
composite indexes of financial well-being the ranges of values that indicate promising, uncertain,
and discouraging financial well-being are different. For the Z-score index a score below 1.81
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indicates that bankruptcy is likely, and a score above 2.99 indicates that bankruptcy is unlikely.
Z-scores between 1.81 and 2.99 are indeterminate. For the Z"-score index, a score below 1.10
indicates that bankruptcy is likely, and a score above 2.60 indicates that bankruptcy is unlikely.
Z"-scores between 1.10 and 2.60 are indeterminate. The Agency has determined that any
company whose Z-score or Z"-score at baseline does not suggest the likelihood of bankruptcy,
but whose with-regulation projected Z-score or Z"-score does indicate the likelihood of
bankruptcy, is considered to suffer significant economic impact from the regulation.
6.3 REFERENCES
1. Pogue, Dr. Gerald A. Estimation of the Cost of Capital for Major United States
Industries with Application to Pollution-Control Investments. November. 1975.
2. Brigham, Eugene F., and Louis C. Gapenski. Financial Management: Theory and
Practice. 6th Ed. Orlando, FL, The Dryden Press. 1991.
3. Brigham, Eugene F., and Louis C. Gapenski. Financial Management: Theory and
Practice. 6th Ed. Orlando, FL, The Dryden Press. 1991.
4. Brigham, Eugene F., and Louis C. Gapenski. Financial Management: Theory and
Practice. 6th Ed. Orlando, FL, The Dryden Press. 1991.
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CHAPTER?
MARKET IMPACTS OF THE CWT EFFLUENT LIMITATIONS
GUIDELINES AND STANDARDS
This chapter describes the results of the analysis of market impacts resulting from the
Agency's proposed regulatory options:
• Regulatory Option 1: Metals Option 3, Oils Option 2, and Organics Option 1
• Regulatory Option 2: Metals Option 3, Oils Option 3, and Organics Option 1
The Agency is recommending control options for each subcategory. Therefore, for
facilities in more than one subcategory, compliance with the effluent limitations guidelines and
standards will involve complying with the controls for each relevant subcategory. Thus, if a
facility accepts both oils and metals from off-site, the facility will incur the costs associated with
complying with both the proposed Metals Subcategory pollutant controls and the proposed Oils
Subcategory pollutant controls.
As described above, complying with the proposed CWT effluent limitations guidelines
and standards would generally increase the costs of performing various CWT services. The costs
incurred by a CWT facility would depend on
• the types of affected CWT processes the facility has on-site,
• the types of waste managed in those CWT processes, and
• the baseline levels of control the facility had achieved for each CWT process.
For each control option, compliance costs were estimated for each CWT process at each facility,
based on facility-specific information about the types of waste managed and the baseline levels
of control. These costs are described in detail in Chapter 4. The EPA expects that facilities
affected by the standard would undertake capital investments and annual O&M expenses to
comply with the standard. In addition, facilities permitted under RCRA would be required to
modify their permits to include the changes in their processes and equipment. Monitoring to
ensure compliance would also impose costs on the facilities.
7.1 COMPANY RESPONSES TO THE COSTS OF COMPLIANCE
The Agency assumes that facilities and the companies that own them will determine the
actions to take to maximize their profits with the regulation in effect. In this analysis, the
responses of companies owning commercial CWT facilities and companies owing non-
commercial CWT facilities are assessed under different assumptions. The Agency assumes that
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facilities performing CWT services on a commercial basis will modify their market behavior to
maximize their with-regulation profits at the facility level. The methodology used to model
commercial facility and market responses to the costs of complying with the regulation is
described in Chapter 5.
In each regional CWT market, facilities were assumed to determine their with-regulation
profit-maximizing quantity of waste treatment, believing that the other facilities in that market
will not react to this change in quantity by modifying the quantities they treat. The model
simultaneously determines the equilibrium market price and quantity in each CWT market and
the profit-maximizing quantity of waste treated in each CWT service by each facility. Overall,
the quantity of waste treated in CWT processes declines and the price of CWT services increases.
Individual CWT facilities may increase or decrease the quantity of waste they treat and may
experience increased or decreased costs, revenues, and profits. These facility-level changes are
summed across commercial CWT facilities owned by each company to provide inputs into the
company-level impacts analysis reported in Chapter 8.
Non-commercial CWT facilities are assumed not to modify their CWT operations in
response to the costs of compliance but rather to pass the costs of compliance along to their
parent company. This assumption reflects information received from non-commercial facilities
indicating that their CWT operations were treated as a cost center rather than a profit center. The
CWT operations were assumed to be treated like other "overhead" operations such as centralized
accounting or legal departments. Although the CWT operations provide a service to the
company as a whole and are compensated for that service, they are not generally expected to
make a profit. The impacts of the regulation on non-commercial CWT facilities are thus
assumed to be incurred by the parent company owning those facilities and are reported in
Chapter 8. The first part of this chapter addresses impacts on facilities with commercial CWT
operations.
7.2 MEASURES OF IMPACTS
As described above, commercial CWT facilities' adjustments in response to the
compliance costs of the regulation result in changes in market prices and quantities in the
markets for CWT services. As described in Chapter 3, as many as three individual markets for
each of the broad types of CWT service exist in each of six regions. The actual changes in prices
and quantities estimated in each of those markets are presented in Appendix F. The measure of
market impact presented here is the median change in price and quantity for all the markets in
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each broad CWT treatment type: metals recovery, oils recovery, metals treatment, oils treatment,
and organics treatment.
For each commercial CWT facility, the with-regulation equilibrium may be characterized
by changes in the quantity of waste treated, changes in revenues, changes in costs, changes in
profits, and changes in employment. These changes were estimated by the market model, along
with the changes in market price and quantity discussed above. Each of the impacts is reported
in detail in Appendix F. The impacts on commercial CWT facilities are summarized by changes
in facility profitability.
Frequently, the assumption is made in economic modeling that facilities making negative
profits (whose revenues are less than their costs) will be closed. In the CWT industry, however,
this has not been the case recently. It appears that the criterion for closure is not current
profitability but expected future profitability. Data provided in the questionnaire indicated that in
1989, 22 of the 85 CWT facilities were unprofitable. Of 18 unprofitable facilities contacted for
clarification, all but two were still in operation two years after the questionnaire.
Several reasons may explain why unprofitable facilities remain in operation rather than
being closed by their owners. First, 30 of the 70 commercial CWT facilities receive some of the
off-site waste they treat from other facilities under the same ownership. These facilities perform
a service to the rest of their company and are unlikely to close even if their commercial
operations are unprofitable, although they may curtail commercial operations if they do not cover
costs. Second, most of the CWT facilities are regulated under RCRA. Closure of a RCRA
facility requires that the site be cleaned up, which in some cases would entail expensive long-
term remediation. Owners may find it maximizes their profits in the short run to keep in
operation facilities that are losing money on their CWT operations, rather than incurring the costs
of "clean-closing" the facility. Finally, the rapidly changing demand conditions in the industry
may cause owners to keep facilities open because they expect that, once the facility adjusts its
operations to correspond to new demand conditions, it will become profitable. For these reasons,
the Agency is not conducting a traditional facility closure analysis for the CWT industry.
Facility-level changes in revenues and costs were computed as inputs to the company level
analysis, and changes in facility profitability are reported, but they were not used to project
closures.
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7.3 RESULTS OF THE MARKET ANALYSIS
The integrated market/facility model described in Chapter 5 was used to estimate the
equilibrium with-regulation changes in market prices and quantities and facility revenues, costs,
profits, and quantities resulting from complying with EPA's proposed regulatory options.
7.3.1 Market Impacts
As described above, the market impacts of the proposed effluent limitations guidelines
and standards, if promulgated, would include changes in market prices and quantities in affected
CWT markets. As discussed above, the facilities, in deciding how to respond to the O&M
compliance costs, modify the amount of CWT services they offer, resulting in a decrease in
market supply in most CWT markets. The market model solves simultaneously for the with-
regulation equilibrium market price and quantity and the with-regulation facility quantities in
each market.
Most of the analytical inputs and results shown in this report are reported separately for
BPT/BAT controls and for PSES controls. For the market impacts, however, this is not
appropriate. Market-level impacts cannot be broken into impacts of BPT/BAT controls and
impacts of PSES controls. Because many regional markets include both facilities that are direct
dischargers and facilities that are indirect dischargers, and because the Agency is expecting to
promulgate both types of controls simultaneously, market impacts must be analyzed and reported
based on the combined effects of the BPT/BAT and PSES controls analyzed together. Table 7-1
shows the median percentage changes in prices and quantities for each of the five broad types of
CWT service.
TABLE 7-1. MARKET IMPACTS OF BPT/BAT AND PSES CONTROLS
Market
Metals Recovery
Oils Recovery
Metals Treatment
Oils Treatment
Organics Treatment
Option 1
Percentage Percentage
Change in Change in
Price Quantity
2.64 -3.02
8.64 -11.00
26.74 -20.12
28.86 -15.14
34.92 -16.69
Option 2
Percentage Percentage
Change in Change in
Price Quantity
2.64
41.76
26.74
35.31
34.92
-3.02
-65.40
-20.12
-35.44
-16.69
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The median percentage changes in price and quantity in affected CWT markets indicate
that overall the impact of the effluent guidelines limitations and standards is moderate, although
in some markets especially under Option 2, impacts are significant. Under each broad market
category, there are some regional submarkets that are virtually unaffected by the regulation and
others that incur significant changes in price and quantity. In all cases, the market prices of
broad types of CWT services are projected to increase and the quantity of waste treated in CWT
processes is projected to fall. Thus, one of the expected features of the guidelines is a reduction
in the absolute quantity of wastes commercially treated, in addition to an improvement in the
level of treatment. These market adjustments in quantity are reflected in decreases in the
quantity of waste treated at some individual CWT facilities. In some cases, with less waste being
treated, CWT processes at some facilities may close down. Other facilities may experience
increases in the quantity treated in some CWT processes, because their costs are unaffected by
the controls, or they incur very small increases in costs relative to other facilities supplying CWT
services in their market. These facility-specific variations are summarized below and are
aggregated in the market-level responses.
Demanders of CWT services may either have decreased the quantity of CWT services
demanded by generating less waste (pollution prevention) or by substituting other waste
management options not affected by this regulation for CWT services. These other waste
management options include on-site waste treatment and off-site waste disposal by such means
as underground injection or incineration. As discussed in Appendix D, the Agency has assumed
that demand is moderately responsive to changes in price; that is, that a one percent change in
price results in a one to 1.5 percent change in quantity demanded. If demand in some CWT
markets is less responsive to changes in price than was assumed for this analysis, price increases
would be greater than estimated and quantity decreases would be smaller than estimated. The
converse would be true if demand is more responsive to price than assumed.
Under Regulatory Option 1, median price increases range from 3 to 35 percent, while
median decreases in the quantities of waste treated range between 3 and 20 percent. Under
Option 2, median price increases range from 3 to 42 percent, while median quantity treated
decreases range from 3 to 65 percent. Thus, the median changes in price and quantity indicate
that for some markets, impacts of the effluent limitations guidelines and standards may be
significant.
Market impacts are especially significant for the oils recovery and oils treatment markets
under Regulatory Option 2. One reason for the high costs of compliance with this regulatory
option and for the resulting significant impacts is that many facilities in the Oils Subcategory
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have relatively low levels of treatment at baseline. (For example, only one oils recovery facility
treats the wastewater generated from the oils recovery process.) Thus, the investment they must
make to comply is significant.
As discussed in Appendix D, the cost of CWT services in overall production cost of the
production processes that generate waste is generally very small (less than 1 percent). Thus, the
Agency does not predict changes in the prices or quantities of goods whose production generates
the demand for CWT services.
7.3.2 Facility Impacts
In addition to the changes in prices and quantities experienced by affected markets for
CWT services, complying with the costs of the control options results in impacts on CWT
facilities. Facilities adjust the quantities of waste treated in each treatment process to maximize
their profits with the regulation in effect. At the same time, the cost per gallon treated and the
price received per gallon treated also change. Thus, CWT facilities experience changes in
revenues and costs as a result of the effluent limitations guidelines and standards. Changes in
facility revenues and costs resulting from the market and facility responses to the effluent
limitations guidelines and standards combine to result in changes in facility profitability (Profit =
Total Revenue - Total Cost). For this analysis, profit is defined as Earnings Before Taxes, or
EBT.
Table 7-2 summarizes the changes in facility profitability resulting from the controls. In
Table 7-2, "profits improved" shows the number of facilities for which either of the following
was true: (1) facility profits were positive both with and without the regulation and were higher
with the regulation, or (2) facility profits were negative both with and without the regulation but
were less negative with the regulation. "Profits worse" shows the number of facilities for which
either of the following was true: (1) facility profits were positive both with and without the
regulation but were lower with the regulation, or (2) facility profits were negative both with and
without the regulation and were more negative with the regulation. "Became unprofitable"
shows the number of facilities that were profitable without the regulation but became
unprofitable with the regulation in effect.
The most severely affected facilities become unprofitable with the regulation in effect.
As noted in Chapter 3, several of these facilities were just breaking even at baseline but were
pushed into unprofitable territory by the market responses to the regulation. Companies owning
these facilities were previously made more profitable by their ownership of these facilities; now
they are made less profitable. Because these facilities are the most severely affected, their
changes in employment will be highlighted in the following section.
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TABLE 7-2. PROFITABILITY IMPACTS BY DISCHARGE STATUS
Regulatory Option 1
Regulatory Option 2
Direct Dischargers
Profits improved
Profits worse
Became unprofitable
Indirect Dischargers
Profits improved
Profits worse
Became unprofitable
Zero Dischargers
Profits improved
Profits worse
Became unprofitable
2
5
0
12
30
9
13
0
0
2
5
0
12
29
10
13
0
0
7.3.3 Employment Impacts
Changes in employment evaluated in this analysis result from two sources:
• Changes in the quantity of CWT services produced require changes in the quantity of
labor used.
• Labor is required to operate the controls on which the control options and combined
regulatory options are based.
Table 7-3 shows the estimated changes in employment, both positive and negative, resulting
from changes in the quantity of CWT services provided. To estimate changes in employment,
the Agency used data provided in the questionnaire about hours of full-time and part-time
employment associated with CWT operations. These data were used to compute the number of
full-time equivalent employees associated with each gallon treated at each CWT facility. Then,
the estimated change in the quantity of waste treated at each CWT facility is multiplied by this
employment factor to estimate the change in facility employment. In addition to these market-
related changes in employment, it shows the estimated labor requirements to operate the controls
under each option. Finally, it sums the two categories to give an overall estimate of the change
in employment projected to result from each control option and combined regulatory option.
7-7
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TABLE 7-3. EMPLOYMENT IMPACTS
Option 1
Option 2
Changes in Employment Resulting from
Market Adjustments
Job losses at facilities becoming unprofitable
Job losses at other facilities
Job Losses
National Total
Job Gains
National Total
Net Change In Employment From Market
Adjustments
National Total
Changes in Employment due to Labor
Requirements of Controls
National Total
Total Change in Employment
National Total
-62
-557
-619
242
-378
710
332
-75
-655
-730
229
-501
735
234
The Agency's combined regulatory options are both projected to result in a net increase
in employment, because of the relatively large number of employees estimated to be needed to
operate the pollutant controls. Option 1 is projected to result in 619 market-related job losses
and 242 market-related job gains, for a net change in employment resulting from market and
facility adjustments to the regulation of 378 job losses. An estimated 710 additional employees
will be needed to operate the pollutant controls so that the overall employment impact of Option
1 is an increase of 332 employees. Option 2 is projected to cause 730 market-related job losses
and 229 market-related job gains so that the net impact of facility and market adjustments to the
regulation is a loss of 501 jobs. Because 735 additional employees are projected to be needed to
operate the controls, the overall impact of the regulation is a net gain of 234 jobs.
Several points should be made about these employment impacts. The market-related job
increases, while partially offsetting the market-related job decreases on a national basis, occur at
different plants from the job losses. There is no guarantee that the workers displaced at one
CWT plant would be hired at another CWT plant or would be willing to move to seek those jobs.
7-8
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Similarly, it is not certain (although it is likely) that the skills required to operate the pollution
control equipment are the same as those required to operate the capital equipment the CWT
facility had in place at baseline. Thus, the employment gains associated with the controls may
only partially offset the job losses from production decreases at a given plant. Thus, from the
individual employee's standpoint, the fact that complying with the regulation results in a net
increase in CWT employment nationwide may not mean that they do not experience
displacement due to the regulation. From the point of view of communities in which CWT
facilities are located, however, the net increase in employment is likely to be good news.
Community impacts of the effluent limitations guidelines and standards are discussed in
Chapter 10.
7 J.4 Inputs to the Company-Level Analysis
As discussed above, changes in facility revenues and costs, assets, and liabilities resulting
from the regulation were aggregated to the company level by summing the changes across all
facilities owned by each company. Summary statistics for the facility-level changes in revenues,
costs, and profits are shown in Appendix F. These company-level changes were then used to
estimate changes in companies' likelihood of bankruptcy resulting from the regulation.
Assessment of company-level impacts is important because the resources the parent company has
available determine whether the CWT facilities will be able to comply with the proposed
regulation. In this sense, whether the regulation is economically achievable or not depends on
how CWT facilities' parent companies are affected by the regulation. These impacts are
assessed in the following chapter.
7-9
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CHAPTER 8
COMPANY IMPACT ANALYSIS
The company impact analysis evaluates the impact of regulatory compliance on
companies owning facilities that would be subject to the CWT effluent limitations guidelines and
standards. Analysis of the economic impact of regulatory options at the company level is
perhaps the most important component of the EIA. Because CWT services are intermediate
goods that are integral to production processes of final goods marketed in many dissimilar
industries, it is difficult to identify a "typical" CWT facility, and it is equally challenging to
identify a "typical" corporate parent of a CWT facility. Some facilities operate as non-
commercial cost centers for parent companies whose primary focus has nothing to do with waste
management. Others are operated by large waste management companies that rely entirely on
commercial sales of waste treatment and disposal services. Some CWT facilities are identical in
size and scope of operations to the companies that are legally and financially responsible for their
activities. Others are several intermediate levels of ownership removed from their corporate
parents. These peculiarities were discussed in detail in Chapter 3.
The Agency cannot confidently predict facility closures as a response to the financial
burdens of the regulation. Historical observation has shown that companies are extremely slow
to close unprofitable CWT facilities. The Agency has determined that the best method for
evaluating total impacts of the regulation is to project the impacts on company finances at the
highest level of corporate ownership of affected CWT facilities. The impacts resulting from both
BPT/BAT and PSES compliance under each of the regulatory options are presented. Two
companies that own both a direct and an indirect discharging facility are included in the
summary of impacts for both standards.
The company impact analysis is organized into three sections. The first section reviews
the concepts used to drive the financial analysis. The second section describes the methodology
used to implement these concepts. The third section presents the results of the company analysis.
8.1 ANALYTIC APPROACH
The company-level analysis is the final step in a multi-staged effort to model the impacts
of the proposed regulatory options. Inputs to this analysis include
• engineering cost estimates for each CWT facility,
• projected adjustments in the with-regulation market prices and the quantities of CWT
services offered at each affected CWT facility, and
• information regarding the baseline financial status of CWT facilities' parent companies.
8-1
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A company's ability to comply with the regulatory requirements is assessed in two stages:
• The baseline analysis identifies companies whose financial condition, independent of
demands of the proposed effluent limitations guidelines and standards, is already so
distressed that compliance with the regulation may not be advisable. Such companies
would be at risk of financial failure even without regulatory costs. For this reason,
companies that fail both the baseline and the with-regulation analyses are not
considered to suffer severe impacts as a result of the regulation.
• The post-compliance analysis identifies those companies, otherwise financially sound,
whose financial viability may be impaired by regulatory compliance. Such companies
would be weakened by the financing burden and additional operating expenses of the
proposed regulatory options.
The company-level analysis is based on the assumption that owners respond to the
regulation by installing and operating pollution control equipment or discontinuing regulated
processes within the facility. The impacts of these facility-level responses, presented in
Chapter 7, must be aggregated across all facilities owned by a company to assess the regulation's
economic impacts on the parent company's financial performance. This analysis is conducted
from a perspective that evaluates companies' financial strength both before and, on a projected
basis, after their CWT facilities have incurred the cost and revenue impacts presented in
Chapter 7. For a company to meet the demands of the regulation without severe economic
distress it must be financially viable both at baseline and post-compliance. The following section
summarizes the methodology used to derive company-level economic impacts. A more detailed
description of the company impacts model is presented in Chapter 6.
Some companies that own more than one CWT facility own facilities that are in different
discharge categories. Because of differences in the guidelines and standards to which direct and
indirect dischargers are held, the Agency has tried, where possible, to present the economic
impacts of the regulatory options for direct and indirect dischargers separately. For the company
impact analysis this means that impacts to companies owning CWT facilities in more than one
discharge status category are included in summaries of each of the discharge categories that
describes facilities that they own. Table 8-1 shows the distribution of companies by the range of
discharge categories that apply to the facilities that they own.
8.2 ANALYTIC PROCEDURE
As described in Chapter 6, the Agency projects changes in the financial status of
companies owning CWT facilities by first projecting the changes in the cost of capital and
8-2
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TABLE 8-1. COMPANY COUNT BY TYPES OF DISCHARGERS OWNED
Discharge Status Category
Number of Companies
Direct Only
Indirect Only
Zero Only
Direct and Indirect
Indirect and Zero
Direct, Indirect, and Zero
12
34
6
1
3
1
Total
57
changes in the capital structure for potentially affected companies, then by using this information
and the estimated changes in revenues and costs, to assess changes in the likelihood of
bankruptcy.
8.2.1 Changes in the Cost of Capital
Companies will need to raise additional capital to comply with each of the proposed
regulatory options. To do so they can tap three different sources of capital. They can borrow the
money from creditors, they can use retained earnings if they have them, or they can issue new
stock. The assumptions used to project how companies will elect to raise the required capital
were explained in detail in Chapter 6. In each case companies will experience some change in
their debt structure. Depending on the financing option projected for a given company, these
changes may also change the company's cost of capital. The greater a company's reliance on
financing with new external equity (new stock) the greater the likelihood of increases in the
company's cost of capital.
Figures 8-1 and 8-2 permit comparison across companies of different sizes and across
companies owning direct and indirect discharging CWT facilities of the projected shares of
capital compliance costs to be financed with resources drawn from new debt, retained earnings,
and new external equity. Generally, the larger the company the smaller the projected share of
compliance capital costs that are financed with new external equity and the greater the share
8-3
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Figure 8-1. Projected Share of Compliance Capital Costs by Type of Financing
for Companies Owning at least One Indirect Discharging CWT
Facility
0%
20%
40%
60%
80%
Projected Share of Compliance Capital Costs
Financed Through Debt
Projected Share of Compliance Capital Costs
Financed Through Retained Earnings
Projected Share of Compliance Capital Costs
Financed Through New Equity
RO1 N = 9
RO2 N = 10
RO1 N = 9
RO2 N = 9
RO1 N = 7
RO2 N = 7
RO1 N = 9
RO2 N = 9
RO1 N = 34
RO2 N = 35
100%
Note: The projected financing decisions of two companies that own both a direct discharging CWT
facility and an indirect discharging CWT facility are included in both figures.
RO1 = Regulatory Option 1.
RO2 = Regulatory Option 2.
8-4
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Figure 8-2. Projected Share of Compliance Capital Costs by Type of Financing
for Companies Owning at least One Direct Discharging CWT Facility
CD
O
Q
CO
o
3
RO1 N = 0
RO2 N = 0
RO1 N = 2
RO2 N = 2
RO1 N = 2
RO2 N = 2
RO1 N = 10
RO2 N = 10
RO1 N = 14
RO2 N = 14
20%
40%
60%
80%
100%
Projected Share of Compliance Capital Costs
Financed Through Debt
Projected Share of Compliance Capital Costs
Financed Through Retained Earnings
Projected Share of Compliance Capital Costs
Financed Through New Equity
Note: The projected financing decisions of two companies that own both a direct discharging CWT
facility and an indirect discharging CWT facility are included in both figures.
RO1 = Regulatory Option 1.
RO2 = Regulatory Option 2.
8-5
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financed with retained earnings. Smaller companies owning direct discharging CWT facilities
are projected to rely exclusively on new external equity to finance their capital compliance costs.
As a group, however, indirect discharger owners of all sizes are projected to use new external
equity to finance a far greater share of their compliance capital costs than are owners of direct
dischargers.
In keeping with their greater reliance on new external equity, smaller companies are
projected to incur greater increases in their costs of capital than larger companies. The baseline
cost of capital is generally higher for companies owning direct discharging CWT facilities than
for owners of indirect dischargers, and it is typically higher for indirect dischargers than it is for
zero dischargers. There is only a marginal difference in the relative increases in capital costs
projected for companies owning CWT facilities of different discharge statuses, when the
companies are not segregated according to their relative sizes. The WACC increases by about
two percentage points from baseline to post-compliance with Regulatory Option 1, and it
increases slightly more from baseline to post-compliance with Regulatory Option 2. Descriptive
statistics on the change in the cost of capital for affected companies of different sizes are
presented in Table G-l (see Appendix G). Differences in the projected changes in the cost of
capital for companies owning CWT facilities in different discharge categories can be found in
Table G-2 (see Appendix G).
After projecting companies' financing decisions, the Agency incorporated projected
changes in companies' capital structure and capital costs along with the changes in costs and
revenues projected to occur at their CWT facilities and constructed new company balance sheets
and income statements to simulate with-regulation changes in company finances. Table 8-2
shows the adjustments made to the baseline financial statements to develop the with-regulation
financial statements used for this analysis.
8.2.2 Bankruptcy Analysis
Using projected post-compliance financial statements, the Agency recalculates the
financial ratios used to estimate the respective composite indexes used to identify regulation-
induced changes in the likelihood of bankruptcy for publicly-traded and private companies. For
publicly-traded companies the appropriate index is the Z-score, a multidiscriminant function that
simultaneously considers liquidity, asset management, debt management, profitability, and
market value to assess the company's potential for bankruptcy. For companies that are not
publicly-traded, the Agency uses a similar function called the Z"-score as a predictor of
company-level financial distress. The Z"-score function differs from the Z-score function in that
8-6
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TABLE 8-2. CALCULATIONS USED TO CONSTRUCT WITH-REGULATION
FINANCIAL STATEMENTS
Financial Statement
Category Calculations
Income Statement
Annual Revenues
Cost of Sales
Gross Profit
Expenses due to
Regulation
Other Expenses and
Taxes
Net Income
Balance Sheet
Cash
Accounts Receivable
Cash + Accounts
Receivable
Other Current Assets
Total Current Assets
Fixed Assets
Other Noncurrent Assets
Total Assets
Accounts Payable
Other Current Liabilities
Total Current Liabilities
Noncurrent Liabilities
Total Liabilities
Net Worth
Total Liabilities and
Owner's Equity
Baseline annual revenues + the estimated change in annual
revenues.
No change from baseline.
Annual revenues - cost of sales.
Interest: Projected share of capital costs financed through debt'
debt interest rate.
Depreciation: 10% • compliance capital costs.
Operating: operating compliance costs.
(Gross profit — estimated expense due to regulation) •
baseline ratio of other expenses and taxes to gross profit.
Gross profit — estimated expense due to regulation —
other expenses and taxes.
No change from baseline.
No change from baseline.
No change from baseline.
No change from baseline.
No change from baseline.
Baseline fixed assets + compliance capital cost.
No change from baseline.
Total current assets + fixed assets + other noncurrent assets.
No change from baseline.
Baseline other current liabilities + amortized compliance cost
financed through debt - estimated interest expense.
Accounts payable + other current liabilities.
Baseline noncurrent liabilities + (capital compliance cost
financed through debt - current portion of debt).
Total current liabilities + noncurrent liabilities.
Total assets - total liabilities.
Total assets.
Note: Depreciation expense is based on the first year's allowable deduction for industrial equipment under the
modified accelerated cost recovery system.
8-7
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there is no market-value parameter considered, and the coefficients for the other four financial
parameters are different. Details about the individual financial ratios included in each of these
composite indexes are provided in Section 6.2.2. Companies whose baseline and with-regulation
Z-score values (or Z"-score for companies that are not publicly-traded) indicate that they are
financially viable at baseline, but are likely to experience financial failure post-compliance, are
considered to suffer severe economic impacts from the regulation.
83 RESULTS
With-regulation Z-scores were computed to assess the probability that the regulation will
result in financial failure or bankruptcy for potentially affected companies. In the baseline
analysis, EPA estimates that 6 of the 48 companies for which enough data are available to
estimate Z or Z" scores are likely to experience some form of financial failure. Tables G-3
through G-5 (see Appendix G) compare the likelihood of bankruptcy at baseline with an
assessment of that likelihood for companies after incurring expected CWT market adjustments to
each regulatory option. Four additional financial failures over baseline are projected for
Regulatory Option 1, three of which are small privately-held single-facility companies, and one
is a privately-held company in the third largest size category.
As discussed in Section 6.1, affected companies can experience changes in the revenues
generated by CWT services as well as in the costs of providing these services. The net impact on
a company's profitability is negative if cost increases exceed revenue increases, but it is positive
if revenue increases exceed cost increases. The projected market adjustments (of higher prices
and lower quantities of services provided) in the markets for oils treatment and oils recovery are
much greater in response to Regulatory Option 2 than in response to Regulatory Option 1.
Despite the fact that the compliance costs are generally higher for Regulatory Option 2 than they
are for Regulatory Option 1, the net impact of cost and revenue changes is less painful for a
number of companies owning CWT facilities. Under Regulatory Option 2, the prices of oil
treatment and oil recovery services are projected to increase substantially in many regional
markets. For some companies, this results in significant increases in revenues and profitability.
In total numbers only three additional failures over baseline are projected as a result of
Regulatory Option 2. These financial failures are also more evenly distributed across size
categories. Two new failures are projected to occur among the 13 companies in the smallest size
category, but one small company projected to fail at baseline is projected to benefit from the
regulation to the extent that financial failure is unlikely post-compliance with Regulatory Option
2. Thus there is one net additional failure for the smallest size category. There is also one new
8-8
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failure projected for companies in the second smallest size category and one new failure
projected for the second largest size category.
No new publicly-traded companies are projected to fail in response to either regulatory
option. In each case where companies are projected to suffer severe impacts of either regulatory
option the affected companies are private companies whose facilities offer their waste treatment
services on a commercial basis only. It is perhaps not surprising that these are the companies
most severely hit by such a regulation, because they rely more heavily on revenues from CWT
services than do other companies with greater vertical integration and other sources of revenue.
As discussed at the conclusion of Chapter 6, 15 companies are indistinguishable in terms
of their size and scope of operations from the CWT facilities for which they are legally and
financially responsible. Two of these 15 companies are projected to fail at baseline, four are
projected to fail post-compliance with Regulatory Option 1, and three are projected to fail post-
compliance with Regulatory Option 2. The results of Regulatory Option 2 are particularly
interesting in the context of these single-facility companies whose only business is off-site waste
treatment. One of these companies, a small business projected to fail at baseline, is projected not
to fail after complying with Regulatory Option 2. Two of the other companies in this group, one
a small business and one in the second smallest size category, are projected to fail with
Regulatory Option 2.
8.4 CONCLUSIONS
Overall, company impacts are not predicted to be severe. Only four additional companies
are estimated as likely to be bankrupt as a result of Regulatory Option 1, and a net increase of
three companies are predicted as likely to be bankrupt as a result of Regulatory Option 2. This
reflects four companies becoming likely to be bankrupt and one company that was likely to be
bankrupt at baseline becoming unlikely to be bankrupt as a result of the market adjustments to
Regulatory Option 2. Overall, therefore, the Agency concludes that the proposed effluent
limitations guidelines and standards are economically achievable.
8-9
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CHAPTER 9
SMALL BUSINESS IMPACTS
This chapter considers the expected effects of the proposed effluent limitations guidelines
and standards for the CWT industry on small businesses. The Regulatory Flexibility Act (RFA)
requires that federal agencies consider whether regulations they develop will affect small entities
(which may include nonprofit organizations, small governmental jurisdictions, and small
businesses). If the proposed rule is likely to have a significant adverse economic impact on a
substantial number of small entities, a regulatory flexibility analysis is required. The Act allows
some flexibility in defining small entities and determining what are a substantial number and
significant impact.
9.1 METHODOLOGY
This analysis considers whether the proposed effluent limitations guidelines and
standards for the CWT industry are likely to have a significant impact on a substantial number of
small entities. At the outset the term "small entity" was defined. Small businesses are identified
by Small Business Administration (SBA) general size standard definitions. For SIC code 4953,
Refuse Systems, small business concerns are those receiving less than $6 million/year, averaged
over the most recent three fiscal years.1 Small government entities are defined in the RFA as
those with populations less than 50,000. Only 1 of the 85 in-scope CWT facilities identified for
this analysis is owned by a government entity, and it is owned by the federal government and
administered by the U.S. Navy. No affected facilities are owned by a small government entity.
Consequently, this analysis focuses on impacts incurred by potentially affected companies.
Directly affected companies range from some of the largest companies in the U.S. to very small,
single-facility waste treatment companies. Of the 84 private-sector facilities, 13 are owned by
single-facility companies grossing less than $6 million annually.
EPA provides guidelines for determining when a "substantial number" of these small
entities have been "significantly affected."2 This EPA guidance states that a "substantial
number" is "more than 20 percent of these (small entities) affected for each industry the
proposed rule would cover." The Agency's chosen measure of severe impacts is a change in
financial viability, as indicated by the companies' baseline and with-regulation Z-score (or Z"-
score for companies that are not publicly-traded) values, from a level that indicates that
bankruptcy is unlikely or indeterminate to a level that suggests that bankruptcy is likely. Thus, if
the Agency determines that the 20 percent of small entities threshold is appropriate and over 20
9-1
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percent of the small entities affected by a regulatory option were projected to risk bankruptcy as
a result of the option, then a regulatory flexibility analysis of that option would be needed.
9.2 RESULTS
Because the regional markets for CWT services modeled for this analysis include both
direct and indirect discharging CWT facilities, the economic impacts of each regulatory option
presented in this report are the projected impacts of both the BPT/BAT guidelines and PSES
standards under each regulatory option. The impacts of each regulatory option are presented
separately for entities affected by the BPT/BAT and PSES rules. These impacts can be
compared in Tables G-3 through G-5 (see Appendix G).
9.2.1 Impact of BPT/BAT Regulations on Direct Dischargers
Under the proposed effluent limitations guidelines and standards, no companies are
projected to incur severe economic impacts. Furthermore, none of the companies owning direct
discharging CWT facilities are small entities, as defined by the SBA size standard. Therefore,
conducting a regulatory flexibility analysis of either of the regulatory options for direct
discharging CWT facilities presented in this report is not necessary.
9.2.2 Impact of PSES Regulations on Indirect Dischargers
Under the effluent limitations guidelines and standards proposed as Regulatory Option 1,
three of the four entities projected to incur severe impacts are small businesses. If the EPA
Administrator certifies that three companies constitutes a substantial number, then the 20 percent
of affected entities threshold (3/13=23%) would indicate a need for a regulatory flexibility
analysis for this option.
Only two of four entities projected to incur significant impacts under Regulatory Option 2
are small businesses. Furthermore, one small entity projected to fail without the regulation is
projected not to fail in the post-compliance analysis. On balance, there is a projected net increase
of just one small business failure over baseline as a result of Regulatory Option 2, therefore
conducting a regulatory flexibility analysis of Regulatory Option 2 is not necessary.
9.3 MITIGATING MEASURES
The impacts reported in the previous section indicate that all but the largest companies
will experience impacts because of the regulation. While the disparity is much more pronounced
under Regulatory Option 1 than under Regulatory Option 2, a greater share of the smallest
9-2
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businesses are projected to incur severe impacts as a result of the regulation than is the case for
financially larger entities. This may accelerate the consolidation of the CWT industry that began
in the 1980s, with large waste treatment companies and other multi-disciplinary companies
buying up smaller waste treatment companies. EPA is particularly concerned about these
impacts on small entities. To address these concerns, measures designed to mitigate the impacts
on small entities are being considered. First, the proposed regulatory options are in the form of
effluent limitations guidelines and standards rather than design, equipment, work practice, or
operational standards. This reduces impacts by giving the CWT facility owner/operator the
freedom to use the least costly mix of process changes and control equipment installations that
will meet the limitations. This measure potentially reduces impacts at all potentially affected
CWT facilities regardless of the size of the facility. The Agency also considered proposing less
stringent control options for each of the treatment subcategories.
9.4 REFERENCES
1. Code of Federal Regulation, 1991.
2. Memorandum from the Administrator, U.S. Environmental Protection Agency, entitled
"EPA Implementation of the Regulatory Flexibility Act." February 9, 1982.
9-3
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CHAPTER 10
COMMUNITY IMPACTS ANALYSIS
In response to the effluent limitations guidelines and standards, commercial CWT
facilities are predicted to modify the quantities of waste they treat. This change in production
levels will be associated with changes in employment. The changes in employment predicted to
occur as a result of the regulation include direct changes, which combine these market-related
changes in employment with changes in employment resulting from the labor requirements of the
regulation, and indirect changes, which result from the changed spending of those people
experiencing the direct employment effects. No changes in employment are predicted to result
from controls on non-commercial facilities, because the Agency assumes that the companies
owning these facilities will continue to operate them without changing the quantity of waste
treated in response to the regulation. Overall, employment is predicted to increase as a result of
the effluent limitations guidelines and standards.
Changes in output and employment at a CWT facility affect not only the welfare of the
individual employees either hired or laid off but also the communities in which the CWT
facilities are located, because unemployed individuals have less income and spend less in the
community, in addition to perhaps placing additional burdens on community services within the
community. Conversely, newly employed individuals spend some of their income in the
community, which increases the incomes and spending of other community residents. Direct
changes in employment thus result in a multiplied community-wide impact. The U.S.
Department of Commerce, Bureau of Economic Analysis (BEA), publishes estimates of direct-
effect employment multipliers1 for each state for broad industry categories. These multipliers
estimate the direct total change in employment resulting from one job gained or lost in each
industry category. These data can be used to estimate total community impacts resulting from
changes in the operations of CWT facilities.
10.1 DIRECT EMPLOYMENT CHANGES
Direct employment changes resulting from compliance with the proposed effluent
limitations guidelines and standards would include facility-specific changes in employment at
commercial CWT facilities that result from their changes in CWT operations as a result of
market adjustments to the proposed regulation. In addition, direct employment effects of the
proposed regulation include the estimated labor requirements of the controls. These labor
requirements are estimated on a national basis and are therefore not included in the community-
level analysis.
10-1
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10.1.1 Facility-Specific Changes in Employment Resulting from Market Adjustments
As described in Chapter 7, the Agency estimated changes in employment at each
commercial CWT facility resulting from market adjustments to the costs of complying with the
proposed effluent limitations guidelines and standards, The Agency does not project facility
closures for any CWT facility as a result of the proposed regulation, because the owners of
unprofitable facilities appear to allow them to continue to operate for several years. Thus, there
are no employment changes estimated as a result of facility closures. Instead, changes in
quantity treated at each facility are multiplied by facility-specific employment factors, computed
based on information from the questionnaire. These employment factors show the number of
full-time equivalent employees (FTEs) for each gallon treated (a fractional quantity).
Change in employment (FTEs) = Change in quantity treated (gallons) •
Employment factor (FTEs/gallon)
For some CWT facilities, the quantity treated is estimated to increase as a result of the
regulation, and employment is therefore estimated to increase also. For other facilities, the
quantity treated is estimated to decrease as a result of market adjustments to the proposed
regulation, and employment is also estimated to decrease. Table 10-1 shows a frequency
distribution of the direct employment effects of the BPT/BAT and PSES controls under each
regulatory option. Because the Agency expects to impose regulations on direct and indirect
dischargers simultaneously, the model was run imposing compliance costs on both types of
facilities. This method is appropriate, because many markets include both direct and indirect
dischargers, and the best estimate of the economic impacts is the combined effect of both
BPT/BAT and PSES controls imposed simultaneously. Thus, the results described below
represent the impacts of all controls on facilities affected by the BPT/BAT controls or the PSES
controls, rather than the effects of the BPT/BAT controls and the PSES controls imposed
independently.
Table 10-1 shows that, in general, changes in employment at CWT facilities are fairly
small. While two facilities (one direct discharger and one indirect discharger) are estimated to
experience more than 100 job losses as a result of market adjustments, one indirect discharger is
also estimated to increase employment by more than 100 jobs. The median change in
employment for direct dischargers is -4 under Regulatory Option 1 and -5 under Regulatory
Option 2. For indirect dischargers, the median change in employment is -2 under Regulatory
Option 1 and -5 under Regulatory Option 2. CWT facilities that are zero dischargers are
10-2
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TABLE 10-1. CHANGES IN CWT EMPLOYMENT RESULTING FROM MARKET
ADJUSTMENTS AT CWT FACILITIES
Number of Facilities
Change in Employment
BPT/BAT
Increase
Decrease by fewer than 10 jobs
Decrease by more than 10 jobs
PSES
Increase
Decrease by fewer than 10 jobs
Decrease by more than 10 jobs
Regulatory Option 1
2
4
1
12
25
13
Regulatory Option 2
2
4
1
11
21
18
estimated to experience no change in employment or employment gains ranging from 1 to 12
employees.
10.1.2 Labor Requirements of the Controls
<•
The other type of direct employment effect is the estimated labor requirements of the
control options. These data are presented at the national level, rather than the facility level, and
are used to qualify and place in context the market-related community-wide employment effects.
This comparison is described in Section 10.4 at the end of this chapter.
10.2 COMMUNITY EMPLOYMENT EFFECTS
The direct market-related changes in employment at commercial CWT facilities can be
used to estimate changes in total employment in the communities in which the CWT facilities are
located. As noted above, the changed incomes of individuals either hired or laid off at CWT
facilities will result in changes in their spending within the community. This change, in turn,
will result in changes in employment at establishments throughout the community where the
CWT employees transact business. The BEA direct-effect regional employment multipliers,
published for broad industry categories in each state, measure the change in state-wide
employment expected to result from a one-job change in employment (including the initial one
job change). Table 10-2 shows the direct-effect regional employment multipliers used to
10-3
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TABLE 10-2. DIRECT-EFFECT REGIONAL MULTIPLIERS FOR STATES IN
WHICH CWT FACILITIES ARE LOCATED
State
California
Connecticut
Georgia
Illinois
Indiana
Kentucky
Louisiana
Maryland
Michigan
Minnesota
North Carolina
New Jersey
Nevada
New York
Ohio
Oklahoma
Pennsylvania
Rhode Island
South Carolina
Tennessee
Texas
Virginia
Washington
Direct-Effect Employment Multiplier
5.1316
3.2796
4.0769
5.3610
5.3335
5.4906
4.9349
3.9997
3.6638
3.6915
3.6247
3.8339
3.0610
2.9124
5.1695
5.0973
5.6759
3.2728
3.9489
4.4237
6.5537
4.7204
3.8849
estimate the total change in employment resulting from the market adjustments to CWT controls.
These multipliers range from 2.91 in New York to 6.55 in Texas, and average 4.05 across all
states. Thus, overall, each one-job change in employment occurring at a CWT facility results in
a statewide change in employment of between three and six jobs.
Table 10-3 is a frequency distribution of the total change in community employment
resulting from the changes in CWT employment reported in Table 10-1. For direct dischargers,
estimated community-wide changes in employment range from a gain of 71 employees to a loss
10-4
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TABLE 10-3. CHANGES IN COMMUNITY EMPLOYMENT RESULTING FROM
MARKET ADJUSTMENTS AT CWT FACILITIES
Number of Communities
Change in Employment
BPT/BAT
Increase by 0 to 100 jobs
Decrease by fewer than 50 jobs
Decrease by more than 300 jobs
PSES
Increase by more than 400 jobs
Increase by 1 to 100 jobs
Decrease by fewer than 50 jobs
Decrease by 50 to 160 jobs
Decrease by more than 600 jobs
Regulatory Option 1
2
4
1
1
11
26
11
1
Regulatory Option 2
2
4
1
1
10
22
16
1
of 337 under both regulatory options. The median change in community employment for
communities in which direct dischargers are located is 23 employees. For indirect dischargers,
the change in community employment is predicted to range from a gain of 426 jobs to a loss of
634 jobs under Regulatory Option 1 and to range from a gain of 426 jobs to a loss of 658 jobs
under Regulatory Option 2. The median change in employment for communities in which
indirect-discharger CWT facilities are located is estimated to be 11.5 employees under
Regulatory Option 1 and 18 employees under Regulatory Option 2. Thus, overall, the market-
adjustment changes in community employment are generally small.
10.3 MEASURING THE SIGNIFICANCE OF COMMUNITY EMPLOYMENT
IMPACTS
To assess the severity of these impacts on the affected communities, the Agency
employed the most conservative definition of "affected community" available. Thus, the
affected community is defined as the city or town in which the CWT facility is located, if the city
or town has a population exceeding 10,000. For CWT facilities located in cities or towns with
populations less than 10,000, the Agency assumed that the labor force from which the CWT
facility draws employees is the county in which the CWT facility is located.2 The Agency
compared the estimated change in community employment with baseline 1990 community
10-5
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employment. A severe employment impact would occur if the change in community
employment exceeded 1 percent of the baseline 1990 community employment. Table 10-4
shows a frequency distribution of the impact measure, change in employment as a percentage of
baseline 1990 employment. In no community did the change in employment exceed 1 percent of
baseline community employment; therefore, no significant employment impacts are predicted to
result from the proposed effluent limitations guidelines and standards.
TABLE 10-4. PERCENTAGE CHANGE IN COMMUNITY EMPLOYMENT
Number of Communities
Percentage Change in Employment Regulatory Option 1 Regulatory Option 2
BPT/BAT
Increase by less than 0.1 percent
Decrease by less than 0.2 percent
Decrease by 0.2 to 0.4 percent
PSES
Increase by 0.1 to 0.99 percent
Increase by less than 0.1 percent
Decrease by less than 0.1 percent
Decrease by 0.1 to 0.5 percent
Decrease by 0.5 to 0.9 percent
2
3
2
2
10
27
9
2
2
, 2
3
3
8
28
8
3
Percentage changes in community employment resulting from the proposed effluent
limitations guidelines and standards are estimated to range from a decrease of 0.88 percent to an
increase of 0.99 percent. The median percentage change in employment is -0.05 percent for
direct dischargers under both regulatory options and is -0.01 percent for indirect dischargers
under both regulatory options. Thus, the market-adjustment related changes in community
employment will not result in significant community impacts.
10.4 INCLUDING THE LABOR REQUIREMENTS OF THE CONTROLS
As noted above, the Agency estimates that CWT facilities will have to hire additional
workers to operate the controls required under the proposed effluent limitations guidelines and
standards. Table 10-5 compares the market-adjustment changes in employment with the labor
requirements of the controls.
10-6
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TABLE 10-5. COMPARING MARKET CHANGES IN EMPLOYMENT WITH LABOR
REQUIREMENTS OF CONTROLS
Change in Employment
Regulatory Option 1 Regulatory Option 2
BPT/BAT
Market-related change in CWT employment -112 -114
Labor requirements of controls 126 129
PSES
Market-related change in CWT employment -272 -390
Labor requirements of controls 584 606
Nationwide, increases in CWT employment resulting from the labor requirements of the
controls exceed decreases in CWT employment from CWT production changes in response to
market adjustments to the regulation. Of course, employment may fall as a result of the controls
at some facilities. Overall, however, the employment impact is expected to be positive rather
than negative: the proposed effluent limitations guidelines and standards are estimated to result
in increases in employment at CWT facilities.
10.5 CONCLUSIONS
Market-related changes in employment at CWT facilities are projected to result in
insignificantly small changes in community employment if the proposed effluent limitations
guidelines and standards are promulgated. National estimates of the labor requirements of the
controls exceed the estimated changes in CWT employment resulting from market adjustments
to the regulation. Thus, the overall impact of the proposed effluent limitations guidelines and
standards is estimated to be a small increase in employment in most communities in which CWT
facilities are located.
10.6 REFERENCES
1. U.S. Department of Commerce, Economics and Statistics Administration, Bureau of
Economic Analysis. Regional Multipliers: A User Handbook for the Regional Input-
Output Modeling System (RIMS II). May 1992.
2. U.S. Department of Commerce, Economics and Statistics Administration, Bureau of the
Census. County and City Data Book. 1994. Used 1990 employment for the city or
county in which the CWT is located. For cities over 25,000 and for counties,
employment is listed. For cities between 10,000 and 25,000, employment is estimated by
using the average employment/population ratio for all CWT locations with employment
data: 0.4485. This ratio was multiplied by the 1990 population for communities between
10,000 and 25,000 population to estimate their 1990 employment.
10-7
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CHAPTER 11
INTERNATIONAL TRADE EFFECTS
Generally, changes in the costs incurred by a domestic industry result in changes in the
imports and exports of the products produced by that industry. In the case of the CWT industry,
however, there is virtually no international trade in CWT services. The Agency therefore does
not expect any international trade effects to result from the proposed effluent limitations
guidelines and standards.
11.1 RESTRICTIONS ON INTERNATIONAL SHIPMENTS OF HAZARDOUS
WASTE
Much of the waste accepted by CWT facilities is considered hazardous and is regulated
under RCRA. RCRA establishes stringent regulations for exporting and importing hazardous
waste.
11.1.1 Exports of Hazardous Waste
Under Subpart E of RCRA, §262.50 through §262.58, exports of hazardous waste are
prohibited unless the following are true:
• EPA is notified of an intended export 60 days before the initial shipment.
• The receiving country has consented to receive the hazardous waste.
• A copy of the EPA Acknowledgment of Consent to the shipment, accompanies the
hazardous waste shipment.
• The hazardous waste shipment conforms to the terms of the receiving country's written
consent as reflected in the EPA Acknowledgment of Consent.
In addition to the above requirements, special manifest requirements, annual reporting
requirements, and recordkeeping requirements are associated with the export of hazardous waste.
11.1.2 Imports of Hazardous Waste
Importers of hazardous waste are required under Subpart F, §262.60, to comply with
special manifesting requirements associated with the shipment of hazardous waste. Once
imported, hazardous waste must be managed under the same regulations that apply to
domestically generated hazardous waste.
11-1
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11.2 TRENDS IN INTERNATIONAL SHIPMENT OF HAZARDOUS WASTE
Overall, the U.S. exports approximately 150,000 tons of hazardous waste annually, 80 to
90 percent of it to Canada. This is less than one percent of hazardous waste generated annually,
but it is increasing. Exports of hazardous waste have increased over the period 1986 to 1990; in
1990, EPA received 550 notices of export, which was approximately twice the number received
in 1986.
Under the Basel Convention on the Control of Transboundary Movements of Hazardous
Wastes and then- Disposal, which the U.S. signed in 1990, imports and exports of hazardous
waste and some types of non-hazardous waste may be more restricted. The Congress has ratified
the Convention but must enact enabling legislation before the Convention will apply to U.S.
international trade in waste. "Proposed federal legislation to implement the Basel Convention
would prohibit the export and import of hazardous and municipal wastes and residues from the
incineration of municipal wastes, except in cases where the U.S. has a bilateral agreement with
another country ensuring that wastes will be handled in an environmentally sound manner."1
11.3 CONCLUSIONS
Because international trade in hazardous wastes is such a small share of the quantity of
waste generated, and because the restrictions on transboundary shipments of hazardous waste are
expected to become increasingly stringent, the Agency does not expect the proposed effluent
limitations guidelines and standards to affect international trade in waste treatment services. As
noted above, the share of waste management costs in total production costs for the goods whose
production generates waste is very small. Therefore, the Agency does not predict significant
impacts on the markets for those goods as a result of the proposed regulation, including
international trade in those goods. Overall, the Agency does not predict significant changes in
foreign trade to result from the proposed effluent limitations guidelines and standards.
11.4 REFERENCES
1. Lorenz, William T. & Co. 1993 Update—Hazardous Waste Control Industry Outlook.
1993.
11-2
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CHAPTER 12
IMPACTS ON NEW SOURCES
In this chapter, the effects of the proposed New Source Performance Standards (NSPS)
and Pretreatment Standards for New Sources (PSNS) on new discharge sources are considered.
New facilities have the opportunity to incorporate the best available demonstrated technologies,
including process changes, in-plant controls, and end-of-pipe treatment technologies and to use
facility site selection to ensure adequate treatment system installation. The impacts of the
proposed regulations on new sources are expected to be less burdensome than the impacts of the
BPT/BAT and PSES regulations on existing sources. Designing a new technology prior to
facility construction is typically far less expensive than retrofitting a facility for a new
technology. The proposed NSPS and PSNS regulations and the reasonableness of the associated
costs are discussed below.
12.1 NEW SOURCES
Many of the facilities in the CWT industry accept hazardous waste from off-site for
treatment and are therefore regulated under RCRA. Siting a new RCRA-regulated facility
involves obtaining a RCRA permit for the facility. This process, in turn, involves a lengthy
application process including public hearings on the siting and frequently becomes extremely
political and costly. In addition, changes in the pattern of demand for CWT services has resulted
in reduced demand and excess capacity for some types of treatment in some regions of the
country. For both of these reasons, very few new RCRA-regulated facilities have been sited in
the past ten years, and the Agency expects this trend to continue.
In addition to completely new RCRA-regulated CWT facilities, new sources may include
new operations at existing RCRA-regulated CWT facilities. In addition to the cost of designing,
purchasing, and installing new capital equipment for the process, such new CWT operations
require modifications to the facility's RCRA permit, if the facility has one. This process is costly
(estimated by the Agency for this analysis to cost $30,000) but is less onerous than the process of
obtaining a new RCRA permit. Thus, existing RCRA-regulated facilities may have some new
sources.
Finally, not all existing CWT facilities are RCRA-regulated. Thus, new sources may not
be RCRA-regulated. These new sources would not incur the costs associated with obtaining or
modifying a RCRA permit. However, the demand trends discussed above apply to these
facilities as well. Overall, the demand for off-site waste management services in general is not
12-1
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projected to grow over the next few years, so the Agency does not expect many new sources to
be constructed.
12.2 NSPS
EPA is proposing to set NSPS equivalent to the proposed BPT/BAT effluent limitations
for all subcategories of the CWT industry. This represents the best available and best
demonstrated technology for the CWT industry as a whole. The EIA shows that this regulatory
approach, as shown in Regulatory Options 1 and 2, would be economically achievable for
existing sources. EPA believes that new sources will be able to comply at costs that are similar
to or less than the costs for existing sources, because new sources can apply control technologies
more efficiently than sources that need to retrofit for those technologies. EPA's analysis
concludes that NSPS equivalent to Options 1 and 2 would be economically achievable for new
sources and would not be a barrier to entry.
12.3 PSNS
EPA is proposing to set PSNS equivalent to NSPS effluent limitations for all
subcategories of the CWT industry. The Agency is proposing to establish PSNS for the same
pollutants and the same points of application as are being proposed for NSPS. EPA considered
the cost of the proposed PSNS technology for new facilities and concluded that those costs are
not so great as to present a barrier to entry, as demonstrated by the fact that currently operating
facilities are using these technologies. The Agency considered energy requirements and other
non-water quality environmental impacts and found no basis for any different standard than the
selected PSNS. As with the NSPS, the Agency has analyzed the economic impacts for
Regulatory Options 1 and 2 for existing indirect dischargers and has concluded that they are
economically achievable. Because new indirect dischargers can implement these controls at
costs that are equal to or lower than the costs for existing sources, the Agency concludes that the
proposed PSNS regulations would be economically achievable and would not be a barrier to
entry.
12-2
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APPENDIX A
Copy of Part B of the Waste Treatment Industry
Questionnaire
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U.S. ENVIRONMENTAL PROTECTION AGENCY
WASTE TREATMENT INDUSTRY QUESTIONNAIRE
PART 2. ECONOMIC AND FINANCIAL INFORMATION
INTRODUCTION
The U.S. Environmental Protection Agency (EPA) is conducting a survey of the Waste Treatment Industry
as pan of its effort to establish national wastewater regulations for this industry. For purposes of this
questionnaire, hazardous and non-hazardous wastes will be covered. The data collected by the
Technical section of the questionnaire will be used to determine the number of facilities in this industry,
the number of dischargers to surface waters and publicly-owned treatment works, the characteristics of
these discharges, and the treatment technologies currently used by this industry. The data collected by
the Economic and Financial section of the questionnaire will be used to characterize the industry and to
estimate the posstole economic impacts of the regulations.
AUTHORITY
This survey is conducted under the authority of Section 308 of the Clean Water Act (the Federal Water
Pollution Control Act, 33 U.S.C. Section 1318). All facilities which receive this questionnaire must
respond. Only if you were instructed in Section A of Part 1 of the questionnaire to stop filling out the
questionnaire are you not required to complete Part 2. Follow the questionnaire instructions and answer
the questions as accurately as possible. PLEASE RETURN THE QUESTIONNAIRE TO EPA WITHIN 60
DAYS. Late filing or failure otherwise to comply with these instructions may result in criminal fines, civil
penalties, and other sanctions as provided by law.
WHO SHOULD COMPLETE THE
ECONOMIC/FINANCIAL SECTION OF THE QUESTIONNAIRE?
Each section of this questionnaire should be completed by the person who is most knowledgeable about
the information it requests. Nevertheless, verifying each section of the questionnaire and signing the
certification statement located in Part 3 should be a single individual's responstoiUty. Accurate responses
will enable EPA to consider the information in future policy decisions.
EPA has prepared this part of the questionnaire so that M is applicable to a wide variety of waste
management facilities. Therefore, not all the questions may apply to your facility. Unless instructed
otherwise, you are expected to make an effort to complete every item using available data. However, you
are not required to perform non-routine tests or measurements solely for the purpose of responding to this
questionnaire. If exact measurements are not avaicbfe but can be estimated, please provide estimates
and note, on the NOTES page at the end of each section, the method used in making the estimation.
Please indicate on the NOTES page all question* tor which your responses are estimates.
Note: If you responded "No" to Question A.17 In Pert 1, you am not required to complete Part 2.
QUESTIONNAIRE HELPLINE
If you have any questions about the economic/f inanoai part of the questionnaire or would like to provide
additional information, please contact the Waste Treatment Industry Questionnaire Helpline at 1-800-626-
5767.
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INSTRUCTIONS
PROVISIONS REGARDING DATA CONFIDENTIALITY
Regulations governing the confidentiality of business ir. ation are contained in 40 CFR Part 2 Subpart
B. You may assert a business confidentiality claim cover.ng part or ail of the information you submit in the
manner described in 40 CFR 2.203(b):
•(b) Method and timt of asserting business confidentiality daim. A business which to submitting information
to EPA may assert a business confidentuilfcy daim covering the information by piecing on (or attaching to)
the information, at the time it is submitted to EPA, a cover sheet, stampad or typed legend, or other suitable
form of notice employing language such •* trade secret,' •proprietary.' or 'company corrfiderrtiaL' Atogedly
confidential portions of otherwise non-ex idential documents should be dearly identified by the business,
and may be submitted separately to faea*ate identification and handling by EPA H the business desires
confidential treatment only until a certain date or until the occurrence of a certain event, the notice should so
state."
H no business confidentiality claim accompanto* the Information when It is received by EPA, Er- A
may make the Information available to the public without furthtr nottcd to you.
Please be specific in indicating whether a claim of confidentiality covers all or only part of the information
on a questionnaire or attachment.
Information cohered by a daim of confidentiality will be disclosed by EPA only to the extent, and by
means of ttie rocedures. s t forth in 40 CFR Part 2 Subpart B. In general, submitted informatton
protected by a business confidentiality daim may be disclosed to other employees, officers, or authorized
representatives of the United States concerned with carrying out the Clean Water Act. or when relevant to
any proceeding under the Act.
Effluent data are not eligible for confidential treatment, pursuant to Section 308(b) of the Clean Water Act
The information submitted will be made available to EPA contractors in order that the contractors may
carry out the work required by their contract with EPA. All EPA contracts provida that contractor
employees shall use the information only for tlhe purpose of carrying out the work required by their
contract and shall refrain from disclosing any confidential business information 19 anyon* other than EPA
without the prior written approval of each affected business or of the EPA legal office. Any comments you
may wish to make on this issue must be: jbmftted in writing at the time of submittir^ your response.
Please direct any questions regarding confidential business information to the Waste Treatment Industry
Questionnaire Helpline at 1-800-626-5767.
CHECKLIST
Bo sure that the following additional information is hxajded wen the completed questionnaire, unless
instructed otherwise:
Q Question IL22: 1987,1988. and 1989 annual reports for the facfity (H independently owned) or
for the business entity that owns and/or centre* the f acfltty; include income statements and
balance sheets. (Please see definitions of factty and business entity, p. M-1.)
Q Question O.2: Hthe facility uses a istandard cortract in arranging win efierts to accept aqueous
liquid waste, sludge, and/or wastewater generated offsfte for treatment onstte, please attach a
copy of the standard contract. (See p. O-l.)
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GENERAL INSTRUCTIONS
1. RfiWJd all definitions. Ptease read all definitions on page M-1 carefully before completing Part 2 of
the questionnaire. The individual who responds to each section must be familiar with the pertinent
economic and financial aspects of waste treatment, disposal, and recycling/recovery operations at
this facility.
2. Mark responses for each question. Please drde the appropriate response or responses in each
question. More than one response may be circled for some questions, where appropriate. Please
complete all questions that require written responses by printing or typing in the spaces provided. If
the space allotted for the answer to any question is not adequate for your complete response, please
continue the response in the NOTES area at the end of each section of the questionnaire.
Reference the comments to the appropriate question. If additional attachments are used to darify a
response, please make certain that the code number for this questionnaire, which appears at the top
right hand comer of each page, is also placed at the top right hand comer of each page of the
attachments.
3. Please enter all asset, liability, revenue, and cost Information In dollars, and price Information
In dollars per ton. Please enter quantity Information In abort tons (2000 poundssl ton).
4. Indicate Information which should be treated as confidential. Please follow the instructions
given in the PROVISIONS REGARDING DATA CONFIDENTIALITY section on page ii to indicate
which information in your responses is confidential so that it may be protected under confidentiality
procedures.
5. Answer all Hems unless Instructed otherwise. Please answer all ttems unless instructed to do
otherwise. The purpose of this questionnaire is to gather all available economic and financial
information pertinent to hazardous and non-hazardous waste treatment, disposal, and
recycling/recovery operations that produce wastewatars. if a question is not applicable, indicate by
writing "N/A." If, after conscientious attempts to obtain requested information, an item remains
unknown and cannot be estimated, write "UNK" and explain in the NOTES area at the end of the
appropriate section why such information is not available, if an item seems ambiguous, complete it
as fully as possible and state your assumption in doing so in the NOTES area at the end of the
appropriate section. Reference all explanations and assumptions to the appropriate questions. If
actual data are not available to answer a question, please estimate and indicate that you have done
so in the NOTES.
6. Retain a copy of completed questionnaire. EPA will review the information submitted and may
request your cooperation in answering follow-up clarification questions, if necessary, to complete the
data base. Please retain a copy of the completed questionnaire, including attachments, in case EPA
must contact you to verify your responses. Also, please maintain a record of sources used to
complete the financial section.
7. H you detached the economic and financial section of the questionnaire, please reattach it
and return the entire questionnaire to:
Debra S. DiCianna
U.S. EPA (WH-552)
Office of Water
Office of Water Regulations and Standards
Industrial Technology Division
401 M Street, SW
Washington, DC 20460
8. Call in questions. If you have any questions about the economic/financial section, please
telephone the Waste Treatment Industry Questionnaire Helpline at 1-800-626-5767.
HI
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INSTRUCTIONS
This page is intentionally
left blank.
tv
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FILE
CONTACT AND FACILITY INFORMATION
PLEASE RETURN THIS PAGE WITH YOUR COMPLETED ECONOMSC AND FINANCIAL QUESTIONNAIRE.
1. Provide the name, title, and telephone number of the individual who may be contacted to
P+4-t csr answer questions concerning Information submitted In Part 2. Economic and Financial
p* 41 COM Information.
Name of Contact:
Title of Contact:
P+<»ic Telephone Number: ( ).
11> What is the most convenient time to call?
ATTACH
LABEL
HERE
Review the information on the preprinted label above. If any of the information is incorrect,
enter the correct information in the appropriate spaces on this page.
2. If the mailing address shown on the preprinted label Is not correct, enter the corrections to
tn*label ln tne spaces provided below.
P**t Q N/A
?<* * *.A Name of Facility:
O * a. B Street Address or P.O. Box:
e City:
State:
Zto:
3.
&r
?* * 1 Co/v\
If the street address of the facility Is different from the mailing address, provide the street
address in the spaces provided below.
Q N/A
Name of Facility:
Street Address:
City:
State:
Zip;
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INSTRUCTIONS
This page is intentionally
toft blank.
vS
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SECTION M: BUSINESS ENTITY FINANCIAL INFORMATION
The purpose of Section M is to collect financial information about the business entity directly owning
and/or controlling your facility. These data will be used to assess impacts of the regulation on
business entities.
For independently-owned and operated facilities and multi-facility establishments whose primary
business is waste treatment, recycling/recovery, and/or disposal, the business entity is the facility or
establishment. The information requested in Section M is to be based on corporate annual reports.
For multi-facility establishments whose primary business is not waste treatment, recycling/recovery,
and/or disposal activity, the business entity is the level of ownership closest to the facility for which'
there exist income statements, balance sheets, market or book value of stock. This may be, for
example, the waste management division of a larger company.
Answer the questions in sequence and do not leave any entry blank unless instructed otherwise.
Definitions and specific instructions are provided throughout. Use the NOTES page at the end of the
section if you wish to explain your response to any question. Reference each comment with the
appropriate question number. Reminder: Please provide estimates, if possible, of data lor which
exact measurements are unavailable. Indicate on the NOTES page at the end of the section which
responses are estimates, and explain the method of estimation.
DEFINITIONS
Financial Statements: balance sheet and income statement that were derived from accounting records
according to generally accepted accounting principles (GAAP).
Business Entity: a proprietorship, partnership, or corporation, or a division or subsidiary of a
proprietorship, partnership, or corporation, for which financial statements exist.
Facility: the physical location or site where waste is managed.
DUNS Number: a unique nine-digit number assigned by Dun & Bradstreet Corporation to each business
establishment (i.e., to each branch location, headquarters location, and single location
establishment). These identification numbers, based on the Data Universal Numbers System, are
referred to as D-U-N-S Numbers (printed here as DUNS).
Commercial Facility: a facility that treats, disposes, or recycles/recovers the wastes of other fadfities not
under the same ownership as this facility. Commercial operations are usually made available for
a fee or other remuneration. Commercial waste treatment, disposal, or recycling/recovery does
not have to be the primary activity at a facility for an operation or unit to be considered
"Commercial".
Non-commercial Facility: a facility that provides treatment, disposal, or recycling services to other
facilities under the same ownership as this facility, for which no fee is charged. Included in this
definition are intracompany waste treatment facilities, which treat, dispose, or recycle/recover the
wastes generated off-site from facilities under the same corporate ownership, intra-company
waste treatment facilities may receive remuneration in the form of intra-company funds, services,
etc.
Value of Product Manufactured (for non-commercial facilities only): quantity of product manufactured,
valued at market price.
M-1
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FlLE
PART 2. SECTION M. BUSINESS ENTTTY FINANCIAL INFORMATION
M.I. is this facility Independently owned and operated? (
5 (Circle one number.)
C.Of\
01 Yes (GO TO QUESTION M.10ON PAGE M-3)
02 No (CONTINUE TO NEXT QUESTION)
M.2.
MJ3.
M.4.
., the facility Is the buslnass anttty.)
What Is the nama and mailing address of tha business entity that directly owns and/or
controls this facility and for which financial statements exist?
Name of Business Entity:
Street Address or P.O. Box:
City:
State:
.Zip:
What la the name and mailing address or ;he corporate parent that owns and/or controls
this buslnass entity?
Q Same as in Question M.2
Name of Corporate Parent:
Street Address or P.O. Box:
City:
State:
What Is the business entity's DUNS number?
(tf the business entity does not have a 'VS number, circle the response code for "not
applicable.")
DUNS number:
Not applicable: 00
-i i i i-i i . i i
MJS.
j-ce
ftv^f .reom
M.6.
tfl
Com
Please gtve the month and year when the business entity purchased or took control of the
facility.
Month-, i i i Yean 19L_LJ
Does the business entity currently own and/or control any other facilities engaged In
aqueous liquid waste, sludge, and/or wastewater treatment, recycling/recovery, and/or
disposal operations?
(Circle one number.)
01 Yes (CONTINUE TO NEXT QUESTION)
02 NO (GO TO QUESTION M.B ON THE NEXT Pf 3£)
M-2
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PART 2. SECTION U: BUSINESS ENTITY FINANCIAL ^FORMATION
M.7.
Including your facility, how many aqueous liquid waste, sludge, and/or wastewater
treatment facilities that accept waste from offslte does the business entity own and/or
control?
Number of facilities (including your facility): L
M.8.
Does the business entity currently own and/or control any facilities not engaged In
treatment, recycling/recovery, and/or disposal of aqueous liquid waste, sludge, and/or
wastewater from off she?
(Circle one number.)
01 Yes (CONTINUE TO NEXT QUESTION)
02 No (GO TO QUESTION M. 10)
M.S.
COX
Give the number of facilities owned and/or controlled by the business entity which are not
engaged In treatment of aqueous liquid waste, sludge, and/or wastewater from offshe?
Number of facilities: i i i i
M.10. Please report all Information for catendaryear requested. For questions M.12-M.16 and
A* 414 c ar N.24-N.32, please report information for ca/encfaryears 1987.1988. and 1989. For all other
/v\ 4> / f to m questions, please report information for calendar year 1989. If It fe impossible for you to report
information on a calendar year basts, you may report information on a fiscal year basis.
Information reported on basis of:
(Circle one number)
01 Calendar year
02 Fiscal year
(GO TO QUESTION M. 12 ON THE NEXT PAGE)
(CONTINUE TO NEXT QUESTION)
M.11. If Information Is reported on fiscal year basis, what am the start and end months of your
iw«..icar fiscal year (e.g^ January. 01, Februarys 02)7
Start month:
/* * n 0 End month: i i i
M-3
-------
PART 2. SECTION Ifc BUSINESS ENTITY RHANCUL WFOWUTION
1
I
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-------
PART 2. SECTION M; BUgNESS ENTITY FINANCIAL
M.17. For the business entity, report the following amounts for each calendar year.
Sates *+''
3*
*1 1987: Si I t ITI I ( ITI I i i
'f 1988: Si i t lfl I I ITI l i i
1989: $L
.1 l l l.l i i
b. Working capital
/n«H7B?7 1987: $
1988: $
I I I.I I
c. Retained earnings
d. Earnings before interest and taxes 1987: $L
• 1988: $L
J l,i l l i,l l i i
1989: Si I I l,l I I Ijl I I I
M*ne»i 1987: Si i i i,i i i ITI i i i
1988: $l l I ITI I I ITI l i i
1989: Si l l ITI l l ITI l l l
I I l,l I I l,l I l l
l I l,l I I ITI l l l
e. Total assets
1989: $ LJ__L_J)L_l_l
1987: $l
1988: $t
J l.l l i l.l l i
l l iti L
l.t l l l
1989: Si i l ITI l l ITI
f. Book value of total liabilities
1 1
1987: $
1988: $
1989: $LJ__LJ)I L
l.l l I l
l l !TI
l.l l I l
M.18. What Is the discount rate currently used by the business entity when calculating net
41 v t&x pr»Mnt values for waste treatment, recycling/recovery, and/or disposal capital Investment
decisions?
Discount rate: L__LJ • LJLJ %
M.19. What Is the corporate Income tax rate that applies to the business entity?
corporate income tax rate:
M.20. What Is the average pre-tax rate of Interest the business entity paid on debt In 1989?
Pre-tax interest rate: |__LJ .i_LJ%
M-5
-------
PART 2: SECTION M: BUSINESS ENTITY FWANOAL INFORMATION
M.21. What Is the business entity's after-tax rate of return on equity?
•-&£
<•*•'* After-tax return on equity rate:
M.22.
car
Include copies of the 1987,1988, and 1989 annual reports and 10K reports for your facility
(If Independently owned) or for the business entity that owns and/or controls your facility,
including Income statement and balance sheet, with your return of the completed
questionnaire. Business entitles owning and/or controlling multiple facilities need send
only one copy of each annual report.
Q OMECK IF OoPjES XNCLU2>EJ>.
M-€
-------
PART 5. SECTION M: BUSINESS ENTITY FINANCIAL INFORMATION
MCfl
/V\C
NOTES «
*\CC_
*vc.cdj Question
Number(s)
a
M
Notes, comments, etc.
M-7
-------
PART 2. SECTION M: BUSINESS ENTTTY FINANCIAL INFORMATION
This page is intentionally
left blank.
M-8
-------
SECTION N: FACILfTY FINANCIAL INFORMATION
The purpose of Section N is to collect financial information at the facility level. This information will be
used to assess impacts of the regulation on facilities.
Answer the questions in sequence and do not leave any entry blank unless instructed otherwise.
Definitions and specific instructions are provided throughput. Use the NOTES page at the end of the
section if you wish to explain your response to any question. Reference each comment with the
appropriate question number. Reminder: Please provide estimates, if possible, of data for which
exact measurements are unavailable. Indicate on the NOTES page at the end of the section which
responses are estimates, and explain the method of estimation.
N.1.
com
What Is your facility's DUNS number?
(If your facility does not have a DUNS number, circle the response code for Tut applicable.")
DUNS number:
Not applicable: 00
N.2.
N * J ^ &T
* CO/A
What SIC Code best represents your facility's main operation?
(See the list of possible SIC Codes, Table R-2 in Instructions and Reference Tables.)
SIC Code:
i i i i i
N.3. Do you conduct manufacturing operation* «t this facility?
(Circle one number.)
01 Yes (CONTINUE TO NEXT QUESTION)
02 No (GO TO QUESTION N. 10 ON PAGE N-3)
N.4. Do your manufacturing operations generate aqutous liquid wast*, sludge, and/or
wastMWrttr?
(CMe One number.)
01 Yes (CONTINUE TO NEXT QUESTION)
02 No (GO TO QUESTION N.6 ON THE NEXT PAGE)
-------
PART 2. SECTION N: FACILITY FINANCIAL INFORMATION
N.5. What quantity of wastewater waa generated by thia faclltty'a manufacturing operations
N 4+rc.M cturtng 1987,1986, end 1989, and what p«rc*ntag« of thla waatawatar waa treated onatte?
-
Year
1987 N$4.r/q«1 L.
1988 M+4JT/W L
1989 H^W/it** L
Quantity Generated
i i i,i i i ITI i i
i i i.i i i i.i i i
i i ui i i 1.1 i i
Jtons H
Jtons w
jtons H
Percent Treated Onslte
:+*r«|7l , , ,o/a
'HJ"»rf i i ; i%
**rB?1| i | j%
N.7.
N.6. What waa the calendar yaar during which manufacturing operations begar tt thla facility?
tear
year: i i t i i
- - -
Does your facility ship any product manufactured onslte to other facilities under the same
ownership as your facility?
(Circle one number.)
01 Yes (CONTINUE TO NEXT QUESTION)
02 No (GO TO QUESTION N.10ON THE NEXT PAGE)
What was the total value of shipments or value of product manufactured and shipped to
other facilities under the samfi ownership In calendar years 1987,1988, and 1989?
(Please include these revenues or cross charges In your responses to Questions N27b. N28b.
andN29b, orN30b, N31b. andN32b.)
N.8.
1987:
1988: $1
1989: $ I
I l l II t l II l l I
||L_LJL_J|l
j i
NA.
How was the transfer price determined for shipments to other facBttles under the same
ownership?
r
(Circle one number.)
01 Market price
02 Manufacturing cost
03 Other (specify;:
-------
PART 2. SECTION N: FACILITY
N.10. What was the calendar year during which aqueous liquid waste, sludge, and/or wastewater
M *' * cw treatment, recycling/recovery, and/or disposal began at this facility?
*
Year: L
N.11. What was the calendar year during which the most recent major expansion or renovation
of aqueous liquid waste, sludge, and/or wastewater treatment, recycling/recovery, and/or
~ disposal capacity was substantially completed at this facility?
(A major expansion or renovation is one which resulted in a production increase of at least 10%
and/or a capital expenditure equal to at least 10% of the accumulated gross investment in plant
and equipment at the time of the investment decision.)
Year: 191 i i
N.12. Does your facility have a RCRA Part B permit?
H <*> i a «.& i (Circle one number.)
01 Yes (CONTINUE TO NEXT QUESTION)
02 No (GO TO QUESTION N20 ON PAGE N'T)
N.1 3. Estimate the cost of obtaining this facility's RCRA Part B permit.
a- Lefla|fees:
N 4 / 3 & b. Administrative costs:
N*i3e. c. Public relations:
N * 1 5_>i d. Other (specify): H »l 3 MO
e. Total:
$1
$1
$1
$1
$1
1 I 1,1 I 1
1 1 1,1 1 !
1 1 !tl 1 1
1 1 1,1 1 1
1 I !rl I 1
1,1 1 1 1
1,1 1 1 1
1,1 I I 1
1,1 ! I 1
1,1 I ! 1
N.14. Has this facility's RCRA Part B permtt ever been modified?
one
01 Yes (CONTINUE TO NEXT QUESTION)
02 No (GO TO QUESTION N20 ON PAGE N-7)
N-3
-------
PART 2. SECTION N: FACILITY FINANCIAL tN FORMATION
N.15. How many modifications hav» bc«n mad* to th« faculty's RCRA Part B p*rmtt?
Number of modifications:
ffer each modification, complete Questions N. 16 through N. 19 on the next page. If, for example,
three modifications were made to your RCRA Part B permit, photocopy Page N-5 (Questions
N. 16 through A/. 19) two times.. JLJse the original page to report information on the first
modification, and the remaining copies to report on the second and third modifications. Number
each copy in the space provided in the top right comer of the page.
-------
PART 2. SECTION N: FACILITY FINANCIAL INFORMATION
MOD8RCAT1ON«| | OF] \
NM/ttoSN
N.16. What was the date of the modification to the facility's RCRA Part B f>ermit?
N.17. Estimate the cost of obtaining this modification.
jr
a. Legal fees: & i i ifi i i ifi i i i
M*ns b. Administrative costs: Si ! i ifi i i ITI i i i
N*I?C c. Public relations: & i i i,i i i iti i i i
d. Other (specify):. u+n J>' Q Si i i ifi i i i,i
J> ^ O
N *-n e e. Total:
N.18. For what purpose was the permit modified?
(Circle one number.)
Cow
M 4/ ? 01 Addition of new tanks for waslewater treatment
02 Addition of new units for other treatment technologies
03 Addition of new treatment technologies
04 Request for increase of storage capacity
05 Request for increase of treatment capacity
06 Request for increase of Subtitle C landfill capacity
07 Closure of a treatment unit/facility section
08 Other (specify):
Si i i ITI i i ift i i j
Si i i 1.1 i i
N.19. How much time was required for this modification to be approved?
r
II«>I<»
-------
PART 2. SECTION N; FACILITY FINANCIAL ^FORMATION
This page is intentionally
toft War*.
-------
FILE NAmE •.
PART 2. SECTION N: FAaUTY FINANCIAL ^FORMATION
N.20. Are your wastewater, sludge, or aqueous liquid waste treatment operations conducted, at
i*M>c&c least In parMn units permitted under RCRA?
(Circle one number.)
01 Yes
02 No
N.21. Does this squaous liquid waste, sludge, and/or wastewater treatment facility provide
**'tw transportation services?
(Do not include transportation services provided by another division or facility. Include only
transportation services for which the costs and revenues are attributed to this aqueous liquid
waste, sludge. and/Or wastewater treatment facility.)
01 Yes (CONTINUE TO NEXT QUESTION)
02 No (GO TO QUESTION N^4 ON PAGE N-S)
N.22. What is the average distance over which you transport aqueous liquid waste, siudge,
Nf J12C.W
and/or wastewater?
MBes: | |, i i i i
What Is the average cost or price of transportation services?
a. Per loaded mile:
b. Per ton:
c. Other (spectfy):_
N
-------
PART 2. SECTION N: FACILITY FINANCIAL INFORMATION
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PART 2. SECTION N: FAaUTY FINANCIAL INFORMATION
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-------
PART 2. SECTION N: FACILITY RNANdAL INFORMATION
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H-10
-------
PART 2. SECTION N; FACILITY RNANOAL INFORMATION
(D
IF THIS FACILITY IS COMMERCIAL (I.E. ACCEPTS WASTE FROM OFFSITE FACILITIES NOT
UNDER THE SAME OWNERSHIPS CONTINUE TO QUESTION N.27 ON THE NEXT PAGE.
OTHERWISE, GO TO DIRECTIONS ON PAGE N-15.
(2)
IF YOUR FACILITY IS COMMERCIAL, AND ALSO. ACCEPTS WASTE FROM OFFSITE
FACILITIES UNDER THE SAME OWNERSHIP. PLEASE COMPLETE ALL PARTS OF
QUESTIONS N.27 THROUGH N.29.
REPORT AH COSTS OF WASTE TREATMENT OPERATIONS
IN PART F OF QUESTIONS N.27 THROUGH N.29. THIS MAY INCLUDE THE COSTS OF
TREATING ANY OR ALL OF THE FOLLOWING:
WASTE FROM OFFSITE FACILITIES NOT UNDER THE SAME OWNERSHIP,
WASTE FROM OFFSITE FACILITIES UNDER THE SAME OWNERSHIP,
AND/OR WASTE GENERATED ONSfTE.
GIVE REVENUES ASSOCIATED WITH COMMERCIAL WASTE MANAGEMENT SERVICES IN
PART A OF QUESTIONS N.27 THROUGH N.29.
INCLUDE THE TOTAL REVENUES ASSOCIATED WITH NONCOMMERCIAL WASTE
MANAGEMENT SERVICES UNDER PART C (NET SALES OF OTHER GOODS AND SERVICES
AND OTHER OPERATING REVENUE) OF QUESTIONS N.27 THROUGH N.29.
REPORT FACILITY LEVEL DATA FOR ALL OTHER PARTS OF QUESTIONS
N.27 THROUGH N.29. (PART B AND PARTS D THROUGH O).
THEN, REPORT IN DETAIL THE REVENUES FROM INDIVIDUAL NONCOMMERCIAL WASTE
TREATMENT OPERATIONS IN PART A OF QUESTIONS N.30 THROUGH N.32.
N-11
-------
PART 2. SECTION N: FACILITY FINANCIAL INFORMATION
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N>12
-------
PART 2. SECTION N; FACILITY
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-------
PART 2. SECTION N: FACJLJTY RNANCUL IN' r **ATION
I
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N>14
-------
PART 2. SECTION N: FAaUTY FINANCIAL INFORMATION
0)
IF YOU DID NOT COMPLETE QUESTIONS N.27 THROUGH N.29,
PLEASE RESPOND TO ALL PARTS OF QUESTIONS N.30 THROUGH N.32.
THESE QUESTIONS REQUEST COSTS AND REVENUES, CREDITS, OR
CROSS CHARGES FOR NQN-CQMMERC1AL FACILITIES.
(2)
IF YOU DID COMPLETE QUESTIONS N.27 THROUGH N.29, AMR
YOUR FACILITY ALSO ACCEPTS WASTE FROM OFFSITE FACILITIES
UNDER THE SAME OWNERSHIP AS YOUR FACILITY,
PLEASE COMPLETE PART A OF QUESTIONS N^O THROUGH N.32,
SHOWING THE REVENUES, CREDITS, OR CROSS CHARGES YOUR FACILITY
RECEIVED FOR TREATMENT OF WASTE GENERATED BY FACILITIES
UNDER THE SAME OWNERSHIP AS YOUR FACILITY.
(3)
IF YOU DID COMPLETE QUESTIONS N.27 THROUGH N.29,
AND YOUR FACILITY DOES NOT ACCEPT WASTE FROM OFFSTTE FACILITIES
UNDER THE SAME OWNERSHIP AS YOUR FACILITY,
PLEASE GO TO QUESTION N.33 ON PAGE K~19
N-15
-------
PART 2. SECTION N; FACILITY FINANCIAL WFOHMAT1ON
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-------
PART 2. SECTION N; FAaUTY RKANCUL INFORMATION
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PART 2. SECTION N; FACitJTY FINANCIAL ^FORMATION
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•»••*• z ^. -, -t £
« tt « * "^ ~"
._ * ^/ ^ «y »v 1t
-------
PART 2. SECTION N; FAaUTY FINANCIAL INFORMATION
N.33. What were the average total number of employee* and the total employee hours worked at
HO J3 car th9 (aciltty ln calendar year 1989 In the categories listed?
M 4, j 3
Average Total
Employees
Total
Employee Hours
a. Aqueous liquid waste, sludge, and/or
waste water treatment operations
(including maintenance)
i. full-time employees
ii. part-time employees
b. Other waste treatment, recycling/
recovery, and/or disposal operations
(including maintenance)
\. full-time employees
ii. part-time employees
c. Production: other
d. Non-production:
(e.g.. sales, clerical, and administrative)
e. Of the total number of employees and
labor hours worked at this facility in the
categories a-c above, how many were
employees of contractors?
H33A2
.1 I I lrl I I I
it—l_LJfL_LJ_J H4 33 & i
rl I I I H<» J3C
.1111
.1 I \ lrl I I I
N-19
-------
PART 2. SECTION N; FACILITY RHANaAL INFORMATION
N.34. What waa tht 1989 value of bulldOnga, land, and aquipm*nt at thia facility?
(Note: We would prefer the appraised or assessed value of land, buildings, and equipment. If
that is not available, please give book value.)
a. What was the value of land for this facility in1989?
i. appraised or assessed value n+3v/H SI i I ITI i i ITI i i i
ii. bookvalue w3vAi $ LJL_LJ>LJ_L_J,l
b. What was the value of buildings at this facility in 1989?
i. appraised or assessed value N4>3v.si $ i i i i,i
H. bookvalue Hi\ $ I i i i,i i i iti i i i
0. bookvalue & ' ' ' 'T' ' ' 'T' ' ' '
On what percentage of market valu« is your tax MMum«m
(If you did not report the assessed value of the facility's buildings, land, and equipment, circle the
response code for "not applicable.")
N 4- *.r A Percentage of market value: i i i _ | %
Not applicable: 00
N.36. What Is tht •stlmated liquidation valta of your facility?
Estimated liquidation value: $| _ i i ITI i i ITI i i i
HJS7. Estlmatt tha closura and poat-elo*ura coata which would ba Ineurrad H your facility ware
1C.1iC ^tft.-H
rt 4 31 com cioaaa.
a. Closure costs: S i i i ITI i ! 1,1 i i i
b. Post-closure costs: $ i i i i?i i i
i t i
N-20
-------
MCL
PART 2. SECTION N: FAaUTY FINANCIAL INFORMATION
a
H5.A
r Question
Numbers)
M.x»-Aa/xx Notes, comments, etc.
1
2.
3
N-21
-------
PART 2. SECTION N: FACILITY FINANCIAL INFORMATION
This page is intentionally
ton blank.
N-22
-------
SECTION O: COSTS AND REVENUES FROM AQUEOUS LIQUID
WASTE, SLUDGE, AND/OR WASTEWATER TREATMENT
The purpose of Section O is to obtain costs for aqueous liquid waste, sludge, and/or wastewater
treatment technologies which could form the basis of effluent limitations guidelines. This information
will be used to assess impacts on waste treatment processes.
Answer the questions in sequence and do not leave any entry blank unless instructed otherwise.
Definitions and specific instructions are provided throughout. Use the NOTES page at the end of the
section if you wish to explain your response to any question. Reference each comment with the
appropriate question number. Reminder: Please provide estimates, if possible, of data for which
exact measurements are unavailable. Indicate on the NOTES page at the end of the section which
responses are estimates, and explain the method of estimation.
0.1.
Where are the facilities located which generate the aqueous liquid waste, sludge, and/or
wastewater you accept from offslte?
(Circle the number for the largest area that applies.)
01 Within 50 miles of your facility
02 Within your state
03 Within a few adjacent states
04 Nationwide
O.2. Which of the following describes the contractual arrangements under which you accept
aqueous liquid waste, sludge, and/or wastewater from offsrte for treatment?
(Circle all that apply. Include a copy of a standard contract with your completed
questionnaire If one Is available.)
-41 01 Contracts are written and signed on the basis of the individual shipment of aqueous liquid
waste, sludge, and/or wastewater.
- * 2. 02 Contracts are signed with customers under which your facility agrees to accept all aqueous
liquid waste, sludge, and/or wastewater generated by the customer and meeting certain
criteria for a pre-set fee per shipment.
L-*5 03 Other /soecifv): Q *«* J2. _<* 3 O
-------
PART 2. SECTION O: COSTS AND REVENUES FROM AQUEOUS WASTE AND WASTEWATER TREATMENT
O.3. What was the total amount of revonue earned by your facility for transportation of aqu«ous
O*4 3 car
, and/or wastftwattr for on-aKatraatmtnt during 1987, 1988, and 1989?
a. Aqueous liquid waste, sludge, and/or wastewaier
received from offsite facilities not under the
same ownership: O**3
0*43
1987 $L__LJ_J|L
1988 $L_
04-43 A 8^ 1989 $ L_LJ_J»L_L
b. Aqueous liquid waste, sludge, and/or wastewater
received from offsite facilities under the same
ownership: o*43 BS1 1987 $ I I I l,l I I l,l I ! I
1988 $| L
1989 Si I I ITI
O.4. What waa the total quantity of aqueous liquid waste, sludge, and/or wastewater treated
onstta durlng 1987i 1988> and 1989?
a. Aqueous liquid waste, sludge, and/or wastewater
received from offsite facilities not under the same
ownership: n*+uAti 1987 i t i ITI i i i.i i i itons
1988 i i i ITI ! I ITI I I l tons
1989 i i i ITI i l ITI i i i tons
b. Aqueous liquid waste, sludge, and/or wastewater
received from offsite facilities under the same
ownership:
I 1 I.I I I
i ! I tons
1988 i i i
i i I' ' '
i i i II '»
i i i tons
c. Aqueous liquid waste, sludge, and/or wastewater
generated ortsite
(estimated value of services): 0 **
-------
PART 2, SECnON O: COSTS AND REVENUES FROM AQUEOUS WASTE AND WASTEWATeR TREATMENT
O.5. Are any approved or authorized Investment projects planned for water pollution control?
(Circle one number.)
01 Yes (CONTINUE TO NEXT QUESTION)
02 No (GO TO QUESTION O.8)
Describe and give the estimated capital cost of each approved or authorized water
pollution control project.
(If additional space is necessary, complete the description in the NOTES space. Reference the
information by the above question number.)
a. Project 1: $ i i i
Describe: o*«»6ftO
O.S.
04* 4 B b. Project 2: S I
Describe:
BO
c. Projects: $ L
Describe:
CO
0447
O.7. What is the projected completion date of each approved or authorized water pollution
O^4>7C&I 8
** (Report the month, date, and year as two-digit numbers; e.g., June 1, 1989 • 06-01-89.)
C
A. Project 1:
o<
b. Project2: i i 1-1 i t-i i i
c. Projects: i i 1-1 i i-i i i
O J. Did this facility perform aqueous liquid waste, sludge, and/or wastewater treatment on a
commercial basis In 1989 (I*., did the facility accept for treatment onsite aqueous liquid
waste, sludge, and/or wastewater that was generated at an offshe facility not under the
same ownership)?
(Circle one number.)
01 Yes (CONTINUE TO NEXT QUESTION)
02 No (GO TO QUESTION 0.10 ON PAGE O-5)
O44*
-------
PART 2. SECTION O: COSTS AND REVENUES FROM AQUEOUS WASTE AND WASTEWATER TREATMENT
O.9. Enter 1989 price Information In the following table for each type of aqueous liquid waste,
O<»4<* CBI »|Udgt, and/or wastewater that Is currently treated In wastewater treatment processes
onstte.
Answer for ALL this facility's commercial wastewater treatment operations, rather than for each
individual wastewater treatment process. Base your price information on a typical shipment size
for each waste type. Circle "A/A" in the column provided for any waste type that you do not treat.
Enter price information in dollars and cents.)
Average or Typical Not
Price ($Aon) Applicable
01
Organic Liquids
a. Oily liquids
b. Halogenated liquids, including
hatogenated solvents
c. Nonhatogenated liquids, including
nonhatogenated solvents O44s ti
d. Organic water mixtures 044* *>i
Inorganic Liquids
e. Liquids containing toxic organics o <*<«*£•»
f. Liquids containing toxic inorganics
(other than cyanide) O 4>
-------
PART 2. SECTION O: COSTS AND REVENUES FROM AQUEOUS WASTE AND WASTEWATEB TREATMENT
OJ3, continued.
Average or Typical Not
Price <$/ton) Applicable
Inorganic Sludges
q. Sludges containing toxic metals O44<*<5« $( i.i i i i.i
r. Inorganic process sludges 044q M $| i.i i i
s. Sludges containing cyanide (may contain
toxic metals or inorganics) 044«* s i $| iri i i i.i i i
t. Sludges containing toxic inorganics
(other than cyanide) O44^ri $ i.i i i i.i i i
u. Inorganic sludges containing toxic organics $1 1,1 i i i.
O44 ^ Ul
Other (specify):
vV.
O 44
-------
PART 2. SECTION O: COSTS &ND REVENUES FROM AQUEOUS WASTE AND WASTEWATER TREATMENT
O4> "
O.1 1. Enter typical 1989 unit cross charges for each typ i of aqueous liquid wast*, sludge, and/or
c BJ wastewater that Is currently treated In wastewater treatment processes onsite.
(77,/s is the em0unt per ion charged faciTities u the same owr ship for treatment of each
type of waste. Base your -n'rt cross charge info/i nation on a typi. shipment size for each waste
type. Circle "NA'in the column provided for any waste type that you do not treat. Enter price
information in dollars and cents.)
Average or Typical
Charge (S/ton)
Not
Applicable
Organic Liquids
a. Oily liquids
b. Halogenated liquids, including
halogenated solvents
c. Nonhalogenated Hquic. including
nonhalogenated solvents
d. Organic water mixtures
Inorganic Liquids
e. Liquids containing toxic organics o * » e l
f. juids containing toxic inorganics
Bother than cyanide)
g. Liquids containing cyanide (may contain
toxic metals or inorganics)
h. Liquids containing chromium (may contain
other toxic metals or inorganics)
i. Liquids containing toxic metals
(other than chromium)
j. Waste concentrated =?=ids (may contain
nontoxic metals or inorganics)
k. Waste concentrated bases (may contain
nontoxic metals or inorganics)
I. Othe- nqueous liquids (may contain
nor.vwc metals, inorganics, or organics)
Organic Sludges
m. Halogenated organic sludges
n. Nonhalogenated organic sludges
o. Oil sludges
p. Dye and paint sludge
CONTINUED ON THE NEXT PAGE
>fil Al
)4u6l
><»llCI
>4n?l
>*» £1
5*n Fl
ain
34U 6-1
main
0
-------
PART 2. SECTION O; COSTS AND REVENUES FROM AQUEOUS WASTE AND WASTEW.ATER TREATMENT
C.11, continued.
Inorganic Sludges
q. Sludges containing toxic metals O4>" o> i
r. Inorganic process sludges 0411 R«
s. Sludges containing cyanide (may contain
toxic metals or inorganics) O4 n s i
t. Sludges containing toxic inorganics
(other than cyanide) O * « TI
u. Inorganic sludges containing toxic organjcs (
Other (specify):
V, O$(iVO On WO
Ol; Wl
x> o$n /o o*» x i
Average or Typical
Charge ($/ton)
Si ifi i i i.i i )
Si iri i i i.i i i
Si iri i i i.i i i
&!,!!! I.I 1 1
Si 1,1 1 1 I.I 1 1
Si lfl 1 1 I.I 1 1
Si 1,1 1 1 I.I t 1
Si 1,1 i i i.i i i
Not
Applicable
NA O4
NA 0*
NA O*
NA O+
NA CH
NA 04
NA CH
NA 0<
i Si
Ti
O.12. How was the value of aqueous liquid waste, sludge, and/or wastewater treatment
computed for each of the following?
a. Aqueous liquid waste, sludge, and/or wastewater received from off site facilities under the
same ownership:
O4I2.A
b. Aqueous liquid waste, sludge, and/or wastewater generated onsite (estimated value of
services):
O-7
-------
PART 2. SECTION O: COSTS AND REVENUES FROM AQUEOUS WASTE AND WASTEWATER TREATMENT
O.13. Does this facility have thermal processes onsite that generate aqueous liquid waste,
sludge, and/or wastewater?
(Circle one number.)
01 Yes (CONTINUE TO NEXT QUESTION)
02 No (GO TO QUESTION 0.15)
O.14. What quantity of wastewater was generated by this facility's thermal processes during
O4> m c ar } 987|., 988> and 1989| and wnat percentage of this wastewater was treated onstte?
Year
Quantity Generated
Percent Treated Onstte
1987
I l.l I I
j | tons
i i i i%
1988 O*'VA87 i i I ITI I I ITI I I I tons
1989 O*JCom
Year
Quantity Generated
Percent Treated Onsite
1987
1988
1989
i i l.
tons
tons
1111%
ft-si i ti 1,1 i i i;i ii itons
-------
FILE. Nfr/AE OC,
. SECTION O: COSTS AND REVENUES FHOM AQUEOUS WASTE ANO WASTEWATEff THEATME«VT
NOTES
Oc p$e ___ ocoi-
OC.A
oes
QU»«lon
Numbar(s)
Notes, commtnts. «tc.
D
-------
PART 2. SECTION O: COSTS AND REVENUES FROM AQUEOUS WASTE AND WAS
YOU HAVE COMPLETED THE ECONOMIC AND FINANCIAL SECTION OF THIS
QUESTIONNAIRE. PLEASE CHECK TO SEE THAT YOU HAVE ANSWERED ALL RELEVANT
QUESTIONS, AND THAT YOU HAVE ATTACHED ANY ANNUAL REPORTS, 10K REPORTS, OR
STANDARD CONTRACTS AVAILABLE.
O-10
-------
APPENDIX B
SOURCES OF COMPANY FINANCIAL DATA
-------
-------
TABLE B-l. CALCULATIONS USED TO CONSTRUCT BASELINE FINANCIAL
STATEMENTS
Financial Statement Category
Calculations
Income Statement
Annual Revenues
Collected from data sources identified in Table 4-10 or (total assets) /
(assets to sales benchmark).
Cost of Sales
Sales • (1 -ROS benchmark) • [(cost of sales share from common size
income statement) / (cost of sales share plus general and administrative
expenses share from common size income statement)]
Gross Profit
Other Expenses and Taxes
Net Income
Balance Sheet
Cash
Accounts Receivable
Cash + Accounts Receivable
Other Current Assets
Total Current Assets
Fixed Assets
Other Noncurrent Assets
Total Assets
Accounts Payable
Other Current Liabilities
Total Current Liabilities
Noncurrent Liabilities
Total Liabilities
Net Worth
Total Liabilities and Owner's Equity
Annual revenues - cost of sales.
Gross profit - net income.
ROS benchmark • annual revenues.
(Cash + accounts receivable) - accounts receivable.
(Collection period benchmark / 365) • annual revenues.
Total Assets • [(cash share from the common size balance sheet plus
accounts receivable share from the common size balance sheet) / (total
current assets share from the common size balance sheet)].
Total current assets - (cash + accounts receivable).
Total current liabilities • current ratio benchmark.
Fixed assets to net worth benchmark ratio • net worth.
Total assets - fixed assets - current assets.
Collected from data sources identified in Table 4-10 or (annual sales) •
(assets to sales D&B benchmark ratio).
Annual revenues • accounts payable to sales benchmark.
Total current liabilities - accounts payable.
Current liabilities to net worth benchmark • net worth.
Total liabilities - total current liabilities.
Total assets - net worth.
Total assets / (1+total liabilities to net worth benchmark).
Total assets
Note: These calculations were used to set up financial statements for potentially affected firms for which actual
financial statements were not available from published sources. Benchmark ratios are based on the Dun &
Bradstreet Key Financial Ratios contained in Table 4-12.
B-l
-------
TABLE B-2. DATA FROM THE COMMON SIZE FINANCIALS USED TO
CONSTRUCT BASELINE FINANCIAL STATEMENTS
Income Statement Items
SIC
Code
2819
2834
2869
2879
2911
2992
3312
3339
3351
3523
3679
3724
4011
4226
4911
4953
5093
5169
5171
8999
Cost of
Sales
0.629
0.525
0.633
0.603
0.725
0.669
0.689
0.792
0.834
0.679
0.650
0.705
0.554
0.563
0.670
0.614
0.705
0.697
0.855
0.538
Gross
Profit
0.371
0.475
0.367
0.397
0.275
0.331
0.311
0.208
0.166
0.321
0.350
0.295
0.446
0.437
0.330
0.386
0.295
0.303
0.145
0.462
General and
Administrative
Expenses
0.312
0.442
0.314
0.362
0.241
0.302
0.255
0.153
0.181
0.268
0.315
0.247
0.342
0.357
0.2(59
0.319
0.252
0.2(54
0.127
0.402
Net
Income
0.059
0.033
0.053
0.035
0.034
0.029
0.056
0.055
-0.015
0.053
0.035
0.048
0.104
0.080
0.061
0.067
0.043
0.039
0.018
0.060
Balance Sheet Items
Cash
0.108
0.124
0.113
0.094
0.080
0.086
0.107
0.098
0.026
0.104
0.125
0.080
0.120
0.133
0.039
0.113
0.152
0.139
0.118
0.187
Accounts
Receivable
0.285
0.189
0.248
0.220
0.186
0.317
0.287
0.121
0.212
0.196
0.289
0.227
0.135
0.194
0.060
0.221
0.237
0.368
0.284
0.268
Total
Current
Assets
0.626
0.608
0.587
0.636
0.514
0.674
0.609
0.590
0.495
0.715
0.721
0.634
0.354
0.428
0.186
0.421
0.628
0.763
0.616
0.617
Source: Dun & Bradstreet.
Desktop Edition.
1990-1991. Industry Norms and Key Business Ratios. New York: Dun & Bradstreet
B-2
-------
TABLE B-3. LOWER QUARTILE BENCHMARK DEBT RATIO
SIC Code
Debt to Total Assets (%)
2819
2834
2869
2879
2911
2992
3312
3339
3351
3523
3679
3724
4011
4226
4911
4953
5093
5169
5171
8999
71
60
66
63
74
61
70
52
73
63
67
70
65
72
69
68
62
70
65
59
aDebt to assets benchmark values are computed based on lower quartile debt to equity ratios using the following
formula: (lower quartile debt to equity) / [(lower quartile debt to equity) +1].
Source: Dun & Bradstreet. 1990-1991. Industry Norms and Key Business Ratios. New York: Dun & Bradstreet
Desktop Edition.
B-3
-------
TABLE B-4. MEDIAN INDUSTRY BENCHMARK FINANCIAL RATIOS
SIC
Code
2819
2S34
2869
2879
2911
2992
3312
3339
3351
3523
3679
3724
4011
4226
4911
4953
5093
5169
5171
8999
Current
Ratio
1.7
2.4
1.9
1.9
1.4
2.3
1.8
1.7
1.8
25
22
2.1
12
1.8
1.7
1.4
22
1.8
1.8
23
Total
Asset
Turn-
over
53.5
90.2
49.9
55.6
53.6
35.3
43.9
43.3
60.0
50.2
46.9
66.2
199.5
73.3
209.3
52.8
30.6
32.0
21.6
39.8
Debt to
Total
Assets
52%
43%
48%
50%
59%
47%
55%
42%
71%
44%
46%
49%
48%
47%
61%
50%
40%
50%
46%
34%
Return
on
Sales
4.40%
5.00%
5.30%
3.50%
3.40%
3.00%
4.40%
4.90%
1.10%
4.30%
3.00%
3.80%
7.00%
7.10%
6.50%
6.70%
3.10%
2.30%
1.20%
6.80%
Return
on
Assets
8.20%
6.10%
7.80%
4.40%
4.90%
6.00%
7.20%
10.80%
-0.20%
7.20%
5.20%
5.60%
4.30%
9.00%
3.20%
8.90%
8.40%
6.40%
5.20%
7.70%
Return
on Net
Worth
15.60%
12.60%
16.80%
9.00%
10.90%
13.50%
17.40%
16.40%
-3.90%
14.80%
13.10%
12.60%
11.70%
16.90%
8.70%
20.50%
18.00%
15.30%
10.00%
18.50%
Fixed
Assets
to Net
Worth
49.3
46.7
58.0
36.1
132.5
28.1
68.1
43.2
156.0
34.8
30.8
60.8
116.6
78.7
174.6
93.4
44.7
29.1
59.0
44.7
Collection
Period
46.0
49.9
42.7
47.3
39.8
42.3
42.7
38.7
48.2
31.4
47.8
50.0
62.8
41.6
34.7
42.4
22.6
43.1
20.1
50.1
Total
Liabilities
to Net
Worth
109.0
74.4
92.4
98.1
146.9
88.2
122.0
72.8
245.5
77.0
85.2
95.1
91.1
87.6
158.6
101.1
66.6
100.5
86.1
51.1
aDebt to assets benchmark values are computed based on lower quartile debt to equity ratios using the following
formula: (lower quartile debt to equity) / [Qower quartile debt to equity) +1].
Source: Dun & Bradstreet. 1990-1991. Industry Norms and Key Business Ratios. New York: Dun & Bradstreet.
Desktop Edition.
B-4
-------
APPENDIX C
SIC Code Definitions
-------
-------
SIC
Code Industry
SIC
Code Industry
Agricultural Production—Crops
0111 Wheat
0112 Rice
0115 Corn
0116 Soybeans
0119 Cash grains, nee
0131 Cotton
0132 Tobacco
0133 Sugar crops
0134 Irish potatoes
0139 Field crops, except cash grains, nee
0161 Vegetables and melons
0171 Berry crops
0172 Grapes
0173 Tree nuts
0174 Citrus fruits
0175 Deciduous tree fruits
0179 Fruits and tree nuts, nee
0181 Ornamental nursery products
0182 Food crops grown under cover
0189 Horticultural specialties, nee
0191 General farms, primarily crops
Agricultural Production—Livestock
0211 Beef cattle feedlots
0212 Beef cattle, except feedlots
0213 Hogs
0214 Sheep and goats
0219 General livestock, nee
0241 Dairy farms
0251 Broiler, fryer, and roaster chickens
0252 Chicken eggs
0253 Turkeys and turkey eggs
0254 Poultry hatcheries
0259 Poultry and eggs, nee
0271 Fur-bearing animals and rabbits
0272 Horses and other equines
0279 Animal specialties, nee
0291 General farms, primarily livestock
Agricultural Services
0711 Soil preparation services
0721 Crop planting and protection
0722 Crop harvesting
0723 Crop preparation services for market
0724 Cotton ginning
0729 General crop services
0741 Veterinary services, farm livestock
0742 Veterinary services, specialties
0751 Livestock services, except specialties
0752 Animal specialty services
0761 Farm labor contractors
0762 Farm management services
0781 Landscape counseling and planning
0782 Lawn and garden services
0783 Ornamental shrub and tree services
Forestry
0811 Timber tracts
0821 Forest nurseries and seed gathering
0843 Extraction of pine gum
0849 Gathering of forest products, nee
0851 Forestry services
Fishing, Hunting, and Trapping
0912 Finfish
0913 Shellfish
0919 Miscellaneous marine products
0921 Fish hatcheries and preserves
0971 Hunting, trapping, game propagation
Mining
1011 Iron ores
1021 Copper ores
1031 Lead and zinc ores
1041 Gold ores
1044 Silver ores
1051 Bauxite and other aluminum ores
1061 Ferroalloy ores, except vanadium
1081 Metal mining services
1092 Mercury ores
1094 Uranium, radium, vanadium ores
1099 Metal ores, nee
1111 Anthracite
1112 Anthracite mining services
1211 Bituminous coal and lignite
1213 Bituminous and lignite services
1311 Crude petroleum and natural gas
1321 Natural gas liquids
1381 Drilling oil and gas wells
1382 Oil and gas exploration services
1389 Oil and gas field services, nee
1411 Dimension stone
1422 Crushed and broken limestone
1423 Crushed and broken granite
1429 Crushed and broken stone, nee
1442 Construction sand and gravel
1446 Industrial sand
1452 Bentonite
1453 Fire clay
1454 Fuller's earth
1455 Kaolin and ball clay
1459 Clay and related minerals, nee
1472 Barite
1473 Fluorspar
1474 Potash, soda and borate minerals
Note: nee = not elsewhere classified.
C-l
-------
SIC
Code Industry
SIC
Code Industry
1475 Phosphate rock
1476 Rock salt
1477 Sulfur
1479 Chemical and fertilizer mining, nee
1481 Nonmetallic minerals services
1492 Gypsum
1496 Talc, soapstone, and pyrophyllite
1499 Nonmetallic minerals, nee
Construction
1521 Single-family housing construction
1522 Residential construction, nee
1531 Operative builders
1541 Industrial buildings and warehouses
1542 Nonresidential construction, nee
1611 Highway and street construction
1622 Bridge, tunnel, and elevated highway
1623 Water, sewer, and utility lines
1629 Heavy construction, nee
1711 Plumbing, heating, air conditioning
1721 Painting, paper hanging, decorating
1731 Electrical work
1741 Masonry and other stonework
1742 Plastering, drywall, and insulation
1743 Terrazzo, tile, marble, mosaic work
1751 Carpentering
1752 Floor laying and floor work, nee
1761 Roofing and sheet metal work
1771 Concrete work
1781 Water well drilling
1791 Structural metal erection
1793 Glass and glazing work
1794 Excavating and foundation work
1795 Wrecking and demolition work
1796 Installing building equipment, nee
1799 Special trade contractors, nee
Food Products
2011 Meat packing plants
2013 Sausages and other prepared meats
2016 Poultry dressing plants
2017 Poultry and egg processing
2021 Creamery butter
2022 Cheese, natural and processed
2023 Condensed and evaporated milk
2024 Ice cream and frozen desserts
2026 Fluid milk
2032 Canned specialties
2033 Canned fruits and vegetables
2034 Dehydrated fruits, vegetables, soups
2035 Pickles, sauces, and salad dressings
2037 Frozen fruits and vegetables
2038 Frozen specialties
2041 Flour and other grain mill products
2043 Cereal breakfast foods
2044 Rice milling
2045 Blended and prepared flour
2046 Wet corn milling
2047 Dog, cat, and other pet food
2048 Prepared feeds, nee
2051 Bread, cake, and related products
2052 Cookies and crackers
2061 Raw cane sugar
2062 Cane sugar refining
2063 Beet sugar
2065 Confectionery products
2066 Chocolate and cocoa products
2067 Chewing gum
2074 Cottonseed oil mills
2075 Soybean oil mills
2076 Vegetable oil mills, nee
2077 Animal and marine fats and oils
2079 Shortening and cooking oils
2082 Malt beverages
2083 Malt
2084 Wines, brandy, and brandy.spirits
2085 Distilled liquor, except brandy
2086 Bottled and canned soft drinks
2087 Flavoring extracts and syrups, nee
2091 Canned and cured seafoods
2092 Fresh or frozen packaged fish
2095 Roasted coffee
2097 Manufactured ice
2098 Macaroni and spaghetti
2099 Food preparations, nee
Tobacco
2111 Cigarettes
2121 Cigars
2131 Chewing and smoking tobacco
2141 Tobacco stemming and redrying
Textile Mill Products
2211 Weaving mills, cotton
2221 Weaving mills, synthetics
2231 Weaving and finishing mills, wool
2241 Narrow fabric mills
2251 Women's hosiery, except socks
2252 Hosiery, nee
2253 Knit outerwear mills
2254 Knit underwear mills
2257 Circular knit fabric mills
2258 Warp knit fabric mills
2259 Knitting mills, nee
2261 Finishing plants, cotton
2262 Finishing plants, synthetics
Note: nee » not elsewhere classified.
C-2
-------
SIC
Code Industry
SIC
Code Industry
2269 Finishing plants, nee
2271 Woven carpets and rugs
2272 Tufted carpets and rugs
2279 Carpets and rugs, nee
2281 Yarn mills, except wool
2282 Throwing and winding mills
2283 Wool yarn mills
2284 Thread mills
2291 Felt goods, except woven felts and hats
2292 Lace goods
2293 Paddings and upholstery filling
2294 Processed textile waste
2295 Coated fabrics, not rubberized
2296 Tire cord and fabric
2297 Nonwoven fabrics
2298 Cordage and twine
2299 Textile goods, nee
Apparel and Related Textiles
2311 Men's and boys' suits and coats
2321 Men's and boy's shirts and nightwear
2322 Men's and boys' underwear
2323 Men's and boys' neckwear
2327 Men's and boys' separate trousers
2328 Men's and boys' work clothing
2329 Men's and boys' clothing, nee
2331 Women's and misses' blouses and waists
2335 Women's and misses' dresses
2337 Women's and misses' suits and coats
2339 Women's and misses' outerwear, nee
2341 Women's and children's underwear
2342 Brassieres and allied garments
2351 Millinery
2352 Hats and caps, except millinery
2361 Children's dresses and blouses
2363 Children's coats and suits
2369 Children's outerwear, nee
2371 Fur goods
2381 Fabric dress and work gloves
2384 Robes and dressing gowns
2385 Waterproof outergarments
2386 Leather and sheep lined clothing
2387 Apparel belts
2389 Apparel and accessories, nee
2391 Curtains and draperies
2392 House furnishings, nee
2393 Textile bags
2394 Canvas and related products
2395 Pleating and stitching"
2396 Automotive and apparel trimmings
2397 Schiffli machine embroideries
2399 Fabricated textile products, nee
Lumber and Wood Products
2411 Logging camps and logging contractors
2421 Sawmills and planing mills, general
2426 Hardwood dimension and flooring
2429 Special product sawmills, nee
2431 Millwork ;
2434 Wood kitchen cabinets
2435 Hardwood veneer and plywood
2436 Softwood veneer and plywood
2439 Structural wood members, nee
2441 Nailed wood boxes and shook
2448 Wood pallets and skids
2449 Wood containers, nee
2451 Mobile homes
2452 Prefabricated wood buildings
2491 Wood preserving
2492 Particleboard
2499 Wood products, nee
Furniture and Fixtures
2511 Wood household furniture
2512 Upholstered household furniture
2514 Metal household furniture
2515 Mattresses and bedsprings
2517 Wood TV and radio cabinets
2519 Household furniture, nee
2521 Wood office furniture
2522 Metal office furniture
2531 Public building and related furniture
2541 Wood partitions and fixtures
2542 Metal partitions and fixtures
2591 Drapery hardware and blinds and shades
2599 Furniture and fixtures, nee
Paper Products
2611 Pulp mills
2621 Paper mills, except building paper
2631 Paperboard mills
2641 Paper coating and glazing
2642 Envelopes
2643 Bags, except textile bags
2645 Die-cut paper and board
2646 Pressed and molded pulp goods
2647 Sanitary paper products
2648 Stationery products
2649 Converted paper products, nee
2651 Folding paperboard boxes
2652 Set-up paperboard boxes
2653 Corrugated and solid fiber boxes
2654 Sanitary food containers
2655 Fiber cans, drums, and similar products
2661 Building paper and board mills
Note: nee = not elsewhere classified.
C-3
-------
SIC
Code Industry
SIC
Code Industry
Printing and Publishing Industries
2711 Newspapers
2721 Periodicals
2731 Book publishing
2732 Book printing
2741 Miscellaneous publishing
2751 Commercial printing, letterpress
2752 Commercial printing, lithographic
2753 Engraving and plate printing
2754 Commercial printing, gravure
2761 Manifold business forms
2771 Greeting card publishing
2782 Blankbooks and looseleaf binders
2789 Bookbinding and related work
2791 Typesetting
2793 Photoengraving
2794 Electrotyping and stereotyping
2795 Lithographic platemaking services
Chemical Products
2800 General chemical manufacturing
2812 Alkalies and chlorine
2813 Industrial gases
2816 Inorganic pigments
2818 Organic pesticide products
2819 Industrial inorganic chemicals, nee
2821 Plastics materials and resins
2822 Synthetic rubber
2823 Cellulosic man-made fibers
2824 Organic fibers, noncellulosic
2831 Biological products
2833 Medicinals and botanicals
2834 Pharmaceutical preparations
2841 Soap and other detergents
2842 Polishes and sanitation goods
2843 Surface active agents
2844 Toilet preparations
2851 Paints and allied products
2861 Gum and wood chemicals
2865 Cyclic crudes and intermediates
2869 Industrial organic chemicals, nee
2873 Nitrogenous fertilizers
2874 Phosphatic fertilizers
2875 Fertilizers, mixing only
2879 Agricultural chemicals, nee
2891 Adhesives and sealants
2892 Explosives
2893 Printing ink
2895 Carbon black
2899 Chemical preparations, nee
Petroleum and Coal Products
2911 Petroleum refining
2951 Paving mixtures and blocks
2952 Asphalt felts and coatings
2992 Lubricating oils and greases
2999 Petroleum and coal products, nee
Rubber and Plastic Products
3011 Tires and inner tubes
3021 Rubber and plastics footwear
3031 Reclaimed rubber
3041 Rubber and plastics hose and belting
3069 Fabricated rubber products, nee
3079 Miscellaneous plastics products
Leather Products
3111 Leather tanning and finishing
3131 Boot and shoe cut stock and findings
3142 House slippers
3143 Men's footwear, except athletic
3144 Women's footwear, except athletic
3149 Footwear, except rubber, nee
3151 Leather gloves and mittens
3161 Luggage
3171 Women's handbags and purses
3172 Personal leather goods, nee
3199 Leather goods, nee
Stone, Clay, and Glass Products
3211 Flat glass
3221 Glass containers
3229 Pressed and blown glass, nee
3231 Products of purchased glass
3241 Cement, hydraulic
3251 Brick and structural clay tile
3253 Ceramic wall and floor tile
3255 Clay refractories
3259 Structural clay products, nee
3261 Vitreous plumbing fixtures
3262 Vitreous china food utensils
3263 Fine earthenware food utensils
3264 Porcelain electrical supplies
3269 Pottery products, nee
3271 Concrete block and brick
3272 Concrete products, nee
3273 Ready-mixed concrete
3274 Lime
3275 Gypsum products
3281 Cut stone and stone products
3291 Abrasive products
3292 Asbestos products
3293 Gaskets, packing, and sealing devices
3295 Minerals, ground or treated
3296 Mineral wool
3297 Nonclay refractories
3299 Nometallic mineral products, nee
Note: nee = not elsewhere classified.
C-4
-------
SIC
Code Industry
SIC
Code Industry
Primary Metal Industries
3312 Blast furnaces and steel mills
3313 Electrometallurgical products
3315 Steei wire and related products
3316 Cold finishing of steel shapes
3317 Steel pipe and tubes
3321 Gray iron foundries
3322 Malleable iron foundries
3324 Steel investment foundries
3325 Steel foundries, nee
3331 Primary copper
3332 Primary lead
3333 Primary zinc
3334 Primary aluminum
3339 Primary nonferrous metals, nee
3341 Secondary nonferrous metals
3351 Copper rolling and drawing
3353 Aluminum sheet, plate, and foil
3354 Aluminum extruded products
3355 Aluminum rolling and drawing, nee
3356 Nonferrous rolling and drawing, nee
3357 Nonferrous wire drawing and insulating
3361 Aluminum foundries
3362 Brass, bronze, and copper foundries
3369 Nonferrous foundries, nee
3398 Metal heat treating
3399 Primary metal products, nee
Metal Fabrications
3411 Metal cans
3412 Metal barrels, drums, and pails
3421 Cutlery
3423 Hand and edge tools, nee
3425 Hand saws and saw blades
3429 Hardware, nee
3431 Metal sanitary ware
3432 Plumbing fittings and brass goods
3433 Heating equipment, except electric
3441 Fabricated structural metal
3442 Metal doors, sash, and trim
3443 Fabricated plate work (boiler shops)
3444 Sheet metal work
3446 Architectural metal work
3448 Prefabricated metal buildings
344.9 Miscellaneous metal work
3451 Screw machine products
3452 Bolts, nuts, rivets, and washers
3462 Iron and steel forgings
3463 Nonferrous forgings
3465 Automotive stampings
3466 Crowns and closures
3469 Metal stampings, nee
3471 Plating and polishing
3479 Metal coating and allied services
3482 Small arms ammunition
3483 Ammunition, except for small arms, nee
3484 Small arms
3489 Ordnance and accessories, nee
3493 Steel springs, except wire
3494 Valves and pipe fittings
3495 Wire springs
3496 Miscellaneous fabricated wire products
3497 Metal foil and leaf
3498 Fabricated pipe and fittings
3499 Fabricated metal products, nee
Nonelectrical Machinery
3511 Turbines and turbine generator sets
3519 Internal combustion engines, nee
3523 Farm machinery and equipment
3524 Lawn and garden equipment
3531 Construction machinery
3532 Mining machinery
3533 Oil field machinery
3534 Elevators and moving stairways
3535 Conveyors and conveying machinery
3536 Hoists, cranes, and monorails
3537 Industrial trucks and tractors
3541 Machine tools, metal cutting types
3542 Machine tools, metal forming types
3544 Special dies, tools, jigs, and fixture
3545 Machine tool accessories
3546 Power driven hand tools
3547 Rolling mill machinery
3549 Metalworking machinery, nee
3551 Food products machinery
3552 Textile machinery
3553 Woodworking machinery
3554 Paper industries machinery
3555 Printing trades machinery
3559 Special industry machinery, nee
3561 Pumps and pumping equipment
3562 Ball and roller bearings
3563 Air and gas compressors
3564 Blowers and fans
3565 Industrial patterns
3566 Speed changers, drives, and gears
3567 Industrial furnaces and ovens
3568 Power transmission equipment, nee
3569 General industrial machinery, nee
3572 Typewriters
3573 Electronic computing equipment
3574 Calculating and accounting machines
3576 Scales and balances, except laboratory
3579 Office machines, nee
3581 Automatic merchandising machines
Note: nee = not elsewhere classified.
C-5
-------
SIC
Code Industry
SIC
Code Industry
3582 Commercial laundry equipment
3585 Refrigeration and heating equipment
3586 Measuring and dispensing pumps
3589 Service industry machinery, nee
3592 Carburetors, pistons, rings, valves
3599 Machinery, except electrical, nee
Electrical and Electronic Machinery, Equipment,
and Supplies
3612 Transformers
3613 Switchgear and switchboard apparatus
3621 Motors and generators
3622 Industrial controls
3623 Welding apparatus, electrical
3624 Carbon and graphite products
3629 Electrical industrial apparatus, nee
3631 Household cooking equipment
3632 Household refrigerators and freezers
3633 Household laundry equipment
3634 Electric housewares and fans
3635 Household vacuum cleaners
3636 Sewing machines
3639 Household appliances, nee
3641 Electric lamps
3643 Current-carrying wiring devices
3644 Noncurrent-carrying wiring devices
3645 Residential lighting fixtures
3646 Commerical lighting fixtures
3647 Vehicular lighting equipment
3648 Lighting equipment, nee
3651 Radio and TV receiving sets
3652 Phonograph records
3661 Telephone and telegraph apparatus
3662 Radio and TV communication equipment
3671 Electron tubes, receiving type
3672 Cathode ray television picture tubes
3673 Electron tubes, transmitting
3674 Semiconductors and related devices
3675 Electronic capacitors
3676 Electronic resistors
3677 Electronic coils and transformers
3678 Electronic connectors
3679 Electronic components, nee
3691 Storage batteries
3692 Primary batteries, dry and wet
3693 X-ray apparatus and tubes
3694 Engine electrical equipment
3699 Electrical equipment and supplies, nee
Transportation Equipment
37ii Motor vehicles and car bodies
3713 Truck and bus bodies
3714 Motor vehicle parts and accessories
3715 Truck trailers
3716 Motor homes on purchased chassis
3721 Aircraft
3724 Aircraft engines and engine parts
3728 Aircraft equipment, nee
3731 Ship building and repairing
3732 Boat building and repairing
3743 Railroad equipment
3751 Motorcycles, bicycles, and parts
3761 Guided missiles and space vehicles
3764 Space propulsion units and parts
3769 Space vehicle equipment, nee
3792 Travel trailers and campers
3795 Tanks and tank components
3799 Transportation equipment, nee
Instruments
3811 Engineering and scientific instruments
3822 Environmental controls
3823 Process control instruments
3824 Fluid meters and counting devices
3825 Instruments to measure electricity
3829 Measuring and controlling devices, nee
3832 Optical instruments and lenses
3841 Surgical and medical instruments
3842 Surgical appliances and supplies
3843 Dental equipment and supplies
3851 Ophthalmic goods
3861 Photographic equipment and supplies
3873 Watches, clocks, and watchcases
Miscellaneous Manufacturing
3911 Jewelry, precious metal
3914 Silverware and plated ware
3915 Jewelers' materials and lapidary work
3931 Musical instruments
3942 Dolls
3944 Games, toys, and children's vehicles
3949 Sporting and athletic goods, nee
3951 Pens and mechanical pencils
3952 Lead pencils and art goods
3953 Marking devices
3955 Carbon paper and inked ribbons
3961 Costume jewelry
3962 Artificial flowers
3963 Buttons
3964 Needles, pins, and fasteners
3991 Brooms and brushes
3993 Signs and advertising displays
3995 Burial caskets
3996 Hard surface floor coverings
3999 Manufacturing industries, nee
Note: nee = not elsewhere classified.
C-6
-------
SIC
Code Industry
SIC
Code Industry
Railroad Transportation
4011 Railroads, line-haul operating
4013 Switching and terminal devices
4041 Railway express service
Local Passenger Transportation
4111 Local and suburban transit
4119 Local passenger transportation, nee
4121 Taxicabs
4131 Intercity highway transportation
4141 Local passenger charter service
4142 Charter service, except local
4151 School buses
4171 Bus terminal facilities
4172 . Bus service facilities
Trucking
4212 Local trucking, without storage
4213 Trucking, except local
4214 Local trucking and storage
4221 Farm product warehousing and storage
4222 Refrigerated warehousing
4224 Household goods warehousing
4225 General warehousing and storage
4226 Special warehousing and storage, nee
4231 Trucking terminal facilities
4311 U.S. Postal Service
Water Transportation
4411 Deep sea foreign transportation
4421 Noncontiguous area transportation
4422 Coastwise transportation
4423 Intercoastal transportation
4431 Great Lakes transportation
4441 Transportation on rivers and canals
4452 Ferries
4453 Lighterage
4454 Towing and tugboat service
4459 Local water transportation, nee
4463 Marine cargo handling
4464 Canal operation
4469 Water transportation services, nee
Air Transportation
4511 Certified air transportation
4521 Noncertified air transportation
4582 Airports and flying fields
4583 Air terminal services
Pipelines
4612 Crude petroleum pipelines
4613 Refined petroleum pipelines
4619 Pipelines, nee
Transportation Services
4712 Freight forwarding
4722 Passenger transportation arrangement
4723 Freight transportation arrangement
4742 Railroad car rental with service
4743 Railroad car rental without service
4782 Inspection and weighing services
4783 Packing and crating
4784 Fixed facilities for vehicles, nee
4789 Transportation services, nee
Communications
4811 Telephone communication
4821 Telegraph communication
4832 Radio broadcasting
4833 Television broadcasting
4899 Communication services, nee
Electrical, Gas, and Sanitary Services
4911 Electric services
4922 Natural gas transmission
4923 Gas transmission and distribution
4924 Natural gas distribution
4925 Gas production and/or distribution
4931 Electric and other services combined
4932 Gas and other services combined
4939 Combination utility services, nee
4941 Water supply
4952 Sewerage systems
4953 Refuse systems
4959 Sanitary services, nee
4961 Steam supply
4971 Irrigation systems
Wholesale Trade
5012 Automobiles and other motor vehicles
5013 Automotive parts and supplies
5014 Tires and tubes
5021 Furniture
5023 Home furnishings
5031 Lumber, plywood, and millwork
5039 Construction materials, nee
5041 Sporting and recreational goods
5042 Toys and hobby goods and supplies
5043 Photographic equipment and supplies
5051 Metals service centers and offices
5052 Coal and other minerals and ores
5063 Electrical apparatus and equipment
5064 Electrical appliances, TV and radios
5065 Electronic parts and equipment
5072 Hardware
5074 Plumbing and hydronic heating supplies
5075 Warm air heating and air conditioning
Note: nee = not elsewhere classified.
C-7
-------
SIC
Code Industry
SIC
Code Industry
5078 Refrigeration equipment and supplies
5081 Commercial machines and equipment
5082 Construction and mining machinery
5083 Farm machinery and equipment
5084 Industrial machinery and equipment
5085 Industrial supplies
5086 Professional equipment and supplies
5087 Service establishment equipment
5088 Transportation equipment and supplies
5093 Scrap and waste materials
5094 Jewelry, watches, and precious stones
5099 Durable goods, nee
5111 Printing and writing paper
5112 Stationery supplies
5113 Industrial and personal service paper
5122 Drugs, proprietaries, and sundries
5133 Piece goods
5134 Notions and other dry goods
5136 Men's clothing and furnishings
5137 Women's and children's clothing
5139 Footwear
5141 Groceries, general line
5142 Frozen foods
5143 Dairy products
5144 Poultry and poultry products
5145 Confectionery
5146 Fish and seafoods
5147 Meats and meat products
5148 Fresh fruits and vegetables
5149 Groceries and related products, nee
5152 Cotton
5153 Grain
5154 Livestock
5159 Farm-product raw materials, nee
5161 Chemicals and allied products
5171 Petroleum bulk stations and terminals
5172 Petroleum products, nee
5181 Beer and ale
5182 Wines and distilled beverages
5191 Farm supplies
5194 Tobacco and tobacco products
5198 Paints, varnishes, and supplies
5199 Nondurable goods, nee
Retail Trade
5211 Lumber and other building materials
5231 Paint, glass, and wallpaper stores
5251 Hardware stores
5261 Retail nurseries and gardens
5271 Mobile home dealers
5311 Department stores
5331 Variety stores
5399 Miscellaneous general merchandise stores
5411 Grocery stores
5422 Freezer and locker meat provisioners
5423 Meat and fish (seafood) markets
5431 Fruit stores and vegetable markets
5441 Candy, nut, and confectionery stores
5451 Dairy products stores
5462 Retail bakeries, baking and selling
5463 Retail bakeries, selling only
5499 Miscellaneous food stores
5511 New and used car dealers
5521 Used car dealers
5531 Auto and home supply stores
5541 Gasoline service stations
5551 Boat dealers
5561 Recreation and utility trailer dealers
5571 Motorcycle dealers
5599 Automotive dealers, nee
5611 Men's and boys' clothing and furnishings
5621 Women's ready-to-wear stores
5631 Women's accessory and specialty stores
5641 Children's and infants' wear stores
5651 Family clothing stores
5661 Shoe stores
5681 Furriers and fur shops
5699 Miscellaneous apparel and accessories
5712 Furniture stores
5713 Floor covering stores
5714 Drapery and upholstery stores
5719 Miscellaneous home furnishings stores
5722 Household appliance stores
5732 Radio and television stores
5733 Music stores
5812 Eating places
5813 Drinking places
5912 Drugstores and proprietary stores
5921 Liquor stores
5931 Used merchandise stores
5941 Sporting goods and bicycle shops
5942 Book stores
5943 Stationery stores
5944 Jewelry stores
5945 Hobby, toy, and game shops
5946 Camera and photographic supply stores
5947 Gift, novelty, and souvenir shops
5948 Luggage and leather goods stores
5949 Sewing, needlework, and piece goods
5961 Mail order houses
5962 Merchandising machine operators
5963 Direct selling organizations
5982 Fuel and ice dealers, nee
5983 Fuel oil dealers
5984 Liquefied petroleum gas dealers
Note: nee = not elsewhere classified.
C-8
-------
SIC
Code Industry
SIC
Code Industry
5992 Florists
5993 Cigar stores and stands
5994 News dealers and newsstands
5999 Miscellaneous retail stores, nee
Financial
6011 Federal Reserve banks
6022 State banks, Federal Reserve
6023 State banks, not Federal Reserve, FDIC
6024 State banks, not Federal Reserve, not FDIC
6025 National banks, Federal Reserve
6026 National banks, not Federal Reserve, FDIC
6027 National banks, not FDIC
6028 Private banks, not incorporated, not FDIC
6032 Mutual savings banks, Federal Reserve
6033 Mutual savings banks, nee
6034 Mutual savings banks, not FDIC
6042 Nondeposit trusts, Federal Reserve
6044 Nondeposit trusts, not FDIC
6052 Foreign exchange establishments
6054 Safe deposit companies
6055 Clearinghouse associations
6056 Corporations for banking abroad
6059 Functions related to banking, nee
6112 Rediscounting, not for agricultural
6113 Rediscounting, for agricultural
6122 Federal savings and loan associations
6123 State associations, insured
6124 State associations, noninsured, FHLB
6125 State associations, noninsured, nee
6131 Agricultural credit institutions
6142 Federal credit unions
6143 State credit unions
6144 Nondeposit industrial loan companies
6145 Licensed small loan lenders
6146 Installment sales finance companies
6149 Miscellaneous personal credit institutions
6153 Short-term business credit
6159 Miscellaneous business credit institutions
6162 Mortgage bankers and correspondents
6163 Loan brokers
6211 Security brokers and dealers
6221 Commodity contracts brokers, dealers
6231 Security and commodity exchanges
6281 Security and commodity services
Insurance
6311 Life insurance
6321 Accident and health insurance
6324 Hospital and medical service plans
6331 Fire, marine, and casualty insurance
6351 Surety insurance
6361 Title insurance
6371 Pension, health, and welfare funds
6399 Insurance carriers, nee
6411 Insurance agents, brokers, and service
Real Estate
6512 Nonresidential building operators
6513 Apartment building operators
6514 Dwelling operators, except apartments
6515 Mobile home site operators
6517 Railroad property lessors
6519 Real property lessors, nee
6531 Real estate agents and managers
6541 Title abstract offices
6552 Subdividers and developers, nee
6553 Cemetery subdividers and developers
6611 Combined real estate, insurance, etc.
Holding and Other Investment Offices
6711 Holding offices
6722 Management investment, open-end
6723 Management investment, closed-end
6724 Unit investment trusts
6725 Face-amount certificate offices
6732 Educational, religious, etc. trusts
6733 Trusts, nee
6792 Oil royalty traders
6793 Commodity traders
6794 Patent owners and lessors
6798 Real estate investment trusts
6799 Investors, nee
Hotels and Personal Services
7011 Hotels, motels, and tourist courts
7021 Rooming and boarding houses
7032 Sporting and recreational camps
7033 Trailering parks for transients
7041 Membership-basis organization hotels
7211 Power laundries, family and commercial
7212 Garment pressing and cleaners' agents
7213 Linen supply
7214 Diaper service
7215 Coin-operated laundries and cleaning
7216 Dry cleaning plants, except rug
7217 Carpet and upholstery cleaning
7218 Industrial launderers
7219 Laundry and garment services, nee
7221 Photographic studios, portrait
7231 Beauty shops
7241 Barber shops
7251 Shoe repair and hat cleaning shops
7261 Funeral service and crematories
7299 Miscellaneous personal services
Note: nee = not elsewhere classified.
C-9
-------
SIC
Code Industry
SIC
Code Industry
Business Services
7311 Advertising agencies
7312 Outdoor advertising services
7313 Radio, TV, publisher representatives
7319 Advertising, nee
7321 Credit reporting and collection
7331 Direct mail advertising services
7332 Blueprinting and photocopying
7333 Commerical photography and art
7339 Stenographic and reproduction, nee
7341 Window cleaning
7342 Disinfecting and exterminating
7349 Building maintenance services, nee
7351 News syndicates
7361 Employment agencies
7362 Temporary help supply services
7369 Personnel supply services, nee
7372 Computer programming and software
7374 Data processing services
7379 Computer related services, nee
7391 Research and development laboratories
7392 Management and public relations
7393 Detective and protective services
7394 Equipment rental and leasing
7395 Photofinishing laboratories
7396 Trading stamp services
7397 Commercial testing laboratories
7399 Business services, nee
Automotive Repair, Services, and Garages
7512 Passenger car rental and leasing
7513 Truck rental and leasing
7519 Utility trailer rental
7523 Parking lots
7525 Parking structures
7531 Top and body repair shops
7534 Tire retreading and repair shops
7535 Paint shops
7538 General automotive repair shops
7539 Automotive repair shops, nee
7542 Car washes
7549 Automotive services, nee
Miscellaneous Repair Services
7622 Radio and television repair
7623 Refrigeration service and repair
7629 Electrical repair shops, nee
7631 Watch, clock, and jewelry repair
7641 Reupholstery and furniture repair
7692 Welding repair
7694 Armature rewinding shops
7699 Repair services, nee
Entertainment
7813 Motion picture production, except TV
7814 Motion picture production for TV
7819 Services allied to motion pictures
7823 Motion picture film exchanges
7824 Film or tape distribution for TV
7829 Motion picture distribution services
7832 Motion picture theaters except drive-in
7833 Drive-in motion picture theaters
7911 Dance halls, studios, and schools
7922 Theatrical producers and services
7929 Entertainers and entertainment groups
7932 Billiard and pool establishments
7933 Bowling alleys
7941 Sports clubs and promoters
7948 Racing, including track operation
7992 Public golf courses
7993 Coin-operated amusement devices
7996 Amusement parks
7997 Membership sports and recreation clubs
7999 Amusement and recreation, nee
Health Services
8011 Offices of physicians
8021 Offices of dentists
8031 Offices of osteopathic physicians
8041 Offices of chiropractors
8042 Offices of optometrists
8049 Offices of health practitioners, nee
8051 Skilled nurse care facilities
8059 Nursing and personal care, nee
8062 General medical and surgical hospitals
8063 Psychiatric hospitals
8069 Specialty hospitals, except psychiatric
8071 Medical laboratories
8072 Dental laboratories
8081 Outpatient care facilities
8091 Health and allied services, nee
Legal, Educational, and Social Services
8111 Legal services
8211 Elementary and secondary schools
8221 Colleges and universities, nee
8222 Junior colleges
8231 Libraries and information centers
8241 Correspondence schools
8243 Data processing schools
8244 Business and secretarial schools
8249 Vocational schools, nee
8299 Schools and educational services, nee
8321 Individual and family services
8331 Job training and related services
8351 Child day care services
Note: nee = not elsewhere classified.
C-10
-------
SIC
Code Industry
SIC
Code Industry
8361 Residential care
8399 Social services, nee
8411 Museums and art galleries
8421 Botanical and zoological gardens
Professional Organizations
8611 Business associations
8621 Professional organizations
8631 Labor organizations
8641 Civic and social associations
8651 Political organizations
8661 Religious organizations
8699 Membership organizations, nee
8811 Private households
Miscellaneous Services
8911 Engineering and architectural services
8922 Noncommercial research organizations
8931 Accounting, auditing, and bookkeeping
8999 Services, nee
Government
9111 Executive offices
9121 Legislative bodies
9131 Executive and legislative combined
9199 General government, nee
9211 Courts
9221 Police protection
9222 Legal counsel and prosecution
9223 Correctional institutions
9224 Fire protection
9229 Public order and safety, nee
9311 Finance, taxation, and monetary policy
9411 Administration of educational programs
9431 Administration of public health programs
9441 Administration of social and manpower programs
9451 Administration of veterans' affairs
9511 Air, water, and solid waste management
9512 Land, mineral, wildlife conservation
9531 Housing programs
9532 Urban and community development
9611 Administration of general economic programs
9621 Regulation, administration of transportation
9631 Regulation, administration of utilities
9641 Regulation of agricultural marketing
9651 Regulation miscellaneous commercial sectors
9661 Space research and technology
9711 National security
9721 International affairs
9999 Nonclassifiable establishment
Note: nee = not elsewhere classified.
C-ll
-------
-------
APPENDIX D
Detailed Demand Elasticity Discussion
-------
-------
As explained above, waste treatment is an input into the production of other goods and
services, whose production also creates waste. The demand for the CWT input is derived from
the demand for the other goods and services. In the market model, the change in quantity
demanded of CWT service i is described as a function of the change in the market price for CWT
service i and the elasticity of demand for CWT service i. Thus, the change in quantity demanded
is given by
where;
Qi
Pi
dQi = rii • dPi « (Qi/Pj),
= change in quantity demanded of CWT service i,
= price-elasticity of demand for CWT service i,
= change in price of CWT service i,
= baseline quantity demanded of CWT service i, and
= baseline price of CWT service i.
CWT service markets are characterized as regional markets. Based on information
provided in the CWT survey, the Agency believes that most of a CWT's customers are located
within the same state as the CWT or a few adjacent states. For our market model, the continental
United States was divided into six regional markets for CWT services. All the generators within
that region are assumed to send their off-site waste to a CWT facility located within the region.
Thus, competition for customers is assumed to occur essentially within the region, although
CWT facilities located outside the region do offer a (very costly) alternative to CWT facilities
within the region. The presence of these "treaters of last resort" affects the assumptions made
about the price-elasticity of demand for CWT services.
The price-elasticity of demand (which will be referred to as the elasticity of demand from
here on) measures the responsiveness of demand for a service to changes in its price. It is
defined as the percentage change in the quantity demanded of a service divided by the percentage
change in its price:
Tli=
where the right-hand side variables are defined as above.
D-l
-------
Economic theory states that the elasticity of the derived demand for an input is a function
of the following:
• demand elasticity for the final good it will be used to produce;
• the cost share of the input in total production cost;
• the elasticity of substitution between this input and other inputs in production; and
• the elasticity of supply of other inputs.1'2'3
Using Hicks' formula.
H = [s(n + e) + Ke(n - s)] / [n = e - K(n - s)]
where;
Tji = elasticity of demand for the CWT service i,
s = elasticity of substitution between CWT service i and all other inputs,
n = elasticity of demand for final product,
e = elasticity of supply of other inputs, and
K = cost share of CWT service i in total production cost.
Hicks, in the Appendix to The Theory of Wages, shows that, if n > s, the demand for the
input is less elastic the smaller its cost share.4 If the data were available, this formula could be
used to actually compute the elasticity of demand for each CWT service. As noted above,
however, nearly every production activity generates some waste that is managed off-site. The
number of final products whose elasticity of demand (n) would need to be included is very large,
and the elasticities of demand for those products vary widely. Thus, resources do not permit
determination of a value for n. This makes direct computation of the elasticity of demand, TJ,
impossible. In spite of this, the formula is useful because it identifies factors that influence the
magnitude of the elasticity of derived demand. Knowledge of the general magnitude of those
factors makes it possible to make an educated assumption about the magnitude of r\.
The elasticity of substitution, s, between a given waste treatment service and other inputs
is low but not zero. This means that waste generators do have some limited options in the way
they produce their final goods or services. Some limited substitution is possible between
treatment technologies for a given waste form. In addition, generators may choose to substitute
out-of-region CWT services for within-region CWT services, although transportation costs
D-2
-------
would increase greatly. Further, generating facilities may substitute on-site capital, labor, and/or
materials for off-site waste treatment either by choosing to manage the waste on-site or by
undertaking on-site pollution prevention activities. These options are quite limited, however, so
s is expected to be small, and n is likely to be larger than s.
Thus, the magnitude of t| is proportional to the magnitude of K, the cost share of CWT in
final goods production. Other analyses done on the CWT industry found that the cost share for
waste treatment was historically very small, frequently hundredths of a percent of total
production costs. Recent regulatory changes may have increased the unit cost somewhat, but it is
still expected to be fairly small.
Insufficient data exist to enable the Agency to estimate the elasticity of demand for CWT
services econometrically. Instead, assumptions were made about the relative magnitudes of the
parameters of the Hicks equation describing the elasticity of demand for intermediate goods and
services. Based on these assumptions, a reasonable assumption was made about the magnitude
of the elasticity of demand for CWT services in each regional market.
Overall, the demand for CWT services is assumed to be just slightly elastic (between -1.0
and -1.5). Demand elasticity in this range means that, when the price of CWT services increases,
the quantity of CWT services demanded will decrease by slightly more, in percentage change,
than the price has increased. In fact, the demand elasticity may be slightly inelastic rather than
slightly elastic. Mathematical characteristics of the economic impact analysis model being used
require that the absolute value of the demand elasticity in a given CWT market exceed the largest
market share of any facility in the market. Because some of the markets being modeled are
regional monopolies, they would need to have a price elasticity of demand exceeding 1 in
absolute value. For simplicity, -1.01 is the minimum elasticity used for any of the markets. It is
possible that some of the markets have lower elasticities, so the analysis reported here may be
overstating the decreases in market quantity that result from the regulatory costs, and therefore
overstating some of the facility-level impacts.
Typically, when assumptions are made regarding parameters of a model, a sensitivity
analysis is performed to assess the impact that those assumptions have on the outcome of the
analysis. In this case, the model itself constrains the parameter values that can be used. Thus,
this model can not be used to test the impact of less elastic demand. As a sort of sensitivity
analysis, a discounted cash flow analysis was performed assuming various degrees of compliance
cost "pass through." The results of this DCF analysis indicate that if demand were infinitely
elastic and the same quantity of CWT services were provided (full cost absorption at the CWT
D-3
-------
facility), 14 facilities would become unprofitable under Option 1, and 17 under Option 2. If 20
percent of the compliance costs were passed through to the customers of CWT facilities, and the
same quantity of CWT services were performed, ten facilities would become unprofitable under
Option 1 and 14 under Option 2. If, on the other hand, 80 percent of compliance costs were
passed through to consumers and the same quantity of CWT services were performed, only 2
facilities would become unprofitable under either EPA Regulatory Option. This is an imperfect
type of sensitivity analysis, because the assumptions about market behavior used for a discounted
cash flow analysis are much more rigid than the assumptions embodied in the market model
(neither producers nor demanders are assumed to adjust their quantities in response to changing
market conditions). Nevertheless, it indicates that the intermediate assumptions about the
elasticity of demand may result in an over-estimate of the impact on facility profitability if they
are not accurate. It should be emphasized, however, that the Agency believes that the assumed
elasticities of demand are reasonable given the nature of CWT services and the regional markets
in which they are traded.
REFERENCES
1. Allen, R.G.D. Mathematical Analysis for Economists. New York, St. Martin's Press.
1938. 509pp.
2. Hicks, J.R. "Marshall's Third Rule: A Further Comment." Oxford Economic Papers
13:262-65. 1961.
3. Hicks, J.R. The Theory of Wages. 2nded. New York, St. Martin's Press. 1966. 247pp.
4. Hicks, J.R. The Theory of Wages. 2nded. New York, St. Martin's Press. 1966. 247pp.
D-4
-------
APPENDIX E
Detailed Market Model Discussion
-------
-------
The imperfect competition economic model discussed in this appendix analyzes the
market response of CWT facilities to EPA regulatory control options. This interactive model
enables the user to introduce an exogenous shock in the form of compliance costs in order to
determine post-regulatory equilibria. The results of this model provide market-level, facility-
level, and employment impacts expected to result from each of the 13 control options that were
at some point under consideration by EPA. The following discussion provides an overview of
the CWT economic model.
This study modeled certain aspects of the CWT industry, focusing on market
identification and characterization, definition of CWT services provided, and producer
characteristics within each of six defined geographic regions. The analysis employed modeled
markets as imperfectly competitive (either monopolistic or oligopolistic). In this appendix, we
introduce model variables, equations, and matrix algebra.
E.1 BASELINE DATA
Producers of CWT services are defined as facilities that accept waste from offsite for
treatment (including treatment or recovery of metals, oils, or organics). Because of the nature of
the industry, CWT facilities provide many different services while competing in multistate
regions within the U.S. In this study, these regions are represented by six regional market
models. Each regional model was constructed to analyze the market responses of CWT facilities
to the costs of complying with EPA's proposed regulatory options.
As described in Chapters 3 and 4, the best available data suggest that CWT facilities
compete within six regional markets; therefore, six regional models were constructed to analyze
the CWT industry. The following six regional markets are illustrated in Figure 3-2.
• Northeast
• Southeast
• Upper Midwest
• Lower Midwest
• Northwest
• Southwest
CWT facilities differ widely from one another in terms of their size and the types of
waste management services they offer. Facilities in each of the regional markets listed above
engage in one or more of the following waste treatment processes:
E-l
-------
• metals recovery
• oils recovery
• metals wastewater treatment
• oils wastewater treatment
• organics wastewater treatment
Within each broad CWT service category, treatment methods and costs vary as a result of
variations in the waste being treated and the specific treatment technologies used. Thus, each
broad CWT service category may include as many as three separate markets in each region
differentiated by per-unit treatment costs. For example, a regional market may include a market
for high cost metals recovery and a separate market for low cost metals recovery. The model
treats these as two distinct markets. Table E-l identifies the service markets modeled in each
regional market in this analysis and provides regional market summary statistics (market prices
and quantities).
E.1.1 Market Structure
Most economic impact analyses that include a market analysis assume a perfectly
competitive market structure. Perfectly competitive markets are characterized by a large number
of producers, each small relative to the industry, so that each facility's market share (ratio of
facility output to total market output) is low. Facilities engaged in perfect competition are not
able to influence prices.
Because of the small number of facilities competing within each CWT market, market
concentration tends to be high (i.e., a small number of facilities are responsible for a high
percentage of the total production in each market); therefore, CWT markets cannot be treated as
perfectly competitive. As modeled, from one to twelve facilities supply CWT services in each
market Therefore, the markets must be characterized as imperfectly competitive and modeled
accordingly. Markets with only one producer are monopolistic; markets with a small number of
producers are oligopolistic.
Most CWT markets are highly concentrated regional markets with a small number of
facilities engaged in competition. In such oligopolistic markets, suppliers are aware of their
competitors' actions and have the ability to influence prices. Other CWT markets can be
characterized as monopolies, in which only one facility supplies a product for an entire market
The monopolist has 100 percent market share and is a price setter, constrained only by market
disciplines.
E-2
-------
TABLE E-l. REGIONAL MARKET SUMMARY STATISTICS
Market/Process
Northeast
High-Cost Metals Recovery
Low-Cost Metals Recovery
High-Cost Oil Recovery
Low-Cost Oil Recovery
High-Cost Metals Treatment
Low-Cost Metals Treatment
Oil Treatment
Organics Treatment
Northwest
High-Cost Oil Recovery
Low-Cost Oil Recovery
Metals Treatment
Oil Treatment
Organics Treatment
Southeast
Metals Recovery
High-Cost Oil Recovery
Low-Cost Oil Recovery
Metals Treatment
Oil Treatment
Organics Treatment
Southwest
High-Cost Metals Recovery
Low-Cost Metals Recovery
Oil Recovery
Number of
Facilities
19
1
1
3
2
2
12
2
7
6
1
3
5
2
2
8
1
3
1
3
3
3
10
2
1
1
Market
Price
$93.22
$3.14
$0.67
$0.17
$1.35
$0.31
$0.28
$0.38
$18.17
$0.25
$0.92
$0.16
$0.16
$6.33
$0.15
$0.05
$0.24
$0.24
$0.22
$0.26
$2.80
$0.48
Market Quantity
(103 gallons)
14
61,698
9,771
14,615
1,477
226,573
18,254
53,625
500
13,451
17,443
190
627
2,442
7,058
330
79,106
11,580
15,059
7,279
605
5,705
(continued)
E-3
-------
TABLE E-l. REGIONAL MARKET SUMMARY STATISTICS (CONTINUED)
Market/Process
Southwest (continued)
High-Cost Metals Treatment
Low-Cost Metals Treatment
Oil Treatment
Organics Treatment
Lower Midwest
Metals Recovery
Oils Recovery
High Cost Metals Treatment
Low Cost Metals Treatment
Oil Treatment
High-Cost Organics Treatment
Low-Cost Organics Treatment
Upper Midwest
Metals Recovery
High-Cost Oil Recovery
Medium-Cost Oil Recovery
Low-Cost Oil Recovery
High-Cost Metals Treatment
Medium-Cost Metals Treatment
Low-Cost Metals Treatment
Oil Treatment
Organics Treatment
Number of
Facilities
5
4
3
1
9
1
1
2
6
1
1
5
22
2
2
5
5
1
2
12
5
4
Market
Price
$1.28
$0.08
$0.59
$1.76
$0.90
$0.07
$1.13
$0.09
$0.15
$1.94
$0.17
$12.77
$0.86
$0.29
$0.11
$4.87
$0.71
$0.22
$0.16
$0.22
Market Quantity
CIO3 gallons)
2,887
43,026
22,467
837
773
8,074
1,605
118,248
2,275
124
13,124
94
674
35,006
47,213
2,749
2,509
131,585
7,638
674
E-4
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E.2 MODEL METHODOLOGY
When a supplier in a competitive market makes its production decision, it only needs to
examine market price. By definition, the supplier is such a small part of the market that it views
itself as unable to influence the market price through its own actions. Thus, the supplier can
ignore the impact of its own production decision on market price. However, when a supplier in
an oligopolistic market makes its production decision, it must consider the behavior of other
suppliers and the effect of their output decisions on market price. In an oligopolistic market,
each supplier forms expectations, or conjectures, about its competitors' production decisions to
make decisions on its own optimal production level. Obviously, a wide variety of conjectures
are possible. We model oligopolistic behavior using the Cournot-Nash model of producers'
conjectures.
The Cournot-Nash model is the most common model of oligopolistic behavior found in
empirical analysis. Following this model, each supplier maximizes its profits, given its
conjecture that all other suppliers will not respond directly to its change in output. Furthermore,
those beliefs are confirmed in equilibrium (i.e., each supplier optimally chooses to produce the
amount of output that the other suppliers expect it to produce). Thus, in a Cournot-Nash
equilibrium no supplier will find it profitable to change its production decision once it discovers
the choices actually made by the other suppliers. Figures E-l and E-2 illustrate the facility under
oligopolistic competition without and with the regulatory control costs.
As illustrated in Figure E-l, the oligopolistic facility faces a downward sloping marginal
revenue curve (MR) derived from a downward sloping residual demand curve (not shown). The
demand curve is a residual demand curve in the sense that it is the demand for this facility's
output, taking into account the output of all the other competitors in the market The production
costs of the facility are characterized by the inverted L-shaped cost function or supply curve (S).
This shape implies that the average cost (cost per unit) of supplying the CWT service is constant
up to the facility's treatment capacity. The profit-maximizing facility will choose to produce at
the intersection of its marginal cost (MC) and MR curves. Because average variable cost is
constant, average variable cost (AVC) equals marginal cost (MC). Thus, the optimal production
level for this facility is q*. The price (P*) is determined by the demand curve at the chosen
production level.
As Figure E-2 shows, imposing the regulation will shift the horizontal portion of the
facility's marginal cost curve up by the per-unit output variable compliance costs (i.e., from MC
to MC1). Given this shift, the facility's optimal production level is reduced to q*' at the
E-5
-------
Figure E-11. Oligopolistic Facility
$/q
pm
AVC = MC
MR
q/t
,M
^capacity
intersection of the MC' and MR curves. Figure E-2 depicts the new higher price level (P*1)
associated with the regulation-induced lower production level at the facility.
E.I.3 Variables
Exogenous variables (i.e., predetermined by factors outside the scope of the model) and
endogenous variables (i.e., determined by the model) are included in the economic model. These
exogenous and endogenous variables are identified by symbols in the model equations defined in
Section E. 1.4.
Exogenous Variables
TU" = Demand elasticity for consumers of CWT service j
Sij = Market share for producer i of CWT service j
E-6
-------
Figure E-2. Effects of Compliance on Oligopolistic Facility
pm
pm
qM=q*
AVC1 = MC1
AVC = MC
qft
^capacity
Endogenous Variables
Pj = Price of CWT service j
qji = Quantity of CWT service j provided by and producer i
Qj = Market quantity for service i
E3 EQUATIONS OF THE MODEL
The economic model for centralized waste treatment incorporates the Cournot-Nash
assumption regarding facilities' conjectures or perceptions about the response of other producers
in the market to an exogenous shock. This model consists of a small number of suppliers (N)
within a defined market, each with the ability to influence market price, P. Each supplier i
maximizes profits by choosing its level of production (qi):
E-7
-------
MaxTti = P(Q)qi - C(qi) -F
(E.1)
where Q is market output, C(qO is the supplier's variable cost function, and F reflects fixed net
costs (fixed costs minus fixed revenues). The first-order condition (the derivation of it\) with
respect to qi is:
871,
(E.2)
The second term in Eq. (E.2) drops out by imposing the Cournot-Nash assumption that
each supplier expects that all other suppliers will not respond directly to its change in production
f i.e., -r*f = 0 \ Further, the partial derivative of market output (Q) with respect to the output level
V d
-------
(i.e., MRj = P [l + -1 = MCA As shown in Table E-l, the case is observed for a number of
V . L TIJ J
services marketed across the various regions modeled for this analysis.
The regulatory compliance costs provide the exogenous shock to the model: the variable
compliance cost (q) is the change in the marginal cost of production for each affected supplier
(dMQ), that is, the shift in the supply curve of each service, and the fixed compliance costs (FA)
affecting the profitability of the facility as a whole.
First, the change in marginal revenue (dMRi) must equal the change in the marginal cost
(dMQ) for each supplier in the post-compliance equilibrium so that:
dMRi = dMQ
For each supplier, the change in marginal
(E.4)
„—, 0_ _0 cost (dMQ) is equal to the unit compliance cost
(cj), while the change in marginal revenue (dMRi) is the expected change in the marginal revenue
expression (Eq. E.3) with respect to price, fdMR= ^p \o that (Eq. E.4) is now:
V. )
T|
Note that for single producers this monopoly condition is:
dP(l+-) = Q
11
so that the change in price equals the change in costs due to regulation, that is dP= Q.
Second, the market demand condition must hold:
(E.4a)
(E.4b)
(E.5)
Third, the change in market quantity must equal the sum of the changes in quantity of
individual suppliers:
N
dQ = Idqi
(E.6)
Eqs. (E.4), (E.5), and (E.6) provide us with N + 2 linear equations in N + 2 unknowns
(dqi, dQ, and dP) for each oligopolistic market within a region, where N is the number of
E-9
-------
facilities offering that individual CWT service in that region. A monopolistic market will have
two linear equations and two unknowns. (Since market supply and facility supply are identical,
there is no need to model both.) Each regional model is thus represented by a system of
equations: N + 2 equations for each oligopolistic market, and two equations for each
monopolistic market. These systems of equations can be solved using linear algebra:
B = A-1C
where B is the vector containing (dP, dq,, and dQ), A"1 is the inverse of A, an N + 2 x N + 2
matrix, and B is the vector containing (cj, 0,0,).
For example, assume that our model market consists of three regional facilities (i.e.,
N = 3) competing in two markets (one market is a monopoly and the other is an oligopoly with
two competitors). Therefore, we have six linear equations in six unknowns that can be expressed
in matrix notation as
0
0
0
0
&
0
0
-1
0
0
0
-1
B C
P,/qi\
•nlQi2] °
P ( .
Tm^J 0
0 0
-1 0
0 -1
1 0
dp
dP2
dqi
dq2
dQ,
dQ2
_
Cl
C2
C3
0
0
0
E-10
-------
Rows 1 and 2 of the A matrix above represent the marginal conditions (Eq. E.4) for the
two facilities competing in the oligopoly market. Row 3 of the A matrix represents the marginal
condition for the single supplier in the monopolistic market (Eq. E.4a). The fourth row of the A
matrix is the market demand condition (Eq. E.5) for the oligopoly market, and Row 5 is the
market demand condition for the monopolist. The final row of the A matrix represents the
supply condition (Eq. E.6) for the oligopoly facilities. There is no supply condition (Eq. E.6) in
the matrix algebra calculations for a monopolist because the change in market quantity will
always equal the change in quantity of the individual supplier because there is only one supplier.
The C vector contains the average variable compliance costs associated with each facility
and service. When the inverse of the A matrix is multiplied by the C vector, the model solves for
the unknown price and quantity changes shown in the B vector.
The model must consider the given capacity constraints of each supplier. If faced with
little or no variable control costs, a supplier may wish to increase its current level of output.
However, its increase must be limited to the difference between plant capacity and current
production, that is, qmax - q*. A decrease in production also must be restricted to the negative
of the facilities' baseline production quantity. Operationally, this step involves running the
model and determining for each supplier whether its optimal decision (dMR = dMC) is feasible
given its capacity constraint (qmax). For each supplier where q* > qmax, the model adjusts the
A matrix presented above to account for the constraint placed on each supplier due to limited
capital capacity. For each supplier where q*< 0, the model adjusts the A matrix above to set the
new production quantity to 0, representing a process closure.
After solving for the unknowns (i.e., dqi, dQ, and dP), the post-compliance output level
for each supplier (q? ) and product price (P*) are inserted into the profit function of each
individual supplier to determine the supplier's post-regulation profits:
P(Q)qi-C(qi)-CV(qi) -F-
(E.8)
where Cv(qf) is the total variable compliance costs, FA is the total fixed compliance cost, and the
other variables are defined as above.
E.4 MODEL OUTPUT
For each market for a specific type of CWT service in a region, the model projects
market-level adjustments in price and quantity. For each facility in a CWT service market, the
model projects adjustments in quantity of waste treated, revenues, costs, and profits.
E-ll
-------
Employment changes are also calculated at the facility level. The model is capable of
determining facility closures, eliminating those closed facilities, and providing a new equilibrium
based on market interaction of the remaining facilities; however, for reasons described in Chapter
5 of this report, the Agency does not estimate facility closures in this analysis.
These model outputs are used as inputs into various other modules of the economic
impact analysis. The facility-level changes in revenues and profits are aggregated to the
company level and are used to estimate changes in profitability and the likelihood of bankruptcy
for companies owning CWT facilities. Facility-specific changes in employment are aggregated
to the community level and are used to estimate impacts on the communities in which CWT
facilities are located.
E-12
-------
APPENDIX F
Detailed Market Model Results
-------
-------
The market impacts model described in Appendix E was used to evaluate not only the
proposed regulatory options, but also other possible control options for each subcategory. Three
control options were evaluated for metals, four for oils, and two for organics. This appendix
presents the results of the market and facility impacts estimation for each of those control options
and for the combined EPA regulatory options. The model results presented include changes in
market prices and quantities and changes in facility profitability.
F.I MARKET IMPACTS
Table F-l shows the changes in market prices and quantities that are projected to occur
with each control option and the two combined regulatory options, in each regional market for
each specialized type of CWT service. Table F-2 shows the with-regulation equilibrium price
and quantity in each regional market for each specialized CWT service. Results are shown for
the two combined regulatory options, EPA 1 and EPA 2, in the first two columns. Then, results
are shown for the individual control options for the Metals Subcategory, Oils Subcategory, and
Organics Subcategory.
F.I.I Metals Subcategory
The Metals Subcategory costs increase the costs of performing metals recovery and
metals treatment. Therefore, the impacts are felt on only those markets. The metals costs
increase sharply from Option 1 to Option 2 and increase slightly from Option 2 to Option 3. The
magnitude of the market impacts reflects this pattern.
The Northeast region is home to a large number of metals treatment and recovery
facilities. Because of the historical importance of metals fabrication and metals finishing in that
region, a large number of facilities generate metal-bearing waste; therefore the region includes a
large number of treaters of metal-bearing waste. The Northeast region includes two metals
recovery markets and two metals treatment markets. The price for low cost metals recovery is
not affected by the controls, but the price of high cost metals recovery increases by 1.7 percent
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under Option 3. The price of low cost metals treatment increases by 3 percent under Option 1
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The price of metals recovery in the Southeast increases by 0.06 percent under Option 1 and by
1.9 percent under Options 2 and 3. The price of metals treatment increases by 0.48 percent under
Option 1 and by about 13 percent under Options 2 and 3. The quantity of metals recovery in the
Southeast falls by 0.09 percent under Option 1 and by 13 percent under Options 2 and 3.
In the Upper Midwest, the metals recovery markets are essentially unaffected by the
controls under all three metals options. The markets for high cost metals treatment and low cost
metals treatment experience very small changes under Metals Option 1 and moderate changes
under Metals Options 2 and 3. The market for medium cost metals treatment experiences a
dramatic reduction in quantity and increase in price under all three metals options, because one
large producer nearly stops offering medium cost metals treatment, while another small producer
that does not incur compliance cost expands its quantity of metals treatment services performed.
In the Lower Midwest, the market for metals recovery shows a 0.2 percent increase in
price and a 0.39 percent decrease in quantity under all three control options. The market for high
cost metals treatment is unaffected by the metals control options, because neither facility in that
market incurs compliance costs. The market for low cost metals treatment, on the other hand,
experiences a 4.5 percent increase in price and a 4.8 percent decrease in quantity under Metals
Option 1, and a 9 percent increase in price and a 9.6 percent decrease in quantity under Metals
Options 2 and 3. In that market, two facilities significantly decrease the production of metals
treatment services, while three others increase the quantity of metals treatment services
performed.
The Northwest has no market for metals recovery. The market for metals treatment
experiences a small increase in price sind decrease in quantity under Metals Option 1 and a
moderate roughly 7 percent increase in price and decrease in quantity under Metals Options 2
and 3.
The Southwest includes two metals recovery markets and two metals treatment markets.
Low cost metals recovery is unaffected by the controls under any metals option. High cost
metals recovery experiences a small price increase and quantity decrease under Metals Option 1
but a fairly large (27 to 29 percent) increase in price and decrease in quantity under Metals
Options 2 and 3. High cost metals treatment experiences small price and quantity changes under
Metals Option 1 and moderate changes under Options 2 and 3.
The market for low cost metals treatment, on the other hand, experiences 9 to 10 percent
changes in price and quantity under Option 1 and a 77 percent increase in price and 81 percent
F-10
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decrease in quantity under Metals Options 2 and 3. Under Option 1, two of the four facilities in
the market increase production while the other two decrease production. Under Options 2 and 3,
however, all four facilities experience significant decreases in the quantity of metals treatment
services performed.
F.1.2 Oils Subcategory
EPA evaluated four oils control options. The first. Oils Option 1, represents the baseline
level of treatment and has no costs of compliance associated with it. Oils Option 2 and Oils
Option 3 are the two control options proposed by the Agency as part of EPA 1 and EPA 2,
•respectively. Oils 4 has higher costs than Oils 3, but according to the data collected by the
Agency, this method provides no improvement in pollutant removals; it is therefore not cost-
effective.
The Northeast region has two oils recovery markets and. one oils treatment market. The
oils recovery markets experience moderate (13 and 15 percent) changes in price and quantity
under Oils Option 2 but much larger (55 and 49 percent) changes in price and quantity under
Options 3 and 4. Oils treatment experiences a very small change in price and quantity under
Option 2 and moderate changes in price and quantity under Options 3 and 4.
The Southeast region also has two oils recovery markets and one oils treatment market
In the market for high cost oils recovery, costs of complying with Oils Option 2 cause a small
change in price and quantity, and costs of Options 3 and 4 re$ult in moderate changes (9 and
11 percent). In the market for low cost oils treatment, on the other hand, the only facility in that
market is projected to stop performing this service in response to'all three options. Thus, in spite
of a significant increase in price, quantity falls by 100 percent. *
.s
The Upper Midwest has three oils recovery markets and one oils treatment market. High
cost oils recovery experiences only very small changes in price and quantity under all three
control options. Medium cost oils recovery experiences small changes in price and quantity
under Option 2 and fairly large changes (43 to 44 percent) under Options 3 and 4. The market
for low cost oils recovery incurs the highest impacts. Under Option 2, prices and quantities
change by about 14 percent. Under Options 3 and 4, however, in spite of significant price
increases, all the facilities offering the service are projected to close their oils recovery processes.
Another way of looking at this occurrence is that the price rises sufficiently that, given the
elasticity of demand for the service, demand falls to zero. .The market for oils treatment
experiences significant increases in price and decreases in quantity under all three oils control
options.
F-ll
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The Lower Midwest has one oils recovery market and one oils treatment market. Both
markets experience moderate changes in price and quantity under Oils Option 2. Under Oils
Options 3 and 4, however, the single facility offering services in the oils recovery market is
projected to close that process. The same facility, which is also the sole provider of oils
treatment services, is projected to greatly reduce its quantity of treatment services performed.
The Northwest has two oils recovery markets and one oils treatment market. In the high
cost oils recovery market, small changes in price and quantity occur in responses to Oils Option
2, and moderate changes (10 to 11 percent changes in price and 20 to 23 percent changes in
quantity) occur in response to Options 3 and 4. The impacts on the market for low cost oils
recovery are higher, in percentage terms. Under Option 2, price and quantity change by slightly
more than 7.5 percent. Under Options 3 and 4, prices and quantities change by 60 and 68
percent, respectively. Under all three control options, the two facilities offering oils treatment
are predicted to close down those processes.
The Southwest region has one oils recovery market and one oils treatment market. Both
markets experience small changes in price and quantity (1.5 to 4.8 percent) under Oils Option 2
and moderate changes (23 to 38 percent) in quantity under Options 3 and 4.
F.1.3 Organics Subcategory
EPA evaluated two control options for control of organics. Of these, Organics 1 is the
Agency's preferred option. In the Northeast region, Option 1 results in a 5.3 percent increase in
price and decrease in quantity, while Option 2 causes a 13.5 percent increase in price and
decrease in quantity in the market for organics treatment services. In the Southeast, both options
result in a 64 to 65 percent increase in price and decrease in quantity. In the Upper Midwest,
prices and quantities in the organics treatment market change by approximately 72 percent. In
the Lower Midwest, prices and quantities in the market for high cost organics treatment are
unchanged, and prices and quantities in the market for low cost organics treatment change by
only 1 percent In the Northwest, the two facilities offering organics treatment are predicted to
close those processes under both organics options. In the Southwest, the market for organics
treatment experiences a 5 percent increase in price and a 7 percent decrease in quantity under
both organics control options.
F.1.4 Regulatory Options
The market impacts of the combined regulatory options reflect the market impacts of the
individual control options for each subcategory that are combined to form the regulatory options.
F-12
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Thus, the price and quantity changes associated with EPA's Regulatory Option 1 are the same as
the price and quantity changes for Metals Option 3, Oils Option 2, and Organics Option 1.
Similarly, the price and quantity changes associated with EPA's Regulatory Option 2 reflect the
changes in prices and quantities associated with Metals Option 3, Oils Option 3, and Organics
Option 1.
To assess the overall impacts of the regulatory options on the markets for prices and
quantities, the Agency computed the median change in price and quantity for each general type
of waste treatment (metals recovery, oils recovery, metals treatment, oils treatment, and organics
treatment). These overall measures of market impact, shown in Table 7-1, indicate moderate
changes in market prices and quantities in most markets. Under Regulatory Option 2, however,
the median changes in price and quantity for oils recovery are significant: a 42 percent change in
price and a 65 percent change in quantity. It should be noted that this represents the change in
only one market for oil recovery; other markets experience price and quantity impacts that are
smaller or larger than these median values.
F.2 IMPACTS ON FACILITY PROFITS
As described in Appendix E, each commercial CWT facility experiences changes in its
costs and revenues as a result of the compliance costs and market adjustments associated with the
control options and combined regulatory options. This section discusses the projected changes in
profits at commercial CWT facilities.
The market adjustments discussed above have a profound effect on the profits of
commercial CWT facilities. In nearly all CWT markets, prices are projected to increase in
response to the combined regulatory options. Thus, some facilities may find that their revenues
increase as a result of the regulation. Overall, market quantities decrease in response to the
regulatory options. For most facilities incurring compliance costs under a regulatory option, the
equilibrium quantity of waste treated in each process declines due to the increased cost of
treatment Thus, while the unit cost of treatment increases, total costs may decline because of
decreases in the quantity of waste treated. Similarly, even though the market price has increased
for each CWT service market, facilities experiencing significant declines in the quantity of waste
treated will earn lower total revenues. Tables F-3 and F-4 explore changes in the total revenues
and costs earned by commercial CWT facilities under each individual control option and under
the combined regulatory options.
F-13
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F-15
-------
Tables F-3 and F-4 indicate that, in most markets, the average facility experiences both
decreased revenues and decreased costs. This occurs because the quantity of waste treated by
most facilities declines. In all markets, the average facility experiences decreases in revenues;
this shows that, on average, decreases in quantities override increases in prices in their effects on
facility revenues. In nearly all markets under all regulatory and control options, however, the
maximum change in revenue is positive; that is, some facilities experience increased revenues.
Similarly, in most markets under most control and regulatory options, the average facility
experiences a decrease in costs. This decrease indicates that the decrease in quantity associated
with market adjustments to the controls overrides the increased per-gallon cost of treatment in its
effect on facilities' costs. At the same time, some facilities in each market experience increased
costs. It is the relative changes in facility revenues and facility costs that determines the impact
of the regulatory and control options on facility profits.
Facility profit is defined as earnings before taxes:
where;
EBT
TR
TC
EBT = TR - TC,
earnings before taxes,
total revenues, and
total costs including interest payments.
Thus, the change in a facility's profits resulting from the regulatory options depends on the
combined changes in revenues and costs at that facility. Tables F-5 through F-8 examine the
impacts of the control options and combined regulatory options on commercial CWT facilities'
profits. Table F-5 shows average, minimum, and maximum changes in facility profits by
regional market, and Table F-6 shows average, minimum, and maximum with-regulation facility
profits by regional market. Table F-7 tabulates the effects of each control and regulatory option
on facility profitability by regional market, and Table F-8 shows the same tabulation by
discharge status.
F.2.1 Metals Control Options
Nationwide, the mean facility experiences a slight decrease in profits under Metals
Option 1 and a slightly larger increase in profits under Metals Options 2 and 3. In the Northeast
region, the mean facility experiences significant increases in profits under all three metals
F-16
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F-21
-------
options. In the other regions of the country, the mean facility experiences small to moderate
decreases in profits under almost all the metals options (the exception being a slight increase in
profits for the average facility in the Lower Midwest under Metals Option 1). Note that the
largest increase in profits in the Northeast is approximately three times the largest decrease in
profits under the metals options. This suggests that the positive mean change in profits may be
due to one or two facilities with relatively large increases in profits.
Nationwide, 27 profitable facilities are made better off by Metals Option 1, and 21
profitable facilities remain profitable but are made worse off. One previously profitable facility
is projected to become unprofitable under Metals Option 1. Seven unprofitable facilities are
made better off under Metals Option 1, and 15 unprofitable facilities are made worse off. Metals
Option 2 is projected to make 27 profitable facilities and six unprofitable facilities better off.
Twenty-two profitable and 16 unprofitable facilities are made worse off, including two facilities
that were profitable but are projected to become unprofitable under Metals Option 2. Metals
Option 3 is projected to make 28 profitable facilities more profitable and six unprofitable
facilities less unprofitable. Twenty-one profitable and 16 unprofitable facilities are projected to
be made worse off by Metals Option 3, including three profitable facilities that are projected to
become unprofitable. The Southeast, Upper Midwest, and Lower Midwest generally have more
facilities whose profitability is projected to improve under the metals control options, while the
Northeast, Northwest, and Southwest have more facilities whose profitability is projected to get
worse under the metals control options.
In Table F-4, there are 51 indirect dischargers, 7 direct dischargers, and 13 zero
dischargers. Eighteen of the indirect dischargers are projected to experience improved
profitability under Metals Options 1 and 2, and 19 are projected to experience improved
profitability under Metals Option 3. Thirty-three indirect dischargers are projected to experience
decreased profitability under Metals Options 1 and 2, and 32 under Metals Option 3. Three
direct dischargers are projected to be made better off under Option 1, and two under Metals
Options 2 and 3, while four or five facilities are made worse off. Predictably, zero dischargers
are at worst unaffected and at best made more profitable under the metals control options.
Because they experience no compliance costs, but the price of the services they provide
increases, their profitability generally increases. Eight profitable and five unprofitable facilities
are unaffected or made better off by the metals control options. Thus, zero dischargers are
generally benefited by the metals control options, roughly 65 percent of indirect dischargers are
made worse off under the metals control options, and roughly 31 percent of direct dischargers are
made worse off.
F-22
-------
1.2.2 Oils Control Options
Under Oils Option 2, the average facility nationwide experiences a moderate ($66,000)
decline in profits, while under Oils Options 3 and 4, the average facility experiences a significant
decrease in profits (more than $200,000). In the Northeast, the average facility experiences a
slight increase in profits, while in all other regions slight to significant decreases in profits are
experienced by the mean facility. In the Lower Midwest, only one facility experiences a change
in profitability due to the oils control options. To avoid revealing facility-specific projections, no
data are reported.
Under Oils Option 2, 32 profitable facilities and 18 unprofitable facilities experience
improved profitability; 21 facilities are made worse off, including four profitable facilities that
are projected to become unprofitable. Under Oils Options 3 and 4, 31 profitable and 17
unprofitable facilities experience improved profitability. Twenty-three facilities are projected to
become less profitable, including six profitable facilities that are projected to become
unprofitable under Oils Options 3 and 4. In three regions (Northeast, Lower Midwest, and
Southwest) a much higher percentage of facilities are made more profitable than are made less
profitable under the oils control options. In the remaining regions, the shares of facilities made
better off and facilities made worse off are relatively equal.
Thirty-one indirect dischargers are made better off under Oils Option 2, while 20
facilities are made worse off. Four indirect dischargers that are profitable without the regulation
are projected to be unprofitable with it. Under Oils Options 3 and 4, 29 indirect discharger
facilities are made better off while 22 are made worse off, including six that were profitable and
are projected to become unprofitable.
F.2.3 Organics Control Options
The mean facility nationwide is projected to experience a moderate decrease in profits
($60,000) under Organics Option 1 and a somewhat larger ($94,000) decrease in profits under
Organics Option 2. Again, the mean facility in the Northeast experiences a slight increase in
profitability under Organics Option 1 but a larger decrease under Organics Option 2. In all other
regions, the mean facility experiences a decrease in profits under both organics control options.
In the Southwest only one facility experiences a change in profitability due to the organics
control options. To avoid revealing facility-specific projections, no data are reported.
Fifty-six facilities are made better off under Organics Option 1, while 15 are made worse
off including one that was profitable that is projected to become unprofitable. Under Organics
F-23
-------
Option 2, 55 facilities are unaffected or made better off; 16 facilities are made worse off
including one that becomes unprofitable. In all regions, more facilities are unaffected or made
better off in terms of profitability than are made worse off by the organics control options. Most
striking is the Upper Midwest, in which 17 facilities are unaffected or made better off, while only
four are made less profitable.
Thirty-eight indirect dischargers are unaffected or made better off by both organics
control options. Thirteen are made worse off, including one facility projected to become
unprofitable. Five direct dischargers are unaffected or made better off under Organics Option 1,
and two are made worse off. Four direct dischargers are unaffected or made better off under
Organics Option 2, while three are made worse off. As always, the 13 zero dischargers are
unaffected or made better off.
F.2.4 Regulatory Options
Under Regulatory Options 1 and 2, facilities experience the combined effects of the
compliance costs associated with controls for each subcategory. Unlike the market impacts, the
profitability impacts associated with the regulatory options cannot be discerned by examining the
profitability effects of the individual control options; rather, the profitability effects of the
combined regulatory options must be evaluated by imposing the control costs associated with
each control option simultaneously. Table F-7 shows the regional pattern of changes in
profitability associated with the combined regulatory options. Table F-8 shows the pattern of
profitability changes by discharge status. As noted previously, the Agency assumes that the
BPT/BAT controls and the PSES controls are imposed simultaneously. Thus, the profitability
impacts on direct discharging facilities are not the impacts of the BPT/BAT controls imposed by
themselves; rather, they are the impacts on direct dischargers of the market and facility
adjustments associated with the simultaneous imposition of both the BPT/BAT controls and the
PSES controls.
As shown in Table F-8, two direct dischargers, 12 indirect dischargers, and 13 zero
dischargers have improved profitability as a result of Regulatory Options 1 and 2. This includes
facilities that were profitable without the effluent limitations guidelines and standards and are at
least as profitable with the regulation in effect. It also includes facilities that were losing money
without the proposed regulation and are projected to lose less money with the regulation in
effect. Overall, therefore, under both regulatory options, 27 facilities experience at least as high
profits with the regulation in effect as without it. The most severe negative profitability impacts
are experienced by facilities that are profitable without the proposed regulation in effect but are
F-24
-------
projected to be unprofitable with the regulation. Nine indirect dischargers are projected to
become unprofitable under Regulatory Option 1 and ten under Regulatory Option 2.
As discussed in text of the report (Chapter 4) the Agency has reason to believe that
facilities that become unprofitable are not immediately closed by their owner companies. For
this reason, the facilities becoming unprofitable are assumed to continue operating. Changes in
each CWT facility's costs and revenues are passed along to the company owning the CWT
facility and result in changes in the parent company's profits. These changes in profits,
combined with estimated changes in the parent company's cost of capital, and changes in assets
and liabilities, result in changes in company's financial status. The economic achievability of the
effluent limitations guidelines and standards is evaluated by examining the impacts of the
regulatory options on the likelihood of bankruptcy for companies owning CWT facilities.
F-25
-------
-------
APPENDIX G
Detailed Company-Level Results
-------
-------
TABLE G-l. SUMMARY STATISTICS OF CWT FACILITY OWNERS' ESTIMATED
BASELINE AND WITH-REGULATION COSTS OF CAPITAL BY
COMPANY SIZE CATEGORY
Company Size in Annual Receipts ($106/year)
Regulatory Option and Statistic
Number of Observations
Baseline
Mean (percent)
Standard Deviation
(percentage points)
Quartiles (percent)
Upper
Median
Lower
Regulatory Option 1
Mean (percent)
Standard Deviation
(percentage points)
Quartiles (percent)
Upper
Median
Lower
Regulatory Option 2
Mean (percent)
Standard Deviation
(percentage points)
Quartiles (percent)
Upper
Median
Lower
$0 to $6
13
9.50
2.34
11.36
10.90
8.74
14.97
18.69
11.36
10.90
8.75
9.50
2.34
13.01
11.36
8.75
$6 to $30
14
7.88
1.92
9.68
7.96
6.46
8.55
2.27
10.44
8.29
6.46
7.88
1.92
10.44
8.29
6.83
$30 to $340
9
9.07
1.99
11.16
8.74
8.27
9.66
2.21
11.16
9.59
8.27
9.07
1.99
11.16
9.62
8.27
Over $340
21
8.38
1.92
9.53
8.36
7.51
8.53
2.00
9.53
8.98
7.51
8.38
1.92
9.53
8.98
7.51
G-l
-------
TABLE G-2. SUMMARY STATISTICS OF CWT FACILITY OWNERS' ESTIMATED
BASELINE AND WITH-REGULATION COSTS OF CAPITAL BY
DISCHARGE STATUS OF THEIR CWT FACILITIES
Discharge Status3
Regulatory Option and Statistic
Number of Observations
Baseline
Mean (percent)
Standard Deviation
(percentage points)
Quartiles (percent)
Upper
Median
Lower
Regulatory Option 1
Mean (percent)
Standard Deviation
(percentage points)
Quartiles (percent)
Upper
Median
Lower
Regulatory Option 2
Mean (percent)
Standard Deviation
(percentage points)
Quartiles (percent)
Upper
Median
Lower
Direct
14
9.46
2.04
11.36
9.82
7.96
9.97
2.32
11.36
10.61
7.96
10.01
2.28
.11.36
10.61
8.56
Indirect
36
8.38
2.14
9.81
8.62
6.51
10.67
11.54
10.80
9.00
6.90
11.46
14.01
11.13
8.88
7.03
Zero
10
9.14
1.92
11.36
8.42
8.27
9.21
1.91
11.36
8.75
8.27
9.21
1.91
11.36
8.75
8.27
Companies owning more than one type of discharger are included in each discharge category that describes CWT
facilities that they own.
G-2
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G-3
-------
TABLE G-4. WITH-REGULATION LIKELIHOOD OF BANKRUPTCY BY
COMPANY OWNERSHIP TYPE
Ownership Type
Likelihood of Bankruptcy
Publicly-traded companies'1
Likely
Indeterminate
Unlikely
Subtotal
Other companies*3
Likely
Indeterminate
Unlikely
Subtotal
All companies
Likely
Indeterminate
Unlikely
Subtotal
Missing Values
Total
Regulatory Context
Regulatory
Baseline Option 1
4
7
8
19
2
8
19
29
6
16
26
48
9
57
4
7
8
19
6
9
23
38
10
16
31
57
0
57
Regulatory
Option 2
4
7
8
19
5
7
26
38
9
14
34
57
0
57
Bankruptcy prediction is based on the Z-score for companies with publicly traded stock. If a company's Z-score is
less than 1.81, the model predicts that bankruptcy is likely. If a company's Z-score is greater than 2.99, the model
predicts that bankruptcy is unlikely. Z-scores between 1.81 and 2.99 fall in the indeterminate range, and the
model makes no prediction for these companies.
^Bankruptcy prediction is based on the Z"-score for companies that do not issue publicly traded stock. If a
company's Z"-score is less than 1.10, the model predicts that bankruptcy is likely. If a company's Z"-score is
greater than 2.60, the model predicts that bankruptcy is unlikely. Z"-scores between 1.10 and 2.60 fall in the
indeterminate range, and the model makes no prediction for these companies.
G-4
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