»   EPA
Regulatory Impact Analysis  of
Proposed  Effluent Limitations
Guidelines and  Standards  for
the   Metal    Products   and
Machinery Industry (Phase 1)
                 Dr. Lynne G. Tudor, 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
      Credit  must be given to the Bill Cleary and  the whole MP&M team for their
professional manner, conscientious effort, and contributions.  Special credit has to go to
Edward Gardetto and Richard Healy of the Standards and Applied Sciences Division for their
contribution to, and review of this report. Additional thanks go to Robert Southworth, of the
Health and Ecological Criteria Division, for providing help in understanding the sewage sludge
regulations and review of the sewage sludge chapter; to Charles White who provided access
to and data calculated from the National Sewage Sludge Survey (NSSS); to Matthew Clark for
reviewing the RIA; and to Keith Silva, of Region IX, who contributed to and provided a
review of Appendix E which details the administrative costs associated with the rule.
      Credit must also be given to Abt Associates for their assistance and  support  in
performing the underlying analysis supporting the conclusions detailed in this report. Their
study was performed under Contracts 68-CO-0080, 68-C3-0302, and 68-C4-0060.
      Additional information used in this document was provided by Radian under Contract
68-C4-0024, Versar under Contract 68-D3-0013, and SAIC under contract 68-C4-0046.

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                                   Table of Contents
EXECUTIVE SUMMARY	ES.l

CHAPTER l: INTRODUCTION	1.1

CHAPTER 2: THE METAL PRODUCTS AND MACHINERY INDUSTRY AND THE NEED FOR
REGULATION	2.1

2.1 Introduction	2.1

2.2 Overview of the Facilities Potentially Subject to Regulation	2.1

2.3 Need for the Regulation	2.3
  Addressing Market Imperfections.	2.4
  Achieving a More Complete and Coherent Regulatory Framework for the MP&M Industry and Other Metals
  Industries	2.5
  Reducing Pollutant Discharges	'.	2.8
  Meeting Legislative and Litigation-Based Requirements	2.9

CHAPTER 3: OVERVIEW OF THE REGULATORY OPTIONS CONSIDERED FOR THE METAL PRODUCTS
AND MACHINERY INDUSTRY, PHASE I	...3.1

3.1 Introduction	,	3.1

3.2 BAT/BPT Options for Direct Dischargers	3.1

3.3 PSES Options for Indirect Dischargers	3.4

3.4 Summary of the Combined Regulatory Proposal	3.8

CHAPTER 4: ECONOMIC IMPACTS OF THE PROPOSED REGULATION	4.1

4.1 Introduction	...4.1

4.2 Economic Impact Analysis Methodology	4.2
   Structure of the Facility Impact Analysis	4.3
   Data Supporting the Facility Impact Analysis	4.5
   Methodology for Calculating Facility Impacts	4.6

4.3 Estimated Facility Economic Impacts	4.10
   Baseline Closure Analysis	4.10
   Post-Compliance Impact Analysis	4.10

4.4 Labor Requirements of Regulatory Compliance and Net Employment Impact	4.16
   Direct Labor Requirements of 'Complying with the Proposed Regulation	4.17
   Indirect and Induced Labor Requirements of Complying -with the MP&M Rule	4.18

4.5 Community Impacts	4.19
   Assessment of Community Impacts for Estimated Sample Facility Closures	4.20
   Assessment of State-Level Employment Impacts	;	4.21
   Assessment of State-Level Employment Impacts Including Possible Employment Gains	4.22

4.6 Impacts on Firms Owning MP&M Facilities	4.23

4.7 Foreign Trade Impacts	4.26

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4.8 Regulatory Flexibility Analysis	4.28
  Small Business in the MP&M Industry	4.30
  Impacts of the Proposed Regulation on Small Business	4.30
  Small Business Impact Finding	4.33

4.9 Cost Effectiveness Analysis of MP&M Regulatory Options	4.34
  Cost-Effectiveness Analysis for Indirect Dischargers	4.35
  Cost-Effectiveness Analysis for Direct Dischargers	4.37

CHAPTERS: SOCIAL COSTS OF THE PROPOSED REGULATION....	5.1

5.1 Introduction	5.1

5.2 Overview of Costs Analyzed	5.1

5.3 Resource Costs of Regulatory Compliance	5.3

5.4 Costs of Administering the Proposed Regulation...	5.3

5.5 Costs of Unemployment	5.6
  Cost of Worker Dislocation	5.6
  Cost of Administering Unemployment	5.8
  Total Cost of Unemployment.	5.8

5.6 Total Social Costs	5.9

SECTION III: ASSESSMENT OF BENEFITS	Ill.i

CHAPTER 6: POLLUTANT REDUCTION	6.1

6.1 Introduction	6.1

6.2 Data Sources.....	6.2

6.3 Use of Data for Nondetected Pollutants	6.3

6.4 Calculation of Unit Operation Production-Normalized Pollutant Loadings	6.3

6.5 Calculation of Industry Raw Wastewater Pollutant Loadings	6.4

6.6 Calculation of Industry Baseline Pollutant Loadings	6.7

6.7 Option 2a/2 Pollutant Removals	6.9

CHAPTER 7: OVERVIEW OF BENEFITS EXPECTED FROM THE MP&M REGULATION	7.1

7.1 Introduction	7.1

7.2 Economic Concepts Applicable to Benefits Analysis	7.1
  Benefit Categories Applicable to the Regulation	7.1
  Methods for Valuing Benefit Events	7.5
  Benefit Categories Analyzed for the MP&M Regulation	7.7
  Linking the Regulation to Beneficial Outcomes	7.9

7.3 Qualitative Description of Benefits	7.11
  Pollutants of Concern	7.77
  Human Health Effects	7.75
  Ecological Effects..	7.75
  POTWEffects	7.16

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CHAPTER 8: HUMAN HEALTH BENEFITS	8.1

8.1 Introduction	.	8.1

8.2 Methodology for Analyzing Human Health-Related Benefits	8.3
  Reduced Incidence of Cancer from Consumption of Fish Taken from Waterways Affected by MP&M Industry
  Discharges	8.4
  Reduced Incidence of Cancer from Consumption of Drinking Water Taken from Waterways Affected by MP&M
  Industry Discharges	8.13
  Reduced Frequency oflngestion of Pollutants at Rates Likely to Pose a Risk of Systemic Health Hazard	8.17
  Reduced Occurrence of Pollutant Concentrations Resulting from MP&M Discharges in Excess of Human
  Health-Based Ambient Water Quality Criteria	8.20

8.3 Findings from the Analysis of Human Health Benefit Measures	8.23
  Reduced Incidence of Cancer from Fish Consumption	....8.24
  Reduced Incidence of Cancer from Water Consumption	8.25
  Reduced Systemic Health Hazard from Fish and Water Consumption	8.26
  Reduced Frequency of Pollutant Concentrations in Excess ofHealth-BasedA WQC Limits.	8.27

8.4 Limitations and Uncertainties Associated with Estimating Human Health Benefits	8.28
  Sample Design and Analysis of Benefits by Location of Occurrence	8.29
  Estimation ofIn-Waterway Concentrations of MP&M Pollutants	8.30
  Consideration of the Joint Effects of'Pollutants	8.30
  Consideration of Background Concentrations of MP&M Pollutants.	8.31
  Consideration of Downstream Effects	8.31
  Estimation of the Exposed Fishing Population	8.32

CHAPTER 9: ASSESSING THE ECOLOGICAL BENEFITS OF THE MP&M REGULATION
(RECREATIONAL FISHING)	9.1

9.1 Introduction	9.1

9.2 Methodology for Assessing Ecological Benefits	9.3
  Identifying Discharge Reaches in which Pollutant Concentrations in Excess of Aquatic Life A WQCsAre
  Estimated To Be Eliminated.	9,4
  Valuing the Elimination of Pollutant Concentrations in Excess ofAWQCs	9.6

9.3 Estimated Aquatic Life Benefits for the MP&M Regulation	9.9

9.4 Limitations and Uncertainties Associated with Estimating Ecological Benefits	9.10
  Sample Design and Analysis of Benefits by Location of Occurrence	9.11
  Estimation of In-Waterway Concentrations of MP&M Pollutants	9.12
  Consideration of Background Concentrations of MP&M Pollutants.	9.12
  Consideration of Downstream Effects	9.12
  Estimation of the Value  to Recreational Fishermen of Reducing Concentrations of MP&M Pollutants to Levels
  Considered Protective of Aquatic Life and Human Health	9.13
  Potential Overlap in Valuation of Enhanced Recreational Fishing Opportunities and Reduced Cancer Risk Via
  the Fish Consumption Pathway	9.75

CHAPTER 10: ESTIMATING THE EFFECT OF REDUCED POLLUTANT DISCHARGES ON
DISTRIBUTIONS OF AQUATIC SPECIES	 10.1

10.1 Introduction	10.1

10.2 Overview of Species Sensitivity Distributions	10.3

10.3 Developing Species Sensitivity Distributions for MP&M Pollutants	10.7
  Collection of Aquatic Toxicity Data	1Q.7
  Development of Species Sensitivity Distributions	10.8
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  Estimated Species Sensitivity Distributions	70.77
10.4 Using Species Sensitivity Distributions to Assess the Effects of MP&M Pollutant DischargeslO.17
  Sampling Issues and the Decision Against Sample Weighting of Discharge Effects	7 0.18
  Summary of Data Sources	70.20
10.5 Findings from the Species Sensitivity Distribution Assessment	10.21
  Change in Concentrations Relative to Acute Exposure Ambient Water Quality Criteria	70.22
  Change in Concentrations Relative to Species Lethal Effect Thresholds	10.24
  Change in the Proportion of Species Affected	70.25
CHAPTER 11: ASSESSING ECONOMIC PRODUCTIVITY BENEFITS STEMMING FROM REDUCED
POLLUTION IN SEWAGE SLUDGE...	11.1
11.1 Introduction	11.1
11.2 Current Sewage Sludge Generation, Treatment, and Disposal Practices	11.4
  Sewage Sludge  Characteristics and Treatment	77.4
  Sewage Sludge  Use and Disposal Practices	77.5
  Current Use of Alternative Sewage Sludge Use and Disposal Practices	11.6
11.3 Pollutant Limits for Use and Disposal Options	11.7
  Land Application..,	11-8
  Surface Disposal...,	77.70
  Incineration	;	•	77.70
11.4 Costs of Sewage Sludge Disposal and Use Practices	11.11
11.5 Estimating the Reduction in Sewage Sludge Disposal Costs	11.13
11.6 Estimated Savings in Sewage Sludge Disposal Costs	11.20
11.7 Limitations ofthe Benefit Estimation Methodology	11.22
CHAPTER 12: COMPARISON OF ESTIMATED COSTS AND BENEFITS FOR THE PROPOSED
REGULATION	12.1
12.1 Total Monetized Benefits	12.1
12.2 Total Monetized Social Costs	12.1
12.3 Comparison of Monetized Benefits and Costs	12.2
REFERENCES	R.l
APPENDIX A: DESCRIPTION OF THE FATE AND TRANSPORT MODEL USED TO ESTIMATE
POLLUTANT CONCENTRATIONS AT THE INITIAL POINT OF DISCHARGE AND BELOW THE INITIAL
DISCHARGE REACH.	A.l
A.I Introduction....	A.1
A.2 Model Equations	A.2
A.3 Model Assumptions	.	A.3
A.4 Hydrologic Linkages	A.4
A.5 Associating Risk with Exposed Populations	A.5
A.6 Summary of Data Sources	„	A.5
  Pollutant Loadings.	A.5
                                             IV

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  Hydrologic Parameters	•	A.5
  Chemical Fate and Decay Parameters	-A.6
  Population Data	A.6

APPENDIX B: DETAILED METHODOLOGY FOR ESTIMATING THE TOTAL EXPOSED POPULATION
FOR THE FISH CONSUMPTION PATHWAY	B.l

B.I Introduction	B.I

B.2 Methodology	B-!
  Using Fishing License Data to Estimate the Number of Recreational Anglers in Counties Abutting MP&M
  Reaches	B.I
  Estimating the Number of Subsistence Fishermen	B.4
  Using Creel Survey Data to Estimate the Percentage of the Fishing Population that Fish Affected Reaches...B.4
  Adjusting for Fish Advisories	B.4
  Estimating Household Exposure for the Fish Consumption Analyses	B.5
  Using Sample Weights to Calculate Total Exposed Population	B.6

APPENDIX C: DIFFERENTIAL SAMPLE WEIGHTING TECHNIQUE FOR MULTIPLE DISCHARGE
EVENTS ON SAMPLE REACHES	C.I

C.I Introduction	•	C.I

C.2 Methodology for Developing Sample-Weighted Estimates for Sites with more than Facility	C.2

APPENDIX D: ESTIMATION OF SEWAGE SLUDGE USE OR DISPOSAL COSTS	D.I

D.I Introduction	D-l

D.2 Use or Disposal Cost Estimates from Previous EPA Publications	D.3

D.3 Adjustments to Use or Disposal Cost Estimates Based on Additional Research	D.4

D.4 Costs of Co-Disposal	D-5

D.5 Limitation of Benefits for Land-Constrained POTWs	D.7

APPENDIX E: GOVERNMENT ADMINISTRATIVE COSTS OF RULE IMPLEMENTATION (UNFUNDED
MANDATES)	E.I

E.I Introduction	E>1

E.2 The NPDES Permit Program and General Pretreatment Regulations	E.I
   NPDES Basic Industrial Permit Program	E-l
   Pretreatment Program	^-^

 E.3 Methodology	•	E-3

 E.4 Findings	E-4
   Number of Facilities	E-4
   Unit Costs of Administrative Functions	&•?
   Annualized Incremental Costs	E-1&

 APPENDIX F: SUMMARY OF ESTIMATED COSTS AND BENEFITS FOR THE ALTERNATIVE OPTION
 CONSIDERED FOR PROPOSAL: OPTION 1A/2	F.I

 F.I Introduction	F.!

 F.2 Economic Impacts and Social Costs	F.I

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F.3 Estimated Benefits	F.3

F.4 Comparison of Estimated Costs and Benefits	F.4

APPENDIX G: ENVIRONMENTAL ASSESSMENT OF THE PROPOSED EFFLUENT GUIDELINES FOR THE
METAL PRODUCTS AND MACHINERY INDUSTRY (PHASE I)	G.l
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                                     Executive Summary

Introduction
       The Environmental Protection Agency is proposing effluent limitations guidelines and standards for
the Metal Products and Machinery (MP&M) Industry, Phase I, under Sections 301, 304, 306, 307 and 501
of the Clean Water Act. The MP&M Phase I regulation applies to 7 industrial sectors — Hardware,
Aircraft,  Electronic Equipment, Stationary  Industrial  Equipment, Ordnance,  Aerospace, and  Mobile
Industrial  Equipment—  and  includes limitations for  Best Practicable  Control Technology,  Best
Conventional Pollutant Control Technology,  Best Available Technology Economically  Achievable, New
Source Performance Standards, and Pretreatment Standards for Existing and New Sources.

       Pursuant to Executive  Order 12866 [58 Federal Register 51, 735  (October 4, 1993)],  EPA
determined that this regulation is a "significant regulatory action" because its annual cost to the economy is
expected to  exceed $100 million. In accordance with the Executive Order's requirements, EPA prepared
this Regulatory Impact Assessment (RIA), which assesses the costs and benefits to society of the proposed
regulation. This Executive Summary summarizes the major elements of the RIA, including a review of: (1)
the MP&M industry and its effluent discharges;  (2) the proposed regulatory option; (3) the major economic
impacts and costs of the proposed regulation; (4) the regulation's expected benefits; and (5) the comparison
of estimated costs and benefits.

Overview of the MP&M Industry and its Effluent Discharges
       From a  detailed technical and economic  survey of the MP&M industry, EPA estimates that the
industry contains 10,601 facilities that discharge water and are thus potentially subject to regulation. These
10,601 water discharging facilities represent about 11 percent of an estimated 90,000 total facilities that
participated in the MP&M Phase I business sectors as of 1987 (from Census  of Manufacturers data). Of
the 10,601 water-discharging facilities, EPA estimates that 8,706 facilities are indirect dischargers (i.e.,
they discharge effluent to a POTW) and would  thus be subject  to Pretreatment Standards  for Existing
Sources (PSES). The  remaining 1,895 facilities are estimated to be direct dischargers (i.e., they discharge
effluent directly to a waterway under a NPDES  permit) and will thus  be subject to  Best Available
Technology Economically Achievable (BAT) and Best Practicable Control Technology Currently Available
(BPT) requirements.
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        The MP&M facilities that are potentially subject to this regulation contribute significantly to the
US economy. TableJES.l, below, summarizes important economic data for the estimated 10,601 water-
discharging MP&M facilities. These data show that, in 1989, the facilities potentially subject to regulation
employed over 3,000,000 persons or approximately 16 percent of the total US manufacturing employment
of 19.5 million.1 Total revenues for these facilities are estimated at $491 billion or about 18 percent of the
total shipments for US manufacturing of $2,793 billion. Value added, a more meaningful measure of the
value of production jactivity, is estimated at about  $168 billion or approximately 13 percent of the total
value added of $1,308 billion for US manufacturing. Total payroll for the facilities is estimated at about
$62 billion or approximately 12 percent of the total of $533 billion for US manufacturing in 1989.
Table ES.l; Summary Data for 1989 for jFacHities Potentially Subject to MP&M Phase I Regulation
Estimated Revenue, Value Added and Payroll in Millions of 1989 Dollars
Sector
Hardware
Aircraft
Electronic Equipment
Stationary Industrial Equipment
Ordnance
Aerospace i
Mobile Industrial Equipment
All Phase I Sectors
Total US Manufacturing
Phase I Facilities as a Percent of
Total US Manufacturing
Faculties
4,197
856
1,280
2,769
190
545
764
10,601


Employment
379,000
552,000
700,000
419,000
131,000
580,000
275,000
3,036,000
19,492,000
15.58%
Revenue
44,327
96,715
155,101
52,918
21,666
54,430
65,914
491,071
2,793,000
17.58%
Value Added
9,463
24,858
80,502
12,815
7,059
19,454
14,101
168,252
1,308,000
12.86%
Payroll
5,845
15,148
12,503
6,306
4,006
9,660
8,151
61,620
533,000
11.56%
Source: US Environmental Protection Agency, Section 308 Survey Data, 1989, and Statistical Abstract of
the United States, 1992, Department of Commerce
        The MP&M industry discharges substantial quantities of pollutants, including toxic pollutant
compounds (priority and nonconventional metals and organics) and conventional pollutants such as total
suspended solids (TSS) and oil and grease. EPA estimates that baseline pollutant discharges  for MP&M
Phase I direct dischargers include approximately 557,000 Ibs/yr of priority metals, 3,840 Ibs/yr of cyanide,
 18,200,000 Ibs/yr of oil  and  grease, 2,590,000  Ibs/yr  of total suspended solids, 634,000  Ibs/yr  of
nonconventional metals, 96,400,000 of other nonconventional pollutants, 8,940 Ibs/yr of priority organic
pollutants,  and 68,600  Ibs/yr of nonconventional organic  pollutants. In  addition,  EPA estimates that
 1 Although the MP&M Phase I sectors include non-manufacturing activities and employment, nearly 95 percent of
 the revenue received by facilities affected by the regulation  is estimated to be derived from manufacturing
 activities. Thus, the comparison of employment and other economic values with totals for the US manufacturing
 sector provides a relevant basis  for understanding the economic  significance of the  industries and facilities
 potentially subject to this regulation.
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MP&M Phase I indirect dischargers release approximately 6,100,000 Ibs/yr of priority metals, 170,000
Ibs/yr of cyanide, 170,000,000  Ibs/yr of oil and grease,  17,700,000  Ibs/yr of total  suspended solids,
5,860,000 Ibs/yr of nonconventional metals, 1,170,000,000 of other nonconventional pollutants, 406,000
Ibs/yr of priority organic pollutants, and 1,970,000 Ibs/yr of nonconventional organic pollutants.

        Discharges of these pollutants to surface waters and POTWs have a number of adverse effects,
including degradation of aquatic habitats, reduced survivability and  diversity of native aquatic life, and
risks to human health through the consumption of affected fish and water. In addition, these pollutants may
disrupt biological wastewater treatment systems and contaminate sewage sludge. Metal constituents are of
particular.concern because of the large amounts present in MP&M effluents. Unlike most toxic organic
compounds and other wastes that are rendered innocuous in activated sludge systems, metals are elements
and cannot be eliminated. Moreover, in solution, some metals have a high affinity for biological uptake.
Depending on site-specific conditions, metals form insoluble inorganic and organic complexes that partition
to sewage sludge at POTWs or sediments in aquatic ecosystems. The metal constituents can return to a
bioavailable form upon land application of sewage sludge; dredging and resuspension of sediment; or as a
result of seasonal, natural, or induced alteration of sediment chemistry. The goal of the proposed regulation
is to reduce the pollutant discharges as outlined above and to mitigate these harmful consequences.

Summary of the Proposed Regulation
        The  proposed  regulation  includes  PSES  limitations  for  indirect dischargers  and  BAT/BPT
limitations for direct dischargers.

        Proposed  PSES Option for Indirect Dischargers. After considering  several  alternatives,  EPA
        selected the option referred to as Option 2a as the PSES regulatory option for indirect dischargers.
        The  Option 2a limitations are based on lime and settle treatment with in-process flow reduction
        and will apply to "large" flow indirect discharging facilities (i.e., with an annual effluent discharge
        volume of at least  1 million gallons per year). "Low" flow facilities (i.e., that discharge less than 1
        million gallons per year) would not be subject to PSES requirements,  thus exempting over 75
        percent of the estimated 8,706 indirect dischargers from PSES requirements. Permitting authorities
        will  implement the  Option 2a  limitations  as  mass-based  standards that  reflect  specified
        concentration limits and a discharge flow that assumes good pollution prevention and water
        conservation practices. Thus, Option 2a embodies a requirement for pollution prevention and water
        conservation in conjunction with conventional lime and settle treatment technology.
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        Proposed BAT/BPT Option  for  Direct Dischargers. EPA  selected the option referred to  as
        Option 2 as  the  BAT/BPT  regulatory  option for  direct  dischargers.  Option 2's  discharge
        limitations are based on the same technology — lime and settle treatment -with in-process flow
        reduction — as the PSES limitations discussed  above. Accordingly,  the  proposed BAT/BPT
        option also embodies a requirement for pollution prevention and water conservation in conjunction
        with conventional treatment technology.
                  I
        EPA selected these options for regulatory proposal because they embody best available technology
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for reducing effluent discharges;  impose very minor  economic  impacts  in  terms  of facility  closures,
employment losses, financial requirements, and burdens among small business-owned facilities; are cost
effective; and achieve substantial pollutant reductions.

Economic Impacts and Costs of the Proposed Regulation
        EPA assessed the economic  impacts of the proposed  regulation using detailed financial and
technical data from a sample of 396 water-discharging facilities. Engineering studies of these facilities were
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undertaken to assess  the pollution prevention and treatment system needs for complying with possible
regulatory  options and to estimate the capital  costs  and  annual operating and maintenance costs  of
compliance. These compliance cost estimates provided the basis for analyzing how  an effluent guideline
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would likely affect the financial performance and condition of MP&M facilities,  and for gauging the costs
that would be incurred by society as a result of regulation. Impacts estimated from the sample facility
analysis were extrapolated to the MP&M industry population level using sample weights.
                  i

        Summary of Economic Impacts
        Overall, EPA found the economic impacts of the proposed  regulatory options for indirect and
direct discharging facilities to be very modest. Economic impacts were assessed in the following categories:
                  r
•       Facility closures and related losses in employment and shipments. EPA estimated that a total of 25
        facilities (7 indirect discharging facilities and 18 direct discharging facilities), or 0.7 percent of the
        facilities to which the regulation is expected to apply,  would close as a result of regulation. The
        total  estimated  employment  losses amount to 698 full-time equivalent positions (FTEs) (0.03
        percent  of [the  total employment  in facilities thus potentially subject to  regulation) and  the
                                               ES.4

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      associated value of lost shipments amounts to $140 million (0.03 percent of the total shipments in
      facilities potentially subject to regulation).2

      Compliance costs. EPA estimated that the industry would incur a total of $414 million in capital
      costs for regulatory compliance. The estimated total annualized, after-tax cash cost to industry,
      which reflects private costs of capital and expected tax treatment of capital outlays and annual
      expenses, amounts to $161 million.

      Labor requirements of compliance and net employment loss from  the regulation. EPA estimated
      that the manufacturing, installation, and operation of compliance equipment would generate an
      annualized  labor requirement that is  likely  to exceed the estimated 698 job losses in closing
      facilities. Specifically, compliance activities are  estimated to generate an annual direct  labor
      requirement of 1,594 FTEs with payments to labor of $90 million.

      Community employment impacts. EPA assessed community impacts by comparing community-
      and state-wide employment losses to the total employment in the communities and states in which
      estimated facility closures are located. The estimated employment losses  include the losses in both
      MP&M facilities and in other affected industries. From this analysis, EPA found that no affected
      communities or states would be expected to incur employment losses exceeding one percent of total
      employment, the threshold of significant impact.

      Foreign trade impacts. EPA assessed foreign trade impacts in terms of the change in net exports
      (i.e., exports minus imports) by allocating closing facilities' sales  between domestic and foreign
      producers based on the historical competitiveness of MP&M industrial sectors in international
      markets. From  this analysis,  EPA estimated that exports will not be measurably affected by
      compliance with the proposed regulation, while imports  are estimated to increase by approximately
      $5.3 million, or 0.01 percent of the 1991 imports of the MP&M Phase I industry commodities.

      Impacts on  firms owning MP&M facilities. Because firm-level  impacts may exceed those assessed
      at the level  of the facility, particularly when a firm owns more than one facility that will be subject
      to regulation, EPA assessed the likely financial impacts on firms owning MP&M facilities. EPA
      found that only one firm among the 225  firms owning MP&M sample facilities that passed the
All compliance costs and impact measures are in 1994 dollars.
                                            ES.5

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       post-compliance closure analysis would be expected to incur significant financial stress as a result
       of regulation. Because the sample of facilities was not designed to be  a random sample of firms,
       EPA performed this analysis for sampled firms only and did not make national estimates.

       Impacts on riew sources. The proposed regulation includes limitations  for new direct and indirect
       discharging Sources within the MP&M Phase I category. The limitations are the same as those
       proposed for existing facilities except that new low-flow indirect discharging facilities would not be
       exempt from the discharge limitations. EPA found that the new source  limitations applicable to
       new facilities would be economically achievable regardless of facility discharge volume.
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       Regulatory flexibility Analysis (small business  impacts'). In accordance  with the requirements of
       the  Regulatory Flexibility  Act (Public Law  96-354), EPA performed  a Regulatory Flexibility
       Analysis of |the proposed regulation. This  analysis showed that the MP&M industry is largely
       comprised of small business entities: over 75 percent of facilities are estimated to be owned by a
       small business, and 25 percent of water-discharging  facilities are estimated to have  9 or fewer
       employees while 50 percent of water-discharging facilities have 79 or fewer employees. In addition,
       the Regulatbry Flexibility Analysis found that facility closures were somewhat more concentrated
       among these  small entity classifications. At the same time, EPA also found that the expected level
       of'closures .among small entities is extremely low on  an absolute basis: 0.4 percent of small
       business-owned facilities; 0.9 percent of facilities with 9 or fewer employees; and 0.2 percent of
       facilities with 10 to 79 employees.  EPA also found that the financial burdens on small business
       entities will !be very modest:  total annual compliance  costs among small business-owned  average
       0.11 percent of revenue and  only 0.26 percent  of small business-owned facilities are  expected to
       incur total annual compliance costs exceeding  5 percent of revenue.3 From these findings, EPA
       concluded that the facility closure impacts and compliance cost burdens of the proposed option
       would not constitute an undue impact on  small business entities. Pursuant to Section 605(b) of the
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       Regulatory IFlexibility Act,  5 U.S.C.  605(b), the  Administrator  certified that the proposed
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       regulation Will not have a significant economic impact on a substantial number of small entities.
3 In previous regulations, EPA has judged annual compliance costs that are less than five percent of facility
revenue as not likely to impose a significant financial burden on the complying entity
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        Social Costs of the Proposed Regulation
        The social costs of the proposed regulation are the opportunity costs to society of employing scarce
resources to achieve the regulation's pollution reduction objectives. These costs include both monetary and
non-monetary outlays made by society. Monetary  outlays  include  private-sector compliance  costs,
government administrative costs, and other adjustment costs, such  as the  cost of  relocating displaced
workers. Non-monetary  outlays, some of which  can be  assigned  monetary values, include losses in
consumers'  and producers' surpluses in  affected product markets, discomfort or inconvenience, loss of
time, and a slowdown in the rate of innovation. For this analysis, EPA estimated the following components
of social cost: the cost  of society's economic  resources  for achieving compliance with the proposed
regulation; the cost to governments of administering the proposed regulation;  and the cost of administering
unemployment programs  for job losses resulting from regulation, and worker dislocation costs.

        Resource Cost of Compliance
        The chief component of the estimated annual social cost is the cost of complying with the proposed
regulation. The portion of this cost that is expected to be borne directly by the MP&M Phase I industries
amounts to $160.6 million ($1994),  as discussed above, and reflects the cost of pollution prevention and
treatment systems needed to achieve compliance with the proposed discharge limitations.  In addition, this
amount reflects the expected tax treatment of capital outlays and annual expenses and is also based on
private costs of capital. However, the appropriate measure of the cost  of compliance to society will omit
these tax effects and will also reflect the opportunity cost of capital to society  or social discount rate. These
adjustments add an estimated $29.7 million to the estimated  private industry cost of the regulation, bringing
the cost of compliance to society to $190.3 million ($1994).  This amount may be interpreted as the value of
society's productive resources — including labor, equipment, and other  material — that is  needed annually
to achieve the reductions in effluent discharges specified by the proposed regulation.

        Cost of Administering the Proposed Regulation
        In addition to the resource costs for achieving effluent discharge reductions, EPA also estimated
the cost to all levels of governments for administering the proposed regulation. The main component of this
administrative  cost category is  the  cost of labor  and material resources for writing permits under the
regulation  and for compliance monitoring and enforcement activities. EPA estimates that these costs will
range from $2.1 to $3.4 million ($1994) annually.
                                               ES.7

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        Cost of Unemployment
        To account for the social cost of unemployment, EPA estimated the cost of worker dislocation
(exclusive  of cash benefits) to the individual and  the additional  cost  to governments to administer
unemployment programs. The dislocation cost is estimated based on  workers' incremental willingness-to-
pay to avoid job dislocation in a hedonic wage framework. The estimate used in this analysis approximates
                  i
a one-time willingness-to-pay to avoid an involuntary episode of unemployment and reflects all monetary
                  i
and non-monetary impacts of unemployment incurred by the worker. It does not include offsets to the cost
                  j
of unemployment such as unemployment compensation or the value of increased leisure time.

        EPA estimated the implied one time statistical cost  of an involuntary layoff for the MP&M
industry at $83,000lto $110,000 ($1994). To calculate the annual cost of employment displacement for the
proposed regulation, EPA annualized this value over  the 15-year analysis period at a social opportunity
cost of deferred consumption of three percent and multiplied the resulting annual value by the total number
of job losses (698 'FTEs) in estimated facility  closures. On this basis,  EPA estimated that annualized
worker displacement costs for the proposed regulation would range from zero to $6.6  million. The lower
end of this range reflects EPA's finding that  compliance-related demands for labor would  exceed the
estimated loss in employment from facility closures.

        Unemployment as the result of regulation may also impose costs to society through the additional
administrative burdens placed on the unemployment system (the cost of unemployment benefits per se  is
not a social cost but instead a transfer payment within society).  Administrative costs include  the cost of
                  !
processing unemployment claims, retraining workers, and placing workers in new jobs. Using data from the
                  i
Interstate Conference  of Employment Security Agencies,  EPA estimated that the per unemployed worker
                  i
cost of administering unemployment programs for job  losses amounts to approximately $100 per job loss.
Multiplying this figure by the 698 job losses and annualizing the result over the 15-year analysis period
yields an annual unemployment administration cost of less than $10,000 per year. Again, considering that
the net employment;loss from the regulation may be negative, EPA used a range of from zero  to $10,000
for the additional annual cost of unemployment administration.
                  i
                  i
        Estimated Total Social Costs
        Summing across all social costs results in a total social cost estimate of $192.4 to $200.3 million
annually ($1994). These social cost estimates do  not include losses in consumers' and producers' surpluses
resulting from the change in quantity of goods and services sold in affected product markets. However, in
the conservative analytic framework in which  compliance costs were tallied, MP&M industry product
                                              ES.8

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prices were assumed not to increase as a result of the proposed regulation. In this case, the estimated
resource costs of compliance will approximate the loss in producers' surplus  and, with no increase in
prices, consumers' surplus will not change.

Benefits of the Proposed Regulation
        The proposed regulation will reduce MP&M industry pollutant discharges with a number of
consequent  benefits  to society,  including:  improved quality of freshwater, estuarine, and marine
ecosystems; increased survivability and diversity of aquatic life and terrestrial  wildlife; reduced risks to
human health through consumption of fish or water taken from affected waterways; and reduced cost of
disposal or use of municipal sewage sludge that is affected by MP&M pollutant discharges. EPA estimates
that the proposed limitations will substantially reduce pollutant discharges. As summarized in Table ES.2,
limitations for direct and indirect dischargers are estimated to achieve pollutant reductions ranging from 57
percent  of priority organics from direct dischargers to 99 percent or more of several pollutant categories.
Table BS.2? Summary of Pollutant Reductions Under Proposed Option 2a/2
Class Of Pollutant
Priority Metals
Cyanide
Oil and Grease
Total Suspended Solids
Nonconventional Metals
Other Nonconventionals
Priority Organics
Nonconventional Organics
Direct Dischargers
Baseline
Discharge
Obs/yr)
557,000
3,840
18,200,00
2,590,000
634,000
96,400,000
8,940
68,600
Pollutant
Reduction
(Ibs/yr)
517,000
3,840
18,000,000
2,220,000
501,000
64,900,000
5,080
61,600
Percent
Reduction
93
>99
99
86
79
67
57
90
Indirect Dischargers
Baseline
Discharge
(Ibs/yr)
6,100,000
170,000
170,000,000
17,700,000
5,860,000
1,170,000,000
406,000
1,970,000
Pollutant
Reduction
flbs/yr)
5,610,000
169,000
147,000,000
12,000,000
3,490,000
878,000,000
328,000
1,610,000
Percent ;
Reduction.
92
99
87
68
60
75
81
81
Source: US Environmental Protection Agency
        EPA assessed the benefits from the expected pollutant reductions in three broad classes: human
health, ecological, and economic productivity benefits. Each class is comprised of a number of more
narrowly defined benefit categories. EPA expects that benefits will accrue to society in  all of these
categories. However, because of data limitations and imperfect understanding of how society  values some
of these benefit categories, EPA was not able to analyze all of these categories with the same level of rigor.
At the highest level of analysis, EPA was able to quantify the expected effects for some benefit categories
and attach monetary values to them. Benefit categories for which EPA developed dollar estimates include
reduction in cancer risk from fish consumption, increased value of recreational fishing opportunities, and
reduced costs of disposal or use  of POTW sewage sludge. For  other benefit categories, EPA was able to
quantify expected effects  but not able to estimate monetary values for them. These benefit categories
                                              ES.9

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include reduced incidence of cancer among humans from consumption of contaminated drinking water,4
reduced risk to aquatic life, and reduced risk of systemic hazard to human health from consumption offish
and  drinking  water.  Finally,  non-quantified,   non-monetized  benefit  categories  include:  enhanced
diversionary uses; improved aesthetic quality of waters near the discharge sites; enhanced water-dependent
recreation other than fishing; benefits to wildlife and to threatened or endangered species; improved tourism
opportunities; cultural values; tourism benefits; and biodiversity benefits.
                  i
        The  monetary assessment  of benefits is inevitably incomplete. As  described above,  monetary
values were estimated for only a few  of the likely benefit categories. In addition, because of data and
measurement limitations,  some of the  available  valuation measures do not fully account for all of the
mechanisms by which society is likely to value a given benefit event. As a result, the estimated dollar
                  I
values that are attached to certain of the estimated benefit events may understate society's willingness-to-
pay to achieve those benefit  events. For example, reduced sewage sludge disposal  costs may understate
society's willingness-to-pay for less polluted sewage sludge because public preferences as revealed through
political decision-making processes  indicate that  some communities would be willing to pay for beneficial
sewage sludge use (land application) even when  it is more costly than other disposal options. As a result,
the estimate of the dollar value of benefits to society is a partial estimate and, in all likelihood, understates
substantially the economic benefits that will accrue from the proposed regulation. The following discussion
focuses on the benefit categories for which EPA developed monetary estimates.
        Human Health Benefits
                  i
        EPA analyzed the following measures of health-related  benefits from the proposed  regulation:
reduced cancer risk! from fish and water consumption, reduced risk of systemic health hazard from fish and
water consumption; and reduced  occurrence of in-waterway pollutant concentrations in excess of human
health-based ambient water quality criteria (AWQC).  Of these health  benefit measures, EPA was able to
monetize only the reduction in cancer risk.
                  i
        EPA estimated the change in aggregate cancer risk through two exposure paths: (1) consumption of
fish taken from waterways affected by MP&M pollutant discharges; and (2) consumption of drinking water
4 It should be noted; that it is possible to monetize these benefits. However, since EPA has established drinking
water criteria for the MP&M pollutants with cancer slope factors, EPA assumes  that public drinking water
treatment systems will reduce these pollutants in the public water supply to levels that are protective of human
health. Therefore, El?A is not claiming any monetary benefits of avoided cancer cases for these pollutants.

                  i                            ES.10

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taken from waterways affected by MP&M pollutant discharges. In-stream concentrations of 4 carcinogenic
toxicants were estimated for 396 facilities discharging directly or indirectly to 326 receiving waterways
using a model of the instream pollutant mixing and  dilution process. In-stream concentrations were
estimated for the initial discharge reach and, in the drinking water consumption analysis, for downstream
reaches taking into account the various mechanisms by which pollution concentrations diminish below the
initial point of discharge (e.g., dilution, adsorption, volatilization, and hydrolysis). For the fish consumption
exposure path, pollutant contamination offish flesh was estimated using biological uptake factors. Data on
licensed fishing population  by state and county, presence of fish advisories, fishing activity rates, and
average household  size were used to estimate the exposed population  of recreational  and subsistence
anglers and their families that would benefit from reduced pollutants in fish flesh. Fish consumption rates
for recreational and subsistence anglers were used to estimate the change in cancer risk  among these
populations. For the drinking water exposure path, the calculated in-stream concentrations  were used to
estimate  the  change in cancer risk in  populations that are served by public water  supply intakes on
waterways affected by MP&M discharges.

       For combined recreational and subsistence angler household populations,  the proposed regulation
is projected to eliminate approximately 2.7 cancer cases per year from a baseline of about 11.1 cases
estimated at the current discharge level, representing a reduction of about 25 percent (see Table ES.3). For
the drinking water population, EPA estimated that reduced pollutant discharges under the proposed BAT
and PSES  options would reduce cancer risk by approximately 3.0 cancer cases per year. EPA valued the
reduced cancer cases  using estimated willingness-to-pay values for avoiding premature mortality. The
values used in this analysis are based on a range of values recommended by EPA's Office  of Policy
Analysis from a review of studies quantifying individuals' willingness to pay to avoid increased risks to
life. In 1994  dollars,  these values range from $2.5  to $13.4  million per statistical  life saved.  For the
proposed regulation, the benefits associated with reduced incidence of cancer from fish consumption are
estimated to range from $6.8 million to $36.2 million per year ($1994), depending on  the  choice of
willingness-to-pay value that is used to value the avoided cancer events. Although  EPA estimated the
change in  cancer risk resulting from reduced  exposure to MP&M pollutants  via  the drinking  water
pathway, these effects were not included in the monetary estimate of benefits because EPA has  published
drinking water criteria for the four pollutants for which the cancer analysis was completed. Thus, the total
estimated value for human health benefits ranges from $6.8 million to $36.2 million per year ($1994).
                                               ES.ll

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Table ES.3; Estimated Avoided Cancer Cases and Value of Benefits for tfce tfroDosed JteettJatSon
CAS*
75092
117817
127184
7440382
!
!
t
Chemical
Dichloromethane
Bis(2-ethylhexyl) phthalate
Tetrachloroethene
Arsenic !
Brinfcing Water
Blinking
Water
Criterion ?
yes
yes
yes
yes
Totals ;
Avoided
Caneer
'Cases
0.041
0.750
0.060
2.167
3.018
Value of
Benefit*
{$ million)
0.0
0.0
0.0
0.0
0.0
Fish Consumption
Avoided
Cancer
Cases
0.015
1.426
0.014
1.256
2.711
Value of
Benefit1
(S million)
0.04 - 0.20
3.59 - 19.06
0.03 - 0.18
3.16 - 16.79
6.82 - 36.23
* The value of avoided cancer cases via the drinking water consumption pathway was not included in the
monetary estimate of benefits for the proposed regulation. EPA has published a drinking water criterion for all
of these chemicals and it is assumed that drinking water treatment systems will reduced concentrations of the
chemicals to below adverse effect thresholds.
f Estimated annual value of avoided cancer case ($1994): $2.5 million - $13.4 million
Source: U.S. Environmental Protection Agency
       Ecological Benefits Valued on the Basis of Enhanced Recreational Fishing Opportunities
       EPA analyzed two measures of ecological benefits from the proposed regulation: (1) reduced
occurrence of in-waierway pollutant concentrations in excess of acute and chronic exposure AWQCs for
                  I
protection of aquatic life; and (2) reduced frequency with which aquatic  species are exposed to lethal
concentrations of certain MP&M  pollutants.  EPA used  the  findings from the analysis  of reduced
occurrence of pollutant concentrations in excess of AWQCs to access improvements in recreational fishing
habitats and, in turn;  to estimate a monetary value for the enhanced recreational fishing opportunities.
                  !
       To  assess aquatic life benefits, EPA  estimated the effect of facility discharges  of regulated
pollutants on pollutant concentrations in affected waterways. The estimated concentrations were compared,
                  i
on a baseline and post-compliance basis, with EPA AWQCs for acute and chronic exposure impacts to
aquatic life. Pollutant concentrations in  excess  of these values indicate potential impacts to aquatic life.
EPA's analysis found that 130 reaches exceed AWQC  values at baseline discharge levels. The proposed
regulation is estimated to eliminate concentrations in excess of the criteria on 88 of these reaches, leaving
an estimated 41 reaches with concentrations in excess of AWQC values for aquatic life.

       EPA expects that society will value such improvements in aquatic species habitat by a number of
mechanisms. For this analysis, EPA estimated a partial  monetary value of ecological improvements based
on the value of enhanced recreational  fishing opportunities.  Specifically, the elimination of pollutant
                  i
concentrations exceeding AWQC limits for protection of aquatic species and human health is expected to
generate benefits to recreational anglers.  Such benefits are expected to manifest as increases in the value of
the fishing experience per day fished or the number of days anglers subsequently choose to fish the cleaner
waterways. These |benefits,  however,  do not  include  all of  the benefits that are  associated with
                                              ES.12

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improvements in aquatic life. For example, recreational benefits do not capture the benefit of increased
assimilative capacity of a receiving waterbody, improvements in the taste and odor of the instream flow, or
improvements to other recreational  activities such as swimming and  wildlife observation that may be
enhanced by improved water quality.

       EPA' analysis of instream concentrations indicated that MP&M pollutant concentrations would
exceed an  AWQC  limit on 257 reaches  as the result of baseline MP&M discharges.  The expected
reductions in discharges for the proposed regulation eliminate the occurrence of concentrations in excess of
AWQC limits on 123 of these discharge reaches, leaving 134 reaches with concentrations for one or more
pollutant that exceed AWQC limits (see Table ES.4).
Table ES4; Estimated Discharge Beaches with MP&M Pollutant Concentrations in
Excess of AWQC Limits for Protection of Aquatic Species or Human Health
Regulatory
Status
Baseline
Option 2a/2
Readies with Concentrations Exceeding
AWQCAcate
Exposure Limits for
Aquatic Species
27
22
AWQCCluronie
Exposure Limits for
Aquatic Species
130
41
AWQC Limits
for Human
Health
137
97
Number of Reaches \
with Concentrations :
J&fteedingAWQC
Limits I
257
134
Note: In the baseline, the total number of reaches with concentrations exceeding AWQC limits does not equal
the sum of the numbers in the separate analysis categories because some reaches have concentrations hi excess of
AWQC limits for more than one analysis category.
Source: US Environmental Protection Agency
       EPA calculated the value of enhanced recreational fishing opportunities by first estimating the
baseline value of those fisheries in which all instances of MP&M pollutant concentrations in excess of
AWQCs are eliminated. Second, EPA estimated the value of improving the water quality in these fisheries
based on the incremental value to anglers of eliminating  all contaminants from a  fishery (Lyke,  1992).
Estimates  of the increase in value of recreational fishing to anglers range from $23.6 million to $84.3
million annually ($1994).

       Benefits from Reduced Cost of Sewage Sludge Disposal
       EPA expects that reduced effluent discharges from the MP&M industry will yield economic
productivity benefits. These benefits occur because reduced discharges from the regulated industry  reduce
production costs or increase the value of output in industries whose performance is affected by regulated
industry discharges.  For this  analysis,  EPA estimated productivity  benefits  for  one  benefit category:
reduced pollutant contamination of effluent discharged by MP&M facilities to sewage treatment systems
and associated savings in sewage sludge use or disposal costs. To estimate the potential cost savings from
reduced pollutant contamination of sewage sludge, EPA calculated baseline and post-compliance sewage
                                             ES.13

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sludge quality and compared sewage sludge pollutant concentrations to criteria for land application and
                   i
surface disposal.5 EPA assumed that POTWs choose the least expensive sewage sludge use or disposal
option for which sludge meets pollutant criteria. For rural POTWs, the least expensive or "preferred"
option is generally agricultural application (a beneficial use of the sludge) or surface disposal of sewage
sludge.            :
                   i
       As a result of the proposed regulation, many POTWs are expected to achieve substantial cost
savings by disposing of sewage sludge through agricultural application or surface disposal.  For POTWs
with limited access to agricultural land and surface disposal sites, the cost savings resulting from sewage
sludge with lower pollutant concentrations are expected to be less substantial. However, disposal of sewage
sludge that meets agricultural application limits through distributing and  marketing methods  may achieve
                   i
some cost savings for these facilities. In the baseline, EPA estimates that 5,559 of 6,950 POTWs meet
pollutant limits for surface disposal  or land application.  Of the 5,559 POTWs, 5,309 meet the limits on
pollutant concentration  for land application while 250 meet only the surface disposal pollutant limits.
Under the proposed'MP&M regulation, the number of POTWs that are expected to meet pollutant limits
for surface disposal or land application increases to 5,743 (or an increase of 184 POTWs) and the entire
amount of this net increase occurs in land application. EPA estimates that the shift of these  184 POTWs
from more expensive disposal options into land application will yield benefits ranging from $39.1 to $86.0
million annually ($1994).

       Total Estimated Value of Benefits
       For the  proposed regulation, total benefits for the three categories for which monetary estimates
were possible range from $69.6 to $206.5 million annually.  As noted above, this  benefit estimate  is
necessarily incomplete because it omits numerous  mechanisms by which society is likely to benefit from
reduced effluent discharges from the MP&M industry. Examples of benefit categories not reflected in this
                   i
estimate include: noh-cancer related health benefits, other water dependent recreational benefits, existence
                   i
and option values, and benefits to wildlife and endangered species.
5 "Industrial sludge," jwhich results from the operation of treatment systems at MP&M facilities, will increase both
in quantity and in level of contamination as a result of the proposed regulation.   The cost of managing and
disposing of this industrial sludge is included in the estimated costs of regulatory compliance used in the economic
and regulatory impact analyses.
                   !                            ES.14

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Comparison of Estimated Costs and Benefits
       Because not all of the benefits resulting from the proposed regulatory alternative can be valued in
dollar terms, a complete cost-benefit comparison cannot be performed. The social cost of the proposed rule
is estimated at $192.4 to $200.3 million annually ($1994). The sum total of benefits that can be valued in
dollar terms ranges from  $69.6 million to $206.5 million annually ($1994). Combining the estimates of
social benefits and social  costs yields a net monetizable benefit ranging from negative $130.7 million to
positive $14.1 million  annually (see  Table ES.5). This assessment of the relationship between costs and
benefits is subject to severe limitations on the ability to estimate comprehensively the expected benefits of
the proposed regulation. If all  of the benefits of regulation  could  be quantified and monetized,  EPA
estimates that in all likelihood the benefits of regulation would exceed the social costs.
                      Table ES.5: Comparison of Estimated Benefits and Costs for
                     Proposed Effluent Limitation Guidelines ami Standards for the
                Metal Products and MaeWnery JMttstryvftoase I (millions of 19S9 dollars)
        Benefit and Cost Categories
      Value
        Benefit Categories
             Human Health Benefits: Fish Consumption
             Human Health Benefits: Water Consumption
             Recreational Fishing Benefits
             Avoided Sewage Sludge Disposal or Use Costs
        Total Estimated Benefits
        Cost Categories
             Cost to Industry for the Proposed Regulation
             Adjustments for Tax Code and Use of Social Discount Rate
             Costs of Administering the Proposed Regulation
             Unemployment Administration and Worker Displacement Costs
        Total Social Cost
        Net Benefits (Benefits less Costs)	
   $6.8
   $0.0
  $23.6
  $39.1
$36.2
 $0.0
$84.3
$86.0
  $86.4   - $208.9
      $160.6
       $29.7
   $2.1   -    $3.4
   $0.0   -    $6.6
 $192.4   - $200.3
($130.7)  - $14.1*
         * For calculating the range of net benefits, the low net benefit value is calculated by subtracting
         the high value of costs from the low value of benefits. The high net benefit value is calculated
         by subtracting the low value of costs from the high value of benefits.
         Source: US Environmental Protection Agency	
                                              ES.15

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                                           Chapter 1
                                          Introduction

        The Environmental Protection Agency is proposing effluent limitations guidelines and standards for
the Metal Products and Machinery (MP&M) Industry, Phase I, under Sections 301, 304, 306, 307 and 501
of the Clean Water Act. On the basis of the economic impact analysis in support of the regulation,  EPA
estimated that the MP&M Phase I regulation is likely to result in aggregate costs to the economy in excess
of $100 million annually.1 As a  result, the Agency  found  that the proposed regulation is a "significant
regulatory action" as defined by Executive Order 12866 [58 Federal Register 51, 735 (October 4,  1993)]
and  prepared a regulatory impact  assessment (RIA) in accordance with the Executive Order.  Under
Executive Order 12866, the Agency is required to assess  both the benefits and costs to society of the
proposed regulation.

        This report has been prepared to comply with Executive Order 12866 and documents the analyses
and  findings from the regulatory impact  assessment of the MP&M Phase I regulation. The  report is
organized into four major  sections and  12 chapters as follows.  Section I, which includes this introduction
and Chapters 2 and 3, contains a brief overview of the MP&M industry, summarizes the purpose of the
proposed regulatory action,  and outlines  the rationale underlying EPA's  selection of the  proposed
regulatory option (referred to as Option 2a/2). Section II reviews the economic impacts (Chapter 4) and
expected costs to society of the proposed regulation (Chapter 5). Section III assesses the expected benefits
to society of the proposed regulation and includes an introductory discussion to the analysis of benefits
(Section III) and 6  chapters.  Following the Section III introductory  discussion,  Chapter 6 discusses the
reductions in pollutant discharges expected to be achieved by the  regulation while Chapter 7 provides  an
overview of the benefits associated with those discharge reductions  and the methodology for analyzing
benefits. The next four chapters each review specific benefit categories. Chapter 8 contains the analysis of
human  health-related  benefits,  and Chapter  9  assesses  expected ecological benefits.  Chapter  10
supplements Chapter 9's  discussion of ecological benefits with an analysis of the effect of reduced
pollutant discharges on distributions of aquatic species. Chapter 11 analyzes cost savings to publicly
  See Economic Impact Analysis Of Proposed Effluent Limitations Guidelines And Standards For The Metal
Products And Machinery Industry (Phase I) for a detailed discussion of the estimated economic impacts of the
MP&M Industry Phase I regulation.
                                                1.1

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owned treatment works expected to result from reduced metals contamination of sewage sludges that are

affected by MP&M industry discharges.
                   I
                   i
                   [
       The final seption and chapter of the document, Chapter 12 presents the overall comparison of

monetized costs and benefits for the proposed regulatory option, Option 2a/2.


       The document also includes a Reference Section following Chapter 12 and seven Appendixes, as

follows:            .


Appendix A:   Description of the Fate and Transport Model Used to Estimate Pollutant Concentrations at

               the Initial Point of Discharge and Below the Initial Discharge Reach


Appendix B:   Detailed Methodology for Estimating the Total Exposed Population for the Fish

               Consumption Pathway


Appendix C:   Differential Sample Weighting Technique for Multiple Discharge Events on Sample

               Reaches
                   !
                   j
Appendix D:   Estimation of Sewage Sludge Disposal Costs


Appendix E:   Estimation of Administrative Costs of the Regulation
                   i

Appendix F:   Assessment of Costs and Benefits for Alternative Regulatory Option Considered for

               Proposal (Option la/2)


Appendix G:   Environmental Assessment of the Proposed Effluent Guidelines for the Metal Products and

               Machinery Industry (Phase I).


        This RIA is  one of four documents associated with the economic analyses supporting the

development of the  MP&M Phase I effluent guidelines. Economic Impact Analysis of Proposed Effluent

Limitations Guidelines and Standards for the Metal Products and Machinery Industry (Phase I) contains

the economic impact analysis of the proposed regulation. Another companion document, Cost-Effectiveness

Analysis of Proposed Effluent  Limitations Guidelines, and Standards for the Metal Products and

Machinery Industry, (Phase I), presents a cost-effectiveness analysis of the various regulatory options

considered.  The fourth document, Industry  Profile for the Metal Products and Machinery Industry

(Phase I), presents a detailed profile of the Phase I industries.
                                               1.2

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                                           Chapter 2
       The Metal Products and Machinery Industry and the Need for Regulation

2.1     Introduction
        The MP&M Phase I  regulations  will apply to seven industrial sectors that are of substantial
importance  in  the U.S.  economy:  Hardware,  Aircraft,  Electronic  Equipment,  Stationary  Industrial
Equipment, Ordnance, Aerospace, and Mobile Industrial Equipment. This chapter provides an overview of
the industry with a focus on the economic contribution of the MP&M facilities that are potentially subject
to regulation. In addition, the  chapter reviews the reasons that EPA is proposing to  further regulate the
industry's effluent discharges. This section includes a discussion  of: the general conceptual issue of
addressing market imperfections; the need to reduce pollutant discharges from the MP&M industry and to
achieve a more coherent regulatory framework for the industry; and requirements that stem from the Clean
Water Act and litigation.

2.2     Overview of the Facilities Potentially Subject to Regulation
        The MP&M Phase I regulation will apply to process wastewater discharges from sites performing
manufacturing, rebuilding or maintenance on  a metal part, product or machine in the seven industrial
sectors noted above. To support the economic and technical analysis  of the MP&M Phase I regulation,
EPA sent detailed questionnaires (the Data Collection Portfolio or DCP) requesting technical and economic
information to a stratified sample of 1,020 facilities in the MP&M sectors. After detailed data verification
activities, EPA used the responses from 396 of these facilities in the economic and technical studies for this
regulatory impact assessment and the other economic  and technical analyses  undertaken for the regulation.
The technical and economic data obtained from these facilities provided the basis for estimating the costs of
the regulation to industry and  society, and for assessing the change in pollutant discharges and associated
benefits to society.

        From analysis of the  questionnaire  responses, EPA estimated that the MP&M Phase  I  sectors
comprise 10,601  water-discharging facilities that would be potentially subject to the effluent discharge
limitations applicable to existing facilities. These 10,601 water-discharging facilities include 8,706 indirect
discharging facilities (i.e., facilities discharging effluent to  a publicly owned sewage treatment works or
                                                2.1

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POTW) that would be subject to Pretreatment Standards for Existing Sources (PSES).1  The remaining
1,895 faculties are estimated to be direct dischargers (i.e., they discharge effluent directly to a waterway
under aNPDES perjnit) and would thus be subject to Best Available Technology Economically Achievable
(BAT) and Best Practicable Control Technology Currently Available (BPT) requirements.

       From Department of Commerce data, EPA estimates that approximately 90,000 establishments or
facilities participated in the MP&M Phase I business sectors as of 1987. Thus, the estimated 10,601 water-
discharging facilities  that are potentially subject to regulation represent about 11  percent of the total
facilities in the MP&M Phase I  industries. The MP&M  facilities that are potentially  subject to this
regulation contribute significantly to the U.S. economy. Table 2.1, below, summarizes important economic
data for the estimated 10,601 water-discharging facilities on which the economic analysis of this regulation
                  i
is based.2
- 1 . taMe2»i
Summary Economic Data far Facilities Subject to Regulation in MP&M Phase I Sectors
Estimated Revenue, Value Added and Payroll in Millions of 1989 Dollars
Sector
Hardware
Aircraft i
Electronic Equipment
Stationary Industrial Equipment
Ordnance
Aerospace
Mobile Industrial Equipment
All Phase I Sectors
Total U.S. Manufacturing
Phase I Facilities as a Percent of
Total U.S. Manufacturing
Facilities
4,197
856
1,280
2,769
190
545
764
10,601


Employment
379,000
552,000
700,000
419,000
131,000
580,000
275,000
3,036,000
19,492,000
15.58%
Revenue
(SmttBon)
44,327
96,715
. 155,101
52,918
21,666
54,430
65,914
491,071
2,793,000
17.58%
Value Added
($j»BBoa)
9,463
24,858
80,502
12,815
7,059
19,454
14,101
168,252
1,308,000
12.86%
Payroll
(S million)
5,845
15,148
12,503
6,306
4,006
9,660
8,151
61,620
533,000
11.56%
Source: U.S. Environmental Protection Agency, Section 308 Survey Data, 1989, and Statistical Abstract
of the United States, 1992, Department of Commerce
1 The PSES regulatory option selected by EPA for proposal includes  an exemption for indirect discharging
facilities with smaller discharge volumes. This exemption is expected to exclude over 75 percent of the estimated
8,706 indirect discharging facilities from coverage under the proposed regulation.
2 See Industry Profile Of the Metal Products and Machinery Industry (Phase I) for a detailed overview of the
economic structure of the MP&M industry and the background economic conditions in which the MP&M Phase I
regulation is being proposed. Also, see Chapter 3 of Economic Impact Analysis of Proposed Effluent Limitations
Guidelines and Standards for the Metal Products and Machinery Industry (Phase I).
                                                2.2

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        These data show that the 10,601 water discharging facilities employed over 3,000,000 persons in
 1989 or approximately 16 percent of the total U.S. manufacturing employment of 19.5 million in 1989.3
 Total revenues for the 10,601 facilities are estimated at  $491 billion or about  18 percent of the total
 shipments for U.S. manufacturing in 1989 of $2,793 billion. A more meaningful measure of the value of
 production activity in these facilities is provided by value  added4, which is estimated to amount to about
 $168 billion or approximately 13 percent of the total value  added of $1,308 billion for U.S. manufacturing
 in 1989. The estimated payroll for the 10,601 facilities is about $62 billion or approximately 12 percent of
 the total of $533 billion for U.S. manufacturing in 1989.

        Table 2.1 also shows economic activity data for the seven MP&M sectors covered by the Phase I
 regulation. On the basis of number of facilities, the Hardware,  Stationary Industrial Equipment,  and
 Electronic Equipment sectors are the largest sectors subject to regulation. These three sectors account for
 over 75 percent of the total of 10,601 facilities potentially  subject to regulation. However, on the basis of
 employment and dollar measures of economic activity, the Hardware sector is less dominant. A ranking on
 both employment and value  added  shows that Electronic Equipment  is the largest sector in terms of
 economic contribution followed by Aircraft, Aerospace, Stationary Industrial Equipment, Mobile Industrial
 Equipment, Hardware, and Ordnance.

 2.3     Need for the Regulation
        This section reviews the reasons that EPA is proposing  the MP&M  Phase I  regulation. These
 reasons include: the general conceptual issues of addressing market imperfections; the need to achieve a
 more complete and coherent regulatory framework for the MP&M industry and other metals industries; the
 need to reduce pollutant discharges from the MP&M industry; and compliance with Clean Water Act and
 litigation-based requirements.
  Although the MP&M Phase I sectors include non-manufacturing activities and employment, nearly 95 percent of
the revenue  received by facilities affected by the regulation is estimated  to be derived from manufacturing
activities. Thus, the comparison of employment and other economic values with totals for the U.S. manufacturing
sector provides a  relevant basis for understanding the  economic significance of the industries and facilities
expected to incur costs under the regulation.
  Value Added is the difference between the output price of a good or service and the price of all material inputs
used in producing  the good or service, and is generally considered a better measure than revenue of the value of
production that occurs, in a given economic activity.
                                                2.3

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        Addressing Market Imperfections
        The conceptual basis of environmental legislation, in general, and the Clean Water Act and the
MP&M Phase I regulation, in particular, is the need  to  correct  an imperfection—  uncompensated
environmental  externalities—  in the  functioning  of the  market  economy.  In the  performance  of
manufacturing  and other business activities, entities  (e.g., MP&M facilities) release pollution or cause
other environmental harm without accounting for the consequences of these actions on other parties who do
not directly participate in the business transactions of the business entities. In effect, these actions impose
environmental harm or costs on these other parties (sometimes referred to as third parties). However, these
costs are not recognized by the  responsible entity in the conventional market-based accounting framework.
Because the  responsible entities do  not  account for these  costs, they are external to the  accounting
framework and the (consequent production and pricing decisions  of the  responsible entity. In addition,
because no  party  is  compensated  for the adverse  consequences  of the pollution releases  or other
environmental harm,| the externality is uncompensated.

        When the external costs are not accounted  for in the production and pricing  decisions of the
responsible business entity, the  decisions by that entity (and others) will yield a mix and quantity of goods
and services in the economy, and an allocation of economic resources  to production activities that are less
than optimal. In particular, the quantity of pollution and related environmental harm caused by the business
activities of the responsible business entities will, in general, exceed optimal levels. As  a result, society will
not maximize  total! possible welfare.  In addition,  adverse  distributional effects may  accompany the
uncompensated environmental externalities. If the distribution of pollution and environmental harm is not
random among the U.S. population but  instead is concentrated among certain population  subgroups based
on  socio-economic' or  other   demographic  characteristics,  then  the  uncompensated  environmental
externalities may produce undesirable transfers of economic welfare among subgroups  of the population.

        The goal of environmental legislation and subsequent implementing actions,  such as the MP&M
Phase I  regulation ithat is the subject  of this  Regulatory  Impact  Assessment,  is  to  correct these
environmental externalities by requiring businesses and other polluting entities to reduce their pollution and
environmental  harm.  In  so doing,  Congress, in enacting  the  authorizing  legislation, and  EPA, in
promulgating the implementing regulations, act on behalf of society to  achieve a level of pollution, and as a
consequence, a mix of goods  and services, that more nearly approximates the mix and level of those
activities that would occur if the polluting entities folly accounted for the costs of their pollution-generating
                   i
activities. As a result, the mix and quantity of goods and services provided by the economy, the allocation
                                                2.4

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of economic resources to those  activities,  and  the  quantity  of pollution  and environmental  harm
accompanying those activities will yield higher net economic welfare to society.

        Requiring polluting entities to achieve reduced levels of pollution and environmental harm is one
approach to addressing the problem of environmental externalities. In this way, the polluting entities see the
cost of their pollution and environmental harm activities as the cost of achieving compliance with the
regulatory limits on those activities, thus internalizing the external costs. A polluting entity will either incur
the costs of meeting the regulatory limits on pollution and environmental harm,  or  will determine that
compliance  is not in its best financial interest and will cease the pollution-generating  activities. This
approach  to addressing the  problem  of environmental externalities will generally  result in improved
economic efficiency and net welfare gains for society if the cost of reducing the pollution and environmental
harm activities  is less than the value of benefits to society from the reduced pollution and environmental
harm.

        It is theoretically possible to correct the market imperfection by means other than direct regulation.
For example, negotiation and/or litigation could achieve an optimal allocation of economic resources and
mix of production activities within the economy. However, the transaction costs of assembling the affected
parties and involving them in the negotiation/litigation process as well as the public goods character of the
improvement sought by negotiation or litigation will frequently render  this approach to addressing the
market imperfection impractical.

        Achieving a More Complete and Coherent Regulatory Framework for the MP&M Industry
        and Other Metals Industries
        A particular reason for  the  MP&M Phase I regulation is to achieve a more  coherent  regulatory
framework for the  effluent discharge limitations  that apply  to  the  MP&M  industry and other metals
industries whose operations may overlap with the MP&M industry.

        EPA has previously promulgated effluent  guidelines  regulations for  thirteen  metals-related
industries. In some  instances, these industries may perform operations that are found in MP&M Phase I
facilities. These effluent guidelines are:

•       Electroplating (40 CFR Part 413);
•       Iron & Steel Manufacturing (40 CFR Part 420);
•       Nonferrous Metals Manufacturing (40 CFR Part 421);
                                                2.5

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•       Ferroalloy Manufacturing (40 CFR Part 424);
•       Metal Finishing (40 CFR Part 433);
•       Battery Manufacturing (40 CFR Part 461);
•       Metal Molding & Casting (40 CFR Part 464);
•       Coil Coating (40 CFR Part 465);
                  I
•       Porcelain Enameling (40 CFR Part 466);
•       Aluminum Forming (40 CFR Part 467);
•       Copper Forming (40 CFR Part 468);
•       Electrical & Electronic Components (40 CFR Part 469); and
•       Nonferrous ^Metals Forming & Metal Powders (40 CFR Part 471).
                  I
        The industries covered by these existing effluent guidelines are generally involved in the production
                  i
of semi-finished  goods while the MP&M  industry is  defined to  include facilities that manufacture,
                  i
                  !
maintain, or rebuild 'finished metal parts, products, and machines. Although the existing regulations would
in some instances apply to metals processing operations that are performed at an MP&M facility, many
facilities that are defined as part of the MP&M industry are not covered by effluent limitations or the
coverage is uncertaik. Thus,  a key purpose of promulgating effluent limitations for the MP&M industry is
to complete the regulatory coverage of the metals processing industries under the Clean Water Act and to
provide consistent regulatory requirements for parts of the metals industries whose regulatory coverage is
uncertain or may involve multiple, overlapping requirements. Figure 2.1  illustrates the structure of the
metals-related industries from mining  to  production of finished products  and shows where the MP&M
effluent guidelines will fit in this overall industry structure.
                  i
                  F
        EPA recognizes that many MP&M sites will also have operations covered by one of the existing
metal processing  effluent guidelines listed above. In general, with the  exception of the metal finishing
regulations, the existing effluent guideline will continue to apply to those operations judged to be covered
by it. MP&M will provide the basis for  establishing permit limitations for the unit operations which at
present are not covered, covered by the metal finishing effluent guidelines regulation, or covered by best
professional judgment. The MP&M Phase I  effluent guidelines regulation will replace the metal finishing
regulation for sites; with operations in an MP&M Phase I industrial  sector. Both  MP&M and metal
finishing apply to the same  types of unit operations. EPA included the metal finishing sites in its data
collection and study of the MP&M industry and estimated the costs and impacts on these sites to comply
                  i                          •                 -
with the proposed MP&M regulation. The proposed regulation does not apply to  surface finishing job
                                               2.6

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shops  and independent circuit board manufacturers as defined in this regulation; they will continue to be

covered by 40 CFR Part 413 and 40 CFR Part 433.
                       Figure 2.1: Metals Industries Effluent Guidelines
                                             Mining
                                          Manufacturing
                    Iron and Steel            Nonferrous            Ferroalloys
                    40 CFR Part 420       40 CFR Part 421     40 CFR Part 424
           Iron & Steel
        (40 CFR Part 420)
    Metal Molding and Coating
        (40 CFR Part 454)
       Aluminum Forming
        (40 CFR Part 467)
         Copper Forming
        (40 CFR Part 468)
       Nonferrous Forming
        (40 CFR Part 471)
    Fabrication
Metal Products and
Machinery Industry
  (Manufacturing,
    Maintenance
  and Rebuilding)
                                     Finished Metal Products
                                                                   Specialty Products
 Metal Finishing
(40 CFR Part 433)
  Electroplating
(40 CFR Part 433)
     Z
  Mil! Products
                               Coil Coating
                            (40'CFR Part 465)
                          Battery Manufacturing
                           /(40 CFR Part 461)
                          / Porcelain Enameling
                            (40 CFR Part 466)
                              Electrical and
                          Electronic Components
                            (40 CFR Part 469)
  'Surface finishing job shops" defined in the proposed MP&M regulation are identical to 'job shops" defined in
the metal finishing category (40 CFR 433). Indirectly discharging job shops which were considered existing for the
metal finishing category (existing prior to August 31, 1982) and independent printed circuit board manufacturers
will continue to be covered by the electroplating category (40 CFR 413). Indirectly discharging jobs shops which
were considered new sources for the metal finishing category and directly discharging job shops will continue to be
covered by the metal finishing category.
                                               2.7

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        Reducing Pollutant Discharges
                   [
        EPA selected! the MP&M industry as a  candidate for regulation  under the Clean Water Act
                   !
because the industry  releases substantial quantities of pollutants,  including toxic pollutant compounds
(priority and nonconventional metals  and organics) and conventional pollutants such as total suspended
solids (TSS) and oil land grease. In terms of the quantities of pollutants estimated to be released by the
MP&M Phase I industry and subject to  control by the  proposed regulation, EPA estimates that baseline
pollutant loadings for MP&M Phase I direct dischargers include approximately 557,000 Ibs/yr of priority
metals, 3,840 Ibs/yr ;of cyanide, 18,200,000 Ibs/yr of oil and grease, 2,590,000 Ibs/yr of total suspended
                   !
solids, 634,000 Ibs/yr of nonconventional metals, 96,400,000 of other nonconventional pollutants, 8,940
Ibs/yr of priority organic pollutants, and  68,600 Ibs/yr of nonconventional organic pollutants. In addition,
EPA estimates that MP&M Phase I indirect dischargers discharge  approximately 6,100,000 Ibs/yr  of
priority metals, 170,000 Ibs/yr of cyanide, 170,000,000 Ibs/yr of oil and grease, 17,700,000 Ibs/yr of total
suspended solids, 5,860,000 Ibs/yr of nonconventional metals,  1,170,000,000 of other nonconventional
pollutants, 406,000 Ibs/yr of priority organic pollutants, and 1,970,000  Ibs/yr of nonconventional organic
pollutants. Moreover,  MP&M industry  pollutants may be generally controlled  by straightforward and
widely used treatment system technologies such as the chemical  precipitation and clarification technology
                   |
(frequently referred tp as the lime and settle process).6

        Discharges of these pollutants to surface waters and POTWs have  a number of adverse effects,
including  degradation of aquatic habitats, reduced survivability and diversity of native aquatic life, and
increased human health risk through the consumption of contaminated fish and water. In addition, many of
these pollutants may disrupt biological  wastewater treatment systems and contaminate sewage sludge.
                   i
Metal constituents  are of particular concern because of the large amounts  present in MP&M effluents.
Unlike most toxic organic compounds and other wastes that are metabolized in activated sludge systems to
relatively innocuous', constituents,  metals are elements and cannot  be eliminated. Moreover, in solution,
some metals have a high affinity for biological uptake. Depending on site-specific conditions, metals form
insoluble  inorganic and organic complexes that  partition to sewage  sludge at POTWs  or underlying
sediment in aquatic ecosystems. The accumulated metal constituents  can  return to a bioavailable form upon
land application of sewage sludge; dredging and  resuspension  of  sediment; or as a result of seasonal,
natural, or induced alteration of sediment chemistry. Benefits of reducing metal and other pollutant loads
from MP&M facilities to the environment include reduced risk of cancer and systemic human health risks,
  See Chapter 6 for more detailed information on the pollutants of concern in the MP&M industry.
                                                2.8

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improved recreation opportunities (e.g., fishing and swimming), improved aquatic and benthic habitats, and
less costly disposal and increased beneficial use of sewage sludge. The goal of the proposed regulation is to
reduce the pollutant discharges as  outlined in the  preceding paragraph  and to mitigate these harmful
consequences. These pollutant discharges and their harmful  consequences  are  the externalities, as
discussed above, that environmental legislation, in general, and this regulatory action, in particular, aim to
address.

       Meeting Legislative and Litigation-Based Requirements
       Finally, EPA's proposal of the MP&M regulation meets general requirements of the Clean Water
Act and is specifically in response to a court order resulting from litigation brought against the Agency.

       EPA is proposing effluent  limitations guidelines and standards for the  MP&M  industry under
authority of the Clean Water Act, Sections 301, 304, 306, 307, and 501. These CWA sections require the
EPA Administrator to publish limitations  and guidelines for controlling industrial  effluent discharges
consistent with the overall CWA objective to "restore and maintain the chemical, physical, and biological
integrity of the Nation's waters." EPA's proposal of the  MP&M Phase I industry regulation responds to
these requirements and authorities.

       In  addition, the proposed MP&M  regulation responds to the requirements of a  consent decree
entered by  the Agency as a result of litigation.  Section 304(m) of the Act (33 U.S.C.  1314(m)), added by
the Water Quality Act of 1987, required EPA to establish schedules for (i) reviewing and revising existing
effluent limitations guidelines and standards, and (ii) promulgating new effluent guidelines. On January 2,
1990, EPA published an Effluent Guidelines Plan (55 FR 80), in  which schedules were  established for
developing new and revised effluent guidelines  for several industry categories. 'One of the industries for
which the Agency established a schedule was the Machinery Manufacturing and Rebuilding Category (the
name was changed to Metal Products and Machinery in 1992).

       Natural Resources Defense Council, Inc. (NRDC) and Public Citizen, Inc. challenged the Effluent
Guidelines  Plan in a suit filed in U.S.  District Court for  the District of Columbia (NRDC et al v. Reilly,
Civ. No. 89-2980).  The plaintiffs charged that EPA's  plan did not  meet the requirements of Section
304(m). A  Consent  Decree in. this litigation was entered by the Court on January 31,  1992.  The terms of
the Consent  Decree are reflected  in the  Effluent  Guidelines Plan published on September  8,  1992
(57 FR 41000). This plan required, among other things, that EPA propose effluent guidelines  for the Metal
Products and Machinery (MP&M) category by November, 1994 and  take final action on these effluent
                                               2.9

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guidelines by May, j!996. The most recent Effluent Guidelines Plan was published on August 26, 1994
(59 FR 44235). EPA filed a motion with the court on September 28, 1994, requesting an extension until
March 31, 1995, for the EPA Administrator to sign the proposed regulation and a subsequent four month
extension for signature of the final regulation in September 1996. EPA's proposal of the MP&M Phase I
industry regulation responds to this Consent Decree and the amended Effluent Guidelines Plan.
                                              2.10

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                                          Chapter 3
                 Overview of the Regulatory Options Considered for the
                    Metal Products and Machinery Industry, Phase I

3.1    Introduction
       In developing effluent limitations and guidelines for the Metal Products and Machinery Industry,
EPA  defined  and evaluated a  number  of Best Available Technology/Best  Practicable Technology
(BAT/BPT) options for direct dischargers and Pretreatment Standards Existing Sources (PSES) options for
indirect dischargers. The following discussion defines the options that were  considered  for proposal,
summarizes their technology basis, and outlines the rationale for the regulatory proposal that is the focus of
this Regulatory Impact Assessment.

3.2    BAT/BPT Options for Direct Dischargers
       EPA evaluated three BAT/BPT regulatory options for direct discharging facilities:

       Option 1: Lime and Settle Treatment
       Option 1 consists of preliminary treatment for specific pollutants and end-of-pipe treatment with
       chemical precipitation (usually accomplished by raising the pH with an alkaline chemical such as
       lime or caustic  to produce insoluble metal  hydroxides) followed by clarification. This treatment,
       which  is also commonly referred to as lime and settle treatment,  has been widely, used throughout
       the metals industry and is well documented to be effective for removing metal pollutants. As with a
       number of previously promulgated regulations, EPA established these options on the basis that all
       process wastewaters, except solvent bearing wastewaters, would be treated through lime and settle
       end-of-pipe treatment.

       All of the regulatory options considered for the MP&M category were  based on a commingled
       treatment of process wastewaters through lime and settle with preliminary treatment when needed
       for specific waste streams. Preliminary treatment is performed to remove oil  and grease through
       emulsion breaking and oil skimming; to destroy  cyanide  using sodium hypochlorite; to reduce
       hexavalent chromium to the trivalent form of chromium which can subsequently be precipitated as
       chromium hydroxide; or to break metal complexes by chemical reduction. EPA also included the
       contract hauling of any wastewaters associated with organic solvent degreasing as part  of the
       Option 1 technology.
                                              3.1

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Through sampling  episodes  and site  visits, EPA determined that some  wastewaters,  usually
          i
alkaline cleaning wastewaters and water-based metal working fluids (e.g., machining and grinding
coolants, deformation  lubricants), may  contain significant amounts of oil and grease. These
          !
wastewaters  require preliminary treatment to remove oil  and grease and organic pollutants.
Chemical emulsion  breaking followed by either skimming or coalescing is an effective technology
          i
for removing these pollutants.

EPA also identified MP&M wastewaters  that may contain significant amounts of cyanide, such as
plating and cleaning wastewaters. These  wastewaters require preliminary treatment to destroy the
cyanide, which is typically performed using alkaline  chlorination with sodium hypochlorite or
chlorine gas.  EPA has also identified hexavalent chromium-bearing wastewaters, usually generated
by anodizing, conversion coating, acid treatment, and electroplating operations and rinses. These
wastewaters require chemical reduction of the hexavalent chromium to trivalent chromium. Sodium
metabisulfite or gaseous sulphur dioxide are typically used as reducing agents. Several surface
treatment Wastewaters typically contain  significant amounts of chelated metals.  These chelated
metals require chemical reduction to break down the chelated metals  prior to lime and settle.
Sodium borohydride, hydrazine, and sodium hydrosulfite can be used as reducing agents. These
preliminary treatment technologies are more effective and less costly on segregated wastewaters,
prior to adding wastewaters that do  not  contain the pollutants being treated with  the preliminary
treatment technologies. Thus, EPA includes these preliminary treatment steps whenever it refers to
lime and settle treatment.
          i
Option  2: In-Process Flow Reduction and Pollution Prevention and Lime and Settle Treatment
Option  2 builds  on Option  1  by adding in-process  pollution prevention,  recycling, and  water
conservation methods  that allow for  recovery and  reuse  of materials.    These techniques or
technologies  can save money for companies by allowing materials to be used over a longer period
before they need to be disposed. They can also can be used to recover metal or  metal treatment
solutions. , Using these techniques along with water conservation leads to  the  generation of less
pollution and results in more effective treatment of the wastewater that is generated.  As has been
demonstrated by  numerous  industrial  treatment systems,  the  treatment  of metal  bearing
wastewatets  is relatively independent of influent concentration.  In fact, since the treatment system
is a physical/chemical system, and will generally function to certain physical/chemical properties,
within  a broad range, the more highly concentrated wastewater influent will  result in  better
          i
pollutant removals  and less mass of pollutant in the discharge. In addition, the cost of a treatment
                                         3.2

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       system largely depends on the size which in turn largely depends on flow, thus the lower the flow
       of water to the treatment system the less costly the system. The in-process technologies included in
       Option 2 include:

       •   Flow reduction using flow restrictors, conductivity meters, and/or timed rinses, for all flowing
           rinses, plus countercurrent cascade rinsing for all flowing rinses;

       •   Flow reduction using bath maintenance for all other process water-discharging operations;

       •   Centrifugation and 100 percent recycling of painting water curtains;

       •   Centrifugation  and  pasteurization  to  extend  the life of water-soluble machining coolants
           reducing discharge volume by 80 percent; and

       •   In-process metals  recovery using ion exchange followed by electrolytic recovery of the cation
           regenerant for  selected  electroplating rinses.  This includes first-stage  drag-out rinsing with
           electrolytic metal recovery.

       The flow reduction practices included in Option 2 are widely used by MP&M sites and are also
       included as part of the regulatory basis for a number of effluent guidelines regulations in the metals
       industry.

       Option 3: Advanced End-of-Pipe Treatment
       Option 3 includes all of the Option 2 technologies plus advanced end-of-pipe treatment.  Advanced
       end-of-pipe treatment  could be either reverse osmosis or  ion exchange to remove suspended and
       dissolved solids yielding  a treated wastewater that can be partially recycled as process water. This
       technology is not widely used but has  been demonstrated by some MP&M sites, particularly in
       instances where the water supply is contaminated and requires clean-up before it can be used. For
       the purposes of modelling  the cost of compliance  and  resulting pollutant removals,  Option 3
       technology is expected to achieve a treated wastewater that  is sufficiently clean for 90 percent of
       the treated wastewater to be recycled back to the facility for reuse in industrial operations.

       Of these options, EPA selected Option 2 as the  proposed BPT/BAT regulation for direct existing
discharging facilities because Option 2 embodies best available technology for reducing effluent discharges.
Moreover, as discussed in  Chapter 5 of this document, EPA found that Option 2 would impose modest
economic  impacts in terms of facility closures, employment losses, and financial requirements. In addition,
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EPA found that Option 2 is cost effective. Finally, EPA concluded that Option 2 would impose a modest
and manageable burden among small business-owned, direct discharging facilities.
                   i
        Although EPA found that Option 1 was economically achievable, EPA rejected this option because
it does  not include the pollution prevention and water conservation technologies that have been widely
demonstrated in the MP&M industry and that have been included in the BAT technology specifications for
numerous previous effluent guidelines in the metals industry. EPA found the economic impacts of Option 3
to be unacceptably high and therefore rejected it for proposal.

3.3     PSES Options for Indirect Dischargers
        EPA initially;  evaluated three PSES regulatory options for indirect dischargers. The technology
basis for these options is the same as that discussed above for the  BAT/BPT options. These options are as
follow:             '

        Option 1: Lime and Settle Treatment
                   \
        Under this option, Pretreatment Standards for Existing Sources (PSES) would be established on
        the basis of the application of lime and settle treatment without any pollution prevention and flow
        controls imposed. The implementation of this option would likely result in concentration-based
        standards imposed on facilities by Control Authorities.

        Option 2: In-Process Flow Reduction and Pollution Prevention and Lime and Settle Treatment
                   \
        This option AJvould establish PSES on the  basis that all facilities should comply with mass-based
        standards that are based on the Lime and Settle technology and associated concentration limits as
        specified  for| Option 1. However, the  mass-based standards would  be calculated from  a flow
        volume that reflects good pollution prevention and water conservation practices. Thus, this option
                   |
        embodies a requirement for pollution prevention and water conservation in conjunction with the
        Lime and Settle Treatment process. The flow basis would be determined by the relevant Control
        Authority usijng site-specific factors and flow guidance.

        Option 3: Advanced End-of-Pipe Treatment
        This  option' would establish  PSES  based on the  same  technology  and  mass-based  limit
        specifications  as  set forth for in Option 2 plus additional end-of-pipe treatment through reverse
        osmosis or ioji exchange to achieve additional removals and produce a treated wastewater that can
        be recycled back to the facility for reuse as process waters.
                                               3.4

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        From its preliminary analysis of these options, EPA initially selected Option 2, In-Process Flow
Reduction and  Pollution Prevention and Lime  and Settle Treatment, as the preferred PSES  regulatory
option for  indirect dischargers.  Stated  simply, EPA preferred Option 2 because  it would  apply to  all
indirect discharging facilities, mass-based standards that embody  best available technology based on a
combination of treatment systems and pollution prevention measures. Moreover, as documented below in
Chapter 5,  EPA found that  Option 2  would impose relatively modest  economic impacts  in terms  of
expected facility closures and employment losses in the MP&M industry and thus concluded that Option 2
would be economically achievable. However,  upon further analysis and consideration, EPA reached
additional findings that weighed against the proposal of Option 2  and caused the  Agency to define and
evaluate modifications to Option 2 as the basis for a PSES proposal. These findings involved three issues
as follows:

       Impact  on  small business. In its Regulatory Flexibility Analysis, EPA found that  Option 2 would
       be  expected to disproportionately  burden  small business-owned facilities in terms of  facility
       closures and financial requirements. In particular,  by embodying technology requirements  for
       pollution prevention as well as treatment systems, Option 2 was found to impose greater financial
       burden on MP&M small business-owned, indirect discharging facilities than would result from the
       treatment system-only basis of  Option  1.  As discussed in  Chapter 5, Section 5.8,  below, EPA
       considered modifications to Option 2 in an effort to mitigate financial and economic burdens on
       small business-owned facilities.  These modifications differentiated among facilities based on the
       annual volume of facility discharge;  however, EPA anticipated that relaxing the requirements for
       small discharge volume facilities would  also mitigate the regulatory burden  among small business
       entities.

       Cost effectiveness. For indirect discharging facilities with smaller discharge volumes, EPA found
       that Option 2 would not be cost effective (see Chapter 5, Section 5.9). That is, for facilities with
       relatively smaller discharge volumes,  Option 2 would not achieve sufficient additional reductions in
       pollutant discharges beyond those achieved  by  Option 1  to support its higher cost relative  to
       Option 1. In view of this finding, EPA considered modifications  to  Option  2 that  would be more
       cost effective for indirect discharging facilities with smaller discharge volumes.

       Impact  on  permitting authorities. EPA  was concerned that Option 2, by  requiring  mass-based
       permits  for all indirect discharging facilities, regardless of discharge volume,  would substantially
       burden the  authorities that administer the permit requirements. In particular, as part of the public
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       participation in the regulation  development process, the Association of Metropolitan Sewerage
       Agencies  (AMSA) commented that the permit administration  requirements  of covering  small
       discharge facilities under mass-based limitations would unduly burden permitting authorities. In its
       analysis  of the MP&M Phase I  industry, EPA estimated that a large percentage  of indirect
       discharging facilities had relatively small annual discharge: over 75 percent of the estimated 6,700
       indirect  discharging  facilities  discharge   less than  1 million gallons  annually. Thus,  EPA
       acknowledged that Option 2 would require a large number of permits to be written for these
       smaller discharge volume facilities and could therefore  impose a substantial burden on permitting
                  i
       authorities.; In response to  this concern, EPA undertook a limited analysis of the likely costs to
       permitting authorities of issuing  mass-based and  concentration-based permits. This analysis
       indicated that the cost to permitting authorities of covering smaller discharge volume facilities (less
       than  1 million gallons  per year) could vary considerably among permitting  authorities but, in
       aggregate, plight not  be excessive: EPA estimated a total annual cost of $1.1 to $3.8 million for
       writing and administering permits for indirect discharging facilities with effluent discharge of less
       than 1 million gallons per year. Still, in view of the limited nature of EPA's analysis of permitting
       costs and,  moreover, in view  of the findings with regard  to  small business impact  and cost
       effectiveness (which  also  argued  for moderating requirements among  smaller facilities),  EPA
       decided to define and evaluate modifications to Option 2 that would reduce the number of mass-
       based permits needed for implementing the regulation.

       On the basis of these findings, EPA defined and evaluated two additional PSES regulatory options
for indirect discharging facilities: Option la and Option 2a. EPA found that both options addressed the
issues described above and presented  superior alternatives  to Options  1, 2, or 3, alone, for regulatory
                  !
proposal.  However, with  respect to each of the issues noted above — impact on small business, cost
effectiveness, and burden  on permit writing authorities —  EPA found  that Option 2a provided a better
solution than Option la. Accordingly, EPA selected Option 2a as the preferred PSES option  for indirect
discharging facilities. Option la and Option 2a, together with the basis of their selection for regulatory
proposal, are discu$sed below:

       Option la: Tiered PSES for "Low" Flow and "Large" Flow Sites. This option would establish a
       tiered PSES requirement and blends elements of Option 1  and Option 2 depending on a  site's
       annual discharge volume.  Sites with  a discharge volume of less than 1,000,000 gallons per year
       ("low" flow sites) would meet the concentration-based standard set forth in Option 1.  Sites with a
       discharge volume  of at least 1,000,000 gallons per year ("large" flow sites) would meet the mass-
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       based standards that embody pollution prevention as well as the Lime and Settle Treatment process
       as set forth in Option 2.

       By adopting the  concentration-based requirements of Option 1 for "low" flow sites, Option la
       reduces the number for facilities  for which mass-based permits would need to be written. In
       addition, Option la reduces the expected compliance costs and financial burdens for the smaller
       discharge volume facilities, many of which are small businesses. Finally, because of the reduced
       requirements on smaller discharge volume facilities,  Option la achieves better cost effectiveness
       than Option 2.

       Option 2a: In-Process Flow Reduction and Pollution Prevention and Lime and Settle Treatment for
       "Large" Flow  Sites. This option would establish the same PSES requirements as specified for
       Option 2. However, these requirements would apply to only  "large" flow sites — that is, indirect
       discharge sites with a discharge volume of at least 1,000,000 gallons per year. All such sites would
       comply with mass-based standards based on the Lime and Settle Treatment process coupled with a
       requirement for pollution prevention and water conservation as specified for Option 2. "Low" flow
       indirect discharge sites —  that is, with a discharge  volume of less than 1,000,000 gallons per
       year — would  not be  subject to PSES requirements. EPA  estimates that,  of the  8,706 indirect
       discharge facilities in the MP&M Phase I industry, 6,708 would qualify as low flow discharge sites
       and thus would not be subject to the Option 2a PSES requirement.

       By exempting low flow discharge sites from PSES  regulatory requirements,  Option 2a, even more
       so than Option la, mitigates the difficulties  of Option 2. Specifically, because of the regulation's
       reduced coverage in terms of number of facilities, Option 2a would substantially reduce the burden
       on  permit-writing authorities.  In addition, low flow indirect discharging facilities would bear no
       costs as a result of regulation, substantially reducing financial burdens and closure impacts among
       small business-owned facilities. Finally, as discussed below at Chapter 5, Section 5.9, EPA found
       that Option 2a  would be expected to achieve substantially better cost effectiveness  than the other
       regulatory options considered for indirect discharging facilities.

       Thus, EPA  found that Option 2a addresses the limitations of Option 2 while imposing even fewer
economic impacts than  Option 2 or Option  la in terms of facility closures and financial burdens. Moreover,
Option 2a embodies best available technology for reducing the industry's effluent discharges. Accordingly,
EPA judges that Option 2a presents a balanced regulatory approach  for reducing effluent discharges from
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the MP&M Phase I indirect discharging facilities while not imposing undue burdens on industry or on the
permit-writing authorities that will be directly responsible for administering the regulation.
                   i
                   !
3.4     Summary of the Combined Regulatory Proposal
        From thes"e considerations, EPA selected Option 2a (PSES) for indirect discharging facilities and
Option 2 (BPT/BAT) for direct discharging facilities as the regulatory proposal for the Metal Products and
Machinery Industry, Phase I. The following chapters discuss the economic impacts, cost effectiveness, and
expected costs and benefits to society of the combined regulatory option: Option 2a/2.  In addition,
Appendix F contains the analytic results for Option la/2, the other combined regulatory option that EPA
considered for proposal. As noted above, EPA considered Option la/2 as an alternative to Option 2, but for
the reasons discussed above, eventually settled on Option 2a/2 as the combined regulatory proposal.
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                                           Chapter 4
                       Economic Impacts of the Proposed Regulation

 4.1     Introduction
        The proposed Metal Products and Machinery Industry Phase I regulation specifies limitations for
 the industry's effluent discharges. To meet these effluent discharge limits, the industry will need to install
 and operate pollution prevention and effluent treatment systems, which in turn will impose costs on the
 firms and facilities in the industry.  The incurrence of these costs will cause economic impacts in the
 MP&M industry and national economy, which could include: facility closures with concomitant losses in
 production  and  employment; unemployment impacts in  the  communities in  which closures may occur;
 reduced international competitiveness and balance of trade in the MP&M industries; financial burdens on
 the firms  that own facilities subject to regulation; and  disproportionate effects on small businesses in the
 MP&M industry. In developing the proposed regulations for the MP&M industry, EPA based its choice of
 the preferred option on considerations of economic achievability  as indicated by the estimated  impacts
 within these economic impact categories, and the environmental  gains expected to be  achieved by the
 regulation. In addition, EPA took account of the expected  cost  effectiveness of alternative  regulatory
 options in reducing effluent discharges from the MP&M  industry,  and the expected cost of administering
 the permitting activities under the proposed regulation.

        This chapter summarizes the economic impact and cost-effectiveness analyses  undertaken for the
 proposed  regulations  on direct and  indirect discharging facilities. The detailed presentation of these
 analyses is  contained in the documents:  Economic Impact Analysis Of Proposed Effluent Limitations
 Guidelines And  Standards For The Metal Products And Machinery Industry, Phase  I (EIA), and Cost
 Effectiveness Analysis of Proposed Effluent Limitations Guidelines and Standards of Performance for the
Metal Products and Machinery Industry, Phase I (cost-effectiveness report).

        The economic  impact and cost-effectiveness analyses are pertinent to the Regulatory Impact
Analysis for two reasons.  First, they assess likely impacts of the proposed regulation on the MP&M
industry and within the broader context of the U.S. economy. Second, these analyses and the compliance
cost data  underlying them provide the basis for  estimating  the aggregate cost to the economy of the
proposed regulation. The costs of labor, equipment, material, and other economic resources needed for
regulatory compliance are the major component of the cost to  society of the proposed regulation. As
discussed in the following chapter (Chapter 6, Social Costs of the Proposed Regulation), the resource costs
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of compliance are combined with other elements of social cost to estimate the regulation's overall cost to
                    ':
society. This cost is compared with EPA's estimate of the value of benefits expected to be achieved by the
regulation to gauge the expected net monetizable benefits to society from implementing  the proposed
MP&M Phase I regulation.
                    i
        The following sections of this chapter are organized as follows. Section 4.2 provides an overview
of the methodology for the economic impact analysis and Section 4.3  summarizes the facility impact
analysis, which provides the foundation of the overall economic impact assessment. The next five  sections
address the additional analysis categories, which are, in large part, based on the findings from the facility
impact analysis: Section 4.4, Labor Requirements;  Section 4.5, Community  Employment Impacts; Section
4.6, Firm-Level Impacts; Section 4.7, Foreign Trade Impacts; and Section 4.8,  Regulatory Flexibility
Analysis. The final section of the chapter, Section 4.9, summarizes the cost effectiveness analysis of the
MP&M regulatory options.

4.2     Economic Impact Analysis Methodology
        The promulgation of the MP&M effluent guideline partially  rests on  a finding  of economic
achievability.  The  analyses supporting  the  determination of economic achievability  for  the proposed
regulation include a facility impact analysis, which assesses how facilities are expected to be  affected
financially by the proposed regulation. Key outputs of the facility impact analysis include expected facility
closures in the MP&M industry and the associated losses in employment and value of economic activity in
those facilities. The findings from the facility impact analysis provide the basis for other analyses regarding
the economic achievability of the regulation. These include:

•       A firm-level analysis, which assesses the impact of effluent guidelines on the financial performance
        and condition of firms owning MP&M facilities subject to regulation;

•       A labor requirements analysis, which assesses the likely demands for labor that will accompany the
        activities of facilities to comply with effluent guidelines;

•       A community impact analysis, which assesses the local employment impact of possible facility
        closures;
                    i
•       A foreign trade analysis, which assesses the effect of effluent guidelines  on the international
        competitiveness and balance of trade of the MP&M industries; and
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•       The Regulatory Flexibility Analysis, which assesses the economic and financial impacts of effluent
        guidelines for the MP&M industries on small businesses.

        The following section addresses the facility impact analysis. This discussion is followed  by the
other analyses of the economic impact of effluent guidelines for the MP&M industries.

        Structure of the Facility Impact Analysis
        The facility-level  impact analysis involves  a series of financial  analyses to assess the  expected
occurrence of significant  financial  impacts  as  the result  of  an  MP&M effluent guideline. Several
considerations define the structure of the facility impact analysis, including: the impact categories analyzed;
baseline and post-compliance analyses; assumptions regarding the ability of facilities  to pass compliance
costs on to customers; and whether  facilities were expected to discharge effluent to a publicly  owned
treatment works (POTW) (i.e.,  indirect dischargers) or directly to a waterway (i.e.,  direct dischargers).
Each of these considerations is discussed briefly below.

        Impact Categories Analyzed
        Two categories of significant  impact are assessed: (1) facility closure, which is judged as a severe
economic impact, in that all employment and production at the facility are assumed to be terminated; and
(2) financial stress short of closure, which is judged to be a moderate economic impact. The estimates of
facility  closures and associated employment and production losses underlie the other analyses required for
the assessment of economic achievability. The second impact category, financial stress short of closure,
signifies that facilities may experience difficulty in financing the pollution prevention and treatment systems
needed for compliance or that, because of compliance, may subsequently experience difficulty in financing
other capital needs.

        Baseline and Post-Compliance Analyses
        The facility closure analyses were undertaken on both a pre-compliance, or baseline, basis, and a
post-compliance basis.  The purpose  of the Baseline Analysis is to identify facilities that  are currently
experiencing or are projected to  experience significant financial stress following the period for which the
Survey  was completed. These facilities are having or are expected to have serious financial difficulties
regardless of the promulgation of effluent guidelines. Attribution of these financial difficulties  to the
effluent guidelines rather  than to  facilities' current financial problems would inaccurately  represent the
burden  of the effluent guidelines.  Accordingly, facilities that failed the baseline  analysis were excluded
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from the  subsequent, post-compliance analyses that measure the  impact of compliance  on financial
                  I
performance and condition.

       The Post-Compliance Analyses differ from the Baseline Analysis by accounting for the capital and
operating costs of pollution prevention and discharge treatment systems needed to comply with regulatory
options. The post-compliance analyses thus indicate how facility financial performance and condition are
                  i
likely to be affected by the proposed regulation and provide the basis for identifying whether facilities may
be expected to incur a significant financial impact.

       Pass Through of Compliance Costs to Customers
       The analyses  of Post-Compliance Closure and Financial Stress Short Of Closure were performed
under assumptions of both zero-cost-pass-through  and partial-cost-pass-through  of compliance costs to
customers. The zer0-cost-pass-through case provides  a conservative assessment of regulatory  impacts in
that facilities are assumed to pass none of the costs  of compliance  through to customers.  That is, both
quantities and prices — and therefore revenues — for each facility's production were assumed to remain
constant after compliance even though costs were increased on the basis of the estimated equipment and
operating requirements for effluent guidelines compliance. Because it is likely that companies would both
attempt and be able to recover some of the compliance costs by increasing prices, the no-cost-pass-through
case represents an extremely conservative, worst case assessment of the effects of the regulation.
                  i
        For a more realistic assessment of impacts, EPA also analyzed the impact of regulatory options
under  an  assumption of  partial-cost-pass-through.  For the partial-cost-pass-through analysis,  EPA
estimated the ability of firms in each of the MP&M sectors to recover compliance costs from  customers.
                  i
The assessment of cost pass-through potential was  based on an econometric analysis of historical pricing
and cost trends in the MP&M industries over a fifteen-year  period coupled with an analysis of market
structure factors that provide additional insight into the likely ability of firms to pass on higher costs to
customers. Market structure factors considered in the analysis include: market power based on horizontal
and vertical integration; extent of competition from  foreign suppliers  (both  in  domestic and export
markets); barriers to competition as indicated by higher than normal profitability; and the long term growth
trend in the industry. The analysis of pass-through potential yielded a pass-through parameter applicable to
each MP&M industry sector indicating the fraction  of compliance costs that firms subject to regulation are
expected to recover from customers through increased revenues. The partial-cost-pass-through analysis
yielded modestly lower impacts  in terms of expected facility  closures and losses in employment and
production.
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         Facility Discharge Status
         Whether facilities discharge effluent streams to a .publicly owned treatment works (POTW) (i.e.,
 indirect dischargers) or directly to a waterway (i.e., direct dischargers)  is relevant to the structure of the
 economic impact analysis because these facilities and their effluent streams are regulated under different
 technology standards.  Indirect dischargers  are subject to Pretreatment  Standards  for Existing  Sources
 (PSES) while direct dischargers  are subject to Best Available  Technology  Economically  Achievable
 (BAT), Best Practicable Control Technology Currently Available (BPT), and Best Conventional Pollutant
 Control Technology (BCT) requirements.  For this  regulation,  different sets of regulatory options were
 considered for indirect and direct dischargers. As discussed in Chapter 4, five PSES regulatory options
 were  considered  for indirect  dischargers  and three BAT/BPT  options  were  considered  for  direct
 dischargers. EPA performed the facility impact analyses separately for these two classes of facilities and
 the regulatory options that were considered for them.  In the following discussion, economic impact analysis
 results are presented separately for the two classes of facilities and are  also summed for the proposed
 options for both facility classes.1

         Data Supporting the Facility Impact Analysis
         The most important source of data for the facility impact analysis is the facility-level financial data
 obtained by the DCP. These data include: three years  (1987-89) of income statements and balance sheets at
 the level of the  facility; the composition  of revenues by customer type and MP&M  business  sector;
 estimated value of facility assets and liabilities in liquidation; borrowing costs; and ownership of the facility
 business and total revenues of the owning entity (if separate from the facility).

        In addition to the DCP data, several secondary  sources provided data for the analysis. In most
 cases, secondary source data were used to characterize a background economic or financial condition, in
 the economy as  a whole  or  in the particular industries subject to the  MP&M effluent guideline. For
 example, secondary source data were used to define capital market conditions underlying the cost-of-capital
  Note, however, that the social cost and benefit analyses presented in the chapters following Chapter 5 do not
distinguish between direct and indirect discharging facilities. Separate analysis of the cost and benefit results by
discharge classes is not relevant and all cost and benefit values are aggregated over both classes of dischargers. For
example,  human  health and ecological benefits are assessed on the basis  of the  change in  in-waterway
concentrations of  pollutants  independent of whether the pollutants are discharged from a direct or indirect
discharging facility.
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analysis. Secondary source data also figured prominently in the analysis of cost pass-through potential for
the MP&M sectors.1 Secondary sources used in the analysis include2:

•       Department  of  Commerce  economic  census  and  survey  data  including  the Censuses  of
        Manufacturers, Annual Surveys of Manufacturers, and international trade data;
                  I
•       The Benchmark Input-Output Tables of the United States, published by the Bureau of Economic
        Analysis in the Department of Commerce;

•       Price index1 series from the Bureau of Labor Statistics, Department of Labor;

•       U. S. Industrial Outlook, published by the Department of Commerce;

•       Industry trade publications; and
                  I
•       Financial publications, including the Value Line Investment Survey and Robert Morris Associates
        annual data summaries.

        Other vital data  for the analysis of facility impacts include the estimates of capital and operating
costs for complying with regulatory options. These cost estimates were developed by EPA from engineering
studies of sample MP&M industry facilities. These studies took into account the characteristics  of effluent.
discharges and existing treatment systems  at the facilities and estimated the additional pollution  prevention
and treatment system needs for complying with the  alternative regulatory options. The estimated capital
costs and annual operating and maintenance costs for pollution prevention and treatment systems provided
the basis for assessing how an effluent guideline would be likely to affect the financial performance and
condition of MP&M facilities and whether those facilities might be expected to incur significant economic
                  I
impacts.

        Methodology for Calculating Facility Impacts
        The estimation  of facility impacts  is based  on the following analyses:  the  Baseline Closure
 Analysis, the Post-Compliance Closure Analysis, and the Financial Stress Short of Closure Analysis. Each
 analysis is described briefly in the following section. Table 4.1, below, summarizes the methodology for
 each impact category.
 2 See the Public Record for a detailed listing of the secondary information sources used in the economic impact
 analysis.          |
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        Baseline Closure Analysis
        The Baseline Facility Closure Analysis is based on two financial tests, both of which must be
failed for the facility to be deemed a closure:

1.       After-Tax Cash Flow Test. This test examines whether a facility has lost money on a cash basis
        for the three years covered by the DCP. If the facility's cash flow is negative when averaged over
        the period of analysis,  then  the facility's management and ownership is presumed to  be under
        pressure to change operations or business practices to eliminate future losses. One possible change
        is to terminate  operations at the facility. Whether it may be  financially  advantageous  to the
        facility's ownership to terminate facility operations is the subject of the second financial test.

2.       Liquidation Value and Going-Concern Value Comparison  Test. This test examines whether the
        liquidation value of facility  assets exceeds the going concern value  of the facility based on a
        discounted value analysis of the facility's after-tax cash flow. The liquidation value of facility
        assets was calculated from information provided by facilities in the DCP  and reflects the market
        value of facility assets less expenses associated with closure  and liquidation. The financial question
        underlying this comparison is whether the facility  is worth more in liquidation or in its  current
        operation (i.e., as a going concern). If the liquidation value exceeded the going-concern value, then
        facility ownership is presumed to see a reward for terminating the facility's business and liquidating
        its assets.

        If a facility failed both tests,  then the facility  was presumed to be in jeopardy of financial failure
independent of the   application of  the MP&M effluent  guideline  and  was  excluded  from  further
consideration in the analysis of effluent  guideline impacts.  Failure of the after-tax cash flow tests means
that the facility is incurring a cash loss and is thus under financial pressure to alter its business to  prevent
future losses. Failure of the liquidation value/going-concern  value test means that facility ownership would
benefit financially by terminating operations and liquidating facility assets. The combination of these two
circumstances  leads  to  the expectation  that facility  management  and ownership may decide to cease
business at the facility independent of the application of an MP&M effluent guideline. Facilities failing
only one test were carried forward to  the post-compliance analysis; because of their more fragile condition,
these facilities were more likely to fail that analysis.
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Imnaet Category
                          Table 4.1: StMtuaaiy
Description
Analysis
Significance of
Negative Finding
 1.   Baseline Closure
Identifies facilities that are
in jeopardy of financial
failure regardless of the
promulgation of effluent
guidelines
Two tests:
1.  After-tax cash flow
negative? and
2.  Liquidation value
exceed going concern
value?
Facilities failing both
tests are considered a
baseline closure and
excluded from
subsequent analyses
 2.   Post-Compliance
     Closure
Identifies facilities that are
likely to close instead of
implementing the pollution
prevention and treatment
systems needed for effluent
guidelines compliance
Two tests:
1.  Post-compliance after-
tax cash flow negative? and
2.  Liquidation value
exceed post-compliance
going concern value?	
Facilities failing both
tests are projected to
close as the result of
regulation, a severe
economic impact.
 3.   Financial Stress Short  Identifies facilities with
     of Closure     |        limited ability to finance the
                   1        pollution prevention and
                           treatment systems needed
                   i        for effluent guidelines
                           compliance
                          Two tests:
                          1.   Decline in pre-tax
                          ROA to a level that
                          jeopardizes access to
                          financing? or
                          2.   Decline in ICR to a
                          level that jeopardizes access
                          to financing?          	
                          Facilities failing either
                          test are likely to
                          experience financial
                          weakness as the result
                          of regulation, a
                          moderate economic
                          impact.
        Post-Compliance Closure Analysis

        The Post-Compliance Closure analysis is identical in structure to the Baseline Closure Analysis

with the exception that the after-tax cash flow amounts used in the After-Tax Cash Flow test and in the

Liquidation Value and Going-Concern Value Comparison test are adjusted to reflect the  annual cash

outlays for financing and operating the pollution prevention and treatment systems needed to  comply with

an MP&M effluent 'guideline. The adjustments to cash flow reflect the annualized costs of purchasing and
                   '                                                          \
financing equipment for compliance with the alternative regulatory options and include allowances for the
                   1
cost of debt and equity financing. In addition, the cash flow adjustments reflect the annual costs incurred by

facilities  for  operating and  maintaining  the pollution prevention and treatment systems needed for

compliance. The capital cost and operating and maintenance costs that underlie these cash flow adjustments

were estimated by EPA on the basis of engineering  studies of pollution prevention and treatment system

needs at sample MP&M facih'ties for complying with alternative regulatory options.

                   i
        In the same way as for the Baseline Closure Analysis, a facility was judged likely to close as a

result of regulation pnly if the facility fails both the After-Tax Cash Flow Test and the Liquidation Value

and Going-Concern; Value Comparison Test. The requirement to fail both tests again rests on the logic that
                   \
negative cash flow provides the impetus  for considering facility  closure to avoid future losses and the

excess of liquidation value over going concern value provides the reward for doing so.
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        The analysis of post-compliance facility closures was undertaken for the sample facilities that were
not assessed as baseline closures. These results were then extrapolated to the facility population using
sample weights. As discussed  above,  facility closure is considered a severe economic impact as  all
employment and production from the facility is assumed to be lost as a result of closure. Moreover, for this
analysis, none of the production or employment losses were assumed  to be offset by possible increases in
MP&M production activity at other facilities that remain in production. Thus, the assumption of full loss of
employment and production in closing  facilities is conservative and overstates possible employment and
production impacts.

        Analysis of Financial Stress Short of Closure
        The analysis of Financial Stress Short of Closure identifies facilities whose financial condition is
so weak as to  imply  difficulty in financing the  treatment system investments for compliance with  an
MP&M effluent guideline.  This analysis was undertaken only for those facilities that passed the preceding
Facility Closure analysis.  Facilities that fail  the Financial Stress  analysis were judged as  likely  to
experience a financial impact that is less severe  than closure as the  result of efforts to comply with  an
MP&M effluent guideline.  However, they would be expected to incur significant financial stress  from
undertaking compliance-related investments and/or incurring the operating cost  burdens  of compliance.
Financing assistance might be  required from the parent firm or through an equity infusion or other financial
restructuring. These facilities or firms are projected to become among  the poorer, but still viable, financial
performers in an industry. Although they are not projected to fail or otherwise terminate operations directly
because of  compliance requirements, the  deterioration in their financial performance would presumably
leave them at greater risk of failure from other factors in their business  environment.

        The analysis of Financial Stress Short of Closure was based on two tests of financial performance
and condition calculated at the facility level. The measures of financial performance and condition — pre-
tax return on assets and interest coverage ratio — are among  the more  important criteria reviewed by
creditors and equity investors in determining whether and under what terms to provide financing to a firm.
These measures also provide insight into the ability of firms to generate funds for compliance investments
from internally  generated equity — that  is, from after-tax cash flow. The  basis for evaluating these
measures was by comparison of the facility values with industry norms obtained from secondary sources.

        The analyses of pre-tax return on  assets (ROA) and interest coverage ratio (ICR) were performed
by first calculating ROA and  ICR values for facilities independent of the  financial effects of complying
with an effluent guideline. The ROA and ICR values were then adjusted to reflect the expected changes in
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facility finances resulting from installing and operating the pollution prevention and treatment systems
needed for effluent guidelines compliance. As a result of the compliance-related outlays, if a facility's ROA
or ICR fell below industry norms, the facility was judged likely to incur a moderate impact (i.e., financial
stress short of closure) as a result of regulatory compliance. The industry norms for evaluating ROA and
ICR were developed from  data reported in Robert Morris  Associates Annual  Statement  Summaries
(RMA).3  Specifically, facility ROA and ICR values  were compared with  the lowest quartile (i.e., 25th
percentile) value for the  respective financial measures as calculated from RMA data for the relevant
industries over the period 1985-1992.

4.3     Estimated Facility Economic Impacts
        The findings from the facility impact analysis are summarized below.

        Baseline Closure Analysis
        The estimated baseline closures for both indirect and direct discharge facilities are summarized in
Table 4.2. Of the estimated 10,601 discharging facilities, 13.9  percent or 1,471 facilities were assessed as
baseline closures from the financial analyses outlined above.  The 1,471 baseline closures  include 1,413
indirect dischargers, or 16.2 percent of indirect dischargers, and 58  direct dischargers, or 3.1 percent of
direct dischargers. The facilities estimated to close in the baseline analysis are in jeopardy  of financial
failure independent of the promulgation of the MP&M regulation.  The estimated baseline closures are
removed from the subsequent post-compliance analysis of regulatory impacts.
                   i
        Post-Compliance Impact Analysis
        The findings from  the Post-Compliance Impact Analyses are  summarized  below. Findings are
presented first  for the PSES options considered for  indirect  discharging  facilities, and then for the
BAT/BPT options considered for direct  discharging facilities.  A third section presents aggregate findings
for the proposed PSES and BAT/BPT options for both discharger classes.  In each discussion, findings in
terms of estimated facility closure and lost employment and production  are presented for both the highly
unlikely zero-cost-pass-through case and the more realistic partial-cost-pass-through case. The expected
impacts of compliance in terms of estimated total capital cost  and total annual costs are also summarized.
In addition, the numbers of facilities expected to incur moderate impacts are discussed.
 3  RMA provides financial statistics based on bank credit reports from public-reporting and non-public-reporting
 firms in a variety of industries.
                                                4.10

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Table 4Jte Summary of Baseline Closure Analysis
Indirect Direct
Total Bisenargers JMschargers
Facilities in Analysis
(dischargers only)
Baseline Failures
(percent failing in class)
Facilities in Analysis
(percent in class)
10,601
100.0%
1,471
13.9%
9,130
86.1%
8,706
82.1%
1,413
16.2%
7,293
83.8%
1,895
17.9%
58
3.1%
1,837
96.9%
       Indirect Dischargers
       For indirect discharging facilities, EPA analyzed the impacts  of five possible PSES regulatory
options — Options 1, 2, 3, la, and 2a — and found that all options except Option 3 were economically
achievable. Of the options considered, EPA is proposing Option 2a as the preferred PSES regulatory
option. Option 2a embodies best available technology for reducing the  industry's effluent discharges and
provides  substantial environmental benefits (as detailed  in this report). In addition, EPA estimates that
Option 2a will impose very modest economic impacts, will impose the lowest burdens on small businesses
(in conjunction with Option 2 for direct discharging faculties), is the least costly to administer, and has the
lowest cost-effectiveness value of all the options.

       The estimated facility-level impacts associated with each of the PSES options are presented in
Table 4.3 (a full discussion of the impacts of the original three options can be found in Chapter 4 of the
EIA). The  following discussion reviews the impact findings for the two PSES options that were
subsequently developed: Option la and the  PSES  proposal, Option 2a. As described in  Chapter 4,
Option la applies the requirements of Option 1 or Option 2 to facilities based on whether facilities are
'low" flow (i.e., discharge volume of less than 1,000,000  gallons per year) or 'large" flow (i.e., discharge
volume of at least 1,000,000 gallons per year), while Option 2a applies the requirements of Option 2 to
only "large" flow facilities.

       Impacts of Option la: Tiered PSES for "Low" Flow and "Large" Flow Sites.
               Zero-Cost-Pass-Through Analysis

       Under Option la, which applies the limitations of Option 1 or Option 2 based on facility discharge
volume,  EPA estimates that 151 facilities or 2.1 percent  could be expected to close as the  result  of
regulation. The employment and shipments losses associated with these  facility closures  are conservatively
estimated at 2,354 FTEs  (0.11 percent of total) and $202 million (0.05 percent of total), respectively.
Under Option la, 54 facilities are expected to incur financial stress short of closure, a moderate economic
impact. EPA estimates that industry will incur capital costs of $373 million for complying with Option la,
                                               4.11

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and the estimated total annualized, after-tax cash cost to industry, which reflects private costs of capital
and expected tax treatment of capital outlays and annual expenses, amounts to $178 million.
Table 4.3j Estimated Impacts of Regulatoi-y Compliance, Indirect Dischargers
(dollar values! in $090. 1989)
s

Facilities in Analysis
i Options Initally Considered for Proposal
Option ^ Option ^ Option 3
7,293
7,293
7,293
Subsequent Options
Option la Option 2a
7,293
1,792
Zero-Cost-Pass-Through Analysis (unrealistic worst case)
Severe Impacts (closin
Number of Facilities i
Percent of Class !•
Employment (FTEs) :
Value of Shipments
g facilities)
161
2.20%
3,001
$316,939
151
2.07%
2,354
$202,031
227
3.11%
18,215
$2,013,307

151
2.07%
2,354
$202,031
7
0.40%
540
$114,509
Moderate Impacts (financial stress short of closure)
Number of Facilities
42
124
184
54
12
Financial Impacts on Complying Facilities
Capital Cost
$235,374
$372,345
$1,002,541
$373,127
$299,428
Total Annual Compliance Cost
Tax-adjusted" ;
No adjustments*
$172,491
$231,296
$182,232
$228,330
$525,311
$668,824
1$ 178,059
$221,887
$121,585
$146,050
Partial-Cost-Pass-Through Analysis
Severe Impacts (closin
Number of Facilities
Percent of Class ;
Employment (FTEs)
Value of Shipments
e facilities)
91
1.25%
1,714
$279,162
52
0.72%
892
$151,711
160
2.20%
7,710
$735,140

82
1.12%
1,068
$164,254
7
0.40%
540
$114,509
Moderate Impacts (financial stress short of closure)
Number of Facilities
0
41
66 |
Financial Impacts on Complying Facilities
Capital Cost •
$238,132
$375,372
$1,020,259 |
Total Annual Compliance Cost
Tax-adjusted*
No adjustments*
$173,798
$232,913
$183,721
$230,184
$537,334
$684,583
12
12

$375,885
$299,428

1 $179,366
$223,503
$121,585
$146,050
* "Tax-adjusted" compliance costs are an estimate of the annual cash compliance cost to industry and reflect
private costs of capital and expected tax treatment of capital outlays and annual expenses.
* Compliance costs with 'No adjustments" are an estimate of the total annual cost of compliance without tax
adjustments and with capital costs annualized on the basis of a real social discount rate.
               Partial-Cost-Pass-Through Analysis
                    i
        The more realistic, partial-cost-pass-through analysis shows fewer impacts than the zero-cost-pass-
through analysis. Among indirect dischargers, 82 facilities or 1.1 percent are expected to close as a result
of regulation and only 12 facilities are expected to incur moderate economic impacts. Employment and
shipments losses associated with closing facilities are estimated at  1,068 FTEs (0.05 percent of total) and
                                               ,4.12

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$164 million (0.04 percent of total), respectively. Total capital costs of compliance are estimated at $376
million and total annualized compliance costs are estimated at $179 million, tax-adjusted.

        Impacts of Option 2a: In-Process Flow Reduction and Pollution Prevention and Lime and Settle
        Treatment for "Large" Flow Sites.
               Zero-Cost-Pass-Through Analysis

        Among the five PSES options  that EPA analyzed, the proposed Option 2a,  which applies  the
limitations of Option 2 to large flow facilities and exempts low flow facilities from regulation, achieves the
lowest impacts in terms of facility closures, employment losses,  and financial burdens. Under Option 2a,
EPA estimates that a minimal number  of facilities — 7 — would be  expected to close as the result of
regulation. These 7 facilities  represent 0.1 percent of the 7,293 indirect discharge facilities found to pass
the baseline closure analysis and 0.4 percent  of the 1,792 indirect discharge facilities that both have a
discharge volume  of at  least 1,000,000 gallons per year and pass the baseline closure analysis.  The
employment and shipments losses associated with these facility closures are conservatively estimated at 540
FTEs (0.03 percent of total) and $115 million (0.03 percent of total), respectively. In addition to the facility
closure impacts, 12 facilities  are expected to incur financial stress short of closure because of regulation.
EPA estimates that industry will  incur capital costs  of $299 million to comply with Option 2a.  The
estimated total annualized, after-tax cash cost to industry, which reflects private costs  of capital and
expected tax treatment of capital outlays and annual expenses, amounts to $122 million.

               Partial-Cost-Pass-Through Analysis

        The estimated impacts of Option 2a under the  partial-cost-pass-through case are the same as  the
already modest values estimated for the zero-cost-pass-through case. The estimated closure and financial
impact values remain the lowest among the five PSES options analyzed for indirect discharging facilities.

       Direct Dischargers
       For direct discharging facilities,  EPA analyzed  the impacts of three possible BAT/BPT regulatory
options: Options 1, 2, and  3. Like the rinding for PSES options for indirect discharging  facilities,  EPA
found that both Options 1 and 2 were economically achievable but that Option 3 is not. Of these BAT/BPT
options,  EPA is proposing Option 2 because it represents the performance achievable  with the best
available technology  and, in view of its  comparatively  modest  economic impacts, is economically
achievable. The estimated facility-level impacts associated with each of the regulatory options are presented
in Table  4.4.  For direct dischargers, EPA estimated the same level of facility closure and compliance cost
                                               4.13

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impacts under both the zero-cost-pass-through and partial-cost-pass-through analyses. Thus, these results
for these two cases are not presented separately. The estimated moderate impacts — that is, financial stress
short of closure — did vary between the two cost pass-through cases and these differences are noted in the
summary  table. The following discussion reviews the impacts  estimated  for the  proposed Option!
(Chapter 4 of the Economic Impact Analysis Report contains a full discussion of all the options).

Ttnf
Table 44; Estimated Impacts of Regulatory Compliance, Direct Dischargers
(4oU«r value? in SOCHD* 1989)
Option 1 Option 2 Option 3
Facilities in Analysis
1,837
1,837
1,837
Severe Impacts (closing facilities)
Zero-Cost-Pass-Through and Partial-Cost-Pass-Through Analyses (same results)
Number of Facilities
Percent of Class
Employment (FTEs)
Value of [Shipments
18
0.96%
158
$5,277
18
0.96%
158
$5,277
90
4.92%
7,339
$756,873
Moderate Impacts (financial stress short of closure)
Zero-Cost-Pass-Through
Number of Facilities
Partial-Cost-Pass-Through
Number of Facilities
6
0
0
0
0
0
Financial Impacts on Complying Facilities
Zero-Cost-Pass-Through and Partial-Cost-Pass-Through Analyses (same results)
Capital Cost
$40,421
$53,995
$108,700
Total Annual Compliance Cost
Tax-adjusted*
No adjustments*
$13,908
$15,516
$15,477
$16,332
$54,602
$68,720
" "Tax-adjusted" compliance costs are an estimate of the annual cash compliance cost to
industry and reflect private costs of capital and expected tax treatment of capital outlays
and annual expenses.
* Compliance costs with 'No adjustments" are an estimate of the total annual cost of
compliance without tax adjustments and with capital costs annualized on the basis of a
real social discount rate.

jacts of Option 2: In-Process Flow Reduction and Pollution Prevention and Lime and Settle
        Treatment  ;
        Under the proposed Option 2, EPA estimated that 18 facilities or 1.0 percent of direct dischargers
 passing the baseline:analysis would close as  a result of regulation. Associated employment and shipments
 losses are estimated at 158 FTEs (0.03 percent of total) and $5 million (0.01 percent of total), respectively.
 In both the zero-cost-pass-through and partial-cost-pass-through analyses, no  additional facilities  were
 assessed as likely to incur financial stress short of closure. EPA estimates that industry will incur capital
 costs of $54 million for complying with Option 2. The estimated total annualized, after-tax cash cost to
 industry, which reflects private costs of capital and expected tax treatment of capital outlays and annual
 expenses, amounts to $15 million.
                                                4.14

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       Aggregate Impacts for the Combined Regulatory Proposal for Existing Facilities: Option 2afor
       Indirect Discharging Facilities and Option 2 for Direct Discharging Facilities
       Aggregate impacts for both indirect and direct discharging facilities are summarized in Table 4.5
below, for the proposed regulatory options applicable  to existing  facilities:  Option 2a for indirect
dischargers (PSES)  and Option 2 for direct dischargers (BAT/BPT). Table 4.5 also summarizes the
impacts for the combination of Option 2 for direct dischargers  and Option la for indirect dischargers
(Option la is the other PSES option that EPA defined and analyzed  as a  candidate for proposal after
rejecting the initially selected Option 2).  The following  discussion reviews the aggregate impacts for the
selected regulatory options: Option 2a and Option 2 (Option 2a/2).
Table 4.5; Estimated Aggregate Impacts of Regulatory Compliance for the Proposed Regulation;
Options 2a and 2 and the Alternative Considered fi&r Proposal: Options la and 2
{dollar values in $000, 198£>

Facilities in Analysis
Option 2a/2
{regulatory
proposal) *
3,629
Option la/2 (alternative considered)
Zero-Co$t-Pass-
Throiigu
9,130
Partial-Cost-Pass-
Through
9,130
Severe Impacts (closing facilities)
Number of Facilities
Percent of Class
Employment (FTEs)
Value of Shipments
25
0.69%
698
$119,786
169
1.85%
2,513
$207,308
99
1.09%
1,226
$169,531
Moderate Impacts (financial stress short of closure)
Number of Facilities
12
54 | 12
Financial Impacts in Complying Facilities
Capital Cost
$353,424
$427,122
$429,880
Total Annual Compliance Cost
Tax-adjusted*
No adjustments*
$137,063
$162,382
$193,536
$238,218
$194,844
$239,835
* Impact results for Option 2a/2 are the same for both the zero-cost-pass-through and the partial-cost-pass-
through cases.
f "Tax-adjusted" compliance costs are an estimate of the annual cash compliance cost to industry and reflect
private costs of capital and expected tax treatment of capital outlays and annual expenses.
J Compliance costs with "No adjustments" are an estimate of the total annual cost of compliance without tax
adjustments and with capital costs annualized on the basis of a real social discount rate.
Source: U.S. Environmental Protection Agency
        Overall, 9,130 facilities passed the Baseline Closure analysis and thus are potentially subject to
regulation. However,  because of the  exemption  of low-flow dischargers from the proposed PSES
Option 2a, only 3,629 of these facilities (1,837 direct discharging facilities and 1,792 'large flow" indirect
discharging facilities) are  expected to be  subject  to  the  proposed  regulation.  Under the  proposed
Option 2a/2, EPA found that 25 facilities (0.3 percent of facilities passing the baseline closure analysis and
0.7 percent of the facilities expected to  be subject to regualtion) would be expected to close as a result of
                                               4.15

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regulation in both the zero-cost-pass-through and partial-cost-pass-through analyses.  The total associated
employment impact amounts to 698  FTEs (0.03 percent of the total employment in facilities passing the
baseline analysis and thus potentially subject to regulation) and the associated value of lost shipments
amounts to $120 million (0.03 percent of the total shipments in facilities passing the baseline analysis and
thus potentially subject to regulation).5 In addition to the estimated closure impacts, a modest 12 facilities
are expected to encounter financial stress short of closure as a result of the proposed regulation. Summed
over both indirect and direct discharging facilities, the total capital costs of compliance amount to $353
                   i
million. Total annualized costs of compliance are estimated at $137 million, when calculated on an after-
tax basis using private costs of capital.

4.4     Labor Requirements  of Regulatory Compliance and Net Employment Impact
                   I
        Firms will need to install and operate treatment systems to comply with an  effluent limitations
guideline for the MP&M industry.  The manufacture, installation, and operation of these systems will
require use of labor;resources. To the extent that these labor needs translate into employment increases  in
affected firms,  a MP&M rule has  the potential to generate employment gains, which may offset the
                   i                                         	
employment losses that are expected to occur in closing facilities. The employment effects that would occur
in the  manufacture, • installation, and operation of treatment systems are termed the "direct" employment
gains of the rule. Because these employment effects are directly attributable to the MP&M rule, they are
conceptually parallel to the employment losses that were estimated for the facilities that are expected  to
                   i
incur significant impacts as a result of the MP&M rule.

        In addition to direct employment gains, the MP&M rule  may generate other employment gains
                   i
through two mechanisms. First, employment effects may occur in the industries that are linked to the
industries that  manufacture  and install compliance equipment;  these  effects  are termed "indirect"
                   r
employment gains. For example, a firm that  manufactures the pumps, piping and other hardware that
comprise a treatment system will purchase intermediate goods and services from other firms and sectors  of
the economy. Thus, increased economic activity in  the firm that manufacturers the treatment system
components  has the potential to increase activity and employment in these linked firms and sectors. Second,
the increased payments to labor  in the directly and indirectly affected industries will lead to increased
  The impact analysis results for Option 2a/2 are the same throughout for both the zero-cost-pass-through and
partial-cost-pass-through cases.
  An analysis of possible employment increases that may partially offset these losses is presented in the next
section.
                                               4.16

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 purchases  from consumer-oriented service and retail businesses, which in turn lead to additional labor
 demand and employment benefits in those businesses. These effects are termed "induced" employment
 gains.

        In view of these possible employment gains, EPA estimated the labor requirements associated with
 compliance with the proposed MP&M Phase I regulatory option: Option 2a for indirect dischargers and
 Option 2 for direct  dischargers. Labor requirements — and thus the possible employment gains — were
 estimated in two steps. EPA first estimated the direct employment effects associated with the manufacture,
 installation, and operation of compliance equipment. Second, EPA considered the additional employment
 effects that might occur through the indirect and induced effect mechanisms outlined above.

        Direct Labor Requirements of Complying with the Proposed Regulation
        EPA  separately  analyzed each  component  of the direct labor  requirements: manufacturing,
 installing, and operating  compliance equipment. The analysis is based on the compliance cost estimates
 developed  for the economic impact  analysis of the MP&M regulation. Compliance requirements and
 associated costs were estimated for each facility in the Survey that was assessed as incurring costs. For the
 labor requirements analysis, compliance costs and their associated labor requirements were considered only
 for those facilities that were  not assessed as either a baseline closure or a closure due to compliance. That
 is, the analysis considered the labor  requirement effects associated only with those facilities that, upon
 compliance with the rule,  would be likely to continue MP&M production activities.

        EPA  estimated  the  direct  labor  requirements for manufacturing  and  installing  compliance
 equipment based  on the cost of the equipment and its installation, and  labor's expected  share of cost in
 manufacturing and installing the equipment. The labor input was estimated in dollars based on information
 contained in the National Input-Output Tables assembled by the Bureau of Economic Analysis  in the
 Department of Commerce. In particular, the direct requirements matrix identifies the value of each  input,
 including  labor, that is required  to produce a one dollar value of output for  a subject industry. The
 industries in the input-output tables that were used as the basis for this analysis are: the Heating, Plumbing,
 and Fabricated Structural Metal Products  Industry  (Bureau of Economic Analysis industry classification
40) for compliance  equipment manufacturing; and the  Repair and Maintenance Construction Industry
 (Bureau of Economic Analysis industry classification 12) for compliance equipment installation. The  dollar
value of labor's contribution was converted to a full-time employment equivalent based on a yearly labor
cost of $48,000  (1989 dollars, including benefits and  payroll taxes). Because compliance equipment
                                              4.17

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                  !
purchase and installation are considered one-time outlays, the labor requirements for these activities were

annualized over a 15-year period at the seven percent social discount rate.

                  i
        For the analysis of the labor required to operate compliance equipment, EPA used the estimates of
                  I
annual labor hours that were developed as the basis for assessing the annual operating and maintenance

costs of the MP&M regulatory options.
                  i

        From  these  analyses,  EPA estimated an  annual  direct  labor requirement  of 1,594 full-time

equivalent positions  (FTEs) for complying with the combined regulatory proposal for existing facilities:

Option 2a for indirect dischargers  and  Option 2 for  direct dischargers (Option 2a/2). Of this total, the

annualized labor requirements  for  manufacturing and installing compliance equipment are 187  and 85

FTEs, respectively.;  Compliance equipment operation is estimated to require 1,322 FTEs annually. The

corresponding anmial estimated payments to labor is $76,522,000 ($1989) (see Table 4.6).
                 ,6? Analysis of Possible Employment Generation Effects of Proposed Regulatory
          Options ior the MP&M Industrys Options 2a and 2 for indirect and Direct Dischargers
                             fall dollar amounts in thousands of 1989 dollars)	
                         Total
                       Weighted
                      Exoenditures
Labor Cost
 Share of
Production
  Value1
Labor Cost Component
one-time       annual
  basis          basis2
   Direct Labor
   Requirements3
one-time   annual
  basis      basis
Direct Labor Effects From Compliance Equipment:
Manufacturing
Installation
Operation
$263,693
$87,898

31.02%
42.23%

$81,787
$37,122

$8,980
$4,076
$63,467
1,704
773

187
85
1,322
 Total Direct Labor Effects
                              $76,522
                                      1,594
 Notes:           ;
 1 Source: U.S. Department of Commerce, The 1982 Benchmark Input-Output Accounts of the United States,
 December 1991. The labor cost share of production value for compliance equipment manufacturing is based on
 the input-output composition of the Heating, Plumbing, and Fabricated Structural Metal Products Industry
 (Bureau of Economic Analysis industry group 40). The labor share of production value for compliance equipment
 installation is based on the Repair and Maintenance Construction Industry (BEA industry group 12).
 2 Annualized over 15 years at the social discount rate of 7 percent.
 3 Number of jobs calculated on the basis of an average hourly labor cost of $24.00 and 2,000 hours per
 labor-vear.       S                                                        	
        Indirect and Induced Labor Requirements of Complying with the MP&M Rule

        In addition to its direct labor effects, an MP&M effluent guideline may also generate labor

 requirements through the indirect and induced effect mechanisms described above.  EPA assessed the

 indirect and induced employment effects of the proposed regulatory options by use of multipliers that relate

 aggregate economic effects, including indirect and induced effects, to direct economic effects. Using a range

 of multipliers from previous studies of the  aggregate employment effects of general water treatment and
                                                4.18

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pollution control expenditures, EPA estimated that the total labor requirement effect would range  from
3,900 to 6,400 FTEs for the proposed Option 2a/2 . The lower end of this range reflects the use of lower
multiplier values and conservative assumptions regarding effects on economic activity in industries linked
to the MP&M industry. The higher end of the range reflects the higher multiplier values and assumes full
incurrence of indirect economic effects in industries linked to the MP&M industry.

4.5     Community Impacts
        EPA expects that the employment losses resulting from MP&M facility closures will not have a
significant impact on the national economy. However, employment losses may be  significant at the  local
level if facility closures are concentrated  regionally or if they occur in smaller communities. Therefore,
EPA examined the community level employment impacts  that may result from the proposed regulatory
options for the MP&M industry.  Community impacts were assessed by estimating  the expected  change in
employment in communities with MP&M facilities that are affected by regulation. Possible community
employment effects include the  lost  employment  in facilities that are  expected to  close because of
regulation,  and  related employment  losses in  other  businesses  in  the  affected community. These
employment losses are considered significant if they are expected to exceed one percent of the pre-
regulation level  of employment  in the affected communities. For such comparisons, a community is
generally defined as the area in which  employees may  reasonably commute to work— typically  a
Metropolitan Statistical Area (MSA), or county if the affected community is not contained within  a MSA.

        To understand the significance of community employment impacts from the proposed regulation,
Option 2a/2, EPA performed two analyses  of expected  community  employment impacts. First,  EPA
examined the community employment impacts based on the known location of the sample facility closures
estimated to result from each of the  proposed regulatory  options. Because the location  of these sample
facilities is known, it is possible to compare the expected employment loss from closure,  including losses in
related businesses, with the pre-regulation employment  in the affected community, defined as  either the
MSA  or the county in which the sample facility closure  is located. This  analysis  directly tests the
significance of employment losses in the communities in which the estimated closing sample facilities are
located.

        Second,  EPA examined  the  significance of expected facility  closures  taking into account the
employment losses from the closing facilities in the underlying facility population that  are represented by
the sample  facility closures. Because the locations of these non-sample closing facilities are not known, it
was not possible to measure the significance of the associated employment losses in specific communities.
                                              4.19

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Instead, EPA distributed these employment losses among states and assessed their significance at the state
level, taking into account the estimated job losses in both MP&M facilities and in related businesses.
•
                  I
        In addition to these analyses of the impact of employment losses, EPA also considered the effect of
possible employment gains as discussed in the preceding section at the state  level. Specifically,  EPA
distributed the possible employment gains among states and calculated a net potential employment impact
by  state taking into account  the  expected  effect of both facility  closures and  labor demands  from
compliance-related outlays.

        Assessment of Community Impacts for Estimated Sample Facility Closures
                  t
        To assess the  significance of facility closures  and associated employment losses in specific
communities, EPA compared the employment loss from estimated sample facility closures,- including losses
in related businesses, to the pre-regulation level of employment in the communities in which the sample
facilities are located.

        For the proposed  Option 2a/2 (Option 2a for indirect  dischargers  and Option 2  for direct
dischargers), the facility closure analysis indicated that three sample facilities would be expected to close as
a result of regulation. Two of the three sample facilities are located in  California:  1 in Merced county, 1 in
the Los Angeles-Long Beach MSA. The third facility is located in Virginia, in the Norfolk-Virginia Beach-
Newport News MSA. The total of employment losses in these sample facilities amounts to 168 FTEs,  or an
average of 56 FTEs per closing sample facility (see Table 4.7).
Table 4.7: Community Employment Impacts fa Estimated Sample Closing Facilities: Option 2a/2
MSA or County
Los Angeles-Long Beach
Merced County
Norfolk-Virginia Beach-
Newport News ;
I>re-
Regulation
Employment
4,173,000
64,617
594,463
Facilities
Affectea
Number
1
1
1
Empl.
CPTKs)
97
62
9
MP&M
State
Multiplier
2.72
2.72
2.27
Total Employment
Ix>sslnMSA
FEES
264
169
20
as % of £re»
Regulation
Employment
0.01%
0.26%
0.00%
Source: U.S. Environmental Protection Agency
        In addition to the primary employment losses (i.e., those that occur in the estimated MP&M
facility closures), employment losses may also occur through the secondary impact mechanism.  Such
                  i
secondary employment  losses may occur in: (1) industries that are economically linked to MP&M
industries and (2) ponsumer businesses whose employment is affected by changes in the  earnings and
expenditures of the employees in the directly and indirectly affected industries. To assess these secondary
                                              4.20

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employment losses,  EPA calculated state-specific, composite MP&M employment multipliers that are
based on the estimated relationship of employment in MP&M industry sectors to total state employment,
and the composition of employment within a state among the seven MP&M Phase I sectors. These state-
specific composite employment multipliers were calculated from Regional Input-Output Modeling System
(RIMS) multipliers  developed by the Bureau of Economic Analysis (BEA) within the Department of
Commerce.

       To calculate the expected total  employment loss (i.e., considering  both primary and secondary
employment impacts) in the communities  in which estimated sample facility closures  are located, EPA
multiplied the employment loss in the estimated sample facility closures by the composite multiplier for the
particular state. The total losses by MSA ranged from 20 to 264 FTEs. To assess the significance of these
losses, EPA compared  the estimated total employment loss  with the pre-regulation employment in the
community, based on 1990 Census  data.  For the two facilities that are located in an-MSA, the pre-
regulation employment is the 1990 employment for the MSA. For the facility that  is not located within a
MSA, the pre-regulation employment is the 1990 civilian employment for the county in which the facility is
located. This comparison indicated that none of the estimated sample facility closures would be  expected to
have a significant impact  on total  community employment. The largest of the  percentage  impacts is
estimated for Merced County, California and amounts to 0.26 percent. The estimated impact in the Los
Angeles-Long Beach MSA amounts to only 0.01 percent, while the impact in the Norfolk-Virginia Beach-
Newport  News MSA rounds to zero when calculated to the nearest hundredth  of a percent (see Table 4.7).

       Assessment of State-Level Employment  Impacts
       To capture the effect of employment losses in the non-sample facilities that  are represented by the
estimated sample facility closures, EPA performed a second analysis in which the employment loss in these
non-sample facilities was  distributed among states  in proportion  to pre-regulation levels  of MP&M
industry employment. Because the community locations of these non-sample, represented facilities is not
known, it is not possible to analyze the impact of these employment losses in specific communities as
defined by MSAs or counties.

       In addition to the 168 FTE losses in the 3 sample facility closures, EPA estimated that another 530
FTE employment losses and 22 facility closures would  occur in the underlying population that is
represented by the sample facilities. EPA distributed these losses among states in proportion to each state's
estimated MP&M Phase I  sector employment as  calculated from Department of Commerce employment
data. To  estimate the total employment loss by state  (i.e., both primary  and secondary  losses), EPA
                                             4.21

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multiplied the primary losses for each state by the state's composite employment impact multiplier as
developed from BEA state- and industry-specific multipliers. The estimated loss by state averaged 36 FTEs
and ranged from a low of zero to a high of 621; 32 states and the District of Columbia had a total estimated
loss of less than 25 FTEs. Table 4.8 summarizes the estimated facility closures and associated primary and
total employment losses for the 9 states in which the total employment loss is estimated to exceed 50 FTEs.
                  i
To evaluate  the significance of the estimated total employment loss by state, EPA  compared the
employment loss values with estimated total civilian  employment for each state, as  reported by the
Department of Commerce for 1991.
Table 4.8: Estimated Facility Closures and Total Employment
1 Lo^s for States with Largest Total l^ws; Option ?a/2
State
California
Ohio
Illinois
Pennsylvania
[Texas
Michigan
New York
Wisconsin
Indiana
Estimated
To&l
Facilaiy
Closures
4.9
1.6
1.6
1.3
1.3
1.1
1.2
0.8
0.7
Employment
Losses in
Facilities
{FTEs}
228
38
38
31
32
27
30
20
17
Total
Employment
Loss
(FTE$)
621
116
116
89
89
74
64
53
52
Loss in all other states is less than 50 FTEs.
Source: U.S. Environmental Protection Agency
        From these calculations, the estimated total employment loss as a percent of total state employment
rounds to zero when calculated to the nearest hundredth of a percent for all 50 states and the District of
Columbia. The maximum estimated employment loss as a percentage of total state employment amounts to
less than one-half of one-hundredth of one percent of total state employment (Table 4.9 lists the estimated
employment loss results for the 10 states with the highest percentage impacts). Thus, on the basis of the
findings from this and the preceding analysis, EPA expects that the proposed regulation for the MP&M
industry will not cause significant employment impacts at the local level.

        Assessment of State-Level Employment Impacts Including Possible Employment Gains
        As a final part of the analysis of community level employment impacts, EPA considered the total
state-level employment impacts including the effect of possible employment gains. Possible labor gains, as
                  j
discussed in the previous section, were distributed by state in proportion to MP&M employment by state,
and state-level employment multipliers were applied to these gains to estimate the total potential state-level
                                              4.22

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employment gain. The multipliers used for this analysis were selected to correspond to the industries in
which primary labor effects are expected to occur. These values were subtracted from the total employment
loss values calculated in the preceding section to calculate a net employment loss by state, taking into
account the possible employment gains from compliance-related activities.
Table 4,9* Total Employment Lass by State, 10 States with
Highest Percentage Loss; Option 2a/2
State
California
Ohio
Wisconsin
Connecticut
Illinois
Indiana
Michigan
Pennsylvania
Massachusetts
New Hampshire
Estimated
Tsfctf Facility
Closures
4.9
1.6
0.8
0.6
1.6
0.7
1.1
1.3
0.7
0.1
Employment
Loss in
JPacUities fFTEs)
228
38
20
15
38
17
27
31
17
3
Total percentage employment loss for all states rounds to
Source: U.S. Environmental Protection Agency
Total
Employment
t*ss (f TEs-)
621
116
53
35
116
52
74
89
45
9
Total State
Employment
mm
13,714,000
5,094,000
2,453,000
1,679,000
5,598,000
2,632,000
4,125,000
5,524,000
2,847,000
589,000
Loss as a
Percent
of Total
0.005%
0.002%
0.002%
0.002%
0.002%
0.002%
0.002%
0.002%
0.002%
0.001%
zero at the nearest hundredth of a percent.
        The estimated employment gain values range from a low of zero for the District of Columbia,
which has a very low estimated employment in the MP&M industry, to a high of 552 for California, the
state with the largest estimated MP&M industry employment. The average possible gain by state amounted
to 81 FTEs. These values were subtracted from the estimated total loss values calculated in the preceding
section to yield an estimated net employment loss by state for the proposed regulation. For all states but
California, which has an estimated net employment loss of 69 FTEs, the estimated potential gain exceeds
the estimated loss from facility closures (Table 4.10 summarizes these values for the 10 states with the
highest  estimated loss from  facility closures). Thus, the  potential employment gains  associated with
compliance activities could substantially offset the local employment losses expected to result from facility
closures.

4.6     Impacts on Firms Owning MP&M Facilities
        The assessment of economic achievability of the MP&M regulation is  based  primarily on the
facility-level impact analysis. However, because the firm-level impacts may exceed those assessed at the
level of the facility, particularly when a firm owns more than one facility that will be subject to regulation,
EPA  also  conducted  a firm-level impact analysis for the MP&M regulation. The firm-level  analysis
                                               4.23

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estimates the impact of regulatory compliance on firms owning facilities  subject to MP&M effluent
guidelines.
Table 4,10; Employment Loss and Possible <5a>n by State, JjB States with
Highest Estimated Loss front Facility Closures: Option 2a/2
State
California
Ohio '
Illinois
Pennsylvania
Texas :
Michigan
New York
Wisconsin
Indiana '
Massachusetts
Total Loss
from Facility
Closures
621
116
116
89
89
74
64
53
52
45
Employment
(Jain, Primary
Impact Only
209
115
113
93
97
82
: 90
59
51
52
Total <5ala
with
Multiplier
552
345
344
265
261
222
187
155
153
130
H*
Employment
Loss
69
(229)
(228)
(176)
(171)
(148)
(124)
(102)
(101)
(86)
Source: U.S. Environmental Protection Agency
        Secondary financial sources and DCP responses provided income statement and balance sheet data
for 255 firms that own 290 of the 396 sampled facilities.  Sufficient data were not available to analyze
compliance impacts on the parent firms of the remaining 106 facilities.

        EPA conducted the firm-level impact analysis under the zero-cost-pass-through scenario. Because
                  !
the DCP sample was not designed as a random sample of firms, but was instead directed toward estimating
national characteristics of faculties, the DCP sample data used in this analysis is not sample weighted. The
findings apply only to the firms that own sample facilities and do not represent national estimates of firm-
level impacts.

        EPA assessed firm-level impacts on the basis of changes in measures of profitability and interest
coverage, as calculated from firm financial statements. These measures, Pre-Tax Return on Assets (ROA)
and Interest Coverage Ratio (ICR), are the same as those used in the facility-level Analysis of Financial
Stress Short of Closure. When applied at the level of the firm, these measures indicate the firm's ability to
attract  the capital needed  for expansion in the normal  course of  business  or  for pollution  control
investments associated with effluent guidelines compliance. EPA used the same thresholds of minimum
financial performance for these  two measures in the facility-level Financial  Stress Short of Closure
analysis. These thresholds are based on a weighted average of the first quartile values for ROA and ICR
for the relevant MP&M industries as reported in the  Robert Morris  Associates publication Annual
Statement Studies.
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        In the same way as for the facility closure analysis, EPA performed the firm-level analysis in two
steps: (2) a baseline analysis, which evaluates the firm's financial condition independent of the costs of
regulatory compliance; and (2) a post-compliance analysis, which accounts for the effects of compliance
costs on the firm-level financial measures. In the baseline analysis, firms whose ROA or ICR were below
the industry standards were considered financially  weak  independent of regulation and were eliminated
from further analysis. Firms that pass both of the thresholds were subjected to a post-compliance test, in
which their financial measures were changed to reflect the impact of the MP&M effluent guideline. Firms
that failed either threshold post-compliance but pass both pre-compliance are expected to incur significant
financial stress as a result of compliance with the regulation.

        The firms consist of both single and multiple facility firms. In the case of single facility firms, the
impact on each firm's ROA and ICR is identical to the impact calculated on the basis of the responding
facility's financial statements and estimated compliance costs, alone. The impacts for single  facility firms
correspond to those calculated in the facility level analysis.

        Analysis  of  firm  impacts  for multiple  facility firms,  however,  involves  aggregating and
extrapolating financial and compliance cost  data for sample facilities to the level of the firm. If all of a
firm's revenues come from activities subject to the MP&M regulation, the impact of regulation on that firm
will clearly be greater than the  impact  on a firm that participates minimally in activities subject to  the
MP&M regulation, all other things being equal. Similarly, a firm whose production is heavily concentrated
in foreign facilities would also experience less significant impacts than firms primarily producing in  the
U.S. (i.e., with more facilities subject to the MP&M effluent guideline).

        The analysis of firm-level impacts for multiple facility firms is made difficult because compliance-
related information is available only for the sample facilities owned by these firms. That is, information is
not available for the non-sample facilities owned by a firm in terms of whether or not those facilities would
be subject to the MP&M regulation and, if so, the costs that they would incur to achieve compliance with
the proposed regulation. Lacking this information, the firm-level analysis estimated impacts based on two
scenarios that cover the full range of possible regulatory applicability to the non-sample facilities owned by
a firm. The first scenario is based on the minimum applicability of the regulation and assumes that  the
sampled facilities are the only facilities that engage in activities  subject to regulation in a firm, hi this
scenario, the firm level impact of the regulation is calculated by adjusting the firm-level financial measures
for the compliance costs incurred by the firm's  sampled facility(ies).
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       The second Scenario is based on the maximum applicability of the regulation and assumes that all
of a firm's activities are subject to regulation, whether associated with a sampled facility or not.  In this
scenario, EPA calculated a firm-level impact by extrapolating the estimated costs of compliance  for the
firm's sample facility(ies) to the level of the firm assuming that all of the firm's revenues are subject to
                   i
regulation. Specifically, the compliance costs for the sample facility (or the sum of costs over facilities, for
those firms owning more than one sample faculty) were scaled upward by the ratio of firm revenue to the
sum of sampled facility revenues. This method presumes a uniform relationship between compliance costs
and revenue over all the facilities owned by a firm. EPA then used these estimated firm-level compliance
costs under the scenario in which all revenue is subject to regulation to adjust the pre-compliance measures
of financial performance.

        Of the 255 firms analyzed, 73 firms, or slightly less than 29 percent, failed one or both of the firm
financial tests pre-compliance and therefore failed the baseline firm-level impact analysis. These firms are
assessed as  being financially weak based on current circumstances and independent of the effects of the
MP&M regulation. Of these 73 firms, 39 own facilities that were projected to close under the facility-level
baseline closure test

        Of the 182 firms  that pass  the baseline  firm financial test, only one  failed either  test under
Option 2a/2, even under the conservative zero-cost-pass-through assumption (see Table 4.11).  The single
adversely affected firm is a single facility firm and accounts for less than 0.0001 percent of revenues
earned by all 255 Sampled firms in the firm-level  impact analysis. These  results are independent of the
assumptions about the share of firm  revenue subject to regulation. The minimum and maximum impact
scenarios yielded identical results, in  terms of financial test failures.  From this  analysis, EPA finds that
firm-level impacts are not likely to be significant.
Table 4Jfc Summary of Urn B»|>a«t Analysis ItesatfKst
Option 2a/2
Number of Firms in Analysis
Baseline Failures
Incremental Post-Compliance Failures
255
73
1
Source: U.S. Environmental Protection Agency
 4.7     Foreign Trade Impacts
        Products of the MP&M industry  are traded internationally. Therefore,  changes in domestic
                   i
 production resulting from effluent regulations could affect the balance of trade. In particular, some of the
 production from facilities estimated to close because of regulation may be replaced by foreign producers,
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thus changing the U.S. foreign trade balance. The foreign trade analysis examines the trade balance effects
of Option 2a/2 under the zero-cost-pass-through assumption. This assumption is conservative in the sense
that it projects the most post-compliance closures. Even under this assumption, EPA estimates that the
MP&M industry will  experience less than a 0.01  percent loss in its trade balance. Therefore, EPA finds
that the proposed effluent guidelines will not have a significant adverse impact on the international trade
status of the MP&M Phase I industry.

        The foreign trade impact analysis identifies three scenarios that span the likely range of foreign
trade responses to post-compliance closures. Each scenario describes a possible outcome of the competition
between domestic and foreign producers to replace the production loss from closure of domestic facilities.
The three scenarios are as follows:

1.      Worst case. In the worst case scenario, all production for domestic consumption and for export by
        domestic facilities subject to post-compliance closure is replaced by foreign sources. Therefore, the
        net trade  balance deteriorates by  the  total  amount  of production  lost by  post-compliance
        incremental closures.

2.      Best case. In the best case scenario, all production for domestic consumption and for export by
        facilities subject to closure are replaced in full by production and exports from other domestic
        facilities. The net trade balance is unaffected by regulation.

3.      Proportional case. Domestic  production of facilities subject  to  closure  is replaced both by
        remaining domestic facilities and by foreign imports in the same proportions as the baseline ratio of
        imports and exports to the total domestic market. In this scenario, if, in the baseline case, imports
        accounted for half of the domestic market, then a closing facility's  production for domestic sales
        would be replaced half by imports and half by other domestic producers. This scenario is meant to
        reflect the historical performance of the MP&M Phase I  industries in competing with  foreign
        producers for import and domestic markets.

        In the foreign trade impact analysis,  EPA assigned each sample facility that is expected to close —
and its associated revenue — to one of the three scenarios, depending on the findings from two assessments
of the facility's exposure to competition from foreign producers. The first assessment is based on sample
facilities' responses to DCP questions concerning the magnitude and source of competition in various
markets, including export and domestic markets. The second assessment is based on secondary source data
provided  by the Department of Commerce and used in the industry profile.  This assessment considers the
                                               4.27

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overall competitiveness of the MP&M industries in import and export markets, with respect to foreign
competitors.

       On the basis of the two assessments, facilities with significant exposure to foreign competition
were assigned to the; -worst case trade impact scenario while facilities with little expected exposure to
foreign competition were assigned to the best case trade impact scenario. Facilities with moderate exposure
to foreign competition were assigned to the proportional case trade impact scenario.

       After assigning each sample facility closure to a trade impact scenario, EPA allocated the export
and import market revenues from estimated facility closures between foreign and domestic producers
according to the rules for the three trade scenarios. The changes in exports and imports accruing from all
incrementally closing facilities were multiplied by their sample weights and summed to yield an estimate of
the aggregate impact bn imports, exports and the trade balance resulting from promulgation of the effluent
guideline.

       Table 4.12 presents the results from the foreign trade impact analysis. As shown in the table, even
under the conservative zero-cost-pass-through assumption, the proposed effluent guideline will have a
                   i
negligible impact on U.S. imports, exports and the trade balance.
                   i
       On the  basis of sample-weighted national  estimates, EPA estimates that exports will not be
measurably affected by compliance with the proposed regulation, while imports are  estimated to increase
by approximately $5.3 million, or 0.01  percent of the 1991 imports of the MP&M Phase I industry
commodities, according to Department of Commerce data. The net effect on the trade balance is therefore a
decline of $5.3 million,  or approximately 0.01 percent of the current trade balance in MP&M Phase I
industry commodities.
                Table 4.12: MP&M PhaSelJMuent Guideline Impacts on Foreign Trade
                     Sample Weighted National Estimates for Option 2a/2($ millions)
                    i    	 -    Exports.,   Imports   Trade Balance
            Baseline                             112,565.1    72,157.1
            Post-Compliance Change                   0.0        5.3
            Percent Change From Baseline	0.00%     0.01%
40,408.0
    -5.3
 -0.01%
            Source: U.S. Environmental Protection Agency and Department of Commerce
4.8     Regulatory Flexibility Analysis
        In accordance with the requirements of the Regulatory Flexibility Act (Public Law 96-354), the.
                    t
Agency performed a; Regulatory  Flexibility Analysis of the  proposed regulation.  The purpose  of the
Regulatory Flexibility Act is to ensure that, while achieving statutory goals, government regulations do not
                                              4.28

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impose disproportionate impacts on small entities. On the basis of the Regulatory Flexibility Analysis (see
Chapter 10 of the EIA), EPA expects that the proposed regulation will not have a significant economic
impact on a substantial number of small entities.

       In developing the proposed regulation, EPA sought from the outset to define a regulation that
would not unreasonably burden small entities.  In particular, EPA considered a number of regulatory
alternatives for indirect and direct  dischargers, each of which was assessed to have varying degrees of
impact on small entities. In selecting the proposed regulation from among these alternatives, EPA balanced
several factors, including: the need  for additional reduction in  effluent discharges  from the MP&M
industry; the fact that the MP&M industry is largely comprised of small business entities; and the need to
achieve additional reduction in effluent discharges without imposing unreasonable  burdens on  small
entities. As a result of these  considerations,  EPA expressly framed the proposed regulation to reduce
impacts and adminstrative costs on small entities.

        Specifically, as discussed above, EPA settled on the proposed regulation for indirect dischargers,
Option 2a, after considering and rejecting the initial Option 2. On the basis of the facility impact analyses,
EPA  determined  that Option 2  would be economically achievable by indirect discharging facilities. In
accordance with this finding, EPA initially considered adopting the mass-based requirements of Option 2
for all  indirect  discharging facilities. However,  further  analysis indicated  that, while  economically
achievable, Option 2  would place  greater  financial burden on  smaller  facilities  and, moreover, would
substantially  burden  permitting authorities by  requiring that mass-based standards  be written for  all
indirect discharging facilities,  regardless of size and amount of discharge reduction to be achieved.  For
these reasons, EPA defined and evaluated two additional options: Option la, which applies the Option 2
requirements  to large flow facilities and the modestly  less stringent  Option 1 requirements  to low flow
facilities; and  Option 2a,  which applies the  requirements of  Option 2 to  large flow facilities  while
exempting low flow indirect discharging facilities from regulation. EPA found that both of these additional
options would mitigate the burden of regulation on small businesses and permitting authorities. However,
EPA  found that  the latter option, Option 2a, much more  substantially reduced the closure  impacts  and
financial  burdens among  MP&M facilities  owned by small business  and, as well, the  regulatory
implementation burden  on permitting authorities.  After considering other  factors  that  also  favored
Option 2a — namely, cost effectiveness and pollutant reductions — EPA decided to propose Option 2a as
the PSES option for indirect discharging facilities.
                                                4.29

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       The following sections summarize the analyses  underlying the Agency's conclusion that the
proposed regulation will not have a significant economic impact on a substantial number of small entities
                  i   •
       Small Business in the MP&M Industry
       EPA analyzed the role of small entities in the MP&M industry and the associated impacts that
would be caused by:the proposed regulation. These analyses showed that the MP&M industry is largely
comprised of small business entities and, accordingly, the regulation could apply to a substantial number of
small entities. Specifically, on the basis of Small Business  Administration (SBA)  firm-employment size
criteria, EPA estimates that over  75 percent of the  estimated 10,601 water discharging facilities in the
MP&M Phase I industries are owned by a small business. With over 75 percent of the facilities to which
the regulation is expected to apply defined as small businesses, EPA also examined the employment size
distribution of the MP&M facilities to  gain additional insight into how smaller facilities are likely to be
affected by  the proposed regulation. From the analysis  of the facility  employment distribution, EPA
estimated that 25 percent of water-discharging facilities have 9 or fewer employees and that 50 percent of
water-discharging facilities have 79 or fewer employees.

       EPA also  found that small facilities play a substantial role in the economic performance and
contributions of the MP&M industry. From Department of Commerce data for 1989, EPA estimates that
over 97 percent of facilities in the MP&M Phase I industries (including both water-discharging and non-
discharging facilities) have fewer than 250 employees. These relatively small facilities account for about 49
percent of total  MP&M industry employment, 40 percent of total shipments, and 40 percent of the MP&M
industry's contributipn to gross domestic product.

       Impacts of the Proposed Regulation on Small Business
       To gauge whether the proposed  regulation would have a significant impact on a substantial number
of small entities, EPA considered the level of impacts and compliance costs expected to be imposed on
small entities.  From these analyses, EPA found that the  proposed regulation will impose significant
economic  impacts (i.e., facility closures) more frequently  among  small  business entities than among
MP&M facilities  generally. In addition,  these analyses  indicated that the compliance  cost burden (as
measured by total annual compliance costs as a percent of facility revenue) is expected to be greater among
small business  entities than among MP&M facilities generally. However,  for both of these measures of
small business impact — frequency of facility closures and compliance cost burden — EPA found that the
absolute levels  of impacts were so slight as to not constitute a significant economic impact on  small
                                              4.30

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entities. Moreover, the impact levels under the proposed regulation are much lower than those that would
be expected under any of the other options that EPA considered for proposal.

        Facility Closure Impacts by Business Size
        Table 4.13  summarizes the findings from the facility closure analysis according to business  size
classification. The first three columns — Option 1, Option 2, and Option 3  — combine the results for
indirect and direct dischargers for  each of those options. The latter two columns reflect the additional
options that  were developed for  indirect dischargers — Option la  and  Option 2a —  combined  with
Option 2 for direct dischargers. Specifically, the rightmost column, which is labeled Option 2a/2, combines
results for Option 2a for indirect dischargers and Option 2 for direct dischargers and thus represents the
proposed regulatory option. The next column to the left, which is labeled Option la/2,  combines results for
Option la for indirect dischargers and Option 2 for direct dischargers and represents the other option that
EPA defined as an alternative to the initially selected Option 2 for indirect and direct dischargers.
	 	 	 Table 44& Facility Closure finpaefs br Business S&e
Facility Classifications
Total Estimated Facility Closures
(as percent of facilities in impact analysis)
Closures By SBA Firm-Size Criteria
Small Business-Owned
(as percent of class1)
Other (not Small Business-Owned)
(as percent of class)
Closures By Facility Employment Class
1-9 Employees
(as percent of class)
10 - 79 Employees
(as percent of class)
80 or more Employees
(as percent of class)
Regulatory Option
Initial Options
Option!
178
2.0%
178
2.6%
0
0.0%
83
4.1%
95
4.0%
0
0.0%
Option 2
169
1.8%
169
2.5%
0
0.0%
83
4.1%
84
3.5%
2
0.1%
Option 3
317
3.5%
248
3.6%
69
3.1%
83
4.1%
132
5.5%
102
2.2%
i Subsequent Options
Option la/2
169
1.8%
169
2.5%
0
0.0%
83
4.1%
84
3.5%
2
0.1%
Option 2a/2
25
0.3%
25
0.4%
0
0.0%
18
0.9%
5
0.2%
2
0.1%
1 'Class" refers to the indicated sub-group of facilities (e.g., Small Business-Owned Facilities) and 'percent
of class" means the percentage of that group expected to incur facility closure impacts.
Source: Environmental Protection Agency
       As shown in the table, all estimated facility closures for Options 1, 2, la/2, and 2a/2 occur among
small business-owned facilities, as defined on the. basis of SBA criteria. Only under Option 3 are closures
estimated to occur  among facilities not owned by small businesses.  The analysis  according to  facility
employment size gives similar results with estimated facility closures occurring more frequently in the 1-9
and 10-79 employee size classes.
                                               4.31

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        Although closure impacts are concentrated among small entities, the expected level of closures
under the proposed option is extemely low for the small entity categorizations analyzed: 0.4 percent of
small business-owned facilities; 0.9 percent of facilities with 9 or fewer employees; and 0.2 percent of
facilities with  10 to  79  employees.  Notably,  closures among the small  entity categorizations are
substantially higher for all the other options analyzed. To illustrate, for small business-owned facilities, the
closure rate ranges from 2.5 percent to 3.6 percent for the other four composite options presented in the
table. Overall, EPA finds that the rate of expected facility closures among small business entities is well
within acceptable bounds.

        Compliance, Cost Impacts by Business Size
        EPA also considered the compliance costs likely to be incurred by facilities in complying with the
proposed regulation. EPA assessed compliance costs in terms of (1) the total annual compliance costs
expected to be imposed on facilities according to business size and (2) total annual compliance cost as a
percentage of facility revenue as a measure of the relative burden of compliance costs.

        Analysis of Total Annual Compliance Costs
        Table 4.14 summarizes total annual compliance costs by business size classification of facility for
the alternative regulatory options. Total annual compliance costs are calculated as the annual after-tax cash
flow impact on facilities and reflect private costs of capital and the expected tax treatment of capital
outlays and operating costs of compliance. This analysis shows that the aggregate compliance costs  to
small entities are substantially lower under the proposed Option 2a/2 than under all the other options
analyzed. At $54.5 million, the estimated annual compliance cost for small business-owned facilities under
the proposed Option 2a/2 is approximately 40 percent less than the cost estimated for either the initially
selected Option 2 or the other secondarily defined option, Option la/2. The analysis based on facility
employment size class further confirms the reduced impact of the proposed Option 2a/2 on small entities:
the total costs of Option 2a/2 among facilities with 9 or fewer employees are only about 9 percent  of the
                   I
costs for Option 2 or Option la/2; and the costs for Option 2a/2 among facilities with 10 to 79 employees
are  about half of the costs for Option 2 or Option la/2. That the cost burden of Option 2a/2  on small
business entities is' so much lower than  that estimated for the other options supports EPA's choice of
Option 2a/2 as the proposed regulatory option and the finding that Option 2a/2 will not impose a significant
economic impact on small entities.
                                                4.32

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imirii.i _ in TaWej.14* T^ 	
Facility Classification
All Facilities
By SBA Firm-Size Criteria
Small Business-Owned
Other (not Small Business-Owned)
By Facility Employment Class
1-9 Employees
10 - 79 Employees
80 or more Employees
Regulatory Option
Initial Options i
Option 1
186,399
78,015
108,384
9,384
29,400
147,615
Option 2
197,710
91,370
106,339
9,613
32,351
155,746
OptionS :
579,912
281,815
298,097
10,054
74,660
495,198
Subsequent Options
Option la/2
193,541
89,978
103,563
9,332
31,828
152,380
Option 2a/2
137,067
54,539
82,528
831
15,910
120,326
Source: Environmental Protection Agency
       Analysis of Compliance Costs Relative to Facility Revenue
       Table 4.15 summarizes the  relative compliance cost burden among facilities by business size
classification.  For this analysis, the  compliance cost burden was assessed as the ratio of total annual
compliance cost to facility revenue. Table 4.15 indicates for each option the average value of compliance
costs as a percentage of revenue for facilities by size class, and lists the percentage of facilities in each size
class expected to incur compliance costs exceeding 5 percent of revenue. For several previous regulations.,
EPA judged annual compliance costs that are less than.five percent of facility revenue as not likely to
impose a significant financial burden on the complying entity.

       As shown in Table 4.15, EPA estimates that compliance costs as a percentage of facility revenue
will be higher for small entities than for MP&M facilities generally both for the proposed Option 2a/2 and,
as well, for the other options considered. However, among small business-owned facilities, total annual
compliance costs are estimated to average only 0.11 percent of revenue for the proposed Option 2a/2.
Moreover, in comparing compliance costs with the  5 percent of revenue threshold, EPA found that a very
small percentage of small business-owned facilities, only 0.26 percent, are expected to incur total annual
compliance costs exceeding 5 percent of revenue under the proposed regulatory option. Accordingly, EPA
judges that the proposed regulation's cost burden on small entities would be manageable based on accepted
standards of cost severity.

       Small Business Impact Finding
       In view of this analysis and in recognition of the Agency's efforts,  as summarized above, to define
the proposed option in a way that would reduce impacts to small entities, EPA concluded that the facility
closure impacts and compliance cost burdens of the  proposed option will not constitute an undue impact on
small business entities.
                                               4.33

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Table 445? Sfotal Annual Compliance Costs as a Fereentage of Facility Hevewte
Alt Mschargersi AF Business Size Grderia
Facility Size Classes
Regulatory Option
Initial Option*
Optiow X i
Compliance Costs as a Percentage ofFacilit
All Facilities ;
By SBA Firm-Size Criteria
Small Business-Owned Facilities
Other (not Small Business-Owned)
By Facility Employment Class
1-9 Employees
10-79 Employees :
80 or more Employees
0.41%
0.51%
0.11%
1.09%
0.41%
0.12%
Option 2
Option 3
Subsequent Options
Option la/2
Option 2a/2
V Revenue, Average Values by Facility Class
0.42%
0.53%
0.11%
1.12%
0.42%
0.13%
0.65%
0.78%
0.26%
1.20%
0.79%
0.36%
0.41%
0.51%
0.11%
1.08%
0.42%
0.13%
0.10%
0.11%
0.06%
0.10%
0.12%
0.09%
Percentage of Facilities by Class with Compliance Costs Exceeding Five Percent of Revenue
All Facilities
By SBA Firm-Size Criteria
Small Business-Owned Facilities
Other (not Small Business-Owned)
By Facility Employment Class
1-9 Employees
10-79 Employees
80 or more Employees
0.52%
0.69%
0.00%
1.27%
0.94%
0.00%
0.47%
0.63%
0.00%
1.27%
0.76%
0.00%
1.35%
1.79%
0.00%
2.78%
2.49%
0.17%
0.52%
0.69%
0.00%
1.27%
0.93%
0.00%
0.19%
0.26%
0.00%
0.00%
0.73%
0.00%
Source: Environmental Protection Agency
4.9     Cost Effectiveness Analysis of MP&M Regulatory Options
        In addition; to  the foregoing analyses,  EPA  performed  a  cost-effectiveness  analysis of  the
alternative regulatory options for indirect dischargers (PSES) and direct dischargers (BPT/BAT). This
analysis is detailed in  'Cost-Effectiveness  Analysis of Proposed  Effluent Limitations Guidelines  and
                   j
Standards  for the Metal Products  and Machinery  Industry,  Phase I" (hereinafter  Tost Effectiveness
Report').  Cost-effectiveness  analysis is  used in the development  of effluent limitations guidelines to
evaluate the relative efficiency of alternative regulatory options in removing pollutants from the effluent
discharges to the nation's waters,  and to  compare the  efficiency of a proposed  regulation with that
                                                                                    •
estimated for previous regulations.

        The  cost effectiveness  of  a regulatory  option is defined as  the incremental annual  cost  per
incremental toxic-weighted  pollutant removal  for that  option.  The result  of the  cost-effectiveness
calculation represents the unit cost of removing the next pound-equivalent of pollutants and is expressed in
constant  1981 dollars  per  toxic  pound-equivalent removed ($/lb-eq).  The  costs used in the cost-
effectiveness analysis are calculated on a pre-tax basis and capital costs are annualized using an estimated
real opportunity cost of capital to society of 7 percent. Thus, these costs represent the costs incurred by
industry on behalf of society for compliance with the proposed regulation. The cost-effectiveness values for
                                               4.34

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a given option may be compared with those of other options being considered for a given regulation and
also with those calculated for other industries or regulatory settings. Although not required by the Clean
Water Act, cost-effectiveness analysis is a useful tool for evaluating regulatory options for the removal of
toxic pollutants.

        EPA performed the cost-effectiveness analysis for the MP&M regulation separately for indirect
dischargers (subject to PSES) and direct dischargers  (subject to BAT/BPT). For each of the  regulatory
options, the pounds-equivalent removed were calculated by multiplying the estimated pounds removed of
each pollutant by its toxic weighting factor and summing the toxic-weighted removals over all toxic (i.e.,
excluding conventional) pollutants. The estimated annual compliance costs for each option were deflated
from  1989 dollars to 1981  dollars. The cost-effectiveness values were then calculated as the change in
compliance cost, in moving to a given option from the next less stringent option, divided by the change in
toxic-weighted removals. The following sections summarize the results for the two classes of facilities.

        Cost-Effectiveness Analysis for Indirect Dischargers
        Table 4.16 summarizes the cost-effectiveness analysis for the PSES regulatory options applicable
to indirect dischargers. Annual compliance costs are shown in 1989 dollars and also in 1981 dollars. In
addition, pollutant removals are reported on both an unweighted and toxic-weighted basis.  The regulatory
options are listed in order of increasing stringency on the basis of the estimated toxic-weighted pollutant
removals.

        As shown  in Table 4.16,  Option 2a/2 achieves approximately  12.8 million pounds of toxic
pollutant removals, on an unweighted basis and 881,300  pounds-equivalent on a toxic-weighted basis.
Because Option 2a/2 is the least stringent option in terms of pollutant removals, the cost-effectiveness of
this option is the same as its average cost per pounds-equivalent removed, $127. EPA considers this value
to be acceptable when compared to values calculated for previous regulations.

        The next more stringent option, Option 1, is estimated to  achieve approximately  14.6  million
pounds of toxic pollutant removals on an unweighted basis and  988,900 pounds-equivalent on a toxic-
weighted basis, which is a 107,100 pounds-equivalent increment over Option 2a/2. With an  estimated
annual compliance cost of $137 million ($1981), or $65 million more than Option 2a/2, the calculated cost
effectiveness  for  Option 1's removals is  $607 per pound-equivalent of  pollutant  removed. This cost-
effectiveness value is higher than the values calculated for other industrial discharge limitations previously
promulgated by EPA.
                                               4.35

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Table 44«: CflstEffectfvettess ef Hegutetarj? Options for 0,
J?s-en}
881.3
988.9
1.011.0
1,011.6
1,105.4
Incremental
(000,lfos-eti>
881.3
107.6
22.1
0.6
93.8
Incremental
Cost
($000,000,
1981)
111.9
65.3
(7.2)
4.9
337.4
Cost
Effectiveness
($/te-eq,
$1981)
127
607
(327)
8,537
3,596
The cost effectiveness for a regulatory option is defined as the incremental cost per incremental removal in toxic
pounds equivalent ($/lb-eq) for that option. The "increment" for a given option is the change in costs or removals
from the next less stringent option, or the baseline if there is no less stringent option (i.e., Baseline to Option 2a,
Option 2a to Option I,...)- Regulatory options are ranked by increasing levels of toxic-weighted removals. Cost
effectiveness-values are calculated in 1981 dollars to permit consistent comparison of cost-effectiveness values
among regulations promulgated at different times.
Source: U.S. Environmental Protection Agency
       In moving from  Option 1 to Option la, toxic-weighted pollutant removals increase by 22,100
pounds-equivalent while costs decrease by $7.2 million. Thus, the cost effectiveness of Option la relative
to Option 1 is a negative $327 per pound-equivalent of additional pollutant removed. Because Option la is
estimated to impose lower cost on industry and society than Option 1 while, at the same tune, achieving
greater toxic-weighted removals, Option la maybe said to dominate Option 1 from an economic efficiency
perspective. That is, within the context of the cost-effectiveness analysis, society would always be better off
by choosing the moire stringent Option la over Option 1 because greater toxic-weighted pollutant removals
would be achieved by Option la but at a lower total pre-tax cost of compliance.

       Stepping beyond Option la to Option 2 is not cost effective for existing indirect  dischargers in
comparison to values calculated for previous  regulations.  Stepping from Option la to Option 2 yields very
little additional toxic-weighted pollutant removals, 600 pounds-equivalent, at an additional  estimated cost
of $4.9 million. Because the increase in removals is so small, the cost-effectiveness value for moving from
Option la to Option 2 is  extremely high at $8,537 per pound-equivalent of additional pollutant removed.
The only difference between Option la and Option 2 is that Option 2 applies the mass-based limitations of
Option 2  to low-flow  indirect dischargers while  Option la   applies  the  somewhat less  stringent,
concentration-based limitations of Option 1 to these facilities. Thus, the  high cost-effectiveness value of
$8,537 stems entirely from the increased stringency of regulatory requirements  for these low-flow indirect
discharging facilities and demonstrates the poor cost effectiveness of applying the Option 2 requirements to
this class of faculties. As noted in Chapter 4, above, the finding of such a high cost-effectiveness value for
                  I
Option 2 for low-flow indirect discharging facilities was an important factor in EPA's decision to define
and evaluate alternatives to Option 2 for these facilities in developing the PSES regulatory proposal.
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        Moving from Option 2 to  Option 3  was also found to  yield a high  cost-effectiveness  value.
Although the incremental removals for this step are relatively substantial at 93,800 pounds-equivalent, the
large increase in cost of $337.4 million yields a cost-effectiveness value of $3,596 per pound-equivalent of
additional pollutant removed, thus  rendering this  option unacceptable from the standpoint of  cost
effectiveness.

        On the  basis of this analysis,  EPA determined that the proposed option,  Option 2a,  is  cost
effective. The cost-effectiveness analysis supports the choice of Option 2a as the proposed PSES regulatory
option for indirect dischargers.

        Cost-Effectiveness Analysis for Direct Dischargers
        Table 4.17 summarizes the cost-effectiveness  analysis for the BPT/BAT  regulatory options
applicable to direct dischargers. As before, annual compliance costs are shown in 1989 dollars and also in
1981 dollars; and pollutant removals are reported on both an unweighted and toxic-weighted basis.  The
regulatory options are listed in order of increasing stringency on the basis of the estimated toxic-weighted
pollutant removals. The ranking of annual compliance costs matches the ranking of option stringency.
fable 417; Cost Effectiveness of Regulatory Options for the Metal Products and Maefciaery Industry
Direct Dischargers (BPT/BAT)
Regulatory
Option
Option 1
Option 2
Options
Annual
Compliance Costs
$900,000,
i9m
15.5
16.3
68.7
($000,000,
mi)
11.9
12.5
52.6
Unweighted
Pollutant
Removals
(oooabs)
1,152.5
1,232.2
1,446.7
tVeigktedfallmaat
Removals
(00%
Ibs-eq)
58.2
70.7
133.6
Incremental
(OCXUfcs-e*!}
58.2
12.5
62.9
Incremental
Cost
($000,000,
mt)
11.9
0.6
40.1
Cost
Effectiveness
(3/lb-eq,
$19$t)
204
50
638
The cost effectiveness for a regulatory option is defined as the incremental cost per incremental removal in toxic
pounds equivalent ($/lb-eq) for that option. The "increment" for a given option is the change in costs or removals
from the next less stringent option, or the baseline if there is no less stringent option (i.e., Baseline to Option 1,
Option 1 to Option 2,...). Regulatory options are ranked by increasing levels of toxic-weighted removals. Cost
effectiveness-values are calculated in 1981 dollars to permit consistent comparison of cost-effectiveness values
among regulations promulgated at different times.
Source: U.S. Environmental Protection Agency
        As shown in Table 4.17, Option 1 is estimated to achieve approximately 1.2 million pounds of
toxic pollutant removals on an unweighted basis and 58,200 pounds-equivalent on a toxic-weighted basis.
With an estimated annual compliance cost of $11.9 million ($1981), the calculated cost effectiveness for
Option 1's removals is  $204 per pound-equivalent of pollutant removed. In moving from Option 1 to
Option 2,  toxic-weighted pollutant removals increase by 12,500 pounds-equivalent at a cost increase of
$0.6 million. Thus, the cost effectiveness of stepping to Option 2 is a comparatively low $50 per pound-
                                              4.37

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equivalent of additional pollutant removed. EPA considers both of these cost-effectiveness values to be
acceptable in relation to the values calculated for previous regulations.

        Option 3's  cost effectiveness of $638 per pound-equivalent of additional pollutant  removed  is
substantially poorer than the cost effectiveness of Options 1 and 2. Stepping from Option 2 to Option 3
nearly doubles the total toxic-weighted removals with a substantial increase of 62,900 pounds-equivalent.
However, Option 3's| annual compliance costs are more than four times those estimated for Option 2 and
the resulting additional cost of $40.1 million yields the relatively high cost-effectiveness value of $638 per
pound-equivalent.

        From this analysis, EPA determined that Option 2 is cost effective, and the cost-effectiveness
analysis supports the choice of Option 2 as the  proposed BPT/BAT  regulatory  option  for direct
dischargers.
                                                4.38

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                                           Chapter 5
                          Social Costs of the Proposed Regulation

5.1    Introduction
       A principal objective of the Regulatory Impact Analysis is to develop and compare estimates of the
benefits and costs to society of the proposed MP&M regulation. The preceding chapter summarized the
expected economic impacts of the proposed regulation on the MP&M industry in terms of facility closures,
associated employment  and production losses, community unemployment impacts, international trade
effects,  financial  impacts on firms owning MP&M facilities,  and impacts on small businesses.  The
economic  impact analyses were based on the estimated costs to  MP&M facilities of complying with the
proposed regulation. These costs of labor, equipment, material, and other economic resources needed for
regulatory compliance are also the major component of the cost to society of the proposed regulation. In the
economic  impact analysis, EPA accounted  for the costs of these resources from the perspective of the
private firm subject to regulation. However, for the analysis of the social cost of the proposed regulation,
these resource costs of compliance are viewed from the perspective of society. In addition,  other elements
of social cost — namely, the costs to government of administering the regulation, and the costs associated
with unemployment resulting from the regulation — are added to the costs of compliance to provide a more
comprehensive accounting of the overall cost of the proposed regulation to society.

        In this chapter,  EPA presents its estimate of the social cost of the proposed MP&M regulation,
Option 2a/2 as described in the preceding chapter. The discussion is organized as follows. The following
section, Section 5.2,  provides an  overview of the three  components of  social cost  analyzed for this
regulation: the cost of society's economic resources for achieving compliance with the proposed regulation;
the cost to governments  of administering the proposed regulation; and the costs of unemployment resulting
from the regulation. The next three sections discuss respectively these three components of social cost. The
last section,  Section 5.6, summarizes the estimate of total social cost.

5.2     Overview of Costs Analyzed
        The social costs of regulatory actions are the opportunity costs to society of employing scarce
resources  in  pollution  control activity.  The social  costs of  regulation  include both  monetary and
non-monetary outlays made by society. Monetary outlays include the resource costs of compliance,
government  administrative costs,  and other adjustment costs, such as the cost of relocating displaced
workers. Non-monetary outlays,  some of  which can  be assigned monetary values,  include  losses in
                                               5.1

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consumers' surplus In affected product markets, discomfort or inconvenience, loss of time, and a slowdown
in the rate of innovation.

        To assess the economic costs to society of the MP&M regulation, EPA relied foremost on the
estimated costs  to  MP&M facilities for the labor, equipment, material,  and other economic resources
needed to meet the discharge limitations specified by the proposed regulation. These cost estimates are the
same as those used;for the zero-cost-pass-through analysis of facility impacts described in the preceding
chapter (i.e., in which firms must absorb all of the regulatory compliance costs). In the societal cost-benefit
analysis, however, the accounting for these costs differs from that in the  facility impact analysis. In the
                   i
facility  impact analysis, costs and their  impacts are considered in terms of their effects on the  financial
performance of the firms and facilities affected by regulation. To understand the significance of those costs
to affected firms and facilities and their likely responses to the proposed regulation, the analyses explicitly
considered the expected tax treatment of the annual  expenses  and  capital outlays for compliance.  In
addition, the annual charges for the capital outlays were calculated using private costs of capital. Thus, the
total annual compliance costs reported in the previous chapter are the costs to industry and are presented
on an after-tax basis  reflecting private costs of capital. In the analysis of the costs to  society, however,
these compliance costs are considered on a before-tax basis and the annualization of capital outlays is
based on an  opportunity cost  of capital to society.  In general,  because of the elimination of tax
considerations, the  estimated compliance  costs are greater from the perspective  of society than  from the
perspective of private industry.

        In  addition to the estimated resource costs to  society of regulatory compliance, the estimate of
social cost presented  in this chapter includes two other cost elements: the cost  to governments (federal,
state, and local) of administering the permitting and compliance monitoring activities under  the proposed
regulation1; and the costs associated with unemployment that may result from the  proposed regulation. The
unemployment-related costs include: the  cost of administering unemployment programs for workers who
are estimated to  lose employment (but not the cost of unemployment benefits, which are a transfer payment
  Executive Order 12875 (Enhancing the Intergovernmental Partnership) requires that the Agency consult with
state, local and tribal governments regarding any regulation the will create an "unfunded mandate" on those non-
federal governmental units. As part of this regulatory analysis, EPA  estimated the cost  to  government of
administering the MP&M regulation. To the extent that these costs are borne by state, local and tribal governments
instead of the federal government, these costs also represent the amount of the unfunded mandate associated with
the proposal.        '
                                                 5.2

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within society); and an estimate of the amount that workers would be willing to pay to avoid involuntary
unemployment.

5.3     Resource Costs of Regulatory Compliance
        The chief component of the estimated annual social cost is the resource cost of complying with the
proposed regulation. The portion of this cost that is expected to be borne directly by the MP&M Phase I
industries amounts to $137.1 million ($1989). This amount is the same as that used for the facility impact
analysis and reflects the cost of pollution prevention and treatment systems needed to achieve compliance
with the proposed discharge limitations (see Chapter 4). In addition, this amount reflects the expected tax
treatment of capital outlays and annual expenses and is also based on private, after-tax costs of capital.

        However, as discussed above, the appropriate measure of cost of compliance to society will omit
these tax effects and will also reflect the opportunity cost of capital to society or social discount rate. The
combined effect of these adjustments is to add an estimated $25.3 million to the estimated private industry
cost of the regulation, bringing the resource cost of compliance to society to $162.4  million ($1989). This
amount includes the annual costs of operating and maintaining pollution prevention and treatment systems,
and an annual charge for the capital cost of these systems. EPA calculated the annual capital charge by
amortizing the estimated cost of purchasing and installing the pollution prevention and treatment systems,
$353.4 million ($1989), over the estimated 15-year productive life of the capital equipment at the estimated
real opportunity cost to society of capital of 7 percent. The total annual resource cost of compliance may
be  interpreted as the value of society's productive resources — including labor, equipment, and other
material — that is needed  annually to  achieve the reductions in effluent discharges  specified by the
proposed regulatory option.

5.4     Costs of Administering the Proposed Regulation
        In addition to the resource costs for achieving effluent discharge reductions, EPA  also estimated
the cost to all levels of governments for administering the proposed regulation.2 The main component  of
this administrative cost category is the cost of labor and material resources for writing permits under the
regulation and for compliance monitoring and enforcement activities. From analysis  of §308 Survey data,
EPA expects increases in government administrative costs for 1,710 facilities that discharge waste water
  Incremental administrative costs were estimated to federal, state, and local levels of government. EPA did not
attempt to estimate the share of these costs that each level of government would incur.
                                                5.3

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indirectly through a publicly-owned treatment works (POTW). Currently, these facilties either do not hold
discharge permits or hold concentration-based permits. However, under the proposed regulation, these
facilities would recjuire a mass-based permit,  entailing additional effort  and expense on the part of
permitting authorities. EPA does not expect increases in administrative costs for facilities that  discharge
then- waste water directly to surface water because the National Pollution Discharge Elimination System
(NPDES) permit program  requires  that  these facilities hold permits. Indeed, these costs  may decline
because the proposed regulation will provide a consistent framework for writing NPDES permits.3

        EPA estimated incremental  administrative costs to government for the proposed regulation by
multiplying unit cost data for administrative functions by the frequency of administrative functions and by
the number of facilities for which the adminstrative functions would be administered. EPA estimated  unit
costs for administrative functions in five major categories:

1.      Permit  application  and  issuance (including:  developing and  issuing  mass-based permits at
        previously  unpermitted facilities; developing  and  issuing mass-based permits  at facilities with
        concentration-based  permits;  providing  technical  guidance;  conducting  public  hearings;  and
        conducting evidentiary hearings);

2.      Inspection (conducted for initial permit development or subsequent inspection);
                   i
3.      Monitoring (including:  sampling and  analyzing permittee's  effluent; reviewing  and  recording
        permittee's compliance self-monitoring reports; receiving, processing, and acting on a permittee's
        non-compliance reports; and reviewing a permittee's compliance schedule report for a permittee in
        compliance and a permittee not in compliance);

4.      Repermitting; and

5.      Enforcement.

        EPA believes that these functions constitute the bulk of administrative activity that will fall on
government as  a  result of  the  proposed  regulation. EPA  recognizes  that other, relatively  minor,
administrative functions exist (e.g., identifying facilities to be permitted, providing technical guidance to
  See Appendix E for a detailed discussion of the analysis of administrative costs likely to result from the proposed
regulation.          ;
                                                5.4

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permittees in years other than the first year of the  permit, repermitting  a facility in significant non-
compliance) but expects the associated costs to be inconsequential compared to the estimated costs for the
five major categories outlined above.

        EPA obtained estimates of the typical unit costs of these administrative functions from several
sources, including: Information Collection Request analyses; a resource planning model used by EPA; an
informal survey of six POTWs and three state permitting officials; and discussions with EPA Regional
Office and Headquarters permitting staff. These data sources indicated that the permitting process, and
therefore permitting costs, vary substantially among permitting authorities. For each major administrative
function, EPA therefore developed a range of typical costs reflecting the varying permitting practices. In
addition, EPA recognized that the permitting of certain highly complex facilities may require effort that
substantially exceeds the  costs for a  typical facility. Therefore, EPA  also estimated  the  unit  costs
associated with a hypothetical complex facility. The permitting of a facility may be rendered complex by
such facility characteristics as undocumented history of process  waste water flow, known problems with
spills or leaks, multiple production processes, several treatment systems, or multiple outfalls.

        EPA used the unit cost estimates, the frequencies of the administrative activities, and the facility
counts to estimate annualized incremental government administrative costs over a fifteen-year period. EPA
first developed schedules indicating the number of facilities to which each activity would be administered in
each year.  EPA then multiplied the number of facilities by the unit costs of each activity and annualized
costs using a discount rate of seven percent. Large facilities were assumed likely to be complex. Thus, EPA
applied the unit cost estimates for "highly complex" facilities to twenty percent of facilities discharging
between 1,000,000 and 6,250,000 gallons per year and 40 percent of facilities  discharging over 6,250,000
gallons per year. From these analyses, EPA calculated annual incremental government administrative costs
associated with the proposed MP&M regulation of $1.6 million to $2.7 million ($1989).

        It  is possible that this increase in costs  may be partially offset by reductions in  government
administrative costs  resulting from promulgation of the MP&M effluent limitations. For example,  the
technical guidance provided by EPA as a component of rulemaking may reduce the research required by
permit writers in developing Best Professional Judgement (BPJ) permits  for industrial dischargers  not
previously covered by a categorical standard or a water quality standard.  Further, the establishment of
discharge standards may reduce the frequency of evidentiary hearings. The promulgation of limitations may
also enable EPA  and the authorized states to cover more facilities under general permits. EPA did not
monetize these cost savings that may result from the rule.
                                                5.5

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 5.5    Costs of Unemployment
        For the analysis of the social cost of unemployment that may result from the proposed regulation,
 EPA considered two cost elements:

 1.      The cost of worker dislocation (exclusive of cash benefits) to unemployed individuals; and

 2.      The additional cost to governments to administer unemployment benefits programs.

        Cost of Worker Dislocation
        EPA calculated the cost of worker dislocation based on an estimate of the value that workers would
 pay to avoid involuntary job loss. The estimate of the amount that workers would pay to avoid job loss was
 derived from hedonic studies of the compensation premium  required by workers to accept jobs with a
 higher probability of unemployment. This framework has been used in the past to impute a trade-off
 between wages and job  security (Topel, 1984; Adams, 1985). Specifically, this estimate approximates a
 one-time willingness-to-pay to avoid an involuntary episode of unemployment and reflects all monetary and
 non-monetary impacts of involuntary unemployment incurred by the worker. It does not include any offsets
                   I
 to the cost of unemployment such as unemployment compensation or the value of increased leisure time.

        EPA calculated the cost of worker dislocation first based on the job losses associated with the
 MP&M industry facility closures estimated to result from the proposed regulation. To provide a more
 comprehensive  assessment of the  potential impact of unemployment,  EPA also accounted for the labor
 requirements for manufacturing, installing and operating the treatment systems needed to comply with the
 proposed  regulation., As discussed  in the preceding  chapter, these labor requirements may  offset the
 employment losses that are estimated to occur in closing MP&M facilities.

        Value to Woxkers of Avoiding Unemployment
        The value of avoiding unemployment is based on the estimated compensation premium required by
 workers to accept a higher probability of unemployment in otherwise equivalent employment opportunities.
 Studies by Topel (1984) and Adams (1985) suggest that the  compensation premium for accepting a one
 percent increase in the annual probability of unemployment is the range of 2.5 percent to 3.3 percent of the
 base compensation value. To illustrate this  finding, assume  that a worker  is presented with a choice
 between two  employment opportunities: one with compensation of $30,000  per year and an  annual
unemployment probability of zero, and a second  otherwise equivalent opportunity  but with an  annual
unemployment  probability  of one  percent. For  the worker  to  accept the second opportunity, its
compensation must be at least 2.5 to 3.3 percent greater than the $30,000 offered for the first opportunity,
                                              5.6

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or at least $30,750  to $30,990 (depending on the percentage premium used).  In this case,  the dollar
premium for accepting the additional one percent annual probability of unemployment is $750 to  $990.

        For the analysis  of the unemployment-related costs of the MP&M regulation, the hypothetical
choice is assumed to be  between an employment opportunity with a zero percent annual probability of
unemployment and a second opportunity with a 100 percent annual probability of unemployment. In this
case, the premium  for  accepting the  employment opportunity with the  100  percent  probability  of
employment is  assumed  to  be 250 to 330 percent of the compensation for the  otherwise comparable
employment opportunity with the assumed zero probability of employment.4 To estimate the premium for
an increase in the probability of unemployment requires an estimate of the average  compensation to
workers in the MP&M industry. For this amount, EPA used the average annual value of wages and salaries
for all manufacturing sector employees of $28,500 ($1989) as reported by the Department of Commmerce,
Bureau of Economic Analysis. Accordingly, the annual compensation premium for a one percentage point
increase in the annual probability of unemployment would be $713 to $941 and the cost of a 100 percent
probability event would be $71,250 to $94,050 ($1989).

        For calculating the annual cost of employment displacement for the proposed regulatory option,
EPA annualized these values over a 15-year period at a social opportunity cost of deferred consumption of
three percent yielding an annualized cost over the 15-year  period  of analysis of $5,968 to $7,878 per
unemployment event.5 For this analysis, these values are interpreted as the annualized amounts  over a 15-
year period that workers would be willing to pay to avoid an instance of unemployment resulting from the
proposed MP&M regulation.

        Unemployment Effects of the Proposed Regulation
        As discussed in the preceding chapter, EPA estimated a total of 698 job losses in MP&M facilities
that are expected to close as a result of regulation. Multiplying these 698 job losses by  the estimated range
  This analysis has a considerable artificiality in that a worker would not realistically be presented with this choice.
The artificiality of the choice in turn underscores the very strong assumption in the analysis. That is, that the cost
of an unemployment event can be estimated by linearly extrapolating the premium estimated for small percentage
differences in the probability of unemployment to a circumstance in which the probability of unemployment is 100
percent. An investigation of literature on  unemployment failed to find an alternative method  for estimating
unemployment costs. This analytic issue warrants further research.
  The opportunity cost of deferred consumption (3 percent) is used in this annualization calculation instead of the
opportunity cost of capital (7 percent) because the value of avoiding unemployment — if "charged" to current
workers — is assumed to be  a displacement from current consumption instead of a displacement from capital
investment.
                                                5.7

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of willingness-to-pay values for avoiding unemployment yields an annual cost of unemployment from
worker dislocation ranging from $4.2 million to $5.5 million ($1989).

       As discussed in Chapter 4, however, EPA also found that compliance with the MP&M regulation
may generate additional labor demands for manufacturing, installing, and operating treatment systems of
1,594 full-time equivalent positions. If these additional  labor demands are realized, the net employment
impact of the proposed regulation may be positive  and unemployment would be  reduced  rather than
increased by the regulation. As a result, the annualized cost of unemployment from worker dislocation may
be zero or negative. For comparing the costs and benefits of the proposed regulation, EPA used a range of
values for the unemployment costs from worker dislocation in which the low value was set to zero and the
high value was set at the higher of the two values estimated for worker dislocation costs, $5.5 million.
                  i                           ,
       Cost of Administering Unemployment
       Unemployment as the result of regulation also  imposes costs on society through the additional
administrative burdens placed on the unemployment system (the cost of unemployment benefits per se is
not a social cost but instead a transfer payment within  society). Administrative costs include the cost of
processing unemployment claims, retraining workers, and placing workers in new jobs. Data obtained from
the Interstate Conference of Employment Security Agencies indicated that the cost of administering an
initial unemployment claim over the period 1991-1993  averaged $93.25 ($1989). The costs included in this
calculation included;total Federal and state funding for administering unemployment benefit programs but
not the cost of benefits. From these data, EPA assumed for the analysis of the MP&M regulation that that
the cost of administering unemployment programs for job losses caused by the MP&M regulation  would
amount to approximately $100 per job  loss. Multiplying  this figure by the estimated loss of 698 jobs under
the proposed regulation yields an additional $70 thousand in social costs. EPA in turn annualized this value
over the  15-year  analysis period at the 3 percent opportunity cost of deferred consumption to yield an
annual cost of $6 thousand ($1989).

       As discussed above, the additional demand for labor resulting from compliance with  the MP&M
rule may more than offset the estimated employment losses in closing facilities. As a result, the net effect
on unemployment administration costs may be zero or negative.

       Total Cost of Unemployment
       When calculated on the basis of the 698 estimated job losses in closing facilities, the total estimated
cost of unemployment ranges from $4.2 million to $5.5 million ($1989) (see Table 5.1, below). As noted in
                                               5.8

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the preceding discussion, however, the additional demand for labor in complying facilities may exceed the
job losses estimated to occur in closing facilities. As a result, the net costs associated with unemployment
as a result of the regulation may be negative. In this regulatory impact analysis, EPA used a range of zero
to $5.5 million ($1989) for estimate of unemployment cost resulting from the proposed MP&M regulation.
To be conservative in the analysis, EPA limited the lower value of this range to zero. That is, EPA did not
recognize the possible savings in unemployment-related costs as  a negative  cost— and,  therefore,
implicitly a benefit — of the regulation.
T&Wte SUU Estimated Total Annual Costs »f XfnuanpIojhimaM:
Employment Loss in Closing Facilities
Annualized Worker Dislocation Cost (Smillion, 1989)
- Low Unit Cost (based on 2.5 percent premium)
- High Unit Cost (based on 3.3 percent premium)
Annualized Unemployment Administration Cost (Smillion, 1989)*
Sum, Worker Dislocation and Unemployment Administration Costs
(based on employment loss in closing facilities)
- Low Value
-High Value
Range of Values Used in Analysis
- Low Value (based on finding that labor demands for compliance
may exceed job losses)
-High Value
698
$4.2
$5.5
$0.0
$4.2
$5.5
$0.0
$5.5
*Rounds to zero.
Source: U.S. Environmental Protection Agency
5.6     Total Social Costs
        Summing across the social cost accounts results in a total social cost estimate of $164.2 to $170.8
million annually ($1989) (see Table 5.2). These social cost estimates do not include losses in consumers'
and producers' surpluses resulting from the change in quantities and prices of goods and services sold in
affected  product markets. However, under the zero-cost-pass-through framework in which compliance
costs have been tallied, MP&M industry product prices are assumed not to increase as a result of the
proposed regulation. In this case, the estimated resource costs of compliance will approximate the loss in
producers' surplus and, with no increase in prices, consumers' surplus will not change.
TableS.2; Estimated Social Cost of the Proposed MP&M Regulation
(mitliom of 1989 dollars)
Social Cost Categories
Cost to Industry for the Proposed Regulatory Option
Adjustments for Tax Code and Use of Social Discount Rate
Costs of Administering the Proposed Regulation
Unemployment: Worker Dislocation and Administration
Total Estimated Social Cost
Low Value
$137.1
$25.3
$1.6
$0.0
$164.0
High Value
$137.1
$25.3
$2.7
$5.5,
$170.6
Source: U.S. Environmental Protection Agency
                                                5.9

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                                           Section III
                                    Assessment of Benefits

        Sections One and Two  of this regulatory impact assessment provided  background information
regarding the Metal Products  and Machinery Industry Phase I effluent guideline  and discussed the
economic impacts and costs associated with the proposed regulation. In Section Three, benefits which stem
from  reductions in wastewater discharges are identified,  described, quantified  and, where possible,
monetized.

        The discussion of benefits begins in Chapter 6 with the estimation of the reduction in the mass of
pollutants that would be discharged from MP&M facilities once the proposed regulation is implemented.
The reduction in pollutant mass is attributable to process changes, improved end-of-pipe treatment and
pollution prevention activities. These pollutant reductions are then translated into improvements in water
and sludge quality which in turn have an effect on human health risks due to consumption of water and fish
tissue, in-stream and near stream biota (e.g., increased diversity and size of an aquatic species), and sludge
disposal options.

        The range of benefits resulting from improvements in water and sludge quality are detailed in
Chapter 7. These benefits are first discussed according to the broad class of benefits to which they belong.
Three classes are considered: human health, ecological, and economic productivity benefits. Each  class is
comprised of a number of more narrowly defined benefits categories. EPA expects that benefits will accrue
to society in all of these categories. Because of data limitations and imperfect understanding of how society
values some of these benefit categories, however, EPA was not able to analyze all of these categories with
the same level of rigor. At the highest level of analysis, EPA was able to quantify the expected effects for
some benefit categories and attach monetary values to them. Benefit categories for which EPA was able to
develop dollar estimates include reduction in cancer risk from consumption of fish,  increased value of
recreational fishing opportunities, and reduced costs of managing and disposing of sewage sludge.1  For
other  benefit categories, EPA was able to quantify expected effects but not able to estimate monetary
values for them.  Examples of these benefit categories include changes hi the frequency with which certain
  EPA also quantified and monetized changes in cancer risk from consumption of drinking water affected by
MP&M discharges. However, EPA has separately published drinking water criteria covering all of the pollutants in
this cancer risk analysis. For this reason, EPA did not include the benefits of reduced cancer risk via the drinking
water pathway in the estimate of expected monetary benefits of the regulation.
                                               III.l

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aquatic species are exposed to lethal concentrations of certain pollutants, and changes in certain human
health and aquatic life risk indicators. Finally, EPA was able to identify and qualitatively describe certain
benefit effects but was not able to assess them on either a quantitative or an economic value basis. These
benefit categories include but are not  limited to:  reduced  health risks due to improved  sludge quality,
enhanced diversionary uses, improved  aesthetic quality of waters near discharge sites, enhanced water-
dependent recreation other than fishing, and benefits to wildlife and to threatened or endangered species,
option and existence values, cultural values, tourism benefits,  biodiversity benefits, and  reduced sludge
management costs due to improved sludge quality.

        The results  of the human health,  ecological  and  economic  productivity benefits analyses  are
presented  separately  in  Chapters 8  through  11.  For each  analysis  the  methodology and results  are
discussed. In Chapter 8, the change in risk of cancer and  systemic hazards from drinking contaminated
water as a result of the proposed regulation are estimated for populations served by drinking water intakes
on waterways to which MP&M facilities discharge. In addition, the change  in risk of cancer and systemic
hazards from consumption of contaminated fish tissue as a result of the proposed regulation are estimated
for recreational and subsistence anglers  and their families. Additional benefits, in the form of reductions in
the occurrence of pollutant concentrations that exceed  health-based water quality toxic effect levels,  are
discussed as well.

        Ecological benefits, discussed  in Chapter 9,  are expressed by comparing estimated  in-stream
pollutant concentrations  to aquatic  life toxic effect levels. Pollutant concentrations  in excess of these
pollutant levels  indicate potential impacts  to  aquatic  life. EPA assumes  that the  elimination of such
occurrences for all regulated  pollutants in  a waterway will  achieve water quality that is protective of
aquatic life. This improvement in  water quality,  in  turn,  generates benefits to recreational anglers by
increasing the value  of  their  experience or the number of days they subsequently  choose to fish  the
waterway.                                   ;

        Ecological benefits  are expanded on in Chapter 10 through a  discussion  of aquatic life benefits
likely to  be associated with a change in  frequency with which certain aquatic species are exposed to lethal
concentrations of pollutants discharged by MP&M facilities. This analysis examines the effects of specific
pollutants  on selected aquatic species with a relatively wide range of sensitivity to MP&M pollutants.
Specifically, twelve MP&M pollutants  thought to be among those having the greatest potential to cause
risk to aquatic life are analyzed. Species with socioeconomic importance such as trout, bass, and catfish are
of primary focus although other species  of less economic importance are also included. This  analysis uses a
                                                III.2

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species sensitivity distribution rather than a single toxicity threshold concentration in comparison to in-
stream pollutant concentrations.

       Finally, to estimate the quantity of sewage sludge that can be  disposed of by less  expensive
methods  as a result of the proposed regulation, EPA calculated baseline  and post-compliance sewage
sludge quality and compared pollutant concentrations in sludge to regulatory limits for land application and
surface disposal  of sewage sludge (Chapter  11).  POTWs are assumed to choose the  least  expensive
management or disposal  method  for  sewage  sludge  subject to the sludge  meeting applicable metals
concentration  criteria. For many POTWs,  the  least  expensive  or "preferred" option is agricultural
application (a type of benefical use) or surface disposal of sludge. Reduced metals concentration in sludge
should enable some POTWs to shift into this less costly disposal option thus generating a benefit to society.

       When reviewing this section, the reader  should keep in mind that the monetary assessment of
benefits is  inevitably incomplete. As mentioned above, monetary values were estimated for only a few of
the likely benefit categories. In addition, the estimated dollar values that are attached to certain of the
estimated benefit  events may understate society's willingness-to-pay to achieve those benefit events. For
example, reduced sewage sludge disposal costs do not accurately reflect  society's willingness-to-pay for
beneficial sludge use since public preference indicates that individuals would actually be willing  to pay for
beneficial sludge use (land application) even if it were more costly than other disposal options. As a result,
the estimate of the dollar value of benefits to society is a partial, noncomprehensive  estimate and,  in all
likelihood, understates substantially the economic benefits that will accrue from the proposed regulation.
                                                III.3

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                                           Chapter 6
                                     Pollutant Reduction

6.1     Introduction
        This chapter describes EPA's estimation of baseline MP&M  industry pollutant loadings  and
pollutant reductions expected under the proposed rulemaking. The Agency estimated pollutant loadings and
reductions  from MP&M sites to evaluate loadings to surface waters and POTWs, to assess the cost-
effectiveness of each MP&M technology option in reducing these loadings, and to estimate the benefits
associated  with reductions  in loadings attributable to  the  proposed regulation. Pollutant loadings for
MP&M direct and  indirect dischargers are  presented in Tables 6.1  and  6.2 respectively.  Pollutant
reductions  for  MP&M direct  and indirect dischargers  are  presented in Tables 6.3  and 6.4. Pollutant
loadings and pollutant reductions were estimated as follows:

1.      Calculation of pollutant loadings for each MP&M unit operation based on available analytical,
        flow, and production data;

2.      Calculation  of industry  raw wastewater pollutant loadings (loadings  before  consideration of
        technology-in-place at MP&M sites);

3.      Calculation  of industry  baseline pollutant loadings (including consideration of technology-in-
        place); and

4.      Calculation of option-specific pollutant loadings and pollutant reductions.

        To estimate pollutant loadings, the Agency calculated production  normalized pollutant loadings
(PNPLs) for each unit operation and metal type combination based on data collected during the field
sampling program and responses  to the MP&M data collection portfolio (DCP). The PNPLs represent the
mass of pollutants  generated  per  unit  of production  (e.g.,  mg/ft2 or mg/lb  removed). EPA  used a
production-based  approach to  estimate  pollutant loadings for  each  unit operation  and  metal type
combination because the Agency believes that pollutant  loadings depend  on the  amount of production
instead of  the amount of water used  to perform the operation.  This approach assumes that the sources of
pollutants  generated while performing MP&M unit operations are the parts processed in the operation or
contaminants present on the parts. The Agency believes  that the amount of pollution generated by a given
unit operation is independent of the amount of water used to carry the pollutant. While adding excess
                                                6.1

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process water will reduce  the concentrations of pollutants in the discharged stream, the total  mass of
pollutants generated will remain  constant with constant production. Though reduced water usage may
result in environmental benefits  (e.g., reduced end-of-pipe treatment system size and reduced treatment
chemical usage, with an associated reduction in sludge generation, and greater treatment efficiency of more
concentrated effluent streams), the total mass of pollutants generated remains constant. The Agency
developed separate PNPLs for  each unit operation and metal type combination identified by DCP
                  i
respondents to account for variation in pollutant loadings over the variety of unit operations performed and
metal types processed at MP&M sites  (e.g., EPA  expects  metallic surface coating operations to have
different PNPLs  from painting operations,  and grinding of zinc parts to have different PNPLs from
grinding of iron parts).
                  i
        The remainder of this chapter describes the data sources used for this effort and presents the step-
by-step methodology used to estimate pollutant loadings and reductions. Section 6.2 describes the data
sources used and the  use  of data for nondetected  pollutants. Section 6.3 describes the calculation of
production-normalized pollutant loadings for each unit operation and  metal type combination. Sections 6.4
and  6.5 describe the calculation  of industry raw wastewater and industry  baseline pollutant loadings,
respectively. Finally, Section 6.6 presents the reductions in pollutant loadings expected under the proposed
Option 2a/2.      \

6.2     Data Sources     ,                  ;
        The Agency used data from the following sources to estimate pollutant loadings and pollutant
reductions for each MP&M model site:

•       Analytical data collected during sampling at Phase I MP&M sites;

•       Analytical data collected during sampling at Phase II MP&M sites; and

•       Analytical data from previously promulgated metals regulations.

        Flow and production  data from responses  to the  MP&M DCPs  were used when flow  and
production data associated with analytical data for a sampled unit operation  were not available. In these
cases, the Agency used the median production-normalized flow (PNF, in gallons per unit of production) for
the unit operation based on data provided in the DCPs. Data from MP&M sampling episodes are contained
in Sampling Episode Reports (SERs) for each sampled site. These reports, as well as data from MP&M
                                               6.2

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DCPs and previous metals regulations used in this assessment, are included in the technical part of the
administrative record for this rulemaking.

6.3     Use of Data for Nondetected Pollutants
        In developing PNPLs, the Agency assumed that all nondetected pollutants of concern were present
at the detection limit. The Agency made this assumption based on process considerations and on analytical
data available from the MP&M sampling program. Each pollutant of concern was expected to be present in
MP&M wastewater because each pollutant  of concern  was generated  by MP&M processes and  was
detected at least three times during the MP&M sampling program. EPA made the following exceptions  to
this methodology for cyanide and organic pollutants:

•       The source of cyanide in cyanide-bearing unit operations is  soluble cyanide salts added to the
        process bath rather than the raw material processed. Based on process considerations (e.g., the use
        of cyanide salts to  control  plating rates  for the unit operation), MP&M  sampling data,  and
        available technical literature, the Agency developed a list of unit operations expected to contain
        cyanide. These unit operations  are  alkaline cyanide  treatment, electrolytic  cyanide cleaning,
        cyanide electroplating, cyaniding heat treating, cyanide air pollution control, and associated rinses.
        For pollutant loadings and reduction estimates, the Agency considered these to be the only MP&M
        unit operations expected to contain cyanide; therefore, for unit operations  not expected to contain
        cyanide, concentration levels below the detection limit for cyanide were assumed to be zero.

•       Organic pollutants  are generated  from  MP&M unit operations through addition of  organic
        additives  to process solutions, removal of organic  materials from  parts,  or contamination  of
        wastestreams by organic pollutants from external sources (e.g., oil, grease). The Agency identified
        the following unit operations as likely to generate organic pollutants: alkaline treatment, barrel
        finishing, chemical machining, corrosion preventive coating, floor cleaning, grinding, heat treating,
        impact deformation,  machining, solvent degreasing  rinsing, metallic coating  stripping,  organic
        coating stripping, dye penetrant testing, hydraulic testing, associated rinses, and non-associated
        rinsing. Concentration levels  below the detection limit for these pollutants were assumed to be zero.

6.4     Calculation of Unit Operation Production-Normalized Pollutant Loadings
        The Agency calculated  PNPLs for each MP&M unit operation and metal  type  combination using
the data sources identified in Section 6.2. For most unit operations, the metal type  was defined as the base
metal on which the unit operation was performed. For the following unit operations, however, the Agency,
                                                6.3

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based on process considerations and available analytical data, determined  that the pollutant loadings
depend  on the  metal  applied rather than the base metal: electroplating, electroless plating, mechanical
plating, and metal spraying. For painting, floor cleaning, and wet air pollution  control, the Agency believes
that the PNPLs do not vary by base metal type; therefore, PNPLs  for these unit operations were not
calculated separately for each base metal type processed.

        The Agency  calculated PNPLs  for each  unit operation and metal type combination using the
following three steps:                          :

1.      Unit operation PNPLs were calculated for each metal type for which analytical data were available
        from the data sources described in Section 6.2.
                   |
2.      Unit operation PNPLs were modeled  for each metal  type for which analytical data were not
        available from the data sources described  in Section 6.2. Data modeling was  based on data
        available for the unit operation performed on other metal types.

3.      Unit operation PNPLs were transferred to unit operations for which data were not available for any
        metal type from  the  data sources  described  in  Section 6.2. Data  were transferred from unit
        operations  that were  expected  to  have  similar wastewater characteristics based on  process
        considerations.
                   i
6.5     Calculation of Industry Raw Wastewater Pollutant Loadings
        Industry raw wastewater  pollutant  loadings  represent the  industry  pollutant loadings  before
accounting for pollutant removals by technology-in-place (TIP) at  MP&M sites. The Agency calculated
raw wastewater pollutant  loadings for each wastewater stream at each model site by dividing the PNPL for
each pollutant  in the  wastewater stream  by the associated PNF and then multiplying by the site's annual
flow for the wastewater stream. EPA estimated site-specific raw wastewater pollutant loadings by summing
the pollutant loadings for each wastewater stream at each model site.

        The site-specific  raw wastewater pollutant loadings were then extrapolated to  the industry level
using sample weights that are based on the sampling strata from which sites were sampled. The scaled-up
site-specific pollutant loadings were summed to calculate the industry raw wastewater pollutant loadings.
The results of the statistical scale-up for  industry raw wastewater pollutant loadings for direct and indirect
dischargers are presented in Tables 6.1  and 6.2,  respectively. Table 6.1  indicates that the industry raw
wastewater pollutant loadings for MP&M  Phase I direct  dischargers include approximately  5,460,000
                                                 6.4

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Ibs/yr of priority metals, 691,000 Ibs/yr of cyanide, 107,000,000 Ibs/yr of oil and grease, 9,220,000 Ibs/yr
of total suspended solids, 15,000,000 Ibs/yr of nonconventional metals, 615,000,000 Ibs/yr of other
nonconventional  pollutants,  20,200  Ibs/yr  of priority organic pollutants,  and  172,000 Ibs/yr of
nonconventional organic pollutants.   Table  6.2 indicates that the  industry raw wastewater pollutant
loadings for MP&M Phase I indirect dischargers includes approximately 26,900,000 Ibs/yr of priority
metals, 9,110,000 Ibs/yr of cyanide, 691,000,000  Ibs/yr of oil and grease, 42,000,000 Ibs/yr of total
suspended  solids,  16,500,000  Ibs/yr  of nonconventional  metals, 3,560,000,000  Ibs/yr  of  other
nonconventional  pollutants,  4,650  Ibs/yr of priority  organic  pollutants, and 3,050,000 Ibs/yr of
nonconventional organic pollutants.
liable 6.1J Summary of Pollutant Loadings for Mt&M Phase I Direct Dischargers1
Pollutant
Antimony
Arsenic
Cadmium
Chromium
Copper
Lead
Nickel
Selenium
Silver
Thallium
Zinc
Total Priority Metals
Cyanide
Total Cyanide
Oil and Grease
Total Oil And Grease
Total Suspended Solids (TSS)
Total TSS
Aluminum
Barium
Boron
Cobalt
Iron
Manganese
Molydbenum
Tin
Titanium
Vanadium
Total Nonconventional Metals
Ammonia as N
Chemical Oxygen Demand (COD)
Industry Pollutant Loadin;
Raw
Wastewater
4,220
1,690
20,600
3,060,000
222,000
18,200
1,650,000
1,250
11,100
1,240
467,000
5,460,000
691,000
691,000
107,000,000
107,000,000
9,220,000
9,220,000
431,000
56,300
85,200
34,200
13,900,000
206,000
289,000
46,400
22,500
2,700
15,000,000
131,000
131,000,000
Baseline
4,160
1,660
2,860
357,000
17,900
16,100
63,400
1,230
386
1,220
91,000
557,000
3,840
3,840
18,200,000
18,200,000
2,590,000
2,590,000
63,100
7,610
84,500
3,840
398,000
50,500
16,800
3,630
4,290
1,560
634,000
92,600
6,500,000
gs {Ibs/yr)
Proposed
Option 2a/2
3,320
1,580
2,060
1,550
5,590
15,400
5,070
904
168
1,150
3,700
40,500
0.0500
0.0496
153,000
153,000
364,000
364,000
11,400
5,430
79,000
553
14,200
1,940
14,100
2,200
3,100
1,120
133,000
39,600
761,000
                                                6.5

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ininiimim$(|ftle;^ 	
1 -
1
Pollutant
Chloride
Fluoride
Sulfate
Total Dissolved Solids
Total Kjeldahl Nitrogen
Total Recoverable Phenolics
Total Phosphorus
Total Other Nonconventionals
1,1,1-Trichloroethane
_!, 1-Dichloroethane
4-Chloro-3-Methylphenol
Ethylbenzene ;
Methylene Chloride
Naphthalene
2-Nitrophenol
Phenol
Bis(2-Ethylhexyl)Phthalate
Di-N-Butyl Phthalate
Phenanthrene
Tetrachloroethene
Toluene
Total Priority Organics
2-Butanone
2-Methylnaphthalene
2-Propanone ',
Alpha-Terpineol
BenzoicAcid
Benzyl Alcohol
Hexanoic Acid
N-Decane
N-Docosane
N-Dodecane
N-Eicosane ;
N-Hexacosane
N-Hexadecane
N-Octacosane
N-Octadecane
N-Tetracosane
N-Tetradecane
N-Triacontane
Total Nonconventional Organics
Industry Pollutant Loadini
Raw
Wastewater
80,000,000
666,000
19,500,000
383,000,000
247,000
11,100
1,850,000
615,000,000
431
189
2,390
329
1,120
2,030
2,840
2,890
2,680
2,680
1,980
372
209
20,200
38,300
1,990
3,750
10,300
7,920
5,050
1,710
1,990
11,900
15,600
4,820
9,100
9,490
7,580
4,070
12,000
22,700
3,600
172,000
Baseline
14,600,000
89,200
6,580,000
67,900,000
155,000
10,100
471,000
96,400,000
322
187
1,330
294
365
470
483
1,730
1,700
1,040
.465
350
204
8,940
8,650
635
1,850
8,910
954
3,870
633
492
1,360
4,490
718
1,290
7,890
1,180
1,950
1,560
21,300
869
68,600
spqibslyf)
Proposed
Option 2^2
4,040,000
24,200
5,290,000
21,300,000
80,000
3,550
29,200
31,600,000
161
81.0
512
96.4
215
154
288
589
978
287
158
259
83.8
3,860
443
334
530
348
413
548
332
167
153
1,000
243
256
427
348
362
348
417
347
7,020
1 Pollutant loadings for calcium, magnesium, and sodium are not presented in this table because
these are typical wastewater treatment chemicals at MP&M sites. Pollutant loadings for acidity, pH,
and total alkalinity are not presented because they are used as performance parameters for chemical
precipitation and settling systems.
Source: U.S. Environmental Protection Agency
6.6

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6.6    Calculation of Industry Baseline Pollutant Loadings
       Industry baseline pollutant loadings represent the industry pollutant loadings after accounting for
removal of pollutants by TIP at MP&M sites. As described above, site-specific raw wastewater pollutant
loadings were developed for each model site. Site-specific baseline pollutant loadings were calculated as the
difference between site-specific raw wastewater pollutant loadings and pollutant removals by TIP at each
MP&M model site.
TaWe 6 & Swsspwq 
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Table 6.2: StHMnnary of Pollutant Loadiu
- i
Pollutant :
Total Recoverable Phenolics
Total Phosphorus
Total Other Nonconventionals
1,1,1-Trichloroethane
1, 1-Dichloroethane
4-Chloro-3 -Methylphenol
Ethylbenzene
Methylene Chloride
Naphthalene
2-Nitrophenol !
Phenol
Bis(2-Ethylhexyl)Phthalate
Di-N-Butyl Phthalate
Phenanthrene
Tetrachloroethene
Toluene
Total Priority' Organics
2-Butanone
2-Methylnaphthalene
2-Propanone
Alpha-Terpinejol
Benzole Acid
Benzyl Alcohol
Hexanoic Acid
N-Decane
N-Docosane
N-Dodecane
N-Eicosane
N-Hexacosane
N-Hexadecane,
N-Octacosane
N-Octadecane !
N-Tetracosane
N-Tetradecane
N-Triacontane
Total Nonconventional Organics
gsfor MP&M pfcase I Indirect Dischargers1
Industry Pollutant Loadin
Raw
Wastewater
134,000
25,100,000
3,560,000,000
125,000
1,910
70,400
4,080
4,160,000
41,700
47,500
37,700
73,300
45,800
33,700
4,330
3,790
4,650,000
1,060,000
33,900
176,000
79,700
122,000
50,100
34,100
33,900
215,000
230,000
80,300
165,000
101,000
133,000
110,000
213,000
155,000
63,500
3,050,000
Baseline
78,000
13,600,000
1,170,000,000
41,800
1,550
48,900
3,650
131,000
21,900
25,700
24,500
51,000
30,200
19,100
4,230
2,430
406,000
791,000
19,700
97,000
54,900
63,900
34,000
21,000
19,300
121,000
127,000
43,400
93,200
70,600
74,000
76,000
119,000
113,000
36,300
1,970,000
gsdfes/yr)
Proposed
Option 2a/2
51,700
2,060,000
288,000,000
3,300
828
8,300
2,690
8,430
4,820
6,640
7,490
13,000
13,800
4,410
3,650
1,070
78,400
146,000
5,100
16,400
5,490
15,900
7,210
4,890
4,550
25,100
29,200
10,400
19,800
8,560
16,600
12,000
25,800
7,110
8,480
368,000
1 Pollutant loadings for calcium, magnesium, and sodium are not presented in this table because
these are typical wastewater treatment chemicals at MP&M sites. Pollutant loadings for acidity, pH,
and total alkalinity are not presented because they are used as performance parameters for chemical
precipitation and settling systems.
Source: U.S. Environmental Protection Agency
        Site-specific baseline  pollutant loadings were extrapolated to the industry level  using sample
weights. The scaled-up site-specific baseline loadings were summed to calculate industry baseline pollutant
loadings. The results of the statistical scale-up for industry baseline pollutant loadings are presented in
                                                 6.8

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Tables 6.1 and 6.2. Table 6.1 indicates that the industry baseline pollutant loadings for MP&M Phase I
direct  dischargers include  approximately 557,000 Ibs/yr of priority  metals, 3,840  Ibs/yr of cyanide,
18,200,000  Ibs/yr of oil and  grease,  2,590,000  Ibs/yr of total suspended  solids,  634,000 Ibs/yr of
nonconventional metals, 96,400,000 of other nonconventional pollutants, 8,940 Ibs/yr of priority organic
pollutants, and 68,600 Ibs/yr of nonconventional organic pollutants. Table 6.2 indicates that the industry
baseline pollutant loadings for MP&M Phase I indirect dischargers includes approximately  6,100,000
Ibs/yr of priority metals, 170,000 Ibs/yr of cyanide,  170,000,000 Ibs/yr of oil and grease, 17,700,000 Ibs/yr
of  total suspended  solids,  5,860,000 Ibs/yr of  nonconventional  metals,  1,170,000,000 of  other
nonconventional  pollutants,  406,000  Ibs/yr of priority  organic pollutants,  and  1,970,000 Ibs/yr of
nonconventional organic pollutants.

6.7     Option 2a/2 Pollutant Removals
        As shown in Tables 6.3 and 6.4, EPA estimates that the proposed BPT limitations will remove an
estimated 517,000 Ibs/yr of priority metals, 3,840  Ibs/yr of cyanide, 18,000,000 Ibs/yr of oil and grease:
2,220,000 Ibs/yr of total suspended solids, 501,000 Ibs/yr of nonconventional metals, 64,900,000 of other
nonconventional  pollutants,  5,080   Ibs/yr  of priority  organic  pollutants,  and  61,600  Ibs/yr of
nonconventional organic pollutants.  Lastly, EPA estimates that the proposed PSES limitations will remove
an estimated 5,610,000 Ibs/yr of priority metals, 169,000 Ibs/yr of cyanide, 147,000,000 Ibs/yr of oil and
grease, 12,000,000 Ibs/yr of total   suspended solids, 3,490,000 Ibs/yr of  nonconventional  metals,
878,000,000 of other nonconventional pollutants,  328,000 Ibs/yr of priority organic pollutants, and
1,610,000 Ibs/yr of nonconventional organic pollutants.
                                                6.9

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Table 6.3; Sununary of PoButantlsledacttons for Direct Dischargers1
•;
Class Of Pollutant
Priority Metals
Cyanide
Oil and Grease
Total Suspended Solids
Noncbnventional Metals
Other Nonconventionals
Priority Organics
Nonconventional Organics
Baseline
Pollutant
Loading
Qbsfyti
557,000
3,840
18,200,00
2,590,000
634,000
96,400,000
8,940
68,600
Option 2a/2
Pollutant
Reduction
Otos/yr)
517,000
3,840
18,000,000
2,220,000
501,000
64,900,000
5,080
61,600
Percent
Reduction
from
Baseline
93
>99
99
86
79
67
57
90
1 Pollutant loadings for calcium, magnesium, and sodium are not presented in
this table because these are typical wastewater treatment chemicals at MP&M
sites. {Pollutant loadings for acidity, pH, and total alkalinity are not presented
because they are used as performance parameters for chemical precipitation and
seeding systems.
Source: U.S. Environmental Protection Agency
fable 6.4t Summary of Pollutant Reductions for Indirect Dischargers1
Class Of Pollutant
Priority Metals
Cyanide
Oil and Grease
Total Suspended Solids
Nonconventional Metals
Other
Priority Organics
Nonconventional Organics
Baseline
Pollutant
Loading
	 flMxr). 	
6,100,000
170,000
170,000,000
17,700,000
5,860,000
1,170,000,000
406,000
1,970,000
Option 2a/2
Pollutant
Reduction
CRus/yr)
5,610,000
169,000
147,000,000
12,000,000
3,490,000
878,000,000
328,000
1,610,000
Percent
Reduction
from
	 Baseline 	
92
99
87
68
60
75
81
81
1 Pollutant loadings for calcium, magnesium, and sodium are not presented in
this table because these are typical wastewater treatment chemicals at MP&M
sites. Pollutant loadings for acidity, pH, and total alkalinity are not presented
because they are used as performance parameters for chemical precipitation and
settling systems.
Source: U.S. Environmental Protection Agency
6.10

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                                           Chapter 7
               Overview of Benefits Expected from the MP&M Regulation

7.1     Introduction
        As required by Executive Order  12866, this Regulatory Impact Analysis assesses the benefits to
society from the reduced effluent discharges that will result from the proposed MP&M Phase I industry
regulations. EPA expects that benefits will accrue to society in several broad categories, including reduced
health risks, enhanced environmental quality, and  increased productivity in economic  activities that are
adversely affected by MP&M industry discharges. This chapter and the four following chapters assess the
benefits that are expected to accrue from the regulation in these  broad categories. This chapter provides a
framework for understanding the benefits likely to be achieved by the MP&M regulation and qualitatively
reviews those benefits. The following chapters present the quantitative and economic analyses of benefits
within the broad benefit categories.

7.2     Economic Concepts Applicable to Benefits Analysis
        To aid in understanding the analysis of benefits for the  MP&M Phase I regulation,  the following
sections provide an overview of the concepts and analytic approaches involved in the benefits assessment.
The first section describes the general categories of benefits expected to result from the regulation while the
following section summarizes methods for attaching values to  some of the benefit measures. The third
section reviews, within the broad categories of benefits likely to be achieved by the MP&M regulation, the
specific benefits that are considered in this analysis and the level of analysis undertaken for them. The final
discussion reviews the chain of events following promulgation of a regulation that leads to the achievement
of the expected benefits.

        Benefit Categories Applicable to the Regulation
        MP&M  industry effluents contain priority and non-conventional metals, organics and conventional
pollutants. The discharge of these pollutants into freshwater,  estuarine, and marine ecosystems increases
the  concentration of the pollutants in aquatic habitats. In turn, these pollutant concentrations adversely
affect aquatic life and terrestrial wildlife, and, if the waterways  are a source of water or food for human
consumption, adversely affect  human health.  Indirect discharges  of  these pollutants  to POTWs may
contaminate municipal sewage sludge rendering it unfit for beneficial use. Many of these pollutants  are
                                             7.1

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either human carcinogens, human systemic toxicants, or aquatic life toxicants. In addition, many of these
pollutants are persistent, resistant to biodegradation, and bioaccumulate in aquatic organisms.

        For this analysis, EPA assessed benefits by identifying the various ways in which the reduction in
discharges from the MP&M industry would  be expected to provide benefits  to  society. The MP&M
regulation, which aims at improving water quality, will provide benefits in three broad categories that are
discussed below: human health, ecological, and economic productivity benefits. Table 7.1 summarizes the
different types of benefits that fall in each of these categories.
Table 7.1: General Categories of Benefits Expected from the
MP&M Regulation
Human Health Benefits
Reduced Cancer Risk
Reduced Systemic Health Hazards
Ecological Benefits
Reduced Risk to Aquatic Life
Reduced Risk to Terrestrial Wildlife
Protection of Biodiversity
Protection of Cultural Valuation '•
Enhanced Recreational Opportunities such as fishing, boating, swimming, hunting, rafting, picnicking,
birdwatching, photography, and hiking
Increased Aesthetic Benefits such as enhancement of adjoining site amenities (e.g. residing, working,
traveling, and owning property near the water)
Existence' Value
Option Value
Economic Productivity Benefits
Enhanced Tourism
Improved Commercial Fisheries Yields
Reduced Sludge Disposal Costs
Beneficial Use of Sludge via Land Application
Reduced Water Treatment Costs
Increased Property Values on or Near the Water
Source: U.S. Environmental Protection Agency



        Human Health Benefits              '.
                 I
        Reduced pollutant discharges to the nation's waterways will generate human health benefits by
 several mechanisms. The most important and readily analyzed of the human health benefits stem from
 reduced risk of illness associated with  the consumption of water, fish or other food that is taken from
 waterways affected by effluent discharges. Human health benefits are typically analyzed by estimating the
 change in the expected number of adverse human health events in the exposed population resulting from a
                 i                           :
 reduction in effluent discharges. While  some health effect mechanisms such as cancer are relatively well
 understood and thus may be quantified in a benefits analysis, others are less well characterized and may not
 be assessed with the same rigor or at all. For example, this analysis quantitatively examines only two direct
 measures of change in risk to human health:  incidence of cancer and a composite indicator of systemic,
                                              7.2

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non-cancer health risk. However, only incidence of cancer was translated into an expected number of
avoided adverse health events and, on that basis, monetized. The economic valuation of these events is
generally based on estimates of the monetary value that society is willing to pay for their avoidance or the
amount that society would need to be compensated, to accept increases in the number of adverse health
events. Such "willingness-to-pay" or "willingness-to-accept" valuations are generally considered to provide
a fairly comprehensive measure of society's valuation of the health-related benefit in that they account for
such factors as the costs of health care1, loss in income, and pain and suffering (both among affected
individuals and family and friends). In some cases, less comprehensive valuations have been used that are
based only on the estimated costs of health care, remedial treatments, or loss of income due to illness.

        Ecological Benefits
        Ecological benefits stem from improvements in habitats or ecosystems that are affected by effluent
discharges. For example,  spawning grounds  for important recreationally or commercially caught fish
species may be restored by  a reduction in MP&M effluent discharges.  It is frequently quite  difficult,
however,  to quantify and  attach economic values  to  ecological benefits. The difficulty in quantifying
ecological benefits results  from imperfect understanding of the  relationship between changes in effluent
discharges and the benefit events. In addition, it is difficult to attach monetary values to these benefit events
because they  often do not occur in  markets  in which  prices  or costs are readily observed. As  such,
ecological benefits may  be loosely classified  as non-market benefits. This classification can be further
divided into non-market use benefits, and non-market, non-use benefits.

        Non-market, use benefits stem from improvements in ecosystems and habitats that, in turn, lead to
enhanced  human use  and enjoyment of the affected areas. For  example, reduced discharges may lead to
increased  recreational use  and enjoyment of affected waterways in such activities as fishing, swimming,
boating, hunting or birdwatching.  Such uses can be classified as either consumptive or non-consumptive.
Consumptive uses can be distinguished from non-consumptive uses in that the former excludes other uses
of the same resource.  For example, if recreational anglers consume their fish catch, the stock of the natural
  Individuals with health insurance, however, would not include the cost of medical care covered by insurance in
their willingness to pay to avoid adverse health effects.
                                              7.3

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resource is at least temporarily depleted. With non-consumptive uses, however, the resource base generally
remains in the same state before and after use (e.g., birdwatching).2

        In some cases, it may be possible to quantify and attach partial economic  values to ecological
benefit events on the basis of market values (e.g., an increase in tourism activity associated with improved
recreational fishing opportunities); in this case, these benefit events might better be classified as economic
productivity related events as discussed below. These events, however, are often not able to be fully valued
using information from economic markets. In this case, they are more appropriately classified as non-
market use benefits since economic markets will only capture related expenditures made by recreationists
such as food and lodging and will not capture the value placed on the experience itself.

        The  second broad class of ecological  benefits, non-market,  non-use  benefits,  includes benefit
                 i                           .
events that are not associated with current use of the affected ecosystem or habitat but arise from the
realization of the improvement  in the affected ecosystem  or habitat resulting from  reduced  effluent
discharges. This class of benefits also includes the value that individuals place on the potential for  use
sometime in the future either by themselves or by future generations. As an example of the former, people
may attach a valub to protecting habitats and species that are otherwise detrimentally affected by effluent
discharges even when they do not use or anticipate future use of the affected waterways for recreational or
other purposes. The  latter can be described as a combination of insurance and speculative value that
reflects individuals'  desires  to protect  the option to  use and enjoy a resource  at some later  time.
Additionally, from an ecosystem standpoint, pristine habitats and wildlife refuges are often preserved under
the assumption that plant or animal species that may yield pharmaceutical, genetic, or ecosystem benefits
are yet to be discovered. Non-market non-use benefits may also manifest by other valuation mechanisms,
such as: cultural Valuation, philanthropy, and bequest valuation. It is often extremely difficult to quantify
the relationship between changes in discharges and the improvements in societal well-being associated with
such valuation mechanisms. That these valuation mechanisms exist, however, is  indisputable as evidenced,
for example, by society's willingness  to  contribute to  organizations whose mission is to purchase  and
preserve lands or habitats for the sole purpose of averting development.
  Even some so-called non-consumptive uses may temporarily deplete the natural resource or reduce the potential
value to other users.  For example, over-use of the habitat or crowding in such pursuits as bird-watching may
diminish the value of the natural resource to other users.
                                               7.4

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       Economic Productivity Benefits
       Reduced pollutant  discharges may also generate benefits through  improvements in economic
productivity. For example, economic productivity gains may occur through reduced costs to public sewage
systems (publicly owned treatment works or POTWs) for managing and disposing of the sludge that results
from treatment of effluent discharges.  With less pollutant contamination of industry's discharges to
POTWs,  the  POTWs in turn incur lower costs in managing and disposing of their treatment residuals.
Similarly, economic productivity benefits may accrue from reduced treatment costs associated with
irrigation  water,  industrial  cooling water and municipal  drinking  water supplies.  Other economic
productivity gains may result from improved tourism opportunities in  areas that are affected by effluent
discharges. In addition, ecological  benefits such  as improved  species survival  will be translated  into
economic productivity benefits such as increases in commercially caught fish populations and yield. When
such economic productivity effects can be identified and quantified, they are generally straightforward to
value because they often involve market-place events for which prices or unit costs are readily available.

       As indicated above,  some of  these  improvements  reduce  societal  costs.  As  such, these
improvements (i.e. reduced treatment and disposal costs) could be described as a reduced cost and be
included  in the economic costs analysis rather than in the benefits analysis. For this analysis,  they are
treated as a benefit of the effluent guideline.

       Methods for Valuing Benefit Events
       As summarized  in the preceding discussion,  some  of  the benefits  expected from the MP&M
regulation will manifest in economic markets through  a change  in prices, costs, or quantities of market-
valued activities that are affected by the reduced effluent discharges. In general, where such market values
of benefit events are available, they are used to estimate  benefits.  For example, one of the benefits
associated with the MP&M regulation is  improved sludge quality. For many POTWs, improved  sludge
quality will translate into an  observable  reduction in sludge disposal costs. However, in other cases,
benefits involve activities or valuation mechanisms that either do not involve economic markets or involve
them only indirectly. In these cases, a number of estimation techniques have been used to value benefits for
which no market value is readily observable, including the  wage-risk approach  and the travel  cost and
contingent valuation methods. These estimation techniques have received considerable empirical  attention
from economic researchers  in the past two decades. As a result, a considerable body of knowledge exists
regarding the proper use of such techniques as well as the resulting  benefit estimates for various  non-
market resources and resource services. These three techniques form the basis of the benefits methodologies
described in Chapters 8 and 9. The following paragraphs briefly describe each methodology:
                                              7.5

-------
Wage-Risk Approach. The wage-risk approach uses  regression estimates of the wage premium
associated with greater risks of death on the job to estimate the amount that persons are willing to
pay to avoid death. For example, two jobs (A and B) may be identical  except workers at job A
have a fatal injury risk such that, on average, there is one more job related death per year for every
10,000 workers in job A than in job B. Reflecting this  risk, workers in job A earn more than
workers in job B. This difference in wages is considered to  be the wage premium that workers
require to accept a job with a slightly higher risk of death. The wage premium estimated for a job
with a slightly  higher probability  of death is  in turn  extrapolated to a one-hundred  percent
probability event as the basis  for the estimate  of the statistical value  of avoiding  death. This
approach relies on two important assumptions. First, it assumes that workers are aware of different
risks across jobs. Second, it assumes workers are able  to move freely between jobs. Benefit values
based on this approach are used in the valuation of reduced cancer cases due to fish consumption
in Chapter 8.

Travel Cost Method. The travel cost method (TCM) uses information  on the costs  that people
incur in traveling to and using a particular site to estimate  a  demand  curve for that site. The
method assumes that people who live X miles from a recreation site and who face time and travel
costs in getting to the site would use the site just as frequently as people living X + h miles from
the site if the people living X miles from the site were faced with an admission fee to the site equal
to the additional time and travel costs associated with the additional distance h.  From this
assumption and  observations regarding the frequency of use of different groups,  a demand curve
for the site can be traced out. The demand curve is then used to estimate the "consumer surplus"
associated with the use of the site, in other words, the value that consumers receive from the site
over and above the costs  that they incur in using it. Consumer surplus is an estimate of the net
benefits  of the resource  to the people  using that resource.  For example, if the resource is a
recreational fishing site,  the method can be used to  value the recreational  fishing  experience.
Benefit values based on this approach are used to value recreational fishing benefits in Chapter 9.

Contingent Valuation. In  the contingent valuation (CV) method, surveys are conducted to elicit
individuals' willingness-to-pay (WTP) for a particular good, such as a fishery, or clean water. CV
is more  broadly applicable than TCM. For example, like TCM,  CV can be used  to estimate
consumer surplus associated with recreational fisheries; however, it can  also be used to estimate
less tangible values such as how much people care about a clean environment. Values from both
           i
the CV approach and the wage-risk approach (described above) underlie the estimated value of
                                      7.6

-------
       avoided death that is used to monetize reduced cancer cases from consumption of contaminated fish
       (Chapter 8).  In addtion, the analysis of recreational fishing benefits in Chapter 9 uses a baseline
       value of the fishery that is derived from CV analysis.

       Benefit Categories Analyzed for the MP&M Regulation
       As discussed above, the benefits of effluent discharge reductions may be classified in three broad
categories: human health, ecological, and economic productivity benefits. EPA expects  that the MP&M
regulation will provide benefits to society in all of these categories. Each class is comprised of a number of
more narrowly defined benefit categories. Because of imperfect understanding of the link between discharge
reductions and benefit categories, and how society values some of the benefit events, however, EPA was
not able to bring the same depth of analysis to all of these categories. In particular, some benefits were able
to be quantified and monetized; some were able to  be  quantified but not monetized; and some were able to
be qualitatively assessed, but neither quantified nor monetized.

        For this analysis, EPA endeavored to quantify and monetize as many benefit categories as possible.
However, the benefit categories that were able to be quantified and monetized represent only a small share
of the total set of benefits expected to accrue from the regulation. To provide perspective on the extent to
which this regulatory impact assessment was able to comprehensively  analyze the benefits, Table 7.2
summarizes, within the three broad benefit categories, the specific categories that are expected to accrue
from the MP&M regulation and the level of analysis applied to each category.

        As shown  in Table 8.2, only a few of the relevant benefit categories can be both quantified and
monetized. The monetized benefits assessed  in this RIA include:  reduced incidence of cancer among
humans from consumption of contaminated fish;  enhanced value of recreational fishing stemming from
improved water quality; and reduced sewage sludge disposal costs related to reduced effluent discharges.
Benefit measures that were quantified but not monetized  include  reduced incidence of cancer among
humans from consumption of contaminated drinking water,3 reduced risk to aquatic life, and reduced risk
of systemic hazards  to  human health attributed to reduced wastewater  releases from MP&M facilities.
Finally,  non-quantified, non-monetized  benefit categories include:  reduced health risks from reduced
  It should be noted that it is possible to monetize these benefits. However, since EPA has established drinking
water criteria for the MP&M pollutants with cancer slope factors, EPA assumes that public drinking  water
treatment systems will reduce these pollutants in the public water supply to levels that are protective of human
health. Therefore, EPA is not claiming any monetary benefits of avoided cancer cases for these pollutants.
                                              7.7

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contamination of sewage sludge by unregulated pollutants; enhanced diversionary uses; improved aesthetic
quality of waters near the discharge sites; enhanced water-dependent recreation other than fishing; benefits
to wildlife and to threatened or endangered species; improved tourism opportunities;  and reduced sludge
management costs due to improved sludge quality.
fable 7.2: Benefit Categories Associated with Water Quality Improvements
„„„„„„„„„ 	 Resul;%g jtr«^ . " ""
Benefit Category
Quantified
and
Monetized
Quantified
and
Nonmottetized
NoBquantified
and
Nonmonetized
Human Health Benefits
Reduced cancer risk due to consumption of
chemically-contaminated fish
Reduced cancer risk due to ingestion of
chemically-contaminated drinking water
Reduced systemic health hazards (e.g.
reproductive, immunological, neurological,
circulatory, or respiratory toxicity) from
consumption of chemically-contaminated fish
Reduced systemic health hazards (e.g.
reproductive, immunological, neurological,
circulatory, or respiratory toxicity) due to
ingestion of chemically-contaminated drinking
water
Reduced canber risk from exposure to
unregulated contaminants in chemically-
contaminated sewage sludge
Reduced systemic health hazards from exposure
to unregulated contaminants in chemically-
contaminated sewage sludge
Reduced health hazards from exposure to
contaminants hi waters used recreationally (e.g.,
swimming and boating)
X







X
X
X







X
X
X
Ecological Benefits
Reduced risk to aquatic life
Enhanced recreational fishing
Improved water enhanced recreation such as
hiking, picnicking, birdwatching, photography
Enhanced in-stream recreation such as
swimming, boating, hunting, rafting, subsistence
fishing
Existence value
Option value
Reduced risk to terrestrial wildlife including
endangered species
Protection of biodiversity
Protection of cultural valuation

X







X










X
X
X
X
X
X
X
                                              7.8

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Tafcte 7Jte Benefit Categories Associated with Water Quality IRK? wvemewts
Resulting from the Metal Products and Machinery Effluent Guideline
Benefit Category
Quantified i
and
Monetized
Ecological Benefits (continued)
Increased aesthetic benefits such as enhancement
of adjoining site amenities (e.g. residing,
working, traveling, and owning property near the
water)
Reduced non-point source nitrogen
contamination of water if sewage sludge is used
as a substitute for chemical fertilizer on
agricultural land
Satisfaction of a public preference for beneficial
use of sewage sludge*



Quantified
and
Nonmonetized
ISfonnuanttfied
and
Nonmonetized




X
X
X
Economic Productivity Benefits
Reduced sewage sludge disposal costs
Enhanced tourism
Improved commercial fisheries yields
Addition of fertilizer to crops (nitrogen content
of sewage sludge is available as a fertilizer when
sludge is land applied)*
Improved crop yield (the organic matter in land-
applied sewage sludge increases soil's water
retention)*
Reduced management practice and record-
keeping costs for users of sewage sludge that
meets exceptional quality criteria
Reduced management and disposal costs for
"cleaner" sewage sludge that does not meet land
application criteria
Avoidance of costly siting processes for more
controversial sewage sludge disposal methods
(e.g., incinerators) because of greater use of land
application
Reduced water treatment costs for municipal
drinking water, irrigation water, and industrial
process and cooling water
X


















X
X
X
X
X
X
X
X
* Some double counting between this benefit category and "reduced sewage sludge disposal costs" is present.
       Linking the Regulation to Beneficial Outcomes
       As indicated in Figure 7.1, the benefits of the proposed regulation occur from a chain of events.
These  events include:  (1) Agency publication  of the  regulation,  (2)  industry changes in production
processes and/or treatment systems, (3) industry reductions in pollutant discharges, (4) changes in water
quality, (5) changes in ecosystem attributes and sewage sludge quality, (6) changes in human responses and
(7) changes in human health and ecological risk. The first two events reflect the institutional and technical
aspects of implementing the regulation. The cost/benefit analysis in this RIA begins with the third event by
                                              7.9

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                          Figure 7.1: Chain of Events in a Benefits Analysis
                                 Example: Water-Related Benefits
                                  1. EPA Publication of Regulation
                         2. Changes in Production Processes and/or Treatment
                                3. Reductions in Pollutant Discharges
                                                 -0-
                                4. Changes in Ambient Water Quality
                             (Pollutant Concentrations & Aquatic Habitat)
                                   5. Change in Aquatic Ecosystem
                       (e.g., Increased Fish Populations & Diversity & Reduced
                                         Bioaccumulation)
                          6. Change in Level of Demand & Value of Fishery
                            (e.g., Recreational & Other Benefit Categories)
                                  7. Potential Change in Health Risk
                              (e.g., From Consumption of Fish Caught)
evaluating the physical effects of the regulation such as the changes in the pollutant content of effluent
discharges and the costs associated with such changes.

        Next, in! Event 4, the changes in pollutant discharges translate into improvements in water and
sludge quality and, in Event 5, these improvements in turn affect in-stream and near-stream biota (e.g.,
increased diversity of aquatic species and size of species populations) and sludge disposal options. Finally,
human effects and the related valuation of benefits enter the analysis at Events 6 and 7.  For example, the
connection between improvements to recreational fisheries and enhanced enjoyment by recreational anglers
occurs at this point. Similarly, the connection between improved water quality and the value of reduced risk
to human health also occurs at this point. These connections are the basis of the benefits analysis presented
in this chapter and the following chapters.
                                             7.10

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7.3     Qualitative Description of Benefits
        MP&M effluent discharges contain  toxic pollutant compounds (priority and  nonconventional
metals and organics) as well as conventional pollutants such as total suspended solids (TSS) and oil and
grease. Discharges of these pollutants to surface waters and POTWs may alter aquatic habitats, adversely
affect the survivability and diversity of native aquatic life, and increase human health  risk through the
consumption of contaminated fish and water. In addition, many of these pollutants may disrupt biological
wastewater treatment systems and contaminate sewage sludge. Metal constituents are of particular concern
because of the large amounts present in MP&M effluents. Unlike many toxic organic compounds and other
oxygen demanding wastes, metals do not degrade in the environment. In solution, some metals have a high
affinity for biological uptake. Depending on site-specific conditions, metals form insoluble inorganic and
organic complexes that partition to  sewage sludge  at  POTWs  or underlying sediment  in aquatic
ecosystems. The accumulated metal constituents can return to a bioavailable form upon  land application;
dredging and resuspension of sediment;  or as a result of seasonal, natural, or induced alteration of sediment
chemistry. Benefits of reducing metal and other pollutant loads from MP&M facilities to the environment
include decreased risk of cancer and systemic human health risks, improved recreation opportunities (e.g.,
fishing and swimming), improved aquatic  and benthic  habitats, and less costly disposal and increased
beneficial use of sewage  sludge. The  potential fate  and toxicity of the pollutants of concern found in
MP&M effluents based on their known  chemical characteristics and their potential effects on human health,
aquatic ecosystems, and POTWs are discussed in the following sections.

        Pollutants of Concern
        From  1986 through  1993, EPA conducted sampling to determine the presence  or  absence of
priority, conventional, and nonconventional pollutants at MP&M facilities located nationwide. The Agency
collected over 700  samples of raw wastewater from MP&M unit operations and influents to treatment
during the sampling episodes. Using these data and applicable selection criteria, EPA selected 69 pollutants
(25 priority pollutants, 2 conventional pollutant parameters, and 42 nonconventional pollutant parameters)
from the 342 pollutants initially identified as pollutants of concern. EPA evaluated  61  of these pollutants,
which include 25 priority  pollutants and  36 nonconventional pollutants, to assess their potential fate and
toxicity based on known characteristics of each chemical (see Table 7.3). Data for the 2 conventional and 6
other nonconventional  pollutants were  not applicable to the evaluation of fate and toxicity of individual
chemicals, although they are associated with adverse water quality impacts.
                                             7.11

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        Human exposure, ecological exposure,  and risk from environmental releases  of toxic chemicals
 depend largely on itoxic potency, inter-media partitioning, and chemical persistence. These factors are, in
 turn, dependent  on chemical-specific properties  relating  to  lexicological  effects on  living organisms,
 physical state, hydrophobicity/lipophilicity, and  reactivity;  the mechanism and media of release; and site-
 specific environmental conditions. Based on available physical-chemical properties and aquatic life  and
 human health toxicity data for the 61 evaluated pollutants, EPA identified that 14 exhibit moderate to high
 toxicity to aquatic 'life; 31 are human systemic toxicants; 7 are classified as known, probable, or possible
 human carcinogens; 8 are designated as hazardous air pollutants (HAP)  in wastewater;  and 25 have
 drinking water criteria (16 with enforceable health-based  maximum contaminant  levels (MCLs), 7 with
 secondary MCLs for aesthetics or taste, and 2 with action levels for treatment). In  terms of projected
 environmental partitioning among media, the Agency determined that 12 of the 61 evaluated pollutants are
 moderately to highly volatile (potentially causing  risk to exposed populations via inhalation),  18 have a
 moderate to high potential to bioaccumulate  in aquatic biota (potentially accumulating in the food chain
 and causing increased risk to higher trophic level organisms and to exposed human populations via fish and
 shellfish consumption), and 11  organics have a moderate to high potential to adsorb to solids (potentially
 contaminating sediment underlying  surface waters or land  receiving sewage sludge application). Twenty-
 four (24)  of the pollutants are metals which, in general, are not applicable to evaluation based on volatility
 and adsorption to solids. EPA assumes that all of the metals have a high potential to adsorb to solids.

        Although EPA did not evaluate the potential fate and toxicity of the 2 conventional pollutants and 6
 other nonconventional pollutants, the discharge  of conventional pollutants  (total suspended solids (TSS)
 and oil and  grease) and  nonconventional pollutants  (chemical  oxygen demand  (COD), total  kjeldahl
 nitrogen  (TKN),  total dissolved  solids (TDS),  alkalinity, acidity,  and  total recoverable  phenolic
 compounds)  can have adverse effects on human health and the  environment.  For example, habitat
 degradation can  result from increased  suspended particulate matter that  reduces light penetration and
 primary productivity, or from accumulation of sludge particles that alters benthic  spawning grounds and
 feeding habitats.  Oil and grease can have a lethal effect on fish by  coating gill surfaces and causing
 asphyxia, depleting oxygen levels as a result of excessive biological oxygen demand, and inhibiting stream
 re-aeration because of surface film. Oil and grease can also have detrimental  effects on waterfowl by
 destroying the buoyancy and insulation of their feathers. High COD levels can deplete oxygen levels, which
can result in mortality or other adverse effects on fish. Bioaccumulation of oil substances can cause human
health problems, such as including tainting offish and bioaccumulation of carcinogenic polycyclic aromatic
compounds. Nitrogen addition can  make surface water susceptible to accelerated  eutrophication and
                                             7.14

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subsequent fouling of drinking water reservoirs. Alkalinity or acidity additions can disrupt or alter the
chemical equilibrium necessary to sustain life. For example,  at higher pH, ammonia toxicity is greatly
enhanced because far more aqueous NH3 (the toxic agent) is produced from available NHU+ ions. Phenolic
compounds, as a group, would exhibit the  toxicity  and chemical behavior of their individual chemical
constituents; the identification, distribution,  and subsequent combined effect of which are unknown and,
therefore, not evaluated.

        Human Health Effects
        EPA expects the proposed regulation to assist in reducing pollutant concentrations in waterways
receiving MP&M wastewater discharges to levels  protective of human health. The benefits from the
proposed  regulation  include  human health benefits from reductions in both  carcinogenic risks and
noncarcinogenic hazards. These benefits result from  reduced human exposure to toxic pollutants through
the consumption of chemical-contaminated fish by recreational and subsistence anglers and their families.
In addition, benefits would result from  reduced human exposure through the consumption of chemically-
contaminated drinking water by populations served by drinking water utilities  located downstream from
MP&M facility discharge sites.

        The carcinogens identified by EPA are classified as known (A) or probable (Bl or B2) carcinogens
that are associated with the development of benign  or malignant growths (cancers) in target organs such as
the lungs, liver, skin, kidney and stomach (see Table 7.4). Noncarcinogenic hazards expected to be reduced
by the proposed regulation include systemic effects (e.g., loss of reproductive, immunological, neurological,
circulatory, or  respiratory function), organ-specific toxicity (liver and kidney), developmental toxicity, and
lethality (see Table 7.5).

        Ecological Effects
        EPA expects the  proposed regulation to generate ecological and recreational benefits  due  to
improved water quality based on the reduction of pollutants to levels below those considered to adversely
impact biota.  Such impacts include  acute and  chronic  toxicity,  sublethal effects  on metabolic and
reproductive functions,  physical destruction  of spawning and feeding habitats, and loss of prey organisms.
These effects will vary  due to the diversity of species with differing sensitivities to impacts.  For example,
lead exposure can cause spinal deformities in rainbow trout. Nickel exposure can affect spawning behavior
of shrimp. Nickel and  copper exposure can affect the growth activity of algae. In addition, copper and
cadmium can be acutely toxic to aquatic life, including finfish.
                                              7.15

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Table 7*4; Hb^ and Target Organs
Carcinogen :
Arsenic
Bis(2-ethyl hexyl) phthalate
Cadmium
Dichloromethane
Lead
Phenanthrene*
Tetrachloroethene
WeigQt-of-Evidence
Classification
A
B2
Bl
B2
B2
D
B2
Target Organs
Skin and lung
Liver
Lung, trachea, and bronchus
Liver
Kidney, stomach, lungs
Skin, lungs and epithelial tissues
Liver
A - Human Carcinogen
Bl - Probable Human Carcinogen (limited human data)
B2 - Probable Human Carcinogen (animal data only)
C - Possible Human Data
D - Not Classifiable as to Human Carcinogenicity
* Evaluated as a carcinogen based on EPA ambient water quality criteria for human health cancer risk for
polynuclear aromatic hydrocarbons (PAHs) as a class.
Note: Chromium in its hexavalent form is a respiratory carcinogen through inhalation exposure; however,
EPA expects chromium to be reduced to its noncarcinogenic trivalent form prior to the metal
precipitation process and does not expect significant amounts of the hexavalent form to be present in
treated MP&M effluent.
Source: U.S. Environmental Protection Agency
        The ecological  benefits that  can be expected from the regulation include protection of both
freshwater and  saltwater organisms, as  well  as terrestrial wildlife and birds  that  consume  aquatic
organisms. The  regulation will result in a reduction in the presence and discharge of, toxic pollutants,
thereby protecting those aquatic ecosystems currently under stress, providing the  opportunity for the re-
establishment  of productive ecosystems in damaged waterways, and protection  of resident endangered
species. In addition, EPA expects the regulation to result in the increased propagation and health offish and
other organisms, maintaining fisheries for both commercial and  recreational purposes. Recreational
activities  such as boating,  water  skiing,  and  swimming would also  be enhanced by  water quality
improvements.

        POTW Effects
        EPA expects the proposed regulation will reduce interference of operations and contamination of
sewage sludge at POTWs receiving effluent discharges from MP&M facilities.  Interference of POTW
processes (e.g., inhibition of microbial degradation) may result from large quantities or high concentrations
of toxic pollutants in these discharges, and may adversely affect the operation of a POTW by potentially
reducing the treatment efficiency or capacity of the POTW. In addition, toxic pollutants  present in  the
effluent discharges may  pass through a POTW and adversely affect receiving water quality or contaminate
sludges generated during primary or secondary wastewater treatment. EPA expects benefits from changes
                                             7.16

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Table 7.5; Toxicants Exhibiting Systemic and Ot&er Adverse Mfects1
Toxicant
Acetone
Antimony
Arsenic
Barium
Benzoic acid
Benzyl alcohol
Bis(2-ethylhexyl) phthalate
Boron
Cadmium
Chromium
Cyanide
Di-n-butyl phthalate
Dichloroethane, 1,1-
Dichloromethane
Ethylbenzene
Fluoride
Lead
Manganese
Methyl ethyl ketone
Molybdenum
Naphthalene
Nickel
Phenol
Selenium
Silver
Tetrachloroethene
Tin
Toluene
Trichloroethane, 1,1,1-
Vanadium
Zinc
Reference Dose Target Organ and Effects
Increased liver and kidney weights; nephrotoxicity
Longevity, blood glucose, cholesterol
Hyperpigmentation, keratosis and possible vascular complications
Increased blood pressure
Gastrointestinal effects2
Forestomach, epithelial hyperplasia
Increased relative liver weight
Testicular atrophy, spermatogenic arrest
Significant proteinuria (protein in urine)
Renal tubular necrosis (kidney tissue decay)2
Weight loss, thyroid effects and myelin degeneration
Increased mortality
Liver and kidney toxicity2
Liver toxicity
Liver and kidney toxicity
Objectionable dental fluorosis (soft, mottled teeth)
Cardiovascular and Central Nervous System effects
Central Nervous System effects
Fetus; decreased birth weight
Increased uric acid
Decreased body weight
Decreased body and organ weights
Reduced fetal body weight in rats
Clinical selenosis (hair or nail loss), liver dysfunction
Argyria (skin discoloration)
Liver toxicity, weight gain
Kidney and liver lesions
Changes in liver and kidney weights
Liver toxicity
Kidney and Central Nervous System effects2
Anemia
1 Chemicals with EPA verified (IRIS) or provisional (HEAST, or other Agency document)) human
health-based reference doses, referred to as "systemic toxicants."
2 Reference dose based on a no observed adverse effect level (NOAEL). Health effects summarized from
Amdur, M.O.; Doull, J.; and Klaassen, C.D.,eds. Casarett and Poult's Toxicology. 4th edition, 1991.
Source: U.S. Environmental Protection Agency
in sewage sludge disposal practices will be generated as POTWs are able to dispose of sludge using less
expensive and more environmentally beneficial methods. For example, higher quality sludge may be applied
to agricultural land rather than incinerated or disposed  of in landfills. Such uses would result in cost
savings for POTWs by increasing opportunities to derive benefits from the distribution of sludge for land
application.
                                             7.17

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                                           Chapter 8
                                    Human Health Benefits

8.1     Introduction
        EPA expects that the proposed Metal Products and Machinery Industry Phase I regulation will
yield human health benefits by reducing effluent discharges to waterways from which fish or water are
taken for human consumption. This chapter reviews the estimation of four categories of expected human
health benefits. The first two categories involve reduction in cancer cases from two exposure pathways:
consumption of chemically-contaminated fish tissue and  ingestion of  chemically-contaminated drinking
water. In the former case, the exposed population consists of recreational and subsistence anglers and their
families. In the latter case, the exposed population consists of individuals served by drinking water systems
that draw water from waterways affected by MP&M industry discharges.  EPA evaluated both of these
benefit pathways in terms of the expected annual reduction in cancer cases in the exposed population and,
where appropriate, the associated monetary value of avoiding those cancer cases.

        EPA also quantified,  but did not  monetize, two additional  measures of human health-related
benefits for the proposed regulation. The first of these  benefit measures indicates change in exposure to
pollutants relative to non-cancer,  systemic health effect thresholds via the fish consumption and drinking
water  pathways.  This analysis used the same  analytic framework  for  estimating change in pollutant
ingestion within the exposed population as used for the cancer analyses. The second benefit measure is
based on a comparison of in-waterway pollutant concentrations to health-based water quality toxic effect
levels. Although EPA was  unable to assign monetary values to  these benefit measures, the quantitative
estimates of benefit events provide additional insight into the human health-related benefits likely to result
from the proposed regulation.

        For all of the benefit categories analyzed,  the health-related measures  were estimated for  the
baseline and for the proposed regulation, Option 2a/2.' The reduction  in the health-related measures (e.g.,
number of annual cancer cases) from baseline to the post-compliance case is the estimated benefit of the
proposed regulation.
  Benefit values were also estimated for Option la/2, which EPA considered for proposal. Cost and benefit results
for this option are summarized in Appendix F.
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        On the basis of these analyses, EPA estimated that, for combined recreational  and subsistence
angler populations, the proposed Option 2a/2 would eliminate  approximately 2.7  cancer cases per year
from a baseline of about 11.1 cases estimated at current discharge levels, representing a reduction of about
24 percent. Monetizing the value of these reduced cancer cases yields benefits that range from $5.4 million
to $28.2 million per year for the fish consumption pathway depending on the value of an avoided cancer
event. Because EPA has established drinking water criteria for all the  pollutants in this analysis that have
cancer potency factors, it is  assumed that public drinking water treatment systems will reduce these
pollutants in the public water supply to  levels that are protective of human health. As a result, for the
drinking water pathway, Option 2a/2 would not eliminate any cancer cases. Accordingly, for this analysis,
EPA is not claiming any  monetary benefits of avoided cancer cases  associated with the drinking water
pathway. In addition, EPA did not estimate the  savings in treatment costs that might accrue to drinking
water systems as a result of reduced concentrations of these pollutants  in the intake waters. Thus, the total
monetized human health benefits are attributed, to the fish consumption pathway  and range from $5.4
million to $28.2 million per year.

        Although not monetized in the analysis, additional benefits will also be realized in the form of
reductions in non-cancer, systemic health risks. An indicator of the change in such risks is the population
exposed to excessive levels of MP&M pollutants by consuming chemically contaminated  fish  or ingesting
chemically contaminated drinking water.  Specifically, for this analysis, EPA evaluated the distribution of
populations exposed to increasing quantities  of  pollutants that  potentially pose a risk of systemic health
effects. The  results  of the analysis  suggest that the proposed regulatory option will reduce the risk of
systemic health effects for a substantial portion  of the  exposed population. In particular, EPA's analysis
shows a significant increase in the portion of the  population for which  the marginal risk of systemic health
hazard from exposure to  pollutants discharged  from MP&M  facilities  is  zero. This finding should be
considered, however, in conjunction with the fact that in general,  the marginal risk of systemic health
hazard from pollutants discharged by MP&M Phase I facilities alone is quite low. As such, the significance
of the marginal risk from MP&M pollutants in contributing to an absolute risk of systemic hazard will
depend on background exposures to MP&M and other pollutants  from sources other than  the MP&M
Phase I industries and the associated background risk level resulting from these exposures. Finally, EPA
estimated that the number of waterways with concentrations for at least one affected pollutant that exceed
human healths-based ambient water quality criteria will be reduced  from 137 in the baseline  to 97 under
Option 2a/2.
                                                8.2

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       The remainder of this chapter reviews the methodology and findings from the analysis of human
health-related benefits. The following section summarizes the methodologies used to estimate the benefit
measure for each of the benefit categories analyzed. The next section reviews the findings for each benefit
category, including, the estimated number of benefit events  for each category, and for those categories to
which EPA attached  a monetary value, the estimated dollar value of benefits. The final section of the
chapter summarizes limitations to the benefits analysis methodologies.

8.2    Methodology for Analyzing Human Health-Related Benefits
       Individuals are potentially exposed to  pollutants  from  MP&M facilities via consumption of
chemically-contaminated fish tissue  and ingestion of chemically-contaminated  drinking water. Potential
human health  effects  include cancer events and  non-cancer health events. As shown in Table 7.4 in the
preceding chapter, risks such as  skin, lung, and liver cancer are associated with exposure to the following
four pollutants:
                       Dichloromethane
                       Tetrachloroethene
Bis(2-Ethylhexyl) Phthalate
Arsenic
In addition, Table 7.5 indicated that non-cancer systemic health effects are associated with exposure to the
following 31 pollutants:
Metals
Antimony
Arsenic
Barium
Boron
Cadmium
Chromium
Lead
Manganese
Molybdenum
Nickel
Selenium
Silver
Tin
Vanadium
Zinc
Non-Metals
Acetone
Benzoic acid
Benzyl alcohol
Bis(2-ethylhexyl) phthalate
Cyanide
Di-n-butyl phthalate
Dichloroethane, 1,1-
Dichloromethane
Ethylbenzene
Fluoride
Methyl ethyl ketone
Naphthalene
Phenol
Tetrachloroethene
Toluene
Trichloroethane, 1,1,
1-
 Health effects  including but not limited to increased blood pressure, gastrointestinal effects, liver and
 kidney toxicity, cardiovascular and central nervous system effects, and decreased birth weight are linked to
 exposure to these pollutants.

        The following discussion summarizes the methodology for estimating the number of benefit events
 for four benefit categories:

 1.      Reduced incidence of cancer from consumption offish taken from waterways affected by MP&M
        industry discharges;
                                                8.3

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2.
3.
4.
Reduced incidence of cancer from ingestion of water taken from waterways affected by MP&M
industry discharges;

Reduced frequency of ingestion of pollutants  via fish and water consumption in quantities
exceeding the Reference Dose (RfD), an indicator of non-cancer, systemic health risk;

Reduced occurrence  of pollutant concentrations  resulting from  MP&M  discharges that are
estimated to exceed human health-based ambient water quality criteria.
        In each case, baseline conditions were compared to the results of the proposed regulatory option to
evaluate the benefits! associated with this rulemaking. In addition, for all of the human health-related benefit
analyses, the analyses were performed at the level of the sample MP&M facility using data developed from
                   E
the Section 308 Survey of MP&M Phase I facilities. The sample results from the first, second and fourth of
these analyses were extrapolated to national estimates using the facility sample weights as  discussed in
Chapter 2.         ;

        It should be noted  that the analyses pertaining to changes  in human health  risk described in this
chapter do not apply to all MP&M  pollutants of concern. Due to  current research limitations, cancer
potency factors, Reference Doses, and ambient water quality criteria are not available for 11 metals,  16
organics and 12 conventional pollutants. As a result, EPA was not able to analyze the potential cancer and
non-cancer health risks associated with these pollutants. In addition, these analyses ignore the potential for
joint  effects of more than  one pollutant.  Each pollutant is dealt  with in isolation and the individually
estimated effects ar6  then  added together.  The analyses do not account for the  possibility that several
pollutants may combine to yield more or less adverse effects to human health than indicated by the simple
sum of the individual effects. Finally, these analyses are unable  to account for background exposures to
these and other chemicals, which, in some instances as documented below, may lead to underestimates of
the reduction in health risk resulting from reduced MP&M industry discharges.

        Reduced Incidence of Cancer from Consumption of Fish Taken  from Waterways Affected by
        MP&M Industry Discharges
        The analysis of reduced annual  occurrence  of cancer  in exposed populations via the fish
consumption pathway involves three  analytic steps:  (1) estimating the reduced annual risk  of incurring
cancer for an individual within the exposed population resulting from reduced pollutant contamination of
fish; (2) estimating the population that would be expected to benefit from reduced pollutant contamination
offish; and (3) calculating the change  in the number of cancer events in the exposed population.
                                                8.4

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       Estimating Cancer Risk from Consumption of Chemically-Contaminated Fish
       The estimated marginal risk2  to an individual of developing cancer is based on the quantity of
carcinogenic chemicals MP&M facilities discharge to waterways, the rate at which the discharged chemical
accumulates  in fish tissue, the cancer effect  of the  discharged chemicals,  and the rate of personal
consumption of chemically contaminated fish. For each sample MP&M facility and the waterway to which
it discharges, EPA calculated the marginal cancer risk to individuals in two population classes that differ
based on  fish consumption  rates:  recreational  anglers and subsistence anglers. To provide a basis for
calculating the reduction in cancer cases estimated to result from regulation, EPA calculated the marginal
cancer risk values for the baseline (i.e., before regulation) pollutant discharge case and the post-compliance
discharge  case, based on the proposed  Option 2a/2. The following discussion summarizes  the marginal
cancer risk calculations.

        For all MP&M chemicals  for which a quantitative relationship between ingestion rate and  annual
probability  of developing  cancer has  been  estimated,  EPA  calculated the  in-waterway pollutant
concentrations for each direct and indirectly discharging facility using a simplified waterway dilution
model. The pollutant concentrations associated with  direct discharge of MP&M pollutants were calculated
as follows:
                                     C =
                                                LxCFi
                                         CFaxWFxCFsxFD
        where:
        C
        L
        CF,
        CF2
        WF
        CF3
        FD
pollutant concentration in surface water (ug/1);
pollutant loading (kg/year);
conversion factor, kilograms to micrograms (106 ug/kg);
conversion factor, gallons to liters (3.785 1/gal);
harmonic mean waterway flow (ftVsec);
conversion factor, ftVsec to gal/day (646,317 gal/day/ft3/sec); and
waterway flow days (365 days/year).
 2  The risk value is referred to  as the marginal risk because  it is the incremental annual probability for an
 individual of developing cancer above and beyond the baseline  probability posed by all other extant factors that
 contribute to a risk of developing cancer.
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        Surface water concentrations associated with indirect dischargers  account for the removal of
pollutants by the publicly owned treatment works (POTWs) that receive and treat facility effluent before
discharge to a waterway. The concentrations from indirect dischargers were calculated as follows:

                                          Lx(1-RE)xCFi
                                        CFaxWFxCFsxFD
        where:
        C
        L
        RE
        CF,
        CF2
        WF
        CF3
        FD
                  =    pollutant concentration in surface water (ug/1);
                  =    pollutant loading (kg/year);
                  =    POTW removal efficiency (unitless, range from 0 to 1);
                  =    conversion factor, kilograms to micrograms (106 ug/kg);
                  =    conversion factor, gallons to liters (3.785 1/gal);
                  =    harmonic mean waterway flow (ftVsec);
                  -    conversion factor, ftVsec to gal/day (646,317 gal/day/ft3/sec); and
                  =    waterway flow days (365 days/year).
        Harmonic mean waterway flows (HMF), defined as the inverse mean of reciprocal daily arithmetic
mean flow values, were used in the mixing analysis to derive human health effects (see EPA, 1991 for more
detail).  Because in-waterway pollutant concentration is  a function of, and inversely proportional to, the
waterway flow downstream of the  discharge, EPA considers  the HMF a more appropriate estimate of
design flow than arithmetic  mean  flow for assessing potential long term human health effects.3  For
additional details on the calculation of waterway concentrations, see Appendix A of this RIA.

        The marginal cancer risk associated with each pollutant discharged by each facility  was calculated
on the basis of the estimated concentration of the pollutant in the affected waterway, the assumed uptake of
the pollutant into fish flesh, the daily rate of fish ingestion, and the cancer risk factor  for each pollutant.
The specific formulation for calculating the risk to an individual from consumption of a given chemical is
as follows:
 In-waterway pollutant concentration is inversely proportional to waterway flow because greater in-waterway flow
leads to greater dilution which, in turn, will decrease the concentration of the pollutant in the waterway.
                   ;                             8.6

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                                 C x CFi x CR x BCF x EF x ED
                                         BWxLTxCF2
       where:
       Risk       =   marginal  annual  risk  of incurring  cancer  from fish  consumption  (change in
                      probability);
       C         =   pollutant concentrations in surface water (ng/1);
       CFi       =   conversion factor, micrograms to milligrams (0.001 mg/|J.g);
       CR       =   human consumption rate offish (kg/day);
       BCF       =   bioconcentration factor of pollutant in fish (I/kg);
       EF        =   exposure frequency of fish consumption (365 days/year);
       ED       =   exposure duration of fish consumption (years);
       BW       =   human body weight (70 kg);
       LT       =   human lifetime (70 years);
       CF2       =   conversion factor, years to days (365 days/year); and
       SF        =   pollutant cancer potency factor (mg/kg-day)"1.
       The pollutants analyzed and their cancer potency factors — that is, the change in probability of
developing cancer per milligram of chemical ingested per  day, per kilogram of.body mass — are presented
in Table 8.1. Three different risk values were estimated using the  relationship outlined above: one for
subsistence fishing households and two for recreational fishing households. The risks differ in the assumed
consumption  rates and exposure  durations of the  respective populations. Persons  living in subsistence
fishing households are assumed to consume  140 grams  per day (0.140 kg/day) of fish over 70 years of
exposure.  The risks to  recreational fishing  households are estimated  over two  lifetime segments.
Specifically, persons living in recreational fishing households are assumed to consume 30 grams offish per
day (0.030 kg/day) over a 30-year period, and 6.5 grams per day (0.0065 kg/day) over a 40-year period.4
The total lifetime marginal risk for these households is calculated by summing the risks for both periods.
  From a recent review of fish consumption patterns and EPA internal guidance, EPA is recommending that the
change in risk for recreational fishing households be analyzed on the basis of a fish consumption rate of 33 grams
per day for the full 70-year exposure period (instead of 30 grams per day for 30 years and 6.5 grams per day for 40
years). The risk and benefits analysis for promulgation of the MP&M Phase I regulation will reflect this revised
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Table $4: Cancer Potency Factors forPoUofcaits Reduced by the
Proposed MP«&M Phase I Regulation
Regulated Pollutant
Dichloromethane
Bis(2-ethyhexyl)phthalate
Tetrachloroethene
Arsenic
Cancer Potency Faefar {mg/kg-day)"1
0.00749
0.01400
0.05099
1.75000
The cancer potency factor is the incremental probability of developing cancer
over a lifetime resulting from ingestion of the indicated chemical at the rate of
one milligram per day per kilogram of body mass. For the marginal rates of
exposure in this analysis and assuming reasonable background chemical
exposures, the potency factor may be reasonably assumed to be a linear constant.
Source: U.S. Environmental Protection Agency
        The pollutant-specific risks to recreational and subsistence anglers from MP&M facility discharges
were then summed over pollutants for each type of angler to obtain marginal risks for each  population
group from each facility's discharge. As such, separate estimates of cancer risk were developed for each
combination of angler type (i.e., defined on the basis offish consumption rate and exposure duration) and
facility discharging at least  one pollutant with a cancer risk factor. The total change in probability of
developing cancer from exposure to  more than  one  MP&M pollutant is assumed to be the sum of the
marginal risk effects from each pollutant: that is, the effects of the individual pollutants are assumed to be
linearly additive. Note that the assumption of linear additivity of cancer risk effects applies not  only to the
combination of pollutants from a single  facility but also to the combined effects of multiple  facility
discharges. As a result, when more than one MP&M facility discharges to the same affected waterway — a
circumstance found to occur with some frequency in the sample facility data — the combination of the
multiple facility discharges  may be accounted for by  simply analyzing  the  effects  of each  facility
independently.  The cancer effects associated with individual facility discharges may later be summed over
facilities at the level of the estimated occurrence of cancer events in the total population. Thus, it is not
necessary to combine pollutant quantities and incremental concentration  effects from multiple facilities at
the point of discharge.  The  ability to aggregate  effects from multiple facilities at the level of estimated
cancer events in the exposed population is important because it avoids certain  problems posed by
differential weighting of sample facility results and which were encountered in other parts of the analysis.

        The risk values associated with the  discharge from each facility were calculated for both the
baseline discharge level and the post-compliance discharge level associated with the  proposed regulatory
assumption. Using the higher  consumption rate over the full  exposure period will increase the regulation's
expected benefits.
                   ;                              8.8

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option, Option 2a/2. The change from baseline to post-compliance case in estimated occurrence of cancer
in the exposed population is the estimated benefit of the proposed Option 2a/2.

       Estimating the Population Expected to Benefit from Reduced Pollutant Contamination of Fish
       The methodology described above provided estimates of the cancer risk to an individual from
consuming fish taken from waterways affected by MP&M facility discharges. Risk values were estimated
for each sample facility discharging at least one MP&M pollutant with a cancer risk  factor,  and for
individuals in the two fish consumption populations under analysis: recreational anglers and subsistence
anglers. To estimate the change in occurrence of cancer resulting from reduced pollutant discharges, these
risk values, which apply to individuals in each consumption class, must be associated with the populations
estimated to consume fish taken from the waterways affected by sample facility discharges.

       As described in the preceding section, the population exposed to chemically-contaminated fish and
thus expected to benefit from reduced MP&M discharges includes recreational and subsistence anglers. In
addition, the other household members of these two groups are also assumed to be exposed to the same risk
level  as  the  angler.  As such, the  exposed population  is defined as the number of recreational and
subsistence anglers that fish MP&M reaches (and other household members), where a reach is defined as a
specific length of river, lake shoreline, or marine coastline and an MP&M reach is defined as a reach to
which an MP&M  facility discharges.5  The geographical area from which anglers would travel to fish a
reach is assumed to include only those counties that abut the MP&M reach. This assumption is based on
the finding in the 1991 National Survey of Fishing,  Hunting,  and Wildlife-Associated Recreation that 65
percent of anglers travel less than 50 miles to fish (U.S. Department of the Interior, 1993).

       Estimating the number of persons fishing  a reach involved  a series of data development and
calculation activities as summarized below. These activities include:

1.     Estimating the licensed fishing population in counties abutting MP&M reaches.

2.     Estimating the population of subsistence fishermen in counties abutting MP&M reaches.
5 The exposed, and thus potentially benefitting, population would also include a category of "all other individuals"
who consume freshwater and estuarine fish. Although these individuals are expected to have a  much lower
consumption average daily consumption rate, they nevertheless would likely receive some benefit from reduced
exposure to pollutants through fish consumption. This analysis omits this consumption category and the associated
benefit estimate.
                                                8.9

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3.     Estimating the fraction of the total fishing population in counties abutting an MP&M reach that
       fish the MP&M reach and, from the fraction, the size of population expected to fish each MP&M
       reach.

4.     Adjusting the calculated fishing populations for the presence offish advisories.

5.     Including family members in the exposed population estimates.

       Estimating the Licensed Fishing Population in Counties Abutting MP&M Reaches
       To estimate the number of persons fishing a reach, EPA first estimated the number of persons with
licenses in counties  abutting the  reaches  to which  MP&M  facilities discharge. The number of fishing
licenses sold in counties abutting MP&M reaches is  assumed to approximate the  number of anglers
residing in the abutting counties. However, it was not possible to assemble this data for every state in which
MP&M facilities are located. For those states for which data  were not assembled,  EPA estimated the
number of licensed anglers per county using data from several sources, including: (a) county level fishing
license data recently collected for the regulatory impact analysis for the proposed Pulp and Paper industry
effluent limitation guideline; (b) county and state fishing license data for neighboring states; and (c) the
number of reach miles within a county as a percent of the state total  (see Appendix B for a detailed
description of this estimation procedure).

       Estimating the Population of Subsistence Fishermen in Counties Abutting MP&M Reaches
       Although fishing licenses may be sold to subsistence fishermen, many fishermen that fish to obtain
a substantial share of their own and their family's diet do not purchase fishing licenses. The magnitude of
subsistence fishing in the US or in individual states, however, is not generally known. For this analysis,
EPA assumed that subsistence fishermen would constitute an additional 5 percent of the licensed fishing
population.6 That is, after estimating the licensed fishing population in counties abutting MP&M reaches,
EPA added 5 percent to this value as the estimated number of subsistence fishermen.

       Estimating the Fraction of the Fishing Population that Fish an MP&M Reach
       In addition to  estimating  the fishing  population in counties abutting MP&M reaches, it is also
necessary to estimate the fraction of the fishing population that  actually  fish the MP&M reaches and are
thus potentially exposed via fish consumption to pollutants discharged from MP&M facilities. The task of
  It is important to estimate recreational and subsistence populations separately because fish consumption rates for
subsistence anglers are considerably higher than those for recreational anglers.
                   '                            8.10

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estimating the fraction of fishing population that fish a given area is difficult because of severe  data
limitations; as a result, any estimates of the fraction of the population that fish a reach are necessarily
subject to considerable uncertainty. In this RIA, EPA found that data limitations at the state level precluded
collecting creel survey data for MP&M reaches. Therefore, for this analysis, EPA relied on estimates of
fishing activity developed in the RIA for the Pulp and Paper industry. In the  Pulp  and Paper industry
analysis, EPA used creel survey data for 8 sites (i.e., data on the number of persons fishing a given fishing
location  and the  catch rate) to estimate the fraction of licensed  anglers in an  area that fish  a given
waterway. These data indicated that about 30 percent of the licensed anglers living  in the counties that
abutted the reaches actually fished those reaches. The MP&M analysis, therefore, employs the same value, .
30 percent, as the fraction of the fishing population living in abutting counties that fish an MP&M reach.
Multiplying the estimated fraction of the fishing population that fish an MP&M reach by the estimated
fishing population yields the estimated number of recreational and subsistence anglers that fish the reach.

        Adjusting for Fish Advisories
        For MP&M reaches where fish advisories (typically due to non-MP&M regulated pollutants  such
as dioxin and mercury) are  in place, EPA assumed that some proportion of anglers would adhere to the
advisory and not fish the MP&M reach in question. Past studies suggest that anglers have a high, although
not complete, level of awareness of fish advisories. These studies further suggest that while anglers may
change their behavior in response to fish consumption advisories, they do  not necessarily  refrain  from
consuming fish taken from  reaches under an advisory.  For example, studies conducted by Belton  et al
(1986), Knuth and Velicer (1990), Silverman (1990), West (1989), Connelly, Knuth,  and Bisogni (1992),
and Connelly and Knuth (1993) indicate that approximately 50 to  87 percent of anglers surveyed  were
aware of state fish advisories on waterbodies where they fish. However, these studies also indicate that only
10 to 34 percent of anglers who were aware of advisories modified their fishing behavior by (1) no longer
fishing a particular location, (2) changing the location  from which to fish, or (3) taking fewer fishing trips
in response to the advisory.  In addition,  between 13 and 68 percent of anglers who were aware of
advisories changed their consumption of catch or preparation habits in response to advisories. The study by
Knuth and Velicer (1990) also found some confusion among anglers regarding which waters were under
advisory: 37 percent of fishermen actually fishing in waters under advisory reported that they were fishing
in uncontaminated waters.

        In summary, these data indicate that not all anglers are aware of advisories and, of those that are
aware of advisories, only some modify their fishing or fish consumption activity in response to an advisory.
On the basis of these data, EPA assumed for the MP&M analysis that recreational fishing activity would

                                               8.11

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be 20 percent less on reaches subject to an advisory than the value that would otherwise be estimated.
Accordingly, EPA reduced by 20 percent the estimated populations of licensed anglers fishing each MP&M
reach subject to an advisory. EPA further assumed that fish advisories do not affect fishing participation by
subsistence anglers; thus, no adjustment was made to the estimates of subsistence fishing population based
on the presence offish advisories. The estimated 20 percent decrease could lead to either an overestimate or
underestimate of the risk associated with consumption of contaminated fish since, (1) anglers that change
locations may simply be switching to other locations where advisories are in place and therefore maintain
or increase their current risk, and (2) anglers that continue to fish contaminated waters may change their
consumption and preparation habits to minimize the risks from the contaminated fish they consume.

        Including Family Members in the Exposed Population Estimates
        Finally,  EPA  assumed that, in addition to anglers  themselves, families of anglers would  also
consume fish taken from waters affected by MP&M facility discharges. Therefore, for each MP&M reach,
EPA multiplied  the estimated numbers  of recreational and  subsistence anglers by 2.62, the size of the
average US household in 1992 based on Current Population Reports (Statistical Abstracts of the  US,
1993). These calculations yield, for each MP&M facility, the household populations of recreational and
subsistence anglers who are estimated to consume fish taken  from the reach to which the MP&M facility
discharges, either directly  or indirectly through a POTW. EPA expects that these populations will benefit
from reduced MP&M industry discharges  by consuming fish that has  lower   levels  of pollutant
contamination.

        Calculating the Change in the Number of Cancer Events in the Exposed Population
        To calculate the reduction in cancer cases estimated to  result from the MP&M regulation, EPA
estimated the number of cancer cases in the exposed population for the baseline and post-compliance
pollutant discharge cases. The reduction  in number of cancer cases from baseline to post-compliance is the
expected health benefit to the exposed fishing population from reduced MP&M pollutant discharges.

        EPA calculated the number of cancer cases associated with the pollutant discharges (baseline or
post-compliance) from each facility by multiplying the marginal cancer risk value for the two population
classes (i.e., recreational fishermen households and subsistence fishermen households) times the estimated
sizes of the population classes living near the facility. The  product of the marginal risk value and the
population size yields the number of annual cancer events in the given population class estimated to result
from consumption offish  taken from waterways affected by MP&M pollutant discharges.  Summing the
values for the recreational and subsistence fishing household classes yields the total number of cancer cases
                                               8.12

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associated with the sample facility discharges. Because these cancer event values apply to sample facilities,
EPA extrapolated the sample results to the total MP&M population by multiplying the result obtained for
each sample facility by its sample weight and  summing the sample-weighted facility  results.  These
calculations are summarized algebraically as follows:
                       N
                      z
                       i
   TCCfc  =  S Wti  x [(POPi,sprt  x  Riski,sPrt) + (POPi,sbst  x  Riskiest)]
Where:
        POPi
        POPi
            i,sbst
        Riski,r(
        Risk
            •i sbst
               Total  national  estimate  of cancer  cases  associated  with consumption  of
               chemically-contaminated fish tissue (baseline or post-compliance)
               Sample weight applicable to facility i (i = 1 to N facilities, where N is the number
               of facilities in the sample)
               Exposed population of recreational fishing households for the reach to which
               facility i  discharges (with adjustments as  indicated for the presence of fish
               consumption advisories)
               Exposed population of subsistence fishing  households for the reach to which
               facility i discharges
               Marginal cancer risk from fish consumption in the recreational fishing household
               population associated with MP&M pollutant discharges from facility i
               Marginal cancer risk from fish consumption in the subsistence fishing household
               population associated with MP&M pollutant discharges from facility i
        These values were calculated for the baseline and post-compliance discharge cases. The difference
 in the values is the number of cancer cases estimated to be avoided annually by reduced MP&M industry
 discharges and the consumption offish taken from waterways affected by those discharges.

        Reduced Incidence of Cancer from Consumption of Drinking Water Taken from Waterways
        Affected by MP&M Industry Discharges
        The analysis of reduced  incidence of cancer  via the drinking water pathway involves three
 analytical steps that are largely parallel to those performed to estimate reduced incidence of .cancer from
 fish consumption: (1) estimating cancer risk to an individual within the exposed population resulting from
 consumption of contaminated drinking water; (2) estimating the population  that would  be expected to
 benefit from reduced pollutant contamination of drinking water; and (3) calculating the change in the
 number of cancer events in the exposed population. The major differences in the execution of these steps.
 for  the drinking  water pathway analysis involve the identification of the exposed population  and the
                                               8.13

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analysis of pollutant discharge effects in both the reach to which a facility discharges and reaches that are
downstream of the discharge point.

       Estimating Cancer Risk from Consumption of Chemically-Contaminated Drinking Water
       Estimation of cancer risk from consumption  of drinking water affected  by MP&M  discharges
requires calculation of in-waterway pollutant  concentrations at the location at which a drinking water
treatment system would draw water for public consumption  (drinking water intake). Thus, calculation of
pollutant concentrations at the water supply intake involves the following elements.

       First, in-waterway pollutant concentrations were estimated for each pollutant in the reach to which
       a facility directly or indirectly  discharges. The method  and formulas for this calculation are
       identical to those described for the analysis of cancer effects for the fish consumption pathway.

       Second, EPA estimated the pollutant concentrations over a distance of 500 kilometers downstream
       from each facility's discharge reach. The estimation  of pollutant concentrations downstream from
       the discharge reach  involved use of an exponential decay model that incorporates mechanisms by
       which  pollution concentrations  diminish below the initial  point of  discharge (e.g., dilution,
       adsorption, partitioning, volatilization,  and hydrolysis). The methods for calculating downstream
       pollutant concentrations are described in more detail in Appendix A.

       Third, for each facility, EPA identified the location of any drinking water intakes within the initial
       and downstream reaches for which pollutant concentrations were calculated and assigned pollutant
       concentration values to each relevant intake point. The locations of these drinking water intakes
       were later used to identify the exposed populations (i.e., the population served by drinking water
       supply systems with intakes that may receive waters affected by MP&M  facility discharges).7

       The estimated pollutant concentrations at the point of drinking water intakes were used to estimate
cancer risk among the exposed population served by the drinking water systems. Pollutants examined in the
drinking water analysis are  the same four  chemicals as those examined in the fish consumption analysis
(see Table 8.1 for a list of the pollutants and their cancer potency factors). In addition, the calculation of
marginal cancer risk uses  a  similar formulation to that used for the analysis of cancer risk associated with
fish consumption. Differences from the fish consumption  formulation  include the omission of a  bio-
7 See Appendix A for additional discussion of the methodology for identifying drinking water intakes and
associated populations.
                                                8.14

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accumulation term (i.e., pollutants are ingested directly through water consumption instead of through fish
consumption) and assumptions  regarding consumption rate and exposure period.  Pollutant ingestion is
assumed to be uniform over the entire exposed population and is based on 70 years of consumption of 2
liters of water per day.

        Another way in which the analysis of cancer events for the drinking water pathway differed from
the analysis for the fish  consumption pathway concerns the accounting for risk reduction effects on a
chemical-specific  basis.  Specifically, EPA  assumed that drinking water treatment systems will  reduce
concentrations to  below adverse effect thresholds for those  chemicals for which  EPA  has published a
drinking water criterion. In fact, EPA has published a drinking water criterion for all four of the chemicals
in the cancer risk analysis.  Accordingly, although EPA estimated the marginal  cancer risk for all of the
chemicals with cancer risk factors, the cancer avoidance benefits from reduced exposure to these chemicals
via the drinking water pathway were excluded from the monetary valuation of expected health benefits.8

        The formula for calculating the marginal risk to an individual resulting from the  discharge of a
given pollutant from a given facility at reaches with a known public drinking water intake is as follows:
                      _. .
                      R'Sk
                                     CxCFixCRxEFxED
                                         BWxLTxCF.
where:
Risk
CR
EF
ED
BW
LT
                      marginal annual risk of incurring cancer from drinking water consumption (change
                      in probability),  calculated at each drinking water intake within 500 km of the
                      initial discharge point;
                      pollutant concentration in surface water in the relevant reach
                      conversion factor, micrograms to milligrams (0.001 mg/ug);
                      human consumption rate of water (2 I/day);
                      exposure frequency (365 days/year);
                      exposure duration (70 years);
                      human body weight (70 kg);
                      human lifetime (70 years);
  As noted above, EPA did not account for any cost savings that might accrue to drinking water treatment systems
as a result of the reduced concentrations of these contaminants in their intake water supply.
                                               8.15

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        CF2       =    conversion factor (365 days/year).
        SF        =    pollutant cancer potency factor (mg/kg-day)"1.
        The marginal risk effects from each facility's pollutants are then summed over pollutants at each
drinking water intake to calculate the marginal risk at each intake resulting from pollutant discharges by
each upstream facility. As a result, the findings earned forward to the next step include the marginal cancer
risk for each combination of facility and associated drinking  water intake(s). As for the analysis  of fish
consumption-related effects,  these values  were calculated for both  the  baseline and  post-compliance
discharge cases.

        Estimating the Population Expected to Benefit from Reduced Contamination of Drinking Water
        For each combination of discharging facility and drinking water intake identified in the preceding
step, the relevant exposed population is the general population served by the drinking water system for
which the drinking water intake was identified. Populations served by drinking water intakes drawing from
reaches affected by MP&M discharges were taken from the Water Supply Database (WSDB) file in the
Graphical Exposure Modeling  System (GEMS). This file contains information on public drinking water
supplies. As discussed above, river segments that contain a drinking water intake were identified in this file
along with the population served by that intake.

        Calculating the Change in the Number of Cancer Events in the Exposed Population
        To calculate  the reduction  in drinking water-related cancer cases estimated to result from the
MP&M regulation, EPA estimated the number of cancer cases in the exposed population for the baseline
and post-compliance pollutant discharge cases. The reduction in number of cancer cases from baseline to
post-compliance is the expected health benefit to the exposed water-consuming population from reduced
MP&M pollutant discharges.

        EPA calculated the number of cancer cases associated with the pollutant discharges (baseline or
post-compliance) for  each combination of facility  and affected drinking water intake by multiplying the
marginal cancer risk value times the population served by the water system drawing water at the drinking
water intake. As before, the product of the marginal risk value and the population size yields the number of
annual  cancer events estimated to result from consumption of water taken  from waterways affected by
MP&M pollutant  discharges. These cancer event  values were summed over all drinking water  intakes
associated with a MP&M facility to yield the total number  of cancer cases associated with the  sample
facility discharges. EPA extrapolated the sample results  to the total MP&M population by multiplying the
result for each sample facility by its sample weight  and summing the sample-weighted facility results. Note
                   ;                            8.16

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that the assumption  of linear additivity of marginal  cancer effects,  as discussed above, allows the
aggregation of cancer-risk effects over facilities and drinking water intakes to be accomplished by simple
addition of the effects calculated separately for each combination of facility and drinking water intake.
These calculations are summarized algebraically as follows:
                                        N          M
                           TCCdw  =  Z Wti x £  (POPij x
                                        i           j
        Where:
                  =    Total national  estimate  of cancer  cases  associated  with  consumption  of
                       chemically-contaminated drinking water (baseline or post-compliance)
                  =    Sample weight applicable to facility i (i = 1 to N facilities)
                  =    Population exposed to discharges by facility i at drinking water intake j (j = 1 to
                       M water supply intakes)
                  =    Marginal cancer risk for discharges by facility i at drinking water intake j
        These values were calculated for the baseline and post-compliance discharge cases. The difference
in the values is the number of cancer cases estimated to be avoided annually by reduced MP&M industry
discharges and the consumption of water taken from waterways affected by those discharges.

        Reduced Frequency of Ingestion of Pollutants  at Rates Likely to Pose a  Risk of Systemic
        Health Hazard
        In addition to cancer events,  exposed populations are also at risk  of developing non-cancer,
systemic health problems such as  reproductive, immunological, neurological, or circulatory problems from
both fish ingestion and  water consumption. In  general, fewer  data are available  on dose-response
relationships for  these non-cancer health outcomes. As a result,  it is not  possible to specifically link
exposure to a pollutant to particular health events. This analysis, however, indicates the change in systemic
health  risk resulting from reduced MP&M discharges by considering estimated pollutant ingestion rates
from the fish consumption and drinking water pathways relative to the Reference Dose (RfD) for each
pollutant. The RfD is an  estimate of the maximum daily  ingestion in mg/kg per day that is likely to be
without an appreciable risk of deleterious effects during a lifetime. Reference doses are available for 26 of
the 69  MP&M pollutants of concern. The pollutants analyzed and their RfDs are listed in Table 8.2.
                                               8.17

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, \ Table 8.2: Rcfe
Regulated Pollutant
Cyanide
Benzole acid
Acetone
1,1, 1-Trichloroethane
Dichloromethane
1, 1-Dichloroethane
Methyl ethyl ketone
Di-n-butyl phthalate
Naphthalene
Ethylbenzene
Benzyl alcohol
Toluene
Phenol
Bis(2-ethylhexyl)
phthalate
Tetrachloroethene
Manganese
Nickel :
Silver
Tin
Antimony ',
Arsenic
Barium
Cadmium
Chromium
Zinc
Fluoride
Selenium
Reference
»os«i{B!&)
(mg/ltg/day>
0.01999000
4.00000000
0.10000000
0.09000000
0.05999000
0.10999000
0.05000000
0.10000000
0.03999000
0.10000000
0.30000000
0.20000000
0.60000000
0.01999000
0.00999000
0.00499000
0.01999000
0.00499000
0.60000000
0.00039000
0.00030000
0.07000000
0.00050000
1.00000000
0.30000000
0.01400000
0.00499000
rentce Doses fl
Drinking
Water j
Criteriou
Yes
No
No
Yes
Yes
No
No
No
No
Yes
No
Yes
No
Yes
Yes
Yes
Yes
Yes
No
Yes
Yes
, Yes
Yes
Yes
Yes
Yes
Yes
tfDs) for MP&M Pollutants im ;
Target Organ and Effects
Weight loss, thyroid effects and myelin degeneration
Gastrointestinal effects
Increased liver and kidney weights, nephrotoxicity
Liver toxicity
Liver toxicity
Liver and kidney toxicity
Fetus, decreased birth weight
Increased mortality
Decreased body weight
Liver and kidney toxicity
Forestomach, epithelial hyperplasia
Changes in liver and kidney weights
Reduced fetal body weight in rats
Increased relative liver weight
Liver toxicity, weight gain
Central nervous system effects
Decreased body and organ weights
Argyria (skin discoloration)
Kidney and liver lesions
Longevity, blood glucose, cholesterol
Hyperpigmentation, keratosis and possible vascular
complications
Increased blood pressure
Significant proteinuria (protein in urine)
Renal tubular necrosis (kidney tissue decay)
Anemia
Objectionable dental fluorosis (soft, mottled teeth)
Clinical selenosis (hair or nail loss), liver dysfunction
Source: U.S. Environmental Protection Agency
        The systemic health effect indicator used in this analysis is calculated for the discharges from each
facility by dividing the estimated ingestion rate of each pollutant by the RfD value for the pollutant and
summing these ratios over pollutants. The analyses were performed separately for the two consumption
pathways— drinking water  consumption and fish consumption— and for fish consumption, for the
separate consumption and exposure periods for recreational and subsistence  fishing populations.  The
procedures and formulations for estimating the in-waterway concentrations and ingestion of pollutants by
exposed populations  are the same as those used for the fish consumption and drinking water consumption
analyses for cancer effects. The only exception is that this analysis was performed only for the discharge
reach and, as a result, pollutant concentrations and associated ingestion rates were calculated only for the
discharge  reach and not for  reaches downstream from that point. As a result, this analysis  will likely
understate populations exposed to  non-cancer systemic risks.  In addition,  like the  other health-benefit
                                               8.18

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analyses described in this chapter, this analysis ignores chemical exposures  from sources other than
MP&M Phase I facility discharges. As described below, because this analysis is  based on a comparison of
exposure values to daily consumption thesholds, the  analysis is likely to understate the frequency with
which individuals may be exposed to these chemicals in  absolute concentrations that would contribute a
significant risk of systemic health hazard.

        Specifically, the hazard ratio for the pollutants discharged from each facility is defined as follows:
        where:
        HR
        DCRk
        RfDk
                                                  'RfDk
                       hazard ratio for the pollutants discharged from  a facility  and assumed to be
                       ingested by a specific consumption pathway
                       estimated daily consumption rate per kilogram of body mass  for pollutant k via a
                       specific consumption pathway (mg/kg-day)
                  =    Reference Dose for pollutant k (mg/kg-day)
        As discussed  above,  these  hazard ratios  were calculated separately  for  the  fish and water
consumption pathways and, for the fish consumption pathway, separately for recreational and subsistence
fish consumption rates. The indicator yields a cumulative hazard ratio applicable to all pollutants with RfD
values for each combination  of facility  and consumption pathway. By summing  over the pollutants
discharged by each facility, the indicator assumes that the combined effect of ingesting multiple pollutants
is proportional to the sum of their effects individually. For example, assume that three MP&M pollutants
are discharged from a  facility.  Pollutant A has a hazard ratio of 0.10, pollutant B has a hazard ratio of
0.05, and pollutant C has a hazard ratio of 0.15. The combined hazard ratio, therefore, is 0.30.

        This analysis considers the change in the distribution of hazard ratio values over the populations
exposed to MP&M pollutants from the discharges of MP&M  sample facilities. As  hazard score values
increase, the risk to individuals of experiencing adverse systemic health effects increases. A hazard ratio
greater than one indicates that individuals would be expected to ingest MP&M pollutants at rates sufficient
to pose a significant risk of systemic health effects. Due to the omission of additional sources of pollutants
such as background and MP&M pollutants from upstream dischargers, however,  it is, possible that hazard
ratios below one may also pose a risk of systemic health effects. That is, hazard ratios estimated in this
analysis  may understate actual risk  because  they  do not include risk  associated with background or
upstream  concentrations of pollutants.  Therefore, by presenting the distribution of hazard ratios, it is

                                               8.19

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possible to evaluate potential changes in systemic health risks over the entire distribution, rather than in
relation to just one threshold value.

       Distributions of these systemic health hazard ratios were calculated for both the baseline and post-
compliance discharge cases. To provide a measure of the reduction in systemic health risk expected to be
achieved by the proposed regulation, EPA calculated the distribution of hazard ratio values over the
exposed  populations for  baseline and  post-compliance  discharges. The basis  for identifying  exposed
populations  is the same as that described for the analysis  of reduced incidence of cancer via the  fish
consumption and drinking water consumption pathways (note, though that the exposed populations for the
drinking water consumption pathway are those associated with drinking water intakes  only in a facility's
discharge reach). Thus, the hazard ratio values calculated in this analysis can be linked to specific exposed
population estimates. In going from the baseline to the post-compliance  cases, the shift in the estimated
population associated with a given  higher hazard ratio values to  a lower hazard ratio values  is the
quantitative measure of benefits from this analysis. That is, these persons are estimated to benefit from the
proposed regulation by reduced probability of exposure to  pollutants at rates  that may pose a risk of
systemic health effects.

       All of the preceding discussion applies to sample facility impacts and associated benefits. Analytic
tractability issues prevented this analysis from being conducted on a sample weight basis. Therefore, the
results apply to sample discharge locations only.

       It should bp noted that this analysis considers  contributions to systemic risk resulting only from
Phase I MP&M  facility discharges. Other sources of exposure to MP&M pollutants and  other chemicals
that may contribute to an aggregate risk of systemic health hazard are not taken into account. For example,
Phase II MP&M facilities, a major source of metals, are not considered here. As such, the hazard ratios
omit 'background'-exposures, and as a result, the hazard ratios calculated for a given population are likely
to be systematically biased downwards.  The net result is the analysis is likely to  understate the numerical
value estimated for hazard ratios, however, the marginal change in hazard ratios between the baseline and
the proposed option would remain the same.

       Reduced  Occurrence of Pollutant Concentrations Resulting from  MP&M Discharges in
       Excess of Human Health-Based Ambient Water Quality Criteria
       As the final approach for quantifying reductions in health risk expected to result from  the proposed
MP&M regulation, EPA  estimated the  extent to  which reduced MP&M discharges would  decrease the
                                               8.20

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occurrence of pollutant concentrations in affected waterways that  exceed human health-based ambient
water quality criteria (AWQC). In a conceptual sense, this analysis and its  findings are not additive to the
preceding analyses of change in cancer and systemic health risks but are another way of quantitatively
characterizing the same possible benefit categories. This analysis provides a measure of the change in
cancer and systemic health risk by comparing the number of discharge reaches  exceeding health-based
AWQCs for regulated pollutants due to MP&M activities in the baseline to  the number exceeding AWQCs
under the proposed option. AWQCs are set at levels to protect human health through ingestion of aquatic
organisms and ingestion of water and aquatic  organisms. Accordingly,  reducing the frequency which
human health-based AWQCs  are  exceeded should translate into reduced risks  to  human health. The
measure of reduced risk to human health quantified in this analysis is  the number of reaches to which
MP&M facilities discharge, directly or indirectly, in which all instances of pollutant  concentrations from
MP&M facility discharges that exceed human health-based AWQCs are estimated to  be eliminated as the
result of regulation. That is, for a given reach to  which  one or more  MP&M facilities discharge, a benefit
event is achieved when the AWQC for at least one chemical was estimated to be  exceeded as a result of
MP&M discharges in the baseline and all such estimated instances of concentrations in excess  of AWQCs
are eliminated by regulation. Because this measure of health-related benefits is independent of the exposed
population that may benefit from reduced discharges and because the benefit measure is not tied to changes
in human health risk per se, the measure should be viewed as an indirect indicator of reduced risk to human
health.9

        To assess whether the proposed regulation, Option 2a/2, could be  expected to eliminate pollutant
concentrations in excess of AWQCs, EPA estimated the baseline concentrations of all MP&M pollutants
for each reach to which one or more MP&M facilities  discharge. As discussed earlier in this  chapter, in-
waterway concentrations were estimated using harmonic mean flow values  for each reach. In addition, the
calculation of concentrations  used  the same  in-waterway dilution  and mixing  model described in the
analysis of cancer risk for the fish consumption pathway. The baseline concentrations  were compared with
human health-based AWQC values (see Table 8.3 for a list of MP&M pollutants with AWQC values).
Reaches in which concentrations of one or more pollutants were estimated to exceed an AWQC value were
identified as exceeding AWQC limits in the baseline. The analysis was repeated using the post-compliance
discharge values for Option 2a/2. Reaches estimated to have  concentrations in excess of AWQCs in the
baseline  but  not  in the  post-compliance case were assessed as having substantial  water  quality
9 The following chapter uses this same information in part as a direct indicator of improved water quality.
                                               8.21

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improvements relative to human health-based criteria as a result of regulation. EPA deems such water
quality improvements to be indicative of reduced risks to human health. Although not explicitly accounted
for in this  analysis, human  health risk reductions are also  likely to occur  wherever in-waterway
concentrations are reduced, regardless of whether or not they are reduced to levels below AWQCs.
Table 8.3: MP&M Pollutants witb Human Health-Based Ambient Water Quality Criteria {AWQCs) . \
"" •,•• •> s
Pollutant '
Cyanide
Parachlorometacresol
Benzoic acid
Acetone
1,1.1- Trichloroethane
Dichloromethane
1,1- Dichloroetliane
Methyl ethyl ketone
Di-n-bulyl phthalate
Phenanthrene
Naphthalene
Ethylbenzene i
Benzyl alcohol
Toluene
Phenol
Bis(2-ethylhexyl) phthalate
Tetrachloroethene •
Lead
Manganese
Nickel
Silver [
Antimony
Arsenic
Barium
Cadmium
Chromium
Copper
Zinc
Selenium
Human Health-Based
AWQC&gfl}
Organisms
	 €H4iy . .
220000
none
2871800
2800000
1030000
1600
92300
540000
12000
.03109
41026
29000
810000
200000
4600000
5.9
8.85
none
none
4600
110000
4300
.14
none
84
670000
none
69000
11000
Water and
Organisms
700
3000
130000
3500
18400
4.7
3900
1700
2700
0.00279
1354
3100
10000
6800
21000
1.8
0.8
50
100
610
170
14
0.017
1000
14
33000
1300
9100
170
	 Target Orfcaas and Effects
Weight loss, thyroid effects and ravelin degeneration
NA
Gastrointestinal effects
Increased liver and kidney weights, nephrotoxicity
Liver toxicity
Liver toxicity
Liver and kidney toxicity
Fetus, decreased birth weight
Increased mortality
NA
Decreased body weight
Liver and kidney toxicity
Forestomach, epithelial hyperplasia
Changes in liver and kidney weights
Reduced fetal body weight in rats
Increased relative liver weight
Liver toxicity, weight gain
Cardiovascular and central nervous system effects
Central nervous system effects
Decreased body and organ weights
Argyria (skin discoloration)
Longevity, blood glucose, cholesterol
Hyperpigmentation, keratosis and possible vascular
complications
Increased blood pressure
Significant proteinuria (protein in urine)
Renal tubular necrosis (kidney tissue decay)
NA
Anemia
Clinical selenosis (hair or nail loss), liver dysfunction
Source: U.S. Environmental Protection Agency
        As discussed in previous sections, EPA estimated the occurrence of pollutant concentrations in
excess of AWQCs on the basis of sample facility data. The findings from the sample facility analyses were
                 i                           i                                  •
extrapolated  to  national estimates using facility  sample weights  that capture the  effect of multiple
dischargers to the same reach in calculating whether pollutant concentrations would exceed AWQCs. As a
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result, it was necessary to use an alternative weighting method to scale sample facility results to national
estimates (see Appendix C).
8.3     Findings from the Analysis of Human Health Benefit Measures
        Using the  methodologies  described in the preceding  section, EPA quantified four measures of
human health benefits expected to be achieved by the proposed MP&M regulation. As outlined previously,
the four health benefit measures are as follows:

1.      Reduced incidence of cancer from consumption offish taken from waterways affected by MP&M
        industry discharges;

2.      Reduced incidence of cancer from ingestion of water taken from waterways affected by MP&M
        industry discharges;

3.      Reduced frequency  of ingestion of pollutants  via fish  and water  consumption  in quantities
        exceeding the Reference Dose (RfD), an indicator of non-cancer, systemic health risk;

4.      Reduced occurrence of waterways in which pollutant concentrations resulting  from  MP&M
        discharges are estimated to exceed human health-based ambient water quality criteria.

        In addition to estimating quantitative values for these four measures, EPA also estimated the
monetary value to society associated with the first  benefit measure. The basis for  assigning monetary
values is described in the following discussion. EPA quantified but did not estimate monetary values for the
second health benefit measure — reduced  cancer risk from consumption  of drinking water affected by
MP&M pollutant discharges—  because EPA has established drinking water criteria for all of the
pollutants  analyzed  for change  in  cancer  risk. Accordingly, EPA assumes that public drinking water
systems will reduce these pollutants in the public water supply to levels that are protective of human health.
EPA was unable to assign monetary benefit values to the third and fourth benefit measures because current
research limitations do not allow these measures to be associated with specific health  improvement events
to which monetary benefit values could be  attached.  Little data is available regarding both dose-response
relationships for non-cancer systemic health outcomes and the monetary  value of avoiding such health
outcomes. As a result, it was not possible at this time to monetize the reduction in systemic health risks that
might be associated with exposures to pollutants discharged by the MP&M industry. Such systemic health
risks include reproductive,  immunological, neurological, and circulatory  problems. Although EPA was
unable to  assign monetary values to the latter two benefit measures for  this  regulation, the quantitative
                                               8.23

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estimates of benefit events provide additional insight into the human health-related benefits likely to result
from the proposed regulation.

        The following sections present the findings from analysis of each of these benefit measures.

        Reduced Incidence of Cancer from Fish Consumption
        As described in the preceding discussion of methodology, EPA estimated the expected reduction in
cancer cases resulting from consumption of chemically contaminated fish taken from waterways affected
by MP&M facility ^discharges. To calculate the reduction in cancer cases, EPA estimated the number of
cancer cases in two exposed population groups — recreational fishermen households and subsistence
fishermen households — for the baseline and post-compliance (Option 2a/2) discharge cases. The reduction
in cancer cases from baseline to  post-compliance is the quantitative measure of benefit for this  benefit
category. Table 8.4 indicates the  number of cancer cases avoided by pollutant for the fish consumption
pathway (the table also summarizes results for the drinking water pathway). For combined recreational and
subsistence angler populations, EPA estimates that the proposed Option 2a/2 will eliminate approximately
2.7 cancer cases per year from a baseline value of about 11.1 cases, representing a reduction of about 24
percent.
Tabled
CAS#
75092
117817
127184
7440382
k Estimated Avoided Cancer Cases an*I Value of Benefits for MP&M Begulatory Option 2a/i
Chemical
Dichloromethane
Bis(2-ethylhexyl) phthalate
Tetrachloroethene
Arsenic
Drinking Water
Drinking
Wafer
Criterion ?
yes
yes
yes
yes
Totals Relevant to the Benefits Analysis
Avoided
Cancer
Cases
0.0410
0.7504
0.0599
2.1529
0.0000
Value of
Benefit*
($ million)
0.0
0.0
0.0
0.0
0.0
Fish Consumption
Avoided
Cancer
Cases
0.0148
1.4263
0.0135
1.2562
2.7108
Value of
Benefit
($ million)
0.03-0.15
2.9 - 14.8
0.03-0.14
2.5-13.1
5.4 - 28.2
* The value of avoided cancer cases via the drinking water consumption pathway was not included in the
monetary estimate of benefits for the proposed regulation. EPA has published a drinking water criterion for all
of these chemicals and it is assumed that drinking water treatment systems will reduced concentrations of the
chemicals to below' adverse effect thresholds.
t Estimated value of avoided cancer case ($1989): $2 million - $10.4 million
Source: U.S. Environmental Protection Agency
       EPA estimated a monetary value of benefits to society from avoided cancer cases for the fish
consumption pathway. The valuation of benefits is based on estimates of society's willingness-to-pay to
avoid the risk of cancer-related premature mortality. Although it is not certain that all cancer cases will
result in death, to develop a worst case estimate for this analysis, avoided cancer cases are valued on the
basis of avoided mortality. To value mortality, EPA used a range of values recommended by an EPA,
                                              8.24

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Office of Policy Analysis (OPA) review of studies quantifying individuals' willingness to pay to avoid risks
to life (Fisher, Chestnut, and Violette, 1989; and Violette and Chestnut,  1986). The reviewed studies used
hedonic wage and contingent valuation analyses in labor markets to estimate the amounts that individuals
would be willing to pay to avoid slight increases in risk of mortality or would need to be compensated to
accept a slight increase in risk of mortality (i.e., the question analyzed in these studies is: how much more
must a worker be paid to accept an occupation with a slightly higher risk of mortality?). The willingness-
to-pay values estimated in these studies are associated with small changes in the probability of mortality.
To estimate  a willingness-to-pay for avoiding certain or  high  probability mortality  events, they  are
extrapolated to the value for a 100 percent probability  event.10 The resulting estimates  of the value of a
"statistical life saved" are used in analyses such as this regulatory analysis to value regulatory effects that
are expected to reduce the incidence of mortality.

        From this review of willingness-to-pay studies, OP A recommended a range of $1.6 to $8.5 million
(1986 dollars) for valuing an avoided event of premature mortality or a statistical life saved. A more recent
survey of value of life studies by Viscusi (1990) also supports this range with the finding that value of life
estimates are clustered in the range of $3 to $7 million (1990 dollars). For this analysis,  EPA adjusted the
figures  recommended in the OPA study to 1989 using the relative change in nominal Gross Domestic
Product (GDP) from 1986 to 1989 (22.6 percent). Basing the adjustment in the willingness-to-pay values
on change in nominal GDP instead of change in inflation accounts for the expectation that willingness to
pay to avoid risk is a normal economic good and that,  accordingly,  society's willingness to pay to avoid
risk will increase as national income increases. Updating to 1989 yields a range of $2 to  $10.4 million. On
the basis of these values, EPA estimated, for the proposed Option 2a/2, that the monetary benefits from
reduced cancer cases from fish consumption would range from $5.4 million to $28.2  million per year (see
Table 8.4).

        Reduced Incidence of Cancer from Water Consumption
        For the drinking water population, Table 8.4 also shows the number of cancer cases estimated to
be avoided for each pollutant  analyzed. As  noted in the methodology discussion, EPA  has established
drinking water criteria for  all four pollutants. EPA assumes that public drinking water treatment systems
will reduce these four  pollutants in the public water supply to levels that are protective of human  health.
   These estimates, however, do not represent the willingness-to-pay to avoid the certainty of death.
                                                8.25

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Accordingly, for this analysis, EPA is not claiming any of the monetary benefits of avoided cancer cases
associated with these pollutants.

        As noted above, EPA did not recognize for this analysis any monetary benefits associated with
reduced cancer risk ;in drinking water consumption. However, to the extent that the proposed regulation
reduces the concentration of MP&M pollutants to values that are below pollutant-specific drinking water
                   I                          i
criteria, public drinking water systems will accrue  benefits in the form of reduced water treatment costs.
EPA was not able to quantify such cost savings in this analysis.

        Reduced Systemic Health Hazard from Fish and Water Consumption
        For both  baseline  and  post-compliance  (Option 2a/2)  discharge cases,  EPA  evaluated  the
distribution of populations associated with sample  facilities exposed to increasing quantities of pollutants
that potentially pose :a risk of systemic health effects. Distributions of hazard ratios were estimated for two
exposed population groups: fishermen (recreational and subsistence) households and individuals served by
drinking water intakes. Table 8.5 summarizes baseline and post-compliance distributions of hazard ratios
and associated population estimates for each exposed population  group. The shift in populations from
higher to  lower hazard score values between the baseline and post-compliance  cases is the measure of
benefit in terms of reduced risk of systemic health hazard.
Table 84; Change fa Bisk of Systemic Healtf* Hazard* frwn Reduced Exposure to MP3$f Pollutants
Distributioit of Hazard Ratios (analysis based  1.00
Totals
Fish Consumption
Baseline
Population*
0
95,990
169,457
520,430
756,189
962,160
798,626
575,276
693,495
344,446
38,749
; 286
4,955,104
Percent
0.0%
1.9%
3.4%
10.5%
15.3%
19.4%
16.1%
11.6%
14.0%
7.0%
0.8%
0.0%
100.0%
Option 2a/2
Population
414,943
95,990
128,667
509,068
703,050
844,046
855,879
798,793
371,018
210,397
23,253
0
4,955,104
Percent
8.4%
1.9%
2.6%
10.3%
14.2%
17.0%
17.3%
16.1%
7.5%
4.2%
0.5%
0.0%
100.0%
Drinking Water Consumption
Baseline
Population ;
0
896,556
4,171,520
8,622,049
8,551,450
5,504,896
11,408,986
2,347,525
1,278,865
1,187,753
235,950
550
44,206,100
Percent
0.0%
2.0%
9.4%
19.5%
19.3%
12.5%
25.8%
5.3%
2.9%
2.7%
0.5%
0.0%
100.0%
Option 2a/2
Population
3,469,727
974,856
4,681,298
8,226,468
11,325,248
5,161,655
5,952,055
1,872,836
1,431,700
1,109,557
150
550
44,206,100
Percent
7.8%
2.2%
10.6%
18.6%
25.6%
11.7%
13.5%
4.2%
3.2%
2.5%
0.0%
0.0%
100.0%
Note that this analysis addresses only 26 of 69 chemicals of concern; excludes background exposures; and is based
only on sample facility discharges and associated populations. The exposed population values are not national
estimates of the populations that would benefit by reduced risk of systemic health hazard.
Source: U.S. Environmental Protection Agency
                                               8.26

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       As shown in Table 8.5, the proposed regulatory Option 2a/2 is  expected to  shift substantial
numbers  of exposed population from higher to lower hazard ratio values. In particular, the population of
fishermen and individuals served by drinking water intakes with a zero marginal risk of systemic health
hazard from exposure to pollutants discharged from MP&M Phase I facilities increases substantially. For
example, under baseline discharge conditions,  no fishermen or individuals served by drinking water intakes
are associated with hazard ratio values equal to zero. Under the proposed regulatory option, the percent of
the population with zero marginal risk values increases to 8.4 percent for fishermen and 7.8 percent for
individuals served by drinking water intakes.

       The shift in the distributions to lower hazard ratio values should be  considered,  however, in
conjunction with the finding that the marginal  risk of systemic health hazard from pollutants discharged by
MP&M  facilities and for which reference exposure values are available is generally quite low.  For
example, analysis of the in-waterway pollutant concentration data suggests that hazard ratios (based on
both the fish consumption and drinking water pathways) for at least 92 percent of the population associated
with sample facilities equal 0.1 or less in the baseline. These values, however, do  not consider background
concentrations of MP&M or other pollutants or contributions to  risk from MP&M pollutants for which
reference exposure values are not available. As such, whether the marginal shifts in hazard ratio values are
significant in  reducing absolute systemic health risks is  uncertain and will depend on the magnitude of
pollutant exposures for a given population from sources that are not accounted for in this analysis.

       Although EPA was unable to associate  an economic value with changes in the number of
individuals exposed to pollutant levels likely  to result in  systemic health effects, the reductions in health
risk indicated by this benefit measure further indicate that the proposed regulation can be expected to yield
human health related benefits.
        Reduced Frequency of Pollutant Concentrations in Excess of Health-Based AWQC Limits
        The final human health benefit category is the reduced occurrence of pollutant concentrations that
are estimated to exceed human health-based toxic effect levels (ambient water quality criteria or AWQCs).
By identifying the number of MP&M discharge reaches on which pollutant concentrations are estimated to
fall below AWQC limits as a result of regulation, the analysis provides an alternative measure of  the
expected reduction in  risk to human health. At current discharge levels,  in-waterway concentrations of
MP&M pollutants are estimated to exceed AWQC limits for human health from consumption of water or
organisms in 137 reaches. As shown in Table 8.6, EPA estimates that the proposed Option 2a/2 would
eliminate the occurrence of concentrations in excess of these AWQC limits in 40 or 29  percent of these
                                               8.27

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reaches.  In addition, EPA estimates that the proposed Option 2a/2 would eliminate the occurrence of
concentrations in excess of AWQC values for human health, consumption of organisms only, on 18 of the
47 reaches on which baseline discharges are estimated to cause concentrations in excess of the AWQC
values. Note that the findings from the analysis of AWQC  values for human health, consumption of
organisms only, are a subset of the findings, for the analysis relative to AWQC limits for human health
from consumption of water or organisms.
Table $,fc MF&MBischatge Reaches with Pollutant Concentrations
Exceeding Human Health-Based AWQC Limits and Redactions
Achieved by lite Proposed Regulatory Option 2a/2

Baseline
Option 2a/2
Percent Reduction
Humtoer of Reaches with Concentrations
Exceeding Health-Based AWQCs
Human Health, Water
and Organisms
137
97
29%
Human Health,
Organisms Only
47
18
62%
Source: U.S. Environmental Protection Agency
8.4     Limitations and Uncertainties Associated with Estimating Human Health Benefits
        This RIA considers four measures of human health benefits.  The first two measures involve
reduction in cancer cases from two exposure pathways: consumption of chemically-contaminated fish tissue
and ingestion of chemically-contaminated drinking water. The third measure indicates change in exposure
to pollutants relative to non-cancer, systemic health effect thresholds via the fish consumption and drinking
water pathways. The fourth measure is based on a comparison of in-waterway pollutant concentrations to
health-based water quality toxic effect levels and captures, via an indirect indicator of change in human
health risk, benefit effects that are encompassed in the first three measures. These four measures, however,
are not inclusive  of all possible human health benefits  and therefore do not provide a comprehensive
estimate of the total human health benefits associated with the propose rule. Moreover, analyses of possible
health benefits are not possible for a significant number of the pollutants whose discharges will be reduced
by the  proposed  regulation. Beyond these  important  limitation  to the  assessment of  benefits,  the
methodologies used to assess the human health benefits that were quantitatively analyzed and, in certain
cases were assigned a monetary value, also involve significant simplifications and uncertainties.  Whether
these simplifications  and uncertainties, taken  together, are likely to lead to  an understatement or
overstatement of the estimated economic values for the human health benefits that were analyzed is  not
known.  Elements  of the analysis involving significant simplifications and  uncertainties  include: sample
design and analysis of benefits by location of occurrence; estimation of in-waterway concentrations of
                                              8.28

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MP&M  pollutants;  consideration  of  the  joint  effects  of pollutants; consideration of  background
concentrations of MP&M pollutants; consideration of downstream effects; and estimation of the exposed
fishing population. Each element is discussed more fully below.

        Sample Design and Analysis of Benefits by Location of Occurrence
        The  Metal Products  and Machinery  Industry  is estimated to  include  over 10,000  facilities
nationwide that generate wastewater while processing metal parts, metal products, and machinery. Many of
these facilities are quite small and,  individually, discharge relatively  small quantities  of pollutants.
However, because of the large number of facilities,  the industry discharges a  significant quantity of
pollutants, in aggregate.  Given this industry makeup,  most individual facilities are not likely to have a
significant adverse impact on human health at any one MP&M reach.  However,  the combined effect of
discharges from several facilities at a given  reach — whether they discharge to that reach or to upstream,
but nearby, reaches — may well result in appreciable risks  to  human  health at the affected reach.  The
circumstance of multiple  dischargers affecting a single reach is found to occur with considerable frequency
based on the sample facility  data.

        The  sample  of MP&M  facilities  on  which  this   analysis  is based  (396)  represents  only
approximately 4 percent  of the total number of MP&M facilities nationwide. More importantly, however,
this  sample was drawn based on the business operating characteristics  of the industry rather than on the
basis of geographic location. With some regularity, multiple MP&M facilities discharge to the same reach.
As a result, the sample does not accurately  reflect the likelihood of co-occurrence  of MP&M facilities on
MP&M reaches and, therefore, the contribution to in-waterway pollutant concentrations made by these
facilities. For example, the sample may include three MP&M facilities all discharging to the same reach. In
actuality, however, five MP&M facilities may discharge to this reach.  This omission of additional facilities
does not create a problem in the analysis of marginal cancer risk because each facility's contribution to
total risk can be  estimated  separately and is assumed be linearly additive. The cancer effects associated
with individual facility  discharges can thus  be  summed over facilities at  the  level of the estimated
occurrence of cancer  events in the total population. Therefore, the  application of sample  weights  will
account for pollutant contributions from facilities  co-occurring on MP&M reaches that are not present in
the sample of facilities.

        This omission does present a problem, however, when analyzing changes in hazard ratios and
changes in in-waterway  pollutant concentrations relative to  human health-based AWQCs for reaches to
which more  than  one facility discharges. For these reaches, changes in hazard  ratios and in-waterway

                                                8.29

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pollutant concentrations from  reduced pollutant discharges should account for the total  discharge  of
pollutants over the several facilities whose discharges may affect the reach — whether they discharge in the
same reach or a reach that is upstream of the affected reach. When facilities whose discharges to the reach
                   i
have unequal sample weights, however, the extrapolation of the results for the sample facility analysis to
the population cannot be accomplished by simply multiplying estimated benefit values by the sum of the
sample weights of the individual facilities. See Appendix C for an explanation of the sample weighting
methodology devised to partially address this problem. While this weighting methodology does recognize
the contributions of facilities with different sample facility weights to aggregate results, it still  does  not
account for the contributions made by co-occurring facilities not included in the sample. The omission of
this information on the frequency of true multiple discharger effects on aggregate instream concentrations
and pollutant exposures may lead to  an understatement  of the benefits likely to be achieved in terms of
reduced frequency of concentrations in excess of AWQC values and of reduced risk of systemic health
hazard.

        Estimation of In-Waterway Concentrations of MP&M Pollutants
        In this analysis, the estimates of human health benefits are based on the estimated changes in in-
waterway concentrations of MP&M pollutants. In-waterway concentrations under baseline conditions and
under the proposed option are calculated for all reaches to which MP&M facilities discharge. Certain data
underlying these analyses are site specific, including: flow rates under average and low flow conditions, and
flow depth. However, other basic assumptions in the model are not site specific, including: chemistry of the
waterway, mixing processes, longitudinal dispersion, flow geometry,  suspension of solids  and reaction
rates.  Where these assumptions differ  from actual conditions,  modeled  results  will approximate  in-
waterway concentrations with varying degrees of accuracy. The  effect of these assumptions on benefit
estimates, however, is indeterminate.

        Consideration of the Joint Effects of Pollutants
        The  analyses pertaining to change in human health risk described in this chapter ignore  the
potential for joint  effects of more than one pollutant. Each pollutant  is dealt with in isolation;  the
individually estimated effects are then added together.  As such, the analyses do not account for  the
possibility that several pollutants may combine to yield more or less adverse effects to human health than
indicated by the simple sum of the individual effects. The effect of combining  pollutants on the baseline and
post-compliance human health risks estimated in this analysis is indeterminate.
                                               8.30

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        Consideration of Background Concentrations of MP&M Pollutants
        In this analysis, background concentrations of MP&M pollutants are not considered. Rather, the
 analysis assumes that  MP&M facilities are the only source of each of the regulated pollutants in the
 waterway. Background contributions  either from other upstream sources or contaminated sediments  from
'previous  discharge practices  are not incorporated.  Furthermore,  although  the  discharge  of  these
 contaminants may cease or be minimized, sediment contamination and subsequent accumulation of the
 regulated pollutants in aquatic organisms may continue for years.

        Excluding background contributions to in-waterway pollutant concentrations affects the results of
 two of the four human health benefits categories; changes in systemic risk and changes in human health-
 based AWQC excursions. In the systemic risk analysis, hazard ratios calculated for a given population are
 likely to be systematically biased downwards because of the omission of exposures to these chemicals from
 other water-related and non-water-related sources.11  The net result is the analysis is likely to understate the
 absolute risk of systemic health hazards.

        Similarly, reductions in human health-based AWQCs excursions calculated for a given MP&M
 reach are likely to be systematically biased downwards. The analysis is, therefore, likely to understate the
 frequency with which in-waterway pollutant concentrations move from values exceeding pollutant specific
 AWQCs to values less than pollutant specific AWQCs as a result of regulation. Thus,  the analysis is likely
 to understate the number of waterways expected to benefit from the regulation by reduced discharges of
 pollutants that are above in-waterway concentrations considered to be protective of human health.

        Consideration of Downstream Effects
        In estimating the reduced  incidence of cancer from consumption of drinking water  it was possible
 to analyze the effects of MP&M pollutant discharges in the reach to which a facility discharges and reaches
 that are downstream of the discharge point. As such, cancer risk was evaluated for populations served by
 drinking water  intakes drawing from initial and downstream reaches. However, it was not possible to
 evaluate cancer risk to recreational and subsistence  fishermen fishing downstream reaches because of a
 lack  of necessary information  for counties abutting downstream reaches.  In addition, due to differential
 weighting of sample facility results,  it was not possible to evaluate hazard ratios indicating non-cancer
   Ideally, the analysis would include not only background concentration and exposure effects from water-related
 exposures but would also account for exposures to chemicals by other routes including, for example: air exposures
 including dust inhalation, and food contamination.
                                                8.31

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systemic health hazards or human health-based ambient water quality criteria excursions in downstream
reaches. By omitting these downstream effects, this analysis potentially understates baseline risk events —
namely, additional cancer cases (from fish consumption), additional populations exposed to non-cancer
systemic risks, and  additional  waterways with  pollutant concentrations exceeding human  health-based
ambient water quality criteria — that would be reduced by the proposed regulation.

       Estimation of the Exposed Fishing Population
       Estimation of the exposed fishing population relies on county fishing license statistics.  Licenses per
county are necessary to associate fishermen with particular MP&M reaches. EPA was not able, however,
to collect this data for every state where MP&M facilities are located. Furthermore, not every state collects
this data at the county level. As a result, a methodology was  developed to estimate the number of licensed
fishermen per county based on: (a) county level fishing license data recently collected for the Pulp  and
Paper RIA, (b) county and state fishing license data for neighboring states where fishing participation is
assumed to be similar, and (c) the number of river miles within a county as a percent of the state total.  See
Appendix B for a detailed description of this methodology. Where fishing activity in neighboring states  and
counties does not approximate actual fishing activity, this approach will lead to an over- or underestimate
of the number of fishermen in counties abutting MP&M reaches. Similarly, if factors other than the density
of river miles  per county influence the proportion of fishermen that fish in that county, this approach  will
lead to an over- or underestimate of the number of fishermen in counties abutting MP&M reaches.  The
effect of this estimation on the benefit estimate, however, is not known.

       In addition, the task of further refining the exposed fishing population by estimating the fraction of
fishermen  that actually  fish a given MP&M  reach  is  difficult because of severe  data  limitations.
Specifically, EPA was not able to collect creel survey data for MP&M reaches. As a result, estimates of
the fraction of the population that fish an MP&M reach are necessarily subject to considerable uncertainty.
As an alternative to collecting MP&M reach specific creel survey data, EPA relied on estimates of fishing
activity developed in the RIA for the Pulp and Paper industry. These data indicated that about 30 percent
of the licensed anglers living in the counties that abutted the reaches actually fished  those reaches.  The
MP&M analysis, therefore, employed the same value, 30 percent, as the fraction of the fishing population
living in  abutting counties that fish an MP&M reach. Since  the Pulp and Paper RIA data rely on only 8
sites nationwide, it is likely that fishing rates at MP&M reaches vary considerably from the estimated 30
percent. It is  unclear,  however, whether such uncertainty creates an upward or downward bias in the
exposed fishing population estimates used in this RIA.
                                               8.32

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       A related issue involves the assumption made regarding the number of subsistence fishermen in the
exposed fishing population. In this analysis, subsistence fishermen are assumed to account for an additional
5 percent of the fishing population. The magnitude of subsistence fishing in the US or in individual states,
however, is not known.  As a result, this estimate may understate or overstate the  actual number of
subsistence fishermen.

       Finally, in order to account for the affect offish advisories on fishing activity, and therefore on the
exposed fishing population, it was assumed that the fishing populations associated with each MP&M reach
subject to an advisory would be  reduced by 20 percent. It should be noted that the estimated 20 percent
decrease could  lead to either an overestimate or underestimate of the risk associated with consumption of
contaminated fish since  (1) fishermen that change locations may simply be switching  to other locations
where advisories are  in place and therefore maintain or increase their current risk, and  (2) fishermen that
continue to fish contaminated waters may change their consumption and preparation habits to minimize the
risks from the contaminated fish they consume.
                                               8.33

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                                           Chapter 9
  Assessing the Ecological Benefits of the MP&M Regulation (Recreational Fishing)

9.1    Introduction
       As discussed in Chapter 7, EPA expects that the proposed Metal Products and Machinery Industry
Phase I regulation will provide ecological benefits through improvements in the habitats or  ecosystems
(aquatic and terrestrial) that are affected by the MP&M Phase I industry's  effluent discharges. Benefits
associated  with changes in aquatic life  include: restoration of sensitive species, recovery of diseased
species, changes in taste and odor producing algae,  changes in  dissolved oxygen,  increased assimilative
capacity  of affected waterways,  and improvement to  related recreational activities  such as  swimming,
fishing and wildlife observation that may be enhanced when risks to aquatic life are reduced. Terrestrial life
benefits are also likely to result from the improvements to aquatic habitats and species.

       As described previously, society is expected to value such ecological improvements by a number of
mechanisms. In some cases, the valuation of ecological benefits will manifest in economic  markets through
a change in prices,  costs, or quantities  of market-valued activities that are affected by the ecological
improvement (e.g., reduced costs for or higher productivity of commercial  fisheries). In other cases, society
exhibits its valuation of ecological improvements through activities or valuation mechanisms that either do
not involve economic markets or involve them only indirectly. Such valuation mechanisms vary widely in
concept.  Some valuation mechanisms involve use of the improved habitat: for example,  increased frequency
and value of use of the improved habitat for recreational activities.  Other,  more  abstract, valuation
mechanisms also apply:  for example, persons may value the protection  of  habitats and  species that  are
otherwise detrimentally affected by effluent discharges even when they do not use or anticipate future use
of the affected waterways for recreational or other purposes.

        This chapter presents an analysis of ecological benefits from reduced  effluent discharges to  the
nation's waterways  as a result of the proposed MP&M regulation. EPA assessed ecological benefits in
terms of reduced occurrence of pollutant concentrations that exceed chronic and acute toxic effect levels for
aquatic species. For this analysis, EPA estimated the in-waterway pollutant concentrations  of MP&M
facility discharges for both the baseline and for the proposed regulation, Option 2a/2. For  both cases, EPA
                                                 9.1

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 identified the discharge reaches'  in which facility discharges are estimated to cause concentrations of one
 or more pollutants to exceed ambient water quality criteria (AWQCs) for  aquatic species. Aquatic life
 AWQCs addressed in this chapter set the upper limit on pollutant concentrations assumed to be protective
 of aquatic life. These AWQCs are also used in the analysis presented in Chapter 10. The human health
 AWQCs  employed in the previous chapter were set in a similar fashion.  The reduced  occurrence  of
 concentrations hi excess of AWQC limits provides a quantitative measure of the  improvement in aquatic
 species habitat expected to result from the proposed regulation. EPA expects that elimination of pollutant
 concentrations in excess of AWQCs will achieve water quality that is protective of aquatic life. From this
 analysis,  EPA found, at baseline discharge levels,  that pollutant concentrations  in 27  Phase I MP&M
 reaches nationally exceed acute aquatic life criteria and 130 reaches exceed chronic aquatic life criteria.
 The proposed regulatory option, Option 2a/2, is estimate to eliminate concentrations in excess of the acute
 criteria on 5 reaches and to eliminate concentrations in excess of the chronic  criteria on 88 reaches. These
 results, however, do not account for background concentrations of MP&M pollutants. Consequently, the
 number of reaches on which AWQC excursions are eliminated may be understated.

        As noted above, EPA expects that society will value such improvements in aquatic species habitat
 by a number of mechanisms. For this analysis, EPA attached a monetary value to ecological improvements
 expected to result from the MP&M regulation for one mechanism:  increased value of recreational fishing
 experience. Specifically, the elimination of pollutant concentrations exceeding AWQC limits for protection
 of aquatic species and human health is expected to generate benefits to recreational anglers. Such benefits
 are expected to manifest as increases in the value of the fishing experience per day fished or the number  of
 days anglers subsequently choose to fish the cleaner waterways.  The  increase in  value  of recreational
 fishing activity resulting from the MP&M  regulation is estimated to range from  $19.8  to $70.6 million
 ($1989) annually.

        EPA emphasizes that this estimated benefit value is only a limited measure of the value to society
 of improvements in aquatic habitats. The estimate of benefits is limited because it focuses on only one
 mechanism, enhanced recreational fishing,  by  which society  may value improved aquatic habitats;  it
 ignores other recreational effects as well as valuation mechanisms that are  separate from recreation.  In
 addition, although the intent of this analysis is to capture valuation  mechanisms that differ from the
  For this analysis, a reach is a length of river, shoreline, or coastline on which a pollutant discharge may be
expected to have a relatively uniform concentration effect. The typical length of a reach in this analysis was 5 to 10
kilometers, although some were considerably longer.
                                                9.2

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valuation of benefits for reduced risk to human health as discussed in the previous chapter, EPA recognizes
that the valuation of benefits based on enhanced recreational fishing experience may overlap to a degree
with the valuation of benefits from reduced risk to human health  from fish consumption. However, as
discussed later in this chapter, EPA judges that the numerical significance of any overlap is very small in
relation to the benefit values estimated for these two benefit categories.

        To further evaluate improvements in aquatic  species habitat, EPA also performed an additional
analysis of ecological benefits that involves a somewhat  innovative method of presenting  aquatic life
benefits. This second analysis  is  based on  distributions  of  aquatic  species  sensitivity to individual
pollutants. The analysis summarizes ecological benefits in terms of the reduced quantity of habitat in which
given percentages of species are estimated to be at risk of exposure to lethal concentrations of pollutants.
This additional species/pollutant-specific ecological benefit analysis is presented in the following chapter,
Chapter 10.

        The remainder of this chapter reviews the methodology and findings from the analysis of ecological
benefits. The following section, Section 9.2, describes the methodology used to estimate the occurrence of
pollutant concentrations in excess of aquatic life ambient water quality criteria in the baseline and under the
proposed option. In addition, this section discusses the approach by which EPA attached a monetary value
to habitat improvements based on enhanced quality of recreational fishing. The next section,  Section 9.3,
presents the results of the analysis. Finally, Section 9.4 summarizes the limitations of these methodologies.

9.2     Methodology for Assessing Ecological Benefits
        The methodology for assessing the ecological benefits of the MP&M Phase I regulation involves
two elements:

 1.      Identifying MP&M discharge reaches for which the proposed regulation is expected to eliminate
        the occurrence of pollutant concentrations that exceed AWQCs for aquatic species; and

2.      Attaching a monetary value to the elimination of occurrences of pollutant concentrations in excess
        ofAWQCs.

These methodology elements are discussed briefly below.
                                                9.3

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        Identifying Discharge Reaches in which Pollutant Concentrations in Excess of Aquatic Life
        AWQCs Are Estimated To Be Eliminated
        EPA evaluated potential impacts to aquatic life by estimating in-waterway concentrations  of
pollutants discharged by  MP&M facilities and comparing those concentrations to AWQC  limits for
protection of freshwater aquatic species. EPA interprets pollutant concentrations in excess of these AWQC
limits to mean significant detriment to the aquatic species habitat. Elimination of those occurrences as the
result of the MP&M regulation is taken to mean a significant improvement in the habitat of aquatic species
and thus provides a quantitative measure of ecological benefit for this regulatory analysis.

        For this analysis, EPA estimated in-waterway concentrations for all Phase I MP&M pollutants for
which AWQC limits are available. Of the 69 MP&M pollutants of concern, AWQCs are available for all
but 9 conventional pollutants. The aquatic life AWQCs used in this analysis include water quality criteria
limits published by EPA and toxic effect levels derived from the scientific literature for pollutants for which
EPA criteria are not available.2 For both the baseline and post-compliance (Option 2a/2) discharge cases,
EPA calculated in-waterway concentrations for acute and chronic exposure and compared the values to
AWQCs. Acute exposure refers to exposure to a pollutant at a relatively high level over a short period of
time (minutes  to a few days).  By contrast, chronic exposure  refers  to multiple exposures to a pollutant
occurring over an extended period of time, or a significant fraction  of an organism's lifetime.  Table 9.1
lists the pollutants considered in this analysis and their acute and chronic aquatic life AWQCs.

        To estimate the in-waterway concentrations resulting from MP&M facility discharges,  EPA used
the same mixing and dilution methods  as outlined in the preceding chapter. Chronic and acute exposure
concentrations  for each pollutant were calculated  on the basis of  7Q10  and 1Q10 stream flow  rates,
respectively where 7Q10 refers to the lowest consecutive 7-day average flow with a recurrence interval of
10 years and  1Q10'refers to the  lowest 1-day average flow with a recurrence interval of 10 years. For
reaches to which more than one sample MP&M facility discharge, EPA  summed the discharge values by
pollutant for all known sample facilities discharging to the reach.  For  baseline discharge values, EPA
identified the MP&M discharge reaches in which concentrations for one or more pollutants were estimated
to exceed AWQC limits. When using post-compliance discharge values for those reaches, if EPA identified
that in-waterway concentrations for all pollutants had fallen below AWQC limits, then EPA assessed that
  Sources include EPA criteria documents, EPA's Assessment Tools for the Evaluation of Risk (ASTER), and
EPA's Integrated Risk Information System (IRIS).
                   ;                            9.4

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aquatic species habitat conditions on that discharge reach would be likely to improve significantly as a
result of the proposed regulation. Although not explicitly accounted for in this analysis, species habitat
conditions are likely to improve whenever in-waterway concentrations are reduced, regardless of whether or
not they fall to levels below aquatic AWQCs.
Table 9.1: Aquatic Life Ambient Water Quality Criteria (AWQCs) for
iimiiB}Httt^^^ 	 mni 	 mn 	 immii 	 mi
{ Aquatic Life Ambient Water Quality Criteria (AWQC) (u«/l)
Regulated Pollutant 1 Acute
Cyanide
Parachlorometacresol
Benzole acid
Acetone
1, 1, 1-Trichloroethane
Dichloromethane
1, 1-Dichloroethane
Methyl ethyl ketone
Di-n-butyl phthalate
Phenanthrene
2-Nitrophenol
Naphthalene
2-Methylnaphthalene
Alpha Terpineol
Ethylbenzene
Benzyl alcohol
Toluene
Phenol
N-Dodecane
N-Eicosane
Bis(2-ethylhexyl) phthalate
N-Decane
Tetrachloroethene
Hexanoic acid
N-Hexadecane
N-Octadecane
N-Tetradecane
N-Docosane
N-Hexacosane
N-Octacosane
N-Triacontane
N-Tetracosane
Aluminum
Iron
Lead
Magnesium
Manganese
Molybdenum
Nickel
Silver
22
4050
180000
6210000
42300
330000
51253
3220000
850
30
160000
1600
909
14533
9090
10000
5500
4200
18000
18000
400
18000
4990
320000
18000
18000
18000
530000
530000
530000
530000
530000
748
None
82
64700
None
None
1400
4.1
Chronic
5.2
1300
171780
1000000
1300
82500
17251
263420
500
6.3
3451
370
309
5503
4600
1000
1000
200
1300
1300
360
1300
510
16437
1300
1300
1300
68000
68000
68000
68000
68000
87
1000
3.2
6470
388
27.8
160
.11999
                                                 9.5

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Table 9J& Aipatie Life Ambient Water Quality Criteria (AWQCs) for
* Pollutants Discharged by the MP&M Industry (continued)
Regulated Pollutant ;
Sodium
Thallium
Tin
Titanium
Antimony
Arsenic
Barium
Boron
Cadmium
Chromium
Cobalt
Copper
Vanadium
Zinc
Calcium
Ammonia as N
Selenium
Sulfate
Chloride
Fluoride
Aauatic Life Ambient Water Quality Criteria (AWQO (ae/I)
Acute
1640000
1400
None
None
88
360
410000
None
3.9
1700
1620
18
11200
120
None
12000
20
None
None
1600
Cfiromc
1020000
40
18.6
191
30
190
2813
31.6
1.1
210
49
12
9
110
200000
1233
5
1000000
230000
160
Source: U.S. Environmental Protection Agency
       EPA extrapolated the findings from the analysis of discharge reaches affected by sample facility
discharges to national estimates using facility sample weights. Where only one facility discharged to a
reach, the number of reaches expected to benefit at the national level is simply the sample weight of the
facility. However, for those reaches to  which more than one sample facility discharges, EPA used the
differential sample-weighting technique outlined in Appendix C to account for different sample weights in
developing national estimates.

       Valuing the Elimination of Pollutant Concentrations in Excess of AWQCs
       The elimination of pollutant concentrations in excess of AWQCs is expected to result in significant
improvements in aquatic species habitat.  In turn, these  improvements in aquatic species habitat are
expected to improve the quality and value of recreational fishing opportunities. For this analysis,  EPA used
the estimated increase in monetary value of recreational fishing opportunities as a partial measure of the
economic  benefit to society from the improvements to aquatic species habitat expected to result from the
proposed  MP&M regulation. The estimation of the monetary value to  society of improved recreational
fishing opportunities is based on the concept of a "contaminant-free fishery," as discussed below.
                                                9.6

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       The reduced occurrence of pollutant concentrations in excess of AWQCs is expected to generate
benefits to recreational anglers by increasing the quality of their experience and/or the number of days they
subsequently choose to fish an MP&M reach. Research by Lyke (1992) has shown that anglers may place
a significantly higher value on a contaminant-free fishery than a fishery with some level of contamination.
Specifically, Lyke estimated the consumer surplus associated with Wisconsin's recreational Lake Michigan
trout and salmon fishery, and the additional value of the fishery if it were completely free of contaminants
affecting aquatic species and human health. Lyke's results are based on two analyses:

1.     A multiple site, trip generation, travel cost model was used to estimate net benefits associated with
       the fishery under baseline (i.e., contaminated) conditions; and

2.     A contingent valuation model was used to estimate willingness-to-pay values for the fishery if it
       were free of contaminants.

Both analyses  used data collected from licensed anglers before the 1990 season. The estimated incremental
benefit values  associated with freeing the fishery of contaminants range from 11.1 percent to 31.3 percent
of the value of the fishery under current conditions.

       For the analysis of the MP&M regulation, EPA assumed that the elimination of concentrations in
excess of AWQC limits could be interpreted as approximately equivalent to achieving a contaminant-free
fishery. Further, in interpreting "contaminant-free  fishery" within the  context of no pollutants exceeding
AWQC limits, EPA concluded that the elimination of occurrences in which pollutants exceed AWQC limits
should apply to both AWQC limits for aquatic life (acute and chronic) and AWQC limits for human health
(as analyzed  in the preceding chapter) where human-health  AWQCs are established in terms  of a
pollutant's toxic effects, including carcinogenic potential.  As noted above, the valuation of benefits on the
basis of enhanced recreational fishing opportunities may overlap in concept with the valuation of reduced
cancer risk to human health via the fish consumption pathway. This issue is discussed in the limitations and
uncertainties section, which is the final part of this chapter.

       Accordingly, EPA used the valuation framework implied by Lyke's results to estimate an increase
in recreational fishing valuation for MP&M reaches in which all instances of MP&M pollutants exceeding
an AWQC limit are eliminated as a result of regulation. That  is, the gain in value of a fishery and the
associated  estimate of benefits for the  MP&M regulation reflects the estimated improvement  in water
quality on only those MP&M discharge reaches in which an AWQC limit for at least one MP&M pollutant
was exceeded in the baseline and no AWQC limits are exceeded by MP&M pollutants in the post-
                                                9.7

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compliance  (Option 2a/2)  analysis.  In this  analysis,  AWQC  limits  were compared  to pollutant
concentrations associated with MP&M Phase I facility discharges  only. Because of data limitations, the
analysis does not consider background concentrations of the MP&M pollutants or other pollutants that are
not affected by the MP&M regulation.

       The estimation of in-waterway concentrations for this analysis combines the calculation procedures
used in the analysis of concentrations relative to human health AWQC limits described in Chapter 8 and
the analysis of concentrations relative to aquatic life AWQC limits described in the preceding section of
this chapter.

       To estimate the gain in value of reaches found to meet the water quality improvement tests  outlined
above, EPA first estimated the baseline recreational fishery value of the reaches on the basis of estimated
annual person-days of fishing per reach and estimated values per person-day of fishing.  Annual person-
days of fishing per reach were calculated using estimates of the recreational fishing population as  follows.
First, EPA estimated the number of licensed fishermen in counties bordering MP&M  reaches using the
same methodology as described in Chapter 8. Next, for reaches subject to a fish consumption advisory
(caused by MP&M or other pollutants), EPA reduced the recreational fishing  population by 20 percent (as
suggested by the literature on fish consumption advisories) to account for angler response to the presence of
a fish advisory.3 The number of fishermen was then multiplied by US Fish and Wildlife (FWS) estimates
of the average number of fishing days per angler in each state to estimate the total number of fishing days
for each MP&M reach. The FWS estimates range from 8.08 days per angler in Colorado to 16.68 days per
angler in Pennsylvania for freshwater fishing and 3.91 days per angler in New Hampshire to  11.04 days
per angler in Florida for saltwater fishing (U.S. DOI, 1993). The baseline value for each fishery was then
calculated by multiplying the estimated total number of fishing days by an estimate of the net benefit that
anglers receive from a day  of fishing  where net benefit represents the total  value of  the  fishing day
exclusive of any fishing-related costs (license fee, travel costs, bait,  etc.) incurred by the angler. In this
analysis, a range of. median net benefit values for warm water and cold water fishing days:  $24.56 and
$31.10, respectively, in  1989 dollars (Walsh et al.,  1988) are used. Weighting by facility-weights and
summing over all benefiting reaches provides a total baseline recreational fishing value of MP&M reaches
that are expected to benefit by elimination of pollutant concentrations in excess of AWQC limits.
3 See Belton et al (1986), Knuth and Velicer (1990),  Silverman (1990), West (1989), Connelly, Knuth, and
Bisogni (1992), and Connelly and Knuth (1993) for more information on angler response to fish advisories.
                                                9.8

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       To estimate the increase in value resulting from elimination of pollutant concentrations in excess of
AWQC limits, EPA multiplied the baseline value for benefiting reaches by the  incremental gain in value
associated with achievement of the "contaminant-free" condition.  As noted above, Lyke's estimate of the
increase in value ranged from 11.1 percent to 31.3 percent. Multiplying by these values yielded a range of
expected increase in value for the MP&M reaches expected  to benefit  by elimination of pollutant
concentrations in excess of AWQC limits.

9.3    Estimated Aquatic Life Benefits for the MP&M Regulation
       For this analysis, ecological benefits were quantified by estimating the reduction in the number of
MP&M discharge reaches on which pollutant concentrations are estimated to  exceed AWQC limits for
protection  of aquatic species. In addition, by also considering the reduction in the number of MP&M
discharge reaches on which pollutant concentrations are estimated to exceed AWQC limits for protection of
human health it was possible to estimate the increase in monetary value of those reaches for recreational
fishing.
        As shown in Table 9.2, EPA's analysis indicates that pollutant concentrations at baseline discharge
levels would exceed acute exposure criteria for protection of aquatic species  on  27 reaches and would
exceed chronic exposure criteria for protection of aquatic species on 130 reaches. EPA estimates  that the
proposed Option would eliminate concentrations in excess of the  acute aquatic  life exposure criteria  on 5
reaches and would eliminate concentrations in excess of the chronic aquatic life exposure criteria on 88
reaches.
TaWe 9,& Estimated HftKH Mschai-ge Beaches with MP&M Pollutant Concentrations In
Excess of AWej C Limits for Protection of Aquatic Species or Human Health
Regulatory
Baseline
Option 2a/2
Reaches with Concentrations Exceeding
AWQC Acute
Exposure Limits for
Aquatic Species
27
22
AWQC Chronic
Exposure Limits for
Aquatic Species
130
41
AWQC Uwits
for Human
Health
137
97
Number of Reaches
with Concentrations
Exceeding AWQC \
IMitS
257
134
Note: In the baseline, the total number of reaches with concentrations exceeding AWQC limits does not equal
the sum of the numbers in the separate analysis categories because some reaches were estimated to have
concentrations in excess of AWQC limits for more than one analysis category.
Source' U S Environmental Protection Agency
         Table 9.2 also summarizes the number of reaches on which baseline concentrations are estimated
 to exceed AWQC limits for human health and aquatic species, and the number of those reaches, post-
 compliance, that are  estimated to become "contaminant free" as a result of regulation.  The combined
 analysis over all AWQC limit categories indicated that MP&M pollutant concentrations would exceed an
                                                9.9

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 AWQC limit on  257 reaches as the result of baseline MP&M discharges. The expected reductions in
 discharges for the proposed regulatory option, Option 2a/2, eliminate the occurrence of concentrations in
 excess of AWQC limits on  123  of these discharge reaches, leaving only 134 reaches with concentrations
 for one or more pollutant that exceed AWQC limits.

        As described above, EPA assumes that elimination of concentrations  in excess of AWQC limits
 will achieve water quality that is protective of aquatic life and human health.  This improvement in water
 quality, in turn, generates benefits to recreational anglers by increasing the value of their experience or the
 number of days they subsequently  choose to fish the waterway. EPA estimated the monetary value of
 improved recreational fishing opportunity for the 123 discharge reaches for which  concentrations in excess
 of AWQC limits  are eliminated. As outlined  above,  EPA estimated  this value  by first calculating the
 baseline value of the benefiting reaches. From the estimated total of 7.25 million person-days fished on the
 123 benefiting reaches, and the  value per person-day of recreational fishing  ($24.56 and $31.10, 1989
 dollars), EPA calculated a baseline value of $178 million to $225.4 million for the 123 reaches. Second,
 EPA estimated the value of improving the water quality in these fisheries based on the increase in value
 (11.1  percent to  31.3 percent) to anglers of achieving a contaminant-free fishery (Lyke,  1992). The
 resulting estimates of the increase in value of recreational fishing to anglers range from $19.8 to $70.6
 million annually. As discussed above, EPA emphasizes that this estimated benefit value is  only a limited
 measure of the value to society of the improvements in aquatic habitats expected to result from the MP&M
 regulation. The estimate  of benefits is limited because  it focuses on  only  one mechanism, enhanced
 recreational fishing, by which society may value improved aquatic habitats; it ignores other recreational
 effects as well as valuation mechanisms that are separate from recreation.

 9.4     Limitations and Uncertainties Associated with Estimating Ecological Benefits
        In this chapter, EPA assessed  ecological benefits in terms of reduced occurrence of pollutant
 concentrations that exceed chronic and  acute toxic effect levels for aquatic  species.  In  addition, EPA
 attached a monetary value to ecological improvements expected to result from the MP&M regulation in the
 form  of increases in the value of recreational fishing. EPA emphasizes, however, that this  estimated
 increase in value constitutes only a  limited measure of the value to society of improvements in aquatic
habitats and  therefore aquatic life. The estimate  of benefits is limited because it focuses on only one
mechanism, enhanced recreational fishing, by which society may value improved aquatic life and aquatic
habitats; it ignores improvements to other recreational activities such as swimming and wildlife observation
as well non-recreational benefits such  as increased  assimilative  capacity  of an  MP&M reach  and
improvements in the taste and odor of the in-waterway flow.
                   :                           9.10

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        In addition to this overriding limitation to the assessment of ecological benefits, the methodologies
used to assess ecological benefits involved significant simplifications and uncertainties. Whether these
simplifications and uncertainties, taken together, are likely to lead to an understatement or overstatement of
the estimated economic values for the ecological benefits that were analyzed is not known. All but two of
these simplifications and uncertainties apply to the human health benefits analysis as well as the ecplogical
benefits analysis and have been discussed at length in the previous chapter. This section,  therefore, briefly
restates those uncertainties applicable to both analyses and identifies two additional elements of uncertainty
pertaining to  the  ecological benefits analysis. Elements of uncertainty in both the human health  and
ecological benefits results include: development of the sample  of MP&M  facilities analyzed in the RIA,
estimation   of  in-waterway  concentrations   of  MP&M  pollutants,   consideration  of  background
concentrations of MP&M pollutants, and consideration of downstream effects. Each is  briefly discussed
below.  The additional elements of uncertainty  specific to the ecological benefits analysis  involve: the
estimation of the value to recreational fishermen of reducing concentrations of MP&M pollutants to levels
considered protective of aquatic life and human health; and whether the valuation of enhanced recreational
fishing  opportunities overlaps the valuation of reduced cancer  health from fish consumption discussed in
the preceding chapter. These issues are also discussed below.

        Sample Design and Analysis of Benefits by Location of Occurrence
        As mentioned in the previous chapter, the sample of MP&M facilities employed in  this analysis
was drawn based on the business  characteristics of the MP&M  industry  instead of on  the basis of
geographic location. With some regularity, multiple MP&M facilities discharge to the  same reach. As a
result, the sample does not accurately reflect the likelihood  of co-occurrence of MP&M facilities on
MP&M reaches and, therefore, the  contribution to in-waterway pollutant concentrations made by these
facilities.

        This omission presents a problem for analyzing changes in in-waterway pollutant concentrations
relative to aquatic life AWQCs  for reaches to which more than one facility discharges because of the
differential weighting of sample facility  results. See Appendix C for an explanation of the sample weighting
methodology  devised  to  address this  problem.  While  this weighting methodology does recognize the
contributions  of facilities with different  sample facility weights to aggregate results,  it does not account for
the contributions made by co-occurring facilities not included in the sample.  The effect this omission will
have on ecological benefit estimates, however, is indeterminate.
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        Estimation of In-Waterway Concentrations of MP&M Pollutants
        As in the case of human health benefits, the estimates of ecological benefits are based on the
estimated changes in in-waterway concentrations of MP&M pollutants. In-waterway concentrations under
baseline conditions and under the proposed option are modeled for all reaches to which MP&M facilities
discharge. Certain data underlying these analyses are site specific; however, other basic assumptions in the
model are not site specific. Where these assumptions differ from actual conditions, modeled results will
approximate in-waterway concentrations with varying degrees of accuracy. The effect of these assumptions
on ecological benefit estimates, however, is indeterminate.

        Consideration of Background Concentrations of MP&M Pollutants
        This  analysis considers only the discharges  from MP&M Phase I facilities in estimating the in-
waterway concentrations of MP&M  pollutants and whether those  concentrations  exceed aquatic  life
AWQCs. Other sources of MP&M pollutants that contribute to in-waterway pollutant concentrations are
not taken  into account. As  such, the estimates  of in-waterway concentrations  omit "background"
contributions, and as a result, the reductions  in aquatic life  AWQC  excursions calculated for a given
MP&M reach are likely to be  biased downwards.  The net result is the analysis is likely to understate the
frequency with which in-waterway concentrations move from  values exceeding pollutant specific aquatic
life AWQCs to values  less than pollutant specific aquatic life AWQCs as a result of the regulation.
Accordingly, the analysis is likely to understate the number of waterways where improvements to aquatic
species  habitat will occur as  a  result of reduced discharges of pollutants that are  above in-waterway
concentrations considered to be protective of aquatic life.

        Consideration of Downstream Effects
        Because of differential weighting of sample facility results, it was not possible to evaluate aquatic
life AWQC excursions in downstream  reaches.  This limitation  also applies to human health benefits and is
discussed in  more detail in Chapter  8. By  omitting such downstream  effects, this analysis potentially
understates the number of waterways with baseline pollutant concentrations that exceed AWQCs and that
would be mitigated by the proposed option.

        Estimation of the  Value to Recreational Fishermen of Reducing  Concentrations of MP&M
        Pollutants to Levels Considered Protective of Aquatic Life and Human Health
        The elimination of pollutant concentrations in excess of AWQCs is expected to result in significant
improvements in  aquatic  species  habitat. In  turn,  these improvements  in  aquatic species  habitat are
                                               9.12

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expected to  improve the quality and value of recreational fishing  opportunities. In this analysis, EPA
estimated an increase in monetary values of recreational fishing opportunities as a partial measure of the
economic benefit to society from the improvements to aquatic species habitat expected to result from the
proposed MP&M  regulation. As discussed above, this  estimation of the monetary value of enhanced
recreational  fishing opportunities is based on the concept of a "contaminant-free fishery." Implicit in this
concept is the assumption that recreational fishermen place a significantly higher value on a fishery that is
free of contaminants than a fishery with some level of contaminants present. This analysis builds on this
assumption  by  further  assuming  that  recreational  fishermen place  the same  value  on  reducing
concentrations of MP&M pollutants to levels considered protective of aquatic life and human health as they
do on eliminating all contaminants from a fishery. While the former level of pollutant reduction is assumed
to be protective of aquatic life and human health, some  level of contamination would still exist in a fishery.
As  such, the value  of recreational fishing benefits estimated in this analysis may be overstated.

        Potential Overlap in Valuation of Enhanced Recreational Fishing Opportunities and Reduced
        Cancer Risk Via the Fish Consumption Pathway
        The evaluation of ecological benefits based on enhanced recreational fishing opportunities attempts
to use a benefit valuation concept that differs from the  valuation of benefits for reduced cancer risk to
human health as discussed in Chapter 8. However, there is some likelihood that the valuation of ecological
benefits based on enhanced recreational fishing experience overlaps to a degree with the valuation of human
health benefits from reduced cancer risk via fish consumption. The numerical significance of this overlap, if
any, will depend on the following conditions:

•       The extent to which the increased value placed by recreational anglers on enhanced recreational
        fishing opportunities includes some valuation of reduced cancer risk from fish consumption;

•       The extent to which the valuation of ecological improvements and reduced cancer risk involves the
        same benefit sites and the same benefiting populations; and

•       The extent to  which the improvements in ecological habitat as indicated by the elimination of
        instances in which pollutant concentrations exceed AWQCs are based on the same four MP&M
        pollutants as used to evaluate reduced cancer risk from fish consumption.

        While EPA acknowledges the potential for overlap in the valuation concepts, EPA judges that the
practical numerical significance of the overlap and, concomitantly,  the potential for "double counting" of
regulation benefits are very minor for the following reasons:
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•       The analysis of ecological benefits and enhanced recreational fishing opportunities is based on 60
        pollutants, or 56 more chemicals than the four chemicals in the cancer risk analysis.

•       Moreover, the elimination of concentrations in excess of AWQCs depends on any of the four
        chemicals in the cancer risk analysis at only a small percentage — 8.5 percent— of benefit sites.
        These same sites account for an even smaller percentage of the estimated benefits  from reduced
        cancer risk, m short, the potential overlap in the dollar values estimated for enhanced recreational
        fishing opportunities and reduced cancer risk from fish consumption is a small percentage of the
        estimated values for both of the benefit categories. Said another way, the benefit sites at which
        reduced cancer risk and enhanced recreational fishing benefits are valued and in which the same
       pollutant reductions generate the benefit values overlap with only minimal frequency.

•       The  valuation  concepts  for  avoidance  of cancer  risk and  enhanced recreational  fishing
        opportunities may overlap because the response to the contingent valuation questions regarding
        willingness-to-pay for achieving a contaminant-free fishery will likely embody valuation based on
        reduced human health risk. However, the higher value of a contaminant-free fishery is also likely to
        reflect other concepts than reduced health risk (e.g., anglers may attach a higher value to reduced
        pollution in the fishery because they expect that the fishery will be more productive or because they
        intrinsically lvalue reduced pollution in the waterways in which they fish). In addition, even when
        reduced health risk from fish consumption is a basis for increased value of recreational fishing, the
        concept of reduced health risk is likely to embrace not only reduced cancer risk but other systemic
        health risks  as well. As such,  the  component of value for enhanced recreational fishing that
        depends — no matter how blurred the relationship — on  reduced cancer risk may be  relatively
        small in relation to the total assessed value for enhanced recreational fishing opportunities.

        Taken together,  these  observations suggest that the  numerical  consequence of any valuation
overlap is likely to be very small in relation to the benefit values calculated for the two benefit categories.
                                               9.14

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                                          Chapter 10
                Estimating the Effect of Reduced Pollutant Discharges on
                              Distributions of Aquatic Species

10.1   Introduction
       This chapter uses an alternative methodology to assess the change in aquatic ecological risks for
selected pollutants whose discharges will be  reduced by the Metal  Products  and Machinery Industry
(MP&M)  rulemaking.  This  methodology incorporates several refinements to traditional ecological risk
assessment methodologies:

1.     It adapts dose-response assessments to  include the use of species sensitivity distributions for
       estimating and summarizing ecological risks.

2.     It highlights potential risks to certain species of socioeconomic importance, such as trout, bass and
       catfish.

3.     It modifies the exposure assessment to include estimates of pollutant concentrations downstream
       from the initial point of discharge.

4.     In conjunction with the downstream  analysis of pollutant concentrations, it incorporates chemical
       fate and decay processes — including volatilization, hydrolysis, partitioning, sorption to suspended
       solids — into the exposure model.

       The goal  of this analysis  is to estimate and summarize the benefits of the MP&M regulations in
terms of the effect of pollutant concentrations in aquatic habitats. The approach used in this analysis yields
a concise  understanding of regulatory benefits as measured by the change in quantity of affected  habitat
(e.g., kilometers of river reach) in which given percentages of a community of resident species are at risk of
exposure to lethal concentrations of pollutants. The analysis summarizes the results of reduced discharges
as the change  in pollutant  effects over a distribution of species with varying sensitivity  to pollutant
concentrations.  In addition, within the distributions, it is possible to track results for selected species. By
summarizing regulatory benefits in terms of expected effects on the aggregate of species in a habitat and
with respect to  particular species within  that aggregate, it is expected that regulatory decision-makers will
be able to grasp regulatory benefits in a more concrete way than is possible when benefits are summarized
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relative to abstract'concepts — for example, change in the expected frequency with which ambient water
quality criteria are exceeded. However, this analysis does not express benefits in monetary terms.

       EPA performed the analysis on 12 of the 69 chemicals whose discharges will be reduced by the
MP&M regulation. These chemicals, listed in Table 10.1, appear to offer relatively greater potential for
reductions  in  risk to aquatic organisms as  a result of the MP&M effluent  guideline. Data limitations
preclude completion of this analysis for other MP&M pollutants of concern. In addition, the analysis was
performed only on the basis of sample facility discharges and associated impacts. Accordingly, the findings
from this analysis are at the sample level only and are not national estimates.  In this way, in comparison to
the national estimate-level analyses and findings presented in Chapters 8, 9 and 11, this analysis and its
findings are better interpreted as the results of a series of case studies. Finally, these  analyses do not
account for discharges from sources other than the sampled MP&M facilities. As a result, the findings are
likely to understate, the river kilometers for which a given percentage of species are likely to be exposed to
lethal concentrations of the analyzed pollutants.
                       104; MP&M Pollutants Included in the Analysis of the Effect of
                    Reduced Pollutant Discharges on Distributions of Aquatic Species
              Arsenic                        Copper
              Bis-2-ethylhexyl-phthalate        Cyanide
              Cadmium                      Lead
              Chromium                     Nickel
Phenanthrene
Selenium
Silver
Zinc
        In this analysis, EPA found that MP&M sample facility discharges  of the 12  pollutants  could
generally be expected to expose relatively small proportions of aquatic community species to a risk of acute
lethality over most of the river kilometers analyzed, both in the baseline and post-compliance case. For only
a few chemicals and in  only a small percentage of the river kilometers analyzed  did the proportion of
species  exposed to a risk of acute lethality substantially exceed 5 or 10 percent of the species in aquatic
communities.  Copper  exhibits the highest ecological impact in the baseline  case, exposing half the
community of species to risk of acute lethality over more than 450 river kilometers, out of approximately
21,000 kilometers modeled. Silver exposes 80 percent of the community to risk  of acute lethality over more
than 300 kilometers of river. For  reasons discussed below, all of these results are unweighted values, on a
sample  basis. Sample-weighted national estimates would yield higher impact estimates. The  proposed
regulatory option, Option 2a/2, is expected to achieve widely varying percentage reductions in species
impacts, depending  on the  pollutant examined. However, Option 2a/2 does achieve large reductions in
ecological risk from copper and silver, and all  post-compliance  results  under Option 2a/2 show low
absolute values of risk.
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        The following sections  document the methods and findings from this analysis.  The chapter first
reviews the basis for using species  sensitivity distributions to assess the ecological effects of changes in
pollutant discharges. The next  section,  Section  10.3, summarizes the development of species  sensitivity
distributions for MP&M pollutants  while Section 10.4 reviews the methods and data used to evaluate the
effects of reduced MP&M  pollutant discharges  relative to the species  sensitivity distributions. The final
section reviews the findings from the analysis in terms of expected effects of discharge  reductions on the
population of aquatic species expected to be present in affected habitats.
10.2    Overview of Species Sensitivity Distributions
        The methodology used to assess the effects of MP&M pollutants on aquatic organisms relies on
describing the toxicity  of each pollutant in the form of a species  sensitivity .distribution1 .  Species
sensitivity distributions  currently provide the basis of regulatory criteria for  the  protection of aquatic
organisms in several countries,  including the United States (Stephan et al., 1985; Erickson and Stephan,
1988) and the Netherlands (HCN, 1989). To illustrate, Figure 10.1 shows a species sensitivity distribution
for cadmium. In this example,  each data point represents, on the horizontal axis,  a given toxicological
effect concentration (e.g., LC50, lethal concentration for fifty percent  of a  species,  or the  pollutant
concentration at which 50 percent of the theoretically supportable population of a given species will die) for
an individual species. The corresponding values on the vertical axis represent the cumulative percentage of
the community of species that would be exposed to  the toxicological  effect at a given  concentration of
pollutant. The upward sloping line represents the estimated or approximate distribution of effects over the
community of species based on the actual toxicological  effect values for each species and a rank ordering
of species present  in the habitat by pollutant  sensitivity.  For example, considering the horizontal  axis,
approximately 0.8 ug/L is the concentration at which trout are expected to exhibit the given toxicological
effect while, for a less  sensitive species such as bluegill,  the given toxicological effect concentration is
approximately 3,500 ng/L. At the same time, the vertical axis indicates that only about 20 percent of the
community of species present in the habitat would exhibit the given toxicological effect at the 30  ug/L
concentration and  that  about 70  percent would exhibit  the  given toxicological  effect  at 1,000  ng/L
concentration. Said another way, for the pollutant in question, trout are at about the 1st percentile in terms
of cadmium sensitivity — 1 percent of species are at least as sensitive as trout to the pollutant — while
  The species sensitivity distributions used in this analysis actually represent cumulative distributions of species
sensitivity. For simplicity, this chapter refers to them as "species sensitivity distributions".
                                                 10.3

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             Figure 10.1: Species Sensitivity Distribution for Cadmium
100%
                                 10            100
                               Concentration (ug/L)
1,000        10,000
                                  10.4

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bluegill are at about the 80th percentile — that is, approximately 80 percent of species are at least as
sensitive as bluegill to cadmium.

        Such  distributions of species sensitivity allow water quality criteria for a pollutant to be set at a
level that will protect a given percentage of the species likely to be present in a habitat. For example, EPA
aquatic life criteria are set at a concentration that would correspond to the 5^ percentile of species effect
concentrations. EPA's intent is that by setting the criterion at the 5* percentile, protection will be afforded
to 95 percent of aquatic species.

        The  use of a species sensitivity distribution offers  several advantages over  a single toxicity
threshold concentration (e.g., a water quality criterion) for evaluating the changes in risks that result from
different regulatory  options. First, species sensitivity distributions can be  used  to relate  exposure
concentrations to the proportion of a group of species whose toxicological effect concentrations (e.g., LC50
or some lower lethal effect threshold such as a LC10 or LCI) are exceeded. This proportion  indicates the
percentage of aquatic species that would  be  directly  affected1  at the exposure  concentration. Unlike
comparisons to water quality criteria,  which usually yield ratios of the exposure concentration to the
criterion concentration, the proportion of species that are likely to be directly affected provides a  more
intuitive indicator of ecological risk. However, both indicators of ecological  risk  (water quality criteria and
proportion of species affected) suffer from the  inability to  account  for indirect  impacts on aquatic
ecosystems, such as those that result from  interruption of predator-prey relationships.  Therefore, neither
approach can be considered to provide an absolute measure of ecological  risk.

        A  second advantage of expressing  a pollutant's toxicity in the  form of a distribution of species
sensitivity  stems from the fact that slopes of species distributions are known to vary substantially across
chemicals  (Erickson and Stephan, 1988).  That is,  depending on the  slope of the line describing the
sensitivity distribution, the same incremental increase in exposure concentration may  result in differing
proportions of species that would be directly affected. For example, Figure 10.2 shows two hypothetical
sensitivity distributions, drawn to be linear, for the purpose of illustration.  Chemical  "A" exhibits a steep
slope in comparison to chemical "B" and has a 5  percent effect concentration of 0.1  mg/1. Chemical "B"
also has a 5 percent effect concentration of 0.1 mg/1, but exhibits a shallower slope. A two-fold increase
above the  5  percent threshold concentration for chemical "A" (e.g., from 0.1 to 0.2 mg/1) would indicate
 2  The term "directly affected"  is used here to reflect effects from direct exposure to a pollutant,  rather than
 "indirect" effects such as those that occur due to the loss of important predator or prey species.
                                                  10.5

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          Figure 10.2: Comparison of Two Hypothetical
                Species Sensitivity Distributions
100%
                  Chemical A
           0.2    0.3   0.4   0.5    0.6   0.7    0.8    0.9
             Species Effect Concentration (mg/L)
                  Chemical B
              Species Effect Concentration (mg/L)
                         10.6

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that nearly 40 percent of the  species would be affected. However, the same two-fold increase  in the
concentration of chemical "B" would affect approximately 15 percent of species, or substantially less than
the proportion observed for chemical "B." Thus, because of its steeper species effect distribution, increases
in concentration beyond the  5 percent threshold  for chemical "A" can  be considered "riskier" than
proportional increases for chemical "B."

        Finally, because the identities of the tested species comprising the species sensitivity distributions
are known, the use of species sensitivity distributions allows EPA to assess which of the tested species are
at risk from the direct effects of exposure to a pollutant. For example, socioeconomic considerations may
place greater value on the frequency of exceeding a lethal threshold concentration (LTC) for game fish such
as trout or bass.

10.3   Developing Species Sensitivity Distributions  for MP&M Pollutants
        The development of species sensitivity distributions for MP&M pollutants required the assembly of
toxic effect data for various aquatic species and a series of calculations to  estimate distributions of toxic
effect levels over the community of species likely to be present in affected habitats.

        Collection of Aquatic Toxicity Data
        Although species sensitivity distributions provide  a more  comprehensive  assessment of a
pollutant's toxicity to  aquatic organisms than comparisons to single toxicological threshold values (water
quality criteria), their use requires that a substantial amount of toxicity data be available and summarized
in a standardized form. The most abundant form of aquatic toxicity data available is acute (short-term)
toxicity data,  where lethality is the primary endpoint measured.  Chronic (long-term) toxicity data are also
available, but are rarely present in a sufficient quantity to enable meaningful sensitivity distributions to  be
constructed. Therefore, this analysis focused on the collection  and evaluation of acute toxicity data for
MP&M pollutants of concern.

        EPA  Ambient Water Quality Criteria Documents were  the primary source of acute toxicity data.
These documents provide the toxicological basis for EPA's national acute and chronic aquatic life criteria.
Each criteria document applies to a given pollutant and contains acute toxicity data for a diverse array of
aquatic species. For example, EPA's aquatic life criteria methodology requires that data  be available from
at least 8 different families in the  Animal Kingdom that occupy  three or more Phyla before a criterion can
be established. In addition to providing a broad  representation  of aquatic taxa,  EPA's  acute  toxicity
datasets have been thoroughly reviewed for quality, and  they  conform  to standardized test designs,
                                                 10.7

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endpoints and exposure durations (e.g., 48 hours for larvae and zooplankton, 96 hours for other species).
Table 10.2 summarizes the available acute toxicity data from EPA criteria documents.3
Table 10.2; Summary of Acute Toxicity Databases from tl,£
Chemical Name
ammonia
antimony
arsenic
bis-2-ethylhexyl phthtalate
cadmium
chloride
chromium (HI)
chromium (VI)
copper
cyanide
lead
nickel
phenanthrene
selenium (TV)
selenium (VI)
silver
2,4,5-trichlorophenol
zinc
Source: U.S. Environmental
Number of Generator
WMcb Data Are Avaiiable
34
9
14
10
42
12
19
27
41
15
10
19
8
21
11
18
10
35
Protection Agency
EPA Criteria Documents
Number of Species for
WMch Data Are Available
48
9
16
12
52
13
20
33
53
17
10
21
9
22
12
19
10
43

        Development of Species Sensitivity Distributions
        Assumptions
        The development of species sensitivity distributions for evaluating ecological risks requires three
basic assumptions. First,  it must be assumed that species sensitivity is a stochastic variable that can be
represented by a probability density function (Suter, 1993). Second, it must be assumed that the available
species toxicity data are a random sample from the population of species. Third, an assumption about the
type of distribution of species sensitivity must be made. These assumptions are discussed below.

        Assumption 1: Species sensitivity is a stochastic variable that can be represented by a probability
        density function. Although the existing acute toxicity data  cover only a small fraction of aquatic
        species, these data appear to be consistent with  the assumption that species sensitivity can be
        described by a probability density function. For example, the lexicological evidence indicates that
        no one aquatic species or group of aquatic species is consistently among the most or least sensitive
  EPA's Aquatic Information Retrieval (AQUIRE) database provided toxicity data for some additional pollutants.
However, insufficient data were available to generate useful regression models.
                                                10.8

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       organisms across  a variety  of chemicals. That  species  sensitivity varies erratically among
       chemicals suggests  that  the sensitivity  of  an  individual speck-.* — whether specified 01
       unspecified— within a group of species  can be approximated as  a  random event from the
       distribution of sensitivities exhibited by a community of species.

       Assumption 2: Available species toxicitv data are a random sample from the population of aquatic
       species. In using species sensitivity distributions to develop aquatic life criteria, EPA has argued
       that  available toxicity data  represent a random  sample over  aquatic  species. (Erickson and
       Stephan, 1988). Although EPA acknowledges that some elements of non-random or systematic
       sampling are introduced  into the criteria datasets (e.g., from the  presence of commonly tested
       species or because of the imposition of minimum diversity requirements), EPA argues that the
       datasets are reasonable approximations of random samples for two reasons. First, EPA reports that
       the available acute toxicity datasets vary widely and apparently haphazardly in their species
       composition.  Second, even for datasets that contain elements of systematic sampling, EPA reports
       that  a high correlation between toxicity and these elements (e.g., taxonomic groups) has not been
       observed, thus reducing the consequences of these deviations from random sampling.

       Assumption 3:  Species sensitivity data approximately follow a lognormal distribution. A frequent
       assumption regarding natural phenomena  in which  values  are bounded at the lower end of a
       distribution by zero is that the data approximate a lognormal distribution — that is, the natural
       logarithm transform of the data values will follow a normal distribution. This study  adopted this
       assumption  and,  in  the  numerical analysis,  confirmed  that  species  sensitivity data can  be
       reasonably approximated by a lognormal distribution.

       Steps in Developing Species Sensitivity Distributions
       EPA and other investigators have  described the general  procedure for  developing a species
sensitivity distribution (U.S. EPA, 1985, 1991; Di Toro et al.,  1988). For this analysis, EPA performed the
following steps to develop  species sensitivity distributions for the chemicals analyzed.

       1. Estimation  of Lethal Threshold Concentrations  (LTCs). Since LC50s represent a relatively
severe effect level (i.e., the concentration that is lethal to 50 percent of the  population), the first step in
constructing the species sensitivity distributions involved reducing each species' LC50 value to  a less
severe effect level — that is, a pollutant concentration at which the fraction of a species population affected
is much  lower than 50 percent, say 10  percent  or 1 percent. To approximate this  "lethal threshold
                                               10.9

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 concentration," each species' LC50 was divided by a factor of two4 EPA has used this conversion factor
 to set acute aquatic life criteria.

        2. Logarithmic Transformation of Threshold Lethal Concentrations. Under the assumption that
 species sensitivity  is lognormally distributed, each species' lethal threshold  concentration (LTC) was
 transformed to its natural logarithm equivalent. In accordance with the assumption of log normality, the
 natural logarithm values of the LTCs [hi (LTC)] will be normally distributed.

        3. Ranking and Estimating Cumulative Probability. The resulting LTC values were ranked over
                   i                          i
 species in ascending order, from most to least sensitive and assigned numeric rank orders within the number
 of species for which toxic effect data were available for a given pollutant (see Figure 10.1). The cumulative
 probability for each species' LTC was calculated as:
        where,
        R
        N
            Cumulative Probability  =


=    Rank order of each LTC value, and
=    Sample size of the dataset.
                                                               R
                                                           (N +  1)
                                                                                             (1)
        4. Assignment of Standard Normal Deviates ("z-values"). Standard normal deviates (z-values)
from the cumulative normal  distribution were  then assigned  to  each species  based on its estimated
cumulative probability value. The assignment of z-values to the cumulative probability values provides an
approximate transformation of the distribution of In(LTC) values to the standard  normal distribution and,
in effect, sets up the hypothesis that the In(LTC)  values  are normally distributed.  The quality of this
transformation — that is, how well, the In(LTC) values approximate a normal distribution — is tested in
the next step.

        5. Plotting the Data and Estimating Species Sensitivity Distributions.  Next,  each pair of data
points [hi (LTC) and its z-value] was plotted on a graph. If the log-transformed data are approximately
normally distributed — that is, if the original, untransformed lethal concentration data are log-normally
distributed —  then  the plot of these data points should approximate a  straight line. In addition, the
  Typically, division of the LC50 by a factor of two will result in response rates ranging from a 1 percent to 10
percent (e.g., LCI, IJC10).  However, the actual response rate of the lethal threshold concentration will vary
depending on the slope of the dose-response function for each species.
                                              10.10

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relationship between In(LTC) and the z-values was estimated by ordinary least squares  regression. The
resulting regression equation of the species sensitivity distribution relates a givmi exposure concentration to
its corresponding z-value. The cumulative probability of each z-value (i.e., percentage of species affected)
was  then obtained from the  standard cumulative normal  distribution table.  The  relationship  between
In(LTC) and z-values was assumed to be, and was  estimated as, a linear relationship. However,  the
relationship between In (LTC) and the cumulative probability values (that are mapped from z-values) is
not linear but follows the traditional cumulative normal distribution. Methods other than this regression
procedure were considered for approximating the species sensitivity distribution. For example, one could
have "connected the points" of LTC and cumulative probability by linear segments or as  a step function.
The  cumulative probability value for a given pollutant concentration would subsequently be calculated
from these piecewise linear relationships. The key advantage offered by the regression approach is that it
permits estimation of the cumulative probability for pollutant concentration values that lie outside the range
of LTC values observed over the set of species for which acute toxicity values were available for a given
pollutant.

        Estimated Species Sensitivity Distributions
        Of the 69  MP&M Phase I pollutants of concern, eleven pollutants could not be evaluated because
quantitative relationships between the pollutant's concentration and its toxicity to aquatic organisms are  not
well established or are  not appropriate (e.g.,  for COD, total  phosphorous, alkalinity,  etc.). Sufficient
reliable data were available to develop statistically useful regression models for  17 of the remaining
pollutants.

        The resulting acute species sensitivity distributions  for these chemicals are shown in Figure 10.3
for freshwater organisms and Figure 10.4 for saltwater organisms. Fewer distributions were constructed for
saltwater organisms than freshwater organisms because the quantity of data was more limited for saltwater
organisms.  On each graph, the cumulative probability of each species' LTC  is plotted  against the log-
transformed value of the LTC. The cumulative probability values shown on the y-axis are mapped from the
z-values of the cumulative normal distribution. As discussed above, if the  LTC values  are lognormally
distributed, the In (LTC) values will  follow  a linear  relationship with these z-values. However,  the
relationship with the underlying cumulative probability values is not linear.  On these graphs, the vertical
axis is linear in z-values but the axis is labeled with the cumulative probability values that are  mapped
from the z-values of the cumulative normal distribution. As a result, the cumulative probability value labels
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               Figure 10.3: Acute Toxicity Profiles for Freshwater Species
                        Ammonia
 >  58%
 5
 f  22%
       •28    2    4    S    I    18    12    14
           Log of Species Lsthal Threshold Concentration (mg/L)
                 Bis-2-ethylhexyl phthalate
   11.11%
    11%
    14% •
 2  77%
o.
|  5«
    1%  '
   8.81%
       •28    2     4     S    >    18    12    14
           Log of Species Lethal Threshold Concentration (ug/L)
                        Chloride
   11.11%
   11%
2  14%
2  77%
a.
I  "%
i  22%
   8.81%
       •2    8     2    48    I    18    12   14
           Log of Species Lethal Threshold Concentration (mg/L)
Cumulative Probability
i*5S53$Ii
s IP
Arsenic


t\
r2 -.918

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i
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Log of Species Lethal Threshold Concentration (ug/L)


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99.99% -




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e% •


Cadmium
r2 ..910

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./x
^^
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^^^

2 8 2 4 8 t 18 12 14
Log of Species Lethal Threshold Concentration (ug/L)
Chromium (III)
r2 ..893

'/
V
A
	 :/..:..::::::::::

! 8 2 4 8 S 10 12 14
Log of Species Lethal Threshold Concentration (ug/L)



















                                                     10.12

-------
Figure 10.3: Acute Toxicity Profiles for Freshwater Species

99.99% -
£
£>
a.
o
.2 50% '
ji
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t

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Chromium {VI)
2


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Log of Species Lethal Threshold Concentration (ug/L)

Cyanide
r2 -.888

A
Y
I
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i ........
Log of Species Lethal Threshold Concentration (ug/L)

Nickel
r2 *.934
*
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j
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7

20 2 48 9 10 12 14
Log of Species Lethal Threshold Concentration (ug/L)



































99.99% •
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99.91% •
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Copper
r2 «.938


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Log of Spscles Lsthal Thrsshold Concentration (ug/L)

Lead
r2 -.966

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Log of Species Lethal Threshold Concsntration (ug/L)

Phenanthrene
r2 -.903

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2 0 2 4 6 1 10 12 1'
Log of Species Lethal Threshold Concentration (ug/L)

































1


































                          10.13

-------
               Figure 10.3:  Acute Toxicity Profiles for Freshwater Species
                       Sel.nlum (IV)
   H.MX •
   MX •
   "*
8  MX
1
|  MX
«   .x
    IX
       •2    0    1    4     1     t    10   12   14
            Log of Spicln Lithil Threshold Concentration (ug/L)
               S«i«nium (VI)
Cumulative Pr
§
4    e    2    4    *    f    10    12    14
    Log of Sptciw Lithal Thrvshold Conctntratton (ug/L)
                          Silver
                                                                                  2,4,6-Trlchlorophanol
   M.MX
   MX
£
8  MX •
I  22X '
S  IX '
   ix •
   0.81%
latlv* Probability
5 3 5 5 I
       •2    0    2    4    e     1    10    12   14
           Log of Species Lethal Threshold Concentration (ug/L)
                 ....y.
-20    2    4    •    8    «    12    14
    Log of Spcclts Ltthal Thrtehold Concentration (ug/L)
                          Zinc
  M.MX
   MX

   77X
   MX •
   22X '
   IX
   IX
   M1X
       •2    0    2    4    t    1    10    12    14
           Log of Species Lethal Threshold Concentration (ug/L)
                                                       10.14

-------
                Figure 10.4: Acute Toxicity Profiles for Saltwater Species
                         Ammonia

    (1%
    94%
|   77%

I   "*
1   22%
5   9%

    1% •
    0.01%
        •2    0    2    4     0     S    10    12    14
            Log of Species Lethal Threshold Concentration (ug/L)
                                                                                            Arsenic
       •2     0     2    4    9     >     10    12    14
            Log of Species Lethal Threshold Concentration (ug/L)
                         Cadmium
                       Chromium (VI)
   90.90% •
    10%
    M% •

    '"'
        •J    «    2    4     9     1    10    12    14
            Loo of Species Lethal Threshold Concentration (ug/L)
            Log of Spicln Ltthal Thraihold Concantratlon (ug/L)
                          Copper
   90.09%
    •8%  -
    50%  •
    22%
    e%
    1%  •
    0.01%
        •I    0     2     4     •    •    10    12    14
            Log of Spacln Lethil Threshold Concintratlon (ug/L)
                                                                                              Lead
    99%
*
1   *** H
o   77%

|   50%

|   22%
3   0%

    1%
    0.01%
        •2    0    2    49     S    10    12    14
            Log of Species Lethal Threshold Concentration (ug/L)
                                                          10.15

-------
          Figure 10.4: Acute Toxicity Profiles for Saltwater Species
                    Nickel
   M.0t%
    01%
I   M% H
a   __..
o   77K
£
5   se% -
|   22% '
3   o%
    1% -
    0.01%
•2     0     24     0     >    10    12    14
     Log of Species Lethal Threshold Concentration (ug/L)
                                                                                    Selenium (IV)
                                                            I  "*
                                                            f  7714
                                                            a.
                                                            |  22%
                                                            3   ,% -I
                                                                1% -
                                                               0.01%
                                                                           •2    0     2     4     «<    10    12    14
                                                                               Log of Species Lethal Threshold Concentration (ug/L)
                    Sliver
                                                                                2,4,5-Trlchlorophenol
   •O.N%
    •IX
|  "*
*  90%
5
|  32%
8   ,%
    1%
   0.01%
                                                              00.09%
                                                               00% -
                                                               M% •
                                                               77% -
                                                               50% -

                                                               22%
                                                               0%
                                                               1% '
•2     0     2    ,4     t     t    10    12    14
     Log of Species Lethal Threshold Concentration (ug/L)
                                                               0.01%
                                                                                                   10    12    14
                                                                        Log of Species Lethal Threshold Concentration (ug/L)
                    Zinc
•2     0     2    4     0     I    10    12    14
     Log of Species Lethal Threshold Concentration (ug/L)
                                                   10.16

-------
are not linear, and the distance — in probability terms — between the equi-spaced labels increases as data
are farther from the median.

        For most of the chemicals analyzed, the species sensitivity distribution is approximated reasonably
well by linear  regression.  The  freshwater organism  analyses for seven chemicals (bis-2-ethylhexyl
phthalate,  chloride, lead,  selenium (IV), selenium  (VI), trichlorophenol,  zinc)  yielded correlation
coefficients  of 0.95 and above. Correlation coefficients of 0.90 and above were observed for 13 of the 17
sensitivity  distributions  for freshwater organisms. For the  11  sensitivity  distributions  of saltwater
organisms, five display correlation  coefficients of 0.95 and above and 8 display coefficients of 0.90 and
above. These high correlation coefficients mean that the estimated regression equations provide a very good
fit for the data.

        Despite the reasonably good fit of the regression line  for most  chemicals, the data for certain
pollutants are less  well  described  by linear regression techniques. Examples for freshwater organisms
include: ammonia,  cadmium (at higher concentrations), chromium III, chromium VI, copper (at lower
concentrations), and cyanide.

        Some of these deviations  from a linear  relationship  may  result from redundancy in certain
taxonomic groups of the datasets (i.e., greater representation of certain species groups compared to other
groups). For example, the lower tail of the freshwater ammonia distribution is heavily  represented by
several species  in certain genera, including  Oncorhynchus (trout) and  Salmo (salmonids). Because species
within the same genus tend to display similar sensitivities (Mayer and Ellersick, 1986), genera represented
by toxicity values for several species may bias the sensitivity distribution because of their greater presence
in the distribution compared to other genera. To reduce the possible over-representation bias, EPA tested
relationships in which species toxicity data were aggregated to the genus level; however, the  improvement
in model fit was inconsistent across  chemicals.

10.4    Using Species Sensitivity Distributions to Assess the Effects of MP&M Pollutant Discharges
        EPA assessed the impact of pollutant discharges on the community of aquatic species by first
estimating the instream concentrations of the 12 pollutants resulting from sample facility discharges at
particular impact sites. The estimated pollutant  concentrations were then compared  with the estimated
species  sensitivity  distributions to gauge  the impact of a particular discharge case in terms of the
percentage of the community of species affected. The methodology used to estimate instream concentrations
                                               10.17

-------
in this chapter incorporates two refinements to the methodology presented in Chapter 9 for assessing the
change in environmental risks associated with the MP&M regulation:

1.     This methodology estimates pollutant concentrations at locations that are "downstream" from the
       initial discharge reach.

2.     This  methodology incorporates important environmental  fate  processes  such as  hydrolysis,
       volatilization, and partitioning to solids.

       Using a geographic-based database that  provides  hydrologic linkages between stream reaches,
discharges for the §308 Survey sample  of 396 MP&M  facilities were modeled for a distance of 100 km
downstream from the initial stream reach. Pollutant concentrations were estimated at the beginning of each
reach and then decayed during travel to the end of the reach. The concentration at the end of each reach
served as the value for the beginning of the next reach. EPA performed these analyses for five cases: pre-
compliance (baseline) and five  post-compliance regulatory  options, as defined below.  The results shown
apply to sampled facilities only. Because of statistical limitations described below, EPA did not extrapolate
the sample facility results to national estimates in this analysis.

       To quantify the fate  and transport of MP&M pollutant releases to surface waters, EPA  used a
simplified fate and transport model;  the equations, assumptions, and data sources for this model are
detailed in Appendix A. Although data relating to the exposure parameters  were collected for all of the
"EPA criteria" pollutants  shown  in Table 10.2, the exposure assessment was  completed only for the  12
pollutants listed in Table 10.1. Chromium discharges were assessed as chromium (VI), while selenium was
assessed  as selenium (IV). Chloride is not among  the MP&M pollutants of concern, and insufficient data
were available to generate useful regressions for antimony.

       The following discussions review the analytic issue of sample weighting of discharge effects and
the decision to perform this analysis on only a sample  discharge basis,  and summarize  the data sources
used in estimating the instream pollutant concentrations.

       Sampling Issues and the Decision Against Sample Weighting of Discharge Effects
       This analysis is performed at the level of the individual stream reach affected by MP&M sample
facility discharges. The analysis recognizes the possibility that the pollutants affecting a given reach may
be discharged by more  than  one sample facility  whether in,  or upstream from, the  analysis site.
Specifically, the pollutant concentrations from each facility's discharges are estimated in the initial reach
                                               10.18

-------
and in downstream reaches within  100 km of the initial discharge point. The concentration of a pollutant
for a given reach is calculated by summing the contributions from all facilities that affect the reach.  The
decision to include the  effect of multiple  discharging sources —  both within and upstream  from the
analysis sites — presented significant analytic  issues  in  developing  an appropriate sample weighting
scheme.5  Upon review of these analytic issues, EPA decided to perform the analysis on only the basis of
sample discharge effects. Two separate but intertwined problems were encountered in trying to develop an
appropriate sample-weighting scheme.

        The  first and more intractable problem  involves the implicit assumption that the frequency of
overlapping  discharges  (i.e., discharges  from  more  than one  MP&M  source  affecting  pollutant
concentrations in a given reach) for the population of MP&M facilities is identical to the rate observed over
the sample of facilities. This assumption would be valid if: (1) the sample of MP&M facilities represented
a random sample from the universe of locations that may be affected by MP&M discharges; and (2) when
a location was sampled,  all MP&M facilities whose discharges may affect that location were then included
in the facility sample. However, the sample was not drawn on the basis of locations that may be affected by
MP&M discharges but instead  on the basis of other economic and  technical criteria that pertain to
facilities. As a result, this analysis is likely to understate the true frequency of overlapping discharges. Said
another way, as  sample  size in  terms  of number  of facilities increases, the observed  frequency of
overlapping discharges  is  likely  to increase because facilities  exist in a finite  geographical space. This
probable understatement of the frequency of overlapping discharges means that this analysis is likely to
understate the frequency with which pollutant concentrations (resulting from MP&M facility discharges)
exceed species' lethal effect thresholds.

        The second problem involves the  difficulty of applying  sample weights to events  in which
discharges from  more than one  sample facility contribute to the estimated instream concentrations  of a
pollutant exceeding the lethal effect threshold for some percentage of species.  In this case, a simple
 5 The AWQC comparison analysis presented in the preceding chapters used a simplified approach to address the
 weighting  issue of multiple  discharger events. However, the analysis  in these chapters did not consider
 concentration effects from dischargers that are upstream from the affected reach. The addition of the upstream
 discharger effects in the Chapter 10 analysis considerably confounded the development of an appropriate weighting
 scheme for multiple discharger effect events.  Simulation methods are available for developing an appropriate
 weighting scheme. However, given that the results from this  analysis would not be used to develop  monetary
 estimates of regulatory effects, EPA decided to use only the sample discharge effect results for the current analysis.
 EPA will continue to examine this issue and will consider developing a sample-weighted national estimate for the
 analysis to support promulgation of the final MP&M Phase I regulation.
                                                10.19

-------
 weighting of the event (e.g., number of river reach km at which the estimated concentration exceeds the
 lethal effect threshold for a given percentage of species) based, for example, on the sum of the sample
 weights for each contributing facility is likely to overstate substantially the frequency of the joint discharge
 events in the population. Even weighting the event on the basis of the maximum of the sample weights for
 contributing facilities will likely overstate the frequency of joint discharge events in the population unless
 the facilities have the same sample -weight.

        Because of these issues,  EPA conducted the analysis on a sample facility basis only and did not
 extrapolate the results from sample facility discharges to develop national  estimates.  As  a result, the
 calculated river kilometers for which pollutant concentrations are reduced will understate substantially the
 quantity of habitat benefiting from reduced pollutant concentrations as a result of the proposed MP&M
 regulation.

        Summary of Data Sources
        Data sources used for the exposure model are summarized in the reference section at the end of this
 document. They are discussed briefly in the section below, according to categories of information.

        Regulatory Options Analyzed
        In addition to the baseline case, this chapter presents results from two MP&M regulatory options:

 1.   Option 3:      Option  3 for both indirect and direct discharging facilities.

 2.   Option 2a/2:   Option  2a  for  indirect  discharging facilities  and Option 2  for  direct  discharging
                   facilities (the proposed regulatory option).

        The presentation of results from the analysis focuses on these two options because the numerical
 results in terms of frequency of exceeding Ambient Water Quality Criteria (AWQC) and kilometers of river
 reach at which the estimated concentration  exceeds the lethal effect threshold for a given percentage of
 species were found to vary little among Options 1, Option la/2, Option 2a/2 and Option 2. As a result, the
graphical summaries of results were very difficult to understand because the separate lines for these options
essentially lay on top of one another. Because of the similarity of these results, this report presents results
for only the baseline,  Option 2a/2  (the proposed option),  and Option 3. However, the analysis  was
conducted for all five options.
                                               10.20

-------
       Pollutant Loadings
       Annual pollutant loadings (kg/yr) were provided by EPA for 396 direct and indirect discharging
MP&M facilities under the various  regulatory options. Pollutant  loadings for indirect dischargers were
adjusted to reflect treatment by the POTW. Annual pollutant loadings were converted to daily pollutant
loadings by dividing by the number of days in one year (365).

       Hydrologic Parameters
       For each reach, EPA obtained steam flow data— namely, the 7Q10 (i.e., the lowest stream flow
expected in 7 consecutive days over a 10-year period) and low velocity values — from the GAGE database
on its Geographical Exposure Modeling System (GEMS).  For estimating compliance with acute criteria,
EPA recommends use of the 1Q10 flow (i.e., the lowest one-day stream flow expected in a 10-year period)
(U.S. EPA, 1991).  The 1Q10 values were estimated from the 7Q10 values based on a regression equation
described by EPA (1991). The length of each reach was obtained from EPA's REACH2 file on the GEMS
database.

       Chemical Fate and Decay Parameters
       Appendix A documents the chemical fate and decay parameters  used in this analysis. For metals,
the only significant loss mechanism  results from partitioning onto suspended solids (Kp). For estimating
Kp, data from Windom (1993) and EPA (1985a) were used. It should be noted that partition coefficients
for metals are highly variable depending on site conditions. For this analysis, average values were used.
Future analysis should evaluate the sensitivity of the model results  to assumptions of the partition
coefficient.

10.5   Findings from the Species Sensitivity Distribution Assessment
       In  this chapter, EPA characterizes the change  in risk to aquatic organisms  from the effluent
limitations guidelines in three ways:

1.     The first evaluation involved comparing exposure concentrations with EPA ambient water quality
       criteria for acute exposure.  Exposure concentrations exceeding these criteria will  pose risks to
       aquatic  ecosystems.  This analysis is  similar to  the  AWQC comparison analyses  presented in
        Chapters 8 and 9; however, the  results presented in this chapter include the effect of upstream
       dischargers and, as described above, are on a sample-discharger  basis only. In addition, the results
       are presented on a chemical-specific basis and are measured in terms of quantity of river kilometers
                                              10.21

-------
        over which AWQC limits are likely to be exceeded (as compared to the number of river reaches
        with concentrations in excess of AWQC limits).

2.      Exposure cbncentrations were also compared to the estimated Lethal Threshold  Concentration
        values (i.e., LC50 H- 2) for selected aquatic species. Species with socioeconomic importance were
        the primary focus of these comparisons, although other species of less socioeconomic importance
        were also included.

3.      The  percentage of the community of species that would be at risk was estimated for pollutant
        concentrations in  each reach. These estimates were  determined using the species sensitivity
        distributions shown in Figure 10.3 for the 12  chemicals  listed in Table  10.1. Specifically,  the
        proportion of the species community at risk of lethal exposure was calculated for each analysis
        reach based on the calculated pollutant concentration at the reach  and the estimated sensitivity
        distribution regression equation.

        As noted in the introduction to this chapter, the reach-level analyses ignore discharges from sources
other than the sampled MP&M facilities.  As a result, the findings from the analysis are likely to understate
the kilometers of river reach for which AWQC are exceeded and the kilometers of river reach for which a
given percentage of species are likely to experience concentrations exceeding the estimated lethal effect
threshold.

        Change in Concentrations Relative to Acute Exposure Ambient Water Quality Criteria
        A total of 21,351 kilometers of affected river  reach are considered in this analysis.  This length of
affected river reach includes  all  reaches to  which sample facilities  discharge  or that lie within 100
kilometers downstream of a discharge reach. Because the analysis is performed at the level of the affected
reach and not at the level of the sample discharging facility, each affected reach is counted only once in the
analysis. Relative to the 21,351 river kilometers analyzed, a small number of river kilometers are predicted
to have baseline concentrations that exceed EPA acute water quality criteria for the 12 pollutants analyzed
(see Table 10.3). Baseline  results for copper show the  highest number of river kilometers exceeding the
acute criterion6  (723 km).  Zinc, cadmium and chromium have reach impacts similar to those of copper.
  Note: criteria for copper, cadmium, lead, and zinc are hardness dependent. A water hardness of 50 mg/L was
assumed for this analysis. If other hardnesses are assumed, higher or lower frequencies of exceeding LTCs would
be predicted.
                                               10.22

-------
Table 10,3: JUver Kilometers With Predicted Concentrations Exceeding Ambient
Water Quality Criteria and Selected Lethal Threshold Concentrations
Pollutant
Arsenic
Bis-2-ethylhexyl phthalate
Cadmium
Chromium (VI)
Copper
Cyanide
Lead
Nickel
Phenanthrene
Selenium (TV)
Silver
Zinc
Option
Baseline
Option 2a/2
Option 3
Baseline
Option 2a/2
Option 3
Baseline
Option 2a/2
Option 3
Baseline
Option 2a/2
Option 3
Baseline
Option 2a/2
Option 3
Baseline
Option 2a/2
Option 3
Baseline
Option 2a/2
Option 3
Baseline
Option 2a/2
Option 3
Baseline
Option 2a/2
Option 3
Baseline
Option 2a/2
Option 3
Baseline
Option 2a/2
Option 3
Baseline
Option 2a/2
Option 3
AWQC
0
0
0
82
7
0
615
548
75
520
299
75
723
613
143
158
99
0
180
126
75
177
123
0
82
7
0
85
85
0
209
161
0
659
403
0
Trout Minnow
0
0
0
0
0
0
714
680
196
0
0
0
414
338
75
158
99
0
75
75
0
12
12
0
0
0
0
0
0
0
209
161
0
159
130
0
0
0
0
0
0
0
111
111
75
0
0
0
324
215
75
96
36
0
0
0
0
48
48
0
0
0
0
0
0
0
209
161
0
0
0
0
Game Amphipod Zoo
0
0
0
0
0
0
0
0
0
0
0
0
324
215
75
96
36
0
0
0
0
102
48
0
0
0
0
0
0
0
209
161
0
731
423
75
0
0
0
0
0
0
75
75
75
297
185
0
723
601
143
0
0
0
87
87
75
12
12
0
7
7
0
85
85
0
209
161
75
0
0
0
0
0
, 0
7
7
0
375
311
75
566
312
75
901
719
143
96
36
0
75
75
0
217
137
0
7
7
0
0
0
0
488
417
75
926
560
75
AWQC: Acute Water Quality Criteria.
LTC: Lethal Threshold Concentrations used are one-half of each species' LTC50.
Estimates are for the sample only and are not weighted national estimates.
Source: U.S. Environmental Protection Agency
Another group  of pollutants — bis-2-ethylhexyl phthalate (BEHP), cyanide, lead, nickel,  phenanthrene,
selenium and silver — is associated with positive but much smaller numbers of river kilometers exceeding
AWQC, ranging from 82 to 209 kilometers. Arsenic concentrations do not exceed AWQC in any of the
reaches analyzed.
                                              10.23

-------
        Table 10.3 shows that Option 3, the most stringent option analyzed, reduces the river kilometers
 exceeding AWQC to zero for all the pollutants released by sample facilities except cadmium, chromium,
 copper and lead. For lead, Option 3 achieves almost a 60 percent reduction in river kilometers exceeding
 the AWQC limit. Option 3's reductions in kilometers that exceed AWQCs for cadmium,  chromium and
 copper are even greater.

        As  expected, the results  for the proposed Option 2a/2 lie  in between the baseline and  Option 3
 results. Option 2a/2 is quite successful at reducing frequencies of exceeding the AWQC for BEHP and
 phenanthrene, which each exhibit a 91 percent decline in river kilometers. It achieves intermediate results
 for cadmium, chromium, cyanide, lead, nickel, silver and zinc. On the lower extreme, Option 2a/2 is least
 successful  at reducing the frequency  of exceeding LTCs for selenium, cadmium and copper, which are
 associated with 0, 11 and 15 percent reductions in river kilometers exceeding AWQC limits, respectively.

        Change in Concentrations Relative to Species Lethal Effect Thresholds
        Table  10.3  also summarizes the number  of river  kilometers with predicted  concentrations
 exceeding lethal effect threshold concentrations (LTC)  of selected species for the three regulatory cases.
 The selection of species for these comparisons includes  fish  of commercial and recreational importance
 (trout and other game fish)  as well as other organisms that are linked to the welfare of commercial and
 recreational  species (minnows, amphipods and zooplankton).  These comparisons serve  to  highlight
 potential risks to specific species (providing they are present in the receiving waters7) but do  not provide an
 indication of overall ecological risk.

        The  baseline concentrations  in excess  of species LTCs  are  broadly parallel to  the patterns
 discussed in association with the frequency of exceeding AWQCs. Cadmium, chromium, copper and zinc
 are associated with the highest frequencies of exceeding LTCs  in the baseline case. The largest numbers of
 kilometers exceeding an LTC are associated with zooplankton:  926 kilometers exceed the zooplankton LTC
 for zinc, followed by 901 kilometers exceeding the zooplankton LTC for copper. Copper accounts for the
 most kilometers exceeding LTCs over the entire range of species shown in Table 10.3. Cadmium exhibits  a
 relatively sizable frequency of  exceeding the  LTC associated  with  trout:  714 kilometers.  Baseline
 frequencies of exceeding LTCs are low or near zero for BEHP, phenanthrene  and selenium.
  Where a species is not present, equivalent species, in terms of ecological position and pollutant sensitivity, will
typically exist in the community.
                                              10.24

-------
       Option 3 is largely successful at reducing frequencies of exceeding LTCs to zero or greatly reduced
levels. The notable exceptions involve amphipod LTCs, which are exceeded over an equal or nearly equal
number of river kilometers in the baseline and Option 3 cases for cadmium (no reduction) and lead (14
percent reduction). However, both  of these cases involve a relatively small baseline  number  of river
kilometers.

       Option 2a/2's performance is somewhat variable. Of the 34 instances in which an LTC is exceeded
for a species by a pollutant, Option 2a/2 achieves no reduction in river kilometers  exceeding LTCs in 12
cases. In only 4 instances does  Option 2a/2 reduce the frequency of exceeding LTCs by at least half. In
other words, more than one-third of the instances  in which LTCs are exceeded are not affected at all by
Option 2a/2, while more than half of these instances  are reduced  by less than  50 percent. However,
Option 2a/2 is moderately successful at reducing river kilometers exceeding LTCs for chromium, cyanide,
silver and zinc.

       Change in the Proportion of Species Affected
       Using the species sensitivity distributions from Section 10.2, EPA estimated the percentage of the
community  of species whose LTCs would be exceeded at various  exposure concentrations for each
pollutant (see Figure 10.5). For interpreting these results, it is assumed that a greater percentage of species
affected signifies a greater likelihood of ecological risk. In Figure  10.5, the horizontal axis represents the
percentage of community species whose LTCs are exceeded and the vertical axis shows the number of river
kilometers at or above the designated value.

       The graph corresponding to chromium, for instance, shows the numbers  of kilometers of river
subject to various levels of ecological risk from chromium in MP&M Phase I  discharges. The thin, black
line  with  solid square markers  indicates that, in the baseline case, slightly less than 500 kilometers are
estimated to have sufficient chromium concentrations to exceed the LTC for 10 percent of species in those
waters. At the 15 percent level of impact on species, the same graph shows a corresponding value of
approximately 300 kilometers. Zero or nearly zero kilometers of river  are estimated to expose more than
25 percent  of resident  species to  chromium  concentrations above their LTC.  Because  over  21,000
kilometers were modeled, the vertical intercepts lie above the range shown on the vertical axes.

        The same graph shows that Option 3, represented by a thin, dotted line with open circle markers,
reduces concentrations so that risk is decreased for all segments of rivers that exhibit positive risk in the
baseline case. Graphically, this is represented by an inward shift of the curve toward the origin. Under
                                               10.25

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                                                                Figure 10.5
              Predicted Risks of Acute Lethality
                          Arsenic
700
    0%   10%  20%  30%   40%  SO'/,  60%   70%  80%  90%
                  Proportion of Community Impacted (%)

           -•-Baseline     — Option2A/2 -°-Option3
           Predicted Risks of Acute Lethality
              Bis-2-ethylhexyl phthalate
                                                                              700
0%   10%  20%  30%   40%   50%  60%  70%   80%   90%
              Proportion of Community Impacted (%)
                                                                                            - Baseline
                                                                                                          - Option 2A/2 ••«>•• Option 3
700
Seoo
1.5°°
g>400
§300
!§200
•J I0°
Predicted Risks of Acute Lethality
Cadmium
Rf Minnow 1
,AWQC| A»pb.
...S 1 *• pod 	 	 ...
Zoe- . rm . ' 	
[plankton! fi^
St)| f ' L~
tfj U"
: \ • \


^r) 	

7
y: : :' .-, :-'-"\\
0% 10% 20% 30*% 40% 50% 60% ' 70% " 80%
Proportion of Community Impacted (%)
-•- Baseline ~~ Option 2A/2 •"=>•• Option 3
90%

                                                                                             Predicted Risks of Acute Lethality
                                                                                                       Chromium
                                                                                   0%   10%   20%   30%  40%  50%   60%  70%  80%   90%
                                                                                                 Proportion of Community Impacted (%)


                                                                                          -m- Baseline    — Option 2A/2 ••«•• Option 3
                  Predicted IlUu
-------
                                                                Figure 10.5

, Impact Level
k Wi Oi -
O O C
O O C
f
8300 -
u
c 200 •
M
fe
.d 100 -
0 -


Predicted Risks of Acute Lethality
Lead





Zoo- 1 	

planktonj
••jTwQcj-j 	
T ! fi>;


Amphi
pod

f 	 Ul

IL" ^

0%
H
L





7 J
. i
\

.fluT

^




7
	 'V 	
p 	



10% 20% 30% 40% 50% 60% 70% 80% 90%
Proportion of Community Impacted (%)
-»- Baseline •• •• Option 2A/2 ••»- Option 3
                                                                                             Predicted Risks of Acute Lethality
                                                                                                          Nickel
                                                                                         10%   20%  30%  40%  50%   60%   70%  80%
                                                                                                  Proportion of Community Impacted (%}

                                                                                           -•-Baseline    — Option 2A/2 ••«>•• Option 3
                                                                                                                                       90%
700
               Predicted Risks of Acute Lethality
                        Phenanthrene
          10%   20%  30%  40%  50%   60%   70%  80%  90%
                   Proportion of Community Impacted (%)

            -•-Baseline    "• Option 2 A/2 ••«>- Option 3
Predicted Risks of Acute Lethality




,f
|j)400 •
"S



Selenium
1
[AWOCl


	



-1— -1
Amphi
pod

^

*
0%


	 """""T Mln
Zoo- I 1 	
—
?

j 	
s^ 	 \
10%
20% 30% 40%
[Blucglll]


now 1 fTn



-r1
i




J 	 v~ 	 - 	 •""









50% 60% 70% 80% 90%
Proportion of Community Impacted (%)
•*- Baseline — Option 2A/2 ••»- Option 3
                   PRofctedRlduor Acute LcUuKy
                            Sim-
     0%   10%   20%   30%  40%  50%  60%   70%   80%  90%
                   Proportion of Community Impacted (%)

            -*• Baseline    — Option 2A/2 ••«>- Option 3
               Predicted Rliki of Acute LtOuUKy
                        Ztac
0%   10%  20%   30%   40%   50%  60%  70%   80%   90%
              Proportion of Community Impacted (%)

       -*- Baseline    — Option 2A/2 •••=>•• Option 3
                                                                     10.27

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 Option 3,  no segment  of river is expected to expose more than 10 percent of species to chromium
 concentrations in excess of their LTC, while in the  baseline case concentrations in almost 500 river
 kilometers were estimated to expose more than 10 percent of community species to a risk of acute lethality.

        Option 2a/2 yields intermediate results at all levels of risk: the curve lies on or between the baseline
 and Option 3 curves. At any non-zero level of risk, Option 2a/2 subjects equal or fewer river kilometers to
 the corresponding level of risk than in the baseline case, but equal or more kilometers than under Option 3.

        In addition  to inward shifts, decreasing risk  can also  be read  on these graphs from  leftward
 movements of "humps" toward the origin. On the graph for cadmium, for instance, almost 100 kilometers
 of river are estimated to expose 60 percent of resident species to concentrations of cadmium above LTC in
 the baseline  case. Under Option 2a/2, though, that  "hump," or sudden  increase, of  approximately  100
 kilometers still exists, but it has moved to a lower level of risk — 55 percent. Option 3, the most stringent
 option considered, yields a 100 kilometer hump, also, but now at a significantly lower risk level of 25
 percent.

        Since increasing proportions of community affected (shown on the horizontal axis) correspond to
 increasing pollutant concentrations, the specific LTC and AWQC values can be plotted on the horizontal
 axis according to their corresponding community impact level. This has been done in Figure 10.5 for each
 pollutant's AWQC and for selected species LTC values. Acute exposure AWQC concentrations tend to
 correspond to approximately a 5 percent level  of species impacts, meaning that when concentrations of
 pollutants  reaches AWQC levels,  approximately  5 percent of species are typically exposed to a risk of
 acute lethality (concentrations above LTC). Amphipod and zooplankton tend to be relatively sensitive to the
 pollutants analyzed, as shown by LTC values in the lower half of the community impact range. Amphipods
 are relatively tolerant, though, of zinc, arsenic and BEHP, when compared to other species. For instance,
 the BEHP concentration required to expose amphipods to risk  of acute lethality is so high that  over 90
 percent of species in the community would also find that concentration to exceed their LTC values.

        Commercial  and recreational  fish, represented  by trout  and bluegill exhibit widely  varying
 sensitivities but generally tolerate higher levels of the pollutants analyzed than zooplankton. As mentioned
 earlier in the chapter, though, these risks include direct effects only and  do not account for the  indirect
 dependence of predatory fish, such as  trout,  on the  integrity of lower levels  of the food chain,  such as
 zooplankton.  Trout are exposed to risk of acute lethality for more than 300 river kilometers with respect to
the baseline loadings of three  pollutants: cadmium, copper,  cyanide (approximately 300 kilometers) and
silver. Option 2a/2 reduces the river kilometers of acute lethality to below 300 kilometers for cyanide and
                                              10.28

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silver. Option 3 would reduce those kilometers to below 300 for all of these pollutants that pose high risk to
trout except cadmium.

        Baseline nickel concentrations are expected to exceed LTC values  of 45 percent of the species in
communities in slightly under 200 kilometers of river. Compared to the other pollutants analyzed here, this
is a moderate level of impact. However, the two representatives of recreational and game fish shown on the
graph indicate that trout and bluegill populations would be exposed to acute risk of lethality over a very
small number of kilometers.

        Overall, risks of acute lethality vary widely across pollutants and species of particular interest, but
absolute numbers of kilometers involved are small, on a non-sample weighted basis.
                                               10.29

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                                         Chapter 11
               Assessing Economic Productivity Benefits Stemming from
                            Reduced Pollution in Sewage Sludge

11.1   Introduction
       As discussed in Chapter 7, Overview of Benefits Expected from the MP&M Regulation, EPA
expects that reduced effluent discharges from the MP&M industry will yield economic productivity
benefits. These benefits occur because reduced discharges from the regulated industry reduce production
costs  or increase the value of output in industries whose performance is affected by regulated industry
discharges. For example, reduced MP&M industry discharges to waterways from which water is diverted
for other economic uses — such as intake waters for industrial processes or for irrigation — may permit
the water to be used without any pre-treatment and hence at lower cost to the user.

       For this analysis, EPA estimated productivity benefits for one benefit category: reduced pollutant
contamination  of effluent discharged by MP&M facilities to sewage treatment systems and associated
savings in sewage sludge use or disposal costs. The treatment of wastewaters such as those generated by
MP&M facilities produces a sludge that contains pollutants removed from the wastewaters. As required by
law, sewage treatment systems must use environmentally sound practices in managing and disposing of this
sludge. Because the MP&M rule will require reductions  in pollutant levels in  wastewater, the sewage
treatment systems that receive MP&M discharges are expected to generate sewage sludges with reduced
pollutant concentrations. As a result, the sewage treatment systems should be able to use or dispose of the
sewage sludges with reduced pollutant concentrations at lower cost. In some cases, wastewater treatment
systems may be able to dispose of the cleaner sludge by  using it in agricultural  applications, which will
generate additional agricultural productivity benefits. In this chapter, EPA assesses the potential economic
benefits resulting from cleaner sewage sludges and develops a partial estimate of the benefit value.

       Several benefits are expected to result from reduced contamination of sewage sludge, including:

1.      Sewage treatment facilities (typically, publicly-owned and referred to as publicly-owned treatment
       works  or POTWs) may be able to use or dispose of sewage sludge through less expensive means.
       The Standards for the Use or Disposal of Sewage Sludge (40 CFR Part 503) contain limits on the
       concentrations of pollutants in sewage sludge that is used or disposed. As a result of the proposed
       MP&M (Phase I) regulation, sewage sludge from some POTWs may meet more stringent pollutant
                                              11.1

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        limits, which, in turn, will permit less expensive use or disposal of the sewage sludge1. In the best
        case, sewage sludge will meet land application pollutant concentration limits. This sewage sludge
        may be disposed of via land application, which in some instances, may be substantially less costly
        than other use or disposal practices (e.g., incineration or land-filling).

        EPA expects  that some  sewage  sludge that currently  meets  only land  application ceiling
        concentration limits and pollutant loading  rate limits will meet the more stringent land application
        pollutant concentration limits as a result of the MP&M regulation. Entities that apply these sewage
        sludges face fewer record keeping requirements than users  of sewage sludge that meets only land
        application ceiling concentration and loading rate  limits.  Further, POTWs producing sewage
        sludge that meets the pollutant concentration limits have no application rate limits other than the
        agronomic rate (determined by the nitrogen needs of the crops and the plant available nitrogen at
        the application site).

        By  land  applying sewage sludge, POTWs may avoid costly siting negotiations regarding more
        contentious sewage sludge use or disposal practices, such as incinerating sewage sludge.

        The nitrogen content of the sewage sludge may be used by POTWs to supplement other sources of
        nitrogen. Sewage sludge applied to agricultural land, golf courses, sod farms, forests, or residential
        gardens is a valuable source of fertilizer.

        The organic matter in land-applied sewage sludge can improve crop yields  by increasing the ability
        of soil to retain water.

        Non-point source nitrogen contamination of water may be  reduced if sewage  sludge is  used as a
        substitute for chemical fertilizers on agricultural  land. Compared  to  nitrogen in most  chemical
        fertilizers, nitrogen in sewage  sludge is relatively insoluble  in water. The release of nitrogen from
        sewage sludge  occurs largely through continuous microbial activity,  resulting  in  greater plant
        uptake and less nitrogen runoff than from conventional chemical fertilizers.
1  "Industrial sludge", which results from the operation of treatment systems at MP&M facilities, will increase both
in quantity and in level of contamination as a result of the proposed regulation. The cost of managing  and
disposing of this industrial sludge is included in the estimated costs of regulatory compliance used in the economic
and regulatory impact analyses.
                                                11.2

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7.      Reduced sewage sludge concentrations of pollutants that are not currently subject to sewage sludge
        pollutant  concentration limits will reduce human health and environmental  risks. Human health
        risks from exposure to these unregulated sewage sludge pollutants may occur from inhalation of
        particulates, dermal exposure, ingestion of food grown in sewage sludge-amended soils, ingestion
        of surface water containing sewage sludge runoff, ingestion of fish from surface water containing
        sewage sludge runoff, or ingestion of contaminated ground water.

8.      Land application of sewage sludge satisfies an apparent public preference for this practice of
        sludge disposal, apart from considerations  of costs and risk.

        This chapter monetizes only the first benefit from the above listj— shifts to less expensive sewage
sludge use or disposal practices. In addition, EPA quantified but did not monetize benefits for POTWs that
are expected to face reduced record-keeping requirements from sewage sludge meeting the Part 503  land
application pollutant concentration limits.  The  remaining benefit categories associated with reduced sewage
sludge contamination were not quantified  largely because of data limitations; however, these unqualified
benefits may be of substantial magnitude, perhaps  exceeding the monetized benefits.

        As the basic concept underlying quantification of these two benefit categories, the analysis assumes
that POTWs choose the least expensive  sewage sludge  use or disposal  practice for which  their sewage
sludge meets pollutant limits. Sewage sludge applied to agricultural land or placed on a surface disposal
site is subject to stricter pollutant limits than sewage sludge used or disposed by other practices; however,
these use or disposal practices are also generally less expensive than the alternatives. Therefore, POTWs
with sewage sludge pollutant concentrations that exceed the land application or surface disposal pollutant
limits in the baseline may be able to reduce sewage sludge use or disposal costs when MP&M  facilities
have complied with effluent limitations. EPA estimated the number  of POTWs and associated quantity of
sewage  sludge that will  meet land application pollutant limits, land application ceiling limits, and surface
disposal pollutant limits because of the MP&M effluent limitations. From estimates of the relative costs of
sewage  sludge use or disposal practices, EPA then  estimated the cost-savings that would accrue to POTWs
from the quantities of sewage sludge that qualify for land application or surface disposal practices.

        On the basis of this analysis, EPA found that the least expensive sewage sludge use or disposal
option for most POTWs  is agricultural  application or surface  disposal. As a result of the proposed
regulation, POTWs are expected to achieve substantial cost savings by using or disposing of sewage sludge
through agricultural application or surface disposal. For POTWs with limited access to  land application
sites (e.g., certain POTWs in highly urbanized areas or certain coastal POTWs), the cost savings resulting
                                               11.3

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from sewage sludge with lower pollutant concentrations are expected to be less substantial. However, these
POTWs may achieve some cost savings by selling or giving away in a bag or other container sewage
sludge that meets land application pollutant concentration limits.2 In the baseline, EPA estimates that 5,559
of 6,950 POTWs meet the pollutant limits for surface disposal or land application. Of the 5,559 POTWs,
5,309 meet  the limits on pollutant concentration for land application while 250 meet only the surface
disposal pollutant limits. Under the proposed MP&M regulation, the number of POTWs that are expected
to meet pollutant limits for surface disposal or land application increases to 5,743 (or an increase of 184
POTWs) and the entire amount of this net increase occurs in land application. EPA estimates that the shift
of these 184 POTWs from more expensive disposal options into land application will yield benefits ranging
from $33.4 million to $73.4 million annually.

       The remainder of this chapter first presents an overview of sewage sludge generation, treatment,
and disposal practices, followed by  a presentation of pollutant limits for sewage sludge use or disposal. The
relative costs of various sewage sludge use or disposal options are then  discussed. The methodology for
estimating reduced sewage sludge  use or disposal  costs  is presented  and the chapter concludes  with the
results of the analysis.

11.2   Current Sewage Sludge Generation, Treatment, and Disposal Practices
       This section  briefly describes sewage sludge characteristics and  treatment processes  and the
methods of sludge use or disposal.

       Sewage Sludge Characteristics and Treatment
       Industrial wastewater that is indirectly discharged to surface water via POTWs is typically treated
in combination with domestic wastewater. Sewage sludge is generated as a result of primary, secondary,
and advanced wastewater treatment: the chemical and physical character of the  resulting sewage sludge
depend on the extent and type of wastewater treatment. The  sewage sludge itself may be conditioned,
thickened, stabilized, and dewatered to reduce the volume.

       Sewage sludge contains five classes of components: organic matter, pathogens, nutrients, inorganic
chemicals, and organic chemicals. The mix and levels of these components ultimately determine the public
  This practice was formerly referred to as "distribution and marketing". The remainder of this document refers to
the practice of selling or giving away sewage sludge in a bag or other container simply as "selling bagged sewage
sludge".
                                               11.4

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health  and environmental  impact of sewage sludge use  or disposal  and may also dictate  the  most
appropriate use or disposal practice (EPA,  1993). The primary constituent of sewage sludge is organic
matter, which is derived from human waste, kitchen waste, and storm water runoff. The concentration of
inorganic pollutants, including metals, in sewage sludge is mainly a function  of the volume and type of
industrial wastes discharged to the POTW and the extent and character of stormwater runoff.  Industrial
processes that discharge to municipal sewers are also  a major source of organic chemicals in sewage
sludge.

       Wastewater  generation from MP&M  facilities  usually results from  lubricants  used in metal
working or from surface treatment operations (e.g., cleaning, chemical etching, or surface finishing). The
characteristics of process wastewaters from MP&M operations vary depending on the unit operation from
which the waters are derived.  Oil-bearing wastewater is typically used as metal shaping coolants and
lubricants, surface preparation solutions for removing oil and dirt from components and associated rinses.
Wastewater that contains hexavalent chromium typically derives from concentrated surface preparation or
metal deposition solutions, sealants,  and associated rinses. Process wastewaters that contain  cyanide are
typically generated by surface preparation or metal deposition solutions  and their associated rinses. Some
process wastewaters contain chelated metals and are typically concentrated surface preparation or metal
deposition solutions and their associated rinses. Virtually all MP&M process  wastewaters contain metal
pollutants.

        Sewage Sludge Use and Disposal Practices
        After sewage sludge has been treated,  it  is either beneficially  used (as described below) or
disposed. The use or disposal practice chosen depends on several factors including: the cost of preparing
the sewage sludge for the chosen use or disposal practice;  the pollutant concentrations; availability of
markets for sewage  sludge; costs of transporting sewage sludge to use or disposal sites; availability of
suitable sites for land application,  landfilling,  or surface disposal; state environmental regulations; and
public acceptance  (EPA,  1993). Many  POTWs use  more than one use or disposal practice  to maintain
operating flexibility and avoid capacity limitations of a single practice.

        The four major sewage sludge use or disposal practices, and their definitions, are:

1.      Land Application: the spraying or spreading of sewage sludge onto the land surface, the injection
        of sewage sludge below the land surface, or the incorporation of sewage sludge into the soil so that
        the sewage sludge can either condition the soil or fertilize crops or vegetation grown in the soil.
                                                11.5

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        Sewage sludge is applied to  agricultural  lands  (pasture,  range land,  crops);  forest  lands
        (silviculture); drastically disturbed lands (land reclamation sites); or may be sold or given away in
        a bag or other container for application to the land (formerly known as distribution and marketing).
        In this report, the term "beneficial use" is synonymous with land application.

2.      Surface Disposal: placing sewage sludge in an area of land on which only sewage sludge is placed
        for final disposal. Surface disposal includes surface impoundments (also called lagoons) used for
        final disposal,  sewage sludge monofills (i.e., sludge-only landfills), and land on which sewage
        sludge is spread solely for final disposal (referred to as a "dedicated site")3. None of the methods
        of surface disposal involves beneficial use of the sewage sludge.

3.      Incineration: the combustion of  organic  and  inorganic  matter in sewage sludge  by high
        temperatures in an enclosed device (EPA, 1993).

4.      Co-disposal: the disposal of sewage sludge in a municipal solid waste landfill (MSWLF) or used
        as cover material at a MSWLF.

        Current Use of Alternative Sewage Sludge Use and Disposal Practices
        In the 1988 National Sewage Sludge Survey (NSSS), EPA examined the distribution of sewage
sludge use or disposal practices for POTWs with at least secondary treatment. The NSSS  included a
category for ocean disposal of sewage sludge. Because ocean dumping was banned by the Ocean Dumping
Ban Act of 1988, this analysis redistributes the quantity of sewage sludge estimated to be disposed in the
ocean among the remaining sewage sludge use or disposal practices based on the NSSS sewage sludge use
or disposal estimates. Excluding ocean disposal of sewage sludge,  EPA now  estimates  that,  nationally,
about thirty-six percent of sewage sludge was co-disposed with municipal solid waste4, thirty-six percent
was land applied, seventeen percent was incinerated, and eleven percent of sewage sludge was surface
disposed (see Table 11.1).
  The Part 503 regulations do not distinguish between types of surface disposal sites.
4 The NSSS used the term "unregulated" to refer to both sewage sludge co-disposed with municipal solid waste and
sewage sludge co-incinerated with municipal solid waste. However, less than one percent of the POTWs reporting
"unregulated" disposal of sewage sludge in the NSSS co-incinerated the sludge (personal communication, Charles
White, EPA, September, 1994). Therefore, in this report, EPA refers to "unregulated" sludge as sludge placed in a
MSWLF.
                                               11.6

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Table 11,1: Estimated Number of POTWs witli atl^ast Secondary Treatment and
Sewage Sludge Mass Use or Disposed, by Use or Disposal Practice (1988)
Use/Disposal Sub-Class ;
Incineration i
Land Application: Agricultural
Land Application: compost
Land Application: forests
Land Application: public contact sites
Land Application: reclaimed
Land Application: sale
Land Application: undefined
Total Land Application i
Co-Disposal: landfill
Surface Disposal: dedicated site
Surface Disposal: monofill
Surface Disposal: other
Total Surface Disposal
Unknown: Other
Unknown: Transfer
All
Number of
POTWs
38$







4,703
3,021



1,364
3,959
25
13,458
Percent of i
POtWs
2,9%







349%
22.4%



10.1% i
29.4%
0,2%
100,0%
Dry Metric
Tons
922*000
1,249,000
160,000
34,000
177,000
70,000
76,000
138,000
1^04T00&
1,940,080
276,000
168,000
147,000
$91,000
0
0
$,3$7,00&
Percent of Buy
Metric Tons
17,2%
23.3%
3.0%
0.6%
3.3%
1.3%
1.4%
2.6%
35,5%
36.2%
5.2%
3.1%
2.7%
11,0%
0.0%
0,0%
100,0%
Source: Tables 1-1 and 1-2. Federal Register, Vol. 58, No. 32, Friday, February 19, 1993, page 9256, 9257.
Adjusted for Ocean Dumping Ban Act of 1988.
11.3   Pollutant Limits for Use and Disposal Options
       Section 405 (d) of the Clean Water Act, as amended, requires EPA to promulgate regulations that
specify acceptable management practices and numerical limits for certain pollutants in sewage sludge. The
regulations protect public health and the environment from reasonably anticipated  adverse effects of
pollutants in sewage sludge that is used or disposed.  In February of 1993, the  Agency published
"Standards for the Use or Disposal of Sewage  Sludge" (40 CFR Part 503). The Part 503 regulations
establish requirements for the final use and disposal of sewage sludge in three circumstances. First, the
regulations establish requirements for sewage sludge placed on a municipal solid waste landfill (MSWLF)
unit. Second, the regulations establish requirements for sewage sludge that is applied to the land for a
beneficial purpose (including sewage sludge sold in a bag).  Third, the regulations establish standards for
sludge that is disposed of on land by placing it on surface disposal sites. Fourth, the regulations establish
requirements for sewage sludge that is incinerated.

       The standards for each end use and disposal practice except placement in a MSWLF unit include
numerical limits on the pollutant concentrations in sewage sludge.  The Solid Waste  Disposal Facility
Criteria (40 CFR Part 258, see Federal Register 50978, October 9,  1991) address sewage sludge that is
co-disposed with household wastes in MSWLFs. EPA  did not  establish  pollutant-specific, numerical
criteria for toxic pollutants of concern in the sewage sludge  for this sewage sludge disposal practice. The
                                               11.7

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Agency concluded that developing such values was not technically feasible and that the design standards
applicable to MSWLFs were adequate to. protect human health and the environment. Part 258 specifies that
treatment works using a MSWLF to dispose of their sewage sludge must ensure that their sewage is non-
hazardous and passes the Paint Filter Liquid Test.

        The  pollutant  limits for sewage sludge  land application, surface  disposal, and incineration
constrain a POTW's choice of sewage sludge use or disposal practice5. The pollutants for which numerical
limits were promulgated for the three sewage sludge use or disposal practices are presented in Table 11.2.
The land application pollutant limits limit the concentrations of ten metals in sewage sludge; the surface
disposal and incineration criteria each  cover a subset of the metals regulated for  land application. The
MP&M effluent limitations cover nine of the ten metals regulated under  the Part 503 sewage sludge
regulation (mercury is not covered by the MP&M regulation).6 Therefore, the effluent guideline has the
potential to increase sewage sludge use or disposal options as sewage sludge pollutant levels decrease.

        The specific limits for each of the three regulated use or disposal practices are described below.

        Land Application
        Part 503 contains  two types of pollutant limitations for land application of sludge: (1) Pollutant
Concentration Limits,  which limit  the concentrations of pollutants in the  sewage  sludge itself and (2)
Pollutant Loading Rate Limits, which limit the amount of pollutants applied to the land.

        Limits on pollutant concentrations are set at two levels: ceiling concentration limits, which govern
whether a sewage sludge can be applied to land at all, and more  stringent pollutant concentration limits
which define, in part, sewage sludge that is exempt from meeting  pollutant loading rate limits and certain
record-keeping requirements.
5 For each  regulated sewage sludge  use  or  disposal  practice, the Part  503 Standard includes the following
elements:  General requirements, Pollutant limits, Management practices, Operational standards, Frequency of
monitoring, Recordkeeping, and Reporting. This discussion refers to the "Pollutant limits" section of a Part 503
Standard.
6 Because mercury is not regulated by the MP&M effluent limitations, data on mercury in the effluent of MP&M
facilities were not available.  It is possible that mercury  contamination restricts POTWs" sewage sludge  use or
disposal options in some cases. However, in the absence of relevant data, EPA assumed that if all other regulated
metal concentrations in sludge meet the pollutant limits for a use or disposal practice, mercury concentrations in
the sewage sludge also meet the pollutant limits for that use or disposal practice.
                                                11.8

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a liner and leachate collection system. The limits for surface disposal sites without liners and leachate
collection systems are shown in Table 11.3 for active sewage sludge whose boundary is greater than 150
meters from the surface disposal site property line, the typical case. For seven metals, the surface disposal
pollutant limits are less stringent than for land application in that these metals are not regulated when
sewage sludge is  surface disposed. The surface disposal pollutant limits for nickel are equivalent to those
for land application, while arsenic surface disposal pollutant limits fall between the land application ceiling
limits  and  land  application pollutant concentration limits.  The  surface  disposal pollutant limits for
chromium are stricter than the chromium land application concentration limits.
Table 11.3: Sewage Sludge Use of Disposal Pollutant Limits
Pollutant
Arsenic
Cadmium
Chromium
Copper
Lead
Mercury
Molybdenum
Nickel
Selenium
Zinc
Land Application Limits
CeilingLunits
{mg/kg dry weight)
75
85
3,000
4,300
840
57
75
420
100
7,500
Concentration Limits
{mg/kg dry weight)
41
39
1,200
1,500
300
17
35T
420
36
2,800
Surface Disposal
Limits
(mg/kg dry weight)*
73

600




420


f Proposed sludge standard of 35 mg/kg is used for molybdenum because the final standard of 18
mg/kg has been remanded.
J Pollutant limits for active sewage sludge unit whose boundary is greater than 150 meters from the
surface disposal site property line.
Source: Standards for the Use or Disposal of Sewage Sludge; Final Rules. 40 CFRPart 257 et al.
Federal Register February 19, 1993.
        Incineration
        The Part 503 Regulation limits the concentrations of lead, arsenic, cadmium, chromium, and nickel
in sewage sludge that is fired in a sewage sludge incinerator and the concentration of total hydrocarbons
(THC) in the sewage sludge incinerator's stack emissions. The pollutant limits are calculated based on the
actual performance of individual sewage sludge incinerators, including the dispersion factor (the ratio of the
increase in ground-level air concentration at the property line to the mass emission rate for the pollutant
from the stack) and the control efficiency of the incinerator (the ability to retain the pollutant in the ash and
the pollution-control system). In this analysis, no benefits are expected to accrue to POTWs as a result of
shifting to sewage sludge incineration because of the higher cost of this practice (as discussed below).
Therefore, the  equations used to  determine whether  sewage sludge meets  the  pollutant limits for
                                                11.10

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incineration are not presented here. The analysis assumes that, at least in some cases, sewage sludge that
does not meet land application or surface disposal pollutant limits does meet incineration pollutant limits.

11.4   Costs of Sewage Sludge Disposal and Use Practices
       The monetary benefits stemming from the ability to switch to land application or surface disposal
of sewage  sludge depend on the costs of land application and surface disposal in comparison to  other
sewage sludge  use or disposal practices.  Appendix  A provides details of EPA's  estimation of cost
differences between sewage sludge use  or disposal practices. This  section  presents an overview of the
estimation of the cost differences as well as the estimates themselves.

       To understand whether and by what amount land application and surface disposal would be less
costly than other use or disposal practices, EPA consulted a wide range of information sources on the cost
of sewage sludge use or disposal practices and the factors  that  influence POTWs'  selection among
alternatives. These sources included:

       Two EPA publications — Handbook for Estimating Sludge Management Costs  (EPA, 1985) and
       Regulatory Impact Analysis of the Proposed Regulations for Sewage Sludge Use and Disposal
       (EPA, 1989)

       Interviews with POTW operators

       Interviews with landfill and incinerator operators

       Interviews with state government solid waste and water pollution control experts

       A review of trade and technical literature on sewage sludge use or disposal practices and costs

       Research organizations with expertise in waste management

       From these sources, EPA developed estimates of the expected cost  savings for  switching to less
expensive use or disposal practices based  on reduced pollutant concentration in sewage sludge. The
estimated cost savings reflect a blend of the information from these sources. No one source provided a
comprehensive set of cost estimates suitable  for use in this analysis.  Overall, EPA found that the costs of
alternative sewage sludge use or disposal practices are likely to vary substantially among POTWs  based on
several factors. The availability of local agricultural land or land suitable for surface disposal of sewage
sludge is the most important of these factors.
                                               11.11

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        EPA found that the costs  of alternative use or disposal practices generally follow a consistent
ordinal  relationship. That is,  certain use or disposal  practices (e.g.,  incinerating sewage sludge)  are
generally more expensive than other practices  (e.g., land application). The general  ranking  of use or
disposal costs from least to most expensive is as follows:

•       Agricultural Land Application, Surface  Impoundments, Surface Disposal to a Dedicated  Site (all
        approximately the same)

•       Monofills

•       Sale or give away in a bag or other container for application to land

•       Co-disposal at a municipal  solid waste landfill

•       Incineration

        Moreover, EPA judges that the differences in costs between certain combinations of these use or
disposal practices (e.g., the cost savings achieved by switching from incineration to land application) are
relatively stable despite the wide range of use or disposal costs for given options among individual POTWs.

        Table 11.4 presents cost savings for land application and surface disposal of sewage sludge in
comparison to other sewage sludge use or disposal practices. These cost savings are estimated assuming
that sewage sludge use or disposal sites are equi-distant from the POTW generating the sewage sludge.
EPA believes this is a reasonable assumption for most POTWs. However,  for some POTWs (e.g., certain
POTWs in highly urbanized areas or certain coastal POTWs), agricultural land and sites suitable for
surface  disposal of sewage sludge may be located farther from the POTW than are municipal solid waste
landfills and incinerators. Due  to sewage sludge transportation costs, such POTWs may not achieve cost
savings  from  agricultural application or surface disposal of sewage sludge. However, some of these
POTWs located farther from  agricultural  and  surface  disposal sites may reduce their sewage sludge
disposal costs by selling bagged sewage sludge.

        To estimate the  percentage of sewage  sludge  that is  prohibitively expensive for agricultural
application or surface disposal  because of transportation costs, EPA relied on the National Sewage Sludge
Survey (NSSS; see Table 11.1). EPA assumed that the percentage of sewage sludge that was sold  in a bag
for land application provided a rough estimate  of the percentage of sewage sludge for which access to
agricultural land was prohibitively  expensive. According to the NSSS, 13.4 percent of sewage sludge that
                                              11.12

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was land applied was either 'composted' or 'sold'. EPA interpreted these land application categories as
representative of sewage sludge that was sold in a bag for land application. Therefore, EPA assumed that
13.4 percent of sewage sludge that qualifies for land application due to the MP&M regulation will be sold
in a bag for land application rather than applied to agricultural land7. Similarly, EPA assumed that 13.4
percent of sewage sludge that qualifies for surface disposal is not, in fact, surface disposed due to high
transportation costs.
Table Jt4s Cost Savings forSWfts in Sewaae Stodse Use orUisnosal ^Practices {Sl^/PM!)

Switch From;
Incineration
Surface
Impoundment
Dedicated Site
Monofill
Co-disposal
Switch To:
Agricultural
Application*
$121-258
$0
$0
$0-75
$72-155
Sold in 3 Bag
for IdiMj
Application
$0-7
$0
$0
$0
$0-41
Monofill
$121-218
N.A.
N.A.
N.A.
$3-151
Surface
Impoundments
$121-258
N.A.
N.A.
N.A.
$72-155
Dedicated Site
$121-256
N.A.
N.A.
N.A.
$21-155
* EPA assumes that the costs of land application to forests, public contact sites, and reclaimed land are similar to
the costs of agricultural application.
 11.5   Estimating the Reduction in Sewage Sludge Disposal Costs
        EPA estimated the reduction in sewage sludge use or disposal costs resulting from MP&M effluent
 limitations using the following six steps:

 1.      For each POTW receiving wastewater from a sample MP&M facility, estimate total industrial
        baseline and post-compliance loadings of Part 503 regulated metals.

 2.      For each POTW receiving wastewater from a sample MP&M facility, calculate the baseline and
        post-compliance  sewage  sludge  pollutant  concentrations based  on all  industrial wastewater
        discharged to the POTW.

 3.      Compare the  sewage sludge pollutant  concentrations  calculated for each POTW with  sewage
        sludge pollutant limits for surface disposal and land application.
 7 Not all sewage sludge that is composted is sold in a bag for land application.  Composted sewage sludge may be
 use or disposed by any sewage sludge use or disposal practice. Because EPA could not determine the use or
 disposal practice of composted sludge, the  Agency conservatively assumed that this sludge was sold in a bag for
 land application.  This assumption may result in an underestimation of the benefits of changes in sewage sludge
 use or disposal practices.
                                                11.13

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 4.      For POTWs that shift into meeting land application or surface disposal pollutant limits under the
         proposed option, estimate baseline sewage sludge use or disposal practices.

 5.      Calculate the economic benefit for POTWs receiving wastewater from a sample MP&M facility by
         multiplying the cost differential between  baseline and post-compliance sludge use  or disposal
         practices by the quantity of sewage sludge that shifts  into meeting land application or surface
         disposal limits.

 6.      Estimate national benefits using sample weighting factors.

 These steps are discussed below.

         Step 1: Estimate total industrial baseline  and post-compliance loadings of Part 503 regulated
         metals to POTWs
         As the first step in estimating sewage sludge pollutant concentrations, EPA estimated the quantities
 of metals  regulated under Part 503 that are discharged to POTWs receiving  wastewater from sample
 MP&M facilities. EPA developed estimates of pollutant loadings from Phase I MP&M facilities based on
 data provided  in the §308  Survey and wastewater sampling  conducted by  the Agency.  Although these
 MP&M wastewater  discharges contribute a substantial percentage of the Part 503 regulated metals
 received by POTWs, wastewater from facilities operating in other industries may also contain  metals.8 In
 particular, industries that will be regulated under the second phase of the MP&M regulation are  expected to
 discharge metals in their wastewater.9

        EPA estimated total baseline metal loadings from all industrial  sources using data from the 1991
 Toxic Chemical Release Inventory (TPJ), as follows:
                                         PLk,j  =
                                               _   MPk|i
        where:
                            %MPk

baseline loadings of pollutant k to POTW i (^g/year);
o
  Residential waste water discharges may also contain metals. EPA did not have data indicating metal loadings in
residential waste water. The effect on the analysis of omitting residential metal loadings is indeterminate.
Q
  The second phase of the MP&M effluent limitations and guidelines will cover the following industrial sectors:
instruments, precious & nonprecious metals, ships, household equipment, railroads,  motor  vehicles, buses &
trucks, and office machines.
                                               11.14

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                  =   loadings of pollutant k from all MP&M Phase I sample facilities discharging to
                      POTW i (ng/year); and
       %MPk     =   the percentage of total reported TRI POTW transfers of pollutant k from MP&M
                      Phase I facilities.
       TRI contains information on releases of listed toxic chemicals from facilities operating in the SIC
codes for manufacturing industries (i.e.,  SIC codes 20  through 39), subject to certain  size exemptions. In
particular,  TRI  includes reported quantities of the Part 503  metals  transferred  to POTWs 10 .  EPA
classified the TRI facilities reporting transfers to POTWs into industries based on each  facility's first-listed
SIC code. Facilities with their first SIC code corresponding to the Metal Products and Machinery or Metal
Finishing effluent guideline categories constitute facilities with processes subject to the Phase I and Phase
II MP&M effluent limitations. EPA divided MP&M loadings between Phase I and Phase II sectors based
on preliminary data analysis  of the entire MP&M  industry conducted in  1987 (EPA,  1989b).  The
preliminary data indicated that industry sectors included in Phase I of the MP&M regulations discharge 52
percent of total metals and other nonconventional pollutants  discharged by the entire MP&M industry.
Table 11.5  presents the estimated percentage of total POTW transfers of Part 503 metals from MP&M
Phase I sectors.

       Post-compliance  pollutant loadings to POTWs are calculated by subtracting the reduction in
MP&M loadings due to regulation from the estimated total baseline loadings.

       Step 2: Calculate Baseline and Post-Compliance Sewage Sludge Quality
       EPA calculated baseline and post-compliance sewage sludge pollutant concentrations in two steps.
First,  for each  metal with  limits under  the  Part 503  regulation,  EPA  calculated POTW influent
concentrations based on the pollutant loading and POTW flow rates as follows:

                                        ir  -      Lk|i
                                        IOk,i ~
                                              FLjXODise
       where:
                  =    POTW influent concentration of pollutant k (ug/liter);
        Lk,j        =    Pollutant k loading to POTW i ((xg/year) ;
  The TRI data on chemical transfers to POTWs could not be used directly because TRI captures only a portion of
releases due to employee, facility-related, de minimis, and threshold exemptions.
                                              11.15

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ODj
                 =   POTW i flow (liters/day); and
                 =   POTW i operation days (days/year).
Table 11.5: Loadings to P&TWs from MP&M Phase I Sectors as a
Percentage of Total Industrial Loadings (by I*art5&3 Metal)
Chemical
Arsenic
Cadmium
Chromium
Copper
Lead
Mercury
Molybdenum*
Nickel
Selenium*
Zinc
Percentage of Loadings fay Weight
1%
52%
25%
25%
21%
34%
0%
34%
0%
44%
* TRI reports zero transfers of molybdenum and selenium to POTWs. Therefore, the
analysis assumes zero transfers of these metals to POTWs from industrial sources
other than MP&M Phase I facilities.
Source: [Versar, 1994b and Memo to the Record regarding "Selection of Machinery
Manufacturing and Rebuilding Industry Sectors for Regulation Development."
       Second, EPA calculated sewage sludge pollutant concentrations for each pollutant:
                               PCk,i = ICk.i x TREk x PFk x SG
       where:
       PCy     =   Concentration of pollutant k in POTW i sewage sludge (mg/kg or ppm);
       ICk,i      =   POTW i influent concentration of pollutant k (jug/liter or ppb);
       TREk     =   Treatment removal efficiency for pollutant k (unitless);
       PFk      —   Sewage sludge partition factor for pollutant k (unitless);
       SG       =   Sewage sludge generation factor ((L-mg)/([xg-kg) or ppm/ppb).
       The sewage sludge generation factor is 5.96, assuming that 1,400 pounds of sewage sludge (dry
weight) are generated for each million gallons (equal to  8,330,000 Ibs) of wastewater processed. In other
words, for every ppb of pollutant removed and partitioned to sewage  sludge, concentration in sewage
sludge is 5.96 ppm dry weight.
                                             11.16

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       Step 3: Compare the sewage sludge pollutant concentrations calculated for each POTW with
       sewage sludge pollutant limits for surface disposal and land application
       EPA  next compared  sewage sludge baseline and post-compliance pollutant concentrations to
pollutant limits for land application and surface disposal using the following formula:
PCk
                                                 CRk,j
       where:
       SEj        =   Sewage sludge exceeds concentration limits for disposal or use practice, j;
                  =   Sewage sludge pollutant, k, concentration; and
                  =   Sewage sludge pollutant, k, criterion for disposal or use practice, j.
       If, in the baseline, any sewage sludge pollutant concentration at  a POTW exceeds the pollutant
limit for a sewage sludge use or disposal practice (i.e., PC/CR >1), then EPA assumed that the POTW is
restricted  from that sewage sludge use or disposal practice. The POTWs with restricted sewage sludge use
or disposal options in the baseline are further analyzed in the post-compliance scenario. If, as a result  of
compliance with the MP&M regulation, a POTW meets all pollutant limits for a sewage sludge use  or
disposal practice (i.e., PC/CR < 1), that POTW is assumed to benefit from the increase in sewage sludge
use or disposal options.

       Step 4: For POTWs that shift into meeting land application or surface disposal pollutant limits
        under the proposed option, estimate baseline sewage sludge use or disposal practices
        The amount of the  benefit stemming from changes in sewage sludge use or disposal practices
depends on the baseline sewage sludge use or disposal practices employed.  As previously stated, this
analysis assumes that POTWs choose the least expensive sewage sludge use or disposal practice for which
their sewage sludge meets pollutant limits. POTWs with sewage sludge that qualifies for land application in
the baseline are assumed to dispose  of their  sewage sludge by land application;  likewise, POTWs with
sewage sludge that meets surface disposal pollutant limits (but not land  application  pollutant limits) are
assumed to dispose of their sewage sludge on  surface disposal  sites. EPA  assumed that the mix of surface
disposal  practices employed by POTWs in the baseline (i.e.,  surface impoundments, monofills, and
dedicated sites) matches the mix of national aggregate surface disposal practices as calculated from EPA's
 1988 National Sewage Sludge Survey (see Table 11.1). According to the NSSS, 47 percent of total sewage
sludge tonnage that is surface disposed is applied to a dedicated site, 28 percent is sent to monofills, and 25
percent is disposed in a surface impoundment. While this mix of surface disposal practices may not match
                                               11.17

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the actual sewage sludge disposal surface practices of any single POTW, the assumed surface disposal
practices are consistent, in aggregate, with actual POTW sewage sludge surface disposal practices.

        POTWs generating "sewage sludge that exceeds land application and surface disposal pollutant
limits in the baseline are assumed to either incinerate sewage sludge or place sewage sludge in a MSWLF.
As previously discussed, pollutant limits for sewage sludge incineration are site-specific and EPA has not
issued pollutant-specific limits for co-disposal of sewage sludge. Because EPA could not use pollutant-
specific limits to determine whether a POTW incinerated or co-disposed of sewage sludge,  the Agency
again relied on the NSSS. The NSSS indicates that, of sewage sludge that is not land applied or deposited
in surface disposal sites, 32 percent is incinerated and 68 percent is placed in MWSLFs. Therefore, each
POTW exceeding surface disposal and land application limits in the baseline is assumed to incinerate 32
percent of its  sewage sludge  and co-dispose of the remainder. Again, this mix of sewage  sludge use or
disposal practices may not match the actual sewage  sludge disposal practices of any single POTW.
However, in aggregate, the assumed distribution corresponds to actual practices.

        Using the sewage sludge disposal cost differentials from Table 11.4, EPA estimated savings for
shifts into land application and surface disposal from the assumed mix of baseline use or disposal practices
(see Table 11.6). As previously discussed, EPA assumed that 13.4 percent of sewage sludge could not be
used or disposed less expensively through agricultural application or surface disposal of sewage sludge due
to transportation costs. For this percentage of affected sewage sludge, benefits are calculated only for shifts
into land application of bagged sewage sludge.

        Step 5: Calculate the economic benefit for POTWs receiving wastewater from a sample MP&M
       facility
        The cost savings for shifts from composite baseline sewage sludge use or disposal practices to land
application or  surface are shown in Table 11.6. Using these cost differentials, reductions in sewage sludge
use or disposal costs are calculated for each POTW receiving wastewater from a sample MP&M facility
as:
       where:
       SCR;
                                                 2200
Estimated sewage sludge use  or  disposal cost reductions resulting from  the
proposed regulation for POTW i ($1989);
POTW i wastewater flow (million gallons/year);
                        11.18

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                       Sewage  sludge to wastewater ratio, assumed to  be 1,400 Ibs. (dry weight) per
                       million gallons of water (lbs./million gallons) and division by  2,200 converts
                       pounds to metric tons;
                       Estimated cost differential between least costly composite baseline use or disposal
                       method for which POTW i qualifies and least costly use or disposal method for
                       which POTW i qualifies post-compliance ($1989/dry metric ton).
Table iL& Cost*
	 ,.,„..,., , . • Conn
Asumed Baseline
PQTWM&Of
Sewage Sludge
tfseor
Disposal Practices
Meet surface disposal pollutant
limits,' do not meet land
application ceiling pollutant
limits
Assumed disposal mix:
47% dedicated site,
28% monofills,
25% surface impoundment
Do not meet land application
pollutant limits or surface
disposal pollutant limits
Assumed disposal mix:
32% incineration,
68% co-disposal
Savings from Shifts in Sludge Use or Disposal Practices front
jostte Baseline Disposal Practices (S1989/BMT)
PoM-ComoiiancePOTW Sewage Sludge Use or Disposal Practice
Agricultural
Application
(8&6 percent of sewage
stodge that meets land
explication pofltitant
limits)
$0-21
$87-$ 187
Bagged Sewage Stodge
(1 $A percent of 'sewage
sludge that meets land
application pollutant
limits}
$0
$0-$30
Surface Disposal
(Meet surface pollutant '•
If mm; dowtmwtlafld
application pollutant
Ifmm) i
N.A.
$30-$187
T Surface Disposal includes monofills, surface impoundments, and dedicated sites.
Source: U.S. Environmental Protection Agency
        As previously discussed, this analysis includes an adjustment to the estimate of national sewage
sludge use or disposal cost benefits for POTWs located at cost-prohibitive distances from agricultural and
surface disposal sites to ensure that these benefits are not overstated. From the NSSS data, EPA assumed
that 13.4 percent of sewage sludge generated in the United States is generated at POTWs that are located
too far from  agricultural land and surface  disposal  sites for these  use or disposal practices to be
economical. This percentage of sewage sludge is not associated with benefits from shifts into surface
disposal or agricultural application.
                                              11.19

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        Step 6: Estimate national benefits using sample weighting factors
        The sewage sludge use or disposal cost reductions are scaled to the national level as follows:
                                  NSCR = E(FWi x SCRi)
       where:
       NSCR

       n

       FW,
       SCR
                                             1=1
-   National estimated sewage sludge use or disposal cost reductions resulting from
    the proposed regulation ($1989);
=   Number of POTWs  estimated to shift  into meeting  surface disposal or land
    application pollutant limits as a result of MP&M effluent limitations;
=   Facility sample weights for facility or facilities discharging to POTWj; and
=   Estimated  sewage sludge use or disposal  cost  reductions resulting  from  the
    proposed regulation for POTWi ($ 1989).
11.6    Estimated Savings in Sewage Sludge Disposal Costs
        On the basis of §308 Survey data, EPA estimates that MP&M facilities discharge wastewater to
6,950 POTWs. In the baseline (i.e., before regulation), EPA estimates that 5,559 of these POTWs generate
sewage sludge that meets pollutant limits for surface disposal or land application. Of the 5,559 POTWs,
5,034 POTWs meet the land application pollutant concentration limits, 275 POTWs meet only the land
application pollutant ceiling limits, and 250 POTWs meet only the surface disposal pollutant limits.

        Under the proposed regulation, the total number of POTWs that are expected to meet pollutant
limits for surface disposal or land application increases to 5,743, or an increase of  184  POTWs. All of
these 184 POTWs meet pollutant limits for land application of sewage sludge. It is these 184 POTWs for
which EPA expects substantial cost-savings as a result of  regulation and for  which  EPA estimated a
monetary value. EPA also estimated that 20 POTWs that previously met only the land application pollutant
ceiling  limits  would, as a result of  regulation, meet the  more  stringent land application  pollutant
concentration limits" . These POTWs are expected to benefit through reduced record-keeping requirements
   EPA also estimated that sewage sludge generated at four POTWs would no  longer meet the pollutant
concentration limits for land application but would only satisfy land application ceiling limits.  This increase in
pollutant concentrations in sewage sludge is due to higher peak pollutant concentrations associated with reduced
number of days of discharge from MP&M facilities. These POTWs are expected to face increased record keeping
requirements.  EPA did not estimate the increased costs for these POTWs but expects the costs to be insignificant
compared to the monetized benefits.
                                              11.20

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and exemption from certain sewage sludge management practices.  However, EPA has  not estimated a
monetary value for these more modest benefits.

       For the 184 POTWs that are estimated to switch into land application, EPA used the estimated
sewage sludge use or disposal cost differentials presented in Table 11.6 to calculate a cost-savings value.
The benefits, which were calculated from the cost ranges reported in Table 11.6,  are estimated to range
from $33.4 million to $73.4 million annually  ($1989;  see Table 11.7). These estimated benefit values
reflect only part of the economic benefits expected to result from  reduced pollutant concentrations in
MP&M discharges to POTWs and the lower pollutant concentrations of the resulting sewage sludges. The
remaining benefit categories enumerated in the  beginning of this  chapter are also  expected to  yield
substantial benefits, perhaps exceeding these dollar estimates.
Table 11*?: Summary of Estimated National Cost Savings from
Shifts In Sewage Sludge Use or Disposal Practices
Shift
Category
Upgrade from minimum
land application ceiling
limits to land application
pollutant concentration
limits as a result of
proposed regulation
Meet land application
pollutant ceiling limits as
a result of proposed
regulation
Meet surface disposal
limits as a result of
proposed regulation
Total net POTWs in which
benefits are expected
Number of
POTWs
20
(4 POTWs 'downgrade' from
meeting land application
pollutant concentration limits
to meeting only land
application pollutant ceiling
limits)
184
(102 upgrade to ceiling limits;
82 upgrade to pollutant
concentration limits)
None upgrade to this category
200
Associated Sewage Sludge
Quantity (DMT/Year)
63,123
(1,312 DMT/yr 'downgrade'
from meeting land application
pollutant concentration limits
to meeting only land
application pollutant ceiling
limits)
439,326
0
501,137
Estimated Benefits :
($1589)
not monetized
$33.4 million
$73.4 million
$0
$33.4 million
$73.4 million
Source: U.S. Environmental Protection Agency
 11.7   Limitations of the Benefit Estimation Methodology
        The  estimates of the cost-saving differentials  for  the various sewage sludge  use or disposal
 practices  were developed based on a blend of information; EPA knows of no definitive source of this
 information. The analysis may over- or under-estimate the cost differentials. In addition, sewage sludge use
 or disposal costs vary by POTW; the POTWs affected by the MP&M regulation may face costs that differ
 from those estimated. The  range of cost-saving values  used in the  analysis attempts to capture the
 uncertainly regarding use or disposal costs.
                                              11.21

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       The estimate of metal loadings to POTWs in the baseline analysis relies on aggregate data from the
1991 Toxic Chemical Release Inventory (TRI). The baseline metal loadings from MP&M facilities of
interest may differ from this  aggregate estimate. The effect of the use of the aggregate  TRI data is
indeterminate.
                                             11.22

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                                         Chapter 12
       Comparison of Estimated Costs and Benefits for the Proposed Regulation

       The preceding Chapters 6 through  11  provided quantitative and qualitative assessments of .the
expected benefits to society from reduced MP&M effluent discharges under the proposed regulation while
Chapter 5 assessed the regulation's expected social costs. This chapter sums the estimated values for the
benefit categories that EPA was able to monetize and compares the aggregate benefits estimate with the
estimate of social costs.

12.1    Total Monetized Benefits
        EPA was  able to develop a partial monetary estimate of expected benefits for the proposed
regulation in three categories: human health, ecological, and economic productivity benefits. Summing the
monetary values reported in the preceding chapters across  these categories results in total monetized
benefits of $58.6 to $172.1  million ($1989) annually for the proposed Option 2a/2 (see Table 12.1). As
noted in Chapter 7, this benefit estimate is necessarily incomplete because it omits numerous mechanisms
by which society is likely to benefit from reduced effluent discharges from the MP&M industry. Examples
of benefit categories not reflected in this estimate include: non-cancer related health benefits; enhanced
diversionary uses; improved aesthetic quality of waters near discharge outfalls; enhanced water-dependent
recreation  other than fishing; benefits  to wildlife and  to threatened or endangered species;  option and
existence values; cultural values; tourism benefits; biodiversity benefits; and reduced sludge management
costs due to improved sludge quality.

 12.2   Total Monetized Social Costs
        As discussed in  Chapter 5, EPA  estimated three categories of  social  cost  for the proposed
 regulation: the cost of society's economic resources for achieving compliance with the proposed regulation;
the cost to governments of administering the proposed regulation; and the costs of unemployment resulting
 from the regulation. Summing over these social cost accounts  results in a total monetized estimate of social
 cost ranging from $164.2 to $170.8 million annually ($1989).  These social cost estimates do not include
 losses in consumers' and producers' surpluses resulting from the change in  quantity of goods and services
 sold in affected  product markets.  However, under  the zero-cost-pass-through framework in which
 compliance costs have been tallied, MP&M industry product prices are assumed not to increase as a result
 of the proposed regulation.  In this case, the estimated resource costs of compliance will  approximate the
 loss in producers' surplus and, with no  increase in prices, consumers' surplus will not change.
                                               12.1

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12.3    Comparison of Monetized Benefits and Costs

        Because not all of the benefits resulting from the proposed regulatory alternative can be valued in

dollar terms, a complete cost-benefit comparison cannot be performed. As shown in Table 12.1, combining

the estimates of social benefits and social costs yields an estimated of net monetizable benefits ranging from

negative $112.5 million to positive $7.8 million annually ($1989). This assessment of the relationship

between costs and benefits is subject to severe limitations on the ability to estimate comprehensively the

expected benefits of the proposed regulation.  If all of the benefits  of regulation could be quantified and

monetized, EPA estimates that in all likelihood the benefits of regulation would exceed the social costs.
              Table 12.1: Comparison of National Annual Mofletizable Benefits to Costs for
                Metal Products and Machinery Industry, Phase I {millions of 1989 dollars)
        Benefit and Cost Categories
       Value
        Benefit Categories
             Human Health Benefits: Fish Consumption
             Human Health Benefits: Water Consumption
             Recreational Fishing Benefits
             Avoided Sewage Sludge Disposal Costs
        Total Monetized Benefits

        Cost Categories
             Cost to Industry for the Proposed Regulatory Option
             Adjustments for Tax Code and Use of Social Discount Rate
             Costs of Administering the Proposed Regulation
             Unemployment Administration and Worker Displacement Costs
        Total Monetized Costs

        Net Monetized Benefits (Benefits less Costs)*
   $5.4
   $0.0
  $19.8
  $33.4
$28.2
 $0.0
$70.6
$73.4
  $58.6  -  $172.1
      $137.1
       $25.3
   $1.9   -    $3.2
   $0.0   -    $5.5
 $164.3   -  $171.1

($112.5)  -    $7.8
        * For calculating the range of net benefits, the low net benefit value is calculated by subtracting
        the high value of costs from the low value of benefits. The high net benefit value is calculated
        by subtracting the low value of costs from the high value of benefits.
        Source: U.S. Environmental Protection Agency
                                               12.2

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                                        References

Anderson, Donald and Ram Chandran.  1987.  "Market Estimates  of Worker Dislocation  Costs," in
       Economics Letters 24, pp. 381-384, Elsevier Science Publishers.

Belton, T., R. Roundy and N. Weinstein, 1986. Urban Fishermen: Managing the Risks of Toxic Exposure,
       Environment, Vol. 28. No. 9, November,  1986.

Connelly, N. and B. Knuth. 1993. Great Lakes Fish Consumption Health Advisories: Angler Response to
       Advisories and Evaluation of Communication Techniques, Human  Dimensions Research Unit,
       Dept. of Natural  Resources, NY  State  College of Agriculture  and Life Sciences,  Cornell
       University, HDRU Series No 93-3, February, 1993.

Connelly, N., B. Knuth, and C. Bisogni.  1992. Effects of the Health Advisory and Advisory Changes on
       Fishing Habits and Fish Consumption in New York Sport Fisheries, Human Dimensions Research
       Unit, Dept. of Natural Resources, NY State College of Agriculture and Life Sciences, Cornell
       University, HDRU Series No 92-9, September, 1992.

Economic Report of the President, 1995

Engineering News Record Construction Cost Index, Jan. 2-9, 1995

Fischer, H.B., EJ. List, R.C.Y. Koh, J. Imberger, and N.H. Brooks. 1979. Mixing in Inland and Coastal
        Waters, Academic Press, New York, 483 pp.

Fisher, A.,  L. Chestnut, and D. Violette.  1989. The Value of Reducing Risks of Death: A Note on New
       Evidence, Journal of Policy Analysis and Management, Vol. 8, No. L, 1989.

Knuth, B. and C. Velicer, 1990. Receiver-Centered Risk Communication for Sportftsheries: Lessons from
       New  York Licensed Anglers, Paper presented at the Americal Fisheries Society Annual Meeting,
       Pittsburgh, Perm, August, 1990.

"Landfill Tipping Fees 1992", Waste Age, November, 1993.

Lyke, A. 1993. Discrete Choice Models to Value Changes in Environmental Quality: A Great Lakes Case
       Study, Thesis submitted in partial fulfillment of the  requirements for the degree of Doctor of
       Philosophy (Agricultural Economics) at the University of Wisconsin-Madison, 1993.
                                              R.1

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Lyman, W.J., W.F. Reehl, and D.H. Rosenblatt.  1981.  Handbook of chemical property estimation
       methods - environmental behavior of organic compounds. New York, NY: McGraw-Hill Book
       Company. 960 pp. (reported or estimated using methods outlined).

SAIC,  1994. Memorandum from Kathleen Stralka, SAIC to Chuck White, EPA re: Estimates of
       Percentage of Sewage Sludge Disposed in 1988, October 19, 1994

Silverman, W. 1990. Michigan's Sport Fish Consumption Advisory: A Study in Risk Communication,
       Thesis submitted in partial fulfillment of the requirements for the degree of Master of Science
       (Natural Resources) at the University of Michigan, May 1990.

Thomann, R.V. and J.A. Muller. 1987. Principles of Surface Water Quality Modeling and Control. New
       York: Harper Collins Publishers.

U.S. Department of Commerce. 1992. Regional Multipliers: A User Handbook for the Regional Input-
       Output Modeling System (RMS II), Economics and Statistics Administration,  Bureau of
       Economic Analysis, Washington, DC

U.S. Department  of the Interior. 1993. 1991 National  Survey of Fishing, Hunting,  and  Wildlife-
       Associated Recreation.

U.S. Department  of the Interior. 1993. 1991 National  Survey of Fishing, Hunting,  and  Wildlife-
       Associated Recreation, DOI, March, 1993

U.S. EPA, 1985. Estimating Sludge Management Costs: Handbook, October. NTIS # PB86-124542.

U.S. EPA, 1989. Regulatory Impact Analysis of the Proposed Regulations for Sewage Sludge Use and
       Disposal, January. NTIS # PB89-136634.

U.S. EPA, 1989b. Preliminary Data Summary for the Machinery Manufacturing and  Rebuilding
       Industry. EPA 440N-89/106. October, 1989

U.S. EPA, 1992. Information  Collection Request for National Pollutant Discharge Elimination System
       and Sewage Sludge Management State Programs. May 28.
                                            R.2

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U.S. EPA, 1992. ReachScan User's Manual.  Office of Pollution Prevention and Toxics,  Exposure
       Evaluation Division. Prepared by Versar Inc. under EPA Contract No. 68-D9-0166. Washington,
       DC.

U.S. EPA, 1993. Regulatory Impact Analysis of the Part 503 Sewage Sludge Regulation. Final. Office of
       Water. March. EPA 821-R-93-006.

U.S. EPA, 1993. Training Manual for NPDES Permit Writers. March,  1993.

U.S. EPA, 1993b.  Information Collection Request for the National Pollutant Discharge Elimination
       system/Compliance Assessment Information. July 30.

U.S. EPA, 1993b. Standards for the Use or Disposal of Sewage Sludge; Final Rules. 40 CFR Part 257 et
       al. Federal Register February 19.

U.S. EPA. 1980. Ambient water quality criteria documents. Washington, DC: Office of Water, U.S. EPA.
       EPA  440/5-80 Series. Also refers to any update of criteria documents (EPA 440/85 and EPA
       440/5-87 Series) or any Federal Register notices of proposed criteria or criteria corrections.

U.S. EPA. 1984 (May). Summary of current oral Acceptable Daily Intakes (ADIs) for systemic toxicants.
       Cincinnati, Ohio: Environmental Criteria and Assessment Office, U.S. EPA. 19 pp.

U.S.  EPA.  1989.  Computer data  base of physical/chemical properties  for SARA 313  chemicals.
       Washington, DC: Office of Toxic Substances,  Exposure Evaluation Division, U.S.  Environmental
       Protection Agency. (Used in the Toxic  Chemical Release Inventory Risk Screening Guide). EPA
       560/2-89-002.

U.S. EPA. 1990. QSAR. Duluth, MN: Environmental Research Laboratory, U.S. Environmental Protection
       Agency.

U.S.  EPA.   1993. Aquatic  Toxicity Information  Retrieval (ACQUIRE)  Data  Base.  Duluth,  MN:
       Environmental Research laboratory, U.S. Environmental Protection Agency.

U.S.  EPA.  1993.  Assessment tools for the  Evaluation  of Risk (ASTER) Data  Base. Duluth, MN:
        Environmental Research Laboratory, U.S. Environmental Protection Agency.
                                              R.3

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U.S. EPA. 1993.  Environmental Research Laboratory - Duluth Fathead Minnow Data Base. Duluth,
       MN: Environmental Research Laboratory, U.S. Environmental Protection Agency.

U.S. EPA.  1993. Health Effects Assessment  Summary Tables (HEAST).  Office of Research and
       Development and Office of Emergency  and Remedial Response, Washington, DC: U.S. EPA.
       OERR 9200/6-303 (92-1).

U.S. EPA. 1993. Integrated Risk Information System (IRIS) Retrieval. Washington, DC: U.S. EPA

U.S. EPA. 1993. Regulatory Impact Assessment of Proposed Effluent Guidelines and NESHAP for the
       Pulp, Paper, andPaperboardIndustry, EPA-821-R-93-020, November, 1993.

Versar, 1994a. Memorandum from Wes Kleene, Versar Inc. to Randi Currier, Abt Associates re: "MP&M
       Sludge Benefit Information", June 21,  1994.

Versar, 1994b. "1992 Chemical Release Data from the Sediment Contaminant Point Source Inventory".

Violette,  D. and L. Chestnut. 1986.  Valuing Risks: New Information on the Willingness to Pay for
       Changes in Fatal Risks, Contract #68-01-7047. Report to the US EPA, Washington, DC, 1986

Viscusi, K. 1992.  Fatal Tradeoffs: Public & Private Responsibilities for Risk, Oxford University Press,
       New York, 1992

Walsh, R., Johnson, D. and J. McKean. 1990. "Nonmarket Values from two Decades  of Research on
       Recreational Demand, "Advances in Applied Micro-Economics, Vol. 5, 1990

West, P., R. Marans, F. Larkin, and M. Fly. 1989. Michigan Sport Anglers Fish Consumption Survey: A
       Report to the Michigan Toxic Substances Control Commission, University of Michigan School of
       Natural Resources, Natural Resources Sociology Research Lab, Technical Report #1, May, 1989.
                                            R.4

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                                         Appendix A
                  Description of the Fate and Transport Model Used to
                     Estimate Pollutant Concentrations at the Initial
               Point of Discharge and Below the Initial Discharge Reach

A.I    Introduction
       To quantify the fate and transport of MP&M pollutant releases to surface waters, EPA used a
simplified fate and transport model. This appendix describes the equations characterizing the model, the
assumptions underlying the model, and the data sources used to estimate the model. The equations defining
the model were combined with geographic information (reach flow, velocity, length, etc.) to estimate
pollutant concentrations at the initial point of discharge and below the initial discharge reach. In the cancer
risk assessment described in Chapter 8, pollutant concentrations were considered  only at the point of
discharge for the fish consumption pathway. Downstream concentrations were considered for the drinking
water pathway. The estimation of pollutant concentrations below the initial discharge reach accounts for
several phenomena that combine to reduce the instream pollutant concentrations with the passage of time.
These phenomena include: volatilization, sedimentation, and chemical decay from hydrolysis and microbial
degradation. In addition, concentrations are adjusted for the change in flow  volume in downstream reaches.
The main assumptions of this analysis are discussed briefly below. Although more advanced models are
available which account for time-variable  flow, sediment  transport, channel geometry changes within a
reach, and detailed simulation of all  in-stream processes, these models will not necessarily produce more
accurate results without sufficient data to support the input parameters.  Estimates of the input parameters
required by these models are subject to a high degree of uncertainty when applied on a national scale, and
gathering such data is beyond the scope of this study.

        EPA has previously applied the approach used  in this  analysis. For example,  the first-order
contaminant degradation relationship described below in equation (1) is currently being used by the Office
of Pollution Prevention and Toxics for exposure analysis in the ReachScan computer program (U.S. EPA,
 1992).
                                               A.I

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A.2    Model Equations
       For each reach associated with each of the analyzed sample MP&M facilities, the total pollutant
concentration in the water column is calculated by the following equation expressed in generic terms of
mass (M), length (L) and time (T) (Thomann & Mueller, 1987):
                                                »)]
                                                                                           (1)
       where:
       CT
       WT
       Q
       VT
       H
                 =   Total toxicant concentration in the water column (M/L3);
                 =   Mass input rate of toxicant (M/T);
                 = •   River flow (L3/T);
                 =   Overall net loss rate of chemical (L/T);
                 =   Flow depth (L);
       x         =   Distance downstream from the point of release (L); and
       U        =   Flow velocity (L/T).
       Importantly, in reaches where more than one facility is discharging, or where pollutant loadings
occur from upstream reaches, the mass input rate (WT)  represents a combined input rate from all sample
facilities affecting the reach.
        The overall net loss rate of chemical (VT) is given by:
        where:
        VT
        VTd
        VTs
        k,
        Ka
        H
        fa
                             VT = Vid + VTS = (ki + KdH) x fd + Vnfp

                      Overall net loss rate of chemical (L/T);
                      Dissolved chemical loss rate (L/T);
                      loss of chemical due to sediment interaction (L/T);
                      volatilization transfer coefficient (L/T);
                      dissolved chemical decay rate (hydrolysis and microbial degradation) (1/T);
                      Flow depth (L);
                      dissolved fraction of toxicant (unitless);
                                                                                           (2)
                                              A.2

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       vn         =   net loss of solids (L/T); and
       fp         =   particulate fraction of toxicant (unitless).

       The dissolved and particulate fractions of the pollutant,/^ andfp , respectively, are estimated by:
                                          fd =
                                                  1
                                               1 + KpS
                                                                                              (3)
       and
                                                 KpS
                                               1 + KpS
                                                                                              (4)
       where:
       Kp
       S
                  =    partition coefficient [L3/M]; and
                  =    suspended solids [M/L3].
        Because the dissolved concentration of metals and most other pollutants in the water column is
generally  considered a more accurate  expression of the toxic or bioavailable fraction than the total
concentrations, equation (1) was  modified to express the pollutant concentrations in terms of dissolved
concentration.

        The dissolved fraction of a pollutant is estimated as:

                                           Cd = f d x CT                                       (5)
        Substituting equation (2) for CT results in the dissolved pollutant concentration being expressed as:
                                     WT
                                  _  Q
                                                     + v" KpS
                                                      (1+KpS)H
                                                                                              (6)
A.3     Model Assumptions
        Four principal assumptions underlie Equation 5, as follows:

1.      Steady flow conditions exist within the stream or river reach. This assumption is necessary due to
        the  broad  geographical  coverage of  this  study.  This assumption significantly reduces  the
        computational effort and  input parameter  requirements  and still produces  a good  first
        approximation fate and transport modeling of pollutants in surface waters.
                                                A.3

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2.      The pollutant concentration is completely mixed laterally (across the stream) and vertically (with
        depth)  within each  reach.  The  approach  involves  a two-dimensional  model  in which the
        concentration is  uniform over the entire cross-section of the stream  reach  but varies with the
        distance of the reach. It is assumed that the contaminant completely mixes at the point of release.
        This assumption will likely underestimate the concentration of a contaminant release in areas where
        mixing is incomplete (e.g., shore-hugging plume) and overestimate concentrations in areas beyond
        the point where incomplete mixing has occurred (e.g., in areas beyond a shore-hugging plume).

3.      Longitudinal dispersion of the pollutant is negligible. The model does not  account for mixing
        outside the plane of discharge along the river reach, although variation in pollutant concentrations
        with distance  is predicted due  to pollutant fate and  decay,  and the differing  hydrology of
        downstream reaches.   In natural streams,  longitudinal   velocity  gradients   due to  channel
        irregularities can cause mixing and, therefore, decrease the peak concentrations as the contaminant
        moves  downstream from the point of release.  However, under steady-state situations,  this
        assumption appears reasonable  (Thomann and Muller, 1987). In addition, Fischer et al. (1979)
        demonstrate that under steady  flow conditions  and complete  lateral  and vertical mixing, the
        solution of the dispersion equation approximates a first-order decay function such as the one shown
        in Equations 1 and 5.

4.      Flow geometry, suspension of solids, and reaction rates are constant within a river reach. Both the
        data that describe a river reach and  the data that are calculated for  a reach are assumed to be
        constant for the full extent of the reach.

A.4     Hydrologic Linkages
        In the drinking water risk analysis, pollutant concentrations were modeled for a distance of 500 km
downstream from the discharge point. Information on  the hydrologic linkages between reaches was
obtained from the REACH2 file of EPA's Graphical Exposure Modeling System (GEMS). In addition to
providing connectivity data, flow data (mean flow, 7Q10), velocity (mean, low) were  obtained for each
reach from the GAGE file in GEMS.

        Using the information  obtained for each reach,  pollutant concentrations were estimated at the
beginning of each reach  and then decayed during travel to the end of the reach according to the process
equations listed above. The concentration at the end of each reach served as the value  for the beginning of
the next reach.  Exhibit  A-l provides an example of the development of exponential loss values for
                                               A.4

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reductions in in-stream pollutant concentrations downstream from the initial point of discharge. Assuming
an average river flow velocity (0.867538 m/sec)  and an average river flow depth (2.528043  m),  the
example indicates the percent of the initial pollutant concentration remaining after the pollutant has traveled
approximately 75 km in a 24 hour period.

A.S    Associating Risk with Exposed Populations
       As described  in Chapter 8,  the potentially exposed population of recreational and  subsistence
fishermen and their families is estimated from county level fishing license data. The number of individuals
served by each drinking water intake, however, is an output of the fate and transport model described in
this Appendix. In the model, if a drinking water intake exists on the initial reach or any downstream reach,
the in-stream pollutant concentration is calculated at that intake and the population served by the intake is
saved with the  concentration for further  analysis  (see Section 8.2 for a discussion of the  cancer risk
assessment).

A.6    Summary of Data Sources
       Data sources used for the fate and transport model are summarized in Exhibits A-l and A-2. They
are discussed briefly in the section below, according to categories of information.

       Pollutant Loadings
       EPA estimated annual pollutant  loadings (kg/yr) for the direct and  indirect sample MP&M
facilities analyzed under the various regulatory options. Pollutant loadings for indirect dischargers reflected
were adjusted to reflect treatment by the POTW. Annual pollutant  loadings  were converted to daily
pollutant loadings by dividing by the number of days in one year (365).

       Hydrologic Parameters
       For each reach, EPA obtained the 7Q10 and low velocity values from the GAGE database on its
Graphical Exposure Modeling System (GEMS).  For estimating compliance with acute effects, EPA
recommends the use of the 1Q10 design flow (U.S. EPA, 1991). The 1Q10  values were estimated from the
7Q10 based on a regression equation described by EPA (1991). For estimating compliance with chronic
effects, EPA recommends the use of the harmonic mean flow (U.S. EPA, 1991).  The harmonic mean flow
values were estimated from the 7Q10 based on a regression equation described by EPA (1991). The length
of each reach (X) was obtained from EPA's REACH2 file on the GEMS database.
                                              A.S

-------
        Chemical Fate and Decay Parameters
        Exhibit A-l summarizes the chemical fate and decay parameters for a sample of the chemicals in
this analysis. For metals, the only significant loss  mechanism results from partitioning onto suspended
solids (Kp). For estimating Kp, data from Windom (1993) and EPA (1985a) were used. It should be noted
that partition coefficients for metals are highly variable  depending on site conditions. For this analysis,
average values were used.

        Population Data
        Data on the number of individuals served by drinking water intakes comes from the Water Supply
Database (WSDB). In this database, river segments that contain a drinking water intake are identified along
with the population served by the intake.
                                               A.6

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                                         Appendix B
                         Detailed Methodology for Estimating the
             Total Exposed Population for the Fish Consumption Pathway

B.I    Introduction
       To develop an estimate of the number of fishermen fishing a reach, EPA assumed that the number
of fishing licenses sold in counties abutting MP&M reaches approximates the number of fishermen living
in counties that border MP&M reaches and that thus are likely to fish those reaches. EPA developed a
methodology to estimate the population based on these estimates of the number of sport and subsistence
anglers fishing  MP&M discharge reaches. The following discussion  reviews the methodology used to
estimate the number of recreational and subsistence fishermen and summarizes results from the analysis.

B.2    Methodology
       The following paragraphs discuss specific elements in the methodology for estimating fishing
populations, and for the human  health risk analysis, the number of persons in households exposed to
MP&M pollutants via fish consumption.

       Using Fishing License Data to  Estimate the Number of Recreational Anglers in Counties
       Abutting MP&M Reaches
       As noted above, EPA assumed that the number  of licensed anglers living in counties that abut
MP&M  reaches would approximate the  population of recreational anglers who  could potentially fish
MP&M reaches. Sample MP&M facilities are located in 39 states.  Due to time and resource constraints, it
was not possible to collect fishing license data for all counties in all 39 states. Fishing license data were
collected at the county level for 5 states and at the state  level  for 4 states. These data were provided by
state Fish and Game Departments. License data for some counties in 24 additional states were available
from the Pulp and Paper Industry effluent guideline regulatory impact analysis (RIA). These data, however,
do not necessarily represent counties in which MP&M facilities are located. No data were available for the
remaining 6 states.  As a result, fishing license data were constructed for the  34 states with no license data
specific to counties containing MP&M facilities using the following three methods:

        1)     Fishing license data is available at the state level but not at the county level
        To estimate the number of licenses per county, total state licenses  were apportioned to counties
based on a relative measure of fishing activity per county. Using information from the Graphical Exposure
                                               B.I

-------
 Modeling System (GEMS) on the sum of all reach miles (river, lake shoreline, and marine coastline) in
 each county and total reach miles for the state, the percent of total state reach miles in each county was
 estimated.  The percent of total state reach miles for the counties that abut MP&M reaches were then
 multiplied by the estimated number of fishing licenses issued in the state to yield an estimate of the number
 of fishing licenses for each county abutting an MP&M reach. Where a reach spans more than one county,
 miles are divided equally between each county  (i.e., if a reach spans 3 counties, each county will be
 assigned one-third of the reach miles).

        This approach was used for Utah, Colorado, Connecticut, and Iowa.

        2)      Fishing license data is available for some counties in the state but not those counties or
               not all of those counties that contain MP&M facilities.
        For some states, some county-level fishing license data  were available from the  recent Pulp and
 Paper RIA; however, the counties for which these data were available did not necessarily include all of the
 counties in the state in which MP&M sample facilities are located. This method uses the partial county-
 level fishing license data collected for the Pulp and Paper RIA to estimate county-level fishing licenses for
 those counties in the state that contain MP&M facilities. This method involves first estimating  the total
 number of fishing licenses issued in the state and then apportioning the licenses to MP&M facility counties
 using the same method as outlined for Method 1, above. As the first step, the percent of reach miles in each
 county was estimated. Second, it was assumed that the number of licenses in a county as a percentage of
 total state licenses is proportional to the number of reach miles in that county as a percentage of total state
 reach miles. Third, fishing licenses were summed across all counties for which there are data. Fourth, the
 percentages of reach miles  for all counties for which there is  license data were summed. The sum of
 licenses is  then proportional to the  sum of the percentages of  reach miles.  Finally, assuming that 100
 percent of the reach miles is proportional to 100 percent of the number of fishing licenses, the total number
 fishing licenses was estimated by multiplying the number of licenses by the inverse of the percentage of
 reach miles.

        The following example illustrates this approach. State X is made up of 4 counties. Counties #1 and
 #4 contain sample MP&M facilities.  License data is only available, however, for Counties #2 and #3. The
portion of total state reach miles in each county is  as follows: County #1 - 10 percent, County #2 - 20
percent, County #3 - 30 percent, and County #4  - 40 percent. Counties #2 and #3 each  have 50 fishing
licenses.  Therefore, 100 licenses correspond to  50  percent of the reach miles  in the state. Using this
relationship yields an estimate of 200 licenses for the state (100 percent of the reach miles).
                                               B.2

-------
        Once total state licenses were estimated, counties with sample MP&M facilities were identified.
Next, the percent of reach miles represented by counties with sample MP&M facilities was multiplied by
the state estimate of fishing licenses to calculate the number of fishing licenses for each county with an
MP&M sample facility.

        This approach was used for Alabama,  Arkansas, California,  Florida,  Georgia,  Kentucky,
Louisiana,  Maryland, Maine, Michigan, Minnesota, Mississippi, North Carolina,  New Hampshire, New
York,  Ohio, Oregon, Pennsylvania,  South  Carolina, Tennessee,  Texas, Virginia, Washington,  and
Wisconsin.

        3)      Fishing license data is not available for certain states with sample MP&M facilities but
               is available for neighboring states with sample MP&M facilities.
        This method assumes that  fishing  activity  in  neighboring  states can  be  used  as a rough
approximation of fishing activity in a state for which there are no data. The first step is to estimate the total
number of fishing licenses in states with no data. This estimate was derived using one of the two following
approaches, depending on the level of data collected for the neighboring state:

1.      Where data were available on the total number  of fishing licenses in the neighboring state, the ratio
        of total fishing licenses to total state population was calculated. This ratio was multiplied by the
        state population for the state with no  data to estimate the total number of fishing licenses in that
        state.

        This approach was used  for  Arizona,  Rhode Island, and Massachusetts. "Neighboring" states
        were Utah (for Arizona) and Connecticut (for Rhode Island and Massachusetts).

2.      If license data were available at the county level in the neighboring state, Method  2, described
        above, was used to calculate the total number of fishing licenses in the neighboring state. Next, the
        ratio of total fishing licenses to total state population was calculated. This ratio was multiplied by
        the state population in the state with no data to estimate the total number of fishing licenses in  that
        state.

        This approach was used for Oklahoma, Nebraska, and  Illinois. Neighboring states were Kansas
        (for Oklahoma and Nebraska) and Indiana (for Illinois).
                                                B.3

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        Once total state licenses were estimated, counties with MP&M facilities were identified. Next, the
percent of reach miles represented by these counties was multiplied by the state estimate of fishing licenses
to calculate the number of fishing licenses for each county in which an MP&M sample facility was located.

        Estimating the Number of Subsistence Fishermen
        The above calculations do not distinguish between recreational and subsistence fishing populations.
It is important to estimate these populations separately, however, because fish  consumption rates  vary
substantially among recreational and subsistence anglers.  Although fishing  licenses may be  sold  to
subsistence fishermen, many fishermen that fish primarily to supplement their own and their family's diet
do not purchase fishing licenses. The magnitude of subsistence fishing in individual states or the country as
a  whole,  however, is not known. For the purposes  of this analysis it is, therefore, assumed  that  an
additional 5 percent of fishermen beyond the estimate of licensed fishermen are subsistence anglers.

        Using  Creel Survey  Data to Estimate the  Percentage of the Fishing  Population that  Fish
        Affected Reaches
        Estimating the percentage of the potential fishing population that actually fish affected reaches is
difficult and subject to considerable uncertainty because of severe data limitations. In the recent Pulp and
Paper RIA, limited creel survey data (from 8 sites) were used to estimate a percentage of the total licensed
fishermen who live in the vicinity of affected reaches that actually fish those reaches. In that RIA, the
average percentage (30 percent) over the 8 sites was applied to other counties where creel survey data  were
not available to develop estimates of the number of anglers fishing affecting reaches. Such creel survey are
very sparse and telephone calls to states with MP&M facilities failed to turn up any additional data for
reaches discharged to by MP&M sample facilities. This analysis, therefore, employs the same percentage
(30 percent) to calculate the fishing population that actually fish affected reaches. That is, the number of
persons actually fishing  an MP&M  reach was calculated  as 30 percent of the estimated number  of
recreational and subsistence anglers for counties that abut the reach.

        Adjusting for Fish Advisories
        For MP&M reaches where fish advisories (typically due to non-regulated pollutants such as dioxin
and mercury) are in place, it is assumed that some proportion of anglers would adhere to the advisory and
not fish the MP&M reach in question. Past studies  suggest that fishermen have a high, although not
complete, level of awareness offish advisories. These studies further suggest that, although fishermen may
change  their  behavior in response to fish consumption advisories, they do not necessarily refrain  from
                                               B.4

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consuming contaminated fish altogether. For example, studies conducted by Belton et al. (1986), Knuth and
Velicer (1990), Silverman (1990), West (1989), Connelly, Knuth, and Bisogni (1992), and Connelly and
Knuth (1993) indicate that approximately 50 to 87 percent of fishermen surveyed were aware of state fish
advisories on waterways where they fish. These studies also indicate, though, that only 10 to 34 percent of
fishermen that were aware of advisories adjusted their behavior by: no longer fishing a particular location,
changing the fishing location, or taking fewer fishing trips in response to the advisory. Between 13 and 68
percent  of fishermen  that were aware  of advisories, however, changed their consumption  of catch or
preparation habits  in response  to advisories. The study by Knuth and Velicer (1990) also indicated that
there was some confusion regarding which waters were considered contaminated. In their study they found
that 37  percent of fishermen actually fishing  in contaminated waters reported that they were fishing in
uncontaminated waters.

        On the basis of the studies cited above, EPA assumed, for this analysis, a 20 percent decrease in
recreational  fishing activity for reaches  under  fish advisory. EPA further assumed that fish advisories do
not affect fishing participation by subsistence anglers.  It should  be noted that the estimated 20 percent
decrease could lead to either an overestimate or underestimate of the risk associated with consumption of
contaminated fish because: (1)  fishermen that change locations may simply be switching to other locations
where advisories are in place and therefore maintain or  increase their current risk; and (2) fishermen that
continue to fish contaminated waters may change their consumption and preparation habits to minimize the
risks from the contaminated fish they consume.

        Estimating Household Exposure for the Fish Consumption Analyses
        The calculations outlined above lead to an estimate of the number of persons fishing reaches
affected by discharges from MP&M sample facilities. These values were used both in analyzing the change
in risk to human health from reduced exposure to MP&M pollutants via the fish consumption pathway, and
in analyzing the change in value of recreational fishing activity from improved water quality. The former
analysis requires an estimate of the total population exposed to MP&M pollutants by consuming fish. EPA
assumes that this population includes not only the fishermen themselves, but the other members of the
household. Therefore, for each reach that is the initial  discharge point of a sample MP&M facility, the
estimated number of recreational and subsistence fishermen fishing affected reaches were each multiplied
by 2.62, the size of the average U.S. household in 1992 based on Current Population Reports (Statistical
Abstracts of the U.S., 1993), to estimate the total potentially exposed population.
                                               B.5

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       Using Sample Weights to Calculate Total Exposed Population
       The following  equations  were used to calculate the exposed  population of recreational and
subsistence anglers and their families for the analyses of change in cancer risk from reduced MP&M
pollutant discharges:


                       TEPRrec = £[Wtf x z(Licc x FAf x CS x House)]
                                  f=iL       0=1                          J
       where:
F

Wtf

C


Licc

FAf



CS
                      TEPRsb=Z
                                 f=i
                             Wtf x Z(Licc x 0.05 x CS x House)
                                           0=1
                  =   National estimate of the recreational fishing  population potentially exposed to
                      MP&M industry discharges;

                  -   National estimate of the subsistence fishing  population potentially exposed to
                      MP&M industry discharges;

                  =   Total number of facilities analyzed;

                  =   Sample weight applicable to the^th facility;

                  =   Total number of counties abutting or containing the initial discharge reach of the
                      fSa. sample MP&M facility;

                  =   Number of fishing licenses in the cth county;

                  =   1  - percentage  reduction in participation due to  the presence, if any,  of a  fish
                      advisory on the initial discharge  reach associated with the ^th sample MP&M
                      facility (1 - 0.20 if the reach has a fish advisory; 1 - 0.00 otherwise);

                  =   Adjustment factor to account for the likelihood that not all anglers in a county fish
                      the reach (0.30); and
        House     =   Average number of persons per household (2.62).

        As discussed in Chapter 8, the total weighted population as developed by the forgoing method was

used in the analysis of reduced cancer cases via the fish consumption pathway. (An alternate sample

weighting scheme was used for analyzing the change in value of recreational fishing on reaches affected by

MP&M discharges. This sample weighting method is described in Appendix C.)
                                               B.6

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                                          Appendix C
                       Differential Sample Weighting Technique for
                      Multiple Discharge Events on Sample Reaches

C.I    Introduction
       For the  analysis of change in cancer risk, EPA used a simple linear weighting technique for
extrapolating results estimated for sample facilities to the population level (see, for example, the discussion
for estimating the total exposed population for fish consumption in Appendix B). This linear weighting was
possible because the marginal effects on cancer risk of a change in pollutant exposure are assumed to be
linearly additive over the facilities, chemicals, and human populations that are affected by changes in
pollutant discharges. However, as discussed in Chapters 8 and 9, EPA used a different sample weighting
technique for extrapolating sample findings to the population in those analyses in which discharges  from
more than one facility were accumulated to estimate a change in pollutant exposure at a given location. In
particular, the need to aggregate discharges from more  than one facility was relevant in those analyses in
which  the estimated baseline  and post-compliance in-waterway concentrations  were  compared  with
Ambient Water  Quality Criteria (AWQC)  values to ascertain a benefit event. These  analyses yielded
estimates of the change in frequency with which AWQCs are exceeded by MP&M facility discharges, and
provided the basis for estimating the increase in value of recreational fishing activity from reduced MP&M
pollutant discharges and  the associated  improvement  in ambient water quality.  In those analyses, the
standard linear weighting  method was able to used for  reaches to which only one MP&M sample facility
discharges. As a result, for a benefit event on a reach with only one sample, the number of reaches expected
to benefit in a similar  fashion at the national level is simply the  sample weight of the single facility
discharging to the reach. However, EPA found more than  one sample facility on approximately 17.5
percent of the sample facility reaches.1 For these reaches to which more than one facility discharges, EPA
used a different procedure for developing  national estimates of benefit events that accounts for the presence
of more  than facility with different sample weights discharging to the reach. This appendix describes that
technique.
 1 Note that, among the sample facility discharge sites, this percentage is a lower bound estimate of the frequency of
 multiple facility discharge sites. While it is not possible for there to be fewer MP&M Phase I facilities on a reach
 than are seen in the sample, it is always possible that another, or perhaps several additional, unsampled and
 therefore unseen facilities are present on a reach on which only one facility was sampled.
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 C.2    Methodology for Developing Sample-Weighted Estimates for Sites with more than Facility
        A key issue is the fact that the MP&M sample is a sample of facilities, while the unit of analysis in
 the AWQC comparison analysis and the recreational fishing benefits analysis is a reach. From the facility
 sample, EPA knows that any given sampled facility is located on its reach, and EPA can use the sample
 weight to  estimate the nationwide number of facilities like that facility.  But because the facility sample
 weights are not reach sample  weights, those weights cannot be used directly to estimate the national
 occurrence of reaches  associated with a specific characteristic of MP&M discharges.  For example, if
 several MP&M sample facilities exist on one reach, a valid national estimate  of the number of reaches
 similar to that reach is not the sum of the facility sample weights. The sum of the facility sample weights is
 an accurate estimate of the number of national facilities, not reaches. The reason is that although that
 number of facilities is estimated to exist nationwide, to  sum the facility weights as  reach weights is to
 assume that those extrapolated  facilities always exist on individual reaches in that combination, when in
 reality the extrapolated facilities may exist together in many combinations on reaches.

        For example,  consider a reach with two sampled facilities, with sample weights of 200 and 5.
 There are  only four other facilities nationwide that are estimated to be like the facility with the weight of
 five, while there are 199 other facilities estimated to be like the facility with the weight of 200. To sum the
 loadings from the two sample facilities and assign a weight of 205 to  that discharge event means that for
 every facility like the  one with the weight of 200  there is  another  like the one with the weight of 5
 discharging along side  it.  That cannot be true, because there are far fewer facilities like the one with the
 weight of 5 than there are  like the one with the weight of 200.

        As this  example illustrates, facilities with small weights occur less frequently in the population of
 facilities than do facilities with  large weights.  As a result, population facilities represented  by  sample
 facilities with larger weights must occur without the presence of facilities with smaller weights, simply
 because there are more  of them.  EPA developed a methodology to account for joint occurrence of facilities
 on reaches to  enable  reasonable estimates of  the nationwide  number of reaches affected by  MP&M
 facilities, based  on the concept of "discharge events."

        'Discharge events" are defined for each  pollutant of concern discharged  by one or more facilities
 on a  reach based on the loadings  (or flows)  of the relevant sample facilities.  The pollutant loading
associated with a discharge event (or discharge event loading) is the sum of the loadings from one or more
of the facilities that discharge to the reach. Similarly, a discharge event flow is the sum of the effluent flow
from one or more of the facilities. There are as many discharge events of each type as there are unique
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sample weights for the facilities on the reach. A sample weight is calculated for each separately defined
discharge event based on the sample weights of the facilities contributing loadings (or flows) to the event.
Discharge events are calculated as illustrated in Table C-l and described as follows:

        For each regulatory option considered, each reach associated with more than one MP&M facility,
and each pollutant of concern discharged by one or more of those facilities, pollutant loadings (or discharge
flows2) are ranked in ascending order of facility  sample weight. The total loadings (or flows) from all
sample facilities on the reach comprise the first event, and this event is assigned the smallest sample weight
among the  facilities  discharging to the  reach,  Wti in  Table C-l. The weight of this facility is then
considered as "used up," and that facility's loadings (or flows) are not included in the  subsequent discharge
events defined for the reach. Subsequent combinations of facilities do not include this facility because its
smaller sample weight relative to the others means that there are no  other population facilities represented
by this facility that could jointly occur with the other facilities.
TaMe C-3U Coasfcuetton of Discharge Events f<*r Am F«Hwta»*l>iscliareett« Jd»yKeacb
Event Number
One
Two
u
N-2
N-l
N
leadings and Flows Assigned to
Event
N
Z Loadi or Flows
i= 1
N-1
Z Loadi or Flow
i= 1
u
LoadN-2 + LoadN-i + Loadn
FlowN-2 + FlowN-i + FlowN
LoadN-i + LoadN
FlOWN-l + F10WN
LoadN
FlOWN
Weight Assigned to Event
Wti
Wt2 - Wti
u
WtN.2-WtN-3
WtN-i - WtN.2
WtN-WtN.l
Notes: N sample facilities discharge to the reach, and are ranked in ascending order of sample weight and
indexed by i (1 = facility with smallest weight, N = facility with largest weight);
Load; = Loading from facility i;
Flowi = Flow from facility i or the POTW associated with facility i;
Wtj = Sample weight of facility i; and
A POTW's flow is included only once per event, even if multiple facilities in that event discharged
through that POTW, to avoid over-counting the POTW's flow.
 2 'Discharge flow" means the facility effluent discharge flow (volume per unit time) for direct discharging
 facilities, and POTW effluent discharge flow for indirect discharging facilities. Loadings are taken as post-POTW
 for indirect discharging facilities.
                                                  C.3

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        Subsequent events are generated by removing the loadings (or flows) of each facilities in the
ranking from a running sum of loadings (or flows) of all facilities in the ranking. The weight assigned to
each subsequent event is the  difference between the weight of the next facility in the ranking and the
previous facility or, said another way, the remaining unused weight of the facility with the smallest weight
among the facilities in the particular discharge event.

        This methodology generates  a set  of discharge events (loadings  or  flows)  for each  pollutant
discharged to the reach, along  with a weight attached to each event. The effluent flows are combined with
the stream flow of the reach, and divided into the event's loading to create a  concentration of pollutant due
to the event. This concentration is then compared to AWQC values to determine whether the concentration
exceeds  AWQC values.  If the concentration is greater than a  criterion, then an estimated AWQC
'exceedence"is identified, and  the AWQC exceedence event is given the weight of the discharge event for
the purpose of establishing national estimates of the number of reaches on which an AWQC is exceeded.

        The above methodology is an outline of that employed by EPA. One additional point is that the
discharge flow of any given POTW into a reach is included only once in any given event, even if multiple
sample facilities included in the event indirectly discharge into that POTW.  To include the POTW's  flow
more than once would over-count the flow. Loadings, however,  from the POTW due to multiple facilities
per event were included in the event's loadings.

        EPA acknowledges that this  analytic method is a relatively  simplistic approach to a complex
analytic situation. However, within the time and resource constraints for addressing this issue and also
taking into account that more sophisticated, and more expensive, approaches might not yield  significantly
different aggregate findings, the Agency believes that the method represents  a reasonable  approach  to
addressing the problem.
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                                        Appendix D
                   Estimation of Sewage Sludge Use or Disposal Costs

D.I    Introduction
       Chapter 11 documents EPA's estimate of the benefits from shifts to less expensive sewage sludge
use or disposal practices resulting from the MP&M  effluent limitations. One input to EPA's benefit
estimate is the costs of the major sewage sludge disposal practices (see Chapter 11). This appendix details
the methodology by which EPA estimated these costs.

       To assess  sludge use or disposal costs, EPA consulted  a  wide range of information sources,
including:

       Two EPA publications - Handbook for Estimating Sludge Management Costs (EPA, 1985) and
       Regulatory Impact Analysis of the Proposed Regulations for Sewage Sludge Use and Disposal
       (EPA, 1989)'

       Interviews with POTW operators in PA, MA, MS, IN, NY, SD, WI, LA, RI

       Interviews with landfill and incinerator operators in NY, NH, CA, IN

       Interviews  with state government solid waste or water pollution control experts in MA, NY, IL,
       NJ, CA

       Interviews  with two members of the  EPA Effluent Guidelines Task Force: the  Chief of the
       Industrial Wastes Division for a Virginia POTW and the Director of Technical Services for a
       California POTW

       A review of trade and technical literature on sludge disposal methods and costs

       Research organizations with expertise in waste management
 1 The final Regulatory Impact Analysis of the Part 503 Sewage Sludge Regulation (EPA, 1993) included site-
 specific analysis of sewage sludge use or disposal costs rather than general values. Therefore, for this analysis,
 EPA relied on the regulatory impact analysis of the proposed rule.
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From these sources, EPA  developed estimates  of the costs  of sludge use or disposal methods and,
subsequently, the cost savings for switching sludge disposal practices. The estimated disposal costs reflect
a blend  of the  information from these sources;  no one source provided a comprehensive set of cost
estimates suitable for use in this analysis. Overall, EPA found that the reported costs of alternative sludge
use or disposal practices are likely to vary substantially among POTWs based on several factors including:

•       the method of cost accounting used

•       inclusion of dewatering costs

•       inclusion of transportation costs

•       amortization

•       whether the POTW was charged for the full costs of use or disposal e.g., when both the POTW
        and the disposal unit are owned by a common municipality

•       the proximity of agricultural land to the POTW

•       the willingness of the local farmers to accept sewage sludge

•       seasonal constraints

•       state regulations on sewage sludge use or disposal

•       the metals concentrations of the sewatesludge

•       local markets for exceptional quality sewage sludge (e.g., golf courses, residential use).

        Except for POTWs with limited access to agricultural land or surface disposal sites, however, EPA
found that the  costs  of alternative  use  or disposal  practices generally follow a consistent ordinal
relationship. That is, certain use or disposal practices (e.g., incinerating sewage sludge) are generally more
expensive than other practices (e.g., land application). Moreover, EPA judges that the differences in costs
between certain combinations of these use or disposal methods (e.g., the cost savings achieved by switching
from incineration to land application) are relatively stable despite the wide range of use or disposal costs.

        The following sections summarize the various information on sewage sludge use or disposal costs
and how this information was blended to develop cost estimates.
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D.2    Use or Disposal Cost Estimates from Previous EPA Publications
       Two EPA publications — Handbook for Estimating Sludge Management Costs (EPA, 1985) and
Regulatory Impact Analysis of the Proposed Regulations for Sewage Sludge Use and Disposal (EPA,
1989) — served as the primary sources of information on sewage sludge use or disposal costs for this
analysis. These documents provided a slate of cost estimates for major use or disposal practices  based on
the quantity of sewage sludge generated annually by a POTW. EPA used these use or disposal cost values
as the starting point for estimating the cost savings that POTWs would achieve by switching to lower cost
use or disposal practices.  However, because of several issues and limitations concerning these estimates,
EPA found it necessary to modify the cost values obtained from these reports and, as discussed below, to
supplement the cost data with information from other sources.

       Handbook for Estimating Sludge  Management Costs provides cost algorithms for 34 common
sewage sludge management processes (including sewage sludge treatment and use or disposal). EPA used
these algorithms to estimate typical sewage sludge disposal costs in the Regulatory Impact Analysis of the
Proposed Regulations for Sewage Sludge  Use and Disposal (hereinafter, referred to as the Proposal Part
503 RIA). Table D.I summarizes from the Proposal Part 503 RIAthe estimated total use or disposal cost
per dry metric ton of sewage sludge for six use or disposal practices and by three POTW flow classes: 1 to
10 million gallons per day (MOD),  10 to 100 MGD,  and greater than 100 MOD. These cost  estimates
include transportation, operating and maintenance, and amortized capital costs.
Table D.1* Annual Use «r Disposal Costs »er Dry Metric Ton of Sludge ®m$f
Ftow
100
Assumed Annual •
Sludge Generation
Pej-FacaWy^Dry
Metete Tons/Yr)
445
3,116
28,478
Sludge Disposal/Use Method"
Agricultural
3Uu»d
Application
$192
$50
$46
Sell of Give/
Away in a
BagqrOtJjer
Container3
$355
$177
$160
Surface
Impoundment
(lagoons)
$192
$50
$46
Dedicated
Disposal
Site
$223
$62
$46
MonofiHs
$267
$90
$46
Incineration
N.A.
$308
$167
Source: Regulatory Impact Analysis of the Proposed Regulations for Sewage Sludge Use and Disposal, EPA, 1989.
a Adjusted from 1987 to 1989 dollars using the Producer Price Index - Construction Materials.
b The source table listed "Model Plant Size" rather than flow groups. However, other tables hi the source document
translated the model plant sizes into the listed flow groups.
"Costs of application to other types of land, including forests, public contact sites, and reclaimed land were not estimated.
According to the National Sewage Sludge Survey, less than five percent of sewage sludge is applied to these types of land.
dEPA previously referred to this practice as "Distribution and Marketing." In the remainder of this appendix, the practice is
referred to simply as "selling bagged sludge".
        As shown in the table, agricultural land application and surface impoundments were estimated to
 be the least expensive use or disposal practices and incineration is the most expensive. The general ranking
 of use or disposal costs from least to most expensive is as follows:
                                              D.3

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        Agricultural Land Application « Surface Impoundments

        Surface Disposal to a Dedicated Site

        Monofills

        Bagged Sewage Sludge

        Incineration

        Table D.I  does not include any  costs for POTWs  with flows less than 1 MOD  and omits
incineration costs for POTWs with flow less than  10 MGD. The Proposal Part 503 RIA included use or
disposal cost estimates for POTWs in these flow rate categories. However, all of the cost estimates in the
Proposal Part 503 RIA were based on the assumption that POTWs would construct and operate their own
sewage sludge use or disposal systems. Although this assumption is  reasonable for larger POTWs, it is
probably not reasonable for smaller POTWs because of operating financial considerations.  Specifically,
this assumption implies unreasonably high use or disposal cost estimates for smaller POTWs, particularly
for incineration because of its  high capital intensity. For example, this assumption would  indicate
incineration costs of $2,639 ($1989) per dry metric ton for POTWs with a flow of 0.5 MGD. Accordingly,
instead of using the very high use or disposal costs indicated by this assumption (and which would likely
overstate the cost  savings from  switching to lower cost use  or disposal  methods),  EPA assumed that
POTWs with flow rates of less than 1 MGD (less than 10 MGD for incineration) will contract their sludge
disposal to  an  operation handling a  greater volume of sludge. Therefore,  POTWs with low flows are
expected to face disposal costs similar to those incurred by larger POTWs.  EPA examined cost differences
between use or disposal practices  only for flow groups with a cost in Table D. 1.

D.3     Adjustments to Use or Disposal Cost Estimates Based on Additional Research
        As previously explained, EPA contacted numerous other information sources to supplement the
data available from the Proposal Part 503 RIA. Generally, these sources confirmed the sewage sludge use
or disposal cost hierarchy shown in Table D.I. However, EPA made four adjustments to the cost data
presented in Table  D.I  to incorporate the  input from these alternate sources.  First, the cost of  surface
disposal at a dedicated site is expected to be similar to the cost of agricultural land application and  surface
impoundments.  The analysis therefore does not associate a benefit with shifts from surface disposal at a
dedicated site to agricultural land application. Second, EPA conservatively assumed that, in some cases,
the costs of selling bagged sewage sludge may equal the costs of sewage sludge incineration.  Third, EPA
                                              D.4

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estimated the cost of co-disposal of sewage sludge in a municipal solid waste landfill (MSWLF)  unit.
Although the Proposal Part 503 RIA estimated co-disposal costs, the estimate was not based on EPA's
Handbook for Estimating Sludge Management Costs, as were the other sewage sludge use or disposal cost
estimates. Therefore, EPA reviewed and updated this cost estimate. Fourth, EPA assumed that certain land-
constrained POTWs will not benefit from agricultural application or surface disposal of sewage sludge due
to limited availability of suitable sites. These latter two adjustments are further discussed below.

D.4     Costs of Co-Disposal
        As mentioned above,  EPA's  Handbook for Estimating Sludge Management Costs  does  not
provide cost information for co-disposal of sewage sludge in a MSWLF unit. In the Proposal Part 503
RIA,  the cost of co-disposing  of sewage sludge, including  full implementation of  Subtitle  D landfill
requirements, was  estimated at $46 per wet metric ton ($1989), exclusive of transportation costs.  This
value, which includes the costs of constructing and operating landfills, was generated using a landfill cost
model.

        For this analysis, EPA compared the estimate from the Proposal Part 503 RIA with estimates of
tipping  fees from a more recent source,  a survey conducted by the National Solid Wastes Management
Association (NSWMA)  (Waste Age,  November, 1993). The  NSWMA survey is an informal  sample of
tipping fees at 282 municipal solid waste landfills throughout the country. The landfills were predominately
owned and operated by private companies and the tipping fee provided was the "spot market" price for
municipal solid waste. Tipping fees for sewage sludge may be higher or lower than these rates. However,
EPA's contacts with both POTWs co-disposing of sewage sludge in a MSWLF unit and landfills accepting
sewage  sludge indicated that there is no systematic variation between tipping fees for other solid waste and
tipping fees for sewage sludge.

        The NSWMA presented average tipping fees by region of the  United States, with  a national
average cost of $31 per ton ($1989; see Table D.2). Tipping fees are assessed based on the weight of the
materials deposited, i.e., the wet weight. For comparison to Table D.I, which shows costs per  dry metric
ton, the sewage sludge was assumed to be 23 percent solids, a typical percent solids following dewatering.
Using this solids value, the average tipping fee was $146/DMT.
                                              D.5

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table $.& J9£2Ti]ppiia#Ii'ees
Region
Northeast
Mid-Atlantic
South
Mid-West
West Center
South Central
West
National Average
byBegiott flu $1<>S9>*
Average ffee
(S/ton)
$65
$47
$22
$27
$12
$12
$27
$31
Average Fee
(S/DMT) ;
$309
$224
$105
$127
$59
$59
$131
$146
Source: Waste Age, November, 1993
a Adjusted from 1992 to 1989 dollars using the Producer Price
Index - Construction Materials.
       The Waste Age article states that "full impacts of the new Subtitle D landfill regulations have not
yet been felt in all regions and significant increases in tipping fees will likely occur in the areas now
reporting the lowest rates". The tipping fees for the "West Central", "South Central", and "South" regions
are therefore likely to increase significantly, driving an increase in the national average tipping fee that
could approach the value of $46 used in the Proposal Part  503 RIA. To avoid overstating the benefits of
shifts in sewage sludge use or disposal, however, this analysis averaged the two estimates of the costs of
co-disposing of sewage sludges, excluding transportation costs. That is, the  estimates of $46/ton  and
$3I/ton were averaged for  an  estimated  national average tipping fee of $38.50  per  ton (equal to
$184/DMT).

       Because this estimate of co-disposal costs does not include sewage sludge transportation costs,
EPA added transportation  costs based  on information in the Proposal Part  503  RIA document. The
Proposal Part 503 RIA estimated transportation costs of co-disposal using the Handbook for Estimating
Sludge Management Costs. The costs ranged from $17 to $131 per dry metric ton depending on the size of
the treatment works. (The  highest cost is  associated with the smallest treatment works).  As discussed
above, however, small treatment works would be likely to contract their sewage sludge use or disposal to
larger operators, thus incurring lower transportation costs  per DMT. From telephone conversations with
POTW superintendents  and  technical  representatives, EPA  estimated  that  $80/DMT  ($1989)  is  a
reasonable upper range of transportation costs to landfills. With transportation costs assumed to range
from $17 to $80 per DMT, total average national costs of co-disposing of sewage sludge are estimated to
range from about $201-265 per DMT ($1989).

        Incorporating the above adjustments made by EPA, Table D.3 presents the cost savings for land
application and surface disposal of sewage sludge in comparison to other sewage sludge use or disposal
                                               D.6

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options. The ranges of cost savings correspond to the variations in costs by POTW flow rate group, as
shown in Table D.I.
Table D,3: Cost Savings for SWfts in Sewage Sludge Use or Disposal Metnodsfor JP0TW*
{S1989MMT)
Switch From:
Incineration
Surface
Impoundment
Dedicated Site
Monofill
Co-disposal
Switch To:
Agricultural
Application
$121-258
$0
$0
$0-75
$72-155
Sell or Give
Away as Bagged
Sludge
$0-7
$0
$0
$0
$0-41
Monofill
$121-218
N.A.
N.A.
N.A.
$3-151
Surface ;
Impoundments i
$121-258
N.A.
N.A.
N.A.
$72-155
Dedicated
Site
$121-256
N.A.
N.A.
N.A.
$21-155
Source: US Environmental Protection Agency
D.5    Limitation of Benefits for Land-Constrained POTWs
        Sewage sludge transportation is a major component of sewage sludge use or disposal costs. The
presentation of the sewage sludge use or disposal cost data in the Proposal Part 503 RIA does not discuss
variability in the distance between a POTW and a use or disposal site.  EPA assumed that the cost data
reflect the relative costs of use or disposal  practices equi-distant from a POTW. In fact, the distance to
certain types of  sewage sludge use  or  disposal sites may vary  systematically  based on  POTW
characteristics. In particular, EPA's contacts indicated that  POTWs located in major metropolitan areas
and in certain coastal areas are often farther from  agricultural land or land that can be used for surface
disposal than from incinerators or co-disposal sites. Because  of increased transportation costs, some of
these urban POTWs may not benefit from switching into agricultural application or surface disposal of
sewage sludge.

        To ensure that benefits are not overstated, this analysis  conservatively assumes that no benefits will
accrue to a percentage of POTWs assumed to be  located at  such distances from agricultural land and
surface disposal sites that sewage sludge use or disposal on these lands in cost prohibitive. If these POTWs
were to apply sewage sludge to land, the analysis assumes that,  because of land constraints, they would sell
bagged sewage sludge rather than apply  the  sewage sludge agriculturally.  Bagged  sewage sludge is
typically viewed favorably by the public because sewage sludge is land applied for nutrients in organic
material. However, selling bagged sewage sludge is a relatively expensive sewage sludge use practice due,
in part, to bagging and marketing expenses. Therefore, POTWs employing this practice may reduce then-
costs only minimally, if at all.
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        To estimate the percentage of sewage sludge for which transportation costs result in agricultural
land application and surface disposal being prohibitively expensive, EPA relied on the National Sewage
Sludge  Survey (NSSS; see Chapter 11, Table 11.1). EPA assumed that the percentage of land-applied
sludge that was sold in bags provided a rough estimate of the percentage of sewage sludge for which access
to agricultural land was prohibitively expensive. According to the NSSS, 13.4 percent of sewage  sludge
that was land applied was either "composted" or "sold." EPA interpreted these land application categories
as representative of sewage sludge that was bagged and sold. Therefore, EPA assumed that 13.4 percent of
sewage sludge that qualifies for land application due to the MP&M regulation will be bagged and sold
instead  of applied to agricultural land2. Similarly, EPA assumed that 13.4 percent of sewage  sludge that
qualifies for surface disposal is not, in fact, disposed in this manner because of high transportation costs.
  Not all sewage sludge that is composted is sold in a bag for land application. Composted sewage sludge may be
used or disposed by any  sewage sludge use or disposal practice. Because EPA could not determine the use or
disposal practice of composted sludge, the Agency conservatively assumed that this sludge was sold in a bag for
land application. This assumption may result in an underestimation of the benefits of changes in sewage sludge use
or disposal practices.
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                                        Appendix E
   Government Administrative Costs of Rule Implementation (Unfunded Mandates)

E.I    Introduction
       To implement the effluent limitations on the MP&M industry, federal, state and local government
entities will authorize and regulate waste water discharges from MP&M facilities. This appendix estimates
the incremental costs to government of administering the MP&M regulations.1

E.2    The NPDES Permit Program and General Pretreatment Regulations
        Any facility that directly discharges waste water to surface water is required to have a permit
issued under the National Pollution Discharge Elimination System (NPDES) permit program. Facilities that
discharge  indirectly through a publicly-owned treatment works (POTW) are regulated by the General
Pretreatment Regulations for Existing and New Sources of Pollution (40 CFR Part 403). The major portion
of government administrative costs associated with implementation of the MP&M categorical  standards
will be the costs of managing the NPDES and Pretreatment programs for MP&M facilities. These two
programs are discussed below.

       NPDES Basic Industrial Permit Program
       The MP&M  Best Available Technology (BAT) and New Source Performance Standards (NSPS)
regulations will be implemented through the NPDES industrial permit program.  EPA does not expect the
administrative costs associated with the NPDES industrial permit program to increase as a result of the
MP&M regulation. The Clean Water Act prohibits discharge of any pollutant  except as permitted by a
NPDES permit. Therefore, every facility that discharges waste water directly to surface water must hold a
permit specifying the mass of pollutants that can be discharged to waterways. The MP&M regulation is
expected to affect the terms of the permits but is unlikely to increase the administrative costs associated
with permitting.

        In fact, EPA expects that the administrative burden of the NPDES permit program will decrease
following promulgation of the MP&M regulation. For example, the technical guidance provided by EPA
 1 The administrative costs to MP&M facilities are included in the estimate of total compliance costs and are
 discussed in the Technical Development Document.
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as a component of rulemaking provides valuable information to permitting authorities that is  likely to
reduce the  research  required to  develop Best Professional Judgment (BPJ)  permits2.  Further, the
establishment of discharge standards may reduce time spent by permitting authorities establishing limits as
well as the frequency of evidentiary hearings. The promulgation of limitations may also enable EPA and the
authorized states to cover more facilities under general permits. General permits are designed to enable the
issuance of one permit covering a specified class of dischargers within a defined geographic area.

        Pretreatment Program
        The General Pretreatment Regulations (40 CFR Part 403) establish procedures, responsibilities,
and requirements for EPA, States, local government, and  industry to control  pollutant discharges to
POTWs.  Under  the Pretreatment Regulations, POTWs  or  approved  states  implement categorical
pretreatment standards (i.e., PSES and PSNS).

        The discharges of an MP&M facility to  a POTW  may, however,  be permitted  prior to
promulgation of the MP&M regulation3. For example, industrial users  subject to another Categorical
Pretreatment Standard are expected to hold a discharge permit. Other significant industrial users (SIU) that
are typically permitted include industrial users that:

•       Discharge an average of 25,000 gallons per.day or more of process waste water to a POTW;

•       Contribute a process waste stream which makes up 5 percent or more of the average dry weather
        hydraulic or organic capacity of the POTW treatment plant; or

•       Have a reasonable potential for adversely affecting  the POTW's operation or for violating any
        pretreatment standard.

        EPA does not expect the costs of administering the pretreatment program to, increase due to the
MP&M regulation for facilities that already hold a permit specifying the allowable  mass of pollutant
discharge to -water.  Government  administrative cost increases are expected,  however, for facilities
holding a concentration-based permit and for unpermitted facilities.  The remainder of this document
  Permits issued to facilities not covered by effluent guidelines or water quality-based standards are developed
based on BPJ.
3 Under the General Pretreatment Program, a facility's discharges may be controlled through a "permit, order or
similar means". For simplicity, this appendix refers to the control mechanism as a permit.
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estimates  these cost increases. As discussed for direct industrial dischargers, the promulgation of the
MP&M rule may cause some administrative costs to decrease. EPA has not monetized potential reductions
in government administrative costs.

E.3    Methodology
        EPA  estimated increases  in government administrative costs  only for indirect discharging
facilities (see discussion of direct dischargers, above). EPA's analysis required three data components:

        1. The number of facilities for which new permitting activities will be required.
EPA relied  on the Section 308 MP&M survey (DCP) to estimate the number of facilities for which new
government administrative functions will be required, as discussed below.

        2. The specific administrative junctions that will be performed and their frequency.
To develop  a list of administrative functions that would be performed more often as a result of the MP&M
limitations,  EPA consulted in-house sources including:

•       Information Collection Requests (ICR) addressing:
        - NPDES compliance assessment information (EPA, 1993b)
        - Applications for the NPDES Discharge  Permit (EPA, 1992)

•       Training Manual for NPDES Permit Writers (EPA, Office of Water, March, 1993)

•       A resource planning model used by EPA's Office of Waste water Management (OWM). OWM's
        activities include all permitting activities  associated with direct dischargers. The activities involved
        in permitting direct and indirect discharges are similar.

•       40 CFR part 403: General Pretreatment Regulations for Existing and New Sources of Pollution

        3. The labor and material costs of the administrative functions.
        For a few administrative functions, the sources EPA used to identify the  function (listed above)
also provided an estimate of the function's cost. To supplement this information, EPA conducted a limited
informal survey of six POTWs and three state permitting officials. EPA requested data on the typical costs
of implementing and adjusting a permit. The survey included large, small, urban,  and rural POTWs. The
responses indicated that the permitting process, and therefore permitting costs, varies substantially among
permit authorities. For each  administrative function,  EPA therefore developed a range of typical costs
reflecting the varying permitting practices.
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        In addition, EPA recognized that the permitting of certain highly complex facilities may require
effort that substantially exceeds the costs for a typical facility. In fact, a permit authority's expenses may
be dominated by expenses attributable to a few complex facilities. Therefore, EPA estimated the permit
costs associated with a theoretical highly complex facility. The permitting of a facility may be rendered
complex by such facility characteristics as undocumented history of process waste water flow, known
problems with  spills or leaks,  multiple and intricate production processes, type and quantity  of process
chemicals used, several treatment systems, or multiple outfalls.

E.4     Findings
        Number of Facilities
        The number  of facilities for which incremental government administrative activities  would be
required varies by  regulatory option4.  EPA  estimated administrative  cost  increases  for  regulatory
Options 2, la and 2a5. (See Chapter 3  of the RIA for a full description of the options.) Under Option 2,
permit authorities would issue mass-based permits to all subject facilities. Option 1A differs from Option 2
in that it allows concentration-based permits in place of mass-based permits for indirect dischargers with
flows of one million or fewer gallons per year. Under Option 2a, the proposed option, indirect dischargers
with flows of one million or fewer gallons per year are exempt from regulation while mass-based permitting
is required for other facilities.

        EPA divided indirect discharging facilities into three  (pre-compliance) flow group categories to
evaluate administrative costs: one million or fewer gallons per year; greater than one million and less than
6.25 million gallons per year;  and at least 6.25 million gallons per year (corresponding to the flow rate
definition of a significant industrial user discharging 25,000 gal/day for 250 days/year). For each of these
flow groups, Exhibit E.I  presents counts of facilities by their permit status. The exhibit also indicates the
facilities for which EPA estimated incremental costs under each of the three options.
4 The Control Authority for the General Pretreatment Program will be either the POTW (i.e., local government) or
the state.
5 These regulatory options refer to limitations for indirect discharging facilities.
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        EPA estimated government administrative costs for all facilities not holding a waste water permit.
To determine facility permit status, EPA analyzed responses to the DCP.  EPA categorized facilities that
reported (1) holding aNPDES permit, (2) having a pending NPDES permit, or (3) being regulated under an
existing national categorical standard as holding a permit in the baseline scenario6.  The data indicate that
seventeen percent of the facilities in the lowest flow group were permitted (i.e.,  910 of 5,357), as were 56
percent of facilities in the middle flow group and 91 percent  of facilities in the highest flow group. (See
Exhibit E.I).

        EPA also estimated administrative cost  increases associated  with certain indirect discharging
facilities holding waste water  permits. In  particular, the regulatory  options require that mass-based
pollutant limitations be issued for  certain dischargers.  Development of mass-based  permits  typically
requires  more labor than development of concentration-based permits.  To  avoid underestimating
government administrative costs, EPA assumed that all permitted facilities in the lowest flow group hold
concentration-based permits. Further, EPA assumed that permitted facilities in the two higher flow groups
hold concentration-based permits unless the facility reported being subject to  a Federal Categorical
Standard that contained only mass-based (i.e., production-based) standards.1 EPA estimated that all but
28 facilities in the middle flow group and 47 facilities in the highest flow group hold concentration-based
permits (See Table E. 1).
Table E.1: Indirect Discharging Facilities Operating under a M
(By Mass-Based Federal Categorical Standard
Facility
flow group
1,000,000 -
6,250,000
gal/yr
>6,250,000
gal/yr
Total
Aluminum
forming
0
43
43
Battery
mfg.
0
0
0
Coil
coating
0
0
0
Copper
forming
20
0
20
Iran/Steel
mfg*
0
0
0
Metal
molding
8
0
8
ass^Based Permit
Nonferrous
metal mfg.
0
0
0
Nonferrous
metal
forming
0
4
4
Total
28
47
75
        In summary, for Option 2a, EPA estimated administrative costs associated with 1,220 facilities
discharging between one million and  6.25 million gallons per year and 490 facilities discharging 6.25
million  or more gallons per year (see shaded areas of Exhibit E.I). For Option 1A, EPA also analyzed
  See questions 10, 11, and 13 of the technical portion of the survey.
7 As reported in Question 13 of the technical portion of the MP&M Section 308 Survey.
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4,447 facilities discharging one million or fewer gallons per year. For Option 2, EPA added 910 facilities in
the lowest flow group, assumed to hold concentration-based permits.

        Unit Costs of Administrative Functions
        EPA  estimated total  incremental  administrative costs  by  multiplying  unit  cost  data  for
administrative functions by the number of facilities to which the function is administered and the frequency
of administration.  EPA estimated  government  administrative unit costs for  administrative functions
grouped into five major categories:

1.      Permit application and issuance (including: developing and issuing concentration-based permits at
        previously unpermitted facilities;  developing  and issuing mass-based permits  at  previously
        unpermitted facilities; developing and issuing mass-based permits at facilities with concentration-
        based  permits; providing  technical  guidance;  conducting  public  hearings; and  conducting
        evidentiary hearings);

2.      Inspection (conducted for initial permit development or subsequent inspection);

3.      Monitoring (including: sampling  and analyzing  permittee's effluent; reviewing and recording
        permittee's compliance self-monitoring reports; receiving, processing, and acting on a permittee's
        non-compliance reports; and reviewing a permittee's compliance schedule report for a permittee in
        compliance and a permittee not in compliance);

4.      Enforcement (including administrative orders and administrative fines); and

5.      Repermitting.

EPA believes that the functions analyzed constitute the bulk of administrative activity. EPA recognizes that
other, relatively minor, administrative functions exist (e.g., identifying facilities to be permitted, providing
technical guidance to permittees in years other than the first year of the permit, repermitting a facility in
 significant non-compliance) but expects the associated costs to be insignificant compared to the estimated
 costs for the five major categories outlined above. These functions  may be minor because their unit costs
 are low or because few facilities are expected to require these functions to be administered.

         For each major administrative function, EPA  provides below: (1) a description  of the activities
 involved,  (2) the percentage of facilities that EPA assumed to require the administrative function by facility
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 flow group, (3) the frequency of occurrence of the function by facility flow group, and (4) EPA's estimates
 of typical unit costs and unit costs for a highly complex facility.

        When cost estimates were provided to EPA in terms of labor hours, EPA monetized the estimates
 assuming an hourly labor cost of $36 ($1989) including fringe benefits, rent, utilities, hardware, travel and
 centralized services such as finance, legal, accounting and personnel. In other cases, sources provided cost
 estimates in  dollars. Because EPA incorporated all data provided, the monetized estimates do not always
 equal the labor estimates multiplied by the assumed labor rate.

        Permit Application and Issuance
        Before issuing a waste water discharge permit to a facility, the permit authority typically  inspects
 the facility,  monitors  the facility's waste water,  and completes pollutant limits calculations  and permit
 paperwork. This section discusses the costs of completing limits calculations and paperwork;  subsequent
 sections address inspection and monitoring  costs. This  section also discusses the costs of technical
 assistance that the control authority may provide facilities to facilitate compliance with new limits.  Finally,
 this section includes the costs of public and evidentiary hearings that may be required for some permits.

        Issue a Concentration-Based Permit for a Previously Unpermitted Facility
        Under Option la, facilities discharging less than one million gallons per year  of process waste
 water  are  subject to pollutant concentration  limits.  To  issue a concentration-based  permit, permit
 authorities first review permit applications for completeness. If an application is incomplete, the authorities
 notify  the applicant and request the missing information. Completed applications are assigned to permit
 writers, who  review the applications in more detail as they develop permit conditions.  The effort required to
 complete these activities depends, in part, on the  extent to which the permit authority has automated the
 permitting process.

        EPA estimated average government administrative costs of developing and issuing a concentration-
based permit at a previously unpermitted facility at 6.5 hours or $232 (1989), with a range of 4 to  9 hours
and $143 to $321. EPA does not expect facilities with flow rates less than one million gallons per year to
present highly complex situations. Therefore, EPA did not estimate costs for a highly complex facility.
Administrative Activity: Develop and issue a concentration-based permit at a previously unpermitted facility
Percent of facilities for which
activity is required
100% of unpermitted MP&M facilities with
process waste water flow of one million or
fewer gallons per year (Option la)
Frequency
of activity
One time
Typical costs
Low
4hrs;
$143
Average
6.5 hrs;
$232
High
9 hrs;
$321
Highly complex
facility costs
N.A.
                                                E.8

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        Issue a Mass-Based Permit for a Previously Unpermitted Facility
        The administrative activities required to issue a concentration-based permit are also required for a
mass-based permit. In addition, for mass-based permits issued under the MP&M rule, the permit writer
must determine whether the facility practices  pollution  prevention  and water conservation methods
equivalent to those specified as the  basis for BPT. If so, the permitting authority  must determine the
facility's historical flow rate; If not, the authority must derive a mass-based limit based on other factors
such as production rates. When a facility matches BPT water conservation practices and provides historic
flow data, development of a mass-based permit is  a relatively straight-forward process. However, at a
facility practicing only limited water conservation, the task will be more challenging, particularly if the
facility has multiple production units and generates integrated process and sanitary waste waters.

        All unpermitted MP&M facilities will require issuance of a mass-based permit under Option 2.
Under Option la and 2a, only unpermitted facilities with flow rates greater than one million gallons per
year will require mass-based permits. EPA assumed that one-third of facilities are permitted in each of the
three years following the rule's effective date because compliance  is mandated within 3 years of the data
the standard is effective (40 CFR Section 403.6)8. EPA further assumed that facilities are repermitted in
five year cycles. The administrative costs of repermitting are discussed below.

        EPA estimated average government  administrative costs of developing and issuing a mass-based
permit at a previously unpermitted facility at 24.5 hours or $874 (1989), with a range  of 9 to 40 hours and
$312 to $1,427. For a highly complex facility, EPA estimated costs at 120 hours or $4,280.
Administrative Activity: Develop and issue a mass-based permit at a previously unpermitted facility
Percent of facilities for which
activity is required
100% of unpermitted MP&M facilities
(Option 2); 100% of unpermitted MP&M
facilities with process waste water flow
greater than one million gallons per year
(Options la and 2a)
Frequency
of activity
One time
Typical costs
Low
9hrs;
$312
Average
24.5 hrs;
$874
High
40 hrs;
$1,427
Highly complex
facility costs
120 hrs;
$4,280
        Issue a Mass-Based Permit for a Facility with a Concentration-based Permit
 8 The actual number of facilities that are permitted each year is likely to differ somewhat from EPA's simplifying
 assumption. The Agency would prefer to receive baseline facility monitoring reports from all facilities early in the
 permitting process. Control Authorities are then expected to place a priority on issuing mass-based permits. These
 minor differences in permit timing are not expected to significantly change the estimated administrative costs.
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        Some of the activities described above  for  issuing a permit at unpermitted facilities will be
simplified in the case that the facility already holds a concentration-based permit. For example, much of the
basic information required in the permitting application will already be entered in the permitting authorities'
records. However, the potentially labor intensive task of determining the flow basis for the permit remains.

        All MP&M facilities holding  a concentration-based permit will require issuance of a mass-based
permit under Option 2. Under Options la and 2a, facilities generating waste water flows less than one
million gallons per year do not require mass-based permits. EPA again assumed that one-third of facilities
are permitted in each of the first three years following the effective date of the rule. EPA further assumed
that facilities are repermitted in five year cycles. The administrative  costs of repermitting are discussed
below.

        EPA estimated average government administrative costs of developing and issuing a mass-based
permit for a facility holding a concentration  based permit at 17.5 hours or $624 (1989), with a range of 3
to 32 hours and  $107 to $1,141. For a highly complex facility, EPA estimated costs at 112 hours  or
$3,995.
Administrative Activity: Develop and issue a mass-based
permit at a facility holding a concentration-based permit
Percent of facilities for which
activity is required
100% of MP&M facilities holding a
concentration-based permit (Option 2);
100% of MP&M facilities holding
concentration-based permits with process
waste water flow greater than one million
gallons per year (Option la and 2a)
Frequency
of activity
One time
Typical costs
Low
3hrs;
$107
Average
17.5 hrs;
$624
High
32 hrs;
$1,141
Highly complex
facility costs
112 hrs;
$3,995
        Provide technical guidance to a permittee
        Technical guidance is frequently provided by permit authorities to permittees concurrent with the
issuance of an initial permit. There are no legal requirements that a permit authority provide a permittee
with technical guidance. However,  such guidance is generally in the interest of all parties  as  it can
accelerate the permittee's compliance and reduce the compliance burden. The extent of technical guidance
provided varies dramatically among permit authorities. In some cases, a permit authority may hold a one-
day workshop to transfer information on a new pretreatment standard to facilities. In other cases, a permit
authority may meet extensively with individual permittees to educate them regarding their responsibilities
under  pretreatment  standards. The range of technical guidance  appears  to depend on the technical
sophistication of the permittee (e.g., whether the permittee already is  in compliance with a waste water
                                               E.10

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permit, whether the permittee is part of a multi-facility company), the resources of the permit authority, and
the extent to which the permit authority has written or standardized guidance available for dissemination.

        EPA assumed that permit authorities provide technical guidance to  all facilities being issued  an
initial mass-based or concentration-based permit under the MP&M pretreatment standards. EPA modeled
technical guidance as occurring in the year the initial permit is issued.

        EPA estimated average government administrative costs of providing  technical guidance at 5 hours
or $178 (1989), with a range of  1 to 9  hours and  $36 to $321. For a highly complex facility,  EPA
estimated costs at 80 hours or $2,853.
Administrative Activity: Provide technical guidance to a permittee on permit compliance
Percent of facilities for which
activity is required
100% of MP&M facilities being issued an
initial mass-based or concentration-based
permit
Frequency
of activity
One time
Typical costs
Low
Ihrs;
$36
Average
5hrs;
$178
High
9 hrs;
$321
Highly complex
facility costs
80 hrs;
$2,853
        Conduct a public hearing on a proposed permit
        Federal regulations provide for a period during which the public may submit written comments on
a proposed permit for direct dischargers and/or request that a public hearing be held. Often, the permitting
authority for indirect dischargers adopts  these federal  standards. Thus, proposed permits for indirect
dischargers may be subject to public comments and hearings. Typically, pretreatment public hearings are
conducted at a scheduled local government (e.g.,  City  Council) meeting. The meetings may, however,
require substantial preparation.

        EPA estimated that a public hearing would be  required for five percent of indirect dischargers
being issued an initial mass-based or concentration-based permit under the MP&M pretreatment standards.
EPA estimated average government administrative costs of conducting a public hearing at 40 hours or
$1,427 (1989), with a range of 30 to 50 hours and $1,070 to $1,783. For a highly complex facility, EPA
estimated costs at 200 hours or $7,134.
Administrative Activity: Conduct a public hearing
Percent of facilities for which
activity is required
5% of MP&M facilities being issued an
initial mass-based or concentration-based
permit
Frequency
of activity
One time
Typical costs
Low
30 hrs;
$1,070
Average
40 hrs;
$1,427
High
50 hrs;
$1,783
Highly complex
facility costs
200 hrs;
$7,134
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         Conduct an evidentiary hearing on a permit determination
         Federal regulations also provide for evidentiary hearings following final permit determination for
 direct dischargers. Again, permitting authorities for indirect dischargers often adopt these federal standards.
 Thus, final permit determinations for indirect dischargers may be subject to evidentiary hearings.

         EPA estimated that an evidentiary  hearing  would be required for five  percent  of indirect
 dischargers  being  issued  an  initial  mass-based or concentration-based  permit  under the  MP&M
 pretreatment  standards.  EPA  estimated  average  government administrative costs  of conducting an
 evidentiary hearing at 350 hours or $12,484  (1989), with a range of 250 to 450 hours  and $8,917 to
 $16,050. For a highly complex facility, EPA estimated costs at 1,000 hours or $35,668.
Administrative Activity: Conduct an evidentiary hearing
Percent of facilities for which
activity is required
5% of MP&M facilities being issued an
initial mass-based or concentration-based
permit
Frequency
of activity
One time
Typical costs
Low
250 hrs;
$8,917
Average
350 hrs;
$12,484
High
450 hrs;
$16,050
Highly complex
facility costs
1000 hrs;
$35,668
        Inspection of permittee
        Permit authorities may  choose to integrate their  inspection and  monitoring work force  or to
administer these functions separately. This discussion covers inspections only; monitoring is discussed in a
following section. Inspections are performed both to assess conditions for initial permitting and to evaluate
compliance with  permit requirements. Inspections  involve record  reviews, visual  observations, and
evaluations of the treatment facilities,  effluents, receiving waters, etc.  (EPA,  1992).  A significant
component of the labor costs - and a major cause of variability in costs between permit authorities - is
travel time from the site of the permit authority to the permittee.

        EPA estimated inspection costs for all facilities being issued an initial permit under the MP&M
rule. For facilities with flows of one million or fewer gallons per year, inspections under Options 2 and  la
are required every five years9. For facilities in the larger flow groups, annual inspections are required10
EPA estimated average government administrative costs of inspection at 8  hours or $453 (1989), with a
n
  During Option development, EPA considered reducing the frequency of inspections for facilities with flow of
1,000,000 or fewer gallons per year. This analysis incorporates the reduced inspection requirements.
10
   Although EPA  requires  only  annual  inspections, some  localities inspect  facilities more frequently. EPA
encourages this practice.
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range of 1 to 24 hours and $50 to $856. For a highly complex facility, EPA estimated costs at 40 hours or
$1,427.
Administrative Activity: Permittee inspection
Percent of facilities for which
activity is required
100% of MP&M facilities
being issued an initial permit
Frequency
of activity
• Facilities with flow <
1,000,000 gal/year:
every 5 years
• Others: Annually
Typical costs
Low
1 hour;
$50
Average
8hrs;
$453
High
24hrs;
$856
Highly complex
facility costs
40 hrs;
$1,427
       Monitoring
       Permitting authorities monitor facilities both to gather data needed for permit development and to
assess compliance with permit conditions. Monitoring includes the sampling and analysis of the permittee's
effluent, review of the permittee's compliance self-monitoring reports, receipt of non-compliance reports,
and review of compliance schedule reports. These activities are discussed below.

       Sample and analyze permittee's effluent
       As noted above, inspection and monitoring staff may be integrated or distinct.  The costs of
inspection were presented above. Federal regulations require that the permit authority "randomly sample
and analyze the effluent from industrial users ...independent of information supplied by industrial users"
(40 CFR Part 403.8). The permit authority obtains samples required by the permit and performs chemical
analyses. The results are used to  verify the accuracy of the  permittee's  self-monitoring  program  and
reports, determine the quantity and  quality of effluents,  develop  permits, and provide  evidence for
enforcement proceedings where appropriate (EPA, 1992).

       Sampling costs include both labor and  laboratory analytic charges. EPA estimated waste water
analytical charges for a whole metals scan, cyanide analysis, and oil and grease analysis.  The sampling
costs vary based on the number of sampling locations at a facility. While many facilities have one sampling
location, complex facilities may have more than 10 sampling locations. As was mentioned in  the discussion
of inspection costs, travel time from the site of the permit authority to the permittee significantly affects
labor costs.

       EPA estimated sampling costs for all facilities issued an initial permit under the MP&M rule. For
facilities with flows of one million or fewer gallons per year, monitoring under Options 2 and  la is required
                                              E.13

-------
every five years11. For facilities in the larger flow groups, annual monitoring is required12.  EPA estimated
average government administrative labor costs of effluent sampling at 8 hours or $453 (1989), with a range
of 3 to  24 hours and $50 to $85613. For a highly complex facility, EPA estimated costs  at 80 hours or
$2,853. In addition, EPA  estimated average analytic charges  at $240 (corresponding to one sampling
location), with this value also serving as the low-end estimate and a high estimate of $480. For a highly
complex facility, EPA estimated analytic charges at $2,400 (corresponding to 10 sampling locations).
Administrative Activity: Sample and analyze permittee 's effluent
Percent of facilities for which
activity is required
100% of MP&M facilities
being issued an initial permit
Frequency
of activity
• Facilities with flow <,
1,000,000 gal/year:
every 5 years
• Others: Annually
Typical costs
Low
3 hour;
$290
Average
8hrs;
$693
High
24hrs;
$1,336
Highly complex
facility costs
80 hrs;
$5,253 .
        Review and record permittee's compliance self-monitoring reports
        40 CFR Part 403.12 specifies that: "Any Industrial  User subject to a categorical pretreatment
standard...shall  submit  to the Control authority during the  months  of June and  December...a report
indicating the nature  and concentration of pollutant in the effluent which are limited by such categorical
pretreatment standards." For facilities with flows of one million gallons per year or less, the MP&M rule
reduces the frequency  of this requirement to one time per  year14.  The permit  authority (i.e., control
authority) briefly reviews these submissions and may enter the information into a computerized system
and/or file the data.

        EPA estimated the costs of handling self-monitoring reports for all facilities being issued an initial
permit under the MP&M rule. EPA estimated average government administrative costs of handling each
self-monitoring report at 1 hour or $36 (1989), with a range of 0.75 to 1.25 hours and $27 to $45. For a
highly complex facility, EPA estimated costs at 4 hours or $143.
" During Option development, EPA considered reducing the frequency of monitoring for facilities with flow of
1,000,000 or fewer gallons per year. This analysis incorporates the reduced monitoring requirements.
12 Although  EPA  requires only annual effluent  sampling, some localities  sample facilities'  effluents more
frequently. EPA encourages this practice.
13 Dollar estimates do not equal labor estimates multiplied by the assumed labor rate because dollar and labor
estimates were obtained from different sources.
14 During Option development, EPA considered reducing the frequency of self-monitoring reports for  facilities
with flow of 1,000,000 or fewer gallons  per  year.  This analysis incorporates  the reduced  self-monitoring
requirements.
                                                E.14

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Administrative Activity: Review and data entry of permittee 's compliance self-monitoring reports
Percent of facilities for which
activity is required
100% of MP&M facilities
being issued an initial permit
Frequency
of activity
• Facilities with flow <
1,000,000 gal/year:
every 5 years
• Others: Annually
Typical costs
Low
0.75 hrs;
$27
Average
Ihrs;
$36
High
1.25
hrs;
$45
Highly complex
facility costs
4 hrs;
$143
       Receive, process, and act on a permittee's non-compliance report
       Generally, when a permittee violates a permit condition, it must submit a noncompliance report to
the permit authority. Permittees report both unanticipated bypasses or upsets and violations of maximum
daily  discharge.  The permit authority receives  and processes  both  verbal and written non-compliance
reports. In some cases, immediate action by the permit authority is required to mitigate the problem.

       Based on estimates in an "Information Collection Request" (EPA,  1993b), EPA assumed that the
annual incremental  increase in non-compliance reports equaled ten percent of minor facilities issued an
initial permit under the MP&M rule and thirty percent of major facilities issued an initial permit under the
MP&M rule.15 EPA estimated average government administrative costs of handling each noncompliance
report at 3.5 hours or $125 (1989), with a range of 3 to 4 hours  and $107  to $143. For a highly complex
facility, EPA estimated costs at 8 hours or $285.
Administrative Activity: Receive, process and act on a permittee 's non-compliance reports
Percent of facilities for which
activity is required
10% of minor MP&M facilities being issued
an initial permit;
30% of major MP&M facilities being issued
an initial permit
Frequency
of activity
Annual
Typical costs
Low | Average
3 hrs;
$107
3.5 hrs;
$125
High
4 hrs;
$143
Highly complex
facility costs
8 hrs;
$285
        Review a permittee's compliance schedule report: for a permittee meeting compliance milestones
        Permittees submit reports to permit authorities that state whether compliance schedule milestones
contained in their permits have been met. EPA assumed compliance schedules cover a three year time
frame. If the facility is in compliance, the permit authority reviews and files the report.

        EPA assumed that the incremental number of facilities submitting compliance schedule reports due
to the MP&M rule will be ninety percent of minor facilities issued an initial permit under the MP&M rule
  A minor facility discharges less than 25,000 gallons per day.
                                              E.15

-------
and ninety-five percent of major facilities issued an initial permit under the MP&M rule.16 EPA estimated
average government administrative costs  of handling each compliance  schedule report for  a facility in
compliance at 0.25 hours or $9 (1989), with a range of 0.2 to 0.3 hours and $7 to $11. For a highly
complex facility, EPA estimated costs at 2 hours or $71.
Administrative Activity: Review a compliance schedule report for a permittee meeting milestones
Percent of facilities for which
activity is required
90% of minor MP&M facilities being issued
an initial permit;
95% of major MP&M facilities being issued
an initial permit
Frequency
of activity
1.5
reports
per year
Typical costs
Low
0.2 hrs;
$7
Average
0.25 hrs;
$9
High
0.3 hrs;
$11
Highly complex
facility costs
2 hrs;
$71
        Review a permittee's compliance schedule report: for a permittee not meeting milestones
        Some compliance schedule reports will indicate that permittees are not in compliance  with their
scheduled milestones. The permit authority is expected to contact these facilities to provide assistance and
to enforce the milestones.

        Based  on estimates in an "Information Collection Request" (EPA,  1993b), EPA assumed that
twenty percent of facilities submitting compliance schedule monitoring reports are not in compliance. EPA
estimated average incremental government  administrative costs of handling each compliance schedule
report indicating non-compliance at 4 hours or $143 (1989), with a range of 3 to 5 hours and $107 to $178.
For a highly complex facility, EPA estimated costs at 8 hours or $285.
Administrative Activity: Review a compliance schedule report for a permittee not meeting milestones
Percent of facilities for which
activity is required
20% of facilities submitting a compliance
schedule report
Frequency
of activity
1.5
reports
per year
Typical costs
Low
3 hrs;
$107
Average
4 hrs;
$143
High
5 hrs;
$178
Highly complex
facility costs
8 hrs;
$285
       Enforcement
       Once a Control Authority identifies permit violations, the Authority determines and implements an
appropriate enforcement action. Considerations when making determinations of the enforcement response
include (1) the severity of the permit violation, (2) the degree of economic benefit obtained through the
violation,  (3)  previous enforcement actions taken  against the violator,  (4) the deterrent  effect of the
16
  A minor facility discharges less than 25,000 gallons per day.
                                               E.16

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response on similarly situated permittees, and (5) considerations of fairness and equity (EPA, 1993). EPA
estimated administrative costs for two levels of enforcement actions: (1) less severe actions such as issuing
an administrative order and (2) more severe activities such as levying an administrative fine.

        Issue an administrative compliance order
        EPA estimated that, annually, ten percent of facilities issued an initial permit under the MP&M
rule will require a minor  enforcement action, such  as issuing an administrative compliance order. EPA
estimated average government administrative costs at 16 hours, or $571 ($1989), with a range of 8 to 24
hours and $285 to $856. For a highly complex facility, EPA estimated costs at 40 hours, or $1,427.
Administrative Activity: Minor Enforcement Action e.g., Issue an Administrative Order
Percent of facilities for which
activity is required
10% of MP&M facilities being issued an
initial permit
Frequency
of activity
annual
Typical costs
Low
8hrs;
$285
Average
16 hrs;
$571
High
24 hrs;
$856
Highly complex
facility costs
40 hrs;
$1,427
        Impose an administrative fine
        EPA estimated that  for  half of the facilities receiving an administrative order, more severe
enforcement actions will be necessary. EPA estimated the average government administrative costs of more
severe enforcement action, such as imposing an administrative fine, at 120 hours, or $4,280 ($1989), with
a range of 80 to  160 hours and $2,853 to $5,707. For a highly complex facility, EPA estimated costs at
240 hours, or $8,560.
Administrative Activity: Minor Enforcement Action e.g., Impose an Administrative Fine
Percent of facilities for which
activity is required
5% of MP&M facilities being issued an
initial permit
Frequency
of activity
annual
Typical costs
Low
80 hrs;
$2,853
Average
120 hrs;
$4,280
High
160 hrs;
$5,707
Highly complex
facility costs
240 hrs;
$8,560
        Repermitting
        The duration of waste water permits cannot exceed five years. Renewing a permit for a facility in
compliance (exclusive of inspection and monitoring) is expected to be a relatively straightforward task. The
data required in the permit application generally requires few changes, although pollutant limits may need
to be recalculated in some cases.  The labor required for repermitting depends, in  part, on the extent to
which the permit authority has automated the paperwork.

        EPA estimated average government administrative costs of reissuing a permit at 10 hours or $268
(1989), with a range of 1 to 14 hours and $36 to $499. For a highly complex facility, EPA estimated costs
at 24 hours or $856.
                                               E.17

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Administrative Activity: Repermit
Percent of facilities for which
activity is required
100% of MP&M facilities being issued an
initial permit
Frequency
of activity
every 5
years
Typical costs
Low
Ihr;
$36
Average | High
lOhrs;
$268
14 hrs;
$499
Highly complex
facility costs
24 hrs;
$856
        Annualized Incremental Costs
        EPA used the unit cost estimates, the frequencies of the administrative activities, and the facility
counts to estimate annualized incremental  government administrative costs  over a fifteen year period
following rule promulgation. EPA first developed schedules indicating the number of facilities to which
each activity is administered in each year. Tables E.2,  E.3, and E.4 show these schedules for regulatory
Options la, 2, and 2a, respectively.

        For example, under regulatory Option 2a (see Table E.4), 1,710 facilities will require an initial
mass-based permit. Because compliance is mandated within three years of the rule's effective date, EPA
assumed that permitting occurs over a three year period. Table E.4 shows one-third of the facilities (570
facilities) are issued a permit in years 1, 2, and 3.

        EPA then multiplied the  number of facilities by the  low, average, and high estimates of the unit
costs of each activity and annualized costs  using a discount rate of seven percent (See Table E.5). EPA
applied the unit cost estimates  for "highly complex" facilities to twenty percent of facilities in the middle
flow group and forty  percent of facilities in  the high flow group. EPA  does not expect facilities with flow
rates  less than one million gallons per year to present complex permitting issues.  The costs for highly
complex facilities are incorporated in the low, typical, and high total cost estimates.

        Under Option 2 — which requires mass-based permits for all  MP&M facilities — administrative
costs are estimated at $5.6 million (1989) per year (See Table E.5). Under Option 1A, administrative costs
are reduced by about  seven percent  to $5.2 million  (1989)  because concentration-based  permits for
facilities with flows of one million gallons per year or fewer are less burdensome than mass-based permits.
Administrative costs  are  further reduced under the  proposed  Option 2a by  nearly 60 percent to $2.2
million. This option entirely exempts indirect discharging facilities with  flow of one  million gallons per year
from regulation.
                                                E.18

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                                         Appendix F
                    Summary of Estimated Costs and Benefits for the
                Alternative Option Considered for Proposal: Option la/2

F.I    Introduction
       In developing the proposed  regulation,  Option 2a/2, for the MP&M  Phase I industry, EPA
considered proposing an alternative regulation referred to as Option la/2. This alternative regulatory option
has a similar framework to Option 2a/2 in that low-flow indirect dischargers (i.e., with annual discharge
volume of less than 1 million gallons per year) were to be regulated differently  from large-flow indirect
dischargers.  However,  whereas the proposed Option 2a/2 exempts low-flow indirect dischargers from
regulatory requirements, the alternative Option la/2 would have required that low-flow indirect dischargers
meet regulatory  requirements that are modestly less stringent than those imposed on large-flow indirect
dischargers.   Specifically,  Option la/2  included  a tiered PSES requirement that blends  elements  of
Options 1 and  2  as  originally  defined  for indirect  dischargers.  Low-flow  sites  would  meet  the
concentration-based standard of Option 1 while large-flow sites would meet the mass-based standards that
embody pollution prevention as well as the Lime and Settle Treatment process as specified for Option 2.
Thus, the alternative Option la/2 is identical to the proposed Option 2a/2 with the exception that low-flow
indirect dischargers meet Option 1 requirements instead of being exempted from regulation.

        EPA completed all  the regulatory analyses for  the  alternative Option la/2 and the results are
summarized in this Appendix.

F.2    Economic Impacts and Social Costs
        EPA's analysis indicated that Option la/2 would be economically achievable by the MP&M
industry. Table  F. 1 summarizes the results of the facility impact analysis  for Option la/2. Although the
impacts  in terms of estimated facility closures, employment losses, and  compliance costs are slightly
greater than those estimated for Option 2a/2 (see Chapter 4), EPA judged these impacts to be economically
achievable. EPA estimated that a total of 169 indirect and direct discharging facilities would close as a
result of regulation under the conservative zero-cost-pass-through analysis; the estimated closures represent
 1.9 percent of the facilities passing the baseline analysis. Associated employment losses amounted to 2,513
FTEs and shipment losses were estimated at $207 million annually in 1989 dollars. EPA  estimated that
capital costs of compliance at $427 million ($1989) and total annualized compliance costs on an after-tax
                                                F.I

-------
basis at $194 million ($1989). Total annualized compliance costs on a pre-tax basis, as used in the social
cost analysis of the regulatory options, were estimated at $238 million ($1989).
Number of Facilities
Percent of Class
Employment (FTEs)
Value of Shipments
169
1.85%
2,513
$207,308
99
1.09%
1,226
$169,531
            Table F4: Estimated Impacts of Regulatory Compliance for the Alternative Option
                   Considered for Proposal: Option la/2 (dollar values in $000, 1989)
                                                     Through Analysis   Through Analysis
           Facilities in Analysis
   9,130
   9,130
           Severe Impacts (closing facilities)
           Moderate Impacts (financial stress short of closure)
           Number of Facilities
      54
      12
           Financial Impacts in Complying Facilities
           Capital Cost
$427,122
$429,880
           Total Annual Compliance Cost
Tax-adjusted^
No adjustments*
$193,536
$238,218
$194,844
$239,835
           f "Tax-adjusted" compliance costs are an estimate of the annual cash compliance
           cost to industry and reflect private costs of capital and expected tax treatment of
           capital outlays and annual expenses.
           J Compliance costs with "No adjustments" are an estimate of the total annual cost
           of compliance without tax adjustments and with capital costs annualized on the basis
           of a real social discount rate.
           Source: U.S. Environmental Protection Agency	
        All other economic analysis categories— small business, community employment, firm  level,
foreign trade, and new source — were also found to have modest impacts. EPA also found that Option la/2
would be cost effective (see Chapter 4).

        Social  costs were estimated in the same categories as discussed in Chapter 5 for the proposed
Option 2a/2. As noted above, the total annual compliance costs to society of Option la/2 were estimated at
$238 million. This amount includes $194 million in after-tax costs borne by industry, plus $44 million in
additional costs which reflect the shifting of costs to society via the tax treatment of capital outlays and
annual expenses, and adjustments for the use of a real opportunity cost of capital to society for annualizing
capital outlays (see Table F.2). The costs to government of administering Option la/2 were estimated at
$3.1 - $7.5 million while the cost of unemployment administration and worker displacement stemming from
estimated unemployment under Option 2a/2 were  estimated at $3.8 -  $5.0 million ($1989). Thus, EPA
estimated total annual social costs for Option 2a/2 of $245.2 - $250.7 million ($1989).
                                                F.2

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                            IU: Comparison of Bsttotaled Benefits and Costs for
                            the Alternative Option la/2 Considered for the
               Metal Products and Machinery Industry, Phase I {millions of 1989 dollars)
        Benefit and Cost Categories
      Value
        Benefit Categories
            Human Health Benefits: Fish Consumption
            Human Health Benefits: Water Consumption
            Recreational Fishing Benefits
            Avoided Sewage Sludge Disposal or Use Costs
        Total Monetized Benefits

        Cost Categories
             Cost to Industry for the Proposed Regulatory Option
            Adjustments for Tax Code and Use of Social Discount Rate
             Costs of Administering the Proposed Regulation
            Unemployment Administration and Worker Displacement Costs
        Total Monetized Costs

        Net Monetized Benefits (Benefits less Costs)*  	
   $7.3
   $0.0
  $29.0
  $43.3
 $37.9
  $0.0
$103.4
 $95.2
  $79.6     $236.6
      $193.5
       $44.7
   $3.1   -    $7.5
   $3.8   -    $5.0
 $245.2   - $250.7

($171.2)  -  ($8.6)
        * For calculating the range of net benefits, the low net benefit value is calculated by subtracting
        the high value of costs from the low value of benefits. The high net benefit value is calculated
        by subtracting the low value of costs from the high value of benefits.
        Source: U.S. Environmental Protection Agency	
F.3     Estimated Benefits
        EPA also estimated the benefits of the alternative Option la/2 in the same categories as described
in Chapters 6 through 12.

        Human Health Benefits
        As a result of reduced contamination offish taken from waterways affected by MP&M discharges,
EPA estimated that Option la/2 would result in 3.6 fewer cancer cases annually among the exposed fishing
populations (see Table F.3). EPA estimated the value of the avoided  cancer cases at $7.3 - $37.9 million

annually ($1989).
Table ¥,3; Estimated Avoided Cancer Cases and Value of Benefits for the Alternative Option la/2
CAS#
75092
117817
127184
7440382
Chemical
Dichloromethane
Bis(2-ethylhexyl) phthalate
Tetrachloroethene
Arsenic
Brmking Water
Drinking
Water
Criterion?
yes
yes
yes
yes
Totals Relevant to the Benefits Analysis
Avoided
Cancer
Cases
0.053
1.061
0.140
2.177
0.000
Value of
Benefit
(S mi 11 ion)
0.0
0.0
0.0
0.0
0.0
Fish Cons»nmti«n
Avoided
Cancer
Cases
0.015
1.879
0.028
1.724
3.646
Value of
Benefit
($ million)
0.0-0.2
3.8 - 19.5
0.1-0.3
3.4 - 17.9
7.3 .- 37.9
1 Estimated value of avoided cancer case ($1989): $2 million - $10.4 million
Source: U.S. Environmental Protection Agency
                                                F.3

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       Recreational Fishing Benefits
       EPA used the same methodology for assessing improvements in aquatic habitats as discussed in
Chapter 9. The alternative Option la/2 was found to eliminate the occurrence of pollutant concentrations in
excess of AWQC limits in all but 22 of the 257 baseline occurrences (see Table F.4). As a result of these
habitat improvements, EPA estimated that the value of recreational fishing on the benefiting reaches would
increase by $29.0 - $103.4 million annually ($1989).
Table F.4t Estimated MP&M Discharge Beaches with MP&M Pollutant Concentrations in
Excess of AWQC Limits for Protection of Aquatic Species or Human Health: Option la/2
Regulatory
Status
Baseline
Option la/2
. Reaches with Concentrations Exceeding
AWQC Acute
Exposure Limits for
Aquatic Species
27
7
AWQC Chronic
Exposure Limits for
Aquatic Species
130
0
AWQC Limits
for Human
Health
137
15
Number of Reaches
with Concentrations
Exceeding AWQC
257
22
Note: In the baseline, the total number of reaches with concentrations exceeding AWQC limits does not equal
the sum of the numbers in the separate analysis categories because some reaches have concentrations in excess of
AWQC Umits for more than one analysis category.
Source: U. S. Environmental Protection Agency
       Avoided Sewage Sludge Disposal or Use Costs
       As a result of reduced metals discharges to POTWs, EPA found that Option la/2 would enable
497 POTWs to dispose of sewage sludge by land application. As a result, the cost to POTWs for disposal
or use of sewage sludge would decrease by an estimated $43.3 - $95.2 million annually ($1989).

       Total Monetized Benefits
       On the basis  of the analysis for these three  benefit  categories, EPA estimated total monetized
benefits for the alternative Option la/2 of $79.6 - $236.6 annually ($1989).

F.4    Comparison of Estimated Costs and Benefits
       Combining the estimates  of social benefits and social costs yields an estimate of net monetizable
benefits for Option la/2 ranging from negative $171.2 million to negative $8.6 million annually ($1989).
As discussed in Chapter 12, the assessment of benefits is necessarily incomplete because of the omission of
numerous mechanisms by which society is likely to benefit from reduced effluent discharges.
                                              F.4

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                            Appendix G
Environmental Assessment of the Proposed Effluent Guidelines for the Metal
              Products and Machinery Industry (Phase I)
                                G.I

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        Environmental Assessment of the
       Proposed Effluent Guidelines for the
Metal Products and Machinery Industry (Phase I)
                    Final Report
                  March 31, 1995
         U.S. Environmental Protection Agency
                   Office of Water
           Office of Science and Technology
         Standards and Applied Science Division
                 401 M Street, SW
               Washington, DC 20460
                    Ed Gardetto
                   Task Manager

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                             TABLE OF CONTENTS
                                                                        Page No.

EXECUTIVE SUMMARY  	  vii

1.    INTRODUCTION	  1

2.    METHODOLOGY	  3

      2.1   Projected Water Quality Impacts	  3

            2.1.1  Direct Discharging Facilities	  3
            2.1.2  Indirect Discharging Facilities	  7
            2.1.3  Sample Set Data Analysis and National Extrapolation	10
            2.1.4  Assumptions and Caveats	11

      2.2   Pollutant Fate and Toxicity  	12

            2.2.1  Chemical Identification  	13
            2.2.2  Compilation of Physical-Chemical and Toxicity Data	13
            2.2.3  Categorization Assessment  	17
            2.2.4  Assumptions and Limitations	21

      2.3   Projected Sludge Disposal Impacts	22
      2.4   Documented Environmental Impacts	24

3.    DATA SOURCES  	25

      3.1   Facility-Specific Data	25
      3.2   Information Used to Evaluate POTW Operations	26
      3.3   Water Quality Criteria (WQC)  	27

            3.3.1  Aquatic Life	27
            3.3.2  Human Health	29

      3.4   Pollutant Fate and Toxicity  	32
      3.5   Documented Environmental Impacts	32
                                        11

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                        TABLE OF CONTENTS (Continued)
                                                                         Page No.

       SUMMARY OF RESULTS	33

       4.1    Projected Water Quality Impacts	33

             4.1.1  Direct Discharge Facility Sample Set	33
             4.1.2  Direct Discharge Facility National Extrapolation	35
             4.1.3  Indirect Discharge Facility Sample Set	36
             4.1.4  Indirect Discharge Facility National Extrapolation	37
             4.1.5  POTW Model Sample Set	39
             4.1.6  POTW National Extrapolation	40

       4.2    Pollutant Fate and Toxicity	40

             4.2.1  Pollutants of Concern	41
             4.2.2  Human Health Effects	 . 41
             4.2.3  Ecological Effects  .	42
             4.2.4  POTW Effects	43

       4.3    Projected Sludge Disposal Impacts	44
       4.4    Documented Environmental Impacts	45
5.
REFERENCES
R-l
                                       in

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                                  ATTACHMENTS
Attachment A   Current and proposed BAT/PSES facility pollutant loadings, effluent
               flows, and operating days ...  ......................... A-l

Attachment B   Receiving stream data for direct and indirect discharging facilities  ... B-l

Attachment C   POTW treatment efficiency removal rates, inhibition values, and
               sewage sludge regulatory levels  ........................ C-l

Attachment D   Aquatic life and human health values used in the Water Quality
               Analysis  ....................................... D-l
Attachment E   Physical/chemical properties used in the categorization assessment . . .  E-l
                                          IV

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                                 LIST OF TABLES
                                                                           Page No.

Table 1.   Frequency of Pollutants from 55 Direct MP&M Facilities Discharging
           to 55 Receiving Streams	46

Table 2.   Summary of Pollutant Loadings for Direct and Indirect MP&M Facilities .  47

Table 3.   Summary of Projected Criteria Excursions for Direct MP&M Dischargers   48

Table 4.   Summary of Pollutants Projected to Exceed AWQC	49

Table 5.   Summary of Projected Criteria Excursions for Direct MP&M Dischargers
           On A National Basis	53

Table 6.   Frequency of Pollutants from 307 Indirect MP&M Facilities Discharging
           to 264 POTWs On 249 Receiving Streams	54

Table 7.   Summary of Projected Criteria Excursions for Indirect MP&M
           Dischargers	55

Table 8.   Summary of Pollutants Projected to Exceed AWQC	56

Table 9.   Summary of Projected Criteria Excursions for Indirect MP&M
           Dischargers On A National Basis  	58

Table 10.   Summary of Projected POTW Inhibition and Sludge Contamination
           Problems	59

Table 11.   Summary of Pollutants Projected to Impact POTWs	60

Table 12.   Summary of Projected POTW Inhibition and Sludge Contamination
           Problems On A National Basis	61

Table 13.   Potential Fate and Toxicity of Pollutants of Concern	62

Table 14.   Human Carcinogens Evaluated, Weight-of-Evidence Classifications,
           and Target Organs	64

Table 15.   Toxicants Exhibiting Systemic and Other Adverse Effects  	65

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                          LIST OF TABLES (Continued)


                                                                       Page No.

Table 16.  Potential MP&M POTW Sludge Disposal Transition	66

Table 17.  Summary Table of Potential MP&M POTW Sludge Disposal Practices  .  .  67

Table 18.  Metal Products and Machinery (MPM) Facilities Included on
          State 304(L) Short Lists	70

Table 19.  Environmental Impact Case Studies of MPM Wastes in the United States  .  73
                                       VI

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                              EXECUTIVE SUMMARY

       The Environmental Assessment of the Metal Products and Machinery (MP&M) Industry
(Phase 1) quantifies water quality-related benefits for MP&M facilities based on site specific
analyses of current conditions and the conditions that would be achieved by proposed BAT (Best
Available Technology) and PSES (Pretreatment Standards for Existing Sources) process changes.
Instream pollutant concentrations for priority and nonconventional pollutants from direct and
indirect discharges are estimated using stream dilution modeling. The benefits to aquatic life
are projected by comparing the modeled instream pollutant concentrations to EPA aquatic life
criteria or to toxic effect levels;  potential adverse human health effects  are projected by
comparing estimated instream concentrations to health-based water quality toxic effect levels or
criteria.  Potential inhibition of POTW operations and sewage sludge contamination (thereby,
limiting  its use for land application) are also  evaluated based  on current and proposed
pretreatment levels. Inhibition of POTW operations is estimated by comparing modeled POTW
influent concentrations to available inhibition levels; contamination of sewage sludge is estimated
by  comparing projected pollutant concentrations  in sewage sludge to available sewage sludge
regulatory standards.   These analyses are performed for a representative sample set of 340
MP&M facilities (55 direct dischargers and 307 indirect dischargers, of which 22 facilities are
both direct and indirect dischargers) and projected for the  entire population of MP&M facilities
nationwide (approximately 9,130 facilities).

       The water quality  modeling  results for  a  sample of 55  direct discharge facilities
discharging 61 pollutants to 55 receiving streams indicate that  at current discharge levels,
instream concentrations of 18 pollutants are projected to  exceed acute aquatic life criteria in
11  percent of the receiving streams.   Instream concentrations of 39 pollutants are projected to
exceed chronic aquatic life criteria or toxic effect levels in 20 percent of the receiving streams.
Instream concentrations of 2 pollutants (using a target risk of 10"6 for carcinogens) are projected
to exceed human health  criteria (developed for consumption of water and organisms) in 16
percent of the receiving streams.  Additionally, instream concentrations of 2 pollutants (using
                                           Vll

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a target risk of 10^ for carcinogens) are projected to exceed human health criteria (developed
for consumption of organisms only) in 5 percent of the receiving streams.

       For the sample set of facilities, the proposed BAT option would reduce the aquatic life
excursions  to 4 percent of the receiving streams for 2 pollutants. Projected excursions from
chronic aquatic life criteria indicate that 13 percent of the receiving streams are impacted by
6 pollutants.  Human health criteria  (developed for consumption of water and organisms)
excursions  would be reduced to 2 pollutants at 7 percent of the receiving streams.  Human
health criteria  (developed for consumption of organisms only) excursions are not reduced at
the proposed BAT option. Pollutant loadings are reduced 17 percent.

       The direct discharge results are projected nationwide using a variable facility weighting
approach.  The extrapolation results in  2,035 facilities discharging directly to 2,035 receiving
streams.  At current discharge levels, instream excursions are extrapolated for the acute aquatic
life criteria to represent 83 receiving streams (4 percent).  Extrapolation of the chronic aquatic
life criteria excursions indicates that 181 (9 percent) of the receiving streams are impacted.
Extrapolated excursions for human  health criteria (developed for consumption of water and
organisms) indicated that 116 (6 percent) of the receiving streams are projected to be impacted.
Additionally, extrapolation of  the human  health criteria  (developed  for  consumption of
organisms only) projected 28 (1 percent) impacted receiving  streams.

       The results based on the proposed BAT option are also  projected nationwide using a
variable facility weighting approach. At proposed BAT discharge levels, instream excursions
are extrapolated for the acute aquatic life criteria to represent 21 receiving streams (1 percent).
Extrapolation of the chronic aquatic life criteria excursions indicates that 78 (4 percent) of the
receiving streams  are impacted.  Extrapolated excursions for human health criteria (developed
for consumption of water and organisms) indicated that 38 (2 percent) of the receiving streams
are projected to  be impacted.   Additionally,  extrapolation of the human health criteria
                                          Vlll

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 (developed for consumption of organisms only) projected 28 (1 percent) impacted receiving
 streams.

       Modeling results for a sample of 307 indirect discharge facilities discharging 61 pollutants
 to 264 POTWs and 249 receiving streams indicate that at current discharge levels, instream
 concentrations of 6 pollutants are projected to exceed acute aquatic life criteria in 3 percent
 of the receiving streams.  Instream concentrations of 19 pollutants are projected to exceed
 chronic  aquatic life criteria or toxic  effect levels in  13  percent  of the receiving  streams.
 Instream concentrations of 5 pollutants (using a target risk of 10* for carcinogens) are projected
 to exceed human health criteria  (developed for  consumption of water and  organisms) in
 8 percent of the receiving streams.  Additionally, instream concentrations of 3 pollutants (using
 a target risk of 10"6 for carcinogens) are projected to exceed human health criteria (developed
 for consumption of organisms only) in 2 percent of the receiving streams.

       For the sample set of facilities, the proposed PSES option is projected to cause acute
 aquatic life excursion for 1 pollutant. Projected excursions from chronic aquatic life criteria
 indicate that 5 percent of the receiving streams are impacted by 10 pollutants. Human health
 criteria (developed for consumption of water and organisms) excursions would be reduced to
 3 pollutants at 5 percent of the receiving streams.  Human health criteria (developed for
 consumption of organisms only) excursions are reduced to zero at the proposed PSES option.
 Pollutant loadings are reduced 32 percent.

       The indirect discharge results are projected nationwide using a variable facility weighting
 approach.  The extrapolation results in 7,387 facilities discharging to 6,864 receiving streams.
 At current discharge levels, instream excursions are extrapolated  for the acute aquatic life
 criteria to represent 123 receiving streams (2 percent).  Extrapolation of the chronic aquatic
life criteria excursions indicates that 553 (8 percent) of the  receiving streams  are impacted.
Extrapolated excursions for human health criteria (developed for consumption of water and
organisms) indicate that 488 (7 percent) of the receiving streams are projected to be impacted.
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Additionally, extrapolation of the human health criteria (developed for consumption of
organisms only) projects 37 (1 percent) impacted receiving streams.

       The indirect discharge results based on the proposed PSES option are also projected
nationwide using a variable facility weighting approach. At proposed PSES discharge levels,
instream excursions are projected as zero for human health criteria (consumption of organisms
only).  Extrapolated excursions for acute aquatic life criteria indicate that 5 (< 1 percent) of
the receiving streams are to be  impacted.  Extrapolation of the chronic aquatic life criteria
excursions indicates that 233 (3  percent) of the receiving streams are impacted.  Extrapolated
excursions  for human health criteria (developed for  consumption of water and organisms)
indicate that 365 (5 percent) of the receiving streams are projected to be impacted.
       In addition, 11 pollutants are projected to exceed biological inhibition criteria in 16
percent of the 264 POTWs receiving current discharge levels from indirect facilities.  These
POTW impacts are projected to be reduced to 6 pollutants causing problems at 14 percent of the
POTWs (14 percent) at the proposed PSES discharge level option.  National extrapolation of
the current discharge results indicates  that 1,117 of the 7,016 (16 percent) POTWs would be
impacted at current levels. At the proposed PSES discharge level, 1,034 POTWs (15 percent)
are projected to have excursions.

       Contamination of sewage sludge is projected to occur in 15 percent and 11 percent of the
POTWs at  current and the proposed  PSES option, respectively.   At current and proposed
PSES option discharge levels,  9 pollutants are projected to exceed  sewage sludge regulatory
standards.  These results are projected  nationwide and predict that  13 percent and 9 percent of
the POTWs are impacted at current and proposed PSES options,  respectively.

       In addition, the potential fate and toxicity of 61  pollutants are evaluated based on known
characteristics of each chemical.  Based on available physical-chemical properties and aquatic
life and human health toxicity data for  the 61 evaluated pollutants,  14 exhibit moderate to high

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toxicity to aquatic life; 31 are human systemic toxicants; 7 are classified as known, probable,or
possible human carcinogens; 8 are designated as hazardous air pollutants (HAP) in wastewater;
and 25 have drinking water values (16 with enforceable health-based maximum contaminant
levels  (MCLs, 7 with secondary MCLs for aesthetics or taste,  and 2 with action levels for
treatment).   In  terms of projected environmental partitioning among media,  12  of the  61
evaluated pollutants are moderately to highly volatile (potentially causing risk to  exposed
populations via inhalation), 18 have a  moderate to high potential to bioaccumulate in aquatic
biota (potentially accumulating in the food chain and causing increased risk to higher trophic
level organisms and to exposed human  populations via fish and shellfish consumption), and 11
organics have a moderate to high potential to adsorb to  solids (potentially contaminating
sediment underlying surface waters or land receiving sewage sludge application).  Twenty-four
(24) of the pollutants are metals which, in general, are not applicable to evaluation based on
volatility and adsorption to solids.  It is assumed that all of the metals have a high potential to
adsorb to solids.

       Projected sewage sludge disposal impacts are evaluated by  assigning the lowest cost
disposal method available at current conditions and at the proposed treatment option. Available
disposal methods are determined by comparing projected pollutant concentrations  in sewage
sludge from sample POTWs to the regulatory limits for various disposal methods.  The transition
from baseline disposal methods to treatment disposal options is compiled for sample POTWs and
projected to POTWs nationwide. At current conditions. 39 of the sample facilities are expected
to incinerate sewage sludge,  22 are expected to dispose of sewage  sludge  by co-disposal
methods, 2 by surface disposal, 16 by land application-low, and 179 by land application-high.
At the proposed treatment option. 34 facilities are projected to incinerate sewage  sludge, 19
are projected to dispose of sewage sludge by co-disposal methods, 2 by surface disposal, 19 by
land application-low,  and 184 by land application-high.   The national projections of sludge
disposal transitions indicates that at current conditions. 962 facilities use incineration, 429 use
co-disposal, 250 use  surface disposal, 275  use land application-low, and 5,034 use land
application-high.  At the proposed treatment option, the national projections indicate that 887
                                           XI

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 facilities will use incineration, 321 will use co-disposal, 250 will use surface disposal, 362 will
 use land application-low, and 5,131 will use land application-high.

       Documented environmental impacts on water quality and POTW operations from
 pollutant discharges from MP&M facilities are also summarized in this document. The summary
 data  are  based  on  information  from  literature abstracts and State 304(1)  Short Lists.
 Environmental impacts on POTW operations  and water quality are reported for 5 MP&M
 facilities.  These impacts include:  (1) environmental and biotic effects; (2) worker exposure;
 and (3) effects on the quality of receiving waters. Forty-six (46) MP&M facilities and POTWs
 which receive discharges from MP&M facilities, are identified by States as being point sources
 causing water quality problems and are included on their 304(1) short list.

       The effects of 2 conventional pollutants and 6 other nonconventional pollutants proposed
 for regulation are not estimated when modeling the effect of the proposed regulation  on the
 water quality of receiving streams and POTW operations or when evaluating the potential fate
 and toxicity of discharged pollutants.  The discharge of conventional pollutants (total suspended
 solids  (TSS)  and oil and grease)  and nonconventional pollutants (chemical oxygen demand
 (COD), total kjeldahl nitrogen (TKN), total dissolved solids (TDS), alkalinity, acidity, and total
 recoverable phenolic compounds) can have adverse effects on human health and the environment.
 For example, habitat degradation can result  from increased suspended paniculate matter that
 reduces light penetration and primary productivity, or from accumulation of sludge particles that
 alters benthic spawning grounds and feeding habitats.  Oil and grease can have a lethal effect
 on fish by coating gill surfaces and causing asphyxia, depleting  oxygen levels as a result of
 excessive biological oxygen demand,  and inhibiting stream reaeration because of surface film.
 Oil and grease can also have detrimental effects on waterfowl by destroying the buoyancy and
 insulation  of their feathers. High COD levels  can deplete oxygen levels, which can result in
 mortality or other adverse effects on fish. Bioaccumulation of oil substances can cause human
 health  problems, such as  including  tainting of fish and  bioaccumulation of  carcinogenic
polycyclic aromatic  compounds.   Nitrogen  addition can make surface water susceptible to
accelerated eutrophication and  subsequent fouling of drinking water reservoirs.   Alkalinity or
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acidity additions can disrupt or alter the chemical equilibrium necessary to sustain life. For
example, at higher pH, ammonia toxicity is greatly enhanced because far more aqueous NH3 (the
toxic agent) is produced from available NIV ions.  Phenolic compounds, as a group,  would
exhibit  the  toxicity  and chemical  behavior  of their individual  chemical  constituents; the
identification, distribution, and subsequent combined effect of  which are  unknown and,
therefore, not evaluated.
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                                 1.  INTRODUCTION

       The purpose of this report is to present an assessment of the water quality benefits of
controlling the discharge of priority and nonconventional pollutants from metal products and
machinery (MP&M) facilities (Phase 1) to surface waters and publicly-owned treatment works
(POTWs). Potential aquatic life and human health impacts of direct discharges on receiving
stream water quality and of indirect discharges on POTWs and their receiving streams are
projected at current,  proposed BAT (Best  Available Technology) and  proposed PSES
(Pretreatment Standards for Existing Sources)  levels by quantifying pollutant releases  and by
using stream modeling techniques.   In addition,  the potential fate and toxicity of pollutants
associated with MP&M wastewater are evaluated based on known  characteristics of  each
chemical. Literature review abstracts and State 304(1) Short Lists are also reviewed for evidence
of documented environmental impacts (e.g., case studies) on aquatic life, human health, and
POTW operations and for impacts on the quality of receiving water.

       While this report  does  not evaluate impacts associated  with  reduced releases  of  2
conventional pollutants and 6 other nonconventional pollutants proposed for regulation, the
discharge of conventional pollutants  (total suspended  solids (TSS) and oil and grease)  and
nonconventional pollutants (chemical oxygen demand (COD), total kjeldahl nitrogen (TKN), total
dissolved solids (TDS), alkalinity, acidity, and  total recoverable phenolic compounds) can  have
adverse effects on human health and the environment.  For example,  habitat degradation can
result from increased suspended paniculate matter that reduces light penetration and primary
productivity, or from accumulation of sludge particles that alters benthic spawning grounds and
feeding habitats.  Oil and grease can have a lethal effect on fish by coating gill surfaces and
causing asphyxia, depleting oxygen levels as a result of excessive biological oxygen demand,
and inhibiting  stream reaeration because of  surface film.  Oil and  grease can  also  have
detrimental effects on waterfowl by destroying the buoyancy and insulation of their feathers.
High  COD levels can deplete oxygen  levels,  which can result in mortality or other adverse
effects on fish. Bioaccumulation of oil substances can  cause human health problems, such as
including tainting of fish and bioaccumulation of carcinogenic polycyclic aromatic compounds.

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Nitrogen  addition can make surface water  susceptible to accelerated  eutrophication and
subsequent fouling of drinking water reservoirs. Alkalinity or acidity additions can disrupt or
alter the chemical equilibrium necessary to sustain life.  For example, at higher pH, ammonia
toxicity is greatly enhanced because far more aqueous NH3 (the toxic agent) is produced from
available NH,* ions.  Phenolic compounds, as a group, would exhibit the toxicity and chemical
behavior of their individual chemical constituents; the identification, distribution, and subsequent
combined effect of which are unknown and, therefore, not evaluated.

       The following sections of this report describe: 1) the methodology used in the evaluation
of projected water quality impacts and projected impacts on POTW operations for direct and
indirect discharging facilities (including assumptions and caveats), in the evaluation of the
potential fate and toxicity of pollutants, and in the evaluation of documented environmental
impacts; 2) data sources used for evaluating water quality impacts such as plant-specific data,
information used to evaluate POTW operations, and water quality criteria and in the evaluation
of documented environmental impacts; 3) a summary of the results of this analysis; and 4) a
complete list of references cited in this report.  The various appendices attached to this report
provide additional detail on the specific information addressed in the main report.

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                                 2. METHODOLOGY

 2.1    Projected Water Quality Impacts

       Potential water quality impacts of direct discharges on receiving streams and of indirect
 discharges on POTW operations and their receiving streams are evaluated using stream modeling
 techniques.   Current and proposed  pollutant  releases  are quantified.  Site-specific potential
 aquatic life and human health impacts resulting from current and proposed pollutant releases are
 evaluated. Projected instream concentrations  for each pollutant are compared to EPA water
 quality criteria, or to toxic effect levels (i.e., lowest reported or estimated toxic concentration)
 for pollutants for which no  water quality criteria have been developed.  Inhibition of POTW
 operation and sewage sludge contamination are also evaluated.  These analyses are performed
 for a representative sample set of 55  direct facilities and 307 indirect facilities (22 facilities are
 identified as both direct and indirect), and projected for the entire population of MP&M facilities
 nationwide (approximately 2,035 direct facilities and 7,387 indirect facilities).  The following
 two sections describe the methodology and assumptions used for evaluating the impact of direct
 and indirect discharging facilities.

 2.1.1  Direct Discharging Facilities

       Using a  stream dilution  model that does not account for fate processes other than
 complete  immediate mixing, projected instream concentrations are calculated  at current and
proposed  BAT treatment levels  for  stream  segments with direct discharging facilities.   The
 dilution model used for estimating instream concentrations is presented as Equation 1.
                                   (OD xFF)  + (EF x SF)
                                                                               (Eq. 1)

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where:
       Q.
       L
       OD
       FF
       EF
       SF
instream pollutant concentration G*g/L)
facility pollutant loading (jig/year)
facility operating days (days/year)
facility flow (L/day)
event frequency (days/year)
receiving stream flow (L/day)
       The facility-specific data (i.e., pollutant loading, operating days, and facility flow) used
in Eq. 1 are derived from the sources described in Section 3.1 of this report.  One of three
receiving stream flow conditions  (the lowest 1-day average flow with a recurrence interval of
10 years (1Q10), the lowest consecutive 7-day average flow with a recurrence interval of 10
years (7Q10), and the harmonic mean flow) is used, depending on the type of criterion or toxic
effect level intended for comparison. The 1Q10 and 7Q10 flows are used in comparisons of
instream concentrations with acute and chronic  aquatic life criteria  or toxic effect  levels,
respectively, as  recommended in the Technical Support Document for Water Quality-based
Toxics Control (U.S. EPA,  1991a).  The harmonic mean flow, defined as the inverse mean of
reciprocal daily arithmetic mean flow values, is used in comparisons of instream concentrations
with human health criteria or toxic effect levels based on lifetime exposure. EPA recommends
the long-term harmonic mean flow as the design flow instead of the arithmetic mean flow for
assessing potential long-term human health impacts because instream pollutant concentration is
a function of, and inversely proportional to, the streamflow downstream of the discharge.
       The event frequency represents the number of times an exposure event occurs during a
specified time period.  For assessing impacts on aquatic life, the event frequency is set equal to
the facility  operating  days.   The calculated instream concentration  is thus  the average
concentration on days the facility is discharging wastewater.  For assessing long-term  human
health impacts, the event frequency is set at 365 days. The calculated instream concentration
is thus the average concentration on all days of the year.  Although this leads to a lower
calculated concentration because of the additional dilution from days when the facility is not

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operating, it is consistent with the conservative assumption that the target population is present
to consume drinking water and contaminated fish every day for an entire lifetime.

       Because streamflows are not available for hydrologically complex waters such as bays,
estuaries, and oceans, alternative means are used to predict pollutant concentrations that are
suitable for comparison with ambient criteria or toxic effect levels for facilities discharging to
these types of waterbodies.  The first choice is to employ site-specific critical dilution factors
(CDFs) to predict the concentration at the edge of a mixing zone. The second choice is to use
estuarine dissolved concentration potentials (DCPs).

       Site-specific CDFs are obtained from a survey of States and Regions recently conducted
by EPA's Office of Pollution Prevention and Toxics (OPPT) (Mixing Zone Dilution Factors for
New Chemical Exposure Assessments, Draft Report, U.S. EPA, 1992). The dilution model used
for estimating estuary concentrations using a CDF is presented as Equation 2.
                                C  =
                                      EFxFFx CDF
                                                                       (Eq.2)
where:
L
EF
FF
CDF
                    estuary pollutant concentration 0*g/L)
                    facility pollutant loading (jtg/year)
                    event frequency (days/year)
                    facility flow (L/day)
                    critical dilution factor (unitless)
Acute CDFs are used to evaluate acute aquatic life effects, whereas chronic CDFs are used to
evaluate chronic aquatic life or adverse human health effects.  It is assumed that the drinking
water intake  and fishing location are at the edge of the chronic mixing zone.   The event
frequency is set equal to the facility operating days for comparison with aquatic life criteria or

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toxic effect levels, and set equal to 365 for comparison with human health criteria or toxic effect
levels.

       The National Oceanic and Atmospheric Administration (NOAA) has developed DCPs to
predict pollutant concentrations in various salinity zones for each estuary in NOAA's National
Estuarine Inventory (NEI).  A DCP represents  the concentration of a nonreactive dissolved
substance under well-mixed steady-state conditions given an annual load of 10,000 tons. DCPs
account for the effects of flushing by considering the freshwater inflow rate,  and dilution by
considering the total estuarine volume.  DCPs reflect the predicted estuary-wide response and,
therefore, may not be indicative of concentrations at the edge of much smaller mixing zones.
The dilution model used for estimating pollutant concentrations using a DCP is presented  as
Equation 3.
                c   =
                                          L x DCP
                                          BLxCF
(Eq. 3)
where:
       L
       DCP
       BL
       CF
estuary pollutant concentration 0«g/L)
facility pollutant loading (kg/year)
dissolved concentration potential G*g/L)
benchmark load (10,000 tons/year)
conversion factor (907.2 kg/ton)
       Water quality criteria or toxic effect levels excursions are determined by dividing the
projected freshwater instream (Eq. 1) or estuary (Eq. 2 and Eq. 3) pollutant concentrations by
EPA  water quality criteria or toxic  effect levels.  A value greater than  1.0  indicates an
excursion.

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2.1.2  Indirect Discharging Facilities

       (a)    Water Quality Impacts

       A stream dilution model is used to project receiving stream  impacts resulting from
releases by indirect discharging facilities as shown in Eq. 4. For stream segments with multiple
POTWs receiving wastewater from multiple MP&M facilities, pollutant loadings are summed
before concentrations are calculated. The facility-specific data used in Eq. 4 are derived from
sources described in Section 3.1 and 3.2 of this report.  Three receiving stream flow conditions
(1Q10 lowflow, 7Q10 low flow, and harmonic mean flow) are used for the current and proposed
pretreatment options. Pollutant concentrations are predicted for POTWs discharging to bays and
estuaries using site-specific critical dilution factors (CDFs) or NOAA's dissolved concentration
potentials (DCPs) as shown in Eq. 5 and Eq.  6.
                                       L x (1-7M7)
                                  (OD x PF) + (EF x SF)
                                                                             (Eq.4)
where:
       Q,
       L
       TMT
       OD
       PF
       EF
       SF
instream pollutant concentration Qxg/L)
facility pollutant loading (/Kg/year)
POTW treatment removal efficiency (unitiess)
facility operating days (days/year)
POTW flow (L/day)
event frequency (days/year)
receiving stream flow (L/day)
                                       L x q-
                                      EF x PF x CDF
                                                                             (Eq.5)

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where:
       L
       TMT
       EF
       PF
       CDF
estuary pollutant concentration G*g/L)
facility pollutant loading (/ig/year)
POTW treatment removal efficiency (unitless)
event frequency (days/year)
POTW flow (L/day)
critical dilution factor (unitless)
                              c  = L x (\-TMT) x DCP
                                          BLxCF
                                                          (Eq. 6)
where:
       L
       TMT
       DCP
       BL
       CF
estuary pollutant concentration 0*g/L)
facility pollutant loading (kg/year)
POTW treatment removal efficiency (unitless)
dissolved concentration potential 0*g/L)
benchmark load (10,000 tons/year)
conversion factor (907.2 kg/ton)
       Potential impacts on freshwater quality are determined by comparing projected instream
pollutant concentrations (Eq. 4) at reported POTW flows and at 1Q10 low, 7Q10 low, and
harmonic mean receiving stream flows with EPA water quality criteria or toxic effect levels for
the protection of aquatic life and human health. Projected estuary pollutant concentrations (Eq.
5 or Eq.  6), based on CDFs or DCPs, are also compared to EPA water quality criteria or toxic
effect levels for the protection  of aquatic life and human health to determine potential water
quality impacts.  Water quality excursions are determined by dividing the projected instream or
estuary pollutant concentration by the EPA water quality criteria or toxic effect levels for the
protection of aquatic life and human  health (see Section 2.1.1 for discussion of stream design
flow conditions, application of CDFs  or DCPs, assignment of event frequency, and comparison
with criteria or toxic effect levels). A value greater than 1.0 indicates an excursion.

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       (b)    Impacts on POTW Operations


       Potential adverse effects on POTW operations include inhibition of POTW processes

(e.g., inhibition of microbial degradation) and contamination of POTW sewage sludges (thereby,

limiting its use  for land application).   Inhibition  of  POTW operations is determined by

comparing calculated POTW influent concentrations  (Eq. 7) with available inhibition levels.

Excursions are indicated by a value greater than 1.0.
                                    pi    OD x PF
                                                                             (Eq. 7)
where:
       L
       OD
       PF
POTW influent concentration frtg/L)
facility pollutant loading (/tg/year)
facility operating days (days/year)
POTW How (L/day)
Contamination of sewage sludge may preclude less costly and potentially beneficial disposal
practices, such as land application.  Sludge quality is evaluated by dividing projected pollutant

concentrations in sludge (Eq. 8) by available EPA regulatory values for land application of
sewage sludge.  A value greater than 1.0 indicates an excursion.
                                  Lx TMTxPAKTxSGF
                                         OD x PF
                                                         (Eq. 8)
where:
       C,p     =     sludge pollutant concentration (mg/kg)
       L      =     facility pollutant loading (pig/year)
       TMT   =     POTW treatment removal efficiency (unitless)
       PART  =     chemical-specific sludge partition factor (unitless)
       SGF   =     sludge generation factor (5.96 mg/kg per jtg/L)

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       OD    =     facility operating days (days/year)
       PF    =     POTW flow (L/day)
       Facility-specific data used to evaluate POTW operations are derived from the sources
described in Sections 3.1 and 3.2.  For MP&M facilities that discharge to the same POTW,
individual loadings are summed before the POTW  influent  and sludge concentrations  are
calculated.

       The partition factor is a chemical-specific value that represents the fraction of the load
that is expected to partition to sludge during  wastewater treatment.   For predicting sludge
generation,  the model assumes that 1,400 pounds  of sludge are generated for each million
gallons of wastewater processed (Metcalf & Eddy, 1972). This results in a sludge generation
factor of 5.96 mg/kg per jtg/L  [(10s gallons x 2.205 Ibs/kg x 3.785 L/gallon)/( 1,400 Ibs x
103 /tg/mg)].  In other words, for every 1 /tg/L of pollutant removed from  wastewater and
partitioned to sludge, the concentration in sludge is 5.96 mg/kg dry weight.

2.1.3  Sample Set Data Analysis and National Extrapolation
       The MP&M industry is comprised of several thousand facilities nationwide.  To facilitate
the various economic, engineering, and environmental analyses performed in  support of the
proposed regulation, BAD prepared a sample set of MP&M facilities.   Each facility in the
sample set represents a portion of the industry as a whole, and is assigned a value that signifies
the number of additional facilities represented by the sample facility. This value, or "weight",
varies  from 2 to 802, with an average value  of 27.   Analyses are performed for 340 facilities
(55 direct dischargers and 307 indirect dischargers, of which 22 facilities are as direct and
indirect dischargers) that represent 9,130 facilities nationwide.  The sample set is intended to
be representative of the industry  as a whole in terms of size, industrial processes, geographic
location, and economic circumstances.  Impacts to aquatic life, human  health and POTW
operations were evaluated for the 340 sample  facilities at current conditions and at the proposed
BAT/PSES option using the methods described in the previous sections.
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       National extrapolation of excursions and problems are made by applying the weight of
the facility causing the excursion or problem and then summing as a whole and across flow

categories. For example, if Facility A (with a weight of 32) is projected to cause acute water

quality excursions for two pollutants, then the national projection would be for excursions of two

pollutants in 32 streams (a total of 64 acute water quality excursions).  If numerous facilities

contribute to a projected excursion or problem, the weight of the facility with the greatest

effluent pollutant concentration is used for the national extrapolation.


2.1.4  Assumptions and Caveats


       A summary of the major assumptions in this analysis follows:
             Background concentrations of each pollutant, both in the receiving stream and in
             the POTW influent, are equal to zero; therefore, only the impacts of discharging
             facilities are evaluated.

             The exposure frequency for evaluating human health impacts from drinking water
             and contaminated fish ingestion is 365 days.

             Complete mixing of discharge flow and stream flow occurs across the stream at
             the discharge point. This mixing results in the calculation of an "average stream"
             concentration even though the actual concentration may vary across the width and
             depth of the stream.

             The process water at each facility and the water discharged to a POTW are
             obtained from a source other than the receiving stream.

             The pollutant load to the receiving stream is assumed to be continuous and is
             assumed to be representative of long-term facility operations.  This assumption
             may overestimate long-term risks to human  health and aquatic life,  but may
             underestimate potential short-term effects.

             1Q10 and 7Q10 receiving stream flow rates are used to  estimate aquatic life
             impacts, and harmonic  mean flow rates are used to estimate human health
             impacts. 1Q10 low flows are estimated using  the results of a regression analysis
             conducted by Versar for EPA's Office of Pollution Prevention and Toxics (OPPT)
             of 1Q10 and 7Q10 flows from representative U.S. rivers and streams (Upgrade
             of Flow Statistics Used to Estimate Surface Water Chemical Concentrations for
                                          11

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             Aquatic arid Human Exposure Assessment, Versar, 1992).  Harmonic mean flows
             are estimated from the mean and 7Q10 flows as recommended in the Technical
             Support Document for Water-Quality-based Toxics Control (U.S. EPA, 1991a).
             These flows may not be the same as those used by  specific  states  to assess
             impacts.

             Pollutant fate processes such as sediment adsorption, volatilization, and hydrolysis
             are not considered. This may result in estimated instream concentrations that are
             environmentally conservative (i.e., higher than  may actually exist).

             Pollutants without a specific POTW treatment  removal efficiency  provided by
             EPA are assigned a removal efficiency of zero,  and pollutants without a specific
             partition factor are assigned a value of zero.

             Sludge criteria levels are only available for 10 pollutants - arsenic,  cadmium,
             chromium, copper, lead, mercury, molybdenum, nickel, selenium and zinc.

             Water quality criteria or toxic effect levels developed for freshwater organisms
             are used in  the analysis of facilities discharging to estuaries or bays.

             The sample set is assumed to represent a national group of facilities discharging
             to streams and POTWs. However, an individual facility in the sample set may
             not have a similar potential environmental impact as effluent  from  the facilities
             it is assumed to represent. A facility that discharges to a stream with a very small
             design  flow may be similar to the facilities it  represents in  all aspects except
             available dilution in the receiving stream.

             The method of "scaling-up" excursions and problems assumes that  the same
             amount of facility-receiving  stream overlap in the sample set exists for the nation.
2.2    Pollutant Fate and Toxicitv


             Human and ecological exposure and risk from environmental releases of toxic

chemicals depends largely on toxic potency, inter-media partitioning, and chemical persistence.

These factors are dependant on chemical-specific properties relating to lexicological effects on

living organisms,  physical state, hydrophobicity/lipophilicity, and reactivity, as well as the

mechanism and media of release and site-specific environmental conditions.
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       The methodology used in assessing the fate and toxicity of pollutants associated with
MP&M wastewaters is comprised of three steps:  (1) chemical identification; (2) compilation of
physical-chemical and toxicity data; and (3) categorization assessment. These steps are described
in detail below.  A summary of the major assumptions and limitations associated with this
methodology is also presented.

2.2.1  Chemical Identification

              From 1986 through 1993, EPA conducted sampling to determine the presence or
absence of priority, conventional, and nonconventional pollutants at MP&M facilities located
nationwide.  The Agency collected over  700 samples of raw wastewater from MP&M unit
operations and influents to  treatment during the sampling  episodes.   Using these data and
applicable selection criteria, EPA selected 69 pollutants (25 priority pollutants, 2 conventional
pollutant parameters, and 42 nonconventional pollutant parameters) for regulation from the 342
pollutants initially identified as pollutants of concern.  Sixty-one (61) of these pollutants are
evaluated, which include 25 priority pollutants and 36 nonconventional pollutants, to assess their
potential fate and toxicity based on known characteristics of each chemical.  Data for the 2
conventional and 6 other nonconventional pollutants were not applicable to the evaluation of fate
and toxicity of individual chemicals,  although they are associated with adverse water quality
impacts.

2.2.2  Compilation of Physical-Chemical and  Toxicity Data

       The chemical specific data needed to conduct the fate and toxicity evaluation for this
study include aquatic life criteria or toxic effect data for native aquatic species, human  health
reference doses (RfD) and cancer potency slope factors (SF),  EPA maximum contaminant levels
(MCLs)  for  drinking  water  protection,  Henry's Law constants,  soil/sediment adsorption
coefficients (K^.), and bioconcentration  factors (BCF) for native aquatic species.
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       Sources of the above data include EPA ambient water quality criteria documents and
 updates, EPA's Assessment Tools for the Evaluation of Risk (ASTER) and the associated
 AQUatic Information REtrieval System (AQUIRE) and Environmental Research Laboratory-
 Duluth fathead minnow data base, EPA's Integrated Risk Information System (IRIS), EPA's
 1993 Health Effects Assessment Summary Tables (HEAST), EPA's 1991 and  1993 Superfund
 Chemical Data Matrix (SCDM), EPA's 1989 Toxic Chemical Release Inventory Screening
 Guide, Syracuse Research Corporation's CHEMFATE and BIODEG data bases, EPA and other
 government reports,  scientific literature, and other primary and secondary data sources. To
 ensure that the examination is as comprehensive as possible, alternative measures are taken to
 compile data for chemicals for which physical-chemical property  and/or toxicity data are not
 presented in the sources listed above.  To the extent possible, values are estimated for the
 chemicals using  the quantitative structure-activity relationship (QSAR) model  incorporated in
 ASTER, or  for some  physical-chemical properties,  utilizing  published  linear  regression
 correlation equations.

       (a)    Aquatic Life Data

       Ambient criteria or toxic effect concentration levels for the protection of aquatic life are
 obtained primarily from EPA ambient water quality criteria documents and EPA's ASTER. For
 several pollutants,  EPA has published ambient water  quality criteria for  the protection of
 freshwater aquatic life from acute effects. The acute value represents a maximum allowable 1-
 hour average concentration of a pollutant at any time that protects aquatic life from lethality.
For pollutants for which no acute water quality criteria have been developed, an acute  value
from published aquatic toxicity test data or an estimated acute value from the ASTER QSAR
model  is used.   In selecting values from the literature, measured concentrations  from  flow-
through studies under typical pH and temperature conditions are preferred. In addition, the test
organism must be a North American resident species of fish or invertebrate. The hierarchy used
to select the appropriate  acute value is listed below in descending order of priority.

       •      National acute freshwater quality criteria;
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             Lowest reported acute test values (96-hour LC50 for fish and 48-hour ECSo/LCso
             for daphnids);
             Lowest reported LCSO test value of shorter duration, adjusted to estimate a 96-
             hour exposure period;
             Lowest reported LC50 test value  of longer duration, up to a  maximum of two
             weeks exposure; and
             Estimated 96-hour LC50 from the ASTER QSAR model.
       BCF data are available from numerous data sources, including EPA ambient water quality
criteria documents and EPA's ASTER. Since measured BCF values are not available for several
chemicals,  methods are used to estimate this parameter based on the octanol/water partition
coefficient  or solubility of the chemical.  Such methods are detailed in Lyman et al. (1982).
Multiple values are reviewed, and a representative value is selected according to the following
guidelines:

       •     Resident U.S. fish species are preferred over invertebrates or estimated values.
       •     Edible tissue or whole fish values are preferred over nonedible or viscera values.
       •     Estimates derived  from octanol/water partition coefficients are preferred over
             estimates based on solubility or other estimates, unless the estimate comes from
             EPA Criteria Documents.

The most conservative value (i.e.,  the highest BCF) is selected among comparable candidate
values.

       (b)    Human Health Data
       Human  health  toxicity data  include  chemical-specific  reference  dose  (RfD) for
noncarcinogenic effects, and potency slope factor (SF) for carcinogenic effects. RfDs and SFs
are obtained first from EPA's Integrated Risk Information System (IRIS), and secondarily from
EPA's Health Effects Assessment Summary Tables (HEAST). The RfD is an estimate of a daily
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exposure level for the human population, including sensitive subpopulations, that is likely to be
without an appreciable risk of deleterious noncarcinogenic health effects over a lifetime (U.S.
EPA, 1989).  A chemical with a low RfD is more toxic than a chemical with a high RfD.
Noncarcinogenic effects  include  systemic   effects  (e.g.,  reproductive,  immunological,
neurological, circulatory, or respiratory toxicity), organ-specific toxicity, developmental toxicity,
mutagenesis, and lethality. EPA recommends a threshold level assessment approach for these
systemic and other effects because several protective mechanisms must be overcome prior to the
appearance of an adverse noncarcinogenic effect. In contrast, EPA assumes that cancer growth
can be initiated from a single cellular event, and therefore, should not be subject to a threshold
level assessment approach. The SF is an upper bound estimate of the probability of cancer per
unit intake of a chemical over a lifetime (U.S. EPA, 1989).  A chemical with a large SF has
greater potential to cause cancer than a chemical with a small SF.

       Other chemical designations related to potential adverse human health effects include EPA
assignment of a concentration limit for protection of drinking water, and EPA identification as
a hazardous air pollutant  (HAP) in wastewater.  EPA establishes drinking water criteria  and
standards, such as the maximum contaminant level (MCL), under authority of the Safe Drinking
Water Act (SDWA).  Current MCLs are available from  IRIS.  A set of 189 hazardous air
pollutants are identified in the Clean Air Act.  The Office of Air Quality Planning and Standards
(OAQPS) has reduced the set of 189 pollutants to produce a draft list of 111  pollutants that are
considered to be hazardous air pollutants when present in wastewater (McDonald, 1994).
OAQPS eliminated pollutants that are inorganic, do not persist in water (short half-life), or have
a Henry's Law constant less than 0.1 atm/mole fraction (approximately 2 x 10"6 atm/m3-mole).

       (c)    Physical-Chemical Property Data

       Three measures of physical-chemical properties are used to evaluate environmental fate:
Henry's Law constant (HLC), and organic carbon-water partition coefficient
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       HLC is the ratio of vapor pressure to solubility and is indicative of the propensity of a
chemical to volatilize from surface water (Lyman et al., 1992). The larger the HLC, the more
likely  the chemical will volatilize.   Most HLCs are obtained from the Office of Toxic
Substances' (OTS) 1989 Toxic Chemical Release Inventory Screening Guide, the Office of Solid
Waste's  (OSW)  Superfund  Chemical  Data Matrix, or the  quantitative  structure  activity
relationship (QSAR) system maintained by EPA's Environmental Research Laboratory (ERL)
in Duluth, MN.
          is indicative of the propensity of an organic compound to adsorb to soil or sediment
particles and,  therefore,  partition to such media.  The larger the K^., the more likely the
chemical will  adsorb to solid material.  Most K^s are obtained from Syracuse  Research
Corporation's  CHEMFATE data base  and  EPA's 1989 Toxic  Chemical Release Inventory
Screening Guide.
2.2.3  Categorization Assessment

       The objective of this generalized evaluation of fate and toxicity potential is to place
chemicals into  groups with qualitative descriptors of potential environmental  behavior and
impact. These  groups are based on categorization schemes derived for:

       •     Acute aquatic toxicity (highly, moderately, or slightly toxic);
       •     Volatility from water (highly, moderately,  slightly, or non volatile);
       •     Adsorption to soil/sediment (highly, moderately, slightly, or non adsorptive); and
       •     Bioaccumulation potential (high, moderate, slight, or no significant potential).

       Using appropriate key parameters, and where sufficient data exist, these  categorization
schemes identify the relative aquatic and human toxicity and bioaccumulation potential for each
chemical associated with MP&M wastewater.  In addition,  the potential to partition to various
media (air, sediment/sludge, or water) and persist in the environment are identified for each
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chemical. These schemes are intended for screening purposes only and do not take the place
of detailed pollutant assessments analyzing all fate and transport mechanisms.

       This  evaluation also identifies chemicals which (1) are known, probable, or possible
human carcinogens;  (2) are  systemic human health toxicants; (3) have EPA human  health
drinking  water standards; and  (4) are tentatively designated as  hazardous air  pollutants in
wastewater by the EPA/OAQPS. The results of this analysis can provide a qualitative indication
of potential risk posed by the release of these chemicals. Actual risk depends on the magnitude,
frequency, and duration of pollutant loading; site-specific environmental conditions; proximity
and number of human and ecological receptors; and relevant exposure pathways. The following
discussion outlines the categorization  schemes.   Ranges  of parameter values  defining the
categories are also presented.

       (a)     Acute Aquatic Toxicity

Key Parameter:      Acute aquatic life criteria/LC50 or other benchmark (AT) 0*g/L)

       Using acute criteria or lowest reported acute test results (generally 96-hour and 48-hour
durations  for fish  and  invertebrates,  respectively), chemicals are grouped according to their
relative short-term effects on aquatic life.

Categorization Scheme:
AT < 100
1,000 > AT >  100
AT > 1,000
Highly toxic
Moderately toxic
Slightly toxic
       This scheme, used as a rule-of-thumb guidance by EPA's Office of Pollution Prevention
and Toxics (OPPT) for Premanufacture Notice (PMN) evaluations, is used to indicate chemicals
that could potentially cause lethality to aquatic life downstream of discharges.
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       (b)    Volatility from Water
Key Parameter:      Henry's Law constant (HLC) (atm-mVmol)
                             TTT p _  Vapor Pressure (atm)
                                      Solubility (mol/m3)
                                             (Eq.9)
       Henry's Law constant is the measured or calculated ratio between vapor pressure at
ambient conditions and solubility at the same conditions.  This parameter is used to indicate the
potential for organic substances to partition to air in a two-phase (air and water) system. A
chemical's potential to volatilize from surface water can be inferred from Henry's Law Constant.

Categorization Scheme:
HLC > lO'3
10-3  > HLC  > 10-5
lO'5  > HLC  > 3 x 10-7
HLC < 3 x lO'7
Highly volatile
Moderately volatile
Slightly volatile
Essentially nonvolatile
       This scheme, adopted from Lyman et al. (1982), gives an indication of chemical potential
to volatilize from process wastewater and surface water, thereby reducing the threat to aquatic
life and human health via contaminated fish consumption and drinking water,  yet potentially
causing risk to exposed populations via inhalation.

       (c)    Adsorption to Soil/Sediments
Key Parameter:      Soil/sediment adsorption coefficient
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           is a chemical-specific adsorption parameter for organic substances that is largely
independent of the properties of soil or sediment and can be used as a relative indicator of
adsorption to such media.  K,,,. is highly inversely correlated with solubility, well correlated with
octanol-water partition coefficient, and fairly well correlated with bioconcentration factor (BCF).
Categorization Scheme:
    > 10,000
10,000 > K,* > 1,000
1,000 > K^ >  10
Koc< 10
Highly adsorptive
Moderately adsorptive
Slightly adsorptive
Essentially nonadsorptive
       This scheme is devised to evaluate substances that may partition to solids and potentially
contaminate sediment underlying surface water or land receiving sewage sludge applications.
Although a high K^ value indicates that a chemical is more likely to partition to sediment, it also
indicates that a chemical may be less bioavailable.

       (d)     Bioaccumulation Potential

Key Parameter:      Bioconcentration Factor (BCF)
                _  Equilibrium chemical concentration in organism (wet weight)
                              Mean chemical concentration in water
       BCF is a good indicator of potential to accumulate in aquatic biota through uptake across
an external surface membrane.
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Categorization Scheme:
BCF > 500
500 > BCF > 50
50 > BCF > 5
BCF < 5
High potential
Moderate potential
Slight potential
No significant potential
       This scheme is used to identify chemicals that may be present in fish or shellfish tissues
at higher levels than in surrounding water.  These chemicals may accumulate in the food chain
and increase exposure to higher trophic level populations, including people consuming their sport
catch or commercial seafood.

2.2.4  Assumptions and Limitations

       The major assumptions and limitations associated  with  the data compilation  and
categorization schemes are summarized in the following two sections.

       (a)    Data Compilation
             If data  are  readily available from electronic data bases,  other  primary and
             secondary sources are not searched.
             Many of the data are estimated and therefore can have a high degree of associated
             uncertainty.
             For some chemicals, neither measured nor estimated data are available for key
             categorization parameters.  In addition, chemicals identified for this study do not
             represent a complete set of wastewater constituents.  As a result, this study is an
             incomplete assessment of MP&M wastewater.
       (b)    Categorization Schemes
       •      Receiving  waterbody  characteristics,  pollutant  loading  amounts,  exposed
             populations, and potential exposure routes are not considered.
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              Placement into groups is based on arbitrary order of magnitude data breaks for
              several categorization schemes.  Combined with data uncertainty, this may lead
              to an overstatement or understatement of the characteristics of a chemical.
              Data derived from laboratory tests may not accurately reflect conditions in the
              field.
              Available aquatic toxicity and bioconcentration test data may not represent the
              most sensitive species.
2.3    Projected Sludge Disposal Impacts

       Li 1993, EPA promulgated sewage sludge regulatory values associated with different
sludge disposal methods for nine metals (40 CFR Part 503, Standards for the Use or Disposal
of Sewage  Sludge,  Final Rules, February  19,  1993).  EPA had  previously established
concentration limits  for co-disposal of sewage sludge (40 CFR Part 258 Table 1).  These
established  sewage  sludge regulatory limits  and  concentration  limits  are presented in
Attachment C.   The concentration limits and regulatory values  are used to project a sewage
sludge disposal method for each sample POTW in the MP&M pollutant loading data base. This
methodology builds on the calculated pollutant concentration in sewage sludge derived from the
pollutant load,  sludge  partition factor, influent flow, and sludge generation factor described
previously in this report (Section 2.1.2). Depending on whether a POTW is projected to exceed
or meet established limits, each sample POTW is assigned the lowest cost disposal method
available at current  conditions and at the proposed treatment  option.  The transition from
baseline disposal methods to treatment disposal options is compiled for sample POTWs and for
a national projection of all affected POTWs using the facility weights described in Sections 2.1.3
and 2.1.4.

       The first step in this analysis is to calculate pollutant concentrations in POTW sewage
sludge from identified  MP&M sources in the sample loading data base as well as from other
unidentified industrial sources.  This procedure of incorporating a pollutant loading factor for
additional industrial contributors is described fully in the Regulatory Impact Analysis (RIA).
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Once these sewage sludge concentration levels are determined, a comparison is made with
established limits for various disposal methods on a pollutant by pollutant basis. If all pollutants
do not exceed the established limits for a given disposal method, then that method is presumed
to be available to the POTW.  Incineration is assumed to be always available regardless of
pollutant concentration levels. This assumes that other factors affecting sewage sludge quality,
such as vector attraction and bacterial levels, do not limit the disposal method.  This method also
assumes that a market for land application  disposal exists for each POTW.  For each POTW,
the lowest cost sludge disposal method available is assigned based on the pollutant sewage sludge
concentration levels.  This analysis  assumes  the following order by ascending cost:   land
application-high, land application-low, surface disposal, co-disposal,  and incineration.  For a
more detailed description of these disposal methods, please refer to the RIA or 40 CFR Part
503.

       The sample POTWs included in this analysis are scaled up to a national projection using
the variable facility weights provided by BAD. For example, if a sample MP&M facility has
a weight of 10, the number of POTWs nationwide is assumed to be 10. In cases where multiple
facilities transfer wastes to the same POTW, the largest facility weight is used to represent the
POTW.  For example, if facility A with weight 10 and facility B with weight 20 discharge to
POTW X, POTW X is assumed to represent 20 POTWs nationwide (with combined loads from
both facility A and facility B).   This extrapolation method  assumes that the same degree of
overlap (i.e., multiple facilities  discharging to a single POTW)  that occurs in the sample also
occurs nationwide.   In  other words, although facility B represents  10 more facilities than
facility A, it is inappropriate to assume those 10 "additional" facilities would be the sole MP&M
dischargers to a POTW because that is not the  case in the sample data set. This procedure may
overestimate the number of POTWs on a national level, but may be more accurate in terms of
the pollutant concentration levels and  projected sludge disposal methods than other procedures.
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2.4    Documented Environmental Impacts

       State 304(1) Short Lists and available literature are reviewed for evidence of documented
environmental impacts on aquatic life, human health, POTW operations, and the quality of
receiving water due  to discharges  of pollutants from centralized waste treatment facilities.
Reported impacts are compiled and summarized.
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                                3.  DATA SOURCES

       Readily available EPA and other agency databases, models and reports are used in the
evaluation of water quality impacts.   The following  five sections describe the various  data
sources used in the analysis.

3.1    Facility-Specific Data

       BAD has provided SASD with projected  MP&M facility effluent  process  flows,
plant/pollutant  operating  days,   and  pollutant  loadings  obtained  from various  sources
(December, 1994).

       The locations of direct MP&M facilities on receiving streams are identified using USGS
cataloging and EPA stream segment (reach) numbers  contained in EPA's Industrial Facilities
Discharge (IFD) data base. Latitude/longitude coordinates, if available, are used to locate those
facilities that have not been assigned a reach number  in IFD.  The names, locations, and the
flow data for the POTWs to which the indirect facilities discharge are obtained from the MP&M
308 Questionnaire, Regional EPA Pretreatment Coordinators, EPA's 1992 NEEDS Survey, IFD,
and EPA's Permit Compliance System (PCS). If these sources did not yield information for a
facility, alternative measures were taken to obtain a complete set of receiving streams and
POTWs.

       Similar to direct facilities, latitude/longitude coordinates (if available) are used to located
those POTWs that have not been assigned a reach number in IFD.  For those facilities in which
the POTW receiving the plant discharge could not be positively identified, the nearest POTW
is identified. The identification of the closest linear distance was based on the latitude/longitude
coordinates of the indirect facility or the city in which it is located.  The corresponding reach
is identified in  IFD, and POTW flow  is obtained from the NEEDS Survey or PCS.  Median
POTW flows and receiving stream flows were calculated from the known data and assigned to
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 any facility where POTW and location could not be positively identified from available data
 sources.

       The receiving stream flow data are obtained from either the W.E. Gates study data or
 from measured streamflow data, both of which are contained in EPA's GAGE file.  The W.E.
 Gates study contains calculated average and low flow  statistics based on the best available flow
 data and on drainage areas for reaches throughout the United States.  The GAGE file also
 includes average and low flow statistics based on measured data from USGS gaging stations.
 Dissolved Concentration Potentials (DCPs) for estuaries and bays are obtained from the Strategic
 Assessment Branch of NOAA's  Ocean Assessments  Division.  Critical Dilution Factors  are
 obtained from the Mixing Zone Dilution Factors for New Chemical Exposure Assessments (U.S.
 EPA, 1992).

       Attachment A provides a listing of cmrrent (baseline) and proposed BAT/PSES facility
 pollutant loadings, effluent flows, and facility operating days. Attachment B provides a listing
 of receiving stream data for direct and indirect discharging facilities.

 3.2    Information Used to Evaluate POTW Operations

       POTW treatment efficiency removal rates are obtained from the POTW Pass-Through
Analysis for the Centralized Waste Treatment Industry (U.S. EPA, 1994).  Rates are developed
 from POTW removal data and pilot-plant studies or by using the removal rate of a similar
pollutant when data are not available.  Use of the  selected removal rates assumes that the
evaluated POTWs are well-operated and have at least secondary treatment in place.

       Inhibition values are obtained from Guidance Manual for Preventing Interference at
POTWs (U.S. EPA, 1987) and from CERCLA Site Discharges to POTWs: Guidance Manual
 (U.S. EPA, 1990).  The most conservative values for activated sludge are used. For pollutants
with no specific inhibition value,  a value based on compound type  (e.g., aromatics) is used.
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       Sewage sludge regulatory levels, if available for the pollutants of concern, are obtained
from the Federal Register 40 CFR Part 503, Standards for the Use or Disposal of Sewage
Sludge, Final Rules (February  19,  1993).  Pollutant limits established for the final use or
disposal of sewage sludge when the sewage sludge is applied to agricultural and non-agricultural
land are used.  Sludge partition factors are  obtained from  the Report to  Congress on the
Discharge of Hazardous Wastes to Publicly-Owned Treatment Works (Domestic Sewage Study)
(U.S. EPA,  1986).

       Attachment C provides a listing of POTW treatment efficiency removal rates, inhibition
values, and sewage  sludge regulatory levels used in the evaluation of POTW operations.  Also
included is a complete reference package.

3.3    Water Quality Criteria (WOO

       The ambient criteria (or toxic effect levels) for the protection of aquatic  life and human
health are obtained from a variety of sources including EPA  criteria  documents, EPA's
Assessment Tools for the Evaluation of Risk (ASTER), and EPA's Integrated Risk Information
System (IRIS). Ecological toxicity estimations are used when published values are not available.
The hierarchies used to select the appropriate aquatic life and human health values are described
in the following  sections.

       Attachment D provides a listing,  by pollutant, of aquatic life values and human health
values used in the Water Quality Analyses.  Also included is a complete reference package.

3.3.1  Aquatic Life

       Water  quality criteria  for  many  pollutants have been established  by EPA  for  the
protection of freshwater aquatic life (acute and chronic criteria).  The acute value represents a
maximum allowable 1-hour average concentration of a pollutant at any time and can be related
to acute toxic effects on aquatic life.   The chronic value represents  the average allowable
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concentration of a toxic pollutant over a 4-day period at which a diverse genera of aquatic

organisms and their uses" should not be unacceptably affected, provided that these levels are not

exceeded more than once every 3 years.


       For pollutants for which no water quality criteria have been developed, specific toxicity

values (acute and chronic effect concentrations reported in published literature or estimated using

various application techniques) are used.  In selecting values from  the literature,  measured

concentrations from flow-through studies  under typical pH and  temperature conditions are

preferred. The test organism must be a North American resident species of fish or invertebrate.

The hierarchies used to select the appropriate acute and chronic values  are listed below in
descending order of priority.


       Acute Aquatic Life Values:

             •     National acute freshwater quality  criteria;

             •     Lowest reported acute  test values (96-hour LC50 for fish and 48-hour
                   EC50/LC5o for daphnids);

             •     Lowest reported LC50 test value of shorter duration, adjusted to estimate
                   a 96-hour exposure period;

             •     Lowest reported LC50 test value of longer duration, up to a maximum of
                   two weeks exposure; and

             •     Estimated 96-hour LC50 from the  ASTER QSAR model.


      Chronic Aquatic Life Values:

             •     National  chronic freshwater quality criteria;

             •     Lowest reported maximum allowable toxic concentration (MATC), lowest
                   observable  effect  concentration  (LOEC),  or  no  observable  effect
                   concentration (NOEC);

             •     Lowest  reported  chronic  growth  or  reproductive   toxicity   test
                   concentration;
                                         28

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                    Estimated chronic toxicity concentration from a measured acute chronic
                    ratio for a less sensitive species, quantitative structure activity relationship
                    (QSAR) model, or default acuterchronic ratio of 10:1.
3.3.2  Human Health


       Water quality criteria for the protection of human health are established in terms of a
pollutant's toxic effects, including carcinogenic potential.  These human health criteria values
are developed for two exposure routes:   (1) ingesting the pollutant via contaminated aquatic

organisms only, and (2) ingesting the pollutant via both  water and contaminated aquatic

organisms as follows.
       For Toxicitv Protection (ingestion of organisms only)
where:
       HH,,,  =
       RfD   =
       IRf    =
       BCF   =
       CF
                                  HH   =  %DxCF
                                                                      (Bq. 11)
             human health value (/*g/L)
             reference dose (mg/day)
             fish ingestion rate (0.0065 kg/day)
             bioconcentration factor (L/kg)
             conversion factor for units (1,
       For Carcinogenic Protection (ingestion of organisms only)
where:
BW
RL
SF
IRf
                                      = BWxRLxCF
                                   00    SFxIRfXBCF
                                                                      (Bq. 12)
                    human health value 0*g/L)
                    body weight (70 kg)
                    risk level (10-6)
                    cancer slope factor (mg/kg/day)'1
                    fish ingestion rate (0.0065 kg/day)
                                          29

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       BCF   =    bioconcentration factor (L/kg)
       CF    =    conversion factor for units (1,000 /*g/mg)
       For Toxicitv Protection (ingestion of water and organisms)
 where:
                              HH  =
                                                 CF
                                                         (Eq-  13)
       HH^o  =     human health value Gtg/L)
       RfD   =     reference dose (mg/day)
              =     water ingestion rate (2 liters/day)
              =     fish ingestion rate (0.0065 kg/day)
       BCF   =     bioconcentration factor (L/kg)
       CF    =     conversion factor for units (1000 /ig/mg)
       For Carcinogenic Protection (ingestion of water and organisms')
where:
       BW
       RL
       SF
       BCF
       CF
                          HH   =
                                        BWxRLx CF
              SF x [
                                               (IRfx BCF) ]
                                                         (Eq.  14)
human health value (jtg/L)
body weight (70 kg)
risk level (lO^5)
cancer slope factor (mg/kg/day)"1
water ingestion rate (2 L/day)
fish ingestion rate (0.0065 kg/day)
bioconcentration factor (L/kg)
conversion factor for units (1,000
The values for ingesting water and organisms are derived by assuming an average daily ingestion

of 2 liters of water, an average daily fish consumption rate of 6.5 grams of potentially

contaminated fish products,  and an average adult body weight of 70 kilograms (Technical
                                          30

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Support Document for Water Quality-Based Toxics  Controls (U.S. EPA, 1991a).  Values

protective of carcinogenicity are used to assess the potential effects on human health, if EPA has
established a slope factor.


       Protective concentration levels for carcinogens are developed in terms of non-threshold
lifetime risk level.  Criteria at a risk level of 10* are  chosen for this analysis. This risk level
indicates  a probability of one additional case of cancer for every 1,000,000 persons exposed.
Toxic  effects  criteria for noncarcinogens include systemic effects  (e.g., reproductive,
immunological, neurological,  circulatory,  or respiratory  toxicity), organ-specific toxicity,
developmental toxicity, mutagenesis, and lethality.


       The hierarchy used  to select the most appropriate human health criteria values is listed
below in  descending order  of priority:
             Calculated human health criteria values using EPA's Integrated Risk Information
             System (IRIS) reference doses (RfDs) or slope factors (SFs) used in conjunction
             with adjusted 3 percent lipid BCF values derived from Ambient Water Quality
             Criteria Documents (U.S. EPA, 1980); three percent is the mean lipid content of
             fish tissue reported in the study from which the average daily fish consumption
             rate of 6.5 g/day was derived;

             Calculated human health criteria values using current IRIS  RfDs or SFs and
             representative  BCF values  for common North  American species  of fish or
             invertebrates or estimated BCF values;

             Calculated human health criteria values using RfDs or SFs from EPA's Health
             Effects Assessment Summary Tables (HEAST) used in conjunction with adjusted
             3 percent lipid BCF values derived  from Ambient Water Quality  Criteria
             Documents (U.S. EPA, 1980);

             Calculated human health criteria values using current RfDs or SFs from HEAST
             and representative BCF values for common North American species of fish or
             invertebrates or estimated BCF values;

             Criteria from the Ambient Water Quality Criteria Documents (U.S. EPA, 1980);
             and
                                         31

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             Calculated human health values using RfDs or SFs from data sources other than
             IRIS or HEAST.
      This hierarchy is based on Section 2.4.6 of the Technical Support Document for Water
Quality-based Toxics Control (U.S. EPA, 199la), which recommends using the most current risk
information from IRIS when estimating human health risks. In cases where chemicals have both
RfDs and SFs from the same level of the hierarchy, human health values are calculated using
the formulas for carcinogenicity,  which always results in the more stringent value of the two
given the risk levels employed.

3.4   Pollutant Fate and Toxicitv

      The chemical-specific data needed to conduct the fate and toxicity evaluation are obtained
from various sources as described in Section 2.2.2 of this report.  Aquatic life and human values
are presented in Attachment D.  Physical/chemical property data are presented in Attachment E.

3.5   Documented Environmental Impacts

      Data are obtained from the 1990 State 304(1) short lists (U.S. EPA,  1991b).  Literature
abstracts are obtained through the computerized information system DIALOG which provides
access to Enviroline, Pollution Abstracts,  Aquatic Science Abstracts, and Water Resources
Abstracts.
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                             4.  SUMMARY OF RESULTS

4.1    Projected Water Quality Impacts

       Water  quality impacts are projected  for  direct,  and indirect discharge facilities by
comparing instream concentrations to criteria for acute aquatic life, chronic aquatic life, human
health for ingestion of water and organisms, and human health for ingestion of organisms only.
Indirect discharge loads are further analyzed based on their projected impact to POTW operation
by comparing POTW influent concentrations to biological inhibition and sludge contamination
criteria.  All tables referred to in these sections are presented at the end of Section 4.

4.1.1  Direct Discharge Facility Sample Set

       The  effects of direct wastewater  discharges on  receiving stream water quality are
evaluated at current and  proposed BAT treatment levels for 55  facilities  discharging 61
pollutants to 55 receiving streams (Table 1).  At current discharge levels these 55 facilities
discharge 41  million pounds-per-year  of priority and nonconventional pollutants (Table 2).
These loadings are reduced to 34 million pounds-per-year at proposed BAT treatment levels;
a reduction of 17 percent.

       Modeled instream  concentrations  of 18  pollutants  (13 metals,  3  organics,  and 2
conventional) are projected to exceed  acute aquatic life criteria in 6 of the 55 (11 percent)
receiving streams at current discharge  levels (Table 3).  At proposed BAT discharge levels 2
streams (4 percent) are impacted by 2 pollutants (2  metals).  A total of 31 individual acute
aquatic life criteria excursions are projected at current discharge levels.  The total number of
excursions is reduced to 3 at proposed BAT discharge levels.

       Instream concentrations of 39 pollutants (23 metals, 10 organics,  and 6 conventionals)
are projected  to exceed chronic  aquatic life criteria or toxic effects levels in 11 of the 55
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receiving streams (20 percent) at current discharge levels.  Proposed BAT discharge levels
reduce projected stream excursions to 7 streams (13 percent) impacted by 6 pollutants (5 metals
and  1  conventional) (Table 3).  A  total of 76 chronic aquatic life criteria excursions are
projected at current discharge levels.  The total number of excursions is reduced to 19 at the
proposed BAT discharge levels.

       Instream concentrations of 2 pollutants (1 metal and 1 organic) are projected to exceed
human health criteria (developed for consumption of water and organisms) or toxic effects
levels in 9 of the 55 receiving streams (16 percent) at current discharge levels (Table 3).
Proposed BAT discharge levels reduce projected  stream excursions to 4 streams (7 percent)
impacted by 2 pollutants (1 metal and 1 organic). There are a total of 13 human health criteria
(developed  for consumption of water and organisms) excursions projected  at current
discharge levels. The total number of excursions is  reduced to 8 at the proposed BAT discharge
levels.

       Additionally, instream concentrations of 2 pollutants (1 metal and 1 organic) are projected
to exceed human health criteria (developed for  consumption of  organisms only) or toxic
effects levels in 3  of the 55 receiving streams (5  percent)  at current discharge levels.  The
number of projected stream excursions is not reduced at the proposed BAT discharge levels.
There are a total of 4 human health criteria (developed for consumption of organisms only)
excursions projected at current and 4 excursions at the proposed BAT discharge levels.

       Individual pollutant tables are presented to identify those pollutants which are projected
to impact water quality. The number of times and excursion magnitudes are presented for all
direct discharge facility analysis (Table 4).
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4.1.2  Direct Discharge Facility National Extrapolation

       Sample  set data are extrapolated using a variable weighting approach described in
Section 2.1.3.  Extrapolated values are based on the sample set of 55 facilities discharging 61
pollutants to 55 receiving streams. These values are extrapolated to 2,035 facilities discharging
61 pollutants to 2,035 receiving streams.

       Extrapolated instream concentrations of 18 pollutants  (13 metals,  3 organics, and 2
conventionals) are projected to exceed acute aquatic life criteria in 83 of the 2,035 (4 percent)
receiving  streams at current discharge levels (Table 5).  At proposed BAT discharge levels,
the projected stream excursions are reduced to 21 streams (1 percent) impacted by 2 pollutants
(2 metals).  A total of 609 acute aquatic life criteria excursions are projected at the current
discharge levels.   The total number of excursions is reduced to 36 at the  proposed BAT
discharge levels.

       Extrapolated concentrations of 39 pollutants (23 metals, 10 organics, and  6 conventionals)
are projected to exceed chronic aquatic life criteria or toxic effects  levels in 181 of the 2,035
(9 percent) receiving streams at current discharge levels (Table 5).  Excursions at proposed
BAT discharge levels are projected for 78 streams (4 percent) impacted by 6 pollutants (5 metals
and 1 conventional). At  current discharge levels a total of 1,449 excursions are projected for
chronic aquatic  life  criteria.   A total of 212 excursions are projected  at  proposed BAT
discharge levels.

       Extrapolated excursions of 2 pollutants (1 metal and 1 organic) are projected from the
human health  criteria (developed for consumption of water and  organisms) in 116 of the
2,035 (6 percent) receiving streams at current discharge levels (Table 5).  At proposed BAT
discharge levels, projected stream  excursions of  human health  criteria  (developed for
consumption of water and organisms) are projected on 38 streams  (2 percent) impacted by 2
                                           35

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pollutants (1 metal and 1 organic). At current discharge levels a total of 155 excursions are
projected.  A total of 76 excursions are projected at the proposed BAT discharge levels.

       Extrapolated concentrations of 2 pollutants (1 organic and 1 metal)  are projected for
human health criteria (developed for consumption of organisms only) in 28 of the 2,035 (1
percent) receiving streams at current and proposed BAT discharge levels (Table 5). At current
and proposed BAT discharge levels a total of 34 excursions are projected based on the national
extrapolation.

4.1.3  Indirect Discharge Facility Sample Set

       The  effects.of indirect  wastewater discharges on  receiving stream water quality are
evaluated at current and proposed PSES treatment levels for 307 facilities discharging 61
pollutants to 264 POTWs and 249 receiving streams (Table 6). At current discharge levels
these 307 facilities discharge 156 million pounds-per-year of priority and  nonconventional
pollutants to POTWs.  These loadings are reduced to 106 million pounds-per-year at proposed
PSES treatment levels; a reduction of 32 percent  (Table 2).

       Modeled instream concentrations  of 6  pollutants  (5  metals  and  1 conventional) are
projected to exceed acute aquatic life criteria in  7 of the 249 (3 percent) receiving streams at
current discharge levels.  At proposed PSES discharge levels one stream is to be impacted by
one pollutant (one metal).  A total of 10 individual acute aquatic life criteria excursions are
projected at current discharge levels.   At proposed PSES discharge levels one excursion is
projected (Table 7).

       Instream concentrations of 19 pollutants (15 metals and 4 conventionals) are projected
to exceed chronic aquatic life criteria or toxic effects levels in 33 of the 249 receiving streams
(13 percent) at current discharge levels.  At proposed PSES discharge levels,  12 streams (5
percent) are projected to be impacted by 10 pollutants (8 metals and 2 conventionals). A  total
                                           36

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of 72 chronic aquatic life criteria excursions are projected at current discharge levels.  The
total number of excursions is reduced to 22 at the proposed PSES discharge levels (Table 7).

       Instream concentrations of 5 pollutants (2 metals and 3 organics) are projected to exceed
human health criteria (developed for consumption of water and organisms) or toxic effects
levels for water and organism consumption in 21 of the 249 receiving streams (8 percent) at
current discharge levels. Proposed PSES discharge levels reduce projected stream excursions
to 13 streams (5 percent) impacted by 3 pollutants (2 metals and 1 organic).  There are a total
of 29 human health criteria (developed for consumption of water and organisms) excursions
projected at current discharge levels.  The total number of excursions is reduced to 15 at the
proposed PSES discharge levels (Table 7).

       Additionally, instream  concentrations of 3  pollutants  (1 metal and  2 organics) are
projected to exceed human health criteria (developed for consumption of organisms only)
or toxic effects levels in 4 of the 249 receiving streams (2 percent) at current discharge levels.
The number of projected  stream excursions is reduced to zero at proposed  PSES discharge
levels. There are a total of 7 human health criteria (developed for organism consumption only)
excursions projected at  current discharge levels.  No excursions are projected at proposed
PSES discharge levels (Table 7).

       Individual pollutant tables are presented to identify those pollutants which are projected
to impact water quality.  The number of times and excursion magnitudes are presented for all
direct discharge facility analysis (Table 8).

4.1.4  Indirect Discharge Facility National Extrapolation

       Sample set data  are  extrapolated using a variable weighting approach.  Extrapolated
values were based on the sample set of 307 facilities discharging 61 pollutants to 249 receiving
                                          37

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streams. These values were extrapolated to 7,387 facilities discharging 61 pollutants to 6,864
receiving streams.

       Extrapolated instream concentrations of 6 pollutants (5 metals and 1 conventional) are
projected to exceed acute aquatic life criteria in 123 of the 6,864 (2 percent) receiving streams
at current discharge levels.  Extrapolated instream concentrations for one pollutant (1 metal)
is projected for 5 (< 1 percent)  streams at proposed PSES discharge levels.  A total of 135
acute aquatic life criteria excursions are projected at the current discharge  levels.   Five
excursions are projected at proposed PSES discharge levels (Table 9).

       Extrapolated concentrations of 19 pollutants (15 metals and 4 conventionals) are projected
to exceed chronic aquatic life criteria or toxic effects levels in  553 of the 6,864 (9 percent)
receiving streams at current discharge levels.  Excursions at proposed PSES discharge levels
are projected for 233 streams impacted by 10 pollutants (8 metals and 2 conventionals). At
current discharge levels a total of 1,025 excursions are projected  for chronic aquatic life
criteria. A total of 413 excursions are projected at proposed PSES discharge levels (Table 9).

       Extrapolated excursions of 5 pollutants (2 metals and 3 organics) are projected from the
human health criteria (developed for consumption of water and organisms)  in 488 of the
6,864 (7 percent) receiving streams at current discharge levels.  At proposed PSES discharge
levels,  excursions of human health criteria (developed for consumption of water and
organisms) are projected for 365 (5 percent)  streams impacted by 3 pollutants (1 organic and
2 metals).  At current discharge levels a total of 582 excursions are projected.  At proposed
PSES discharge levels a total of 407 excursions are projected (Table 9).

       Extrapolated excursions of 3 pollutants (1  metal  and 2 organics) are projected from the
human health criteria (developed for consumption of organisms  only) in 37 of the 6,864
receiving streams at current discharge levels.  At proposed PSES discharge levels, no stream
excursions  of human health criteria (developed for  consumption of organisms only) are
                                          38

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projected.  At current discharge levels a total of 63 excursions are projected. No excursions
are projected at proposed PSES discharge levels (Table 9).

4.1.5  FOTW Model Sample Set

       The effects of indirect wastewater discharges on POTW operation are evaluated at
current and  proposed PSES treatment levels for 307 facilities  discharging 61 pollutants to
264 POTWs. Thirty-seven (37) pollutants are evaluated for potential POTW operation inhibition
and 9 pollutants for potential  sludge  contamination.  At current  discharge levels these
307 facilities discharge 156 million pounds-per-year of priority and nonconventional pollutants.
These loadings are reduced to 106 million pounds-per-year at proposed PSES treatment levels.

       Modeled POTW concentrations of 11 metal pollutants are projected to exceed biological
inhibition criteria in 43  of the 264  (16 percent) POTWs at current discharge levels.   At
proposed PSES discharge levels, 37 POTWs are projected to be impacted by 6 metal pollutants.
A total of 68 individual  biological inhibition criteria excursions  are projected  at current
discharge levels.  At proposed PSES discharge levels 45 excursions are projected (Table 10).

       POTW concentrations of 9 metal pollutants are projected to exceed sludge contamination
criteria in 40 of the 264 POTWs (15 percent) at current discharge levels.  At proposed PSES
discharge levels, 29 POTWs (11 percent) are projected to  be impacted by 9 metal pollutants.
A total of 103 sludge contamination criteria excursions  are projected at current  discharge
levels. The total number of excursions is reduced to 57 at the proposed PSES discharge levels
(Table 10).

       Individual pollutant tables are presented to identify those pollutants which are projected
to impact water quality.  The number of times and excursion magnitudes are presented for all
direct discharge facility analysis  (Table 11).
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4.1.6  POTW National Extrapolation

       Sample set data are extrapolated using  a variable weighting approach.   Extrapolated
values were based on the sample set of 307 facilities discharging 61 pollutants to 264 POTWs.
These values were extrapolated to 7,387 facilities discharging 61 pollutants to 7,016 receiving
POTWs.   Biological  inhibition was evaluated for 37 of the  61 pollutants  and sludge
contamination was evaluated for 9 of the 61 pollutants.

       Extrapolated  POTW concentrations  of  11 metal pollutants are projected to exceed
biological inhibition criteria in 1,117 of the 7,016 (16 percent) POTWs at current discharge
levels. At proposed PSES discharge levels, 1,034 POTWs are projected to have excursions of
6 pollutants.  A total of 1,438 biological imbibition criteria excursions are projected at the
current discharge levels. A total of 1,081 excursions are projected at proposed PSES discharge
levels (Table 12).

       Extrapolated  concentrations  of 9 metal  pollutants  are  projected to exceed sludge
contamination criteria in 879 of the 7,016 (13 percent)  POTWs at current discharge levels.
Excursions at proposed PSES discharge levels are projected for 600 POTWs impacted by 9
metal pollutants.  At current discharge levels a total of 1,771 excursions  are projected for
sludge contamination criteria.  A total of 940 excursions  are projected at proposed PSES
discharge levels (Table  12).

4.2    Pollutant Fate and Toxicity

       The potential fate and  toxicity of the pollutants of concern found in MP&M  effluents
based on their known  chemical characteristics and  their potential effects  on human health,
aquatic ecosystems, and POTWs are  discussed in the following sections.  All tables referred to
in these sections are presented at the end of Section 4.
                                           40

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4.2.1  Pollutants of Concern

       Human exposure, ecological exposure, and risk from environmental releases of toxic
chemicals depend largely on toxic potency, inter-media partitioning, and chemical persistence.
These factors are, in turn,  dependant on chemical-specific properties relating to lexicological
effects on living organisms, physical state,  hydrophobicity/lipophilicity, and reactivity; the
mechanism and media of release; and site-specific environmental conditions. Based on available
physical-chemical properties and aquatic life and human health toxicity data for the 61 evaluated
pollutants, 14 exhibit moderate to high toxicity to aquatic life; 31 are human systemic toxicants;
7 are classified as known, probable, or possible human  carcinogens; 8  are designated as
hazardous air pollutants (HAP) in wastewater; and 25 have drinking  water values (16 with
enforceable health-based maximum contaminant levels (MCLs), 7 with secondary MCLs for
aesthetics or taste, and  2 with action levels for treatment) (Table 13).  In terms of projected
environmental partitioning  among media,  12  of the 61 evaluated pollutants are moderately to
highly volatile (potentially causing  risk to exposed populations via inhalation),  18 have a
moderate to high potential to bioaccumulate in aquatic biota (potentially accumulating in the food
chain and causing increased risk  to higher  trophic level organisms and to exposed human
populations via fish and shellfish consumption), and  11 organics have a moderate  to high
potential to adsorb to solids (potentially contaminating sediment underlying surface waters or
land receiving sewage sludge application). Twenty-four (24) of the pollutants are metals which,
in general, are not applicable to evaluation based on volatility and adsorption to solids.  It is
assumed that all of the metals have a high potential to adsorb to solids.

4.2.2  Human Health Effects

       The proposed regulation will assist in reducing pollutant concentrations in waterways
receiving MP&M wastewater discharges to levels protective of human health.  The benefits from
the proposed regulation include human health benefits from reductions in both carcinogenic risks
and noncarcinogenic hazards.   These benefits result  from reduced human exposure  to toxic
pollutants through the consumption of chemical-contaminated fish by recreational and subsistence
                                           41

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anglers and their families.  Li addition, benefits would result from reduced human exposure
through the consumption of chemically-contaminated drinking water by populations served by
drinking water utilities located downstream from waterways receiving the wastewater discharges
from MP&M facilities.

       The identified carcinogens are  classified as known (A) or  probable (Bl  or B2)
carcinogens that are associated with the development of benign or malignant growths (cancers)
in target organs such as the lungs, liver, skin, kidney and stomach (Table 14). Noncarcinogenic
hazards expected to be reduced by the proposed regulation include systemic effects (e.g., loss
of reproductive,  immunological,  neurological,  circulatory, or respiratory function),  organ-
specific toxicity (liver and kidney), developmental toxicity, and lethality (Table 15).

4.2.3  Ecological Effects

       EPA expects the proposed regulation to generate ecological and recreational benefits due
to improved water quality based on the reduction of pollutants to levels  below those considered
to adversely impact biota. Such impacts include  acute and chronic toxicity, sublethal effects on
metabolic and reproductive functions, physical destruction of spawning and feeding habitats, and
loss  of prey organisms.  These effects will vary due to  the diversity of species with differing
sensitivities to impacts.   For example, lead exposure can cause spinal  deformities in rainbow
trout.  Nickel exposure can affect spawning behavior of shrimp.  Nickel and copper exposure
can affect the growth  activity of algae.  In addition,  copper and cadmium can be acutely toxic
to aquatic life, including finfish.

       The ecological benefits that can be expected  from the regulation include protection of
both freshwater and saltwater organisms, as well as terrestrial wildlife  and birds that consume
aquatic organisms.  The  regulation will result in a reduction  in the presence and discharge of
toxic pollutants, thereby  protecting those aquatic ecosystems currently  under stress, providing
the opportunity for the reestablishment of productive ecosystems in damaged waterways, and
protection of resident endangered species.
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       In addition, EPA expects the regulation to result in the propagation and productivity of
fish and other organisms, maintaining fisheries for both commercial and recreational purposes.
Recreational activities such as boating, water skiing, and swimming would also be preserved
along with the  maintenance of an aesthetically pleasing environment.  Both recreational and
commercial activities contribute, in turn, to the support of local and State economies.

       EPA also anticipates that the  regulation will reduce the ongoing accumulation of
contaminants in sediment that,  in many cases, precludes or  restricts dredging of shipping
channels in inland or coastal harbors receiving MP&M effluents directly or from  upstream
sources.  Allowing dredging, or decreasing its cost, directly benefits commerce and trade.  This
benefit would apply to areas which are currently uncontaminated, but are potentially at risk of
contamination.   This benefit could  also apply to areas that are currently contaminated by
reducing or eliminating active sources.   At these  locations,  this action could  improve the
feasibility and likelihood of success of remediation activities, or potentially lead to a return to
an uncontaminated status in the future as natural forces of burial and shifting and diffusion
disperse historical contaminants below levels of concern.

4.2.4  POTW  Effects

       EPA  expects  the  proposed  regulation will reduce interference  of operations and
contamination of sewage sludge at POTWs receiving  effluent discharges from MP&M facilities.
Interference of POTW processes (e.g., inhibition of microbial degradation) may result from
large quantities or high concentrations of toxic pollutants in these discharges,  and may adversely
affect the operation of a POTW by potentially reducing the treatment efficiency or capacity of
the POTW. In addition, toxic pollutants present in the effluent discharges may pass through a
POTW and adversely affect receiving water quality or contaminate sludges generated during
primary or secondary wastewater treatment.   EPA  expects benefits from changes in sewage
sludge disposal practices will be generated as POTWs are able to dispose of sludge using less
expensive and more environmentally beneficial methods.  For example, higher quality sludge
may be applied to agricultural land  rather than incinerated or disposed of in landfills.  This
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 would result in cost savings for POTWs by increasing opportunities to derive benefits from the
 distribution of sludge for land application.

 4.3   Projected Sludge Disposal Impacts

       Projected sewage sludge disposal impacts are evaluated by  assigning the lowest cost
 disposal method available at current conditions and at the proposed treatment option.  Available
 disposal methods are determined by comparing projected pollutant concentrations in sewage
 sludge from sample POTWs to the regulatory limits for various disposal methods.  The transition
 from baseline sewage sludge disposal methods to treatment disposal options are compiled for
 sample POTWs and for a national projection of all affected POTWs.

        At current conditions, 39  of the sample facilities are expected to incinerate sewage
 sludge, 22 are expected to dispose of sewage sludge by co-disposal methods, 2 by surface
 disposal,  16 by  land application-low, and  179  by land  application-high.  At  the proposed
 treatment option. 34 facilities are  projected to incinerate sewage sludge,  19 are projected to
 dispose of sewage sludge by co-disposal methods, 2 by surface disposal, 19 by land application-
 low, and 184 by  land application-high. The national projections of sludge disposal transitions
 indicates that at current conditions, 962 facilities use incineration, 429 use co-disposal, 250 use
 surface disposal,  275 use land application-low, and 5,034 use land application-high.  At  the
 proposed treatment option, the national  projections indicate  that  887 facilities  will use
 incineration,  321 will use co-disposal,  250  will use surface disposal,  362 will use land
 application-low, and 5,131 will use land application-high. The disposal method transition results
 for the sample data set  and  the national projection is summarized in Table 16.   Table 17
provides  the disposal methods at current and at the selected option for individual POTWs. It
 should be noted that Table 17 does not list the 178 sample POTWs projected at load application-
high at both current and at  the selected option.  Thus, the number of modeled facilities was 80
rather than 258.  Similarly, the national projection for these 80 facilities is 1,920 facilities and
not 6,950 facilities.
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4.4    Documented Environmental Impacts

       Forty-six direct MP&M facilities are identified by States as being point sources causing
water quality problems and are included on their 304(1) Short List (Table 18).  Section 304(1)
of the Water  Quality Act of 1987 requires States to  identify waterbodies  impaired by the
presence of toxic substances, to identify point source discharges of these toxics, and to develop
Individual Control Strategies for these discharges.  Pollutants of concern include antimony,
chromium, copper, cyanide, hex-chromium, mercury, nickel, PCBs, phthalate, silver, thallium,
trichloroethylene, WET, and zinc. Facilities were identified using SIC codes and unique facility
names.

       Environmental impact case studies of MP&M facilities include 5 references identified via
the DIALOG  database.   There case studies provide evidence of high levels of toxics being
discharged by MP&M facilities  to receiving surface water, groundwater, and sediments.  The
case studies present biotic exposure effects including toxic effects on aquatic life and worker
exposure during production. Aquatic life impacts showed varying 96-hour LC50 values ranging
from 0.17 to 56 percent.  In addition, the impacts observed in one study suggest that the impact
on  fish,  bottom fauna, algae,  and higher aquatic plants is localized to the  release point.
Occupational exposure survey results  indicate that the rate of  occupational disease among
workers exposed to increased levels of arsenic, boron, and phosphorus is 1.3 percent per 100
workers  as compared  to 0.4 percent per 100 workers in general manufacturing industry
(Table 19).
                                          45

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               TABLE 2.  SUMMARY OF POLLUTANT LOADINGS FOR DIRECT
                             AND INDIRECT MP&M FACILITIES

Current
Organics
Metals
Classicals
TOTAL
Proposed BAT/PSES
Organics
Metals
Classicals
TOTAL
No. of Pollutants
No. of Facilities (Evaluated)
Lowfiags (povads-i&t-yeait)
Sttreci
16,780
31,492,140
9,477,930
40,986,850
3,787
30,244,011
3,581,353
33,829,151
61
55
Indirect
1,058,005
89,749,256
65,415,432
156,222,693
191,695
79,128,932
27,099,880
106,420,507
61
307
Total
1,074,785
121,241,396
74,893,362
197,209,543
195,482
109,372,943
30,681,233
140,249,658
61*
340**
*  The same pollutants are discharged from a number of both direct and indirect facilities; therefore, the total does
   not equal the sum of pollutants.

** 22 facilities are both direct and indirect dischargers.
                                              47

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               TABLE 10. SUMMARY OF PROJECTED POTW INHIBITION AND
                          SLUDGE CONTAMINATION PROBLEMS
Biological Inhibition

Number of Facilities: 307
Number of POTWs: 264
Number of Pollutants:  37
Number of Metals:  15
Number of Organics: 20
Number of Classicals:  2
Sludge Contamination

Number of Facilities: 307
Number of POTWs: 264
Number of Pollutants: 9
Number of Metals: 9
Number of Organics:  0
Number of Classicals: 0
|| Biological Inhibition
Current
POTWs (No.)
Pollutants (No.)
Total Excursions
ProDOsed PSES
POTWs (No.)
Pollutants (No.)
Total Excursions

43
11 (1.61 - 224)
68
37
6 (1.61 - 224)
45
Slwdge Contatamation

40
9 (1.61 - 224)
103
29
9 (1.61 - 224)
57
Total

51
14
45
12
NOTE: Number in parentheses represents magnitude of excursions.
                                              59

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           TABLE 12. SUMMARY OF PROJECTED POTW INHIBITION AND SLUDGE
                   CONTAMINATION PROBLEMS ON A NATIONAL BASIS
Biological Inhibition

Number of Facilities: 7387
Number of POTWs: 7016
Number of Pollutants: 37
Number of Metals: IS
Number of Organics:  20
Number of Classicals: 2
      Conamination
Number of Facilities:  307
Number of POTWs:  264
Number of Pollutants: 9
Number of Metals: 9
Number of Organics:  0
Number of Classicals: 0
|| . Biological Inhibition
Current
POTWs (No.)
Pollutants (No.)
Total Excursions

POTWs (No.)
Pollutants (No.)
Total Excursions
1117
11
1438
1034
6
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879
9
1771
600
9
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Total
1248
14
1154
12
                                            61

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                               63

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Table 14
Human Carcinogens Evaluated, Weight-of-Evidence
Classifications, and Target Organs
Carcinogen
Arsenic
Bis(2-ethyl hexyl) phthalate
Cadmium
Dichloromethane
Lead
Phcnanthrcne*
Tctrachlorocthene
VVtaght-of-Evidence
Classification
A
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B2
D
B2
Target Organs
Skin and lung
Liver
Lung, trachea, and bronchus
Liver
Kidney, stomach, lungs
Skin, lungs and epithelial tissues
Liver
A  -   Human Carcinogen
Bl  -   Probable Human Carcinogen (limited human data)
B2  -   Probable Human Carcinogen (animal data only)
C  -   Possible Human Data
D  -   Not Classifiable as to Human Carcinogenicity

*   Evaluated as a carcinogen based on EPA ambient water quality criteria for human health cancer risk for polynuclear
    aromatic hydrocarbons (PAHs) as a class.
                                                        64

-------
Table IS
Toxicants Exhibiting Systemic and Other Adverse Effects 1
Toxicant
Acetone
Antimony
Arsenic
Barium
Benzole acid
Benzyl alcohol
Bis(2-ethylhexyl) phthalate
Boron
Cadmium
Chromium
Cyanide
Di-n-butyl phthalate
Dichloroethane, 1,1-
Dichloromethane
Ethylbenzene
Fluoride
Lead
Manganese
Methyl ethyl ketone
Molybdenum
Naphthalene
Nickel
Phenol
Selenium
Silver
Tetrachloroethene
Tin
Toluene
Trichloroethane, 1,1,1-
Vanadium
Zinc
Reference Dose Target Organ and Effects
Increased liver and kidney weights; nephrotoxicity
Longevity, blood glucose, cholesterol
Hyperpigmentation, keratosis and possible vascular complications
Increased blood pressure
No adverse effects observed2
Forestomach, epithelial hyperplasia
Increased relative liver weight
Testicular atrophy, spermatogenic arrest
Significant proteinuria
No adverse effects observed2
Weight loss, thyroid effects and myelin degeneration
Increased mortality
No adverse effects observed2
Liver toxicity
Liver and kidney toxicity
Objectionable dental fluorosis
Cardiovascular and CNS effects
CNS effects
Fetus; decreased birth weight
Increased uric acid
Decreased body weight
Decreased body and organ weights
Reduced fetal body weight in rats
Clinical selenosis (hair or nail loss), liver dysfunction
Argyria (skin discoloration)
Liver toxicity, weight gain
Kidney and liver lesions
Changes in liver and kidney weights
Liver toxicity.
No adverse effects observed2
Anemia
Chemicals with EPA verified or provisional human health-based reference doses, referred to as "systemic toxicants.
Reference dose based on a no observed adverse effect level (NOAEL).
                                                 65

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                                5.  REFERENCES
Lyman WJ, Reehl WF, Rosenblatt DH.  (1982)  Handbook of Chemical Property Estimation
Methods - Environmental Behavior of Organic Compounds.  New York, NY:  McGraw-Hill
Book Company. 960 pp.

McDonald R. (1994) Office of Air Quality Planning and  Standards, U.S.  Environmental
Protection Agency.  Facsimile Transmission to J. Keating, Versar Inc.

Metcalf & Eddy, Inc.  (1972) Wastewater Engineering.  McGraw-Hill Book Company, New
York.

U.S. EPA. (1980)  Ambient Water Quality Criteria Documents.   Washington, DC:  U.S.
Environmental Protection Agency, Office of Water. EPA 440/5-80 Series. [Also refer to any
updated criteria documents (EPA 440/5-85 and EPA 440/5-87 Series)].

U.S. EPA. (1986) Report to Congress on the Discharge of Hazardous Wastes to Publicly-Owned
Treatment Works (Domestic Sewage Study). Washington, DC: U.S. Environmental Protection
Agency, Office of Water Regulations and Standards.

U.S. EPA. (1987) Guidance Manual for Preventing Interference at POTWs. Washington, DC:
U.S. Environmental Protection Agency.

U.S. EPA.  (1989) Risk Assessment Guidance for Superfund (RAGs) Volume I Human Health
Evaluation Manual (Part A). Washington, DC: U.S. Environmental Protection Agency, Office
of Emergency and Remedial Response.  EPA/540/1-89/002.

U.S. EPA. (1990) CERCLA Site Discharges to POTWs: Guidance Manual. Washington, DC:
U.S. Environmental Protection Agency,  Office of Emergency and Remedial  Response.
EPA/540/G-90/005.

U.S. EPA. (1991a) Technical Support Document for Water Quality-Based  Toxics Control.
Washington, DC:  U.S. Environmental Protection Agency, Office of Water. EPA/505/2-90-001.
Available from NTTS, Springfield, VA. PB91-127415.

U.S. EPA. (199Ib) National 304(L) Short List Database. Compiled from Office of Water Files
Dated April/May  1991.  Washington, DC:  U.S. Environmental  Protection Agency, Office of
Water.

U.S. EPA. (1992) Mixing Zone Dilution Factors for New Chemical Exposure Assessments,
Draft Report, October 1992.  Washington, DC:  U.S. Environmental Protection Agency.
Contract No. 68-D9-0166. Task No. 3-35.
                                       R-l

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U.S. EPA. (1994) POTW Pass-Through Analysis for the Centralized Waste Treatment Industry.
Washington, DC:  U.S. Environmental Protection Agency.

Versar, Inc.  (1992)  Upgrade of Flow Statistics Used to Estimate Surface Water Chemical
Concentrations for Aquatic and Human Exposure Assessment.  Report prepared by Versar Inc.
for the EPA's Office of Pollution Prevention and Toxics.
                                        R-2

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