United States ",'• : . :;
.-.Environmental Protection
Agency':- :v:v;;;.r .•:,
;;OfficVOf Water
-(4303);,..:,;;;;:;-;
•April 1995:;
Of Proposed EfflMent Limitations
Guidelines And Standards For
The Metal Products Arid
Machinery IndustryiF^aSe?1)
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» EPA
Cost-Effectiveness 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 Bill Cleary and the whole MP&M team for their professional
manner, conscientious effort, and contributions.
Credit must also be given to Abt Associates for their assistance and support in
performing the underlying 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, and Versar under Contract 68-D3-0013.
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Table of Contents
Section 1
Introduction
1.1
Section 2 ;
Methodology 2 i
2.1 Overview
2.1
2.2 Pollution Control Options
.: 2.3
2.3 Calculation of Pollutant Removals
; 27
2.4 Annualized Costs for Each Control Option
• 28
2.5 Stringency and Cost Ranking ;
28
2.6 Calculation of Incremental Cost-Effectiveness Values
„ • 2.9
2.7 Comparisons of Cost-Effectiveness Values ,
! 2.9
Section 3
Cost-Effectiveness Results 3 j
3.1 Cost-Effectiveness Analysis for Indirect Dischargers
31
3.2 Cost-Effectiveness Analysis for Direct Dischargers |
33
3.3 Alternative Toxic Weighting Factors
3.4
Section 4
Cost-Effectiveness Values for Previous Effluent Guidelines and Standards 4.1
Appendix A
MP&M Pollutants of Concern A j
Appendix B
Toxic Weighting Factors B l
Appendix C
POTW Pollutant Removal Efficiencies
: c.i
Appendix D
Pollutant Weighting Factors
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Appendix E
Results of Cost-Effectiveness Analysis Using Pollutant Weighting Factors b. 1
E. 1 Alternative Toxic Weighting Factors
E. 1
E 2 Cost-Effectiveness Analysis for Indirect Dischargers
E. 1
E 3 Cost-Effectiveness Analysis for Direct Dischargers
E.2
Appendix F
Results of Cost-Effectiveness Analysis Using After-Tax Costs of Compliance f.i
F.I Private Compliance Costs
F.I
F.2 Cost-Effectiveness Analysis for Indirect Dischargers
F.I
F 3 Cost-Effectiveness Analysis for Direct Dischargers
F.2
ReferenCCS Ref.1
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Section 1
Introduction
This cost-effectiveness analysis supports the proposed effluent limitations .guidelines and standards for
the Metal Products and Machinery Industry (MP&M) Phase I Industry.' The report assesses the cost-
effectrveness of five regulatory, options for indirect dischargers, which discharge effluent to publicly-owned
treatment works (POTWs), and three options for direct dischargers, which discharge effluent directly to a
waterway.
'i
Cost-effectiveness analysis is used in the development of effluent limitations guidelines to evaluate the
relativeeffiaencyofaproposedregulation to the effiaency of previous regulations. Cost-effectiveness is defined
as the mcrementa. annual cost (in 1981 constant dollars) per incremental to.c-we.ghted pound of pollutant
removed. This definition includes the following concepts: ;
Toxic-Weighted Removals
Annual Costs
Because pollutants differ in their toxicityjthe reductions in pollutant
discharges, or pollutant removals, are adjusted for toxicity by
multiplying the estimated removal quantity for each pollutant by a
normalizing weight, called a Toxic Weighting Factor (TWF). The
TWF for each pollutant measures its toxicity relative to copper, with
more toxic pollutants having higher TWFs.
The cost-effectiveness analysis uses the estimated annual costs of
complying with the alternative regulatory options. The annual costs
include annual expenses for operating ami maintaining compliance
equipment and for meeting monitoring requirements, and an annual
allowance for the capital outlays for pollution prevention and
treatment systems needed for compliance, these costs are calculated
on a pre-tax basis (i.e., without any adjustment for tax treatment of
capital outlays and operating expenses). In addition, the annual
allowance for capital outlays is calculated using an assumed
^^E^omicImpactAnalysisofEffluentLMtationsGuidelinesfortheM
'ase I).
1.1
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Incremental Calculations
opportunity cost of capital to society of 7 percent. Finally, the
compliance costs are calculated in 1981 dollars to facilitate the
comparison of cost-effectiveness values for regulations developed at
different times for different industries.
The incremental values that are calculated for a given option are the
change in total annual compliance costs and change in removals from
the next less stringent option, or the baseline if there is no less
stringent option, where regulatory options are ranked by increasing
levels of toxic-weighted removals. Thus, the cost-effectiveness
values for a given option are relative to another option, or, for the
least stringent option, to the baseline.
The result of the cost-effectiveness calculation represents the unit cost of removing the next pound-
equivalent of pollutants. Cost-effectiveness is strictly a relative measure used for comparative purposes. This
analysis does not provided an absolute scale by which a particular cost-effectiveness value can be assigned a
qualitative judgment. Because cost-effectiveness values are expressed in 1981 dollars per pound-equivalent
removed cost-effectiveness values for a given option may be compared with those of other options berng
considered for a given regulation and also with those calculated for other industries or past regulates.
Although not required by the Clean Water Act, cost-effectiveness analysis is a useful tool for evaluating
options for the removal of toxic pollutants. It is not intended to analyze the removal of conventional pollutants,
however, such as oil and grease, biological oxygen demand and total suspended solids, and removals of these
pollutant are not included in the cost-effectiveness calculation.
The remaining parts of this report are organized as follows. Section 2 of the report defines cost-
effectiveness, discusses the cost-effectiveness methodology, and describes the relevant regulatory options.
Section 3 presents the findings of the separate analyses for direct dischargers and for indirect dischargers. SecUon
4 compares the cost-effectiveness of the proposed regulation with the cost-effectiveness values calculated for
previously promulgated rules. In addition, the reports includes six appendixes. Appendix A lists the pollutants
of concern and their CAS numbers while Appendix B gives the Toxic Weighting Factor (TWF) for each
pollutant Appendix C contains the Publicly Owned Treatment Work (POTW) removal efficiencies used m this
analysis. These removal efficiences are the the percentage of each pollutant that a typical POTW is expected to
1.2
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remove from indirect facility discharges. Appendix D contains an alternative set ol" weighting factors, Pollutant
Weighting Factors (PWFs), for normalizing pollutant removals according to toxieity. The PWFs are based on
a different analytic convention than the TWFs. The results of the cost-effectiveness analysis using the PWFs are
contained in Appendix E. Finally, Appendix F contains cost-effectiveness analysis results that are calculated on
a different cost basis: these costs are the after-tax annual costs to industry using estimated after-tax costs of
capital to annualize the cost of capital equipment.
1.3
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Section 2
Methodology
2.1 Overview
This section defines cost-effectiveness, describes the steps taken in the cost-effectiveness analysis, and
characterizes the regulatory options considered in the analysis.
Cost-effectiveness calculations are used in setting effluent limitations guidelines to compare the
efficiency of one regulatory option in removing pollutants to another regulatory option. Cost-effectiveness is
defined as the incremental annual cost of a pollution control option in an industry or industry subcategory per
incremental pollutant removal. The increments considered are relative to another option or to a benchmark, such
as existing treatment. Pollutant removals are measured in copper-based "pounds-equivalent." The cost-
effectiveness value, therefore, represents the unit cost of removing the next pound-equivalent of pollutant. While
not required by the Clean Water Act, cost-effectiveness analysis is a useful tool for evaluating regulatory options
for the removal of toxic pollutants. Cost-effectiveness analysis is not intended to analyze the removal of
conventional pollutants (oil and grease, biological oxygen demand, and total suspended solids). The removal of
conventional pollutants is therefore not addressed in this report.
Three factors are of particular importance in cost-effectiveness calculations: (1) the normalization of
pounds of pollutant removed to copper-based pounds-equivalent; (2) the incremental nature of cost-effectiveness,
and (3) the fact that cost-effectiveness results are used for comparison purposes rather man on an absolute basis.
First, the analysis is based on removals of pounds-equivalent - a term used to describe a pound of pollutant
weighted by its toxicity relative to copper. These weights are known as toxic weighting factors. Copper is used
as the standard pollutant for developing toxic weighting factors because it is a toxic metal commonly released
in industrial effluent and removed from that effluent. The use of pounds-equivalent reflects the fact that some
pollutants are more toxic than others. By expressing removals in common terms, the removals can be summed
across pollutants to give a meaningful basis for comparing cost-effectiveness results limong alternative regulatory
options or different regulations. !
Second, cost-effectiveness analysis is done on an incremental basis to compare the incremental or
marginal cost and removals of one control option to another control option or to existing treatment.
2.1
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The third point is that no absolute scales exist for judging cost-effectiveness values. The values are
considered high or low only within a given context, such as similar discharge status or compared to effluent
limitations guidelines for other industries.
Cost-effectiveness analysis involves a number of steps, which may be summarized as follows:
• Determine the relevant wastewater pollutants;
• Estimate the relative toxic weights of priority and other pollutants;
Define the pollution control approaches;
• Calculate pollutant removals for each control option;
• Determine the annualized cost of each control option;
• Rank the control options by increasing stringency and cost;
• Calculate incremental cost-effectiveness values; and
• Compare cost-effectiveness values.
These steps are discussed below.
Pollutant Discharges Considered in the Cost-Effectiveness Analysis
Some of the factors considered in selecting pollutants for regulation include toxicity, frequency of
occurrence, and amount of pollutant in the waste stream. The cost-effectiveness analysis of the proposed Metal
Products and Machinery (MP&M) Phase I effluent limitations guidelines is based on 67 pollutants, listed in
Appendix A.
Relative Toxic Weights of Pollutants
Cost-effectiveness analyses account for differences in toxicity among the regulated pollutants by using
toxic weighting factors (TWFs). Relatively more toxic pollutants have higher TWFs. These factors are necessary
because different pollutants have different potential effects on human and aquatic life. For example, a pound of
nickel (TWF=0.036) in an effluent stream has significantly less potential effect than a pound of cadmium
(TWF=5.16). The toxic weighting factors are used to calculate the toxic pound-equivalent unit — a standardized
measure of toxicity.
In the majority of cases, toxic weighting factors are derived from both chronic freshwater aquatic criteria
(or toxic effect levels) and human health criteria (or toxic effect levels) established for the consumption of fish.
These factors are then standardized by relating them to copper. The resulting toxic weighting factors for each
2.2
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pollutant are provided in Appendix B. Table 2-1 shows some examples of the effects of different aquatic and
human health criteria on weighting factors.
Table 2-1
Weighting Factor Based on Copper Freshwater Chronic Criteria
Human
Pollutant
Copper
**
Hexayalent
Chromium
Nickel
Cadmium
Health
Criteria*
3,400
4,600
170
Aquatic
Chronic
Criteria
12.0
11.0
160.0
1.1
Weighting Calculation
5.6/12.0
5.6/3,400 + 5.6/11
5.6/4,600 + 5.6/160
5.6/170+5.6/1.1
Toxic Weighting
Factor
0.467
0.511
0.036
5.120
0.488
.. wauig uic auyve calculation, ine greats the values for the
Dr. Units for criteria are micrograms of pollutant per liter of
* Based on ingestion of 6.5 grams offish per day.
As indicated in Table 2-1, the toxic weighting factor is the sum of two criteria-weighted ratios: the "old-
copper criterion divided by the human health criterion for the particular pollutant, and the "old" copper criterion
divided by the aquatic chronic criterion. For example, using the values reported in Table 2-1, 10.96 pounds of
copper pose the same relative hazard in surface waters as one pound of cadmium, since cadmium has a toxic
weight 10.96 times (5.12/0.467 = 10.96) as large as the toxic weight of copper.
2.2 Pollution Control Options !
This section summarizes the three BAT/BPT and four PSES options that EPA considered. The
BAT/BPT options would apply to direct dischargers, while PSES options would apply to indirect dischargers.
2.2.1 BAT/BPT Technology Options
L °Pti°n 1: Li"» 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.
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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.
Through sampling episodes and site visits, EPA determined that some wastewaters, usually 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 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
topically 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 bivalent 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.
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2. QBtionl^Erocess Flow Control. Pollution
T ;
n ", Srj^Trntmgi. 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
allowmg matenals 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
generate 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 wastewaters 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 pollutant removals and less mass of pollutant in the
discharge. In addition, the cost of a treatment 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 curtails;
Centrifugation and pasteurization to extend the life of water-soluble machining coolants
reducing discharge volume by 80 percent; and ^oiams
fa-process metals recovery using ion exchange followed by electrolytic recovery of the cation
^ nnses- This mciudes f
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.
3" °Pti°n 3: Adva"CPd F"d-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.
2.5
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2.2.2 PSES Technology Options
Indirect discharging MP&M sites generate wastewaters with similar pollutant characteristics to direct
discharging facilities. Hence, the same treatment technologies and regulatory options - Option 1, Option 2, and
Option 3 - discussed previously for BPT and BAT were considered applicable to PSES. However, as described
below, EPA developed and analyzed two additional options for indirect dischargers that apply the requirements
of Option 1 or Option 2 based on the annual discharge volume of the indirect discharging facility.
The Agency originally considered the following three options in developing PSES for MP&M Phase I
indirect dischargers. These options parallel those for direct dischargers.
Option 1:
Option 2:
Under this option, EPA would establish PSES on the basis of the application of lime and settle
treatment without any pollution prevention and flow controls imposed. In implementing
Option 1, Control Authorities would likely impose concentration-based standards on facilities.
Option 2, as in the BPT selection, adds in-process flow reduction to lime and settle
treatment. This option would establish PSES such that all facilities should comply with mass-
based standards based on the proposed concentration standards and an appropriate flow that
should reflect good pollution prevention and water conservation practices. Thus, Option 2
embodies a requirement for pollution prevention and water conservation in conjunction with
lime and settle treatment. The flow basis would be determined by the relevant Control
Authority, using site specific factors and flow guidance.
As in the BPT selection, Option 3 includes all of the Option 2 technologies plus advanced
end-of-pipe treatment. Advanced end-of-pipe treatment would remove significant amounts
of suspended and dissolved solids and yield a treated wastewater that can be recycled as process
water.
EPA initially selected Option 2, In-Process Flow Reduction and Pollution Prevention and Lime and
Settle Treatment, as the preferred PSES regulatory option Option 2 was associated with relatively small
economic impacts. In addition, Option 2 achieved considerably more pollutant removals than Option 1, while
costing less than Option 3. However, as discussed in Chapter 1 of the Economic Impact Analysis Report,
additional analyses of Option 2 identified several issues that weighed against proposing Option 2 as the basis
Option 3:
2.6
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for PSES effluent guidelines. As a result, EPA defined and analyzed
discharging facilities as follows:
two additional PSES options for indirect
Option la: This option would establish
Option 2a:
PSES requireiiieiit
^
WOOOgallons peryear (gpy), PSES would require mat ^ oomp,y ^
standards of Option ,. For
f 1,000,000 gpv
or greater, PSES would require that the mass-based standards of Option 2 be imposed based
on the proposed concentration standards and an approbate flow volume that should refll
good pollut,on prevention and water conservation practices.
To further reduce the regulatory burden associated with smaller facilities, EPA developed an
tTzersed °n in"process reducti°n and poiiuti°n preventi°n and Hme and settie
treatment for large flow sites. This option would establish the same PSES requirements as
spec.fiedmOpt.on 2, but applied to only large flow facilities^* annual discharge volumes
of at least 1 million gallons). Facilities with discharge volumes of less than 1 mil.,' „
o kAj. i\.-oo lucui i million Simons
per year would not be subject to PSES requirements.
2.3
Calculation of Pollutant Removals
for
lor
ers may be removed bv a POTW A t L
. y eremovedbyaPOTW. As a result, the at-stream removal of pollutants due to PSES
e
the
for cadmium °f 4° percent' "- fc POTW
d,sch.ged to surface waters is on,y 60 pounds. ,f a regulation results in a
and the
42 pounds, alu.ou.h mc ruction m faci.^ d,scharges to the POTW is 70 pounds
fcr"fcd^fci^"t*---^-«
by (I . POTW renaova, efficiency). Cost-effectiveness emulations refl« the fact mat the aa,
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.ductionofpollutantdischarge to surface waters is not 30 pounds (the change in the amount discharged to the
POTW). but 42 pounds (= 60 - 18), the change in the amount ultimately discharged to surface waters.
24 Annualized Costs for Each Control Option
FuU details of the methods by which the costs of complymg with the regulatory options were estimated
can be found in the Technical Development Document »d me Econonuc Impact Analysis Report. A bnef
summary of the compliance cost analysis is provided below.
Two categories of compliance cos* were included in me cost-effectiveness analysis: (1) capital costs,
and(2)operatins, maintenance, and monitoring cos,, Although operating, mamtenance, arvd momtonng costs
occur annually, capita, cos* are oae-time "lump sum" costs. To express the cap,*, cos* on a annual bas,,
uimen5eare,a,anop»
c^McosBw^a™uazeover
cost of capita, to society of 7 percent. Tota, annual cos. are the sum of annual capita, costs
«~**^^*^~*'
a
of Ms reportusespre-^costs as thebasis for its calculations. Thus, tee costs may be interpret as
tosocictyofthefacility-level actions for compliance with MP&M regulatory option, Appendix F presents an
alternative analysis using the after-tax compliance costs expected to be incurred by MP&M facmues.
Compliance costs were origtaally calculated in dollars of the year 1989,the base year of the MP&M
tadusuy Ration ana,ysis. For comparing cost-effectiveness values of me options under review ,„ thos, ,«
oteprcmulgatednJes.toc^pUar.ecosK used into cost-effectiveness analysis were deflated fromto
doUars using En^enngNesRecord's Coastruction Cost Index (CO). This adjustment factor ,s:
1981 CCI , 3535 = Q766
Adjustment factor - J9g9 ccj 4615
25 Stringency and Cost Ranking
Ueregulatoryoptowererankedtodeterrainerelativecost-effec^veness. Options were firs, ranked
in increasing order of stringency, where stringency is aggregate pouutan, remova.,, mealed n, pounds-
equivalent. If two or more options remove equal amoun,s rfpdM* te <»*- «• to «"" -
increasing order of cost For example, if Uvo or more options specify zero discharge, rheremovals under each
optionwouldbeequal. The options would then be ranked from leas, expensive W most expense.
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are
2.6 Calculation of Incremental Cost-Effectiveness Values
After the options have been ranked by stringency and cost, incremental cost-effectiveness values „,
calculated. Cost-effectiveness values were calculated separately for indirect and direct dischargers For each
chscharger category, (he cost-effectiveness value of a particular option is calculated M the incremental annual cost
of that opuondividedby the incremental pounds-equivalent removed by that option. Algebraically, th, equation
CEk =
where:
CE, =
ATCk =
Cost-effectiveness of Option k;
Total annualized compliance cost under Option k; and
Removals in pounds-equivalent under Option k. !
The numerator of the equation is the incremental cost in moving from Option k-1 to Option k. Similarly the
denommator is the incremental removals associated with the move from Option k-1 to Option k Thus cost
effectiveness values are measured in dollars per pound-equivalent of pollutant removed. When k corresponds
to the least stringent option (k = 1), the incremental costs and removals are the increments in moving from the
baseline case to Option k.
2.7 Comparisons of Cost-Effectiveness Values
Two types of comparisons are typically done using cost-effectiveness values. First, the cost-effectiveness
values for the alternative regulatory options and technologies under consideration may be compared among
themselves to identify which options offer relatively higher or lower cost-effectiveness in achieving pollutant
reduce. Se^nd, the ^-effectiveness of regulatory options incremental to the baseline scenario can be used
to assess the cost-effectiveness of controls relative to previously promulgated effluent limitations guidelines for
other industries.
2.9
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Section 3
Cost-Effectiveness Results
3.1 Cost-Effectiveness Analysis for Indirect Dischargers
Tables 3-1 and 3-2 summarize the cost-effectiveness analysis results for the PSES regulatory options
applicable to indirect dischargers. Annual compliance costs are shown in 1989 dollars, as reported in the
EIA, and in 1981 dollars. Pollutant removals are reported on both an unweighted and toxic-weighted basis.
The regulatory options are listed in order of increasing stringency on the basis of the estimated toxic-weighted
pollutant removals.
Table 3-1
National Estimates of MP&M Annualized Costs and Pollutant Removals
Indirect Dischargers (PSES)
Regulatory Option
Option 2a
Option 1
Option 1A
Option 2
Option 3
Annualized Cost, Smillions
1 989 dollars
146.1
231.3
221.9
228.3
668.8
1981 dollars
111.9
177.2
170.0
174.9
512.3
Pollutant Removals, thousands
Raw Pounds
12,769.7
14,611.7
14,872.7
14,878.8
15,612.1
Pounds-Equivalent
881.3
988.9
1,011.0
1,011.6
1,105.4
Source: US Environmental Protection Agency
Table 3-2
National Estimates of MP&M Incremental Costs, Removals and C<
Indirect Dischargers (PSES)
Regulatory
Option
Option 2a
Option 1
Option 1A
Option 2
Option 3
Incremental Cost
($ millions, 1981)
111.9
65.3
(7.2)
4.9
337.4
Incremental Removals
(lbs-eq, thousands)
881.3
107.6
22.1
0.6
93.8
st-Effcctiveness
Coat-Effectiveness
(S/lb-eq)
127
607
(327)
8,537
3,596
Source: US Environmental Protection Agency
As shown in Tables 3-1 and 3-2, Option 2a achieves approximately 12.8 million pounds of toxic
pollutant removals, on an unweighted basis and 881,300 pounds-equivalent on a toxic-weighted basis, at a
cost of $ 112 million ($1981). Since Option 2a is the least stringent option, in terms of pollutant removals,
the cost-effectiveness of this option is the same as its average cost per pound-equivalent removed, $ 127.
EPA considers this value to be acceptable when compared to values calculated for previous regulations.
3.1
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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.
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 1 a 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 time, achieving
greater toxic-weighted removals, Option 1 a may be 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 more stringent Option la over Option 1 because a greater quantity of 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 clearly 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 facilities. As discussed in Chapter 1 of the Economic Impact Analysis Report, the finding of
such a high cost-effectiveness value for 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.
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
3.2
-------
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.
3.2 Cost-Effectiveness Analysis for Direct Dischargers
Tables 3-3 and 3-4 summarize the cost-effectiveness for the BPT/BAT regulatory options applicable
to direct dischargers. As with indirect dischargers, annual compliance costs are shown in both 1989 and
1981 dollars, and pollutant removals are reported in both unweighted and toxic-weighted pounds. The
regulatory options are listed in order of increasing stringency, measured by toxic-weighed pollutant removals.
Table 3 -3 shows that Option 1 achieves 1.153 million pounds of removals on an unweighted basis
and 58,200 pounds-equivalent of removals on a toxic-weighted basis, at a cost of $11.9 million (1981
dollars). Since Option 1 is the least stringent option, it is compared to the baseline, and the incremental costs
and removals shown in Table 3-4 for this option are the same as the total costs and removals. The resulting
cost-effectiveness is $204 per pound-equivalent. [
Moving from Option 1 to the proposed Option 2 achieves 70,700 pounds-equivalent of toxic-
weighted removals, which represents a 12,500 pounds-equivalent increment, at an annual cost of $12.5
million (1981 dollars), which is an increment of $0.6 million over Option 1. Thus the cost-effectiveness of
Option 2 is estimated to be $50 per pound-equivalent. EPA considers the cost-effectiveness values of both
Option 1 and Option 2 to be acceptable in relation to values calculated for previous regulations.
3.3
-------
Table 3-3
National Estimates of MP&M Annualizcd Costs and Pollutant Removals
Direct Dischargers (BAT)
Regulatory Option
Option 1
Option 2
Option 3
- Annualizcd Cost, Smillions
1989 dollars
15.5
16.3
68.7
1981 dollars
11.9
12.5
52.6
Pollutant Removals, thousands
Raw founds
1,152.5
1,232.2
1446.7
Pounds-Kqnivalent
58.2
70.7
133.6
Source: Environmental Protection Agency
Table 3-4
National Estimates of MP&M Incremental Costs, Removals and Cost-Effectiveness
Direct Dischargers (BAT)
Regulatory
Option
Option 1
Option 2
Option 3
Incremental Cost
($ millions, 1981)
11.9
0.6
40.1
Incremental Removals
(Ibs-sq, thousands)
58.2
12.5
62.9
Cost-Effectiveness
($/Ib-eqJ
204
50
638
Source: Environmental Protection Agency
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.
On the basis of this analysis, EPA determines that the proposed Option 2 is cost-effectivene, and
that the cost-effectiveness of the various regulatory options supports the choice of Option 2a as the proposed
BPT/BAT option for direct dischargers.
3.3 Alternative Toxic Weighting Factors
EPA also performed the cost-effectiveness analysis with an alternative set of toxic weighting factors
called Pollutant Weighting Factors. Appendix D lists these weighting factors, and Appendix E presents the
results of the additional analysis.
3.4
-------
Section 4
Cost-Effectiveness Values for Previous Effluent Guidelines and Standards
Tables 4-1 and 4-2 present, for indirect and direct dischargers, respectively, the baseline and post-
compliance pollutant loadings and resulting cost-effectiveness values that were calculated for previous
regulations. The values for the proposed MP&M Phase I regulatory options are also listed in these tables.
All values are based on Toxic Weighting Factors normalized to copper and the cost-effectiveness values are
presented in 1981 dollars.
4.1
-------
Table 4-1: Industry Comparison of Cost-Effectiveness Values for Indirect Dischargers
Toxic and Nonconventional Pollutants Only, Copper Based Weights (1981 Dollars)*
Industry
Aluminum Forming
Battery Manufacturing
Can Making
Coal Mining***
Coil Coating
Copper Forming
Centralized Waste Treatment r
(co-proposal)
- Regulatory Option 1
- Regulatory Option 2
Electronics I
Electronics II
Foundries
Inorganic Chemicals I
Inorganic Chemicals II
Iron & Steel
Leather Tanning
Metal Finishing
Metal Products & Machinery I *
Nonferrous Metals Forming
Nonferrous Metals Mfg I
Nonferrous Metals Mfg II
Organic Chemicals, Plastics...
Pesticide Manufacturing (1 993)
Pesticide Formulating, Packaging.. f
Pharmaceuticals T
Plastic. Molding & Forming
Porcelain Enameling
Pulp & Paper
Pounds Equivalent
Currently Discharged
(To Surface Waters)
fOOf)'
-------
Table 4-2: Industry Comparison of Cost-Effectiveness Values for Direct Dischargers
Toxic and Nonconventional Pollutants Only, Copper Based Weights (1981 Dollars)*
Industry
Aluminum Forming
Battery Manufacturing
Can Making
Coal Mining
Coastal Oil and Gas f
- Produced Water
- Drilling Waste
-TWC*
Coil Coating
Copper Forming
Centralized Waste Treatment f
(co-proposal)
- Regulatory Option 1
- Regulatory Option 2
Electronics I
Electronics II
Foundries
Inorganic Chemicals I
Inorganic Chemicals II
Iron & Steel
Leather Tanning
Metal Finishing
Metal Products & Machinery I f
Nonferrous Metals Forming
Nonferrous Metals Mfg I
Nonferrous Metals Mfg II
Offshore Oil and Gas***
Organic Chemicals, Plastics...
Pesticide Manufacturing (1 993)
3harmaceuticals *
3lastics Molding & Forming
5orcelain Enameling
Petroleum Refining
3ulp & Paper
Textile Mills
Pounds Equivalent
Currently Discharged
(To Surface Waters)
-------
4.4
-------
References
U.S. EPA (1995). Development Document for Proposed Effluent Limitations Guidelines and Standards
for the Metal Products and Machinery Phase I Point Source Category. Office of Water.
U.S. EPA (1995). Economic Impact Analysis of Effluent Limitations Guidelines and Standards for the
Metal Products and Machinery Industry (Phase I). Office of Water.
Ref.l
-------
-------
Appendix A
MP&M Pollutants of Concern
Name
CONVENTIONAL POLLUTANTS
Acidity
Alkalinity
Ammonia As N
Chemical Oxygen Demand (COD)
Chloride
Cyanide
Fluoride
Oil And Grease
Sulfate
Total Dissolved Solids
Total Kjeldahl Nitrogen
Total Phosphorus
Total Recoverable Phenolics
Total Suspended Solids
METALS
Aluminum
Antimony
Arsenic
Barium
Boron
Cadmium
Calcium
Chromium
Cobalt
Copper
Iron
Lead
Magnesium
Manganese
Molybdenum
Nickel
Selenium
Silver
CASNO
i None
: None
7664417
': None
16387006
57125
16984488
None
14808798
None
: None
7723140
: None
None
7429905
7440360
7440382
7440393
7440428
7440439
7440702
7440473
7440484
7440508
7439896
7439921
7439954
7439965
7439987
7440020
7782492
7440224
A.I
-------
Name
Sodium
Thallium
Tin
Titanium
Vanadium
Zinc
ORGANIC POLLUTANTS
1,1,1 -Trichloroethane
1,1 -Dichloroethane
2-Butanone
2-Methylnaphthalene
2-Nitrophenol
2-Propanone
4-Chloro-3-Methylphenol
Alpha-Terpineol
Benzoic Acid
Benzyl Alcohol
Bis(2-Ethylhexyl)Phthalate
Di-N-Butyl Phthalate
Ethylbenzene
Hexanoic Acid
Methylene Chloride
N-Decane
N-Docosane
N-Dodecane
N-Eicosane
N-Hexacosane
N-Hexadecane
N-Octacosane
N-Octadecane
N-Tetracosane
N-Tetradecane
N-Triacontane
Naphthalene
Phenanthrene
Phenol
Tetrachloroethene
Toluene
* Acidity and alkalinity were not included in the cost-effectiveness analysis.
A.2
CASNO
7440235
7440280
7440315
7440326
7440622
7440666
71556
75343
78933
91576
88755
67641
59507
98555
65850
100516
117817
84742
I004I4
142621
' 75092
124185
629970
II2403
112958
630013
544763
630024
593453
646311
629594
638686
91203
85018
108952
127184
108883
-------
Appendix B
Toxic Weighting Factors
CONVENTIONAL POLLUTANTS
Ammonia As N
Chemical Oxygen Demand (COD)
Chloride
Cyanide
Fluoride
Oil And Grease
Sulfate
Total Dissolved Solids
Total Kjeldahl Nitrogen
Total Phosphorus
Total Recoverable Phenolics
Total Suspended Solids
METALS
Aluminum
Antimony
Arsenic
Barium
Boron
Cadmium
Calcium
Chromium
Cobalt
Copper
Iron
Lead
Magnesium
Manganese
Molybdenum
Nickel
Selenium
Silver
Sodium
Thallium
Tin
Toxic Weighting Factor
10.00450
b.ooooo
0.00000
1.07695
0.03500
p.ooooo
b.ooooo
b.ooooo
b.ooooo
,0.05600
b.ooooo
b.ooooo
I
O.b6437
0.18797
4.03347
0.00199
0.17722
5.15747
0.00000
b.02668
D.I 1429
0.46667
0.00560
il.75000
0.00000
0.01443
0.20144
0.03622
1.12050
46.66672
0.00000
6.14000
6.30108
B.I
-------
Name
Titanium
Vanadium
Zinc
ORGANIC POLLUTANTS
1,1,1 -Trichloroethane
1,1 -Dichloroethane
2-Butanone
2-Methylnaphthalene
2-Nitrophenol
2-Propanone
4-Chloro-3-Methylphenol
Alpha-Terpineol
Benzoic Acid
Benzyl Alcohol
Bis(2-Ethylhexyl)Phthalate
Di-N-Butyl Phthalate
Ethylbenzene
Hexanoic Acid
Methylene Chloride
N-Decane
N-Docosane
N-Dodecane
N-Eicosane
N-Hexacosane
N-Hexadecane
N-Octacosane
N-Octadecane
N-Tetracosane
N-Tetradecane
N-Triacontane
Naphthalene
Phenanthrene
Phenol
Tetrachloroethene
Toluene
Toxic Weighting Factor
0.02932
0.62222
0.05099
0.00431
0.00039
0.00003
0.01812
0.00162
0.00001
0.00431
0.00102
0.00033
0.00561
0.11020
0.01166
0.00141
0.00034
0.00042
0.00431
0.00008
0.00431
0.00431
0.00008
0.00431
0.00008
0.00431
0.00008
0.00431
0.00008
0.01527
18.89532
0.02800
0.07426
0.00563
B.2
-------
Appendix C
POTW Pollutant Removal Efficiencies
Name
CONVENTIONAL POLLUTANTS
Ammonia As N
Chemical Oxygen Demand (COD)
Chloride
Cyanide
Fluoride
Oil And Grease
Sulfate
Total Dissolved Solids
Total Kjeldahl Nitrogen
Total Phosphorus
Total Recoverable Phenolics
Total Suspended Solids
METALS
Aluminum
Antimony
Arsenic
Barium
Boron
Cadmium
Calcium
Chromium
Cobalt
Copper
Iron
Lead
Magnesium
Manganese
Molybdenum
Nickel
Selenium
Silver
Sodium
Thallium
POTW Removal
Efficiency %
8.14
2.54
0.00
70.44
61.35
97.14
0:00
0.00
10.00
0.00
'0.00
|o.it
ie.si
71.13
90.89
90.20
70.28
90.05
55.19
91.25
;4.8i
84.11
83.00
<)1.83
31.83
40.60
.S2.17
51.44
34.33
92.42
55.19
53.80
C.I
-------
Name
Tin
Titanium
Vanadium
Zinc
ORGANIC POLLUTANTS
1,1,1 -Trichloroethane
1,1-Dichloroethane
2-Butanone
2-Methylnaphthalene
2-Nitrophenol
2-Propanone
4-Chloro-3 -Methylphenol
Alpha-Terpineol
Benzoic Acid
Benzyl Alcohol
Bis(2-Ethylhexyl)Phthalate
Di-N-Butyl Phthalate
Ethylbenzene
Hexanoic Acid
Methylene Chloride
N-Decane
N-Docosane
N-Dodecane
N-Eicosane
N-Hexacosane
N-Hexadecane
N-Octacosane
N-Octadecane
N-Tetracosane
N-Tetradecane
N-Triacontane
Naphthalene
Phenanthrene
Phenol
Tetrachloroethene
Toluene
POTW Removal
Efficiency %
65.20
68.77
42.28
77.97
90.45
70.00
91.83
28.00
26.83
83.75
63.00
94.60
80.50
78.00
59.78
79.31
93.79
84.00
54.28
9.00
88.00
95.05
^2.40
71.11
71.11
71.11
71.11
71.11
71.11
71.11
94.69
94.89
95.25
84.61
96.18
C.2
-------
Appendix D
Pollutant Weighting Factors
Name
CONVENTIONAL POLLUTANTS
Ammonia As N
Chemical Oxygen Demand (COD)
Chloride
Cyanide
Fluoride
Oil And Grease
Sulfate
Total Dissolved Solids
Total Kjeldahl Nitrogen
Total Phosphorus
Total Recoverable Phenolics
Total Suspended Solids
METALS
Aluminum
Antimony
Arsenic
Barium
Boron
Cadmium
Calcium
Chromium
Cobalt
Copper
Iron
Lead
Magnesium
Manganese
Molybdenum
Nickel
Selenium
Silver
Sodium
Thallium
Tin
Pollutant Weighting Factor
1 0.00081
"l 0.00000
0.00000
0.19231
i 0.00625
i 0.00000
1 0.00000
j 0.00000
0.00000
'•• 0.01000
; 0.00000
0.00000
0.01149
0.07166
57.15000
0.00100
0.03165
0.90909
0.00000
0.00476
0.02041
0.08333
0.00100
0.31250
0.00000
0.01000
0.03597
0.00625
0.20000
8.33333
0.00000
0.02500
0.05376
D.I
-------
Titanium
Vanadium
Zinc
ORGANIC POLLUTANTS
1,1,1 -Trichloroethane
1,1 -Dichloroethane
2-Butanone
2-Methylnaphthalene
2-Nitrophenol
2-Propanone
4-Chloro-3 -Methylphenol
Alpha-Terpineol
Benzoic Acid
Benzyl Alcohol
Bis(2-Ethylhexyl)Phthalate
Di-N-Butyl Phthalate
Ethylbenzene
Hexanoic Acid
Methylene Chloride
N-Decane
N-Docosane
N-Dodecane
N-Eicosane
N-Hexacosane
N-Hexadecane
N-Octacosane
N-Octadecane
N-Tetracosane
N-Tetradecane
N-Triacontane
Naphthalene
Phenanthrene
Phenol
Tetrachloroethene
Toluene
0.00524
0.11111
0.00909
0.00077
0.00027
0.00057
0.00324
0.00029
0.00029
0.00077
0.00018
0.00006
0.00100
0.56900
0.00200
0.00032
0.00006
0.21492
0.00077
0.00001
0.00077
0.00077
0.00001
0.00077
0.00001
0.00077
0.00001
0.00077
0.00001
0.00270
357.14285
0.00500
1.25000
0.00100
D.2
-------
Appendix E
Results of Cost-Effectiveness Analysis Using Pollutant Weighting Factors
E.I Alternative Toxic Weighting Factors
EPA also performed the cost-effectiveness analysis with an alternative set of toxic weighting factors
called Pollutant Weighting Factors (PWFs). Appendix D listed these weighting factors, while this appendix
presents the results of the additional analysis.
- PWFs are derived from either chronic aquatic life criteria (or toxic effect levels) or human health
criteria (or toxic effect levels) established for the consumption of water and fish. For carcinogenic
substances, the human health risk level is 106, rather than 105 in the case of TWFs. In contrast to TWFs,
PWFs are not related to a benchmark pollutant. PWFs are derived by taking the reciprocal of the more
stringent (smaller value) of the aquatic life or human health criteria or toxic effect levels.
While the cost-effectiveness values calculated with PWFs cannot be compared to cost-effectiveness
values calculated with TWFs for previous regulations, they do permit comparisons between options in the
current effluent guideline analysis. In this regard, the PWF-based cost-effectiveness analysis supports the
findings described in Section 3. Among the options considered for MP&M Phase I effluent guidelines, the
cost-effectiveness values for the proposed options for both indirect and direct dischargers are superior to the
values calculated for the other options evaluated.
E.2 Cost-Effectiveness Analysis for Indirect Dischargers
Tables E-l and E-2 summarize the cost-effectiveness analysis results for the PSES regulatory
options applicable to indirect dischargers. Annual compliance costs are shown in 1989 dollars, as reported in
the EIA, and in 1981 dollars, on a pre-tax basis, with capital costs annualized using a 7 percent opportunity
cost of capital. 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.
i
As shown in Table E-l, EPA estimates that Option 2a, the proposed option, would achieve 12.8
million pounds of pollutant removals, which is the same as shown in the previous analysis using TWFs. The
effect of using PWFs instead of TWFs is to reduce the toxic pounds-equivalent of this quantity of removals
from 881,300 to 444,100 pounds-equivalent. Since Option 2a is the least stringesnt option, the incremental
-------
removals and costs shown in Table E-2 are the same as the totals, yielding a cost-effectiveness of $252 per
pound-equivalent of pollutant removed. The cost-effectiveness values for the other regulatory options are
substantially inferior to this value.
Table E-l
National Estimates of MP&M Annualized Costs and Pollutant Removals, Using Pollutant Weighting Factors
Indirect Dischargers (PSES)
Regulatory Option
Option 2a
Option 1
Option 1A
Option 2
Option 3
Annualized Cost, SmiUions
1989 dollars
146.1
231.3
221.9
228.3
668.8
1981 dollars
111.9
177.2
170.0
174.9
512.3
Pollutant Removals, thousands
•daw Pounds
12,769.7
14,611.7
14,872.7
14,878.8
15,612.1
pQfflds~3£quivalent
444.1
528.2
538.7
538.9
586.2
Source: US Environmental Protection Agency
TableE-2
National Estimates of MP&M Incremental Costs, Removals and Cost-Effectiveness
Using Pollutant Weighting Factors
Indirect Dischargers (PSES)
Regulatory Option
Option 2A
Option 1
Option 1A
Option 2
Option 3
Incremental Cost
(S millions, 1981)
111.9
65.3
(7.2)
4.9
337.4
Incremental Removals
(lbs-eq, thousands)
444.1
84.1
10.4
0.2
47.3
Cost-Effectiveness
($/tb-eq)
252
776
(686)
22,854
7,127
Source: US Environmental Protection Agency •,
E.3 Cost-Effectiveness Analysis for Direct Dischargers
Tables E-3 and E-4 summarize the cost-effectiveness for the BPT/BAT regulatory options applicable
to direct dischargers. As with indirect dischargers, annual compliance costs are shown in both 1989 and
1981 dollars, and pollutant removals are reported in both unweighted and toxic-weighted pounds. The
regulatory options are listed in order of increasing stringency, measured by toxic-weighed pollutant removals.
Table E-3 shows that Option 1 achieves 1.153 million pounds of removals on an unweighted basis
and 44,200 pounds-equivalent of removals on a toxic-weighted basis, at a cost of $11.9 million (1981
dollars). Since Option 1 is the least stringent option, it is compared to the baseline, and the incremental costs
and removals shown in Table E-4 for this option are the same as the total costs and removals. This results in
a cost-effectiveness of $269 per pound-equivalent.
E.2
-------
Table E-3
National Estimates of MP&M Annuallzed Costs and Pollutant Removals
Direct Dischargers (BAT)
Regulatory Option
Option 1
Option 2
Option 3
Annualized Cost, Smillions
1989 dollars
15.5
16.3
68.7
1981 dollars
11.9
12.5
52.6
Pollutant Removals, thousands
Raw Pounds
1,152.5
1,232.2
1,446.7
Pounds-Equivalent
44.2
85.0
221.5
Source: Environmental Protection Agency
Table E-4
National Estimates of MP&M Incremental Costs, Removals and Cost-Effectiveness
Direct Dischargers (BAT)
Regulatory
Option
Option 1
Option 2
Option 3
Incremental Cost
($ millions, 1981)
11.9
0.6
40.1
Incremental Removals
(Ibs-eq, thousands)
44.2
40.7
136.6
Cost-Effectiveness
($/tt>-eg}
269
147
238
Source: Environmental Protection Agency
Moving from Option 1 to the proposed Option 2 achieves 85,000 pounds-equivalent of toxic-
weighted removals, which represents a 40,700 pounds-equivalent increment, at an annual cost of $12.5
million (1981 dollars), which is an increment of $0.6 million over Option 1. Thuis the cost-effectiveness of
Option 2 is estimated to be $147 per pound-equivalent.
I
Option 3 achieves incremental pollutant removals of 136,600 pounds-equivalent at the incremental
cost of $40.1 million, thus yielding a cost-effectiveness value of $238 per pound-equivalent. Notably,
Option 3 achieves substantially better cost effectiveness when removals are normalized by using the PWFs
than the TWFs. As a result, in the PWF analysis, all three BAT/BPT options for direct dischargers appear to
be cost effective.
E.3
-------
-------
Appendix F
Results of Cost-Effectiveness Analysis Using After-Tax Costs of Compliance
F. 1 Private Compliance Costs
EPA also performed the cost-effectiveness analysis using total annualized costs of compliance after
tax adjustments and with capital costs annualized on the basis of facility-specific costs of capital. This
analysis differs from that of Section 3 in which annual compliance costs were calculated on a pre-tax basis
with capital costs annualized at a 7 percent opportunity cost of capital to society. The after-tax costs used in
this appendix may be interpreted as the annual costs of compliance as incurred on a cash basis by MP&M
facilities. Because the effect of the tax treatment of operating expenses and capital outlays is to shift to
society a share of the compliance costs, the costs presented in this appendix are generally lower than those
presented in Section 3.
i
The after-tax cost-based cost-effectiveness analysis supports the findings described in Section 3.
Among the options considered for MP&M Phase I effluent guidelines, the cost-effectiveness values
calculated for the proposed options are superior to the values calculated for the other regulatory options
analyzed. *
I
F.2 Cost-Effectiveness Analysis for Indirect Dischargers
As shown in Tables F-l and F-2, Option 2a achieves approximately 12.8 million pounds of toxic
pollutant removals, on an unweighted basis and 881,300 pounds-equivalent on a toxic-weighted basis. The
total compliance costs for this option is $93.1 million in 1981 constant dollars. Since Option 2a 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, $ 106. . j
i
Option 1 is estimated to achieve approximately 14.6 million pounds of toxic pollutant removals on
an unweighted basis and 989,400 pounds-equivalent on a toxic-weighted basis, which is a 107,600 pounds-
equivalent increment over Option 2a. With an estimated annual compliance cost of $132 million ($1981), or
$39 million more than Option 2a, the calculated cost effectiveness for Option 1's removals is $362 per
pound-equivalent of pollutant removed. In moving from Option 1 to Option la, toxic-weighted pollutant
removals increase by 22,100 pounds-equivalent while costs increase by $4.3 million. Thus, the cost
effectiveness of Option la is $193 per pound-equivalent of additional pollutant removed, an acceptable cost-
effectiveness value.
F.I
-------
Moving from Option 1A to Option 2 yields very little additional pollutant removals — 600 pounds-
equivalent— at an additional cost of $3.2 million, yielding a high cost-effectiveness value of $5,530 per
pound-equivalent. Option 3 has the highest pollutant removals and the highest costs, at 1.105 million
pounds-equivalent and $402.4 million (1981 dollars), respectively. Compared to Option 2, this represents a
$262.8 million increase in compliance costs, but a proportionately smaller increase in pollutant removals of
93,800 pounds-equivalent. The corresponding cost-effectiveness is $2,801 per pound-equivalent.
Table F-l
National Estimates of MP&M Annualized Costs and Pollutant Removals
Indirect Dischargers (PSES)
Regulatory Option
Option 2a
Option 1
Option 1A
Option 2
Option 3
Annualized Cost, Smillions
1989 dollars
121.6
172.5
178.1
182.2
525.3
1931 dollars
93.1
132.1
136.4
139.6
402.4
Pollutant Removals, thousands
Raw Pounds
12,769.7
14,611.7
14,872.7
14,878.8
15,612.1
Pounds-Equivalent
881.3
988.9
1,011.0
1,011.6
1,105.4
Source' Environmental Protection Agency
Table F-2
National Estimates of MP&M Incremental Costs, Removals and Cost-Effectiveness
Indirect Dischargers (PSES)
Regulatory
Option
Option 2a
Option 1
Option 1A
Option 2
Option 3
Incremental Cost
($ millions, 1981}
93.1
39.0
4.3
3.2
262.8
Incremental Removals
(tbs-eq, thousands)
881.3
107.6
22.1
.0.6
93.8
Cost-Effectiveness
($/tb-eg)
106
362
193
5,530
2,801
Source: Environmental Protection Agencv
F.3
Cost-Effectiveness Analysis for Direct Dischargers
Tables F-3 and F-4 summarize the cost-effectiveness for the BPT/BAT regulatory options applicable
to direct dischargers. As with indirect dischargers, annual compliance costs are shown in both 1989 and
1981 dollars, and pollutant removals are reported in both unweighted and toxic-weighted pounds. The
regulatory options are listed in order of increasing stringency, measured by toxic-weighed pollutant removals.
Table F-3 shows that Option 1 achieves 1.153 million pounds of removals on an unweighted basis
and 58,200 pounds-equivalent of removals on a toxic-weighted basis, at a cost of $10.7 million (1981
F.2
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dollars). Since Option 1 is the least stringent option, it is compared to the baseline, and the incremental costs
and removals shown in Table F-4 for this option are the same as the total costs £ind removals. This results in
a cost-effectiveness of $ 183 per pound-equivalent.
Moving from Option 1 to the proposed Option 2 achieves 70,700 pounds-equivalent of toxic-
weighted removals, which represents a 12,500 pounds-equivalent increment, at an annual cost of $11.9
million (1981 dollars), which is an increment of $1.2 million over Option 1. Thps the cost-effectiveness of
Option 2 is estimated to be $96 per pound-equivalent. i
Option 3's cost-effectiveness of $476 is considerably higher than the value calculated for Option 2.
Option 3 achieves a substantial increment in pollutant removals of 62,900 pounds-equivalent, but it does so
at an incremental cost of $30 million, compared to Option 2.
Table F-3
National Estimates of MP&M Annualized Costs and Pollutant Removals
Direct Dischargers (BAT)
Regulatory Option
Option 1
Option 2
Option 3
Annualized Cost, Smillions
1989 dollars
13.9
15.5
54.6
1981 dollars
10.7
11.9
41.8
Pollutant Removals, thousands
Maw Pounds
1,152.5
1,232.2
1403.3
Pounds-Equivalent
58.2
70.7
117.5
Source: Environmental Protection Agency
Table F-4
National Estimates of MP&M Incremental Costs, Removals and Cost-Effectiveness
Direct Dischargers (BAT)
Regulatory
Option
Option 1
Option 2
Option 3
Incremental Cost
($ millions, 1981)
10.7
1.2
30.0
Incremental Removals
(Ibs-eq, thousands)
58.2
12.5
46.8
Cost-Effectiveness
(Mb-eq)
183
96
640
Source: Environmental Protection Agency
F.3
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