EPA-901/9-76-003C
ECONOMIC  LAW
ENFORCEMENT
         VOLUME HE
      STRENGTHENING
      ENVIRONMENTAL
   LAW ENFORCEMENT:
    WATER POLLUTION
                  The Judges, (detail American woodcut, 19th Century)
             CONNECTICUT ENFORCEMENT PROJECT
           U.S. ENVIRONMENTAL PROTECTION AGENCY
                     SEPTEMBER, 1975

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This report has been reviewed by EPA and
approved for publication.  Approval does
not signify that the contents necessarily
reflect the views and policies of the
Environmental Protection Agency, nor does
mention of trade names or commercial pro-
ducts constitute endorsement or recommen-
dation for use.
Copies of this document are available in
limited quantities through the Connecticut
Department of Environmental Protection,
State Office Building, 165 Capitol Avenue,
Hartford, Connecticut, 06115.

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EPA-901/9-76-003C
         ECONOMIC  LAW
         ENFORCEMENT
                            VOLUME HE
                        STRENGTHENING
                        ENVIRONMENTAL
                     LAW  ENFORCEMENT:
                      WATER  POLLUTION
         Final Report Submitted Under Contract #M00103910
         by: The Connecticut Enforcement Project
            Department of Environmental Protection
            Hartford, Connecticut 06115
         to: The U.S. Environmental Protection Agency
            Region I
            Boston, Massachusetts 02203
                  September 1975
                   nvir=;r;-;-^.l Protection
                  Region V, Lihrar-y
                  230 South Dearbora Street
                  Chios go, Iliiaois  8060%

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ENVIRONMENTAL PROTECTION AGENCY

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The Judges (detail)
John Andrew and Son (after W H  Drake)
American, 19th Century
Wood engraving
Courtesy Museum of Fine Arts, Boston Ma.

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                       CONTENTS
PART I.

  Chapter I



  Chapter II
USING ECONOMIC CIVIL ASSESSMENTS               1-1

  Using Economic Civil Assessments to Stop
  Illegal Discharges and to Enforce Water
  Pollution Abatement Orders                   1-2

  Using Economic Civil Assessments to Enforce
  Water Discharge Monitoring Requirements      1-21
PART II.      BASELINE PROFILE

  Introduction

  Chapter I     Orders

  Chapter II    Permits

  Chapter III   Monitoring Reports


PART III.     CALCULATING ECONOMIC REMEDIES

  Chapter I     Calculating Assessments

  Chapter II    Determining the Cost of Compliance

  Chapter III   Handling Inflation

  Chapter IV    Adjusting for Individual Income Tax Rates

  Chapter V     Using the Cost of Capital


PART IV.      CIVIL ASSESSMENT REGULATIONS

  Section 22a-6b-502 - Discharging Without a Permit

  Section 22a-6b-503 - Violating the Terms of an Order

  Section 22a-6b-504 - Violating Monitoring Report
                       Requirements
                                               II-l

                                               II-2

                                               II-7

                                               11-45

                                               11-49


                                               III-l

                                               III-2

                                               111-13

                                               111-24

                                               111-26

                                               111-29


                                               IV-1

                                               IV-2

                                               IV-12


                                               IV-21

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                              11
PART V.       OPERATING MANUAL FOR THE APPLICATION OF
              CIVIL ASSESSMENTS

  Chapter I     The Connecticut Enforcement Program

  Chapter II    How to Apply Section 502 Assessments

  Chapter III   How to Apply Section 503 Assessments

  Chapter IV    How to Apply Section 504 Assessments

  Chapter V     How to Conduct Hearings in Civil Assess-
                ment Cases
  Chapter VI
How to Use and Update Tools Employed in
Levying Civil Assessments
       A.  Calculating the Cost of Compliance

       B.  Determing the Applicable Cost of Capital

       C.  Using Inflation Indexes

       D.  Estimating the Source's Income Tax Rate

       E.  Operating the Wang Calculator

  Chapter VII   Appendices

       A.  Developing Cost Curves To Help Calculate
           The Cost of Compliance

       B.  The Cost Curve Treatment Approach

PART VI.      THE IMPACT OF ECONOMIC CIVIL ASSESSMENTS ON
              THE ADMINISTRATIVE COSTS OF ENFORCEMENT
V-l

V-5

V-7

V-30

V-44


V-61


V-71

V-72

V-87

V-108

V-110

V-112

V-139


V-139

V-153


VI-1

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            PART I
USING ECONOMIC CIVIL ASSESSMENTS

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                               1-2
                           CHAPTER  I

                 USING ECONOMIC CIVIL ASSESSMENTS

                  TO  STOP  ILLEGAL DISCHARGES AND

            TO ENFORCE WATER POLLUTION ABATEMENT ORDERS


      Sections 502 and 503  of the Civil Penalties Regulations  are
 designed  to improve the  Department's enforcement capabilities
 concerning  the  two main  instruments of its water pollution  control
 program:  abatement orders and permits.  Section 503  is primarily
 aimed at  the enforcement  of order timetables.   It can  also be  applied
 to  a  limited class of cases in which certain requirements of  permits
 are blatantly violated.  Section 502 is primarily designed  to enforce
 the requirement that  persons wishing to start  new discharges  must
 obtain permits  before doing so.  It can also be used  in certain ways
 to  facilitate the administration of Section 503 cases.

      The  purposes of  the two regulations are different, but their
 basic enforcement approach and most of their provisions are identical,
 Both  regulations will enable the Department to levy civil assess-
 ments without first going  to court.  These assessments will be
 large enough to eliminate the economic benefit of noncompliance
 with  the  pollution control requirement to which they  are directed
 (order timetables and mandatory permits).  The economic benefits
 in  both types of cases are generally the same:  delaying or avoid-
 ing expenditures for  the equipment and the operating  and maintenance
 activities  necessary  to  limit pollution as required by law.   Both
 regulations  provide the  same methodology for calculating assessments
 that  will just  wipe out  these benefits and thus eliminate the
 economic  incentive for noncompliance.


 THE PRE-CIVIL ASSESSMENT
 ENFORCEMENT  PROGRAM

      This section discusses the Water Compliance Unit's order and
 permit systems, the pollution standards it uses, the  enforcement
 tools it had prior to passage of the Enforcement Act  and the
 effectiveness of those tools.

      Orders  and Permits

      The  Department's basic water pollution control authority, the
 Clean Water  Act of 1967  (Chapter 474(a)  of the Connecticut General
 Statutes), originally established two distinct approaches to  con-
 trolling water  pollution:  orders and permits.

      The  Department was authorized to issue legally binding orders
 requiring existing polluters to take specific  steps by specific
deadlines  to  clean up  their discharges.  Sections 25-54(g) and (h) pro-
 vide  for  abatement orders  for pre-Act (pre-1967) municipal  and

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                                 1-3


non-municipal discharges; Section 25-54(j)  authorizes orders for
any discharger under a permit or a previous order where existing
treatment systems no longer adequately control pollution; and
Section 25-54(k) provides for orders for discharges that are not
sources of pollution at present, but will be in the future if
control steps are not taken.  Regulatees under order are allowed
to continue their discharges while coming into compliance.

     All dischargers, whether polluters or not, that might begin
discharging after the Act went into effect (May 1, 1967, except
for municipalities for which the operative date is April 10, 1973)
must obtain Department permission before commencing their discharges.
If the discharge would be a source of pollution, the Department
will not grant this permission until an approved treatment facility
is installed and operational.  It is illegal to start a post-Act
discharge without a permit.

     The basis for the pre-/posb-Act distinction appears to be the
difference in notice between the pre- and post-Act dischargers.
The post-Act discharger should know that it is illegal to pollute
and that the Department regulates discharges and therefore can fairly
expect the discharger to provide for waste treatment, if necessary
before it begins to discharge.  The pre-Act discharger, the dis-
charger under permit or in compliance with an order, and the dis-
charger that is not presently a source of pollution has or had
reason to believe its discharge is or was legal.  It would be
unfair to require such a person to stop discharging pending install-
ation or updating of treatment system.

     However, the distinction in the way in which these two types
of cases can be handled has recently been greatly reduced.  In
part this change reflects the fact that, after several years of
vigorous activity by the Water Compliance Unit, few dischargers
could reasonably claim not to have had some notice of pollution
control requirements.  It also reflects several practical factors.
The Clean Water Act required the Department to seek a court injunction
whenever a discharge was initiated without a permit.  It could not
issue an order, which would allow the discharge to continue while
control facilities were installed.  However, because the Department
could not get court injunctions, the law was changed in 1973 to make
seeking an injunction optional and to allow the Department  to issue
orders in such cases.  Further, to make the Department eligible to
administer the National Pollutant Discharge Elimination System in
Connecticut, the Legislature further amended the Clean Water Act
to allow the Department to issue permits to pre-1967 dischargers.

     Thus, both pre- and post- Clean Water Act dischargers  now
can be issued both orders and permits.  The Department is,  however,
reluctant to issue orders to those who have started a discharge
illegally, and permits issued to pre-1967 dischargers put the
regulatee under no obligation to renew as a condition of continued
operation.  The ability to impose Section 502 assessments on those
who discharge without permits may make the Department less  reluctant
to use orders in such cases.  However, a statutory amendment is
probably needed to make permit renewal for pre-1967 discharges
clearly an obligation.  Once such an obligation is clearly  established
the Department will be able to use Section 502 in such cases.

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                              1-4
     Standards

     The Department does not have a set of clear, predictable
standards that define what discharges require treatment  (or what
type or intensity of treatment).  It must review each discharger's
specific problem before these decisions can be made.  Dischargers
face nothing analogous to the emissions standards that put sources
of air pollution on notice that they have a duty to clean up.  So
far no standards have been developed, at either the State or Federal
level, that would provide similar advance notice and that would
be practically enforceable.  The Unit feels that no standards can
be developed given the state of current technology and the enormous
diversity of processes that must be controlled.

     Both the Unit's requirement that those responsible for new
discharges obtain prior approval for the discharge  (the permit)
and its power to issue orders to dischargers recognizes this need
for case by case decision-making.  Its approach to enforcement
must be based on a similar understanding.

     Connecticut's Clean Water Act sets only general standards to
guide the Department in controlling pollution.  It authorizes the
Department to issue orders to "prevent the continuance of pollution"
(Section 25-27), "to abate pollution" (Section 25-54(g),  (h),  (j),
and also authorizes the Department to require installation of
treatment facilities that will "protect the waters of the State
from pollution" prior to issuance of permits if proposed discharges
would "cause pollution" (Section 25-54 (i)).  The operative
word in each case is "pollution".  That term is defined broadly
and in general terms that provide no specific measurable standard
for administrative guidance (Section 25-54(b)).*
*  In Section 25-54(b),  the term is defined as follows:

     "Pollution" means harmful thermal effect or the contamination
or rendering unclean or impure or prejudicial to public health
of any waters of the state by reason of any wastes or other
material discharged or deposited therein by any public or private
sewer or otherwise so as directly or indirectly to come in contact
with any waters;

     "harmful thermal effect" means any significant change in the
temperature of any waters resulting from a discharge therein, the
magnitude of which temperature change does or is likely to render
such waters harmful, detrimental or injurious to public health,
safety or welfare, or to domestic, commercial, industrial, agricultural
recreational or other legitimate beneficial uses, or to livestock,
wild animals, birds, fish or other aquatic life;

     "rendering unclean or impure" means any alteration of the
physical, chemical or biological properties of any of the waters
of the state, including, but not limited to, change in odor, color,
turbity or taste;

(footnote continued on following page)

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                              1-5


     The statute does set out a somewhat more concrete standard
for hearing officers to use in deciding challenges to orders and
permit denials.  Section 25-54(o) requires hearing officers to
consider, among other unspecified facts, the technological
feasibility of the proposed system.  In the one court case in
which these issues were involved* the court held that the considera-
tion of facts other than technological feasibility was within the
hearing officer's discretion.  Thus, the only time the Water
Compliance Unit is held to specific standards is at hearing challenges
and the only standard it is held to then is that of technological
feasibility.

     No one has yet developed adequate, practically enforceable
standards for water pollution abatement.  Standards for reduction
of pollutant concentrations are difficult to devise because there
are at least seven variables to consider:  the concentration of
pollutants in the discharge; the flow  (e.g. gallons per hour) of
the discharge; the duration of the discharge over various periods
of time  (e.g. hours per day); the discharger's product volume
(e.g. the number of tons of metal processed); the condition of the
receiving body of water; and how difficult and expensive alternative
treatments would be.

     It is essential to have a measure of the quantity of pollu-
tants discharged over time  (the first three variables).  This in-
formation can be difficult to get because flow often is extremely
variable and therefore time-consuming and costly to measure.

     Finding a standard that defines how much of what is discharged
is allowable is even more difficult.  EPA, required by Congress to
develop effluent standards for its water pollution programs, has
published a series of industry effluent guidelines linking the
volume of each type of pollutant that firms in an industry may
discharge to that firm's product volume.  This standard takes into
account what is technologically feasible in an industry and avoids
the difficult enforcement problems posed by variations in the
volume of water in which the pollutants are  carried from the facility.
(footnote continued from preceeding page)

     "wastes" means sewage or any substance, liquid, gaseous, solid
or radioactive, which may pollute or tend to pollute any of the
waters of the state;

     "sewage" means human and animal excretions and all domestic and
such manufacturing wastes as may tend to be detrimental to the public
health;

     "waters" means all tidal waters, harbors, estuaries, rivers,
brooks, watercourses, waterways, wells, springs, lakes, ponds, marshes,
drainage systems, and all other surface or underground streams, bodies
or accumulations of water, natural or artificial, public or private,
which are contained within, flow through or border upon this state or
any portion thereof.

*  Ronson v. Water Resources Commission, Superior Court Docket No. 1545

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                             1-6


However, no enforcement program can rest on this standard.  Admin-
istrators will       never be able to disprove (and the legal
burden is on them to do so)  claims regulatees make about their
product volume.  How is the Department, for example, going to be able
to prove that a metal plater who plates irregularly shaped objects
has really only plated 60,000 square meters of metal goods, not
the 120,000 the company claims?*  If it cannot, the regulatee
will be able to discharge twice the volume of pollutants the
standard allows.

     Although the Department's Water Compliance Unit feels that
water pollution control problems are too diverse even within
classes of dischargers, to allow the use of fixed standards, it
uses a set of informal discharge standards to evaluate the treat-
ment proposals submitted by order recipients and permit applicants.
These standards typically define the weight of various pollutants
allowed per liter of discharge.  They are set assuming that the
flow of water has been reduced equally in all similar cases.  (This
is by no means a safe assumption.)  In some cases they specify the
type of treatment required.   They are meant to require the lowest
levels of discharge pollutant content possible with the best
technologically feasible and widely applicable treatment.

     These standards are not published; the engineers merely keep
a list of them at their desks.  They exist only for relatively
common types of sources, but for these cases they serve as a useful
starting point in establishing treatment requirements.

    • Useful though they are, these informal standards cannot wisely
be turned into enforceable performance standards for industry.  Many
firms would not be covered.   Variations in flow are handled only
with the assumption that the engineer will lower flow as much as is
reasonable for the facility in question - leaving the distinct
possibility that like companies will have different flows and therefore
different levels of pollutant concentration in their discharges.  In
any case, the Unit wants to retain the case-by-case flexibility it
now has to respond to differences in the regulatee's facilities,
developments in control technology, and other factors such as the
regulatee's economics and the degree of danger posed by the specific
pollutants being discharged.  The Unit feels it would lose this
flexibility if it formalized its private, informal guidelines.

     Without a clear effluent standard, the Department's approach
to water pollution control has of necessity had to be case by
case decision-making.  It is this permit and order-based regulatory
structure that Sections 502 and 503 are designed to strengthen.
   Connecticut has not been eager to base its enforcement efforts
   on this standard for another reason:  Connecticut's ad .hoc,
   "whatever is technically possible" standard varies a great deal
   from the Federal guidelines; Connecticut's standards in actual
   cases have been anything from several thousand percent tougher
   to 72 percent less stringent than the Federal standard.

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                               1-7
     Enforcement

     The  Department has had trouble enforcing  prompt compliance
in cases  in  which dischargers choose to be  uncooperative.  Neither
of its existing enforcement options, going  to  court and persuasion,
work very well.   Going to court is slow and expensive.   Moreover -
largely because the injunction remedy is  so severe (plant closings
mean unemployment and great economic losses) - it very  rarely gives
the Department an effective remedy.  Fully  three-quarters of all
cases referred to the Attorney General* to  obtain court relief in
1972 were still there in August of 1974.
                Percent of All Cases Referred to the AG still
                      Pending £n August,  1974
                                           75
               CASK
               REFERRED 19C.9
               TN:
                             19
                                    20
1970
       1971
             1972
               Source:  "Slatus of Actions Deferred to the
                      Office of the Attorney General".
*  The Attorney  General attempts to avoid these delays and uncer-
tainties by trying  first to bluff/negotiate a  satisfactory settle-
ment before going to court.  This is, however, a  difficult task
since  (1) the  cases sent him were referred because  negotiations
with the State had  already broken down and  (2) the  Attorney General
has no additional leverage he can bring to bear on  the recalcitrant
regulatee save the  threat to go to court.  And, on the record, such
a  threat is unlikely to greatly impress such regulatees, because
court actions  can be delayed for long periods  and because only one
injunction has ever been issued and that was in a minor case in
which the Department had not even sought an injunction.

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                                 1-8
     The  only alternative, persuasion, has been  ineffective without
credible  back-up enforcement  capability.

     Many new discharges in 1968-73 were initiated  without permits
and were  referred to the Attorney General.*
                   Permits Issued and Referrals for

                   Discharging Without Permits from

                          1968 ^through 1973

                       102
                                          51
                     Number
                    of Permits
                     Issued
   Number
of Referrals
for Discharging
Without a Permit
     *Some  but not all dischargers referred for discharging
without permits later qualified  for and received  permits.  None
was issued  an injunction, however.

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                                      1-9
       Compliance with  Department orders  has  been  no  better.    The
average  Water  Compliance order  takes twice  the time legally
allowed  it.
                                   Average Compliance Time*
                                   Scheduled**
                                                  Actual
                                                29.9 months
                                   14.2 months
                                                            110%
                  Source:  Completed and active orders in sample of 60 orders
                          issued 1967-1974.
                  *  The scheduled and actual times are the average times for all
                    stops comoleted  or pending.  Since those steps still pending
                    continue to log  time prior to compliance, the actual time il-
                    lustrated here underestimates the actual compliance time in
                    the average case.

                 **  The average scheduled time for all orders is 17.0 months.
                    The average scheduled tune indicated here is less because, for
                    the purposes of  this  chart^ only  those steps for which the pre-
                    vious step was complete were included in the calculation.  To
                    use the average  time  scheduled for all steps as a basis of
                    comparison would underestimate delay.

Moreover,  forty-two percent  of all orders  run more  than one  year
behind  schedule;  less  than one quarter  are  completed  on time:

                            Percent of Orders Experiencing Overruns*
                      100
                                77
                                        62
                                                 42
                                                          34
                                                                   23
                     All
                     Orders
                     Issuer!
More
Than
One
Month
Late
More
Than
Six
Months
Late
More
Than
One
Year
Late
More
Than
18
Months
Late
More
Than
Two
Years
Late
                   Source:  Compliance records of 47 completed and active orders
                           in sample of 60 orders.
                     Based on current status fo'r all steps completed or pending
                     and due for all active and completed orders  in the sample.

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                                1-10
      These delays include extensions, tablings, referrals to the
Attorney General and unexplained delays.  A portion  of  this delay
was  legitimately unavoidable  and therefore not an enforcement
problem.*  What percent of the  delay was unavoidable is not known
exactly.   However, even if it was a large percent, the  remainder
would still represent massive noncompliance.

      As  is generally the case,  a small number of regulatees take
advantage of enforcement weaknesses and manage to delay for years.
Eleven percent of all order recipients experience delays, none of
which was even arguably unavoidabler  longer than two years.
               Average Delay
                (in months)
Average Time-Scheduled and Actual
        (in months)

               61.0
                       43.8
            15.7
                                        17.2
          All Orders
                   Problem Cases
                                    Average Time
                                    Allowed in
                                    Original Sched-
                                    ule for Problem
                                    Cases
            Average Time
            Elapsed to
            Compliance or
            to Date (In-
            complete
            Orders) for
            Problem Cases
It is problems  of this nature and  gave rise to the Enforcement
Act of 1973  and the Section 502 and  503 regulations.
     *Order  timetables are of necessity guesses as to how  long it
will take  to plan and install treatment systems.  Individual  cases
differ widely and unforeseen  problems  often occur. The Department
originally issued orders shortly after detection of pollution to
gain immediate leverage with the polluter.  This caused  some  order
schedules  to be unreasonable and thus resulted in overruns.   Recently,
it has begun to discuss pollution problems with dischargers  in some
detail before issuing orders.  This should eliminate much  unavoidable
delay.

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                               1-11
THE SECTION 502 AND SECTION
503 REGULATIONS	

     The Section 502 and 503 regulations have been written with
three key objectives in mind.

     *  They are designed to provide an incentive just
        large enough to make complying with permit and
        order requirements economically attractive —
        and no larger.  These assessments will also
        ensure that those who comply voluntarily do not
        suffer an economic disadvantage relative to their
        non-complying competitors.

     *  The proposed regulations establish a full range
        of procedural safeguards:  No one can be assessed
        a civil penalty without clear notice of what the
        law requires them to do, and those who are assessed
        will have every opportunity to defend themselves.

     *  Sections 502 and 503 should be easy to use.  Their
        operating procedures will give the Department greatly
        increased enforcement flexibility without straining
        its administrative resources.

The regulations are effective, equitable and efficient means of
combating noncompliance with Connecticut's water pollution control
laws and policies.

     The Economic
     Approach	

     The economic approach of the regulations makes them both
effective and equitable.  Sections 502 and 503 authorize the Depart-
ment to impose civil  assessments  that will be just large enough to
take away all the  economic benefits  of noncompliance  from  those who
discharge illegally  (including  what  they have earned  with  the money
they should have  spent  on compliance during  the  period  they
delay).   The regulations will be effective because they counter-
balance the economic cause of noncompliance.  This approach is
fair to the violator:  the assessments take away no more than the
ill-begotten benefits of noncompliance, and all violators are
assessed on the basis of the same standard.  It also protects those
that comply voluntarily by neutralizing the economic advantage
their non-complying competitors otherwise would have.

     The root cause of most Water Compliance enforcement problems
is the fact that pollution control expenditures represent an
economic loss to the discharger.  There is generally no return on
these expenditures.  The permit applicant or order recipient is
asked to give up both the cash to pay for equipment, install-
ation, operation, etc. for pollution control and the profit it
could have made by investing the cash elsewhere.  By avoiding

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                              1-12

 the pollution control  expenditure entirely,  the  discharger
 can both save these  expenditures  and earn  a  profit  on  the use
 of the  money elsewhere.   By putting  off  the  expenditure  for a
 period  of time,  it can at least save the profit  it  could earn
 with the money over  that  period.   Thus the economics of  water
 pollution control encourage delay.

      There is an additional incentive for  post-67/73 dischargers
 to avoid the permit  requirement.   If they  apply  for a  permit
 before  constructing  the facility  that will cause the discharge,
 they run the risk that the Department will refuse to issue  a
 permit  and thus  block  construction.   If  they simply ignore  the
 permit  requirement and start their discharge,  they  greatly  im-
 prove their bargaining position.   It is  much easier to dis-
 approve a plan than  an operating  plant —  an in-place  invest-
 ment that has already  created jobs and is  paying taxes.   This
 sort of step is  always politically difficult and has,'in fact,
 never been taken.

      In spite of these economic disincentives, most dischargers
 have complied with permit requirements and orders either vol-
 untarily or under pressure from the  Department or the  Attorney
 General.   However, a significant  minority  have been very slow
 to do so and a few blatantly resist  compliance as long as pos-
 sible.   Sections 502 and  503  reverse the economic incentives
 that currently motivate this  uncooperative minority.

      The proposed regulations  enable the Department to eliminate
 the profitability of   noncompliance.  The  following is a simple*
 example of how this will  be  accomplished.  Assume that a firm
 applying for a permit  or  under order was required to make a
 one year expenditure of $10,000 for  equipment, installation,
 operation,  etc.  Assume that  the  firm has  a  cost of capital of
 11.5  percent.  This figure (which is  typical  for many  Connecticut
 industries)  is in effect  the minimum rate  of  return that would
 cause the  firm to invest  in  a new project.   If the  firm  did not
 make  these expenditures,  it would be  assessed $11,150.    The
 firm  will  choose to make  the  $10,000  pollution control expend-
 iture rather  than pay  the  assessment.  Sections  502 and  503
 make  compliance  the profitable option.

      Charging  delinquent dischargers  what  they have saved by
 delaying compliance will protect  competing firms  that  have  com-
 plied from unfair competition.  If four  companies competing
 in  a  five  company market have installed  expensive control facil-
 ities and  the  fifth has not, the  fifth company will be able  to
 underprice  the other four  and/or  obtain  greater  profits.  The
 economic assessments authorized by Sections  502  and 503  would
 remove  the  fifth company's unfair advantage.
  *  This example is somewhat simplified for clarity and ignores
the effects of inflation and tax savings, and the operation of
the formula over longer periods, but the numbers are roughly the
same as if all factors had been taken into account.  All these
variables are considered in the regulation.  See the complete
explanation of the economics of these assessments in Part III
of this Volume.

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                              1-13


     In addition to being effective, these economic assessments
are equitable.  This clear, objective, accurate economic standard
for determining the size of assessments leaves the Department
with almost no scope for overassessing a source.  Assessments can
be no larger than the economic advantage a source has obtained
through noncompliance.  They provide incentives just large enough
to make compliance attractive — i.e., they are strictly remedial,
not in any way punitive.  The regulation's economic standard also
gives the Department no scope for assessing different dischargers
in arbitrarily different ways.  Finally, as was noted above, the
economic approach protects those who comply voluntarily from being put
at an unfair competitive disadvantage by scofflaws.

     The keystone of the proposed regulations is their economic
approach to enforcement.  It eliminates the basic cause of non-
compliance-- its profitability.  It is an equitable approach
because it does this in a way that strictly limits administrative
discretion, fully protects sources against overassessment, and
ensures that both those who have  and those who have not complied
with permit requirements or orders are left in the same economic
position.

     Calculating
     Assessments

     Calculating such economic assessments is a reasonably simple
two step process:  first, determining the cost of qualifying
for a permit or complying with the disregarded order and second,
calculating the benefits of having delayed these expenditures.

     Determing the cost of compliance is the critical first step.
In a good many cases this information will be readily available
in the form of cost estimates based on approved engineering reports
or plans and specifications for the treatment measures required for
the permit or by the order.  When such easily reviewed and verified
estimates are not available, however, the Department has the
expertise to make a reasonable estimate.

     The proposed regulations provide a mandatory correction
procedure  (Sections 502(h) and 503(h)) to adjust such Department
estimates once compliance is achieved and actual costs can be
determined.  Since the person assessed has full access to the
cost data involved, this correction safeguard guarantees that
assessments will be tied to actual costs.  If anyone has paid a
larger assessment than this correction procedure determines is
warranted, they are guaranteed refunds with interest at the cost
of capital rate used in calculating the original assessment.  A
person whose assessment is corrected will thus be in the same
economic position as if data on actual costs had been used in the
initial calculation.

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                            1-14
     The second step in calculating Sections 502 and 503 econ-
omic assessments involves determining the economic benefit of
saving or delaying paying the costs of compliance.  This is
done with a capital budgeting formula identical to that commonly
used by businessmen in evaluating investment options.   It takes
account of all the costs of compliance including initial capital
investments, replacement costs, and operating and maintenance
costs; it weighs the impact of taxes and inflation;  and it
prices the value of delay at a cost of capital rate of return
appropriate for the person being assessed.   A simple formula
translates all these factors into a monthly assessment amount
that is equal to the benefits of one month's noncompliance.


      The  Safeguards

      In drafting the Enforcement Act of  1973, the Legislature
provided  a  variety of  safeguards for persons to whom  it would
be applied.   Sections  502 and  503 go beyond the requirements
of the statute  in ensuring  that the new  enforcement tools
will  be used  fairly.   They  guarantee the regulatee notice of
potential liability and  full procedural  rights.

      Ample  notice of potential liability for civil assessments
is required by  the regulations.  In Section 503 cases, the water
pollution control order  makes  it clear to the recipient that
it has a  legal  obligation to meet the time schedule in the
order.  Future  Department orders will carry a notice  of poten-
tial  civil  assessment  liability for failure to comply promptly.
In Section  502  cases,  the Department is  required to send a
civil assessment warning letter upon detection of a probable
violation of  the permit  requirement.  In addition, if the De-
partment  cannot prove  that  such a discharger had notice of the
permit requirement, it cannot  assess for more than one year of
pre-assessment  illegal discharges.  This cuts up to one year
off the assessment period.  Furthermore, if such a discharger
takes prompt  and effective  action to qualify for a permit,
the Department  cannot  assess for the period after receipt of
the notice  of violation.  These provisions give the good faith
discharger  without notice a substantial assessment break.  They
are a compromise.  Dischargers are responsible for knowing the
law;  and, by  now, very few  persons can plausibly argue that they
knew  nothing  of their  responsibility to control their discharge.
Therefore,  the  Department did  not want to make it impossible
for it to impose assessments on persons who, as all too many
now do, discharge illegally knowing the law — even if the
Department  could not demonstrate that they had received formal
notice.  The  Department  can, of course, mitigate all  or part
of this remaining liability, if it sees fit.  On the  other hand,

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                               1-15


it wanted to limit potential liability where notice could not be
demonstrated.

     An order recipient or potential permit applicant can determine
the maximum assessment for which he may become liable by looking
at the regulation.  Sections 502(d) and 503(d) spell out the
absolute maximum and the maximum monthly assessments for various
costs of compliance. Sections 502 (e) and 503 (e) make available a
detailed explanation of the assessment formula, which will allow the
regulatee to calculate what its actual assessment is likely to be.
The regulations also require that the Department send the person
to be assessed a notice of violation before the assessment takes
effect.  This notice explains the reason for the assessment, informs
the person of his right to a hearing and gives the assessment amount.
This amount is in effect a maximum for the individual, because,
while it can be lowered (Sections 502 (g), (h)  and 503(g),(h)), it
can never be increased.  Thus, the regulatee always has ample notice
of its potential liability before it must decide to accept or contest
an assessment.

     Sections 502 and 503 also provide numerous procedural safeguards
for persons brought into the assessment process.  They have 20 days
after receipt of a notice of violation to apply for an administrative
hearing and may appeal the result of the hearing to the courts.
Connecticut's Administrative Procedure Act and the Rules of Practice
of the Department apply to all proceedings under the regulations, and
they assure persons who are assessed full procedural safeguards such
as guarantees of the opportunity to present evidence and to cross-
examine.  Findings and decisions must be spelled out along with
supporting facts, in writing.  Finally, the amount assessed must
be adjusted to reflect the actual costs of compliance when they can
be accurately determined.  The results of such correction hearings
can also be appealed to the courts.

     The Use of the Economic
     Assessment Device	

     The civil assessment tools provided by Sections 502 and 503
will be used in conjunction with existing enforcement options to
give the Department a more flexible and effective enforcement
capability. Although it will require the Water Compliance Unit to
undertake some tasks that it does not now perform, it  should on
balance reduce the Department's administrative burden, chiefly
because a credible enforcement tool will increase voluntary compliance
and thereby reduce the need for time-consuming follow-up and
negotiations.

     Section 503 would give the Department several new ways of
responding to noncompliance  with  the terms of an order, be
they interim steps or  the final, overall compliance  deadline.   Its
most likely initial response would  be to send  the offending  source
a warning letter under Section 503 (f)(1), especially for noncompliance
with intermediate  steps.  If one or more -such  letters  does  not
achieve the desired results, the Department could  levy

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                             1-16
an economic civil assessment.   Because the Department would be
authorized to take this second step,  very few cases should re-
quire anything more than the first warning letter.

    These new tools would supplement, not replace,  the Depart-
ment's existing enforcement options.   It could extend or table
the order deadline, as it now does, if there appeared to be a
legitimate excuse for delay.  On the other hand, it could also
still refer a case to the Attorney General if the order violator
were extremely recalcitrant or the environmental threat from
noncompliance were sufficiently great.

    Section 502 will also be used in conjunction with referrals
to the Attorney General.  Such injunctions may be necessary  (1)
if the discharge is dangerous and must be stopped immediately or
(2) if the costs of compliance are so high that they would re-
quire assessments larger than those allowed by the Enforcement
Act1s maxima.

     The  procedures  for  levying assessments  under  Sections  502
and  503 are much  the  same.  The first  step is  that of  calculat-
ing  the assessment amount.  The chief  task here  is determining
the  cost  of qualifying  for  a  permit  or complying with  an  order.
The  Department will  either  use cost  data from  the  person  assessed,
if  it  is  available,  or  it will make  its  own  estimates.  For
most cases  it can make  these  estimates with  tolerable  accuracy
quickly,  without  going  through the detailed  engineering work
that consulting  engineers must do  to design  treatment  systems.
Consequently, the  administrative  costs of the  process  can be
kept to a reasonable  level, the Department will  not  interfere
with the  work of  consulting engineers  and, because of  the
correction  process,  the  accuracy  of  the system will  not be jeop-
ardized.   This cost  of  compliance  information,  along with
figures for  the  cost of  capital,  tax rates and inflation  rates  —
all  from  appropriate,  readily available tables —  provide
all  the data  necessary  for  a  small desk calculator to  determine
the assessment  amount — in seconds.  If the Department  decides
to impose the assessment,  all that remains  for it  to do  is to.
notify the noncomplying source  formally of  its assessment in
a notice  of violation.

      The source has 20 days after receipt of a notice of viola-
 tion to contest it.   It has a right to a hearing conducted by
 the Commissioner, a Deputy Commissioner or a duly appointed
 hearing officer pursuant to the APA and the Department's Rules
 of Practice.  If the assessment amount is at issue in the hear-
 ing, the Department can defer collection and postpone the
 hearing until adequate cost information  is available.  More
 commonly, the Department will simply accept the order recip-
 ient's cost estimates for the purposes of deciding how much of
 the assessment is to be collected (leaving the amount assessed
 unchanged so that, if the Department's initial higher estimate
 ultimately proves correct, the higher amount will still  be.due).

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                            1-17
After the conclusion of the hearing, or of any appeals taken
from the Department's decision, or after the expiration of the
time for requesting a hearing, the notice of violation becomes
a legally binding order.

     The Department can start to collect as soon as its order
is final.  However, it has the discretion to collect the assess-
ment at such intervals and in such amounts as it determines will
best serve its regulatory and administrative purposes.  For
instance, if it appears likely that its cost of compliance
estimates were on the high side, the Department can collect
only part of the assessment to avoid the need for refunds later.
If a delinquent discharger is having serious financial difficul-
ties, the Department can allow the discharger to pay at a lower
rate over a longer period of time.

     If a person assessed refuses to pay, the Department can
easily collect by docketing the final assessment order with a
Clerk of the Superior Court.  When this is done,the assessment
automatically becomes a judgment of that court.  If necessary,
the Sheriff will attach and auction whatever assets of the
delinquent source he must to pay the assessment.   (Section 22a-
6b(h) of the General Statutes.)

     There is one potentially  serious administrative problem
that Section 503 may cause for the Department, but Section 502
provides a potential means of  avoiding it.  With Section 503
in effect, persons issued orders will be much more likely to
request hearings than they are now when order timetables cannot
be rigorously enforced.  With  Section 503 in force, accepting
an order timetable entails definite risk:  missing deadlines
automatically creates liability to  assessment.  By contesting
the compliance order, regulatees can minimize this risk:  as
long as the order is not final, its deadlines are not legally
binding and cannot be enforced under Section 503.

      If  a  regulatee  is  already liable under  Section  502,  how-
 ever,  the  Department has a  lever  it can  use  to  discourage  such
 contests:   it can  drop  or  lower Section  502  liability if  the
 regulatee  does not contest  the order.  The regulations make  this
 easy:   the Department cannot  impose Section  502  liability  once
 the  regulatee is under  a binding  Section 503  order.   And  the
 longer  a regulatee takes to get under  the protection  of an
 order,  the greater its  potential  502  liability  becomes.

      Section  502 could  be  made to cover  almost  all dischargers
 not  already permitted or under order.   Now  it covers both en-
 tirely new discharges and  —  importantly —  major  changes in
 a discharge that are not permitted.   It is  not  clear whether
 or not it  could  be used against persons  who  now have a permit
 and  who maintain their  discharge  after their existing permit
 expires without  obtaining  a new one.  -Probably  a statutory
 amendment  is  necessary to  make it clear that continued operation
 is illegal without a permit renewal.   However,  once this  point

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                             1-18
is clarified, dischargers will,  almost by definition,  either be
operating under the terms of an order* or permit enforceable
by Section 503 or be liable to a Section 502 assessment.

     Once the Department enforces the terms of its orders
tightly with Section 503, it must be doubly sure that its order
compliance timetables are reasonable and that it continues to
grant extensions when they are reasonably justified.   The Water
Compliance Unit's relatively new practice of reviewing its
proposed orders with its regulatees before issuing them is an
important step in this direction.  Not only is such reasonableness
important as a matter of equity, but it is the most important
tool available to the Department to hold down the number of order
contests it will have to handle.

     The operation of the Section 502 and 503 regulations
should lighten the Department's administrative load,  primarily
because of a significant increase in voluntary compliance.  A
study of analogous enforcement situations where effective
enforcement tools replaced limited enforcement capability suggests
that voluntary compliance will increase to the point that 72
percent of all violations will be eliminated without enforcement
action.**  If such is the case  (and given the high noncompliance
rate now being experienced, it seems quite plausible), the
average annual cost of processing all cases that go to order
(virtually all significant discharges) will decline from 16 to
22 percent.
     *Although authorized to issue orders to new sources dis-
charging without a permit under Section 25-27 of the General
Statutes since 1967, the Water Compliance Unit has been reluctant
to issue orders to such illegal dischargers,  thereby authorizing
their continued discharges.  Once it can impose a 502 assessment,
and once an order can truly be enforced, the Unit is likely to be
much less reluctant.

    **See CEP back-up study "Evaluating the Impact of More Effective
Enforcement on Voluntary Compliance," available at the Connecticut
State Library, Hartford, Conn., or from Mr. William Drayton,
McKinsey & Company, 245 Park Avenue, New York, New York, 10017.

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                               1-19
                 Annual Administrative Costa for Enforcement

                     (Current Caseload - Costs Per Year)
          Without 503 Assessment

               $125,000
                                 With 503 Assessment
                             $104,000
                                     16%
        22%
                                            $97,000
                             Assumes 60%
                              of All
                             Extensions
                              and 54%
                            of All Tablings
                               Were
                             Unavoidable
Assumes 30%
of Current
 Delay is
Unavoidable
     Section 502 will  also result  in administrative cost savings
for permit cases.  The Department  will save time  in negotiating
with dischargers during the permit application phase, partic-
ularly  because of the  "prompt and  effective action" incentive.
In addition, the likely increase in voluntary compliance will
reduce  costs for detection and referral to the Attorney General,
which now run $119 and $42 per case respectively.*  The total
savings may not be large if the 1968 through 1973 rate of  16
unpermitted discharge  cases and 8.5 referrals per year continues,
However,  the number  of cases more  than tripled in 1974, making
the possible savings more significant.
   *  See Part VI  of this Volume.

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                             1-20
                          CONCLUSION
     Sections 502 and 503 give the Water Compliance Unit a
means of combating its'  two greatest enforcement problems —
unpermitted discharges and noncompliance with  order deadlines,
They both provide for civil assessments based on a clear
economic standard that will bring about compliance by taking
away the present, often substantial, economic benefits of non-
compliance.  This administratively workable standard and the
procedural and informational safeguards in the regulations
make the system fair both to those who voluntarily comply with
environmental laws and to those who do not.

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                               1-21
                            CHAPTER II
                 USING ECONOMIC CIVIL ASSESSMENTS

                    TO ENFORCE WATER DISCHARGE

                     MONITORING REQUIREMENTS
     Roughly one-fifth of all the monitoring  reports required
under the  National Pollutant Discharge Elimination System
 (NPDES)  program in Connecticut are not submitted.
        o
        ex
        &
        00
        a
        •H
        H
        o
        3,
        g
        o
50-


40


30


20-\


10
                                              Average Failure
                                              Rate - 21Z
                               T
                         "I—

                          Oct.
              July      Aug.     Sept.      Oct.     Nov.      Dec.


              Percentage of Due Reports Not Submitted Each Month (1974)
The relatively  small  civil assessments provided by  the Monitor-
ing Report Civil Assessment Regulation (Section 504)  give the
Department a  simple but effective and equitable tool  that will
allow it to cut this  delinquency rate.

     Now the  Department has two options to choose between in
trying to enforce  the monitoring report requirement:   (1)  per-
suasion or  (2)  going  to court to seek a forfeiture  or injunction.
Persuasion is time-consuming and, as the above chart  illustrates,
ineffective in  all too many cases.  Going to court  is too com-
plex, costly, and  slow — and the remedies too severe — to be a
practical alternative for use on such a simple procedural matter,
especially one  that may arise repeatedly and in more  than a hand-
ful of cases.

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                              1-22
      Section 504 provides the Department with a simple, effect-
 ive, and equitable tool to enforce any monitoring and reporting
 it requires regulatees to undertake.  It authorizes the Depart-
 ment immediately to impose a civil assessment that will take
 away the economic benefits of nonsubmission and thus the chief
 incentive to avoid the requirement.

      This Chapter (1)  explains the importance of cutting this
 delinquency rate, and (2) outlines how the 504 civil assessment
 will work.
OBTAINING MONITORING
REPORTS:  THE PROBLEM

     If monitoring reports are not submitted:   (1) the regulatee
may be encouraged to avoid paying the attention it must to ensure
that its control facilities are operated and maintained properly;
(2) the State must spend more of its limited resources on expensive
field inspections of the regulatee; and  (3) the State and Federal
Governments are not receiving data they need for planning and
enforcement work.  Moreover, given the frequency with which
reporting is required, late monitoring means fewer samples and
reports are submitted than are required.

      In  its capacity as administering agency in Connecticut of
the National Pollutant Discharge Elimination System, the Depart-
ment  requires every major discharger in  the State regularly to
sample  its discharges,- analyze them, and report the results.
This  requirement is part of a legally binding Connecticut order or
permit, which also serves as the Federal NPDES permit.

      These permits require  the regulatee to  sample  each  of  its
discharges in a specified manner and at  specified intervals.
Thus,  a  permit  might  require a monthly  composite  sample  from
one discharge and a weekly  grab sample  from  another.   (A grab
sample,  as its  name suggests, involves  scooping a given  volume
of water  out of the discharge in a  short period of  time.  A
composite sample is a  series of grab samples taken  over  a long
period  of time,  usually hourly for  four  hours,  in volumes that
are in  proportion  to  flow  and aggregated  into  one  sample.)
The permit recipient  is required to have the samples analyzed
for various pollutants and  other parameters  (like temperature
and pH).   It must then report the results  to DEP on a  regular
basis,  usually  monthly.  When sampling  intervals are short
 (e.g. daily), analysis of several samples  are required to be
presented in one report.  When the  sampling  intervals  are
larger  (e.g. monthly), one  report is submitted  per  sample,
at the  same interval  as is  required for  the  sampling.

     An indirect but important benefit of this periodic monitor-
ing requirement is that it does not allow the regulatee to ignore
the operation and maintenance of its control facilities — as it
otherwise might since these facilities, unlike the rest of the
regulatee's plant, do not contribute to production.   Ensuring
that the  scofflaw minority pays attention to monitoring will

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                             1-23
help keep the attention of this high risk group on proper operation
and maintenance as well.

     Ensuring prompt monitoring and reporting will also help
prevent the Department's having to undertake very expensive
extra field inspections.  Even with monitoring reports, some
field inspections will remain necessary: there are too many ways
in which the results can be inadvertently or deliberately altered.
However, if the regulatee is reporting regularly, the results
of field inspections can be compared with the regulatee's monitoring
reports and the accuracy of the reports assessed.  If the reports
are found to be inaccurate, the Department knows it has a
problem and can respond.  If no reports are submitted, the
Department must sample more frequently if it is to keep track
of the discharger, and this takes staff away from other pressing
problems.

     Finally, if monitoring requirements are ignored, both the
regulatee and the public are denied a measure of how well the
control facility is operating.

     Late monitoring has little value.  Since most regulatees are
required to monitor frequently, usually monthly, a regulatee that
does nothing for a month can never catch up:  its test for that
month is lost, not late.

THE 504
ASSESSMENT

     The 504 assessment will allow the Department to cut the
current delinquency rate both sharply and quickly.  If a permittee,
having failed to respond to persuasion, does not submit a required
report, the Department will be able immediately to assess him
an amount sufficient to eliminate any economic incentive for
noncompliance.

     The 504 assessment works very simply.  Through a series of
surveys, the Department has determined the typical costs of each
of the component parts of complying with a monitoring report re-
quirement -- sampling the discharge, delivering the sample to a
lab, having any of 70 analyses done (any one or combination of
which may be required in a particular case), and reporting the
results to the Department.  This cost information was used to
develop two schedules:

     *  A schedule of maximum assessments (found in Section
        504(f) of the regulations).  This schedule creates
        a ceiling above which no assessment may go.  It was
        developed primarily from the most expensive instances
        reported in the surveys.

     *  The first of a series of Monitoring Report

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                            1-24
         Assessment Lists that list the typical* costs of
         each possible monitoring and reporting step and
         that will be used to determine individual assess-
         ments.   (A copy of the current List is attached at
         the end of this Chapter; note that assessments based
         on the costs in it will be much lower than the
         maxima allowed by Section 504 (f).)  This last, or
         any revisions, must be published in the Connecticut
         Law Journal before it can take effect.  See
         Section 504 (d).

     In the event that an assessment becomes necessary, all the
Department would do is (1) identify what was required in the
permit but not done and (2) add the costs of what was not done
from the Assessment List.   The resulting amount is the civil
assessment due.

     Example:   A Connecticut discharger is required to report
     monthly on the following discharge parameters:  flow, total
     suspended solids, cyanide, total chromium, hexavalent chrom-
     ium, copper, iron, and pH.  If it failed to submit a report
     and the Department decided that a civil assessment was
     warranted, the assessment would be approximately the follow-
     ing:  the Department would determine the cost of each missed
     requirement from the Assessment List and add:

          Sampling (composite)                  $15
          Delivery                                4
          Reporting                               7
          Analysis
              Total suspended solids       8
              Cyanide                     16
              Chromium - total            11
              Chromium - hexavalent       11
              Copper                      10
              Iron                         9
              pH                           3
          Total Analysis                         68
          Total Assessment Amount               $94
     The Department will update the Assessment List, or parts
of it, as necessary to make sure its costs are realistic —
thereby ensuring that assessments based on it are effective but
not excessive.  This will be done using the same survey approach
employed in calculating the initial list or another approach
     *The first list uses mean costs.  The Department could use other
statistical devices such as the median or mode if it determines that
this would be mpre effective or fair.

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                             1-25


that it determines will give  statistically superior results.
Revised lists must be published in the Law Journal to be effective.

     These economic assessments, even though generally quite small,
will work. Regulatees will prefer complying to paying. Section
504 assessments include provision for the time company managers
and staff spend monitoring and reporting; their time is thus
accounted for.  If they incline not to comply because they resent
the requirement, they probably will like having to pay the State
a civil assessment even less.  Moreover, continued noncompliance
will not only be economically unprofitable, but it will probably
attract the  (unwelcome) attention of the Department's enforcement
staff.

     Section 504 assessments will be both effective and clearly
equitable chiefly because of their close link to economics.  They
just fit the economics of each case:  if a discharger fails to
submit one report with a few simple analyses, that is all it can
be charged for; if it continuously fails to submit several complex
reports, its assessment will be much larger.  They consequently
remove cost savings as a motive for noncompliance.   (In fact, because
the assessment is based on average costs, it will always be higher
than an amount for which a noncomplying permittee could carry
out its monitoring.)  At the same time, the regulatee is charged
no more than what it has saved as a result of its noncompliance.

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                             1-26

         MONITORING  REPORT  ASSESSMENT  LIST

                     (September 1975)
Monitoring Requirement
(A) Sampling
1. grab sample*
2. composite sample**
(B) Delivery***
(C) Reporting****
(D) Analysis*****
General
1. Alkalinity
2. Biological oxygen demand
3. Chemical oxygen demand
4. Total solids
5. Total dissolved solids
6. Total suspended solids
7. TotaJ. volatile solids
8. Ammonia (as N)
9. Kjeldahl nitrogen (as N)
10. Nitrate (as N)
11. Total phosphorus (as P)
12. Acidity
13. Total organic carbon
14. Hardness
15. Nitrite (as N)
16. pH
Trace Metals

17. Aluminum
18. Antimonv
19. Arsenic
20. Barium
21. Beryllium
22. Boron
23. Cadmium
24. Calcium
25. Chromium VI
26. Chromium total
27. Cobalt
28. Copper
29. Gold
30. Iron
31. Lead
$

8
15
4
7


4
20
15
8
8
8
7
11
15
7
10
4
24
5
7
3

12
12
14
12
15
16
11
8
11
11
12
10
7
9
11
Monitorina Recmirement

32. Magnesium
33. Manganese
34. Mercury
35. Molybdenum
36. Nickel
37. Potassium
38. Selenium
39. Silver
40. Sodium
41. Thallium
42. Tin
43. Titanium
44. Vanadium
45. Zinc
Nutrients, Anions, and Organics

46. Organic nitrogen (as N)
47. Ortho-phosphate (as P)
48. Sulfate (as SOs)
49. Sulfide (as S)
50. Sulfite
51. Bromide
52. Chloride
53. Cyanide
54. Fluoride
55. Chlorine-total residual
56. Oil and grease
57. Phenols
58. Surfactants
59. Alqicides
60. Benzidine
61. Chlorinated organic com-
pounds (except pesticides)
62. Pesticides
Physical and Biological Parameters
63. Color
64. Specific conductance
65. Turbidity
66. Fecal streptococci bacteric
67. Coliform bacteria (fecal)
68. Coliform bacteria
69. Other analyses
s

9
9
18
11
12
10
18
11
9
13
14
16
17
11

15
8
6
6
7
10
5
16
11
6
15
17
12
26
36
36
32
4
6
4
i!4
13
12
12
* For  every grab sample required by the permit or order for which no analyses
  are  reported on or before the due date or  the end of the reporting interval
  specified in the permit or order.
** For every composite sample required by the permit or order for which no
   analyses are reported on or before the due date or the end of the reporting
   interval specified in the permit or order.
*** For every report not submitted on or before the due date of the end of the
    reporting interval specified in the permit or order.
**** For every report not submitted on or before the due date or the end of
    the reporting interval specified in the pe'rmit or order.
*****  j-or every analysis required by the permit or order for which no results
      are reported.

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                       PART II
      BASELINE PROFILE OF THE ENFORCEMENT PROCESS
         FOR PRIVATE AND INDUSTRIAL SOURCES
IN THE WATER COMPLIANCE AND HAZARDOUS SUBSTANCES UNIT

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                                                             II-2
               BASELINE PROFILE OF THE ENFORCEMENT PROCESS

                  FOR PRIVATE AND INDUSTRIAL SOURCES

          IN THE WATER COMPLIANCE AND HAZARDOUS SUBSTANCES UNIT
                            INTRODUCTION
     This document describes and analyzes the enforcement
experience of the Water Compliance and Hazardous Substances
Unit (hereinafter referred to as the Water Compliance Unit)
since 1967.  The study focuses on private, largely industrial,
sources.  It defines who is subject to regulation and studies
the extent of compliance delays and the nature and usefulness
of the current means for enforcement.

     This analysis provides an understanding of existing processes
and problems that

     *  was a prerequisite for the design of enforcement
        tools that would

          - address the important problems,

          - mesh closely and economically with exist-
            ing administrative procedures,

          - avoid creating loopholes on the one hand
            and unnecessary and unfair burdens for
            those subject to regulation on the other.

     *  will provide the baseline that is necessary to make
        possible a future evaluation of the effects of the
        new enforcement approaches now being introduced.

     The study deals in the following order with each of the three
program areas for which the Enforcement Project and the Water
Compliance Unit have developed new enforcement tools:  orders to
abate pollution or to correct potential sources of pollution
(issued under Sections 25-54g, h, j, k, 1, and aa of the
Connecticut General Statutes); permits for discharges initiated
after May 1, 1967 (as required in Section 25-54i of the General
Statutes); and monitoring reports submitted in compliance with
the terms of permits or orders.

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                                                             II-3


                       CHAPTER I  -  ORDERS
     Chapter I of this appendix discusses the number and types of
orders issued, the substantial delays in compliance, the possibil-
ity that much of this delay can be cut, the responses to delay
currently available to the Department, and the increased adminis-
trative costs occasioned by overruns in order compliance.
Analyses of the baseline data show that

        - 85 percent of all orders issued have been
          to private sources; in recent years 95
          percent of these cases have been industrial.

        - The average order overruns its deadline by
          more than 100 percent and almost half comply
          more than a year behind schedule.

        - A substantial proportion of the delay can
          probably be cut.

        - Other than going to court, which is slow,
          expensive, and uncertain, the Department has
          not had any way of forcing compliance with its
          orders.  Most delays are merely "tabled".

        - Delays increase the Department's administrative
          costs 55% per case on average.
        CHAPTERS II AND III - PERMITS AND MONITORING REPORTS


     The Water Compliance Unit has experienced enforcement
difficulties in two other areas of its work:

     *  Permits.  Section 25-54i of the Connecticut
        General Statutes requires that all discharges
        initiated after May 1, 1967 be approved and
        permitted in advance.  This requirement allows
        the Department to ensure that all new sources
        are adequately controlled.

             More than one-third of all new sources
        have had to be referred to the Attorney General
        for failing to obtain a permit.  Such cases
        account for 27 percent of all Water Compliance
        referrals.

     *  Monitoring Reports.  National Pollutant Discharge
        Elimination System (NPDES) permits issued by the
        Department require permittees periodically to report
        on the amount of water and the nature and level of
        pollutants they are discharging.  These reports are
        useful to both the Department and the source as a

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                                                      II-4
means of getting information on the continuing
effectiveness of installed water pollution control
facilities.  To obtain the same information with-
out the cooperation of permittees would require
an increase in the number of field inspections, thus
diverting already overburdened staff from other more
pressing responsibilities.

     Over 20 percent of these reports are now
delinquent.  The Department has no means currently
available for enforcing compliance with the mon-
itoring report requirement.  Going to court
over such a relatively small procedural matter
is entirely unrealistic.

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                                                             II-5
                         TABLE OF CONTENTS
Chapter I:  ORDERS 	   7

     (A)   WATER COMPLIANCE ORDERS, 1967-74 	   8
             The Number of Orders Issued	10
             The Percentage Issued to Private/Industrial
             Sources	11
             Who Receives Orders	12
             What Orders Require	13
          -  Changes in What Orders Require,  1967-1974 ....  14
             Steps in Orders	15
             Steps in Different Types of Orders.	16
             Lengths of Order Timetables in Different
             Types of Orders	17
             The Average Compliance Schedule  	  18
             Requests for Hearings 	  19
             Hearing Postponements 	  20
             The Status of All Orders Issued  Since 1967.  ...  21

     (B)   DELAYS IN COMPLIANCE	22
             Overruns in the Average Order	23
             The Percent of Orders with Overruns	24
             Approval Time for Reports and Plans	25
             Overruns in Planning Steps	26

     (C)   CUTTING DELAY	27
             The Percent of All Delay Which Occurs in
             Planning Steps	28
             Distribution of Delay Among All  Orders
             Issued	29
             Overruns by Company and Industry	30
             Overruns by Type of Order	31
             Comparison of Overruns in Water  Compliance
             and Air Compliance Orders	32
             Changes in Overruns, 1967-1974	33

     (D)   CURRENT RESPONSES TO DELAY 	  34
          -  Percent of Orders Tabled, Extended, or
             Referred	36
             Amount of Tabling,  Extension,  and  Referral
             in the Average Order	37
             Relative Use of Alternative Responses 	  38
             Average Lengths of Tablings and  Extensions.  ...  39
             Average Duration of Referrals 	  40
             Relative Annual Use of Alternative
             Responses	41

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                                                             II-6
                                                              Paqe
     (E)  ADMINISTRATIVE COSTS 	  42
             Costs of Delay	43
             Relative Costs of the Alternative Responses
             to Delay	44

Chapter II:  PERMITS FOR NEW DISCHARGES	45

             Annual Number of Permits Issued 	  46
             Annual Number of Referrals for Discharging
             Without a Permit	47
             Duration of Referrals for Discharging
             Without a Permit	48

Chapter III: MONITORING REPORTS FOR NPDES PERMITS	49

APPENDIX:    SAMPLE OF 60 PRIVATE AND INDUSTRIAL ORDERS. ...  50

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                                                            II-7
                            CHAPTER I

                             ORDERS


     Orders are the most important, most heavily used means
the Department has of inducing dischargers to control or
eliminate the pollution for which they are responsible.  Once a
source has been found not to be operating in compliance with
the water pollution statutes and regulations enforced by the
DEP, the Department typically issues an order requiring the
source to take appropriate remedial  action.  The order spells
out a timetable of specific deadlines — both for final com-
pliance and for completion of the major intermediate steps.
Once an order is final, failing to meet any of its deadlines
is a violation of the law.

     Ensuring prompt compliance with orders is one of the Depart-
ment's major enforcement problems.  The average source subject
to an order compliance schedule overruns its timetable by more
than 110 percent.  Consequently, the baseline study of the
enforcement process in the Water Compliance Unit focuses first
and most extensively on orders, and in particular on the extent
and nature of the compliance delays.

     The portion of the baseline dealing with orders, Chapter I,
is broken down into the following subsections:

          (A) - Water Compliance Orders, 1967-1974, a pro-
                file of who has been issued orders, what
                they have been required to do and how
                quickly, and whether or not they have
                contested these orders  (pages 8 to 21 ) •

          (B) - Delays in Compliance, a description of
                the very substantial delays experienced
                to date in obtaining compliance with
                orders  (pages 22 to  26  ).

          (C) - Cutting Delay? an analysis of the nature of
                the delays now being experienced to deter-
                mine if they could be cut  (pages  27 to 33 ).

          (D) - Current Responses to Delay, a review of
                the tools the Department has had available
                to help it handle noncompliance and delay
                 (pages 34to 41).

          (E) - Administrative Costs, a capsule summary of
                the cost to the DEP of using the existing
                tools  (pages 42 to 44 ).

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                                                            II-8


I - Orders



               WATER COMPLIANCE ORDERS, 1967-74
     Since the Department obtained the authority to issue water
pollution abatement orders in 1967:
          * The Number of Orders

               - The number of orders issued has varied
                 considerably from year to year.  (It
                 has been increasing steadily in recent
                 years).
            The Recipients of Orders

               - 85 percent of all orders issued have
                 been to private, mainly industrial, sources»

               - 40 percent of these orders address
                 manufacturers/finishers of metal products.
            The Types of Order

               - Half the orders have required installation
                 of facilities for treating industrial
                 wastewaters.

               - 95 percent of all orders issued since 1967
                 have required treatment or control of
                 industrial wastewaters whereas half the
                 orders issued in 1967-70 were for relatively
                 simpler sewer-connect or sanitary waste cases.
          * Order Timetables

               - 75 percent of all orders set separate dead-
                 lines for planning, preparing for construction,
                 and installation/start-up.

               - The number of steps in an order depends on
                 what the order requires.

               - The length of order timetables varies
                 depending on what the order requires.

               - Order timetables typically allow slightly
                 more than one year to -achieve final com-
                 pliance.

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                                                  II-9


* The Percent of Orders Contested

     - Fewer and fewer order recipients request
       hearings .

     - And the proportion of hearing requests
       that lead to actual hearings has declined
       sharply.


* The Status of Orders

     - 1/3 of all orders issued since 1967 are
       still outstanding.

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                                                                    11-10
I  -  Orders:   A Profile
      SINCE  1971 THE NUMBER OF ORDERS ISSUED HAS  BEEN INCREASING.
                     Number of Orders Issued per Year*
           Number
           of
           Orders
           Issued
                                        -All Orders (incl. municipal)
                                        - Private/Industrial Orders
                     1967 1968 1969 1970 1971 1972 1973 1974**

                            Year Orders Issued
           Source:  List of all orders issued as of July -31, 1974.
           *  Excluding NPDES permits.
           **  Extrapolated from seven-month (January-July, 1974)  total of
              92 orders.
DISCUSSION;   Half of all orders were issued in 1967, the  first
year  the State had  the authority  to issue  orders.   Follow-up
on  these initial, often long-terra orders,  engaged  much  of the
time  of the  limited staff  during  the next  several  years.   The
increase in  activity after 1971 reflects the growth of  the
Water Compliance Unit's staff.

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                                                                  11-11
I - Orders:   A Profile
      84  PERCENT OF ALL ORDERS AS  OF JULY 31,  1974 WERE  ISSUED

TO PRIVATE,  MAINLY INDUSTRIAL SOURCES.
                   Number (and Percent) of All Orders Issued*
                    Private/
                     Industrial**
                                       219
                                      (16%) / Municipal
                    Source: List of all orders issued as of
                          July 31, 1974.
                    *  Excludes NPDES permits.

                   **  Includes 7 orders issued to public
                      water companies.
DISCUSSION;   Because  of the high  proportion  of  all orders  to
private/industrial  sources and because of the express priority
the Department gives  for enforcement in this area, the baseline
study  focuses primarily on the orders issued to private/industrial
sources.   The data  on the following pages refers to private/
industrial sources  unless specifically labelled otherwise.

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                                                                                  11-12

I  - Orders:   A Profile
        ORDERS DEAL WITH WATER POLLUTION PROBLEMS  FROM A WIDE  RANGE

OF  SOURCES  ...

                   The  Industrial Classification of_ Order Recipients
           Y///^ primary metal & metal finishing industries    [   (Other

            Industrial Classification       Percentage of Private/Industrial
          Manufacturers:                    Orders	
                  fabricated metal products \///////////////^^^^^              16.7
                   primary metal industries Y/////77///////Ac. -i
                                         v//////////////A o • '
                      electrical equipment \///////////X^.0
                                machinery \/
                   transportation equipment
              instruments, watches & clocks
                                         i
              miscellaneous mfg. industries
                           food processing |	J6.7
                                        •L
                                 textiles
                     printing - publishing
                      stone, clay, glass &
                         concrete products
                                chemicals I   I 1-7
          Others:
                oil distribution facilities F|8.3
                                    farms I
             car wash  & automotive services[
                                laundries i
                           water districts I   | ]__-
                    non-manufacturing misc.|
                                                5      10      15      20

          Source:  Standard Industrial Code listing  in Connecticut Manufacturing
                  Directory,  1973 or information from files  for sample of pri-
                  vate/industrial orders  (see Appendix for description of sample
                  and  selection methodology).
 ...  HOWEVER,  METAL FABRICATING AND  FINISHING COMPANIES  HAVE
 RECEIVED  ROUGHLY  60  PERCENT OF THE  ORDERS ISSUED  TO  MANUFACTURERS
 AND  ROUGHLY  40  PERCENT  OF  ALL NON-MUNICIPAL ORDERS.

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                                                                                11-13
I  - Orders:   A Profile





       HALF OF THE  ORDERS  REQUIRE  NEW OR SUPPLEMENTAL FACILITIES

FOR  (PRE-)  TREATMENT OF  INDUSTRIAL  WASTEWATERS.
                        Percent of all Orders Issued, 1967-74
               Install or
               Improve
               Sanitary Waste
               Treatment or
               Disposal
               Facility
                                                           Install or
                                                           Improve
                                                           Wastewater
                                                           Treatment
                                                           Facility
Improve
Industrial
Waste Handling*
Modify Oil
Distribution
Facility
                                  Connect to
                                  Sewage System**
                        Source: Sample of 60 orders issued  1967-74.
                        *  Orders in this category contain miscella-
                           neous directives specifically tailored to
                           the peculiar pollution problem addressed
                           by the order.

                       **  For discharges of industrial, commercial,
                           or sanitary waste.

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                                                                        11-14
I -  Orders:  A Profile
      95  PERCENT OF  ALL POST-1971 NON-MUNICIPAL ORDERS  HAVE

REQUIRED TREATMENT  OR CONTROL FOR  INDUSTRIAL WASTEWATERS, WHEREAS

HALF THE ORDERS ISSUED IN 1967-70  WERE  FOR  RELATIVELY  SIMPLE

SEWER-CONNECT  OR SANITARY WASTE CASES.+
                        Percent of All Orders Issued
               EZ1
Sewer-Connect &
Sanitary Waste Cases

       100
                   Sewer
               Connection
                   Only*
                 Sanitary
                   Haste
               Industrial*
            Waste Handling

               Industrial
                   Waste
              Treatment**
       32
| Industrial Waste t
 Oil Facilities Cases
                                           100
                      ,*%
                      ';/////

   Oil
   Distribution
   Facility
                         1967-70
                                         1971-74
              Source:  Sample of 60 orders issued 1967-1974.
              * Includes discharges of industrial, commercial, and
                sanitary wastes.

             ** Includes discharges to streams, ground, and sewers.
+   In  1974  the Department began  to focus more effort on non-industria]
    problems once  again.

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                                                                              11-15
I  - Orders:   A Profile
       75 PERCENT  OF ALL  ORDERS  SET SEPARATE  DEADLINES FOR

PLANNING  (ONE OR TWO STEPS), OBTAINING MATERIALS,  AND  INSTALLING

CONTROLS.
                           Percent of all Orders (1967-1974)
                                                      Four-Step
                                                      Orders*
                                                      Three-Step
                                                      Orders**
                                                      Other
                    Source:  Sample of 60 orders issued 1967-64.
                     *  Deadlines for: (1)  submitting an Engineer-
                       ing Report,  (2) submitting Plans and Specs,
                       (3)  beginning construction,  (4) achieving
                       compliance.

                    **  Deadlines for: (1)  submitting Plans and
                       Specs, (2) beginning construction,  (3)
                       achieving compliance.

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                                                                                          11-16
I  -  Orders;   A  Profile




         THE  NUMBER OF  SEPARATE  STEPS  IN AN  ORDER  DEPENDS ON  WHAT

THE  ORDER  REQUIRES.
                           Mumber o_f Steps b_£ Type of Order Directive
                             (in percent of all orders of each' type)
                                         Type of Order

                                         Y////A Four-Step; Engineering Report, Plans and Specs,
                                         Y'/'f* beqin construction, achieve covpliance
                                         [     | Three-Step: Plans and Specs, begin construction,
                                               achieve compliance
                                               Other
                                     40
                                               SO
                                              \\x\x
                                                         71
                                                                   23****
                        Industrial Industrial Oil         Sanitary    Connection
                        Waste     Waste     Distribution  waste      to Mmicipal
                        Treatment  Handling   Terminal     Treatment   System
                        Facility                         Facility***

                  Source:  Sample of 60 orders issued 1967-1974.
                  *  A case in which plans and specs had been approved  before the
                     order was issued.

                 **  A special situation calling for no more than a report.

                ***  The 29% of all orders with four steps required modification
                     of existing treatment facilities;  the other 71% with three-
                     step orders were required to install disposal systems.

               ****  These three-step orders allowed the option of installing sub-
                     surface disposal (in three steps)  or connecting to the  sani-
                     tary sewer (in one step).

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  I - Orders:   A Profile
                                                                 11-17
       THE AVERAGE ORDER ALLOWS ROUGHLY ONE YEAR FOR A  SOURCE

  TO COME INTO COMPLIANCE.
                    Average Length of Compliance Schedule
Months
Allowed

24-
18 '


12 -

6 -



Year
Orders
Issued
Percent
of all
orders ij
sample*

















i
*


22. 3










1967


47

























12 .2






1968


8
























13.3







1969


5





14 8 15'°
13.5 .-.
CT" — i w average
q.n 10.0 compliance
schedule
for orders
issued
1968-1974=

1970 1971 1972 1973 1974


i 7 | j 5 j j 10 | 13 [_ 5 J

            Source:  Sample of 60 orders issued from 1967 to February, 1974.
             *  The average compliance schedule is the average length of all
               orders issued in 1968-3974 or the average of the annual aver-
               age order lengths weighted by the proportion of all orders
               issued in the given year.
            '*  Since the sample consists of roughly every twentieth order
               selected from a chronological list of orders issued (see
               Appendix),  the proportion of sample orders issued in each
               year closely approximates the actual distribution of orders
               issued over the years covered (1967 to February, 1974).

DISCUSSION:  Engineers in the Water  Compliance  Unit report  that
the  order schedules they write  are  all designed to  give the dis-
charger ample time to  meet the  specified deadlines.   Further,
each order is reviewed for reasonableness by  the Unit's senior
staff at a regular monthly meeting before it  is issued.  The
Unit's recent pattern  of discussing  its proposed compliance
schedule with the  source prior  to issuing the order is a useful
added means of  ensuring that order  timetables are appropriate
to each particular case.  The large  variation in average order
lengths for each year  from 1968 to  1974 is probably explained
by the small size  of the sample on which the  cell for each  year
is based.   However,  the substantially greater average length of
orders issued in 1967,  the first year during  which  orders could
be, issued, relative to the average  length of  orders issued  in
any  subsequent  years is significant.  1967 orders were exceptionally
long because:   (1)  Many of the  orders issued  then were to connect
to planned but  slow-to-deVelop municipal sewers and represented
an early Department priority to coordinate the  long range planning
and  construction of municipal sewerage systems;   (2) The Depart-
ment's initial  focus was on the largest, often  unusually complex
private/industrial sources; and  (3)  The Department  had to schedule
compliance deadlines in such a  way  that its very limited engineering
staff could manage the volume of review and enforcement work falling
due  at any one  time period.

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                                                                       II- 18
I Orders:   A Profile
      HOW MUCH TIME IS  ALLOWED IN ORDER TIMETABLES VARIES

DEPENDING  ON THE  REQUIREMENTS OF THE ORDER.
                  The Time Allowed in Different Types of Order


             Type of Order     Average Length of_ Compliance Schedule
             Industrial Waste
             Treatment Facility
             Industrial Waste
             Handling - Misc.


             Oil Distribution
             Facility*
             Sanitary Waste
             Treatment Facility
             Connection to
             Sewage System
         18.3
     13.6
    12.8
9.7
                                         4-
                                   6     12     18     24

                                Months from Issuance  of Order
              23.1

              +
             Source:  Sample of 60 orders issued 1967-1974.
             * Excluding one order with a two-month compliance schedule
               requiring only a report with recommendations for modifi-
               cation of the facility and/or operating procedures.
 DISCUSSION;   The long time allowed  for sewer connections reflects
 the facts that (1)  many  dischargers  could  not connect  until  a
 planned sewer reached their site and (2) the planning  and instal-
 lation  of municipal sewers often is  a slow process.  Most of the
 time allowed  in industrial wastewater treatment  facilities orders
 is for  detailed study and design prior to  construction.

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                                                                          11-19
I -  Orders:   A Profile
      RECENTLY LESS THAN 5 PERCENT OF  THOSE ISSUED  ORDERS HAVE

REQUESTED HEARINGS ON  THEIR ORDERS, A 2/3  DROP FROM 1967-70.
                 Percent of Order Recipients that Request Hearings
                              14.0
                                          4.6
                                                    (67%)
                            1967-1970
                                       1971-1974
             Source:  "Summary of Actions", Minutes of Monthly Water Com-
                     pliance Senior Staff Meetings.

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                                                                11-20
I - Orders:  A Profile
     75 PERCENT OF ALL RECENT HEARING  REQUESTS HAVE BEEN

POSTPONED OR  TABLED,  A SHARP INCREASE  OVER 1967-70.
            Percent of All Hearing Requests Postponed or Tabled
                                  76
                        20
                                          280%
                      1967-1970
                                1971-1974
          Source:  "Summary of Actions", Minutes of Water Compliance
                Senior Staff Meetings.
DISCUSSION:   The Department seeks  to avoid holding hearings
because of  their great cost to  the State, chiefly the  large
amount of  senior staff time they consume.  Regulatees  generally
do not object to postponing the hearing because, until it is
held, the  order has no legal effect.  Once the Department
develops an effective means of  discouraging delays in  complying
with the terms of a binding order, regulatees will have an even
greater incentive to request hearings — as a means  of avoiding
the risk of accepting an order  that is both theoretically and
in fact enforceable.  The Department will need either  a means
of discouraging such contests or a way of processing them
quickly and economically.

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                                                                              11-21
I -  Orders:   A Profile
      ALMOST  TWO-THIRDS  OF  THE  ORDERS  ISSUED HAVE  BEEN COMPLETED


OR REVOKED.



                     Status of  all Orders Issued Since 1967
                     Source:  Sample of 60 orders issued
                             1967-1974.
                        Orders are revoked when the original
                        reason for issuance is removed —  e.g.
                        when a company goes out of business
                        or discontinues the product line
                        creating the discharge addressed in
                        the order.

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                                                            11-22


I - Orders
                     DELAYS IN COMPLIANCE
     Orders to abate water pollution do not obtain prompt
compliance in most cases:
            The average order overruns its deadline
            by more than 100 percent.

            42 percent of all orders are completed
            over 1 year behind schedule; only 23
            percent are completed on time.

            The planning steps experience the
            largest percent overruns in Four-Step
            Orders.

            DEP order schedules must allow time for
            Department reviews.

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                                                                                  11-23
I  - Orders;    Delays




       ACTUAL COMPLIANCE  TIME  IS  MORE  THAN TWICE  THE ORIGINALLY

SCHEDULED  TIME  IN  THE AVERAGE WATER  COMPLIANCE  ORDER.
                              Average Compliance Time*


                              Scheduled**     Actual

                                           29.9 months
                               14.2 months
                                                        110%
            Source:
                     Completed and  active orders in sample of 60 orders
                     issued 1967-1974.
               The scheduled and actual times  are the average times for  all
               stfp'-- completed or pendinq.  Since those steps still pending
               continue  to log time  prior to compliance, the actual time il-
               lustrated here underestimates the actual compliance time  in
               the average case.

               The average scheduled time for  all orders is 17.0 months.
               Til'* average scheduled time indicated here is less because for
               tin' purposes of this  chart only tho<;e steps for which the pre-
               vious step was complete were included in the calculation.  To
               use the average time  scheduled  for all steps as a basis of
               comparison would underestimate  delay.

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                                                                           11-24
I -  Orders;   Delays




      42% OF ALL ORDERS  RUN  MORE THAN ONE YEAR  BEHIND SCHEDULE;

LESS THAN  ONE  QUARTER ARE COMPLETED ON TIME.




                      Percent  of Orders Experiencing  Overruns*


                 100





77



i




62






42


Al ] More More More
Orders Than Than Than
Issued One Six One
Month Months Year
Late Late Late






More
Than
18
Months
Late



23

More
Than
Two
Yenrs
La to
              Source:  Compliance records of 47 completed and active orders
                     in sample of 60 orders.
                Bnsed on current status for nil steps completed or ponrHni)
                jnd due for all active and completed orders  in the sample.

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                                                               11-25
I - Orders;  Delays
     DEP MUST BE CAREFUL TO INCLUDE TIME REQUIRED FOR  DEPARTMENT

APPROVAL OF PLANS"1"  ~  ONE THIRD OF ACTUAL TIME IN BOTH PLANNING

STEPS — IN SCHEDULED  TIME.

                 Average Actual Time for Submission and Approval
                             (in months)
                         14.9
                                           Time for Approval

                                      I    I Time until Submission
m
10.8
*
1 38%
_ -I

8.7
'
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                                                                                 11-26
I  - Orders;   Delay




       MOST OF THE  TIME ALLOWED IN AN ORDER IS

FOR PLANNING ...
                 Number  of Months Allowed
                  (Average 4-Step Order)
                                          6.3
            5.5
                      5.0
                                2.3
        3 Prepare     Prepare
         Engineering   Plans &
         Report      Specs
Prepare     Install
for        and
Construction Start-up
    Source:   Four-Step Orders in sample of 60 orders,1967-1974.
                        ...  AND  THESE  PLANNING  STEPS  SUFFER THE

                        LARGEST  PERCENT OVERRUNS.
                                              Percent Overrun
                                          (Average 4-Step Order)
to 171
approval
of report
to 96
submission
of report

ISSUE
[ORDER

4:
-•"*•
'* -s -
S
' -|: f 1
74t»--j'T-|
l< • ' | 43 49
1 •" ' 	
' V •..''
A .--:.*•.:'.._... A A .: ":.„,::
/ AV, / a \ 1 >- \ v-uwriji
                                   Engineering  Plans &     for        and
                                   Report      Specs      Construction  Start-up
                       Source:  Four-Step Orders in sample of 60 orders, 1967-1974.

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                                                            11-27


I - Orders
                        CUTTING DELAY
     The Department could cut the very high level of compliance
delay now being experienced by the Water Compliance Unit.*


          - Most delay occurs in the "soft" planning
            steps.

          - One-third of all orders cause three
            quarters of all delay.

          - Percent overruns vary by company much
            more than by industry.

          - However, percent overruns do vary with
            what is required in the order.

          - Water Compliance experiences more delay
            than Air Compliance (although the two are
            not entirely comparable).

          - Percent overruns have increased substantially
            in recent years.
   From a close, but inevitably judgmental analysis of the com-
   pliance records of the 47 completed or active orders in the
   60 case sample, we estimate that up to 70% of the delay is
   avoidable — i.e. due to recalcitrance or procrastination
   by the regulatee.  The remainder of the delay may be due to
   unavoidable circumstances including, among others, inclement
   weather, strikes, or delays by the Department.

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                                                                    11-28
I - Orders:   Cutting Delay





      PLANNING OVERRUNS ACCOUNT FOR 76 PERCENT  OF ALL  DELAY  IN


FOUR-STEP ORDERS.


                          Percent of Total Del a;
                          (Four-Step Orders

                          76
Planr,
& Specs
Enyr .
Report
ISSUE
.,21
•*» &
.'.554
» "• •
--"/;


ORDER Props.™ <-
                                               16
                                                   COMPLY
                                     Prepare 	 Install
                    Fngineering Report       for       and
                    & Plans and Specs    Construction   Start-up
               Sourer:  Tour-Step orders in sample of 60 orders,1967-1974.
               * Poiccnt.uje dfMfly at tributed'to engineering report and
                 plans and specs includes delays for both submission
                 and approval.
DISCUSSION;   It  seems highly likely that the  large  proportion of
total delay  attributable  to planning  steps could be cut sharply.
Planning  is  not  constrained by  possible shortages of physical
capacity  or  materials;  it is a  "soft"  process more  likely  to be
held back by procrastination.

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                                                                       11-29
I -  Orders;  Cutting Delay




      ONE  THIRD OF ALL ORDERS ACCOUNT FOR  75 PERCENT OF ALL

DELAY; 17 PERCENT FOR OVER HALF THE  DELAY.



                  Distribution of  Delay Among AH Orders  Issued
29.8
17.0
8.5




X
f
s
s
* f
S f
* ^'
*' „ *
^ _.«•""
f „ - "*





73.1
51.2
27.8
                        Percentage of
                        Orders Issued
Percentage of
 Total Delay
               Source:  Completed and active orders in 60-case sample.

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                                                                  11-30
I - Orders:  Cutting Delay
     DELAY VARIES  CHIEFLY  BY COMPANY,  ONLY SECONDARILY BY INDUSTRY.
                       Company and Industry Overruns
                       (in percent of scheduled time)
            Food Processing
            and Production
             Fabricated Metal
                Products
                    355
                                                  880
                 325
             180
                                               450
                           qroup
                           average
                           238%

• T ',' " 7




                               group
                               average
                               205%
         -29
             Car Wash and
           Automotive Services
                      190
              Oil Distribution
                 Terminals

                           1200

                       550
                                                       group
                                                       average
                                                       424%
                  -14-

                   I
                                    100
                                        114
group
•average
38%
               -11
           -42
             Source:  Sample of 60 orders issued 1967-1974.
DISCUSSION;  That most  of the variation in how quickly or slowly
cases  come into compliance has been attributable to  particular
companies is encouraging.  This  fact means that the  high average
level  of delay is not attributable to technical problems or
shortages in any one industry or group of  industries;  it is  the
result of some firms dragging their feet while others faced  with
similar problems were able to comply.  Economic incentives are
designed to remove the  incentive for just  such foot-dragging.

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                                                                              11-31
I  - Orders;   Cutting Delay
      HOWEVER,  PERCENTAGE OVERRUNS VARY  WITH THE TYPE  OF  ORDER:

INDUSTRIAL WASTE TREATMENT AND OIL FACILITY ORDERS HAVE  THE

LARGEST OVERRUNS.
                      Average  Percent Overruns* by Type of Order
                271
            Industrial
            Wnsto
            Treatmnnt
            Facility
                            74
Industrial
Waste
Handling
                                       230*
                                                    151'
Oil
Distribution
Facility
Sanitary
Waste
Treatment
Facility
                                                                 91
Connection
to Municipal
Sewage
System
            Source:  Analysis of completed and active orders  in 60-case sample.
               Average of per case percent overruns for all orders of each type.

               This fanuro excludes one extremely delayed case from the sample.
               If this 1200% overrun is included the average would become 424%.

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I - Orders;  Cutting  Delay
                                                              11-32
     WATER COMPLIANCE ORDERS EXPERIENCE MORE THAN THREE TIMES THE


PERCENTAGE OVERRUNS  THAT AIR ORDERS DO.


                 Percent Overruns iri the Average Order
                   (in percent of scheduled time*)

                       110
                                  33
                      Water
                    Compliance
                     Orders1
   Air
Compliance
 Orders2
         Source:
               ]) Analysis of completed and active orders in the
                 60-case Water Compliance order sample;
               2) "Baseline Profile of Air Compliance Unit".
         *  Vircr Orders also allow more scheduled time per case than
           Air Orders do.
DISCUSSION:   Enforcement problems  are  almost always caused by
the  few worst cases.    In the Air Compliance area,13 percent of
those  under  order are  responsible  for  three quarters of all delay.
Any  enforcement system must be both tight enough to be effective
against the  recalcitrant few and,  at the  same time, designed not
to be  unduly burdensome to those who comply voluntarily or who
will do so if they know others are obeying the law and that there
is some risk in not doing  so.

The  fact that the Air  unit has significantly less delay overall,
and  the fact that it has a higher  proportion of overall delay con-
centrated  in a smaller number of its worst, most recalcitrant cases,
suggests that increased enforcement effort by the Water Compliance
Unit probably could reduce compliance  delay significantly, especially
among  the  bulk of cases that are not "hard-core" recalcitrants.

The  enforcement experience of the  Air  and Water Units are not entirely
comparable.   The Water Compliance  Unit has fewer resources it can
allocate per case.  Whereas the Air Unit  typically spends five
months negotiating the terms of an order  with the regulatee before
the  order  is issued,  until recently the Water Unit has issued its
orders without prior negotiation and has, by consequence, tended
to lose the  time required  for talking  with the regulatee during
the  time allocated to  the  first planning  step.  Finally, Water Com-
pliance engineers report that the  engineering required to design  and
install water pollution control systems is generally more complex than
for  air emissions controls, a belief reflected in the longer scheduled
time allowed in Water  Compliance orders.   Consequently, even though
the  regulatees are often the same, one should not exaggerate the
importance of the Air/Water contrast.   Nevertheless, the nature and
extent of  the difference between the two, provides an additional
indication that Water  Compliance delays could be cut significantly.

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                                                                                   11-33
I  - Orders:    Cutting  Delay
       PERCENT  OVERRUNS HAVE INCREASED  SHARPLY SINCE  1967-70.
                  The Change in  Percent Ovorrun from 1967-70 to  1971-74*
                             (in percent of scheduled time)
                  Avtjraue Percent Overrun**
                                 280
                        I 85
                                        77%
Median Percent Overrun
                                                            155
                                                   55
                                                                    182%
                      1967-70   1971-74            1967-70   1971-74

                                  Years Orders Issued




                  Sou ice:  Completed and active orders in sample of 60 cases.
                  *  Percent overrun is calculated as  the overrun divided
                    by the scheduled time for each order issued in the
                    four-year time period.

                 **  Average percent overrun is the average per case overr
                    run for orders issued in the given time period.

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                                                             11-34
I - Orders


                  CURRENT RESPONSES TO DELAY
     The Department now has three responses to delay:   (1) tabling,
 (2) modification  (usually extension) of the order, and  (3) going
to court through referral to the Attorney General.

     Tabling, the alternative with lowest cost to the Department,
is a convenient response to delay in the substantial proportion
of cases in which neither modification nor referral are appropriate
—when new dates for a modified timetable are not yet definable
and referral is not warranted.

     The Department approves extensions or other modifications to
orders only when reasonable new compliance dates have been deter-
mined for an order in which progress is evident and for which the
current timetable is no longer adequate.  Need for modification
may arise, for instance, (1) when unavoidable circumstances have
delayed efforts to comply,  (2) after an engineering study has
shown that the work necessary to control pollution is other than
originally thought, and (3) when long avoidable delays have rendered
the existing timetable obsolete by the time the regulatee resumes
progress towards compliance.

     The Department may refer a case to the Attorney General for
injunction or forfeiture if the regulatee is clearly responsible
for the delay.  The unit has preferred to defer referral and to
depend on persuasion at least as long as the regulatee seems
willing to move forward, because, if the initial warning from the
AG does not work, future progress with the case will depend on
slow and uncertain court proceedings.  To date the courts have
issued only one injunction  (to a private homeowner) and no forfeit-
ures for water compliance violations.

     Tabling/jawboning is the Department's only currently available
response to deliberate/avoidable delay short of invoking the slow
and unsatisfactory court process or legitimizing the delay by
modification of the order schedule.  The Department has not had
an effective incentive to apply to delinquent dischargers.

     This subsection reviews the responses to delay currently
available to the Department:

          - Over half the orders issued since 1967 have been
            tabled, 44 percent extended, and 16 percent referred
            to the Attorney General.

          - The average order is tabled or late with no action
            for 8.5 months, extended for 3.9 months, and is in
            the AG's office for 3.3 months.

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                                                 11-35
Over half the Water Compliance Unit's cumulative
overrun was handled by tabling.

The average tabling lasts for 7.2 months, the
average extension for 2.6 months.

The average referral to the AG stays in his office
for 18.1 months.

The mix of responses has varied considerably from
year to year.

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                                                                         11-36
I  -  Orders;   Responses to  Delay





      OVER HALF OF ALL ORDERS  ISSUED SINCE 1967 HAVE  BEEN  TABLED

AT LEAST ONCE, 44 PERCENT  HAVE  BEEN EXTENDED, AND 16 PERCENT

REFERRED TO  THE  ATTORNEY GENERAL.



                     Percent of All Orders Issued Since 1967
                         54.2
                                   44.1
                                             15.7
                         Orders     Orders     Orders
                         Tabled1    Extended1  Referred2
             Source:  1) Sample of 60 orders  issued 1967-1974.
                    2) "Status of Actions Referred to tho Office of
                      the Attorney General", a list compiled by the
                      Office of the Attorney General.

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                                                                                  11-37
I  - Orders:    Responses to Delay




       THE AVERAGE ORDER IS TABLED  OR LATE.WITH NO  ACTION FOR

8.5 MONTHS,  EXTENDED  FOR 3.9 MONTHS, AND  IS  IN  THE ATTORNEY

GENERAL'S  OFFICE FOR  3.3 MONTHS.
                       Department Response to Delay in Average Case*
                                      (in months)
                             Scheduled Time**
                         Actual
                       Compliance
                       Scheduled
                       Compliance
                          Order
                          Date
                                    14.2
                                              29.9
                                                    \Overrun*
                                                     -Referral to AG
                                                     -No Dept. action

                                                     -Tabling


                                                     -Extension
                                                     -Scheduled
                                                      time
                 Source:  Analysis of  completed or active orders in 60-case
                         sample.
                 *  Scheduled and actual times are averages  for only those
                   steps completed or  pending.

                ** Scheduled time for final compliance in the  average order
                   is 17.0 months.  The scheduled  time here is less since
                   those steps  for which  the  previous step is  not complete
                   have been excluded from the average.

               *** The average  overrun is more than  the 15.7 months indicated
                   here because steps still pending  continue to log time past
                   their scheduled date prior to compliance.

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                                                                         11-38
I -  Orders:   Responses to Delay
      MORE THAN HALF  OF THE TOTAL  AVERAGE OVERRUN OCCURS WHILE AN

ORDER IS TABLED  OR AWAITING DEPARTMENT ACTION.
                       Proportion of Total Overrun
                     Handled by Available Responsps
                  Source:  Analysis of completed and active orders
                         in 60-case sample.
                  * Periods of non-action rarely extend more than
                    one or two months beyond a scheduled deadline.

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                                                                       11-39
I -  Orders;   Responses to Delay




      THE AVERAGE TABLING LASTS FOR 7.2  MONTHS, THE AVERAGE

EXTENSION  FOR  2.6 MONTHS.
                        Ayerage Duration of Response
                              (in months)
                            TABLING     EXTENSION
                             7.2
             Source:  Analysis of completed or active orders in 60-case
                    sample.

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                                                                  11-40
I - Orders:  Responses to Delay




      ORDERS REFERRED TO THE ATTORNEY GENERAL  REMAIN AN AVERAGE

OF 18.1 MONTHS UNTIL WITHDRAWN OR REVOKED.  OVER HALF REMAIN IN

THE ATTORNEY GENERAL'S OFFICE MORE THAN ONE YEAR AND ONE-FOURTH

REMAIN  MORE THAN TWO YEARS.
                  Duration of_ Referrals to the Attorney General
                       (petcent of all orders referred)
          CASE REMAINS
          IN AG's OFFICE:  More    More    More
                      Than    Than    Than
                      Six     One     1 V2
                      Months   Year    Years
                                             25
More
Than
Two
Years
            Source:  "Status of Actions Referred to the Office of the
                  Attorney General".
           NOTE:  THESE FIGURES DO NOT INCLUDE CASES NOT YET REMOVED FROM
                 THE AG's OFFICE.  IN OTHER WORDS, THE WORST CASES WITH
                 THE LONGEST DELAYS ARE NOT INCLUDED — THEREBY UNDER-
                 STATING TYPICAL DELAY IN THE AG'S OFFICE SIGNIFICANTLY.
DISCUSSION:  The Attorney General is able  to get good response
from a  large number  of delinquent dischargers merely by  writing
them a  letter threatening legal  action.  For those who do not
respond to this bluff, however,  the Attorney General enters into
negotiations and ultimately may  go to court.   The court  process
is uncertain:  to date there have been no  forfeitures and one
injunction (to a private homeowner) imposed  on recalcitrant
dischargers.  The court process  is, however,  almost certainly
very slow.  The average referral takes over  a year and half,
and the average takes into account the large number of cases
that respond quickly to their  first warning  from the Attorney
General's office.  This long delay is one  of the key reasons
cited by virtually all engineers interviewed for their reluctance
to refer cases.

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                                                                      11-41
I-  Orders:   Responses  to Delay
      THE  PERCENTAGE OF OUTSTANDING ORDERS PROCESSED THROUGH

EACH OF THESE RESPONSES TO  DELAY  VARIES GREATLY FROM YEAR TO

YEAR.
                       Percent of Outstanding Orders
                     Referred, Extended ^ Tabled per Year

                                     — — —Extension
                                     	 Tabling
                                     	Referral to AG
             40--
              1968   1969    1970    1971    1972

                              Year of Action
                                              1973    1974*
             Source:  Analysis of completed and actual orders in 60-case
                    sample.
             *  Mnii) orders were tabled in 1974 while the unit processed
                Nl'Di-S permits to supercede the old orders.  In addition,
                tli'-- unit relied heavily on the tabling device to ease the
                st-iff burden occasioned by the NPDES permit processing
                load.
DISCUSSION:   The variable use of  each  of the responses  to delay
reflects  changes in  administrative policy.   In recent years  the
increased work  load  and staff shortage has  led to  greater reliance
on  the tabling  device due in part to its low administrative  cost.

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                                                            11-42


I - Orders
                     ADMINISTRATIVE COSTS
     Under existing circumstances
            The administrative cost of processing the
            average case is increased more than 50
            percent by the extensive delay encountered,

            Granting extensions is almost twice as
            expensive to process as tabling.

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                                                                               11-43
I  - Orders:   Administrative  Costs
       THE  COSTS  OF  RESPONDING TO DELAY INCREASE  THE  ADMIN-

ISTRATIVE COSTS OF PROCESSING  THE AVERAGE  CASE OVER  50  PERCENT,
                  Administration Costs of Processing the Average Case
                                   (in dollars)
                                               356
                                   230
                                              —•+* «*.-*.*»>
                                                       55*
                                  Costs
                                 without
                                  Delay
  Costs
  with
Responses
to Delay*
                  Source:
                          Analyses of sample of 60 orders  issued 1967-1974;
                          Interviews with Water Compliance Unit engineers.
                     The administrative costs for responses to delay include
                     the costs to the Department of processing an average of
                     1.2 extensions, .95 tablings, and .24 AG referrals per
                     order.  These processing costs include added field in-
                     spections, meetings, etc., occasioned by the delay.

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                                                                               11-44
I  - Orders:    Administrative Costs
       IT  IS  ALMOST  TWICE  AS  EXPENSIVE  TO  PROCESS  AN

EXTENSION AS  IT  IS TO TABLE THE  SAME  DELAY.
                       Administrative Costs to the DEP of
                       " Alternative~Responses to Delay*~
                              (Average Case)
                                               $21.67
                                   $13.17
                         $7.15
                        Tabling   Modification   Referral1
           Source:  Analyses of sample of  60 orders  issued 1967-74;
                   Interviews with Water  Compliance Unit engineers.
               These costs do not include preparatory field  inspections,
               communications with the regulatee, and other  similar costs.
               Extensions are likely  to entail more expenses of this type
               than tabling in order  for the Department to determine what
               specific adjustments should be made in the new order.

               This cost does not include costs to the Office of the
               Attorney General of to the Courts.

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                                                             11-45
                            CHAPTER II
                    PERMITS FOR NEW DISCHARGES
     All new or significantly modified discharges initiated after
1967 must apply for and obtain a permit prior to beginning the
discharge.  Chapter II reviews the history of this program.


          - The Department has issued roughly 20
            permits a year.

          - It has referred an average of 9 dis-
            charging-without-a-permit cases per
            year to the Attorney General.

          - If the AG cannot bluff the regulatee
            into compliance, referrals typically
            result in long further delay.


     Chapter II does not analyze permits issued under the NPDES
program which the Department only began to administer in 1974.
The analysis here examines only those discharges initiated or
approved as of the end of 1973.  Through the new NPDES permit
program the Department can regulate existing (pre-1967)  as well
as new discharges.

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                                                                  11-46
II - Permits
     THE  DEPARTMENT  HAS ISSUED  ROUGHLY 20 NEW DISCHARGE PERMITS

A YEAR  -- 55 PERCENT FOR STREAM DISCHARGES,  45 PERCENT FOR

GROUNDWATER DISCHARGES.
                Number of_ New Discharge Permits Issued per Year
                       17
                     m
                                     32
                                     20
                                            15
    J	I to groundwater

    YjVSA to streams
                                                    16
   //.
mm
                                                    10
               1968
                      1969
                             1970
                                     1971
                                            1972
                                                   1973
             Source:  Water Compliance list of all new discharge permits.
DISCUSSION;  Because issuing  new discharge permits necessitates
a public hearing  and other  costly administrative procedures,
the  Department  has required permits only  for industrial and
major sanitary  discharges.

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                                                                         11-47
II  - Permits
      THE  DEPARTMENT HAS  REFERRED AN AVERAGE  OF 8.5 DISCHARGING-

WITHOUT-A-PERMIT CASES TO THE ATTORNEY  GENERAL ANNUALLY.
             Annual Number of Referrals for Discharging Without a Permit
               1968
                       1969
                               1970
                                       1971
                                               1972
                                                       1973
                                                              Avg: 8.5
             Source:  "Status of Actions Referred to the Office of the
                    Attorney General".

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                                                                  11-48
II -  Permits
     IF THE AG  CANNOT BLUFF OR NEGOTIATE  VOLUNTARY COMPLIANCE,


SUBSEQUENT RELIANCE ON  COURT PROCESSES LEAD TO  LONG ADDITIONAL


DELAYS.



OF CASES WITHDRAWN* FROM THE AG,  OVER

HALF WERE IN HIS OFFICE OVER ONE  YEAR.

      Duration of Completed Referrals to the AG
              (Percent of Referrals)
              69
CASE r<£MAINS


55


34

21

IN ALi's OFFICE: More More More More
Than Than Than Than
Six One iVj Two
Months Year Years Years
      Source:  "Status of Actions Referred to the
             Office of the Attorney General".
                            THREE-QUARTERS OF ALL CASES  REFERRED


                            TO THE AG IN  1972 WERE STILL THERE  IN


                            AUGUST 1974.

                                Percent of A_l 1 Caseu Referred to the AG still
                                       PendTng in August, 1974
                                        40
                                CASE
                                REFERRED  I960
                                IN:
                                                19
1970
       1971
              1972
                                 Source:  "Status of Actions Referred to the
                                       Office of the- Attorney Gr-neral".
+   Cases are withdrawn after either  elimination of the discharge
    or approval of a  permit.   Because it does  not include data from
    cases that remain unresolved, this chart understates the  duratior
    of referrals  to  the Attorney General.

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                                                                   11-49
                            CHAPTER  III
         MONITORING REPORTS REQUIRED FOR NPDES  PERMITS
      The recently-instituted NPDES program for  stream  discharges
requires the  periodic  submission of monitoring  reports containing
the results of sampling analyses for  the permitted discharges.
Permits may require measurement of the  flow volume, pH,  temperature,
and effluent  waste concentrations.
                  IN A SAMPLE OF 20 PERMITS WHICH HAD REQUIRED SUB-

                  MISSION OF MONITORING DATA FOR AT I.KAST SIX

                  MONTHS AS OF DECEMBER, 1974, 21* OF THE REPORTS

                  WERE NOT SUBMITTED.




                    Percent of_ Monitoring Reports Not Submitted
                     50 :-
                      July   Aug.  Sept.  Oct.  Nov.


                                 Month (1974)



                     Source:  NPDES Monitoring  Files.
                                                    Average Failure
                                                    Rate - 21*
Dec.

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                                                            11-50
                           APPENDIX

          SAMPLE OF 60 PRIVATE AND INDUSTRIAL ORDERS


     The sample was selected from the list of all orders issued
from 1967 to mid-1974.  The sample includes every non-municipal
order with a number divisible by 20, or the first order thereafter,
from #120 to #1300.

          Key to Order Type

          A:  Connect to Municipal Sewage System
          B.  Install New or Modified Sanitary Waste Facility
          C:  Install New or Supplemental Industrial Waste Facility
          D:  Improve Industrial Waste Handling - Miscellaneous
                Directives
          E:  Examine and Modify Structural Integrity of Oil
                Distribution Facility


                                                           Type of
Order No.               Name of Order  Recipient             Order~

 120               Gilbert & Bennett Mfg. Co.                 D
 140               Avon Old Farms School                      B
 160               Moore & Taylor Silversmiths                C
 180               Sirtex Printing Co, Inc.                   B
 200               DeBell & Richardson, Inc.                  C
 220               Brick Top Laundry                          A
 240               Puritan Laundry                            A
 260               Pharos Farm Dairy Co.                      C
 280               Electric Boat Division, General Dynamics   A
 300            _   Electric Storage Battery                   C
 320               Somers Plating, Inc.                       C
 340               Novelty Textile Mills, Inc.                A
 360               G. N. Papers, Inc.                         A
 380               Torrington Company                         C
 400               The Montgomery Co.                         C
 420               Star Pin Company                           C
 440               Lockheed Aluminum Window Corp.             A
 460               Screw and Bolt Corp. of America            C
 481               Colchester Egg Farms                       B
 500               Sunshine Laundry                           A
 520               Nestle Company                             C
 540               Norwalk Asphalt                            C
 560               Fairfield Processing Corp.                 A
 580               Accurate Chrome, Inc.                      C
 600               Willington Name Plate, Inc.                B
 620               New England Motors, Inc.                   A
 641               Jacobs Manufacturing                       C
 660               Riverview Apartments                       A
 682               Westfall-Chafee Laminates, Inc.            A
 700               Benrus Watch Company, Inc.                 D
 720               Idle-Wilde Farm, Inc.                      B
 740               Minit Auto Care Co.                        A
 760               Vincent Buoncare & Sons                    C

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                                                            11-51
                                                         Type of
Order No.               Name of Regulatee                 Order

 780               Car Washes, Inc.                         A
 800               Dainty Maid, Inc.                        B
 820               Federal Paper Board Co., Inc.            C
 840               Superior Steel Ball Co.                  C
 860               Gedney Electric Co.                      C
 882               Connecticut Sand & Stone Corp.           C
 900               Electrotherm Wire Company                C
 920               Mayflower Truck Station, Inc.            D
 940               W&S Surgical Instrument Corp.            C
 960               Raybestos-Manhattan, Inc.                C
 982               New Canaan Water Co.                     C
1001               Bryant Electric Co.                      C
1020               John Ahlbin & Sons, Inc.                 C
1040               Rediflow                                 E
1060               Colonial Board                           C
1081               Holiday Inn of Norwalk                   B
1100               Julius Rytman                            E
1120               Lincoln Oil Co.                          C
1140               Idle-Wilde Farm, Inc.                    C
1160               Revere Corp. of America                  C
1180               New Haven Oil Terminal, Inc.             E
1200               TAD Jones & Company                      E
1225               United Tool & Die                        C
1240               American Oil Company                     E
1263      '         John H. Caruso & Caruso Bros., Inc.      D
1280               Warner Murphy                            C
1328               Milford Rivet & Machine Co.              C

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           PART III
CALCULATING ECONOMIC REMEDIES

-------
                            III-2
                          CHAPTER I
                   CALCULATING ASSESSMENTS
     Economic remedies must be just large enough to make
compliance economically attractive:  they must take away the
entire benefit of noncompliance — including whatever return
the noncomplying person may be able to earn with the money it
has not spent on pollution control for however long the delay
continues.  Such economic assessments should ensure voluntary
compliance because they simultaneously remove the incentive to
delay and guarantee those who do comply a commercially attract-
ive "return" on their abatement investments — not having to
pay the assessments.  This "return" will be sufficiently attract-
ive to make citizens feel that compliance "pays" because it i&
calculated at the cost of capital rate appropriate for the
source, i.e. because it is as large as the returns the source is
obtaining on investments it has recently chosen to make.

     An economic assessment is defined to be that payment which
would, if made at the end of each month throughout a specified
assessment period, have the same net economic impact on a source
as the expenditures necessary for compliance with Department re-
quirements throughout that assessment period.  In other words,
the present value of the stream of assessment payments made over
the assessment period would equal the present value of the net
flow of compliance costs over the same period.

     Economic assessments are based on a simple economic calculus
that is commonly used by businessmen  in  evaluating investment
alternatives.  This calculus requires four main steps;

      (1)   Identify the gross cash flow of all expenditures
          necessary for the source to comply with the law
          during each year of the assessment period and
          adjust for anticipated inflation (deflation).
          Both initial and replacement installed capital
          costs and operating and maintenance expenses
          must be considered.

      (2)   Obtain the net cash flow by adjusting the figures
          in (1) for the effect of tax deductions, chiefly
          for depreciation of capital equipment and
          deduction of operating and maintenance expenses
          and for the effect of a credit for the purchase of
          pollution control equipment.

      (3)   Discount this net cash flow to a present value
          (using a cost of capital rate if the source is
          a business and other appropriate rates if the
          source is a municipality or individual).

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                             III-3
     (4)  Calculate the equal monthly payments that
          will spread out the present value from (3)
          over the entire assessment period using a
          standard amortization formula and a discount
          rate equal to the cost of capital rate used
          in  (3).

The rest of this chapter outlines the methodology of these calcu-
lations in greater detail.   It explains what information is needed
to calculate an assessment, how the impact of taxes is taken
into account, how the calculations are handled by the assess-
ment formula, and how the formula is derived.  It then explains (1)
how the assessment formula was used to establish the schedules
of maximum civil assessments found in the regulations, and (2)
how it is used to calculate individual assessments.
DETERMINING THE COSTS
OF COMPLIANCE
CASH FLOW	

     The first step in determining the proper amount of an
economic assessment is to identify what costs will be incurred
in each year of the period during which control activities can
be presumed to continue.  (How these costs are determined, the
most difficult step in making individual assessments, is ex-
plained briefly in Chapter II of this Part and, in detail, in
Chapter VII of Part V.)  These costs, and the way they will be
handled in the assessment formula, are outlined below briefly:

      (1)  Initial installed  capital costs for pollution control
          equipment facilities considered as an expend-
          iture in year zero.*
  *  It is assumed that all initial capital expenditures would
have to be made in one lump at the beginning of the assessment
period.  In fact such expenditures would generally be made over
a period of time.  For instance, to comply with an order or
qualify for a permit, a regulatee might have to pay $5,000 for
an engineering report in March, $5,000 for detailed plans in
May, $50,000 for equipment and contractor services in July,
$50,000 for equipment in September, and $15,000 for contractor
services at completion of the project in November.  If the
regulatee did not make any expenditures and was assessed a
penalty at the final compliance date, the assessment period would
begin  in December.  For assessment purposes it would be assumed
that the entire $125,000 expenditure should have been made in
November.  This may seem to benefit the regulatee by letting
him keep the benefit of use of much of these funds for a number
of months.  This is not true, because he will be charged the
full monthly assessment until he has made all the requisite
expenditures, even though some expenditures will have been made
many months in advance of final compliance.

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                            III-4
      (2)  Replacement costs for this abatement equipment.
          It is assumed that the equipment will be re-
          placed at the end of each depreciation period
          within the assessment period and that the cost
          will be the cost of the initial equipment in-
          creased (or decreased) by inflation  (or
          deflation) at a rate equal to the average rate
          for the preceding three years.  (The assess-
          ment period is 20 years for reasons discussed
          below; in individual assessment cases it is
          presumed that equipment must be replaced every
          15 years unless the Commissioner finds other-
          wise.  The 15 year figure is based on EPA data
          on the typical life expectancy of water pollu-
          tion control facilities.)

      (3)  The salvage value of any equipment is the ex-
          tent that it is not fully depreciated at the
          end of the assessment period.  This factor is,
          of course, a credit that reduces the net cost.
          Salvage value is also adjusted for inflation
          (deflation).

      (4)  The annual operating and maintenance costs that
          are required to ensure the continuous effective
          operation of the pollution abatement facilities
          over their full depreciable life.   These costs
          are increased (decreased) each year to account
          for inflation (deflation).

     All of these expenses are affected significantly by various
tax provisions.  The assessment formula takes into account the
effects on a source's U. S. income tax of:

      (1)  An investment tax credit for the purchase of
          new abatement facilities.

      (2)  Deductions from taxable income each year of:

          (a)   Depreciation on the capital cost of
               these facilities over their useful
               life (or at accelerated rates when
               this is  approved), and

          (b)   Annual  operating and maintenance costs.
     In developing assessments from the net cash flow of the
costs of compliance created from these cost estimates and tax
considerations, the following assumptions apply:
         Tax savings are calculated  as  if the violator
         is in a tax bracket with  a  known effective rate
         (the variable T in the  assessment formula) in
         all years.

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                            III-5
         Regulatees either have or will have sufficient
         taxable income to take full advantage of any
         tax credits or deductions to which they are
         entitled by virtue of required control expend-
         itures, or their effective U. S. income tax rate
         (T)  will be O.  (See Chapter 5)

         An  investment tax credit is in effect, and is
         obtained at the time equipment is purchased.

         For purposes of discounting, operating costs
         are considered to be paid and corresponding
         tax savings realized at the beginning of each
         year.   Tax savings from depreciation are realized
         at  the  end of each year. *


         If  equipment  is not fully depreciated at the
         end  of  the  assessment period, it can be sold
         at  a salvage  value equal to its economic worth.
         In  that case  a portion of the tax credit must
         be  refunded, pro-rated according to the pro-
         portion of useful life remaining.  (The form-
         ula  for  salvage value is given in the deriva-
         tions section below.)

         For  the purposes of calculating the deprecia-
         tion tax deduction in case-by-case assessments,
         five year accelerated depreciation is used.
         This depreciation formula is approved by the
         IRS  and  is nearly universally used.  For pur-
         poses of determining the intervals between re-
         placements of equipment and the salvage value
         of  equipment, it is assumed that the equipment
         is  not  fully depreciated until the end of its
         expected life  (15 years unless the Commissioner
         determines otherwise).
THE ASSESSMENT
FORMULA	

     While the assessment formula takes into account a wide variety
of interacting variables, Department staff do not have to push their
way through a host of calculations to determine the effects of these
*  Operating costs are, in fact,  paid throughout the year.
This might argue for considering  them to be paid at mid-year.
However, the formula is greatly simplified by assuming they
are paid at the beginning or end  of the year.  The beginning
rather than the end of the year was chosen in part because  doing
so ensured that the resulting assessments will be high enough  to
take away the full economic benefits of noncompliance  regard-
less of when during the year a violator pays its operating
expenses.

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                            III-6
interactions in each case.  The assessment formula has been pro-
grammed for use on a Wang desk-top calculator.  All that is required
of those calculating the assessment is determination of the cost of
compliance and a few additional, easily identified variables.  Once
this is done, a tape cassette with the assessment formula on it is
put in the calculator, the values for the variables are punched
in, and the "Go" button pushed.  The calculator types out the
assessment a few seconds later.*


    This section explains the formula and its derivation.


    Notation

    Input variables:

         AP = Assessment period in years.

         CC = Annual cost of capital or discount rate,
              as a decimal fraction.

         EL = Expected life of control equipment**,in years.

         DL = Depreciable lif<=> (for tax purposes)  of equip-
              ment,  in years.

        CCE = Capital co^ts of control facility equipment**
              for initial equipment,in dollars.

         OP = Operating costs in first year,  in dollars.

         RI = Annual rate of inflation,  as a  decimal fraction.

          T = Effective marginal corporate income  tax rate, as
              a decimal fraction.   (If there  is a  state corporate
              income tax,  T would be the total effective  tax rate.
              It would be given by the formula:

                  T = T0  + (1 - T )  T_,  where Tc  is the  state
                        s          s    r          =>
                  corporate income  tax  rate  and T^  the federal one).

         TC = Investment tax credit  rate,  as  a decimal fraction.
    *   Mr.  Phil Florkoski of the Air Compliance Engineering staff
  has  programmed these formulae and has a library of the tapes.

   **   The  expected life and capital cost figures cover everything
  included  under facility costs in §§502 and 503.  The term equip-
  ment is used because that term is used in the already effective
  Air  regulations for the same class of cost items.   If the term
  facility  were used here,  the notation would have to be changed
  and  there would have to be unnecessary duplication of assessment
  formula programs, etc., since with the exception of this term-
  inology,  they are almost the same.

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                            III-7



    Output variable:

         CA = Civil assessment per month, in dollars.

    Other variables:
        PVO =
Net present value of operating and maintenance
costs over assessment period, net of any tax
savings arising from these costs.
       PVIE = Net present value of initial equipment, net of any
              tax credits and savings arising from the purchase
              and depreciation of this equipment.

        PVE = Net present value of equipment cost over the entire
              assessment period.  (Includes discounted value
              of initial and replacement equipment, less the
              value of tax credits and deductions and of any
              salvage value at the end of the assessment period.)

          A = The amortization factor,  giving the amount of the
              monthly payment required  per dollar of  present value to
              amortized.  This converts the present value of a
              stream of facility and operating costs  that in
              fact occur unevenly over  the assessment period
              into equal monthly payments that have exactly the
              same overall economic  impact.
     Formula

     The civil assessment is given by formula (1)  below,  with
the additional variables defined by equations (2)  through (5),
(These formulae are derived in the following section.)
    CA = (PVO + PVE)   A

              I

                /I + CC
   PVO = (i-1:
                 CC -
  PVIE =
   PVE =
(1-TC)  -
         (DL)(CC)
A
\
                                     CC)°L
                            }
                            /
                                              CCE
           l -
                 + CC
                            PVIE
(1)


(2)



(3)




(4)
                  (1/12)
     A = (1 + CC)	- 1
                                        (5)
          1 -
                 (1 + CC)
                        AP

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                         III-8
Derivations

CA:

     The total present value of compliance costs is the sum
of PVO and PVE.  The economic assessment is the monthly payment
which amortizes this sum over AP years.  Hence, the sum is
multiplied by the amoritzation factor A.

PVO:

     We assume that operating costs are paid in the beginning
of the year.  Each year operating costs increase by an infla-
tion factor of (1 + RI) , regardless of the age of equipment
then in use.  We convert operating costs for year 1-1 to present
value by  discounting by the factor I/  (I + CC) .  Assuming
T is the current maximum rate of .48, there is a tax savings
of 48 .percent of operating costs each year, so net operating
costs are .52 of gross operating costs each year.  In general,
     PVO =
AP

 £
                                      1-1
(l-T)(OP)  (1 + RI)
                                                (1 + CC)
                                                        1-1
     Formula (2) above is an equivalent but more explicit
formula, derived from the sum of a geometric series.
PVIE:

     The cost of initial equipment is CCE.  Deducted from this
is the tax credit (the variable TC) obtained immediately, and
tax savings of the fraction T of allowable depreciation for each
year of depreciable life of the equipment.  In calculating the
maximum assessments that are published in the regulations,
straight-line depreciation is assumed.  Using straight-line
depreciation, annual depreciation is CCE/DL.  Depreciation in
annual year I is discounted by the factor I/ (1+CC)1.  Thus
     PVIE = CCE - (TC) (CCE) -
                               DL
                               1=1
                           (T)
                      / CCE\	1

                      VDL  /   (1 + CC)1
     Formula (3) above is equivalent.
PVE:

     The equipment cost of the K   set of replacement equip-
ment (where K = O for initial equipment) is equal to the pur-
chase price of the initial equipment times a cumulative infla-
tion factor of (1  +  RI)  K x EL.

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                          III-9

     The savings due to the tax credit on replacement equipment
and to deductions for depreciation are proportional to facility
cost, and are thus also inflated by the same cumulative inflation
factor.  Note that all expenditure and savings on this piece of
replacement equipment occur (EL) x (K) years further in the
future than the corresponding cash flows for the initial equip-
ment purchase.  Provided that the entire useful life of the Ktn
replacement equipment lies within the assessment period, its
contribution to net present value is
                              (EL)(K)      .    .
                     1 + RI \              PVIE)
                     i + cc;              v    '

     If the assessment period AP is an integral multiple of the
equipment life EL, then the useful life of all replacement
equipment will be within the assessment period.   In that case,

             (AP/EL) -1              (EL)(K)     ,     *
     PVE =    V        /I +  RI \              (PVIE I
            K = 0       \1 +  CC j              V     /

     Formula  (4) is the equivalent but simpler summation of
this formula.

     If AP is not an integral multiple of EL, then the last
piece of replacement equipment still has a salvage value at
the end of the assessment period.  The salvage value is equal
to the remaining unused economic value of the equipment.  If
the equipment was purchased in year J and there are only X years
remaining in the assessment period (where I is less than EL),
its salvage value is
                 J
     CCE  (1 + RI)
1- ll + CC/
                          l  + CC
           EL j     (1-TC) +-~  (TC)
     This salvage value is such that the net present value of
equipment costs over any period does not depend on what com-
bination of new and used equipment is owned during that period.
As a result, equation  (4)  for PVE holds regardless of whether
AP is an integral multiple of EL.

A:

     The amortization factor is based on the standard formula
for a monthly annuity of unit amount for AP years at an annual
interest rate of CC.  Since the formula is for monthly payments,
the numerator is the monthly cost of capital.
DETERMINING MAXIMUM
ASSESSMENTS	

     For purposes of calculating maximum assessments, the
values used are at or near the most extreme likely value for
the variable in the direction that will result in higher assess-
ments.  This is to make certain that these maxima will not

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                            111-10
preclude the Department from levying assessments large enough
to take away the entire economic benefit of O&M violations.
Individual assessments will use actual data and, as a result,
almost always be much smaller than these maxima.  The maxima
assume the following values:  (Note that CA increases with
increases in CCE, OP, RI,  CC and AP, and decreases with increases
in EL, T and TC.)
       RI = .15  (i.e., 15%).  The typical rate of inflation
       has increased markedly over the last several decades
       and reached levels not far from 15 percent in 1973.

       CC = .20  (i.e., 20%).  Over the long run, the cost of
       capital has generally exceeded the inflation rate by
       about 5 percent to provide an adequate return and to
       compensate  investors for  inflation.

       AP = 20 years.  Twenty years is a common time frame for
       evaluating many capital projects.  Since abatement facilities
       are auxiliary  to production  facilities, such facilities and
       their replacements will have to be used for the life-
       time of the underlying plant requiring control, if the
       source is to remain in compliance with the law.  Conse-
       quently it is reasonable to assume that sources evaluat-
       ing a commitment to abatement will think in terms of the
       common 20-year period.   Moreover, a common assessment
       period helps ensure that assessments are comparable and
       therefore fair.

       EL = 5 years.  Very few significant types of water pollu-
       tion control equipment have useful lives less than five
       years long.

       PL = 5 years.  Federal Tax law permits that pollution
       abatement equipment be depreciated over a five year
       period, or over the expected lifetime of the equipment,
       whichever is shorter.

       T = 0.   Most businesses assessed will have a 48 percent
       tax rate, but a few major sources of pollution may have
       a 0 cax rate.  Thus, to avoid the risk that the maximum
       will be too low for some problem cases, a 0 rate is used
       in the maximum.  In the absence of evidence that a dif-
       ferent rate applies, the 48 percent rate will be used
       with individual cases involving industrial sources.

       TC = 0.  The current rate of the U.S. investment tax
       credit is 10 percent.  However, since the few companies
       that pay no tax would get no benefit from the tax credit,
       a 0 rate is used for the calculation of maxima so as to
       be sure to encompass the economic benefits of such firms.

       CCE, OP - maximum figure in range.  To obtain the maximum
       assessment  when CCE and OP may assume any value over a
       specified range, CCE and OP are set at the upper limits
       of their respective ranges.

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                         III-ll
    An Example:  Derivation
    of a Maximum Assessment

    The following computations illustrate the calculation of the
civil assessment for the upper left cell in the schedule of maxima
in §503 (d)  of the Water Compliance Civil Assessment Regulations.
(This cell is for cases with facility cost, CCE = $2500 and
annual operating cost, OP = $1000.  Other input variables are
set at the values specified above.)
                                        2°
    PVIE =
     PVE =
1 -
/I
i -U
/I
1 - 1 1
0
5(.20)
+ .15\2°
+ .20/
+ .15\5
+ .2oy
                                               =!3,754.26
                                           2500 = 2500
                             (2500.00)   =  7474.60
                                   = .015719
[by (3)]



[by (
            1 -
                (1+20)20

      CA = (13754.26 + 7474.60) .015719 = 333.70
[by  (5)]



[by  (1)]
    For  this  example the civil  assessment would  be  $333.70  for
each month  in which the polluter  failed  to  comply with emissions
standards.
 SETTING
 INDIVIDUAL ASSESSMENTS
        Individual assessments  are  determined using the same
 economics and assessment formula as  were used to fix the maximum
 assessment schedules.  However, the  Department will utilize cur-
 rent, real values for CCE, OP, EL,  DL, RI,  T, TC, and CC.

        *  Equipment Costs  (CCE) will be based on Department
           estimates of the installed equipment costs re-
           quired to bring an uncontrolled source into com-
           pliance or   on evidence of the actual cost.
           (See Chapter II.)

        *  Operating and Maintenance  Expenses (OP) will be
           based on Department  estimates of  the annual cost
           of operating and maintaining this equipment prop-
           erly.   (See Chapter  II.)

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                              111-12
     *  Equipment Life (EL)  is 15 years unless the Commissioner
        determines otherwise initially or in a correction hear-
        ing.   He will use reliable tables from, e.g. the U.S.
        EPA and/or IRS, in making any such adjustments.

     *  Depreciable Life (PL)  is 5 years unless Federal Tax law
        changes or unless the Commissioner determines that the
        lifetime of a particular piece of equipment ( and there-
        fore its depreciable life) is less than five years.

     *  The Rate of Inflation (Deflation) (RI) will be valued
        as the average of the last three years' annual rates based
        on an appropriate price index.   (See Chapter III.)

     *  The U.S. Income Tax Rate  (T)  applicable to the source
        will be assumed to be 48 percent if the source is a
        corporation (with very limited exceptions) and zero
        percent if it is a public body or a nonprofit institu-
        tion.  The rate will vary if the source is an individual
        or partnership.  (See Chapter IV.)


     *  The Investment Tax Credit (TC) will be the rate set
        in the current tax law.   (It is now 10 percent.)

     *  The Cost of Capital (CC) will be set in most cases as
        the marginal rate obtaining in the industry at the
        time.   (See Chapter V.)

     The following chapters explain how to estimate installed
capital and annual O&M costs, how to adjust for inflation, how
to^take different individual tax rates into account, and how to
obtain the cost of capital so critical to the formula.

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                            111-13
                         CHAPTER II
             DETERMINING THE COST OF COMPLIANCE

          IN WATER COMPLIANCE SECTIONS 502 AND 503

              ECONOMIC CIVIL ASSESSMENT CASES
     The most important variables in the assessment calculation
are the control facility costs and the annual expense of operat-
ing and maintaining the facility.  To impose civil assessments
at the appropriate level, the Department must be able to easily
and accurately estimate both facility and operating costs.  This
chapter discusses the key issues in determining the cost of com-
pliance and summarizes the methods by which such costing can be
carried out.
                  THE COST OF COMPLIANCE IN

         DIFFERENT TYPES OF POLLUTION CONTROL CASES

     The cost of compliance is broadly defined in both Sections
502 and 503 to include virtually all costs  (minus all savings)
that would be incurred by a permit applicant or order recipient
in qualifying for the permit or in fully complying with the order.
Such costs include both facility costs (including all expend-
itures which are capitalized and depreciated) and operating costs
(including the continuing, non-depreciable expenses of operating
and maintaining the facility).  Facility costs are aggregated
into a single lump sum, while operating costs are calculated as
a continuing annual expense.

     In all Section 502 cases and in the Section 503 cases that
deal with violation of the terms of orders, the cost of compliance
will include both facility and operating costs.  However, in the
few Section 503 cases that involve violation of the terms of per-
mits (essentially failure to operate and maintain), only operat-
ing and maintenance costs will be included in the cost of com-
pliance.

     There are numerous types of pollution control problems
which are regulated through order and permit procedures, e.g.,
treatment of industrial wastes, discharge of sanitary wastes
to either municipal sewers or the grouridwaters,  and  other
point sources and control of siltration, erosion, and other run-off

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                           111-14
problems.  Naturally,  the cost of compliance with Departmental
requirements varies significantly for different types of water
pollution control problems.   The costs in each individual case,
even for similar types of problems,  are highly idiosyncratic.
The costs may vary in relation to the volume of the flow, the
components of the discharge,  and the required amount of effluent
reduction/control for each particular source.  In addition,
numerous other factors can affect the costs in individual cases,
e.g., the adaptability of existing equipment for treatment pur-
poses; the availability of in-house  labor for installation of
treatment facilities;  the layout of  a plant; the availability
of land for building,  sludge  handling, etc.; and the distance
to a receiving stream, sewer  or acceptable soil for septic-
type treatment.
 FACILITY
 COSTS

     The  items  included  in facility costs vary with  the
 installation.   For  example:

     *  If  installation  or modification of  a treatment,
       disposal,  storage,  or other facility is re-
       quired,  the  facility  costs include  all equipment,
       instrumentation,  materials, labor,  contracting
       and engineering  services,  and other costs which
       must be  incurred  to construct a facility approved
       by  the Department

     *  If  implementation of  measures to control siltation,
       erosion, or  run-off,  is required, the facility
       costs include the costs of all equipment, en-
       gineering  and contracting  services, structures,
       excavation,  regrading, seeding,  and any other
       site work  necessary to meet the pollution control
       requirements of the Department.

     *  If  a source  is required to discharge to  a municipal
       sewer,  the facility costs  include costs  of excava-
       tion, piping, pumps,  engineering and contracting
       services,  and other capitalizable items  required
       by  the  Department.


     Costs Associated with
     Obtaining  Interests in  Land

     The Department may  want to ignore  the cost of  purchasing
 land for the purpose of  treating  water  discharges,  e.g.  with a

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                             111-15
septic system or settling lagoons, in most cases.   Since much
land  suitable  for  such use has  intrinsic  value, the bulk of such
costs are not losses to the source.  Probably all  it is losing is
the value of being able to use the property for financially more
rewarding purposes.  This relative use value will  usually not
be very large,  but the cost of obtaining a defensible estimate
may be large.  When such estimates prove necessary, however, the
Department's Land Acquisition Unit can help the Water Compliance
staff due to its experience with  land valuation.

      Costs of  easements, rights of way and short-term leases
should be included in the cost of compliance if they are likely
to be significant in amount.   Some dischargers will have to ob-
tain such interests in land in order to pipe their treated dis-
charges to a stream or sewer.  These limited interests are far
less likely to  have intrinsic value than ownership.
OPERATION AND
MAINTENANCE COSTS

      The operation and maintenance (O&M)  cost component of the
cost of compliance includes all expenses required to control or
treat a source of pollution on a continuing basis in the manner
required by the Department.  Such control or treatment may be a
stated condition in a permit or order or an implicit requirement
for continuing Department approval of a specific discharge.  Like
the facility costs, the costs of operation and maintenance will
vary significantly from case to case depending on the nature and
location of the discharge, the techniques adopted for controlling
pollution, and other factors.  For example:


     *  For a treatment facility, the O&M  costs include
        the costs of labor, chemicals, electricity,  spare
        parts, sludge hauling, and other expense items
        required to operate the facility and maintain it
        in a state of continuous repair.
        For a municipal sewer connection, the O&M costs
        include all pumping costs, user charges and
        other expense items required to discharge into
        the sewer.
        For a siltation or run-off control structure,
        the O&M costs include all expenses required
        to ensure the effectiveness of the installa-
        tion, such as costs of cleaning out holding basins

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                             111-16
              CALCULATING THE COST OF COMPLIANCE

      In order for the economic assessment approach to work prop-
erly, it is essential that each assessment be based on as complete
and accurate estimates of the costs of compliance as can be ob-
tained at reasonable administrative cost.  If important cost items
are left out, the assessments will be too small to eliminate all
the economic incentive for non-compliance.  If the cost of com-
pliance figures are overstated, assessments will become vulnerable
to legal attack on the grounds that they are punitive and there-
fore criminal, not civil assessments.  Moreover, a systematic
approach to costing assures fairness in enforcement by applying
the same standard to all cases.  The regulations provide for
several costing techniques which ensure the requisite complete-
ness and accuracy of information at acceptable administrative
cost.
THE APPROACHES
TO COSTING

      For the purposes of calculating civil assessments, water
pollution control systems will be costed in a variety of ways:

      *  from actual cost information submitted by reg-
         ulatees and checked by the Department for
         completeness and accuracy

      *  from cost estimates submitted by the regulatee
         and checked by the Department for completeness
         and accuracy

      *  from cost curves that relate facility and/or
         operating costs to a few key variables of the
         discharge

      *  from cost information about similar installations
         obtained from Departmental records •

      *  from cost estimates based on control designs
         prepared by the Department .

The method used in a given case will depend in large part on the
amount of cost information that is available from the regulatee.
When it is available, the Department will use complete, accurate
data on actual costs or estimated costs based on approved engin-
eering reports or plans and specifications.  Where such data is
not available, the Department will rely on other estimating tech-
niques.
      The Use of Actual
      Cost Information

      If purchase vouchers or other verifiable documentation of

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                        111-17
 either the installed capital costs or operation and maintenance
 expenses are available in a particular case, the Department can
 calculate the cost of compliance directly from the submitted
 documents after checking the itemized costs for completeness
 and accuracy.  An engineer familiar with the case can verify
 that all installed capital costs were accounted for by:

     (1)  comparing approved reports and plans with the
          itemized costs to ensure that all planned in-
          stallations, modifications, etc. were included
          in the cost accounting, and

     (2)  relying on his knowledge of the work required
          and the work actually done to ensure that all
          costs were covered.

     The operation and maintenance costs can also be checked:

     (1)  using itemized  lists  of  anticipated expenses
          the Department  might  require  sources to sub-
          mit with engineering  reports  or  plans and
          specifications,  and

     (2)  relying on Department staff knowledge of the
          types of expenses  usually  incurred  in operating
          and maintaining the type of pollution control
          facility in question.

     These steps can be done rather  quickly,  especially after
 Water  Compliance Unit engineers have gained  some experience
 in performing these tasks.   As the  program progresses, engineers
 will be able to rely on  cost data assembled  from numerous cases
 handled by the Unit and  from cost checks  with suppliers.


     The Use of Cost Estimates
     Submitted by Regulatees

     Where a contractor's bid estimates the expected costs to
be incurred in carrying out a Department-approved plan,  the
technique for determining the costs  of  compliance is similar
to the method used when vouchers or  actual costs are available.
An engineer can check the submitted  estimate for completeness
and accuracy using information  from manufacturers,  suppliers,
contractors, or consulting engineers,  and information compiled
by the Department on costs for  similar  installations or control
activities. To allow for the possibility of under-estimation,
the Department will add 10 percent to contractors'  estimates,
20 percent to plans and specifications  estimates,  and
30 percent to engineering report estimates.*
Consulting engineers surveyed by CEP staff reported that
contractor's bid estimates were accurate to ±10%, plans and
specifications based estimates to ±20% and engineering report
estimates to ±30%.   See "Survey of Consulting Engineers," a
CEP file memo available at the Connecticut State Library,
Hartford, Conn., or from William Drayton, McKinsey & Co.,
245 Park Avenue, New York, N.Y. 10017.

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                               111-18
         If cost estimates are incomplete or the reports or plans
    are not accompanied by cost data and that data cannot be
    obtained from the regulatee, the engineer will either cost out
    the approved system using available cost information or use
    one of the approaches for cases with no cost information that
    is discussed below.

          The Use of
          Cost Curves

          Cost curves provide an effective  costing technique which
      minimizes administrative costs and offers  a  clear,  concrete
      standard for use in large  classes of  cases.   The  curves them-
      selves measure  the relationship between facility  and  operating
      costs and a few key variables.

          Costing with the curves is easy.   The  engineer  must first
      determine the appropriate values for  key variables, e.g.: *

          a.  the flow volume in gallons per minute of
              the cyanide rinses, the chrome rinses,  and
              the total metal waste stream,  and

          b.  the appropriate sludge dewatering  mechanism.
             (This determination is made on the  basis of
              the flow volume and the availability of land
              for a sand drying bed.  If a  sand  drying  bed
              is appropriate, the engineer  will  determine the
              number  of different metals and the total  concen-
              tration of metals in the waste stream.)

      Information on the flow and content of the discharge  is
      included in many "P-5"  field inspection reports,  and  could,
      with a note on  the availability of land, easily be  included
      in all of them.  Once this information is  on hand,  the engineer
      need only refer to the appropriate curves  and tables  to deter-
      mine the facility costs.  There are separate curves for
      "treatment modules" and "sludge dewatering."

          Example: A metal finishing plant with an un-
          treated 60  gpm flow containing both cyanide and
          chrome fails to submit an engineering  report  as
          required in an order to install a treatment
          facility.  A set of curves and tables  is avail-
          able (see "Sources of Cost Information," below)
          which allows estimation of the installed costs  of.
          metal waste treatment facilities,  both with and
          without cyanide and/or chrome treatment modules.

          If in this  particular case the cyanide rinse  flow
          is 10 gpm and the chrome rinse flow is 5 gpm, the
          metal treatment cost curves estimate that the
          installed cost of the treatment facility minus  the
          sludge dewatering device would be $212,200.  If
Prototype curves for metal finishing waste treatment costs were dev-
eloped by Water Compliance Unit and CEP staff.  The following example
involves the use of these curves.

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                     111-19
     sufficient land is available for a sand drying bed
     and if the total concentration of the four metals
     in the source's waste stream is 40 ing/liter, the
     installed costs of the sludge dewatering mechanism
     would be $13,820.  Thus the total estimated installed
     cost for the metal waste treatment facility is $226,020.

     The Treatment Module curves suggest the following detailed
cost breakdowns:
          Module                     Flow Rate   Installed Cost

          Cyanide Destruction          10 gpm     $   69,850
          Chrome Treatment              5 gpm         35,350
          Neutralization/Settling      60 gpm        107,000
                                                  $  212,200

The Sludge Dewatering Tables suggest:


     A.   If the flow rate is less than 200 gpm and if sufficient
          land is available, use the costs for a sand drying bed
          for calculating the cost of compliance.

     B.   Flow (F) = 60 gpm
          Concentration (C) = 40 mg/1
          Number of Metals  (N) = 4

          The Installed Cost of a Sand Drying Bed =
          $5.76  (F) (C-N)  + 1375
          $5.76  (60) (40-4) + 1375
          $13,820

A copy of these curves and of the Sludge Dewatering tables
follows.

-------
                                2 X 1 C-YCt FS
                                           «»Dt IX U S A
I 000
    Installed Facility
    Costs*
    (Thousands of Dollars)
   1          2      3455?
                                 KEUFFEL » ESSER CO.
Treatment Module Curves
     2     3    456791
7  8   1
  10
    * T«o+-a 1 1
                            3   »  7 8 9 10         20
                              v Raninment Costs
           30   40  50  60 0 80 90 loo
           Desian Capacity

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                111-21
         Sludge Dewatering Mechanism
A.  Selection of Type


    gpm  Land Available    Land Not Available

   <15  Sand Drying Bed   Sand Drying Bed*

  15-200 Sand Drying Bed   Vacuum Filter

   ">200 Vacuum Filter     Vacuum Filter
B.  Installed Costs of Sludge Dewatering
    Mechanism

1.  Installed Costs
    For a Sand Drying Bed**

    V = flow (gpm)
    C = concentration of metals (mg/liter)
    N = number of metals in process effluent

    Installed Costs = 5.76(V)(C-N)+1375

2.  Installed Costs of a Vacuum Filter***

    Flow         Cost
    (gpm)

    15-100       82,500

    100-500      96,250

    More than    110,000
    500
   Plants with less than a 15 gpm flow,that
   do not have sufficient land available for
   a sludge drying bed, generally make the
   economic choice to haul the wet sludge
   rather than install a vacuum filter.   The
   costs for the sand drying bed approximate
   the incremental future operation and main-
   tenence expenses for hauling wet, rather
   than dry, sludge.

   See File Justification:  "Sludge Dewatering
   Mechanism Cost Formulae."  This document may
   be obtained from the Connecticut State Lib-
   rary, Hartford, Connecticut or from William
   Drayton, Jr., c/o McKinsey & Co., 245 Park
   Avenue, New York,  N.Y. 10017

   The installed costs include the costs
   of a centrifugal pump for the filtrate
   and an installation add-on equal to
   175 percent of the purchased equipment
   costs.

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                        111-22
If an operating and maintenance cost curve is developed,  this
too could be used with readily available information on a few
variables.  In the absence of such curves, O&M costs can be
estimated using standard add-on factors commonly used and
accepted by consulting engineers.
    Use of Cost Information
    From Similar Facilities

    The Department may sometimes be able to use cost data from
a similar facility as the basis of cost of compliance calcula-
tions.  Such a costing technique may be difficult to apoly in
practice since many unrelated factors affect these costs
in water cases. Nonetheless, in some cases the Department will
be able to identify similarities in cost-related character-
istics of the "assessment case" and a "reference case" for
which complete costing data is available.  As Department cost
experience increases, it is expected that a broad range of
"reference cases" will provide a solid data base for comparative
analysis.

    Use of Cost Estimates Based
    On An Original Control Design

    The Department may always make its own cost estimate
based on an original control design prepared by Department
engineers.  While this technique is always available, it is
far more costly to the Department than any other costing
approach.

    A survey of consulting engineers indicated that it would
take approximately 1-2 days for an engineer familiar with
costing and the general type of treatment technology to come
up with a cost of compliance figure within the range of ±30%
accuracy.*  While this cost in engineer time is not prohib-
itive for a small number of cases a year, the Department does
not anticipate using this costing approach unless no other
technique is available.


PROCEDURES FOR FACILITATING
COSTING BY THE DEPARTMENT

    Water Compliance engineers report that in the early stages
of any given case, it is difficult to predict the exact treat-
ment system that will finally be approved.  Accordingly, the
*  See "Survey of Consulting Engineers," a CEP file memo avail-
able in the Connecticut State Library, Hartford, Connecticut,
or from William Drayton, Jr., c/o McKinsey & Co., 245 Park
Avenue, New York, N.Y. 10017.

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                             111-23
      first  few months  of  both  the order  and permit process  are
      characterized  by  considerable  engineering research and by
      negotiations concerning the optimal treatment system between
      the  Department and by  the source.   Yet it is this stage  in
      the  order process (when cost estimates are difficult to
      obtain)  that most compliance delays occur.   (See Part  II
      above.)

          The  Department Economic Civil Assessment Regulations
      anticipate  this difficulty and provide for a number of pro-
      cedures  to  maximize  enforcement impact during the period
      before reliable cost estimates become readily available.  The
      Regulations:

          *  provide for warning letters  which give notice
            of potential  civil assessment liability  to be
            sent upon  detection of  non-compliance that do
            not  require an  assessment amount to be specified

          *  permit  the Department to delay sending notices  of
            violation  with  specific assessment amounts until
            adequate cost data is available.   (The Enforcement
            Act  does not  set a post-detection time interval
            within  which  a  Notice of Violation must  be sent.
            The  interval  is thus limited only by the standard
            of reasonableness.  Assessments can accumulate
            during  this interval as long as the Department's
            delay is not  "unreasonable." Typically, courts
            will not find 6 to 9 months'  delay unreasonable.)

          *  authorize  the Department to  delay any hearings  on
            the  issue  of  the assessment  amount until reliable
            cost information is available.

          *  allow the  Department to make partial collections
            of civil assessments imposed.   (This partial
            collection device  permits the Department to
            collect assessments at  a reduced level until final
            costing data  is obtainable.)


          *  include an important "correction-as-of-right"  pro-
             cedure whereby excessive assessments are cut to the
             precise amount payable  when  actual cost data are
             presented.*  This  correction procedure  justifies the
             Department's use of rough but generally accurate
             estimating techniques  since  the regulatee is guaran-
             teed that he will  receive no economic injury due to
             faulty Department  estimation.
Overpayments, if any, are refunded with .appropriate interest.

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                          111-24
                          CHAPTER III
                      HANDLING INFLATION
     Inflation affects both the purchase price of replacement
equipment and annual operating and maintenance costs.  The
significance of taking inflation into account in estimating the
cash flow of the costs of compliance over a period of years hardly
needs to be underlined after the experience of the last several
years.  Plant costs have increased almost 25 percent in 1972-74,
and operating and maintenance costs, which reflect chiefly labor
and energy costs, have been even more volatile.

INDEXING
INFLATION

     The economic assessment formula adjusts the estimated costs
of compliance cash flow for inflation.  All the Department need
do is adjust the figure used as the assumed inflation (deflation)
rate each year to reflect the average experience of the previous
three years.  A three-year rolling average is used to flatten
out sudden sharp shifts in the rate both to reduce sudden shifts
in assessment levels and because people making capital decisions
similarly "smooth" adjustments in their "inflation expectations."

     The civil assessment regulations allow the Commissioner to
peg the inflation rate used in the assessment calculus to the
Wholesale Price Index prepared by the U.S. Department of Labor
or any other index that he finds is more appropriate.  The U.S.
Bureau of Labor Statistics, although it compiles cost indexes
for hundreds of products and commodities, does not yet prepare
a pollution control index.

     The best available index appears to be the CE Plant Cost
Index published by the trade journal, Chemical Engineering.  It
contains four major components:  (1) equipment machinery, and
supports, (2) construction labor,  (3) building materials and la-
bor, and (4) engineering supervision and manpower.  This weighted
index is generally accepted in the engineering profession as a
highly accurate and reliable guide, and is currently used by the
U.S. Environmental Protection Agency to update Agency publications

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                           111-25
     If the  Chemical Engineering Index is used,  the rate of infla-
tion (RI)  the  Department would use in its economic  assessment cal-
culus throughout  1975 would be 7.9 percent:
                Calculating the Rate of Inflation
                  CE Plant Cost Index (1957-59 = 100)
j.yfa
188
180
172
164
156
T A O




197








197
\j/
n









4
/
'










*










y










/










/










^











•^










^











^-







     C  ^ >,  ^H  O,  >
     H3  (0 (C  D  (U  O
    'to  2 S  T)  w  2
                       Annual Index

                       1969 = 119.0

                       1970 = 125.7

                       1971 = 132.2

                       1972 = 137.2

                       1973 = 144.1

                       1974 = 165.4
Inflation Rate    3 Year Average

    3.8%

    5.0%

    14.8%
7.9%
     The Department  could also use another commonly  accepted
set of indices:   the ENR Cost Indexes, based on costs  in 20
cities around the U.S.  and published weekly by the trade journal
Engineering News  Record.   These consist of five indices for con-
struction, building,common labor, skilled labor, and  material
costs.  To modify these for use, the Department should average
these five components,  and calculate a weekly or monthly average.

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                         111-26
                        CHAPTER IV
                 ADJUSTING FOR INDIVIDUAL
                     INCOME TAX RATES
    One of the key pieces of information required to operate
the civil assessment formula is the regulatee's income tax
bracket.  It is a workably accurate assumption for over 80
percent of all companies that this rate is 48 percent.  How-
ever, there are a few companies that will have lower tax rates.
Moreover, most individuals and partnerships will be taxed at
a lower rate, and municipalities and non-profit institutions
are not subject to tax at all.  For these cases the Department
may wish to adjust the tax assumption used in the formula.

    A source that does not pay income tax would be subject to
civil assessments roughly twice those that persons who are taxed
at the 48 percent rate would be, assuming that the Department de-
cides to adjust the formula for differences in tax rate.  This
is so because investing in and operating abatement facilities
generates a series of tax deductions and credits.  These tax
benefits become more significant the higher the source's income
tax is.  The entire capital cost of the facility becomes a
series of deductions through the tax laws' depreciation provisions,
and these provisions allow especially accelerated depreciation
on pollution control investments.  The cost of operating and
maintaining the facility are deductible in exactly the same
manner as other business expenses.  Further, pollution abatement
investments are eligible for an investment tax credit.  A source
that pays no tax receives no tax benefits from pollution control
expenditures.  Its net cost of compliance equals its gross cost
of compliance.


ADJUSTING
TAX RATES

    Whether and how the Department wants to go about adjusting
for differences in individual regulatees1 tax rates depends on
whether it is dealing with corporations, individuals/partner-
ships, or municipalities.


    Corporations

    Generally the Department will not have to worry about adjust-
ing income tax rates where corporations are concerned.  There are
three types of corporations that may have low income tax rates:
(1) companies operating at a loss,  (2) companies that benefit from
extraordinary tax deductions or credits, notably depletion allow-
ances, even though they are operating profitably and  (3) very
small companies.

-------
                       111-27
    Companies operating  at  a  loss generally do not expect
to continue profitless for  long.  When they do become
profitable, they will be able to use the tax advantages
that accumulated during  the period during which they were
operating at a loss.  Consequently,  such companies will not
alter their evaluation of what an abatement project will cost
them after tax significantly.  Moreover, their calculations and
the CEP formula take into account the after-tax costs of any
commitment well into the future, and the normal businessman is
most unlikely to assume that he will be operating unprofitably
continuously for twenty years.  In other words, the Department
need not worry about adjusting the formula for companies operat-
ing temporarily at a loss.

     Companies with low tax rates because of extensive deductions
and credits other than for operating losses are,however,a more
serious problem.Special provisions in the tax laws, most not-
ably depletion allowances that benefit companies involved in
extractive activities,  can largely or entirely eliminate a com-
pany's income tax liability.   U. S.  Steel and Occidental Petrol-
eum, for example, pay negligible income taxes because of the
tax cover such provisions allow.  For such companies the after
tax cost of an abatement investment is much higher than for
most other businesses.   However, the situation is likely to be
relatively rare, especially given recent Congressional action
to reduce and eliminate the oil depletion allowance.   Therefore,
unless the Department is dealing with an extractive industry,
the Department staff should probably not worry about such cases.

     Very small  companies will be  taxed  at  significantly lower
 rates'^because  the  tax  on  corporations  is  graduated.   This year
 the rate is 20  percent  for the first  $25,000  of taxable income,
 22 percent for  the  second  $25,000 of  taxable  income,  and 48 per-
 cent for taxable income in excess of  $50,000.   This schedule of
 rates is effective  for  1975  only.   If it  is not extended or other-
 wise changed, the former schedule will  apply.   Those rates are 22
 percent for the first $25,000,  26 percent  for the second $25,000,
 and 48  percent  thereafter.   Where a corporation's taxable income
 is sufficiently low that its overall  tax  rate deviates substantially
 from 48 percent,  the Department may well want to modify the formula
 income  tax rate assumptions  to fit  the  specific facts of the case.

     Individuals
     and Partnerships

     When the Department is dealing  with individuals or partner-
 ships,  it should initially assume a tax rate  of 19 .percent for
 individuals (the approximate Connecticut  average for household
 heads in 1972)  and  18 percent for partnerships (the approximate
 Connecticut average for manufacturing partners in 1969).   In
 addition,  given the wide range of effective tax rates paid by
 such persons, the Department will want  to  adjust its tax assess-
 ment formula from case  to  case.   How  it can do so at low cost is
 outlined in the sectiqn immediately after  the brief discussion
 of municipalities and nonprofit institutions.

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                           111-28
     Municipalities and
     Non-Profit Institutions

     Municipalities and non-profit institutions do not pay income
tax and therefore derive no tax benefits from whatever capital
or operating and maintenance expenses they incur in order to
abate pollution.  When dealing with such institutions, the
Department should adjust its civil assessment formula to assume
a zero tax rate.
OBTAINING INDIVIDUAL
TAX RATES	

     When the Department decides it must obtain individual tax
rates in order to set accurate civil assessments, it can do so
in two relatively simple ways:

     *  It can ask the regulatee to submit (1) its most
        recent balance sheets and income statements if it
        is a business and (2) its most recent income tax
        statement if the regulatee is an individual.  The income
        tax statement is private information, and can be obtained
        from the IRS only by a state tax agency.  However, the
        civil assessment regulations specifically provide that
        the Department can require such information, including
        financial data, as it needs, from the regulatee.
        Moreover, since individuals who are likely to be
        subject to civil assessments are also likely to be
        taxed at above average rates, the information will
        probably be provided voluntarily.

     *  For companies, especially publicly-held companies,
        this information is a matter of public record and
        may be found routinely in financial and investment
        publications such as Moody's Industrial Manual or
        the Value Line Investment Survey.  (The first of
        these worksis available in the Connecticut State
        Library.)
ADJUSTING THE FORMULA FOR
CHANGES IN THE TAX LAWS

     In applying civil assessments in individual cases, Depart-
ment staff will not have to research or work through the impact
of specific tax provisions.  All  this  is  handled automatically
by the formula.

     However, from time to time the  provisions of the tax laws
are changed.  The investment tax  credit is  especially likely
to be changed with cyclical change in  the economy.   The pro-
visions in the formula should be  changed  accordingly.  Chapter
I identifies exactly where such adjustments should be made in
the formula for each of the taxes that may  have to be adjusted.

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                          111-29
                           CHAPTER V

                   USING THE COST OF CAPITAL


     One of the innovations of the Connecticut Enforcement Program
 is the attempt to put the regulatory agency into the shoes of the
 regulatee.  Just as businessmen faced with environmental regulation
 focus immediately on the cost of raising and using money to meet
 environmental standards now and in the future, so must economic
 civil assessments take the current and continuing costs of using
 money into account.

     Once the cost of compliance cash flow (which describes the
 cash outlays that will be required in each year of control
 programs) has been established, the economic assessment calculus
 discounts it at the cost of capital rate appropriate to the
 particular regulatee to a present value.  If the cost of capital
 is 10 percent, expenditures of $1100 a year from now would be
 discounted to a present value of roughly $1000 (i.e., 1100/1+. 10) .-

     Such a discounting is necessary because ten dollars of
 expense three years from now is less painful than ten dollars due
 now.  It is less painful because, over the three years one
 retains that ten dollars one can use it.  If, for example, one
 could earn one dollar in each of the three years one had to
 invest the ten dollars, the net reduction in one's current
 worth attributable to this future expense is $7.51 [.10/(1+.10) 1•

     Businessmen evaluating the costs of different investment
 projects, including abatement projects, have to take the time
 value of money into account.  They are keenly aware that ten dollars
 spent three years in the future entails considerably less cost than
 ten dollars spent now.  Similarly, ten dollars received  (or saved
 in taxes) three years hence is less valuable than such a savings
 received immediately.  They consider the total present value of a
 project as its immediate costs plus future costs, reduced by a
 discount factor equal to the time value of money.


 USING THE
 COST OF CAPITAL

     A regulatee's cost of capital is its marginal cost per
 year of obtaining additional capital funds.  For most businesses,
 the cost of capital is the weighted average of the costs of debt
 (e.g.,  bond issues or bank debt)  and equity (e.g., sales of
 common stock).  If a company's capital is 50 percent debt with a
marginal cost of 10 percent and 50 percent equity with a current
 cost of 20 percent, the company's cost of capital will be 15
 percent.

     The CEP formula uses a marginal cost of capital rate so that
 the low interest costs on bonds sold twenty or thirty years ago
do not depress the rate so as to make it a misleading measure of
 the current cost of money to the regulatee.  The marginal cost of
capital rate also effectively reflects changes in the market price

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                          111-30
of money of  all sorts.  When interest rates go up  (and common
stock prices down), the marginal cost of capital will go up,
accurately reflecting the increased cost a regulatee will have
to pay  for the resources required for the control project.

     The cost of capital is the right discount factor to use
in the  economic assessment calculus because  (1) it is the cost
business must pay  for its money and  (2) it therefore represents
a minimum rate of  return businessmen must obtain on their invest-
ments.  A business will be able to earn at least this rate of
return  on any resources available to it, which makes it the
proper  discount rate for bringing future costs to present value.

     The cost of capital is also a good measure of the opportunity
costs of investing in pollution control.  Not only are the
outlays required for such expenditures not recouped, but they
clearly generate no income above expenses.  In the meantime, the
regulatee must pay its cost of capital rate to obtain the money
needed  to pay for  the expenditures.  The civil assessment
formula discounts  future costs by the cost of capital and includes
opportunity costs by using the cost of capital as the interest
rate in the amortization formula.  The flat, monthly rate which
is thereby derived represents not only the dollar cost of control
but also an interest component which equals the minimum rate of
return  available on the investment.  The resulting civil assess-
ment thus offsets not only equipment and operating costs savings
due to  noncompliance, but also the return on capital which would
be made by investment of these savings in a profitable venture.


COMPONENTS OF THE
COST OF CAPITAL

     Since the cost of capital is the cost of raising or borrow-
ing money, it is natural that different people and businesses
have different costs of capital.

     Industry-Wise
     Costs of Capital

     Although the cost of capital is a key tool used all the time
by businessesmen and economists, it is hard to pin down exactly,
especially on a company-by-company basis, chiefly because of the
difficulty of measuring the cost of the equity component.  If
equity  is based on book value,  distortions are possible for a
variety of accounting reasons,  e.g., because assets purchased
long ago that have appreciated substantially may still be
carried at their original worth.  Using market value avoids this
difficulty;  in fact, the market adjusts equity values taking future
as well as current value into account.  However, market values
(1)  are not available for many potential regulatees, and (2) are
subject to sharp swings not entirely caused by facts relevant to
the particular case.  The cost of capital of individual companies
is an issue in litigation periodically and the result is
virtually always a drawn-out,  expensive and not clearly resolved

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                         111-31
contest.  Connecticut's CEP regulations avoid these difficulties
entirely by using industry average cost of capital figures.  This
practice has several other, equally important advantages.

     *  The Department's staff will not have to gather
        financial data about each company and go through
        a series of financial calculations (with which
        most engineers are unfamiliar).  Instead, the
        staff will only have to decide to which industry
        group the regulatee belongs and look up that
        industry's cost of capital on a one-page table
        maintained by the Department.

     *  The Department will not have to worry about
        adjusting for temporary swings in a company's
        financial condition.

Moreover, the use of industry average data seems an acceptably
accurate surrogate measure of company cost of capital rates.
The CEP calculated the cost of capital for a large number of
Connecticut companies and found relatively small deviations
from the industry average figures.  Furthermore the courts
have traditionally approved the use of industry average cost
of capital figures in the regulation of individual companies.

     The Department has now compiled a table of the industry-wide
costs of capital averages for each of the industrial groupings in
Connecticut.  These averages were derived using the weighted
cost of capital methodology outline above, using data drawn
from such readily available and reliable sources as Standard
and Poors, Financial Dynamics, the Federal Trade Commission1s
Quarterly Reports of Financial Data for Manufacturing Companies,
and the Internal Revenue Service's Corporation Income Tax Returns,
This table may be found in Section B in Chapter VII of Part V
below.

      Municipal Costs
      of Capital	

     Like businesses, municipalities have a cost of capital.
Since bond revenue is usually the only source of raising capital
for most cities, towns, and villages, the municipal cost of
capital is usually equal to the bond rate which must be paid on
newly issued municipal bonds.  (While some economists believe
that the governmental cost of capital should reflect the costs
of taking money out of the private sector, and should thus be
equal at least to the average private sector cost of debt, this
theory has not yet achieved general acceptance — at least not
in the governmental community.)  Accordingly, the municipal cost
of capital will be the most recent average municipal bond rate
in Connecticut.

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                         111-32
      Individual Costs
      of Capital	

     Individuals too have costs of capital, most frequently
the interest rate they must pay on money they borrow.
Accordingly, in those rare instances where civil assessments
are to be imposed against individuals, the individual cost of
capital will be the current average interest rate on generally
available personal loans.

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              PART IV
PROPOSED CIVIL ASSESSMENT REGULATIONS

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                              IV-2
                    STATE OF CONNECTICUT
                    RULES AND  REGULATIONS
                           OF
      THE DEPARTMENT OF ENVIRONMENTAL PROTECTION

      CONCERNING:   ASSESSMENT OF CIVIL PENALTIES  FOR ILLEGALLY
                    DISCHARGING WITHOUT A  PERMIT

Section 22a-6b-502(a).   Title.

     This section shall be known and may be cited as "Civil
     Penalty Regulations:   Discharging Without a Permit."

Section 22a-6b-502(b).   Definitions.

     (1)   "Assessment period"  means the period of time
          expressed in months  or portions thereof, during
          which a non-permitted discharge has been allowed
          or maintained by a regulatee.

     (2)   "Cost of capital" means,  as determined by the
          Commissioner, either:   (i)  the weighted average
          of the marginal  rates the Commissioner finds a
          regulatee or class of regulatees typically must
          pay per year for debt and owner's equity or  (ii)
          the annual rate  of return or of savings that the
          Commissioner finds a regulatee or class of regulatees
          could achieve with a sum of money equal to the
          cost of compliance.

     (3)   "Cost of compliance" means the net, after tax
          estimated present value of the sum of facility
          costs, operating costs and all other costs and
          savings the  non-permitted discharger will experience
          in order to  qualify  for a permit including such
          replacement  costs as will later be necessary to
          replace capital  equipment that has either worn out
          or become obsolete,  and taking into account inflation,
          depreciation  and a discount rate equal to the cost
          of capital.

     (4)   "Depreciable  life" means  the  time period of useful
          life expectancy  for  facilities  used to protect the
          waters of the state  from  pollution.  This period
          shall be defined as  15 -years  until and unless the
          Commissioner  finds otherwise  pursuant to Section
          22a-6b-502(e)  or (h),  in  which  case he may consider
          the depreciation periods  allowed for tax purposes
          by the U.S.  Internal Revenue  Service and such
          other guides  as  he determines  are similarly reliable.
          "Depreciation"  means  the  writing off,  in steps,  of
          facility  costs  over the depreciable  life of the
          "Fa^lT 1 T 4-TT
(5)

     facility.
     (6)   "Discharge" means  the  emission  of  any  water,
          substance  or material  into  the  waters  of  the  state
          whether or not  such  substance causes pollution.

     (7)   "Facility  costs" means the  capital and installation
          costs of such facilities  as are or may be required
          to protect the  waters  of  the state from pollution.

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                          IV-3
      Such  costs  shall  include,  but  not  be  limited  to,
      the cost  of equipment,  structures,  activities,  or
      other facilities  required  to protect  the waters of
      the state from pollution and,  in addition,  costs
      of necessary auxiliary  equipment,  technical and
      engineering services  and all development and
      start-up  costs including labor, materials,  and
      necessary testing,  but  shall not include operating
      costs.

 (8)   "Inflation" means the average  annual  rate of
      inflation as measured by the changes  in the Wholesale
      Price Index prepared  by the United States Department
      of Labor  or such  other  index of inflation as  the
      Commissioner may  determine is  most appropriate
      over  the  3  years  prior  to  the  year in which the
      civil penalty is  to be  assessed.

 (9)   "Municipality" means  any metropolitan district,
      town,  consolidated town and city,  consolidated
      town  and  borough,  city, borough, village, fire  and
      sewer district, sewer district and each municipal
      organization having authority  to levy and collect
      taxes or  make charges for  its  authorized function.

(10)   "Non-permitted discharge"  means any discharge to
      the waters  of the state for which  Sections  25-54c
      to 25-541 (inclusive) of the Connecticut General
      Statutes, as amended, or any Regulation promulgated
      by the Department of  Environmental Protection
      requires  possession of  a permit, made when  no such
      permit for  such discharge  is or was in effect.

(11)   "Non-permitted discharger" means any  regulatee
      that  has  initiated, created or originated or  is
      maintaining or allowing a  non-permitted discharge.

(12)   "Operating  costs"  means the non-depreciable annual
      costs for the operation and maintenance of  facilities
      and processes required  to  protect  the waters  of
      the state from pollution which will safeguard
      installed control facilities and/or ensure  continous
      protection  of the waters of the state from  pollution.

(13)   "Party" means each regulatee named or admitted  as
      a party,  or properly  seeking and entitled as  of
      right to  be admitted  as a  party to any administrative
      proceeding  involved in  the assessment of a  civil
      penalty.

(14)   "Permit"  means any license to  discharge to  the
      waters of the state issued pursuant to Section  25-
      54i of the  General Statutes as amended, and any
      order issued pursuant to Sections  25-54 g,  h, j or
      k of  the  General  Statutes  that serves as a  National
      Pollutant Discharge Elimination System permit.

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                              IV-4
    (15)   "Person" means any individual, partnership, association,
          firm, corporation, or other entity, except a
          municipality.

    (16)   "Regulatee" means any person or municipality.

Section 22a-5b-502(c).  Civil Penalties for Discharging Without
a Permit^

     Any non-permitted discharger shall be liable for a
     civil penalty pursuant to Section 22a-6b (a)(2) of the
     Connecticut General Statutes, as amended, and may be
     assessed such a penalty by the Commissioner.

Section 22a-6b-502(d).  Schedule of Maximum Assessments.

     (1)   Any non-permitted discharger may be assessed an
          amount for each month of the assessment period no
          greater than the amount listed in the following
          schedule for the combination of facility costs and
          operating costs which will be required for an
          approved system to treat the discharge so as to
          qualify for any permits required for such discharge.

     (2)   The maximum amounts set forth in this schedule
          represent the  economic advantages that a regulatee
          who maintains  a non-permitted discharge would gain
          from one month's delay in obtaining a permit for
          such discharge.  The schedule assumes economic
          conditions all tending to increase the value to
          the non-permitted discharger of such delay.  These
          maximum amounts have been calculated in three
          broad steps:  a cash flow for each set of compliance
          expenditures,  chiefly facility costs and operating
          costs, is defined; this cash flow is discounted to
          present value; and the maximum monthly civil
          penalty is calculated as that amount which would,
          if paid monthly, amortize the present value of the
          project.  A written explanation of these calculatipns
          shall be available upon request.

     (3)   The Commissioner shall impose lesser penalties
          pursuant to Section 22a-6b-502(e)(1) if he finds
          the probable economic advantages of delay are
          smaller than indicated in this schedule and he may
          further lower  these penalties pursuant to Sections
          22a-6b-502(e)(4), 22a-6b-503(g)  and/or 22a-6b-
          502(h) .

     (4)   In no case shall the assessment exceed $25,000,
          plus $1,000 for each day that the assessment
          period continued after the non-permitted discharger
          assessed the civil penalty received a civil
          penalties final order.

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                IV-5
SCHEIKLE or H/XIMUM ALLOWABLE MONTHLY CIVIL



 P£\A~T1ES  FO-< NON-PERMITTED DISCHARGERS



         him SPECIFIED COSTS
OPERATING
COSTS

50-
1000
51001-
2500
S25G1-
5000
S5.101-
7500
S75C1-
10,000
S10, 001-
15,000
515,001-
20,000
$20,001-
25, 000
525,001-
35, 000
535,001-
50,000
S^D.OOl-
75 ,OCO
S75.001-
iCC.OO
s:cc , col
2::, oo
S*Cj,000
=-c onove

$0-
2500
334
658
1199
!-<:?<<
2280
3361
4442
5523
1685
10928
16333
21738
43359*
*

S2501-
5000
451
776
1316
JS57
2307
3478
4559
5640
7802
11045
16451
21856
43477*
•
FACILITY COSTS
$5001-
10,000
686
1010
1551
2092
2632
3713
4794
5875
8037
11280
16686
22091
43712*
•
$10,001-
20,000
1156
1480
2021
2562
3102
4183
5264
6345
8507
11750
17156
22561
44182*
•
$20,001
35,000
1861
2185
2726
3267
3807
4888
5969
7050
9212
12455
17861
23266
44667+
«
$35,001
50,000
2566
2890
3431
3971
4512
5593
6674
7755
9917
13160
18566
23971
45592*
*
$50,000-
70,000
3506
3830
4371
4911
5452
6533
7614
8695
10857
14100
19506
24911
46532 +
•
570,001-
100,000
4916
5240
5781
(321
6862
7943
9024
10105
122C7
15510
2091:
26321
47942*
*
$100,001-
150,000
7266
7590
8131
8671
9212
10293
11374
12455
14617
17860
23265
28671+
50291+
•
$150,001-
200,000
9616
9940
10481
11021
11562
12643
13724
14805
16967
20210
25615
31021+
52641+
•
$200,001-
300,000
14316
14640
15181
15721
16262
17343
18424
19505
21667
24910
30315*
35720+
*
*
$300,001-
500,000
23715
24040
24580
25121
25661
26742
27823
28904*
31066*
34310*
39715*
45120*
*
•
$500,001-
1,000,000
47214*
47539*
48079*
48620*
49160*
50241^
51322*
52404*
54566*
-
•
*
*
*
$1,000,00
and above
*
•
*
*
*
*
•
*
*
*
•
*
*

* No more than 525,000 plus $1000 for each day that the unabated activity continues after the regulatee has received
a civil penalties final order.
Once the $25,000 element of the maximum is used up, the maximum monthly charge will be S1000 tunes the number iOf days
in the month.

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                              IV-6
     (5)   The Commissioner has determined that the maximum
          civil penalties provided in this schedule will insure
          immediate and continued compliance and will protect
          (i) the public health, safety, and welfare; (ii)
          the public trust in the water, land and other
          natural resources of the state; and (iii) the
          reasonable use of property.

Section 22a-6b-502(e).   Determination of Amount in Individual Cases.

     (1)   The Commissioner shall determine the amount of the
          monthly civil penalty he assesses for each individual
          case of discharging without a permit based on the
          savings that  has been or will be realized by the non-permitted
          discharger as a result of delaying payment of the
          actual or estimated cost of compliance necessary
          to obtain a permit.  Assessments in individual
          cases are calculated in four broad steps:  the
          gross cash flow of the required compliance expenditures,
          chiefly facility costs and operating costs, is
          determined or estimated; the net cash flow is
          established by taking tax and other savings into
          account;  the  net cash flow is discounted to present
          value; and the individual monthly civil penalty is
          calculated as that amount which would, if paid
          monthly,  amortize the net present value of the
          project.

     (2)   If, before the non-permitted discharger has obtained
          a  permit,  the Commissioner determines that he does
          not have enough information regarding that discharger's
          cost of compliance to determine the assessment
          amount accurately, he may base his assessment on
          an estimated  cost of compliance for a treatment
          approach that he determines will generally be
          sufficient to protect the waters of the state
          against pollution in such cases.

     (3)   The Commissioner shall make a written explanation
          of the general methodology used in determining the
          amount of  the penalty in individual cases available
          on request.

     (4)   In setting a  civil penalty in a particular case,
          the Commissioner shall consider all factors which
          he deems  relevant, including but not limited to
          those listed  in Section 22a-6b (c)  of the General
          Statutes,  as  amended, and he may, as a result of
          considering and balancing these factors,  lower the
          civil penalty calculated pursuant to Section 22a-
          6b-502(e)(1).   The Commissioner shall maintain a
          record of  each instance in which he lowers a civil
          penalty pursuant to this section.  This record
          shall include the name and address of the regulatee
          whose penalty was lowered,  the amount of the
          penalty before and after lowering and a summary of
          the grounds for lowering.

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                              IV-7
     (5)  In no case shall an individual assessment exceed
          either (i) the maximum monthly civil penalty set
          out in the schedule in Section 22a-6b-502(d) for a
          case requiring the same facility costs and operating
          costs, or (ii) for the total civil penalty due
          during the entire assessment period, $25,000 plus
          $1,000 for each day that the failure to obtain a
          permit continued after the regulatee received a
          civil penalties final order.

Section 22a-6b-502 (f).  Enforcement Proceedings.

     (1)  Warning Letter.  If the Commissioner finds that a
          regulatee is probably a non-permitted discharger,
          he shall send such regulatee a civil penalties
          warning letter by certified mail or by personal
          delivery or service.  This letter shall notify the
          regulatee that the Commissioner has reason to
          believe the regulatee is maintaining a non-permitted
          discharge and, as a result, could be assessed a
          civil penalty under Section 22a-6b-502 of the
          Civil Penalties Regulations.  For those cases to
          which Section 22a-6b-502(g)(2)(i) applies,  this
          warning letter shall also notify the regulatee
          that it may be able to avoid the imposition of
          civil penalties under Section 22a-6b-502 for up to
          one-half of the assessment period if it takes
          prompt and effective action pursuant to the terms
          of Section 22a-6b-502(g)(2)(i) and  (ii).

     (2)  General.   Enforcement proceedings under this
          section shall be conducted pursuant to the requirements
          of Section 22a-6b-101 of the Civil Penalty Regulations.
Section 22a-6b-502(g).   Mitigation.

     (1)   General.  The Commissioner may mitigate any civil
          penalty levied under this section upon such terms
          as he in his  discretion deems proper or necessary
          upon consideration of the factors set forth in
          Section 22a-6b(b)  of the General Statutes.  The
          Commissioner  shall maintain a record of each
          instance in which he mitigates a civil penalty.
          This record shall include the name and address of
          the regulatee whose penalty was mitigated, the
          amount of the penalty before and after mitigation
          and a summary of the grounds for mitigation.

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                       IV-8
(2)   Partial  Nonimposition  During  Prompt.  Compliance.

     (i)   If,  upon  receipt  of  a warning letter  defined
          in  Section  22a-6b-502(f)(1)  and continously
          thereafter  until  the end of  the assessment
          period, the non-permitted discharger  takes
          prompt and  effective action  to  protect  the
          waters of the  state  from pollution  by its
          discharge,  the Commissioner  shall not impose
          the civil penalty assessable under  Section
          22a-6b-502  for the period between receipt of
          the notice  of  violation  and  the end of  the
          assessment  period, or for any period  more
          than one  year  prior  to receipt  of the notice
          of  violation.

    (ii)   If  the warning letter requests  preparation of
          a compliance plan, the non-permitted  discharger
          shall be  deemed to have  taken prompt  and
          effective action  during  the  period  between
          receipt of  such a request and submission of
          the requested  plan if  (a)  the plan  is a"
          detailed  written  plan of action including a
          timetable which,  once implemented,  will
          qualify the discharger for a permit as  promptly
          and effectively as possible  and if  (b)  it is
          submitted within  forty days  after receipt of
          such a request or within such longer  period
          as  the request may specify.  The non-permitted
          discharger  shall  also be deemed to  have taken
          prompt and  effective action, though it  takes
          no  further  steps,  during the subsequent
          period between its submission of such a
          satisfactory plan of action  and five  days
          after it  has been notified that the Department
          has completed  its review of  the plan  and or
          has issued  an  order.  Thereafter — and, if
          the warning letter does  not  request the
          preparation of a  compliance  plan, from  the
          time the  non-permitted discharger receives
          the warning letter — the non-permitted
          discharger  must take all steps  necessary to
          qualify for a  permit as  promptly and  effectively
          as  possible if it is to  meet the standard of
          performance required in  Section 22a-6b-
          502(g)(2)(i).

   (iii)   Section 22a-6b-502(g)(2)(i)  shall not apply
          to  non-permitted  dischargers who, within the
          preceding 8 years, have  been referred to the
          Attorney  General  for discharging without a
          permit, have been issued a warning  letter
          under Section  22a-6b-502(f)(1)  of this  regulation,

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                             IV-9
               have been issued actual written notice that
               they are maintaining or have previously
               maintained a non-permitted discharge,  or have
               applied for a Connecticut permit for the
               discharge in question or any other similiar
               discharge.

Section 22a-6b-502(h).  Correction of Penalties.

     (1)   A regulatee in receipt of a notice of violation
          issued pursuant to this regulation and Section
          22a-6b-101(a) of the Civil Penalty Regulations may
          petition the Commissioner for correction of the
          civil penalty assessed against him at any time
          between the date of the notice and six months
          after the Commissioner issued the required permit
          or permits to such regulatee.  Such petition shall
          set forth in writing evidence that the cost of
          compliance or the assessment period has been or
          will be less than the Commissioner had initially
          determined in assessing the civil penalty.   Such
          petition shall be sent by certified mail or personal
          service to the Commissioner or his designees.

     (2)   The Commissioner may, in response to such a petition
          lower an assessment if he determines that the
          evidence in the petition establishes that the
          estimates of the cost of compliance on which the
          penalty amount was based and/or the assessment
          period used in assessing the penalty was excessive.
          The Commissioner shall maintain a record of each
          instance in which he corrects a civil penalty.
          This record shall include the name and address of
          the regulatee whose penalty was corrected,  the
          amount of the penalty before and after correction
          and a summary of the grounds for correction.

     (3)   If the Commissioner takes no action in response to
          such a petition or if his response is not satisfactory
          to the petitioning regulatee, such regulatee may
          obtain a hearing as of right once it has received
          the required permit or permits.  A hearing of
          right may also be obtained at any other time as
          the Department and the regulatee agree to,  if such
          agreement is incorporated into a final determination
          on the permit application of the non-permitted
          discharger or a civil penalties final order.
          Following such a hearing the Commissioner shall
          lower the civil penalty if and to the extent that
          (A) the costs of compliance actually incurred have
          been less than he had initially determined and/or
          (B) the total number of days during which the non-
          permitted discharge was maintained was less than
          the total number of days for which assessments
          have been made.

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                             IV-10
     (4)   If the  Commissioner  does  not lower  an  assessment
          in response to a petition for correction that
          includes  an estimate of  the  cost of compliance
          based on  detailed plans  and  specifications  approved
          by the  Commissioner  and  the  cost of compliance  in
          the petition is equal to  seventy-five  percent
          (75%) or  less of the cost of compliance used by
          the Commissioner in  calculating the civil assessment
          levied  against the petitioner,  the  Commissioner
          shall thenceforth and until  the petitioner  receives
          the required permit  or permits collect only that
          portion of the assessment levied that  would have
          been levied if the cost  of compliance  in the
          petition  had been used in calculating  it.  The
          Commissioner shall not be required  to  refund at
          this time any portion of  what he had collected
        i  earlier as a result  of this  adjustment.  The
          Commissioner may also collect less  than the  total assessment
          due in  response to other petitions  if  he determines
          that there is evidence that estimates  of the cost
          of compliance used in calculating the  assessment
          may have  been excessive.   Partial collection does
          not relieve the non-permitted discharger who is
          assessed  a civil penalty of its obligation to pay
          the uncollected portion  of the assessment.

     (5)  Refunds shall be made, with interest calculated
          from the  time of payment and at the cost of capital
          rate used to assess  the  civil penalty.

Section 22a-6b-502(i).  Reduction  of the Assessment Period  for
Uncontrollable Delays.

     (1)  The Commissioner shall exclude from the assessment
          period  such periods  of non-compliance as the non-
          permitted discharger that has been  assessed a civil
          penalty proves have  been caused by strikes or
          lockouts; riots, wars, or other acts of violence;
          floods, hurricanes,  or other Acts of God; or other
          equally severe, unforeseeable and uncorrectible
          accidents, where such acts or events were occasioned
          directly  upon the regulatee assessed or another
          under contract to that regulatee.  In addition,
          the Commissioner shall exclude from the assessment
          period  such periods  of non-compliance as were
          occasioned by delays attributable to the Water
          Compliance Unit of the Department in excess of
          reasonable processing times.

     (2)  Nothing in this section shall prohibit a regulatee
          from proposing, or the Department from accepting,
          a time  schedule which excludes from the assessment
          period  periods of non-compliance caused by other
          acts or events not covered by subsection (1) of
          this section such as contractor's or supplier's
          delays.

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                              IV-11
Section 22a-6b-502(j).   Limited Inclusion of Pre-Detection Period
of Discharging  Without a Permit.

     No period prior to issuance of a notice of violation
     shall be included in an assessment period under this
     section if:  (1)  it took place prior to the effective
     date of this section or (2) took place more than two
     years prior to detection.

Section 22a-6b-502(k).   Request for Information by the Commissioner,

     The Commissioner may require the regulatee assessed to
     provide such additional information, including information
     regarding costs,  as he deems necessary to effectuate
     the purposes of Section 22a-6b-502.

Section 22a-6b-502(1).   Collection.

     (1)  Payment of the civil  penalties assessed under this
          section may be required monthly, or at such time
          or time intervals, or in such amounts as the
          Commissioner  determines will most effectively
          limit the Department's administrative costs and
          further the objectives defined in Section 22a-6b-
          502(d).

     (2)  The present value of  the total civil penalty
          assessed,  calculated  at the time the notice of
          violation is  issued,  shall be held constant
          regardless of the timing of its collection.

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                            IV-12
                       STATE OF CONNECTICUT
                       RULES AND REGULATIONS
                                OF
            THE DEPARTMENT OF ENVIRONMENTAL PROTECTION

     CONCERNING:   ASSESSMENT OF CIVIL PENALTIES FOR VIOLATION
                  OF THE TERMS OF ORDERS TO ABATE POLLUTION
                  OF OR CORRECT POTENTIAL SOURCES OF POLLUTION
                  TO THE WATERS OF THE STATE

Section 22a-6b-503(a).   Title.

     This section shall be known and may be cited as "Civil
     Penalty Regulations:  Violations of the Terms of an Order to
     Abate Pollution of or to Correct Potential Sources of
     Pollution to the Waters of the State."

Section-22a-6b-503(b).   Definitions.

     (1)   "Civil penalties final order" means an order of the
          Commissioner of the Department of Environmental Pro-
          tection levying a civil penalty issued pursuant to
          Section 22a-6b-101 or Sections 22a-6b-500 through 599
          of the Civil Penalty Regulations which has become final
          by the passage of time, the consent of the regulatee to
          whom the order applies, or after hearing.

     (2)   "Cost of capital" means, as determined by the Com-
          missioner, either:   (i)  the weighted average of the
          marginal rates the Commissioner finds a regulatee or
          class of regulatees typically must pay per year for
          debt and owner's equity or   (ii)  the annual rate of
          return or of savings that the Commissioner finds a
          regulatee or class of regulatees typically could
          achieve with a sum of money equal to the cost of
          compliance.

     (3)   "Cost of compliance" means the net, after tax estimated
          present value of the sum of facility costs, operating
          costs and all other costs and savings the regulatee
          will experience in order to come into compliance
          including such replacement costs as will later be
          necessary to replace capital equipment that has either
          worn out or become obsolete, and taking into account
          inflation, depreciation and a discount rate equal to
          the cost of capital.

     (4)   "Depreciable life" means the time period of useful life
          expectancy for facilities used to abate water pollution
          or correct potential sources of water pollution.  This
          period shall be defined as 15 years until and unless
          the Commissioner finds otherwise pursuant to Section
          22a-6b-503(e) or  (h), in which case he may consider the
          depreciation periods allowed for tax purposes by the
          U.S. Internal Revenue Service and such other guides as
          he determines are similarly reliable.

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                       IV-13
 (5)  "Depreciation" means the writing off, in steps, of
     facility costs over the depreciable life of the faci-
     lity.

 (6)  "Facility costs" means the capital and installation
     costs of such facilities as are or may be required to
     abate pollution of or correct potential sources of
     pollution to the waters of the state.  Such costs shall
     include, but not be limited to, the cost of equipment,
     structures, activities, or other facilities required to
     abate pollution of or correct potential sources of
     pollution to the waters of the state, and, in  addition,
     costs of necessary auxiliary equipment, technical and
     engineering services and all development and start-up
     costs including labor, materials, and necessary testing,
     but  shall not include operating costs.

 (7)  "Final  order" means an order of the Commissioner
     issued  or in force pursuant to Sections 25-27, 25-54g,
     25-54h, 25-54j,25-54k, 25-541, or  25-54aa of  the
     General Statutes, as amended, the recipient of which
      (A)  has failed to exercise in timely fashion its right
     to a hearing before the Commissioner, under Section 25-
     54o  of  the General Statues, as amended, or  (B) has
     exercised such right to a hearing, following which the
     Commissioner has issued a final determination  pursuant
     to Section 25-54o or 25-54p of the General Statutes, as
     amended.  For the purposes of this regulation  only, a
     permit  issued by the Commissioner pursuant to  Section
     25-54i  of the General Statutes, as amended, shall be
     considered to be a final order.

 (8)  "Inflation" means the average annual rate of inflation
     as measured by the changes in the Wholesale Price Index
     prepared by the United States Department of Labor or
     such other index of inflation as the Commissioner may
     determine is most appropriate over the  3 years prior to
     the  year in which the civil penalty  is  to be assessed.

 (9)  "Municipality" means any metropolitan district, town,
     consolidated town and city, consolidated town  and
     borough, city, borough, village, fire and sewer dis-
     trict,  sewer district and each municipal organization
     having  authority to levy and collect taxes or  make
     charges for its authorized function.

(10)  "Operating costs" means the non-depreciable annual
     costs for the operation and maintenance of facilities
     and  processes required to abate pollution of or correct
     potential sources of pollution to the waters of the
     state which will protect installed control facilities
     and/or  ensure continuous compliance with the terms of
     applicable final orders.

(11)  "Order  assessment period" means the period of  time,
      measured in months or portions thereof,  (A) that a
     regulatee is late in conforming to an order's  time

-------
                              IV-14
          schedule as measured by the time that has elapsed
          between the date a step is due and the date that the
          abatement, control or compliance measures called for in
          the step are completed, or  (B) during which a regulatee
          has failed to comply with any other requirement of such
          order.

     (12)  "Party" means each person or municipality named or
          admitted as a party, or properly seeking and entitled
          as of right to be admitted as a party to any admini-
          strative proceeding involved in the assessment of a
          civil penalty.

     (13)  "Person" means any individual, partnership, associ-
          ation, firm, corporation, or other entity, except a
          municipality.

     (14)  "Regulatee" means any person or municipality that is
          under or has been issued a final order of the Com-
          missioner.

     (15)  "Step" means one or more actions that a final order
          requires a regulatee to take and includes intermediate
          steps as well as the final step required by the final
          order, but does not include monitoring requirements.

     (16)  "Time schedule" means the date or series of dates by
          which a final order requires a regulatee to take a
          specified step or specified steps (including engineering
          design and planning work) to abate pollution of or
          correct potential sources of pollution to the waters of
          the state.

Section 22a-6b-503(c).  Civil Penalties for Violating the
Terms of a Final Order.

     Any regulatee that has failed to complete a step required by
     a final order in accordance with any applicable time schedule
     or other requirements of such order shall be liable for a
     civil penalty assessed by the Commissioner pursuant to
     Section 22a-6b (a)(3)  of the General Statutes in accordance
     with the procedures prescribed in Section 22a-6b-101 of the
     Civil Penalty Regulations.   The Commissioner may levy an
     assessment against any such regulatee.

Section 22a-6b-503(d).   Schedule of Maximum Assessments.

     (1)   Any regulatee who has  not complied with a step of a
          final order in accordance with the time schedule or
          other requirements of  such order may be assessed an
          amount for each month  of delayed compliance no greater
          than the amount listed in the following schedule for
          the combination of facility costs  and operating costs
          which will be or  has been required to comply with all
          the steps  of  the  final order.

-------
                       IV-15
               SCHEDCLE OF MAXIMUM ALLOWABLE MONTHLY CIVIL

                PENALTIES FOR VIOLATORS OF ORDER TFRHS

                     «I1.1 St"-'LiFIED CObTS
)PI RATING
COSTS

s'o-
1900
S10C1-
2500
s;501-
5000
s 5 "' : 1 -
750C
S1501-
10, 000
SIC, C01-
15,000
$15,001-
20,000
520,001-
25,000
$25,001-
35,000
535, 001-
50,000
$50, oc;-
75,000
$-5,001-
100, 00
s:oc,ooi
200, 00
52CO.OOO
a"c above

SO-
2500
314
656
1199
1731
2280
3361
4442
5523
7665
10928
16333
21738
43359*
•

$2501-
5000
451
776
1316
1S57
2307
3478
4559
5640
7802
11045
16451
21856
43477*
•

$5001-
10,000
686
1010
1551
2092
2632
3713
4794
5875
8037
11280
16686
22091
43712*
"
FACILITY COSTS
$10,001
20,000
1156
1480
2021
2562
3102
4183
5264
6345
8507
11750
17156
22561
44182*
•
$20,001
35,000
1861
2185
2726
3267
3807
4868
5969
7050
9212
12455
17861
23266
44687*
•
$35,001
50,000
2566
2890
3431
3971
4512
5593
6674
7755
9917
13160
18566
23971
45592*
•
$50,000-
70,000
3506
3830
4371
4911
5452
6533
7614
8695
10857
14100
19506
24911
46532 +
-
$70,001-
100,000
4916
5240
5781
6321
6862
7943
9024
10105
12267
15510
20915
26321
47942*
•
$100,001-
150,000
7266
7590
8131
B671
9212
10293
11374
12455
14617
17860
23265
28671+
50291+
•
$150,001-
200,000
9616
9940
10481
11021
11562
12643
13724
14805
16967
20210
25615
31021+
52641+
*
$200,001-
300,000
14316
14640
15181
15721
16262
17343
18424
19505
21667
24910
3031S+
35720+
•
*
$300,001
500,000
23715
24040
24580
25121
25661
26742
27823
28904+
31066+
34310+
39715*
45120+
*
•
$500,001-
1,000,000
47214+
47539*
48079*
48620*
49160*
5024f
51322+
52404+
54566+
*
*
*
•
*
$1,000,00
and above
*
•
•
•
*
•
-
*
*
•
*
-
*

• No more than S25.00C plus S1000 for each day that the unabated activity continues after the regulatee has received
a civil penalties final order.
inCthenmonth'°CO °lelnent of the ""*""•"» « "««S "P. the maximum monthly charge will be S1000 tin.es the number of days
(2)   The  maximum amounts set forth in this schedule repre-
     sent the economic advantages that a regulatee who does
     not  comply with the terms of a final order would gain
     from one month's delay in meeting the final step of
     such order.   The schedule assumes economic conditions
     all  tending to increase the value to the regulatee of
     such delay.   These maximum amounts have been calculated
     in three broad steps:   a cash flow for each set of
     compliance expenditures, chiefly facility costs and
     operating costs, is defined; this cash flow is dis-
     counted  to present value; and the maximum monthly civil
     penalty  is calculated  as that amount which would, if
     paid monthly,  amortize the present value of the pro-
     ject.  A written explanation of these calculations
     shall be available upon request.

-------
                            IV-16


     (3)   The Commissioner shall impose lesser penalties pursuant
          to Section 22a-6b-503(e)(1)  if he finds the probable
          economic advantages  of delay are smaller than indicated
          in this schedule and he may  further lower these penalties
          pursuant to Sections 22a-6b-503(e)(4),  22a-6b-503(g)
          and/or 22a-6b-503(h).

     (4)   In no case shall the assessment exceed  $25,000, plus
          $1,000 for each day  that the order assessment period
          continues after the  regulatee assessed  the civil
          penalty has received a civil penalties  final order.

     (5)   The Commissioner has determined that the maximum civil
          penalties provided in this schedule will insure immediate
          and continued compliance and will protect (i) the
          public health, safety, and welfare; (ii) the public
          trust in the water,  land and other natural resources of
          the state; and (iii) the reasonable use of property.

Section 22a-6b-503(e).  Determination  of Amount in Individual Cases.

     (1)   The Commissioner shall determine the amount of the
          monthly civil penalty he assesses for each individual
          case of failure to comply with the terms of a
          final order based on the savings that will be
          realized by the regulatee as a result of delaying
          payment of the actual or estimated cost of com-
          pliance with all steps of such order.  Assessments
          in individual cases  are calculated in four broad
          steps:  the gross cash flow  of the required com-
          pliance expenditures, chiefly facility costs and
          operating costs, is  determined or estimated; the
          net cash flow is established by taking tax and other
          savings into account; the net cash flow is discounted
          to present value; and the individual monthly civil
          penalty is calculated as that amount which would,
          if paid monthly, amortize the net present value of
          the project.

     (2)   If, before the regulatee has come into compliance with
          the terms of his order, the  Commissioner determines
          that he does not have enough information regarding  that
          regulatee's cost of  compliance to determine the assess-
          ment amount accurately, he may base his assessment  on
          the cost of compliance for a treatment approach that he
          determines will generally be effective in ensuring  that
          applicable standards are met.

     (3)   The Commissioner shall make  a written explanation of
          the general methodology used in determining the amount
          of the penalty in individual cases available on request.

     (4)   In setting a civil penalty in a particular case, the
          Commissioner shall consider  all factors which he deems
          relevant, including  but not  limited to  those listed in

-------
                             IV-17

          Section 22a-6b (c)  of the General Statutes,  as amended,
          and he may,  as a result of considering and balancing
          these factors, lower the civil penalty calculated
          pursuant to  Section 22a-6b-503(e)(1).   The Commissioner
          shall maintain a record of each instance in which he
          lowers a civil penalty.  This record shall include the
          name and address of the regulatee whose penalty was
          lowered, the amount of the penalty before and after
          lowering and a summary of the grounds for lowering.

     (5)   In no case shall an individual assessment exceed either
          (i) the maximum monthly civil penalty set out in the
          schedule in  Section 22a-6b-503(d) for a final order
          requiring the same facility costs and operating costs,
          or (ii) for  the total civil penalty due during the
          entire order assessment period, $25,000 plus $1,000 for
          each day that the failure to comply with the time
          schedule and/or other terms of the final order con-
          tinued after the regulatee received a civil penalties
          final order.

Section 22a-6b-503(f).  Enforcement Proceedings.

     (1)   Warning Letter.  If the Commissioner finds that the
          terms of a final order have probably been violated, he
          may send the responsible regulatee a civil penalites
          warning letter by certified mail or by personal deli-
          very or service.  This letter shall notify the regu-
          latee that the Commissioner has reason to believe a
          violation has occurred and that the violation could
          result in a  civil assessment under Section 22a-6b of
          the General  Statutes, as amended, and this section of
          the Civil Penalties Regulations.

     (2)   General.  Enforcement proceedings under this section
          shall be conducted pursuant to the requirements of
          Section 22a-6b-101 of the Civil Penalty Regulations.

     (3)   Hearing

          (i)  Hearings held pursuant to Section 22a-6b-101(b)
               shall be conducted by the Commissioner, a Deputy
               Commissioner, or a duly appointed hearing officer.
               Such hearings shall be conducted pursuant to
               Sections 4-177 to 4-184, inclusive, of the General
               Statutes, as amended, and the Rules of Practice of
               the Department.

         (ii)  If the  Commissioner, Deputy Commissioner, or
               hearing officer presiding at the hearing
               determines that information important to an
               accurate determination of all or part of the
               civil penalty amount is not available at the
               time of the hearing, but will become available

-------
                             IV-18
               later,  he may defer determining the amount of
               the civil penalty due until he establishes
               that the previously missing information is
               available; at which time he shall promptly
               reconvene the hearing regarding the amount of
               the civil penalty.  The Commissioner may not
               collect any portion of the civil penalty
               until such hearing has been reconvened and
               completed and a civil penalties final order
               has been issued.

Section 22a-6b-503(g).  Mitigation.

     The Commissioner may mitigate any civil penalty upon
     such terms as he in his discretion deems proper or
     necessary upon consideration of the factors set forth
     in Section 22a-6b (b) of the General Statutes.  The
     Commissioner shall maintain a record of each instance
     in which he mitigates a civil penalty.  This record
     shall include the name and address of the regulatee
     whose penalty was mitigated, the amount of the penalty
     before and after mitigation and a summary of the
     grounds for mitigation.

Section-22a-6b-503(h) .  Correction of Penalties.

     (1)   A regulatee in receipt of a notice of violation issued
          pursuant to this section of the Civil Penalty
          Regulations may petition the Commissioner for
          correction of the civil penalty assessed against
          him at any time between the date of notice and six
          months after the Commissioner finds that the
          regulatee has come into compliance.  Such petition
          shall set forth in writing evidence that the cost
          of compliance or the order assessment period has
          been or will be less than the Commissioner had
          initially determined in assessing the civil penalty,
          and it shall be sent by certified mail or personal
          service to the Commissioner or his designee.

     (2)  The Commissioner may,  in response to such a petition
          lower an assessment if he determines that the
          evidence in the petition establishes that the
          estimates of the cost of compliance on which the
          penalty amount was based and/or the order assessment
          period used in assessing the penalty were excessive.
          The Commissioner shall maintain a record of each
          instance in which he corrects a civil penalty.
          This record shall include the name and address of
          the regulatee whose penalty was corrected, the
          amount of the penalty before and after correction
          and a summary of the grounds for correction.

-------
                             IV-19
     (3)  If the Commissioner takes no action in response to
          such a petition within 60 days of the receipt
          thereof, or if his response is not satisfactory to
          the petitioning regulatee, such regulatee may
          obtain a hearing as of right once it has come into
          compliance.  A hearing of right may also be obtained
          at any other time as the Department and the regulatee
          agree to, if such agreement is incorporated into a
          final order or a civil penalties final order.
          Following such a hearing the Commissioner shall
          lower the civil penalty if and to the extent that
          (A) the costs of compliance actually incurred have
          been less than he had initially determined and/or
          (B)  the total number of days during which the
          order terms were not complied with was less than
          the total number of days for which assessments
          have been made.  Refunds shall be made with interest
          calculated from the time of payment and at the cost
          of capital rate used to assess the civil penalty.


     (4)  If the Commissioner does not lower an assessment
          in response to a petition for correction that
          includes an estimate of the cost of compliance
          based on detailed plans and specifications approved
          by the Commissioner and the cost of compliance in
          the petition is equal to seventy-five percent
          (75%) or less of the cost of compliance used by
          the Commissioner in calculating the civil assessment
          levied against the petitioner, the Commissioner
          shall thenceforth collect only that portion of the
          assessment levied that would have been levied if
          the cost of compliance in the petition had been
          used in calculating it.  The Commissioner may also
          collect less than the total assessment due in
          response to other petitions if he determines that
          there is evidence that estimates of the cost of
          compliance used in calculating the assessment may
          have been excessive.  Partial collection does not
          relieve the regulatee assessed of its obligation
          to pay the uncollected portion of the assessment.

Section-22a-6b-503(i).  Reduction of the Order Assessment Period
for Uncontrollable Delays.

     (1)  The Commissioner shall exclude from the order assess-
          ment period such periods of non-compliance as the
          regulatee assessed proves have been caused by strikes
          or lockouts; riots, wars, or other acts of violence;
          floods, hurricanes, or other Acts of God; or other
          equally severe, unforeseeable and uncorrectible acci-
          dents, where such acts or events were occasioned
          directly upon the regulatee assessed or another under
          contract to that regulatee.  In addition, the Commissioner

-------
                             IV-20
          shall exclude from the order assessment period
          such periods of non-compliance as were occasioned
          by delays attributable to the Water Compliance
          Unit of the Department in excess of reasonable
          processing times.

      (2)  Nothing in this section shall prohibit a regulatee
          from proposing, or the Department from accepting,
          a time schedule which excludes from the order
          assessment period periods of non-compliance caused
          by other acts or events not covered by subsection
           (1) of this section  such as contractor's or supplier's
          delays.


Section-22a-6b-503(j).   Request for Information by the Commissioner.

     The Commissioner may require the regulatee assessed to
     provide such additional  information,  including information
     regarding costs,  as he deems necessary to effectuate the
     purposes of Section 22a-6b-503.


section 2^a-fab-503(k).   Collection.

     (1)  Payment of  the civil penalties assessed under this
          section may be required monthly,  or at such time or
          other time  intervals, or in such amounts as the Commissioner
          determines  will most effectively limit the Department's
          administrative costs and further the objectives as
          defined in  Section  22a-6b-503(d).

     (2)  The present value of the total civil penalty assessed,
          calculated  at  the time the notice of violation is
          issued,  shall  be held constant regardless of the timing
          of its collection.

-------
                              IV-21
                    STATE OF CONNECTICUT

                    RULES AND REGULATIONS

                            OF

          THE DEPARTMENT OF ENVIRONMENTAL PROTECTION
CONCERNING:  ASSESSMENT OF CIVIL PENALTIES FOR VIOLATION OF
             MONITORING REPORT REQUIREMENTS OF ORDERS AND
             PERMITS ISSUED BY THE COMMISSIONER
Section 22a-6b-504(a).   Title.  This section shall be known and
may be cited as "Civil Penalty Regulations:  Violation of Moni-
toring Report Requirements."


Section 22a-6b-504(b).   Definitions.  The following definitions
apply to this section:

      (1)   "Commissioner" means the Commissioner of the Depart-
           ment of Environmental Protection or his lawfully
           designated agent.

      (2)   "Composite sample" means any sample not identified
           as a grab sample and required in a permit or order
           that requires monitoring of a discharge.

      (3)   "Department" means the Department of Environmental
           Protection.

      (4)   "Grab sample" means any sample identified as a grab
           sample and required in any permit or order that re-
           quires monitoring of a discharge.

      (5)   "Monitoring report" means any report concerning dis-
           charges to the waters of the state by any person or
           municipality that a permit or order requires the
           person or municipality to file with the Department.

      (6)   "Municipality" means any metropolitan district, town,
           consolidated town and city, consolidated town and
           borough,  city, borough, village, fire and sewer
           district, sewer district and each municipal organ-
           ization having authority to levy and collect taxes
           or make charges for its authorized function.

      (7)   "Person"  means any individual, partnership, associa-
           tion, firm,  corporation or other entity, except a
           municipality.
      (8)   "State-approved,  fee-basis wastewater laboratory"
           means any laboratory licensed or approved for the
           analysis of wastewaters on a fee basis by the Conn-
           ecticut state agency charged with the responsibility
           of licensing or approving such laboratories.

-------
                             IV-22
Section 22a-6b-504(c).   Imposition of Civil Penalties.

      (1)   When the Commissioner determines that a person or
           municipality has failed to submit a monitoring re-
           port required by a permit or order issued pursuant
           to §§ 25-27, 25-54g,  25-54h, 25-54i, 25-54J, 25-54k,
           25-541, or 25-54aa of the General Statutes,  as
           amended, on or before the due date or the end of
           the reporting interval specified in the permit or
           order or has submitted a monitoring report that
           does not include information required by such permit
           or order, the Commissioner may assess a civil pen-
           alty against such person or municipality pursuant
           to §22a-6b(a)(1) and (b) through (i), inclusive, of
           the General Statutes, as amended, and §22a-6b-101
           of the Civil Penalty Regulations.  If the permit
           or order calls for the inclusion of flow data in a
           monitoring report and the report is submitted with-
           out the required flow data, the Commissioner may
           treat the case as one in which no report has been
           submitted.

      (2)   Any person or municipality required by such permit
           or order to submit monitoring reports shall be liable
           for failure to meet any of the monitoring report re-
           quirements of such permit or order, notwithstanding
           any delegation of responsibility to another person
           to monitor or to complete and submit monitoring
           reports.

      (3)   (i)  When the Commissioner determines that a
                person or municipality is liable for the
                imposition of a civil assessment under
                §22a-6b-504(c)(1), he shall cause to be
                delivered to the person or municipality
                by certified mail or personal service a
                letter stating that the person or munic-
                ipality failed to satisfy the requirement
                for the monitoring report due on a spec-
                ified date and indicating the nature of
                the failure.

           (ii)  Such a letter shall be sent no later than
                90 days after the due date of the report
                in question.

          (iii)  The Commissioner may not impose a civil
                assessment under this  section  on any
                person  or municipality in regard to any
                monitoring report  unless  (A) the require-
                ments of §22a-6b-504(c)(3)(i)  have been
                fulfilled, or  (B)  the  90 day period dis-
                cussed  in  §22a-6b-504(c)(3)(ii) has not

-------
                             IV-2 3
               elapsed, or  (C) the Commissioner had sent
               the  regulatee a §22a-6b-504(c)(3)(i)
               warning  letter concerning an earlier re-
               port with closely  similar inadequacies
               to those that give rise to the current
               liability.   For the purpose of this sub-
               section, two reports  shall involve
               "closely similar inadequacies" if neither
               is submitted at all or if both fail to
               include  required data on flow or if both
               fail to  include required data on one or
               more required analyses even if the anal-
               yses are different.
      (4)  The Commissioner may not impose a civil assessment
           under this section in regard to any monitoring re-
           port if one year or more has elapsed since the due
           date of that report.
                                 •

Section 22a-6b-504(d).  Assessment List.

      (1)  The Commissioner shall prepare a list of civil assess-
           ment amounts to be known as the Monitoring Report
           Assessment List.  This list shall include assessment
           amounts based on the costs to persons and/or municipal-
           ities required to submit monitoring reports of grab
           and composite sampling,  delivery for analysis, re-
           porting,  and analysis for each discharge character-
           istic covered by monitoring programs administered
           by the Commissioner.  The amounts in the Monitoring
           Report Assessment List shall (A) for composite and
           grab sampling, delivery for analysis, and reporting,
           be based on representative costs to a sample of
           persons and/or municipalities required  to  submit monit-
           oring reports, and  (B) for each ot the listed anal-
           yses, be equal to the typical charge of state-approved
           fee-basis water laboratories.  The Commissioner shall
           revise the relevant parts of the List if he deter-
           mines that any or all of the representative costs
           or charges on which it is based have changed so much
           that such changes cause the amounts in the Monitoring
           Report Assessment List to be too low to counter-
           balance the economic benefits of non-compliance or
           so high in relation to those benefits as to be un-
           reasonable.

      (2)  No item in the Monitoring Report Assessment List may
           be included in a civil assessment calculation unless
           the list containing the amount has been previously
           published in the Connecticut Law Journal.


Section 22a-6b-504(e).  Calculation of Assessments.  Any civil
assessment levied under this section shall be equal to the sum
of the amounts from the Monitoring Report Assessment List (A) for

-------
                                      IV-24
    composite sampling  for each required  composite sample for which
    no analysis  is reported and for  grab  sampling for  each  required
    grab  sample  for which no  analysis is  reported, (B)  for  delivery
    for each report not submitted,  (C) for analysis for each re-
    quired  analysis for which no results  are reported,  and  (D) for
    reporting for each  report not  submitted.  The Commissioner shall
    also  consider the factors listed in §22a-6b(c) of  the General
    Statutes, as amended, and he may, based on  this consideration,
    lower the assessment to be levied.
    Section 22a-6b-504(f).   Schedule of Maximum Assessment  Amounts.

          (1)   No  amount in a Monitoring Report  Assessment List
                 shall exceed  the amount in the corresponding part
                 of the  following schedule  of maximum amounts.
                     MAXIMUM AHOUVT (in dollars)
                                                                MAXIMUM mourn (in dollars)

(A) Sampling
1. grab MB?!*'
2. conpoiita aa«if>la**
(1) IteUwry"*
(CJ teportln«*4*«


2. Biological oxy9«n damand
4. TOtal aolida
5. Total diaaolvad aolid,,
«. Total •u»p«nd*d solid*
7 . Total volatila aollda
9. Xjaldahl nitrotjtn (*• M)
10. Mittata (aa H)
11 • TuLai phosphorus (a* F)
12. Acidity
14. Baroness
15. nitrite (as N)
16. ft
Tracs Metals
"• Pff*^
19. Arconic
21. Btwryllluet
i i . »oron
23. Cadniw
24 . Calcivai
35. Chroelue VI
26, Chroa\luB total
27. Cobalt
29. Copper
29. Cold
30. Iron
31. Lead

10





I




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33. Manganese
34. Mercury
H. Molvbdraiai
! Nickil
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' 31. S«l«niu»
39. Sllv«t
40. SodttiB
41. Thalliwi
42. Tin
43. Tit«niu»
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^ , 4S. line
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. Ortho-phoiob.?; (a. t\
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• . 41. fulfill iai II1
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. Cyanid*
54. Fluoride
55. Chlorine-total residual
5C. Oil and greaae
57. Pnenola
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. xl«lcldea
60. Beniidine
41. Chlorinated organic coef>oua4a
[exceDt Deaticideal
42. reaticidel
rhyiical and Biological Paraeetera
61. Color
H. Specific conductance
. Turbidity
66. Fecal Streptococci bacteria
67. Collfor» bacteria (fecal)
Sn Conform bacteria
. Other analyaee
10



















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•For every grab temple required by the pemit or order for Milch no enalyeei are tenmtal on or before the due date or the end of the rrrirlm Interval
 epecillad in the pemlt or order.
> for every ooapoelte eemple reajilnd by th« permit or order for «hUti no enelyeee en rejected on or before tna due data or the end of the reporting
 interval epaclilad in the pemit or order.
1 For every report not eubeitted on or before the due date or the and of the reporting interval specified in the pemit or order.
• For every report not eubmztted on or before the due data or the end of the reporting interval efar-l/lart in the pendt or order.
> For every analyeie required by the parelt or order for t4uofa DD reeulte ere reported.
           (2)   The Commissioner has determined that  the maximum
                 civil  penalties provided  in this schedule  will  in-
                 sure immediate and  continued compliance and will

-------
                              IV-25
          protect  (i) the public health, safety, and
          welfare;  (ii) the public trust in the water,
          land and other natural resources of the state;
          and  (iii) the reasonable use of property.
          These maximum amounts are just large enough
          to ensure that the economic incentive for non-
          compliance with monitoring report requirements
          will be eliminated in every case, thereby
          ensuring immediate and continued compliance
          and as much protection of the three other
          listed factors as would higher assessments.
          Because the schedule sets maximum amounts,
          it allows these three factors to be considered
          in setting lower assessments.
Section 22a-6b-504(g).   Maximum Assessment.  No assessment shall
exceed $1000 per monitoring report not submitted in completed
form on or before the due date or the end of the reporting inter-
val specified in the permit or order.


Section 22a-6b-504(h).   Limited Grounds for Non-Imposition  of
Assessments.

       (1)  The Commissioner shall not levy an assessment
           under §22a-6b-504 if the person or municipality
           assessed proves that the violation of monitoring
           report requirements was caused by strikes or
           lockouts; riots, wars, or other acts of viol-
           ence; floods, hurricanes, or other Acts of God;
           or other equally severe, unforeseeable and un-
           correctable accidents; where such acts or events
           were occasioned directly upon the person or
           municipality assessed or another under contract
           to that person or municipality.

       (2)  Nothing in this section shall prohibit a person
           or municipality from proposing, or the Department
           from accepting, an agreement which protects from
           civil assessment liability monitoring report re-
           quirement violations caused by other acts or
           events not covered by subsection  (1) of this
           Section such as contractors' or suppliers' delays.

-------
                PART V


           OPERATING MANUAL

         FOR THE APPLICATION

         OF CIVIL ASSESSMENTS




     Covering the following sections

        of the Regulations of the

Department of Environmental Protection:
    22a-6b-502 - Discharging Without a
                 Permit

    22a-6b-503 - Violating the Terms of
                 An Order

    22a-6b-504 - Violating the Monitoring
                 Report Requirements of An
                 Order or a Permit

-------
                              V-2
                          ABSTRACT
This manual contains:

     *  A brief description of the Connecticut Enforcement
        Program
     *
        A step-by-step guide to the application  of the
        Water Compliance Unit's economic civil assessment
        regulations

     *  A guide for civil assessment hearing officers

     *  An explanation of how to use and update tools
        employed in levying civil assessments
                       IMPORTANT NOTE
          THIS INSTRUCTION MANUAL IS AN INTERNAL DOCUMENT
          OF THE DEPARTMENT OF ENVIRONMENTAL PROTECTION.
          IT IS INTENDED TO HELP DEP STAFF IMPLEMENT AND
          OPERATE THE DEPARTMENT'S CIVIL ASSESSMENT REGU-
          LATIONS .

          NOTHING CONTAINED HEREIN, IN WHOLE OR IN PART,
          HAS THE FORCE OF LAW.  THE APPLICABLE LAW GOVERN-
          ING THE ASSESSMENT OF CIVIL PENALTIES IS TO BE
          FOUND IN §§22a-6b-100 et. seq. OF THE DEPART-
          MENT'S REGULATIONS.

-------
                              V-3
                     TABLE OF CONTENTS






  I.   The Connecticut Enforcement Program                        V-5



 II.   How to Apply Section 502 Assessments                        V-7



      A.   Understanding The Scope Of The Regulation              V-7



      B.   Determining A Violation                                V-8



      C.   Sending Warning Letters                                V-8



      D.   Applying The Waiver Provision Of  §502(g)(2)             V-8



      E.   Calculating An Assessment                              V-10



      F.   Possible Reduction Of The Assessment                   V-ll



      G.   Imposing An Assessment                                 V-12



      H.   Managing A Hearing                                     V-12



      I.   Mitigating An Assessment                               V-13



      J.   Correcting An Assessment                               V--13




      K.   Collecting An Assessment                               V-15



      L.   Forms And Letters                                      V-16



III.   How To Apply Section 503 Assessments                        V-30



      A.   Understanding The Scope Of The Regulation              V-30



      B.   Determining A Violation                                V-30



      C.   Sending Warning Letters                                V-31



      D.   Measuring The Period Of Delay For Orders               V-32



      E.   Measuring The Period Of Delay For Permits              V-35



      F.   Levying, Revising And Collecting  An Assessment         V-35



      G.   Forms And Letters                                      V-37



 IV.   How To Apply Section 504 Assessments                        V-44



      A.   Understanding The Scope Of The Regulation              V-44



      B.   Identifying Cases To Which Assessments Are Applicable  V-44



      C.   Sending A Warning  Letter                              V-45

-------
                              V-4
      D.   Calculating  An  Assessment

      E.   Imposing  An  Assessment

      F.   Managing  A Hearing

      G-   Collecting An Assessment

      H.   Updating  The Assessment List

      I.   Mitigating An Assessment

      J.   Monitoring Report Assessment List

      K.   Forms And Letters

  V.   How To Conduct Hearings  In  Civil Assessment Cases

 VI.   How To Use And Update Tools Employed In Levying Civil
      Assessments

      A.   Determining  The Cost Of Compliance

      B.   Determining  The Applicable Cost Of Capital

      C.   Using Inflation Indexes

      D.   Estimating The Source * s Income Tax Rate

      E.   Operating The Wang Calculator

VII.  Appendices

      A.   Developing Cost Curves To Help Calculate
          The Cost of Compliance

      B.   The Cost Curve Treatment Approach
V-45

V-4 8

V-4 9

V-50

V-50

V-51

V-51

V-54

V-61


V-71

V-72

V-87

V-108

Vr-IIQ

V-112

V-139


V-139

V-153

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                               V-5
                         CHAPTER I
            THE CONNECTICUT ENFORCEMENT PROGRAM
     Over the last decade environmental law and regulation have
expanded dramatically.  The effectiveness of environmental law
enforcement has not kept pace.

     Connecticut has responded to this need with the Enforcement
Act of 1973, P.A. 73-665, which provides the Department of Environ-
mental Protection a wide range of new enforcement powers.  Most
notably, the law authorizes the Commissioner to impose civil assess-
ments in such amounts as will ensure immediate, continued com-
pliance with applicable laws, regulations, orders and permits.

     The Department may impose these assessments directly, without
first going through the courts.  (Everything the Department does
under this authority is, however, subject to subsequent court re-
view.)  This fact makes the tool practical, and credible.

     To achieve these ends, the Enforcement Act has entrusted the
Department with exceptional power.   The Department is charged with
deciding both to bring a case and with determining what to do with
it.  It must exercise this power with great care:  it is not a
judge and does not have judicial discretion.   It must adhere care-
fully, closely, and in every case both to the specific limitations
defined by the Legislature, and to its clear intent  to limit the
Department's discretion as much as possible consistent with achiev-
ing its primary enforcement objective.

     The most important of these limitations is the use of economic
standards to determine the amount of the assessment in every case.
These standards ensure that no person can be charged more than that
person has saved from noncompliance.  This standard also ensures
that the assessment's incentive will be large enough to make com-
pliance pay (and to protect companies that have complied from un-
fair competition from those that have not.)

     The Department's civil assessment regulations provide for
assessments equal to the economic benefit a source realizes during
each incremental period that it delays or avoids coming into com-
pliance.  In effect, they tax away the financial advantages of
noncompliance.   This benefit includes the profit the regulatee can
make on the use of the money it has not invested in pollution con-
trol as long as it delays.  Part III of this Volume explains these
economics in detail.

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                               V-6
     The Water Compliance Unit of the Department has promulgated
or proposed regulations that apply to discharging without a per-
mit (Section 502), violating the terms of an order or permit
(Section 503) — which ensure  that compliance  "pays."  (it
pays because it saves the regulatee charges larger than the cash
outlays required for compliance by an amount equal to the rate of
return the source could typically earn on commercially attractive
investments), and violating monitoring report requirements of
orders or permits (Section 504).

     This Operating Manual is designed to help Department
personnel use these tools.  Chapters II to IV explain how various
operating issues, from warning those who may be liable,to col-
lecting assessments from recalcitrants who seek to delay paying
assessments;  'should be handled for each of the Section 502-504
Regulations . They also provide a series of forms and letters
for use in administering each regulation.  Later Chapters cover
how to use and update the tools needed for setting accurate economic
assessments  easily.

     Volume  T of the Enforcement Project's Final Report provides
a brief overview of the Department's new economic enforcement
approach  (a)  in theory and  (b) as it is applied in all the Depart-
ment's program areas.  Part I of rhis Volume  (Volume III) provides
a fuller description of its application in the Water Compliance
program.

     A copy,  of the Enforcement Act can be found in Volume I, and
copies of the Water Compliance civil assessment regulations cov-
ered by this Manual are reproduced in Part IV of this Volume.

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                              V-7
                         CHAPTER II
            HOW TO APPLY SECTION 502 ASSESSMENTS
     Section 502 authorizes the Department to impose economic
civil assessments on those who are required by §25-54i (or other
sections)  of the General Statutes or by any DEP regulation to
obtain a permit before discharging into the waters of the state,
and who start or continue a discharge without such a permit.
This chapter explains how to implement §502.


A.  UNDERSTANDING THE
SCOPE OF THE REGULATION

     Basically, §502 is designed to enforce the provisions  of
the Clean Water Act and Department Regulations that require certain
discharges to be permitted.  As of August,  1975, only §25-54i of
the Act clearly establishes such a requirement.  It forbids a per-
son to start a discharge after May 1, 1967  or for a municipality
to start one after April 10, 1973 without first obtaining a
permit from the Department.  "Persons" and  municipalities that
started their discharges before these respective dates can be
issued permits under §25-54i(e); however, permits for these
earlier dischargers are not mandatory and may not have to be
renewed if they are revoked or expire.  There are no regulations
dealing with this subject.  The coverage of the permit could be
changed by regulation or statute, but at present §502 COVERS
ONLY POST-1967  (or 1973) DISCHARGERS.

     A violation for §502 purposes is the unpermitted discharge,
not the failure to apply for a permit.  Thus, a company with
several unpermitted separate discharges would have several  §502
violations.  This would be true even though all the discharges
were covered in a single permit.

     Section 502 liability applies to the entire time a non-
permitted discharge is maintained except for:

     *  The time that a person is under a final order
        of the Commissioner (other than a civil assess-
        ment final order).

     *  The time before the effective date  of §502.


     *  Any time more than two years before a violation
        is detected.

-------
                               V-8
     The basis of a §502 assessment is the cost a discharger
must incur to meet the waste treatment requirements for a permit.
The actual assessment in each case is the economic benefit, in-
cluding profit that could be earned in alternative investments,
of not making the expenditure necessary to treat the discharge
adequately.


B.  DETERMINING
A VIOLATION

     The process of detecting and proving §502 violations will
be the same as current practices for detecting §25-54i(a) viola-
tions.  Any discharge that violates §25-54i(a) is a candidate for
a §502 assessment.
C.  SENDING
WARNING LETTERS

     Section 502(f)(1) directs the Commissioner to send a warning
letter  (CA-502-w) to any regulatee that he determines is probably
a non-permitted discharger.   Such letters must be sent certified
mail, return receipt requested.


D.  APPLYING THE WAIVER
PROVISION OF §502(g)(2).

     Section 502(g)(2) provides a means by which a non-permitted
discharger can escape part of its §502 assessment liability  if:

     *  it moves  "promptly and effectively"  to qualify
        for a permit after detection, AND

     *  the Department cannot prove  that it  had notice
        of the permit requirement of §25-54i(a) of the
        General  Statutes.

     The  "prompt  and effective" action  standard is a  flexible
one and gives the  Department substantial discretion,  with one
exception.  If the  Department issues a  first warning  letter which
requests  preparation of  a compliance plan, the discharger meets
the "prompt and  effective" standard  if  it  submits a plan within
40 days that contains a  compliance timetable that will  allow
permit  issuance  as  soon  as possible.  (This  protection  continues
until  just after the Department approves the plan, whereupon
the discharger is  obligated thereafter  to  meet the deadlines
in the  plan.)  If  it  fails to do so, the Department can levy
an assessment for the entire period  of  the illegal discharge.
 (It can also accept a new  schedule if it believes that  there
was a  legitimate excuse  for the overrun.)   If no compliance plan
is requested in  the warning letter,  the discharger must move as
quickly as possible to qualify  for a permit  or the  full assess-
ment can  also be levied.

-------
                               V-9
     If a discharger has had notice of the permit requirement
and continues to discharge illegally, the waiver provision does
not apply.  The types of notice are:

     *  a previous §502 warning letter

     *  other actual written notice of the permit require-
        ment  (e.g. a certified letter mentioning the re-
        quirement)

     *  an application in the past for a  permit for the same
        discharge  or one  similar  to the  discharge  in  question

     *  prior  referral  to  the  AG  for discharging without
        a permit involving the same or a similar discharge.

     If a discharger qualifies for the waiver provision, it will
not have to pay all of the assessment based on pre-warning dis-
charging or any of the assessment based on post-warning discharg-
ing.  The Regulation ordinarily allows the Department to include
up to two years of pre-warning letter discharging in the §502
assessment period.  If the waiver period applies,  the maximum
pre-warning assessment period is one year.  In addition, there
will be no assessment for the period between warning and issuance
of a permit if the discharger satisfies the two waiver require-
ments .

     Upon detecting a non-permitted discharge, the first thing
the Department should do is to check the file and determine
whether any of the above notice steps have been taken.  If they
have not, the Department should send the regulatee a warning
letter indicating that its liability may be waived if it acts
promptly and effectively to comply and specifying whether or not
the Department will require it to submit a compliance plan.

     Finally, a decision must be made on whether to send a Notice
of Violation at this stage.  Even if the waiver provision applies,
the Department can still assess for up to one year of past delay.
IF A NOTICE OF VIOLATION IS SENT IT MUST STATE THE ASSESSMENT
AMOUNT FOR THE FULL ASSESSMENT PERIOD AND THE MONTHLY ASSESSMENT
FOR CONTINUING VIOLATION, EVEN THOUGH PART OF THE FORMER AND ALL
OF THE LATTER MAY BE WAIVED.  The assessment amount in the Notice
is the maximum that can be levied in the case.   Since the waiver
is contingent on future "prompt and effective" action, it should
not be taken into account in calculating the initial assessment
amount.  The assessment amount stated in the Waiver Attachment
(CA-502-WA)  is calculated by multiplying the monthly assessment
times the number of months of pre-warning discharge up to 12
months.  The waiver attachment should be sent with the Notice of
Violation.   It explains the waiver provision and states that only
the limited assessment amount will be collected as long as the
discharger continues to qualify for the waiver.

-------
                               V-10
 E.   CALCULATING
 AN  ASSESSMENT

      Civil  assessments  are  calculated  using  a common  business-
 man's capital  budgeting process.   They are just  large enough to
 make compliance attractive.   Specifically, the civil  assessment
 is  calculated  to be  that payment  which,  if made  at  the end of
 each month  throughout a specified period, would  have  the same
 net economic impact  on  a company  as  the expenditures  necessary
 to  qualify  for a permit.  While the  formula  for  this  calculation
 may appear  complex  (See "Part III -  Economics" above  for an
 explanation),  it is  easy to use.   It has been programmed on a
 Wang Calculator and  quickly can be made to produce  assessments
 easily.   All the Department staff need do is type in  several key
 bits of  data and push the calculator's "Go"  button.

      For most  assessments,  only four variables must be determined
 in  order to calculate the amount  due.   These are:

      (1)  Facility costs — a broad  category of  deprec-
          iable expenses that includes equipment,
          buildings,  construction projects like  lagoons,
          etc. ;

      (2)  Operating  and Maintenance  Costs — non-depreciable
          periodic costs.

      (3)  The  typical cost  of capital  for the source's
           industry  — a rate of return just  high enough
          to persuade a company to invest in a project;

      (4)  The  discharger's  federal income tax rate.

      The precise components of these variables are  spelled out
 in  greater  detail in the "Definitions" section of the Regula-
 tions (see  §22a-6b-502(b)).  To determine values for  these
 variables for  assessment purposes:

      (1)  Obtain the facility and operating  costs usina
          Section VI (A)  of this  manual, "Calculating
          the  Cost of Compliance."

      (2)  Obtain the cost of capital for the appropriate
          industry using Section  VI  (B)  of this  manual,
          "Determining  The  Applicable  Cost of Capital."

      (3)  Obtain the tax rate using  Section  VI (D)  of
          this manual,  "Tax Adjustments."

      To  calculate an assessment,  write these variables onto a
calculation worksheet and calculate the assessment by  using
these variables in the Wang Calculator  (See  Section VI  (D) of
this manual, "Operating  the Wang Calculator.")

-------
                               V-ll
THE MONTHLY ASSESSMENT CALCULATED ON THE WANG SHOULD BE MULTIPLIED
BY THE PERIOD OF DELAY IN THE ASSESSMENT PERIOD TO ASCERTAIN THE
TOTAL AMOUNT OF THE ASSESSMENT TOR ACCRUED DELAY THAT WILL BE IM-
POSED.  THE VIOLATOR IS ALSO OBLIGATED TO PAY THE MONTHLY ASSESS-
MENT AMOUNT FOR EACH ADDITIONAL MONTH IT CONTINUES DISCHARGING
WITHOUT A PERMIT.

     The assessment period for Section 502 cases is the period
of time from the start of the discharge until a permit is issued
or the illegal discharge is stopped, even though some expenditures
necessary to qualify for a permit may be made during that period.
Such expenditures should have preceeded the start of the discharge
by about as much time as they preceeded the issuance of the permit,
Thus the expenditure of money prior to issuance of the permit
does not result in a reduction of the assessment period in a
correction of the assessment amount.
F.  POSSIBLE REDUCTION
OF THE ASSESSMENT	

     After the assessment amount has been calculated with the
formula and before you send out a Notice of Violation YOU MUST
DECIDE WHETHER IT SHOULD BE LOWERED AFTER CONSIDERING SEVEN
FACTORS SET OUT IN §22a-6b(c) of the General Statutes.

     These factors include:

      (i)  The amount of the assessment necessary to
          insure immediate and continued compliance;

    (ii)  The character and degree of impact the
          permit requirement violation has on the
          public trust in the air, water, and land
          and on the natural resources of the state,
          especially any rare or unique natural
          phenomena;

   (iii)  The character and degree of injury to, or
          interference with, public health, safety or
          welfare which is caused or threatened to be
          caused by the violation;

    (iv)  The conduct of the person incurring the civil
          penalty in taking all feasible steps or pro-
          cedures necessary or appropriate to comply or
          tc correct the violation;

      (v)  Any prior violations by such person of statutes,
          regulations, orders or permits administered,
          adopted or issued by the Commissioner;

    (vi)  The economic and financial conditions of such
          person;

-------
                               V-12
   (vii)  The character and degree of injury to, inter-
          ference with reasonable use of property which
          is caused or threatened to be caused by such
          violation.

     You should place a memo in the file stating that you con-
sidered these factors in each case, whether or not you decide to
lower the assessment.  The Enforcement Act requires you to take
the factors into account and you may be challenged in a hearing
or in court if you fail to do so.

     If you find reasons for lowering the assessment, you should
notify the Director or other designated decision-maker.
G.  IMPOSING
AN ASSESSMENT

     The decision of whether or not to impose an assessment in
an individual case is made at the discretion of the Commissioner,
although be may delegate this authority.  Once this decision has
been made, the procedure for imposition is a simple one.

     Once the Department decides to proceed with an assessment,
Civil Assessment Notice of Violation CA-502-NV should bo sent to
the violator, CERTIFIED MAIL, RETURN RECEIPT REQUESTED.  The date
the letter is sent out should be logged on the Civil Assessment
Checklist.

     As these Notices indicate, once the violator receives the
Notice, it has twenty days in which to deliver a written request
for a hearing to the Department.  If the violator does not re-
quest a hearing within this period, the Notics of Violation
automatically becomes a final order of the Commissioner.  The
assessment is then payable on the date specified in the Notice.

     It is important that the twenty-day period after a Notice
of Violation has been received be carefully monitored.  If a
proper request for hearing is received during this period, the
procedures of the following section should be followed.  If an
inadequate request is received before the end of the 20-day
period, the violator should be notified of the problem as quickly
as possible.  If no request for hearing is received, collection
procedures pursuant to Section K of this manual should be followed,
H.   MANAGING
A HEARING

     Civil Assessment Regulations §22a-6b-101(b) provide that
any person receiving a Notice of Violation imposing a civil

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                              V-13
assessment may, within twenty days after receipt of the notice,
request a hearing.  If a source does request a hearing on a
§502 assessment, follow the special procedures for the hearing
which are set forth in Section V of this operating manual.
I. MITIGATING
AS ASSESSMENT

       Section 502 (g) recites the Commissioner's authority under
§22-6b(e) of the General Statutes to mitigate an assessment on
the basis of factors he deems relevant, including the following:

       (1)  the necessity of ensuring immediate and con-
            tinued compliance with the permit requirement;

       (2)  the impact of the non-permitted discharge on
            the public health, safety and welfare;

       (3)  the impact of the non-permitted discharge on
            the public trust in the air, water, land, and
            other natural resources of the state;

       (4)  the impact of the non-permitted discharge on
            the reasonable use of property.


       YOU SHOULD INCLUDE ANY INFORMATION YOU RECEIVE THAT IS
RELEVANT TO THESE ISSUES IN A SPECIAL PLACE IN THE DISCHARGER'S
FILE.  This is important because §502 (g) also requires the
Commissioner to keep a record of each case in which he mitigates
a civil assessment.  This record has to include, among other
things, a summary of the grounds for mitigation.  Public interest
groups or others may challenge specific mitigations and this
information will be important.


J.  CORRECTING
AN ASSESSMENT

      One of the safeguards that was built into the regulation
provides that a discharger may ask that his assessment be cor-
rected to reflect the actual costs of compliance which he in-
curred in qualifying for a permit.  This provision allows a
discharger, after an asessment has been made, to come forward
with hard evidence on the actual cost of compliance and to re-
quest a correction of his assessment.  This must be done in a
written petition.  If the petition is received before the per-
mit is issued, the Department can lower the assessment or lower
the amount collected pending the availability of final cost data.
If the petitioner is dissatisfied with the action taken, it is
guaranteed a hearing after it has received its permit and can
prove its actual costs.

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                               V-14
      It is important to understand that the scope of this
correction procedure is fair but narrow:

      (1)   The only elements of the civil assessment calculus
           subject to correction are the figures for;

           (a)  equipment cost

           (b)  operating and maintenance cost

           (c)  the assessment period (e.g., if the period
                of delay turns out to be shorter than that
                for which an assessment was made)

           (d)  depreciable life of the equipment (if a
                figure other than the 15-year figure
                authorized in the Regulation is used).

           (e)  federal income tax rate.
      (2)  Only "hard evidence" will be accepted to substantiate
           claims for correction.  This means that in most cases
           cost estimates based on approved engineering reports or
           plans and specifications or actual purchase vouchers or
           similar invoices will be required as evidence that
           actual compliance costs are less than those estimated
           by the Department for the purpose of making an assess-
           ment.  Since purchasers can easily obtain proof
           of purchase, such evidence should be required for all
           elements of cost.  The reviewing engineer should care-
           fully scrutinize correction applications which purport
           to substitute completely new cost of compliance figures
           to make sure that they include all elements of cost
           Lhat were considered in making the initial assessment.
           (See Section VI  (A)  of this manual.)

      The  correction  procedure  can  and  should be used  as  an  at-
  tractive  alternative to  the hearing  process at the Notice of
  Violation stage.   If a source  questions  the accuracy  of  a civil
  assessment  calculation,  the Department  should make clear that
  there  is  a  correction-as-of-right  procedure which can be fol-
  lowed  instead  of  the hearing  process.   It may further discourage
  threatened  .appeals  by collecting at a lower rate than the  assess-
  ment allows until  the post-compliance  correction  hearing.   (If
  collections then  prove to have been  too  low, the  Department can
  collect the amount not previously  collected plus  interest.)
 Availability of Deferral
 and Variable Collection

       The Department may defer a hearing on the accuracy of  the
 amount of a civil assessment if it finds that information re-
 garding costs that is necessary to a careful determination of
 the dispute is missing but will become available later.   (See

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                               V-16
L.  FORMS AND LETTERS:
SECTION 502 ASSESSMENTS

     The following forms and letters should be used in applying
civil assessments in Section 502 cases:

     *  Section 502 Assessment Checklist

     *  General Notice of Civil Assessment Letter
        (CA-502/503/504 - GN)

     *  Assessment Warning Letter  (CA-502-W)

     *  Civil Assessment Notice of Violation
        (CA-502-NV)

     *  Civil Assessment Final Order  (CA-502-FO)

     *  Waiver Attachment

     *  Collection Letter  (CA-502-C)

     *  Letter Explaining Factors Used in Calculating the
        Assessment  (CA-502/503-FAC)

     *  Correction Letter  (CA -502/503-COR)

     *  Transfer Letter  (CA-502/503-T)

     *  Refund/Denial Letter  (CA-502/503-R)

     Copies of these  forms and letters follow.

-------
                                        V-17
                     CIVIL ASSESSMENT CHECKLIST: SECTION 502
              Discharger:
         (Name, Address, Town)

              No.
Instruction
Manual
Reference

II  A,B

II  A,B
   Date illegal discharge discovered

   Date discharge believed to have
   been commenced

   Proof of this date:
                                                  Initials
Date
II  A,B

II  D

II  A,B



II  C
   Date §502 became effective

   Warning letter CA-502-W sent on:

   Number of months between date
   warning letter sent and start of
   discharge:
   Discharger

   /"/had

   /~7did not have

   Notice under §502(g)(2).

   Notice was

 /"/Previous §502 warning letter. Date

 /"/Other actual notice           Date

    Type:	

/T Application for permit
    for similar discharge.        Date

/~7 Referral to AG for similar
    discharge                     Date

-------
                                        V-18
Instruction
Manual
Reference

II  E
                                               Initials
Date
II
II  E

II  E

II  E
II  F



II  F

II  F

II  F
Reduction In Assessment Period for
Delay Beyond Regulatee's Control
                                     No
/~7 Yes

Amount of reduction

Assessment variables

Equipment Cost:

Annual Operating and
Maintenance Cost:

Cost of Capital:

Tax Rate:

Equipment Life:

Monthly Liability:

Accrued Assessment Equals:

Considered Lowering Assessment
under §502 (e) (4).

Lowering Recommended

                   fj  Yes

                   C7  No

Amount Lowered

Assessment Amount

Reasons Recorded and Filed

Notice of Violation CA-502-NV
Sent Certified on

Date Return Receipt Returned

Date of Receipt by Source

Twenty Days After Above Date Is

-------
                                        V-19


                                                              Initials    Date
II  F           Hearing Requested Within Above Period


                                         Yes


                                    rj  NO                   	  	

II  G           Hearing Held on                   	  	  	

II  G           Civil Penalties Final Order Issued

                                         Yes

                                         No

                                         On:      	  	  	

                Monthly Assessment                	  	  	

                Accrued Assessment Amount         	  	  	

II  F           Payment Received on Schedule:                 	  	

II  F           Payment Request Letter Sent:	  	

II  F           Collection Referred To:           	  	  	

                                    On:
II  F           Payment Sent to Financial Services

II  I           Request for Correction Received

II  I           Correction Granted  /~7

                           Refused  /~7

                Amount Corrected

                Reasons Recorded and Filed

                Refund Made On:

II  H           Assessment Mitigated

                                    £7  Yes

                                    C7  No

                Amount Mitigated

                Amount of Assessment

                Reasons Recorded and Filed

                Refund Made On:

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                                V-20

            STATE  OF   CONNECTICUT

 DEPARTMENT OF  ENVIRONMENTAL PROTECTION
         STATE OFFICE BUILDING      HARTFORD, CONNECTICUT 06115
                                           Date

     GENERAL  NOTICE OF CIVIL ASSESSMENT PROGRAM
 Dear

     The Department  of Environmental Protection has been
 authorized to use civil assessments in enforcing water pollu-
 tion control laws, regulations, orders and  permits.  The Depart-
 ment has consequently developed three civil assessment regulations.
 Section 502 for illegally discharging without a permit (effective
 on	) ;  Section 503 for not complying with the terms
 of abatement orders  (and permits)  (effective on 	);
 and Section 504 for  violating the  monitoring report requirements
 of orders and permits (effective on 	 ) .

     All three regulations authorize the Department to impose
 economic civil assessments designed to take away the economic
 incentive to delay compliance with the covered requirements in
 order to (1)  ensure  "immediate and continued compliance"  with
 the requirements  and also to (2) protect those who comply vol-
 untarily from being  put at a competitive disadvantage compared
 to a small number who save money by not complying.

     As the owner or operator of an actual  or potential source
 of water pollution,  you will be liable for  discharging (after
 the effective date of §502)  without a permit required by the 1967
 Clean Water Act,  as  amended, (Chapter 474a  of the General Statutes);
 for unexcused failure (after the effective  date of §503)  to comply
with the terms of orders or permits issued  under the Act; and for
unexcused failure (after the effective date of §504) to submit
complete monitoring  reportr, as required by  order or permits.  The
Department can also  still go to court to enforce compliance by
means of injunction, forfeiture and/or criminal sanction.

     We are enclosing copies of the state regulations that explain
your potential assessment liability for violating any of  these
 standards.   (Enforcement Regulations, §S22a-6b-100 to 22a-6b-102
general procedure and §§22a-6b-502 to 22a-6b-504.)  The maximum
amount you may be assessed for each month of emission or  order
violation is  listed  in the table in §22a-6b-602(d).


     If you wish  to  discuss these  regulations or have any questions,
 please do not hesitate to call the Water Compliance and Hazardous
 Substances Unit at 566-3245.

     Thank you for your help in creating and maintaining a better
environment for Connecticut.

                               Sincerely,
                               Robert B.  Taylor
                               Director of  Water Compliance
                               and Hazardous  Substances
                               (CA-502/503/504-GN)

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                                V-21

                  STATE  OF CONNECTICUT

          DEPARTMENT OF  ENVIRONMENTAL PROTECTION
               STATE OFFICE BUILDING    HARTFORD, CONNECTICUT 06115
                                           Date
Dear

     The Commissioner of Environmental Protection has  determined
that you are discharging without a permit in violation of §25<-54i
of the General Statutes.

     The Commissioner therefore has the option of levying a
civil assessment pursuant to §22a-6b-(a)  (2)  of the General
Statutes and §22a-6b-502 of the Department Regulations.  The
maximum monthly assessments that could be levied can be determined
by reference to §22a-6b-502(d).

     Specifically you will be deemed to have taken prompt and ef-
fective action if you

    	 submit a detailed written plan of action, including
       a timetable, which, once implemented,  will lead to
       the issuance of a permit as promptly and effectively
       as possible within 40 days of receipt of this letter.

   	  accept an order issued by the Department.

   	  independently take all steps necessary to qualify
       for a permit as promptly and effectively as possible.

     If you do not meet the above standards the waiver provision
will be deactivated and the Commissioner will be able  to impose
the full assessment against you.

     If you have any questions concerning this warning letter,
please contact	 of the Water Compliance and
Hazardous Substances Unit at 566-3245.

                               Sincerely,
                               Director,
                               Water Compliance and
                               Hazardous Substances
                               CA-502-W

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                                                 V-22
                            STATE  OF  CONNECTICUT
                DEPARTMENT  OF  ENVIRONMENTAL  PROTECTION
                         STATE  OFFICE BUILDING
                                           HARTFORD, CONNECTICUT 06115
                                                                              CIVIL ASSESSMENT
                                                                                 NOTICE OF
                                                                                 VIOLATION

                                                                              No. 502-
TO:

RE:
(Premise Name)
        (Dremise  Address)
Case No.
The Commissioner of Environmental  Protection has determined  that you are and/or have  been discharging
without a  permit in violation of §25-54 (i) of the General Statutes as amended.  This  is  a Notice of
Violation  pursuant to §22a-6b(d) of  the General Statutes and Department Regulations  §S22a-6b-101 and
22a-6b-502.

VIOLATION-         You initiated, created or originated a discharge into the waters  of  the
              state on or before  	 without a permit  as required by Section 25-54i(a)
              of the General Statutes, as amended.and have  continued that discharge  to  	;
ASSESSMENT:         You are hereby  notified that you have  been assessed $       for the period of
              illegal discharge  to date.  Furthermore,  for  each incremental month that you con-
              tinue to discharge illegally after this date,  the Commissioner will impose an
              additional assessment of 	 per month.

HEARING:            You have a right to a hearing on this  assessment.  To request a hearing
              you must deliver to  the Commissioner or the Director of Water Compliance and
              Hazardous Substances a written application  for hearing within twenty days of
              the receipt of this  notice.

PAYMENT:            Unless a hearing is requested, this notice shall become a final order of the
              Commissioner .twenty-one days after the date of receipt.  In such  an event payment
              of the civil assessment shall be due twenty-five days after receipt of this
              notice.   Payment should be made by check  to the order of "Conn. Department of
              Environmental Protection" and should be delivered to:


                                        Director, Water  Compliance and Hazardous Substances
                                        Department of Environmental Protection,
                                        165 Capitol Avenue - Room 129,
                                        Hartford, Connecticut   06115.

If you have  any  questions concerning this notice, please contact the Director at the above address or,
by phone,  at 566-3245.  All correspondence should be identified with the Civil Assessment Notice of
Violation  Number  (see top right-hand corner).
       Signed  (Director)
                                                         Date
                                                 SERVICE

A copy of the  foregoing Notice was submitted to the above-named as indicated below:

/  /   Personally delivered to ^	     	  	
                                                          Recipient's Signature

/  /   Certified mail to the usual  place of business or residence.  Registration No.  :
                                                                                         Date
                                                                                         RPD
                                                                    (CA-502-NV)

-------
                                                 V-23

                            STATE   OF   CONNECTICUT

                DEPARTMENT OF  ENVIRONMENTAL  PROTECTION
                        STATE OFFICE BUILDING      HARTFORD, CONNECTICUT 06115
                                                                            CIVIL ASSESSMENT
                                                                               FINAL ORDER
                                                                            NO. 502-
         (Premise  Name)
        (Premise Address)
     Case  No.
The Commissioner of Environmental  Protection has determined, pursuant to the finding of the Hearing
Officer in  the civil assessment hearing held on                 that you are and/or have been dis-
charging without a permit in violation of §25-54i of the  General Statutes as amended.  This is a
Civil Assessment  Final Order pursuant to  §22-6b(d) of the General  Statutes  and Department
Regulations  S22a-6b-101 and 22a-6b-502.

VIOLATION:   You initiated, created or originated a discharge into the waters of  the state on or
            before 	   without a permit as required by Section 25-54i(a) of the General
            Statutes as amended and have continued that discharge to 	.

ASSESSMENT:  You are hereby assessed $          for the period of illegal discharge to date.  Furthermore,
            for each incremental month you continue to discharge illegally after this date, the
            Commissioner will impose an additional assessment of $ 	  per month.

PAYMENT:    Payment of this civil  assessment is due upon  receipt of this order.  Payment should be
            made by check to the order of "Conn. Department of Environmental Protection" and should
            be delivered to:

                              Directorf Hater  Compliance and Hazardous  Substances,
                              Department of Environmental Protection,
                              165 Capitol Avenue - Room  129,
                              Hartford, Connecticut  06115.


AFPEAL:        You have a right to appeal this civil assessment final order to  the Superior Court for
               Hartford County,  This appeal must be taken within thirty days of  the issuance of this
               order and shall be taken pursuant to the  provisions of §4-183 of the General Statutes.

If you have any questions concerning  this order, please contact the Director of  Water Compliance and
Hazardous Substances at the above  address or, by phone, at 566-3245.  All correspondence  should be iden-
tdfled with the Civil Assessment Final Order Number (see  top right-hand corner).
        Signed(Director)              Date                 Commissioner                     Date



                                               SERVICE

A copy of the  foregoing Order was submitted to the above-named as indicated below:

/	/    Personally delivered to 	                                    /    /
                                                           Recipient's SignatureDate
/__/    Certified mail to the usual place of business or residence.  Registration No.s
                                                                                        RPD
                                                                    (CA-502-FO)

-------
                               V-24

                 STATE OF CONNECTICUT

         DEPARTMENT OF ENVIRONMENTAL PROTECTION
              STATE OFFICE BUILDING    HARTFORD, CONNECTICUT 06115
                        WAIVER ATTACHMENT


     The Commissioner of Environmental Protection is issuing you
a 	 Notice of Violation —  	 Civil Assessment Final Order as-
sessing a civil penalty under §22a-6b-502 of the Department Regu-
lations for discharging without a permit in violation of §25-54i
of the General Statutes as amended.

     It has been determined that you did not have notice of the
permit requirement of §25-54i as required by §22a-6b-502(g)(2)(iii)
of the Civil Assessment Regulations  and therefore are entitled  to
waiver of part of the assessment if  you meet the conditions of
§22a-6b-502(g)(2)(ii).

     You will be required to pay only  $	 for the period
of illegal discharge to date and $0  per month for each month that
you continue to discharge illegally  after receipt of the Notice
of Order SO LONG AS YOU CONTINUE TO  SATISFY THE CONDITIONS OF
§22a-6b-502(g)(ii).  If you do not meet those standards continu-
ously until a permit is issued or the discharge is stopped the
full assessment set out in the attached Notice or Order will be
collected.

     If you have any questions concerning this waiver attachment
please contact the Director of Water Compliance and Hazardous Sub-
stances, Department of  Environmental Protection, 165 Capitol Avenue,
Room 129,  Hartford, Connecticut 06115 or by phone, at 566-3245.
All correspondence should be identified with the Civil Assessment
Notice of Violation or  Final Order Number on the attached Notice
of Order.
                               CA-502-WA

-------
                               V-25

                 STATE OF CONNECTICUT

         DEPARTMENT OF ENVIRONMENTAL PROTECTION
              STATE OFFICE BUILDING    HARTFORD, CONNECTICUT 06115
                                        Date
                      Subject:     Case No.
                                DEP/WC No.'
                   Notice of Violation No.
Dear

     The Department of Environmental Protection has  determined  that
you were discharging without a permit in violation of  §25-54i of
the General Statutes and has consequently imposed a  civil  assess-
ment on you pursuant to Department Regulation 22a-6b-502.   The
Notice of Violation or the Civil Assessment Final Order was sent
to you by personal service or certified mail, and payment of the
assessment was due on 	.  Payment is now over
three weeks late.

     The law provides that if the assessment is not  promptly paid,
it may be enforced in the same manner as a judgment  of the Superior
Court.  Accordingly, if we do not receive your payment promptly,  the C
missioner will file his final order with the Clerk of  the  Superior
Court.  Upon such filing, the order will have the same status as
a judgment of the Superior Court and will be enforced  by the
Sheriff accordingly.

     We expect to receive your delinquent payment no later than
  	.  If we do not receive payment from you by that
time, we will be compelled to institute proceedings  with the
Superior Court.

     If you have any questions concerning this letter, please feel
free to contact me at 566-3245.

                               Sincerely,
                               Director,
                               Water Compliance and
                               Hazardous Substances
                                          (CA-502-C)

-------
                               V-26

                 STATE OF  CONNECTICUT

        DEPARTMENT OF ENVIRONMENTAL PROTECTION
              STATE OFFICE BUILDING    HARTFORD, CONNECTICUT 06115
                                        Date
                      Subject:  Order No.

                               DEP/WC No.
                    Reference:  Your Request of    /   /

                        Notice of Violation No.
Dear

     In response to your request for a written explanation of
the methodology used to determine your assessment,  we enclose
the Department's "Calculating Civil Assessments."

     The variables used to calculate your assessment in the
manner described in this document are as follows.   (Please
refer to Enforcement Regulations §22a-6b-502(b)  for definitions
of these variables):

     "Equipment Costs":  	

     "Operating Costs":  	

     "Inflation":        	

     "Depreciable Life": 	

     "Cost of Capital":  	

     "Tax Rate"       :
     If you have any further questions concerning the assessment
calculation, please do not hesitate to contact Mr.  	
	 at 566-3245.                       	

                             Sincerely,
                             Water Compliance  and
                             Hazardous Substances  Unit
                             (CA-502/503-FAC)

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                              V-27

               STATE  OF  CONNECTICUT

       DEPARTMENT OF  ENVIRONMENTAL  PROTECTION
             STATE OFFICE BUILDING    HARTFORD, CONNECTICUT 06115
                                     Date

                       Notice of Violation No.
Dear

    This letter is written in response to your inquiry regard-
ing possible correction of the amount of the civil assessment
imposed upon you.

    Department Regulations 22a-6b-502(h)  and 503(h)  provide
that a regulatee in receipt of a civil assessment Notice of
Violation may petition the Commissioner for correction of a
civil assessment imposed upon him any time up to six months
after the Commissioner finds the regulatee has come into com-
pliance.

    These regulations require that your petition be in writing
and set forth any evidence that the cost of compliance or the
assessment period has been or will be less than the Commissioner
had initially determined in imposing the civil assessment.  Such
a petition must be sent by certified mail or by personal service
to the Commissioner or the Director of Water Compliance.

    The Commissioner may, in response to such a petition, lower
an assessment he determines was excessive.  If the Commissioner
takes no action in response to such a petition, or if his
response is not satisfactory to you, you may obtain a hearing
of right once you come into compliance or at any other
time specified in a final order.  Following such a hearing,
the Commissioner must correct the civil assessment if and to
the extent that the actual cost of compliance has been less
than he had initially determined.  If you are not satisfied
with this decision, you may appeal it to the courts.

    Any refunds to be made to you under this regulation shall
be made with interest calculated at the same cost of capital
rate used to make the civil assessment.

    If you have any questions concerning this letter or the
nature of the correction procedures under the Regulations,
please contact me at 566-3245.

                                 Sincerely,


                                 Director,
                                 Water Compliance and
                                 Hazardous Substances Unit

                                 fCA-502/503-COR)

-------
                               V-28

                 STATE OF  CONNECTICUT

        DEPARTMENT OF ENVIRONMENTAL PROTECTION
              STATE OFFICE BUILDING    HARTFORD, CONNECTICUT 06115


                         Source:
                         Notice of Violation  No.

                         Amount of Payment  :  $
Bureau of Administration,  Financial Services
Department of Environmental Protection
Room
     The attached check represents  payment  by  the  above-named
source for a civil assessment imposed pursuant to  the  Depart-
ment's regulations 22a-6b-100 et. seq.

     /  /   There remains a possibility  that all or part
            of this check may have  to be paid  back to  the
            issuer with interest.   Therefore,  please deposit the
            check into the civil  assessments pending re-
            ceipts fund and return  a  receipt of such
            deposit to me.

     /  /   The issuer of this check  has no further oppor-
            tunity to appeal or seek  correction of the
            assessment that gives rise to this payment.
            Please deposit the check  into the  General  Fund
            and return a receipt  of such deposit to me.

                               Sincerely,
                              Water  Compliance and
                              Hazardous Substances Unit
                              Enforcement Section
                                                 (CA-502/503-T)

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                               V-29
                 STATE  OF  CONNECTICUT

         DEPARTMENT OF  ENVIRONMENTAL PROTECTION
              STATE OFFICE BUILDING    HARTFORD, CONNECTICUT 06115
                              Notice of Violation No.  :
Dear

     Pursuant to the correction procedures  provided by  Depart-
r.ent Regulations 22a-6b-502 (h)  and 503  (h) ,  the  Commissioner
has considered the evidence you have presented in your  written
petition for correction.

     The Commissioner has

     /	/   determined that your assessment will  be lowered
            by the amount of $ 	.   A check for this
            amount, with  interest,  is enclosed with this
            letter.

     /  /   determined that your assessment for each month of
            continuous violation shall be reduced from  $  	
            to $
            determined that the assessment will  not be  corrected
            at this time,  but that only $	per month
            will be collected until such time as a  final
            decision on correction is  made.

            determined that the initial civil assessment
            imposed upon you is correct and that your
            petition for correction is hereby denied.

     The reason(s)  for the above determination is (are):
     If you have any questions concerning this letter or the
 correction proceedings, please feel free to call me at the
 Water Compliance and Hazardous Substances Unit (566-3245) .
                                Water Compliance and
                                Hazardous Substances Unit
                                (CA-502/503-R)

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                                V-30
                         CHAPTER III
             HOW TO APPLY SECTION 503  ASSESSMENTS
      Section  503  authorizes  the  Department  to  impose  civil
 assessments on  those who  do  not  comply with the  terms of
 water pollution control orders or  permits.   The  main  focus
 of  the section  is order violations, but  it  applies  to permits
 as  well and can be of  some use in  enforcing their requirements.
 A.   UNDERSTANDING  THE  SCOPE
     OF  THE  REGULATION

      Section  503 can be  used  to enforce  the  terms  of  the  full
 range of water pollution control  orders  and  permits.   It  applies
 to  orders issued under §25-27, and  25-54g, h,  j, k or aa  of  the
 General Statutes,  and  to permits  issued  under  §25-54i of  the
 General Statutes.  NPDES permits,  whether  in the form of  state
 orders  or permits,are  covered.

      The order and permit violations  for which it  will be used
 are somewhat  different.   In most  order cases it will  be used
 because the order  recipient failed  to comply with  a deadline
 in  the  order's time schedule.  State, permits do not have  time
 schedules,  but they do have requirements for proper operation
 and maintenance of treatment  facilities  that can be enforced
 with §503.  §503 IS NOT  USED  TO ENFORCE  MONITORING REPORT
 REQUIREMENTS  OF ORDERS OR PERMITS,  THESE ARE ENFORCED WITH
 §504.   It is  important to note that there  can  be only one
 §503 violation per order.  The violation is  falling behind
 the order's time schedule; and the period of  the violation is
 the length  of time that  the recipient is late  in complying
 with a  step of the order.  The delay  in  each step  is  not
 aggregated, however.   The final measure  of the length of  the
 assessment  period  is the delay in complying  with the  final step.


 B.   DETERMINING
A VIOLATION

      Section  503 will  be used primarily  for  cases  where dis-
 chargers do not comply with steps of  orders  on time and occasion-
 ally for failure to comply with permit requirements like  proper
 operation and maintenance.

-------
                               V-31
     An order recipient may be assessed for any unexcused
delinquency in complying with order terms.  However, if a
step is missed and an extension is granted, an assessment
cannot be levied.

     Section 503 civil assessments are proportional to the
duration  of the violation, thus it is important to determine
how long the violation lasted, or if it is continuing, when it
started.  This is not a problem with order cases because the
schedule deadlines clearly mark the start of the violation and
completion  of the required step clearly marks its end.

     There is more of a problem where operating and mainten-
ance requirements of pprmits are involved.  When an inspector
detects a case of non-operation, he may find it hard to tell  (and
perhaps 'impossible to prove) whether or not the violation was
temporary or continuing.   If challenged in a hearing or in
court, the Department must be able to prove how long the viola-
tion lasted.  For this reason YOU SHOULD NOT TRY TO USE §503
WITH PERMIT CASES UNLESS YOU HAVE SOLID EVIDENCE THAT THE NON-
OPERATION CONTINUED FOR A KNOWN PERIOD OF TIME.

     There is a second problem with permit O&M cases.  In some
cases it will be difficult to prove exactly what operating
or maintenance steps were not taken.  It is essential that you
have this information because the costs of the omitted steps are
the basis of the assessment.  If you can't prove what they were,
you can't define any assessment amount.  The easiest cases will
be those in which it is clear that the system was not operated
at all  (e.g. results of frequent sampling indicate no reduction
in the amount of pollutants discharged; the discharger can pro-
duce no bills for chemicals necessary for operation of the
treatment system; the discharger's electricity usage was the
same before and after installation  of the treatment system
even though the system requires substantial electric power).
Cases of partial or ineffective operation should probably be
avoided.

     A separate enforcement approach will be necessary for most
O&M cases.  The Connecticut Enforcement Project has developed
such a program for the Air Compliance Unit.   (See Volume V of
this Final Report.)  The Water Compliance Unit should be able
to adapt this approach to  its program.

     Section 503, then, will allow the Water Compliance Unit
to enforce compliance with its orders.  It will also allow  it
to deal effectively with flagrant instances of noncompliance
with the terms of a permit, especially for failure  to operate
and maintain.
C.  SENDING
WARNING LETTERS

     Section 503 gives the Department the option of  sending a

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                               V-32
warning letter to a suspected violator.   A form letter (CA-
503-W)  may be found in the Forms and Letters Section at the end
of this Chapter.  Although you do not have to send a warning
letter, doing so can serve several important objectives:

     *  Dischargers cannot claim lack of notice after re-
        ceiving this letter. (Agencies are usually required
        to give notice within six to nine months of detecting
        a violation.) Sending a warning letter rather than a
        Notice of Violation allows the Department to delay (a)
        setting the assessment process in motion and  (2)  esti-
        mating an assessment amount that then becomes a maximum.

     *  The warning letter, if made credible by a con-
        sistent commitment to compliance and actual
        imposition of assessments in a few recalcitrant
        cases, will lead to prompt compliance in almost
        all cases, with minimum cost to both regulatees
        and the State.  (Warning letters sent several of
        the most difficult Air Compliance regulatees in
        the spring of 1975 led to dramatic turn-arounds.)
        They should be especially useful when order re-
        cipients begin to fall behind on interim steps
        in their order schedules.  In permit cases, the
        warnings can be used when a violation exists,
        but it can't be proven how long the violation has
        lasted or how extensive it has been.
D.  MEASURING THE PERIOD
OF DELAY FOR ORDERS	

     The amount a source has saved by not complying with the
terms of an order is a direct function of how long the source
has delayed,  and therefore so is its civil assessment liability.
This makes determination of the time a source is behind schedule
critical to calculating civil assessments.

     The period of delay is measured as the length of time between
the dates of scheduled compliance and actual compliance.  It can
be measured for interim steps in the order schedule and/or for
the final compliance deadline.   If civil assessments are tied
to the final deadline only, the Department does not have to
worry about calculating cumulative delay step by step or about
having to make refunds with interest in the event the source
catches up some of the time it lost in earlier steps.   (If the
source has been assessed early in its schedule and then "catches
up" all or part of the delay before the final compliance deadline,
the Department is required to repay a proportionate share of the
assessment with interest.)


     An  example may clarify this point.  Consider the case
of a discharger under a four step order who completed the
first step  six months late, the second step eight months late,
the third step six months  late and the fourth step twelve
months late.  If this discharger were issued a civil assessment

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                                 V-33
 for missing the first step it would pay for six months delinquency.
 It would not have to start paying for the second step until
 it was more than six months late and would pay for two months.
 It would not have to pay at the third step because it did not .
 fall farther behind.  However,  it would start  paying again
 when it became more than six months late on the fourth step
 and would pay for six months.  If, on the other hand, it had
 maintained the same compliance pace as above until the fourth
 step and caught up somewhat on that step, finishing the final
 requirements only six months behind schedule,  the Department
 would have had to refund 1/4 (for 2 of 8 months)  of the assess-
 ment (with interest) .

     By waiting until the final compliance date is missed be-
 fore levying a §503 civil assessment, the Unit can delay com-
 mitting itself to an estimate of  the  assessment,  avoid  the
 need to calculate cumulative delay step by step and, in cases
 in which recipients catch up, avoid the need to make a refund
 (with interest) .   Section 503 allows the Department to send
 warning letters to probable violators, which should allow it
 to stimulate compliance in most cases with intermediate order
 steps at considerably less cost.  However, especially for recal-
 citrant sources that do not react to warning letters, imposing
 an assessment  at  an intermediate step may be useful.

 .h  ^1iS imP°rtant to note that the assessment period covers
 the full period from the final compliance date to the date of
        compliance.  An order recipient will make some expenditures
       to final compliance, but these should not reduce its
 havr%iiabilityVIf he had co™Plied on time, he would
 nave made these expenditures prior to the due  date as well.
  pni-.,       the re9ulations speak in terms of MONTHLY assess-
  ractlons   f^1^ °f  delay ShOUld be »e"ured in months or
   actions  of  months.  For  ease  of calculation,  monthly periods
     Excluding  Delay  Before The
     Effective  Date of  the Regulation

     The Department is  not including delay  accrued  before  the
effective date  of the 503 regulation in the assessment  period
used in calculating civil assessments.  This poses  special
problems during the first year or two of the regulation's use.

     To measure the assessment (or violation) period for sources
that were under order before the effective date, EXCLUDE THE
CUMULATIVE DELAY THAT OCCURRED PRIOR TO THE EFFECTIVE DATE   For
such sources, civil assessments will apply only to any incremental
delinquency that develops after the effective date.   For example
assume  that the effective date is November 1975-

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                                  V-34
                 Discharger A is on a compliance timetable
            which commenced on January, 1974.  Step 3 of
            the order, requiring the start of construction,
            was due on December, 1974, but was not completed
            until March 1, 1975  (3 months behind schedule).
            When Step 4 of the order, requiring verification
            of operation, was due on January 1976, he is
            still 3 months behind schedule.  He does not
            verify until April 1, 1976 and thus completes
            his compliance timetable three months late.
            However, since this source was under order be-
            fore the effective date of the Regulation, his
            cumulative delay which occured before that date
            is to be subtracted from the total period of
            delay.  Here, since there was no increment of
            delay after November 18, 1975 there will be no
            civil assessment applied to this source.


       Delays Verifiably Beyond
       The Source's Control

       The regulation's purpose is to ensure that order recip-
ients move quickly and effectively to comply with the Depart-
ment 's orders.  Delays that the discharger could not have  fore-
seen or avoided and that can be verified  if claimed are therefore
excluded from the period of delay that defines civil assessment
liability in Section 503 (i).  This Section provides that the
Commissioner must exclude from the assessment period any delay
which is caused:
       *  by strikes or lockouts; riots, wars, or other acts
          of violence; floods, hurricanes,  or other Acts of God;
          or other equally severe, unforeseeable and uncorrect-
          able accidents;  or,

       *  by delays attributable to the Water Compliance Unit of
          the Department in excess of reasonable processing times.

       None of these mandatory exclusions can .become a loophole
for the relatively few willful scofflaws with whom the Department
must deal.  Every mandatory exclusion, if claimed, can be easily
verified by the Department.  For example, if a discharger claims
that a strike prevented him from complying, one or two phone
calls can confirm whether or not there was a strike.

       Unverifiable grounds for exclusion are specifically not covered
by §503 (i).  In particular, THIRD PARTY SUPPLIER DELAY is a dis-
cretionary grounds for mitigation only.  Such grounds are left
in the Department's discretion because if they were mandatory
exclusions they could be turned into a major loophole by recal-
citrant sources willing to be less than entirely truthful.  The
Department generally would not be able to disprove such claims.

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                                 V-35
       Although the regulation had to be drafted tightly to deny
such a loophole to these few sources, the Department can grant
extensions for third party delay and other reasons not covered
by §503(i) when, in its judgment, such action is warranted.

       If a source claims a reduction in its assessment period
oecause of excessive process delay by the Department, the Depart-
ment should compare the actual time taken in handling the case
rfith the routine times required for handling similar cases.
The Baseline study of current processing times found in Part II
above can be used as a measure of the range of processing times
that are "routine."
E.  MEASURING THE PERIOD
OF DELAY FOR PERMITS


      When §503 is used to levy assessments for violating operating
 and maintenance requirements of permits the length of the
 assessment period is the time during which the requirement
 was either partly or entirely unmet.

      It can be very difficult to prove the actual length
 of such a period.  Evidence obtained in plant inspections
 can indicate failure to operation or maintain.  There may be
 visual evidence such as malfunctioning components of the
 treatment system.  Samples may indicate such a concentration
 of pollutants that the system could not have been
 operated properly.  Records of chemical usage might indicate non-
 operation.   However, these bits of evidence do not indicate clearly
 when the operating or maintenance failure began.   Proof of a long
 period of violation may  require evidence from a number of days,
 although not necessarily every day.  There must be evidence from
 one or several days to infer reasonably that the system was not
 operated or maintained properly over the entire period.


 F.  LEVYING, REVISING AND
 COLLECTING AN ASSESSMENT

        Sections 502 and 503 are complementary.  The moment a
 discharger comes under a final order, it exchanges §502 liability
 for potential §503 liability.  The two sections are based on
 identical economics, have very similar safeguards, and operate
 under parallel procedures.  Consequently, most of the operating
 guidelines outlined in the last Chapter for §502 also apply to
 §503.


       *  A day's delay in obtaining a permit has the same
          value to the discharger as a day's delay after
          an order is final.  The value of the delay, and
          the amount of the assessment are therefore calcu-
          lated identically except  for a slight variation
          in §503 permit cases.  The 502 and 503

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                                  V-36
         calculations require"virtually the same information
         regarding equipment costs,  operating costs,  and
         industry cost of capital.   They use the same assessment
         formula.  See Chapter II (E)  above.

      *  The Enforcement Act requires the Department  to
         consider mitigation based  on the same list of
         criteria in both cases.   See Chapter II(F).

      *  The procedures for imposing,  reviewing, collecting,
         and correcting assessments are all identical.
         See Chapter II (E,F,G,H,I,  and K.)


        The exception is that the cost of compliance  and con-
sequently the items plugged into the assessment formula are some-
what different in  §503 permit cases.   In permit cases there will
be no initial capital investment to consider.  The basic cost of
compliance will be operating and maintenace costs and future
equipment replacement costs.  The calculation of costs of compliance
in 5503 permit cases is discussed in Section VII(A) of this manual,
"Calculating the Cost of Compliance."  The fact that  the cost of
compliance does not change in the assessment formula  is covered
in "Part III - Economics" above.  (See also Section V II(E)  of
this manual, "Operating the Wang Computer.")

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                                 V-37
G.  FORMS AND LETTERS:
SECTION  503  ASSESSMENTS
      Because §503 is so similar to §502, it is possible to use iden-
 tical forms and letters for most purposes.  Common forms and letters
 carry the identification in the lower right-hand corner, "CA-502/503-_
 They are not reproduced here but will be found in the earlier 502
 "Forms and Letters" section of this manual.  The forms and letters
 needed to implement the 503 Regulations are listed below.

      *  Section 503 Assessment Checklist

      *  General Notice of Civil Assessment Letter
         (CA-502/503/504-GN)
                                         %
      *  Assessment Warning Letter  (CA-503-W)

      *  Civil Assessment Notice of Violation
         (CA-503-NV)

      *  Civil Assessment Final Order
         (CA-503-FO)

      *  Collection Letter  (CA-503-C)

      *  Letter Explaining  Factors  Used  in  Calculating
         The Assessment  (CA-502/503-FAC)

      *  Correction Letter  (CA-502/503-COR)

      *  Transfer Letter (CA-502/503-T)

      *  Refund/Denial Letter (CA-502/503-R)

      The CA-503- forms and letters follow.

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                                 V-38



           CIVIL ASSESSMENT CHECKLIST;  SECTION 503


     Discharger:

     (Name, Address, Town)
          Order /  /                  Order No.

          Permit/  /                  DEP/WC No.

                                      NPDES No.
Instruction
Manual                                                        ,
Reference                                             Initials    Date
III(B)    Order Step No.	,  Scheduled for
III(D)    Period Of Probable Delay Up To Today.

          Does Order/Permit Include A Civil
          Assessment Warning?       	
                               Yes /  /

                               No /  7

III(C)    Warning Letter CA-503-W Sent On:

III(D)    Reduction In Period Of Delay For Delay
          Beyond Regulatee's Control?  	

          External Causes /  /

          Dnreasonable Processing Time /  /

III(F)    Assessment Variables

          Equipment Cost:	

          Annual Operating and Maintenance Cost:

          Cost of Capital:	

          Tax Rate:	

          Equipment Life:	
III(F)     Monthly Liability
III(F)     Accrued Assessment Equals
III(F)     Considered Lowering Assessment
          §503{e) (4))

          Lowering Recommended

                             Yes/37

                             NQ/~7

          Amount Lowered
          Assessment Amount
          Reasons Recorded  and  Filed

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                                   V-39
III(F)    Notice of Violation CA-503-NV Sent
          Certified On:	
III(F)    Date Return Receipt Returned	
III(F)    Date of Receipt by Source	
III(F)    Twenty Days After Above Date Is
III(F)    Hearing Requested Within Above Period
                                         Yes /~7
                                         NO
III(F)    Hearing Held On	
III(F)    Civil  Assessment Final Order Issued
                                     Yes /~7
                                     No /~7
                                     On:
          Monthly Assessment	
          Accrued Assessment Amount
III(F)    Payment Received On Schedule:
III(F)    Payment Request Letter:
III(F)    Collection Referred To:
III(F)    Payment Sent to Financial Services
III(F)    Request For Correction Received
III(F)    Correction Granted/Refused  /	7
                                     /Z7

          Corrected Assessment:	
          Refund (with interest):  	
          Reasons Recorded and Filed
III(F)    Assessment Mitigated
                            Yes /~7
                            No /~7
          Amount Mitigated	
          Amount Of Assessment
          Reasons Recorded and Filed

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                               V-40

           STATE  OF   CONNECTICUT

DEPARTMENT  OF  ENVIRONMENTAL  PROTECTION
        STATE OFFICE BUILDING      HARTFORD, CONNECTICUT 06115
                                         Date
           Order /  /              Notice No.

           Permit / /             Order No.

                                  DEP/WC NO.

                                  NPDES NO.
 Dear

     The  Commissioner of Environmental Protection has determined
 that you are probably in violation of the terms of the  above-
 mentioned order or permit in  that you
 If such  a violation is established, the Commissioner may  levy
 a civil  assessment on you pursuant to §22a-6b(a)(3)  of  the
 General  Statutes and §22a-6b-503 of the Department Regulations.
 The maximum monthly assessments that could be levied can  be
 determined by reference to $22a-6b-503(d).

     If your violation is delinquency in meeting an order
 time schedule, your assessment liability increases in direct
 proportion to the extent to which you fall behind schedule.
 On the other hand, you can avoid all liability by catching
 up and meeting the final compliance deadline specified  in
 your order schedule.

     If your violation is noncompliance with other order or
 permit terms, your liability is again in direct proportion
 to the length of *-ire cairJr.g which you are not in compliance.
 You cannot eliminate the potential liability that has already
 accrued,  but you can prevent its growing larger by promptly
 coming into compliance with the order or permit terms in
 question.


     This letter does not mean the  Department  is initiating
 an assessment  action against you  for the above-mentioned
 noncompliance  now; we hope not  to  have  to take this action.

     If you have any questions concerning this warning,  please
 contact  Mr.	 of  the Water Compliance  and
 Hazardous Substances Unit at 566-3245.

                                Sincerely,
                                 Director,
                                 Water Compliance and
                                 Hazardous Substances
                                 (CA-503-W)

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                                                  V-41
                             STATE  OF  CONNECTICUT
                 DEPARTMENT OF  ENVIRONMENTAL  PROTECTION
                         STATE OFFICE BUILDING
                                         HARTFORD, CONNECTICUT 06115
                                                                                   CIVIL ASSESSMENT
                                                                                       NOTICE  OF
                                                                                       VIOLATION

                                                                                   No.   503-
  TO:

  RE:
(Premise Name)
         " (Premise Address)
       Order/   /              Order No.
                                         Permit/  /
DEP/WC No.
  The Commissioner of Environmental Protection has determined that  you are now in violation of  the terms
  of the above-named State Order or Permit. This  is  a  Notice  of Violation pursuant  to  S22a-6b(d)of the General
  Statutes and  Department Regulations §§22a-6b-101 and 22a-6b-503.

  VIOLATION:  /  / Your order binds you to  complete all steps of  the order in compliance with the  time
                 schedule in the  order.   As of the date of this letter you are:
                             months behind  schedule for step  Number
                                                                       of the time schedule  and are
                 thus in violation of the terms of the order.
            /7  Your permit binds you  to comply with all terms  and conditions embodied in it.
                 failed to comply with  the term or condition of  the permit requiring you to 	
                                                                                  You have
  ASSESSMENT:     You are hereby notified  that you have been assessed $	for the period  of non-
                 compliance to date.   Furthermore, for each incremental month that you do not  comply
                 after this date,  the  Commissioner will impose  an  additional assessment of 	
                 per month.
  HEARING:        You have a right to a  hearing on this assessment.  To request a hearing you must
                 deliver to the Commissioner or the Director of Water Compliance and Hazardous  Substances
                 a written application  for hearing within twenty days of the receipt of this notice.

  PAYMENT:        Unless a hearing is requested, this notice shall become a final order of the Commissioner
                 twenty-one days after  the date of receipt.   In such an event payment of the civil
                 assessment shall be due twenty-five days after receipt of this notice.   Payment
                 should be made by check to the order of "Conn. Department of Environmental Protection"
                 and should be delivered to:

                                           Director,  hater  Compliance and Hazardous Substances,
                                           Department of Environmental Protection,
                                           165 Capitol Avenue - - Room 129,
                                           Hartford,  Connecticut  06115.

  If you have any questions concerning this notice, please contact the Director at the above address or,
  by phone,  at  566-3245.  All correspondence should be identified with the Civil Assessment Notice of
  Violation  Number  (see top right-hand  corner).
        Signed  (Director)
                                               Date
                                                  SERVICE

  A copy of  the foregoing Notice was submitted to the above-named as indicated below:

 /  /   Personally delivered to ^	      	
                                                          Recipient's Signature

/	/    Certified mail to the usual place of business or  residence.  Registration No.:
                                                                                             Date
                                                                                          -RPD	
                                                                    (CA-503-NV)

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                                                    V-42

                              STATE  OF   CONNECTICUT

                  DEPARTMENT  OF  ENVIRONMENTAL  PROTECTION
                          STATE  OFFICE BUILDING       HARTFORD, CONNECTICUT 06115
                                                                                CIVIL ASSESSMENT
                                                                                   FINAL ORDER
                                                                                No"!  sTTT=
 TO:
          (Premise Name)
 RE:


         (Premise Address)

      Order  /  /         Order No.	        Permit /  /                   DEP/WC  No.
 The Commissioner of Environmental  Protection has determined,  pursuant to the finding  of  the Hearing Officer
 in the  civil assessment hearing  held on	that the terms of the above mentioned  [final order]
 (permit]  were violated, and hereby levies a civil assessment.

 VIOLATION: /  /  Your order binds  you  to complete all steps of the order in compliance with the time
                 schedule in the order.  As of the date of this civil assessment final order, you are:
                 	    months behind schedule for  step Number	of  the time schedule
                 and are thus in violation of the order.

          /	/   Your permit binds you to comply with all terms and conditions embodied  in it.  You have
                 failed to comply  with the term(s) or condition(s) requiring you to	


 ASSESSMENT:      You are hereby  assessed $	for the period of violation to date.   Furthermore, for
                 each incremental  month you do not comply after this date, the Commissioner will impose
                 an additional assessment of $	per  month.

 PAYMENT:         Payment of this civil assessment is due upon receipt of this order.  Payment should be
                 made by check to  the order of "Conn. Department of Environmental Protection" and should
                 be delivered to:

                                        Director , Water Compliance  and  Hazardous Substances,
                                        Department of Environmental Protection,
                                        165 Capitol Avenue - Room 129,
                                        Hartford, Connecticut  06115.


 APPEAL:          You have a right  to appeal this civil assessment final order to the  Superior Court for
                 Hartford County.   This appeal must be taken  within thirty days of the issuance of this
                 order and shall be taken pursuant to the provisions of S4-183 of the General Statutes.

 If you  have any questions concerning this order, please contact the Director of Water Compliance and
 Hazardous Substances at the above  address or, by phone, at 566-3245,  All correspondence should
 mention the  Civil  Assessment Final Order Number  (see top right-hand  corner.)
 		   	
       Signed  (Director)                 Date                CommissionerDate




                                              SERVICE

 A copy of the foregoing  Order was submitted to the above-named as indicated  below:

 /  / Personally delivered to 	   _________^__________            /   /
                                                       Recipient's SignatureDate

/	/  Certified mail to the usual place of business or  residence.  Registration No.:	
                                                                                        RPD
                                                                           (CA-503-FO)

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                                 V-43

                  STATE  OF  CONNECTICUT

          DEPARTMENT OF  ENVIRONMENTAL PROTECTION
               STATE OFFICE BUILDING    HARTFORD, CONNECTICUT 06115
                                            Date
                         Subject:   Order No.
                                  DEP/WC No.'
                     Notice of Violation No.
Dear

     The Department of Environmental Protection has  determined
that you were not in compliance with the terms  of  a  [final  order]
[permit]  of the Commissioner and has consequently  imposed a civil
assessment on you pursuant to Department Regulation  22a-6b-503.
The Notice of Violation or the Civil Assessment Final  Order was
sent to you by personal service or certified mail, and payment
of the assessment was due on 	.   Payment is now
over three weeks late.

     The law provides that if the assessment is not  promptly paid,
it may be enforced in the same manner as a judgement of the
Superior Court.  Accordingly, if we do not receive your payment
promptly, the Commissioner will file his final  order with the
Clerk of  the Superior Court.  Upon such filing,  the order will have
the same status as a judgement of the Superior  Court and will be
enforced by the Sheriff accordingly.

     We expect to receive your delinquent payment  no later  than
                      If we do not receive payment from you by that
time, we will be compelled to institute proceedings  with  the
Superior Court.

     If you have any questions concerning this letter,  please  feel
free to contact  me at 566-3245.

                                  Sincerely,
                                  Director,
                                  Water Compliance and  Hazardous
                                  Substances
                                                   (CA-503-C)

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                               V-44
                          CHAPTER IV
             HOW TO APPLY SECTION 504 ASSESSMENTS
     Section 504 authorizes the Department to impose small
civil assessments in the event that required monitoring reports
are not submitted or are submitted incomplete.  The assessments
are based on the average cost of completing the various steps in-
volved in preparing and submitting a monitoring report.
A.  UNDERSTANDING THE
SCOPE OF THE REGULATION

     The federal National Pollutant Discharge Elimination System
(NPDES) is administered in Connecticut by DEP and provides for
the issuance of permits to dischargers.  Federal law requires
permittees to report periodically to DEP on a variety of character-
istics of their discharges.  The 1967 Connecticut Clean Water Act
allows DEP to put monitoring requirements in the Connecticut
orders and permits that it issues as federal NPDES permits (§25-
54i(c) (4)).  The monitoring requirements in each NPDES permit are
thus legally binding on the permittee and can be enforced by DEP.

     Section 504 has a limited function:  to enable the Department
to enforce the principal requirement of an effective monitoring
program, i.e. the prompt submission of complete reports.  As
long as the Department receives such reports regularly, occasional
spot-checks can ensure accuracy.  The steady flow of such reports
will help alert both regulatees and the Department if problems
develop, and it will do so at much less cost than if the Depart-
ment had to rely on a large number of expensive field inspections.


B.  IDENTIFYING CASES TO WHICH
ASSESSMENTS ARE APPLICABLE

     A §504 civil assessment may be imposed in either of the two
following situations:

      (1)  If a permittee fails to submit a monitoring report
          on time, it can be assessed.  However, for the
          purposes of Department administration, a several
          week grace period will be allowed before assess-
          ments are made.

      (2)  If a permittee submits an incomplete report, i.e.
          it does not present all the discharge related in-
          formation required by the NPDES permit, it can be
          assessed.  However, since the Department's primary

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                               V-45
          concern is to receive complete reports, not to
          gather revenue, efforts will be made to make sure
          that permittees understand the monitoring require-
          ments of their NPDES permits before levying assess-
          ments.
C.  SENDING
A WARNING LETTER

     The Department is now planning to send computer-generated
notices to regulatees when monitoring requirements are not met.
It can either routinely include a warning regarding potential
civil assessment liability under the terms of Section 504 in
this letter or wait to send a separate warning letter later and
perhaps more selectively.  In either case, these warning letters
should provide all the enforcement action necessary to induce
prompt compliance by most regulatees, at least as long as the
Department's use of the warning is credible.  The warning letter
is, in other words, a very simple, inexpensive, almost painless
avenue to prompt compliance.*

     If the Department decides to delay imposing a Section 504
assessment for more than 90 days after the day on which the
delinquent report was due, it must send the regulatee a warning
letter within the 90 days.  This requirement  (see Section 504 (c)
(3)) is included in the regulations in order to protect regulatees
from the sudden imposition of multiple Section 504 assessments
without having been given fair notice of their liability.  How-
ever, this requirement does not apply if a regulatee repeats
violations for which it has been sent a warning letter previously.
D.  CALCULATING
AN ASSESSMENT

     Section 504 requires that assessments be calculated using
the "Monitoring Report Assessment List."  This list, which  is
included in this section of the manual, sets assessment amounts
for various monitoring deficiencies.  These deficiencies are
broken into four categories:  sampling, delivery of samples to a
lab, reporting, and analysis.

     The assessments are calculated quite simply.  First, you
must identify what was required in the permit and not done.  Then,
you add up the amounts from the list for each thing that was not
done.  This gives you the assessment amount.  The assessment com-
ponents included will be somewhat different in cases in which no
report was submitted and in cases in which an incomplete report
-was submitted.
     The Air Compliance Unit has used warning letters with great and
     immediate success in implementing a similar civil assessment
     regulation that imposes liability on regulatees that do not
     submit progress reports required in orders.

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                                 V-46
      In  cases in which NO REPORT is  submitted, the  assessment
will  consist of:   (1)  $8  for each grab sample and $15  for each
composite sample required by the permit;  (2) $4 for delivery  (no
matter how many samples are required);  (3)  $7 for reporting; and
 (4) the  appropriate amount for each  analysis required  by the
permit.

      In  cases with an  INCOMPLETE REPORT,  the assessment will
consist  of:  (1) $8 for each grab sample  and $15 for each compos-
ite sample for which results or required  flow data  were not
reported and (2) the appropriate amount for each analysis not
reported or reported from a sample for which no flow data was
reported.

      Cases in which INCOMPLETE OR NO FLOW DATA, though required,
is submitted, are treated as though  NO REPORT was submitted.
 (See  Section 504(c)(l)).   This is because most of the  required
analyses are reported  in  terms of concentration.  Concentrations
are meaningless without flow data, because they give the Depart-
ment  no  idea how much  pollutant is being  discharged.
      §504  Assessments:
      An  Example	
     An  example may help clarify the  assessment calculation pro-
cedure.   The "X"'s indicate items not included in  a  hypothetical
monthly  monitoring report that was  received on time  from a source
with three discharges.   (Refer to the "Monitoring  Report Assess-
ment List" on page  V-53 below.


                        Report Requirements

  Discharge  001            Discharge 002             Discharge 003
  Monthly  composite         Monthly composite         Monthly  composite
  X Chromium - total        Aluminum                 X Oil  and grease
  X Chromium - hexavalent    Chromium «- total          X Total  Suspended Solids
   Copper                Chromium hexavalent        X Temperature
   Iron                  Copper                   X PH
   Nickel                Iron                     X Flow
   Zinc                  Nickel
   Total  Suspended Solids   Zinc
   Temperature          X Cyanide
   PH                    Total Suspended Solids
  X Flow                  Temperature
                         PH
                         Flow

           Applying the amounts found in the "Monitoring Report
     Assessment List", the assessment would include:

           Sampling                 Chromium total  (1)  11
             Grab (0)         0*      Chromium-hex (1)    11
             Composite  (2)    30       Copper (1)         10
           Delivery (0)       0**     Iron (1)             9
           Reporting (0)      0**  '  Nickel (1)         12
           Analysis                 Zinc (1)           11
                                  Cyanide (1)        16
                                   Oil and Grease      15
           Total Suspended
           Solids (2)        16         TOTAL
           PH (2)            6         ASSESSMENT      $147***

-------
                              V-47

                     Notes  and Explanation


     *   There is  no assessment for grab  samples  since
        none were required.
    **
   ***
  ****
 *****
The assessment includes amounts for the composite
samples for 001 and 003, the former because no flow
data were reported and the latter because no data
at all were reported.

There were no charges for delivery or reporting.
This is because usable data were delivered and
reported on one sample.  It would have cost little
or nothing more to deliver additional samples and
include more information in the report.

Note that there is no amount in the assessment
list for temperature even though it is a required
analysis.  It is treated as part of the sampling
because it must be done at the site of the sampling
and takes little time.

The amounts for all the analyses for 001 and 003
and the omitted analyses for 002 are included.
     It will help if,  when calculating Section 504 assessments,  you

     *  WORK CAREFULLY.  It is easy to use the wrong
        numbers in the assessment list or to forget to
        include some items, especially if the permit re-
        quires the monitoring of several discharges.

     *  SAVE YOUR WORKSHEETS.  This will help you explain
        what you have done to any regulatees who may call.
     Lowering Assessments
     Based on the List

     After the assessment amount has been calculated from the
list and before you send out a Notice of Violation, YOU MUST
DECIDE WHETHER IT SHOULD BE LOWERED AFTER CONSIDERING SEVEN
FACTORS SET OUT IN §22a-6b(c) of the General Statutes.

     These factors include:

      (i)  The amount of the assessment necessary to ensure
          immediate and continued compliance;

    (ii)  The character and degree of impact the monitoring
          report violation has on the public trust in the
          air, water, and land and on the natural resources
          of the state, especially any rare or unique natural
          phenomena;

    (iii)  The character and degree of injury to, or interference
          with, public health, safety or welfare which is caused
          or threatened to be caused by the violation;

-------
                               V-48
     (iv)  The conduct of the person incurring the civil
          penalty in taking all feasible steps or proced-
          ures necessary or appropriate to comply or to
          correct the violation;

      (v)  Any prior violations by such person of statutes,
          regulations, orders or permits administered,
          adopted or issued by the Commissioner;

     (vi)  The economic and financial condition of such person;

    (vii)  The character and degree of injury to and inter-
          ference with the reasonable use of property which
          is caused or threatened to be caused by the violation.

     You should place a memo in the file stating that you con-
sidered these factors in each case, whether or not you' decide to
lower the assessment.  The Enforcement Act requires you to 'take
the factors into account and you may be challenged in a hearing
or in court on this basis.

     The use of economic-based assessments takes many of these
factors into account automatically, but you should still give
them consideration in each case.

     If you find reasons for lowering the assessment, you should
notify the Director or other designated decision-maker.


E.  IMPOSING
AN ASSESSMENT

     Section 504 assessments are levied in much the same way
as those under §§502 and 503.   All three regulations incorporate
the procedural provisions of §22a-6b-101.   Section 504 has several
unique provisions that must be kept in mind as well.

     If a permittee has violated the monitoring report require-
ments of its permit for one or more reports and an assessment is
to be levied,  the following steps should be taken:

     (1)   Make sure that the warning provisions of §504(c) (3)
          are met:

               a CA-504-W letter was sent within 90
               days of the report or reports in question,
               or

               the  permitee has continuously not submitted
               reports or submitted incomplete reports for
               a period of time and received a CA-504-W
               warning letter  for one or more of these
               reports,  or

-------
                                V-49
                less than 90 days have elapsed since the
                due date of the report.

      (2)  Make sure that one year or more has not elapsed since
          the due date of the report in question.

      (3)  Obtain the proper authorization for imposing an
          assessment.

      (4)  Fill out and send the permittee a copy of the
          Notice of Violation, CA-504-NV, by certified
          mail.

      (5)  If 20 days have passed since the permittee received
          the Notice of Violation and you have not received
          a request for a hearing, the Notice has the status
          of a final order of the Commissioner.  At this
          point, the right to a hearing has expired and the
          assessment is due in 5 days.

      (6)  If a written hearing request was received within
          the time limit, follow the procedures in the next
          section, "Managing a Hearing".  If a request for
          a hearing was received on time but otherwise did
          not meet the requirement of §101(b) — e.g., it
          was made by phone, etc. — notify the person as
          quickly as possible of the changes needed.

      (7)  If payment is not received by the 25th day after
          receipt of the Notice, send the permittee the
          Collection Letter, CA-504-C.
F.  MANAGING
A HEARING

     The Civil Penalty Regulations, §22a-6b-101(b), provide
that a person may, within 20 days after receipt of the Notice
of Violation, deliver to the Commissioner by certified mail or
personal service a written application for a hearing.  Given
the relatively small size of most §504 assessments and the
undisputable nature of most such violations  (a report was sub-
mitted or it was not, a report was complete or it was not, etc.),
there are likely to be very, very few applications for hearings.

     If a permittee does request a hearing, you should follow
the hearing procedures that are outlined in Chapter V of this
manual.  If a hearing is held, and the Commissioner affirms the
finding of a violation, you will be notified by the hearing
officer that you can proceed with the collection procedures
outlined below.

-------
                                V-50
 G.   COLLECTING
 AN ASSESSMENT

      Particularly  since  Section  504 assessments are small, the
 Department  should  not have any trouble with collection.  Other
 agencies with similar enforcement programs have not had any
 trouble.  However,  for the rare  delinquent case, the Enforcement
 Act  provides an easy collection  procedure.

      If a permittee does not pay his assessment by the date
 indicated on his assessment notice, send him the Collection
 Letter, CA-504-C.   If payment is not received three weeks after
 the  source  has received  the Collection Letter, the case should
 be turned over to  Mr./Ms.	.  He/she will refer
 the  matter  over to the Clerk of  the appropriate Superior Court
 which will  enforce the assessment through the Sheriff.

      When an assessment  is received, the check should be logged
 and  delivered to Mr. 	 in the Bureau of Adminis-
 tration, Financial Services, with the Transfer Letter that is
 attached at the end of this section  (CA-504-T).  Mr.
will have the check deposited in the proper account and will
provide you with a receipt for the assessment check which should
be placed in the permittee's file.


H.  UPDATING THE
ASSESSMENT LIST

     Section 504 (d) (1) requires the Department to revise all or
part of the "Monitoring Report Assessment List" from time to time
when it finds that the costs of monitoring have changed enough
to make the assessment list amounts so unreasonably high or low
that they no longer serve to encourage compliance with monitor-
ing requirements effectively.

     In order to satisfy this requirement, you must first deter-
mine whether the relevant prices and costs have changed sig-
nificantly since the most recent Assessment List was published.
This should be done by re-surveying a group of three to five
permittees and three to five labs that had been surveyed in the
most recent previous revision.   The current costs and prices can
be compared to the previous ones for the same permittees and
labs to see whether they have changed significantly.

     Such price checks should be made every year or so.  They
should be made at more frequent intervals if there are indica-
tions that monitoring costs are changing dramatically.  The
following are examples of such indications:  substantial infla-
tion or deflation in the economy in general; substantial inflation
or deflation in the cost of key elements in monitoring such as
chemical reagents,  lab technicians, etc.; and information vol-
unteered by permittees or labs about their costs.

-------
                               V-51
     If one of these cost checks indicates that there have been
significant changes in the costs of monitoring, a full cost
survey should be run.  This should be conducted using methods
that are at least as reliable as those used in preparing the
initial List.  The initial methodology is described in the CEP
file document, "Developing the Monitoring Report Assessment
List."  Particular attention should be given to obtaining
information from as many state-approved, fee-basis water labs
that handle all basic analyses as possible, and to surveying as
representative a sample of permittees as is feasible.

     The list of labs used in selecting those for the initial
sample came from the Clinical Laboratory Section - Laboratory
Division, Connecticut State Department of Health.  This list
may be obtained from Mr. Earl Thompson  (or his successor) at
the Department of Health.
I. MITIGATING
AN ASSESSMENT

     Section 504 does not have a provision regarding mitigation.
However, the Commissioner is empowered by §22a-6b(e) to mitigate
any assessment on the basis of factors he deems relevent, in-
cluding the following:

     (1)  the necessity of ensuring immediate and
          continued compliance;

     (2)  the impact of the violation on the public
          health, safety and welfare;

     (3)  the impact of the violation on the public
          trust in the air, water, land and other
          natural resources of the state;

     (4)  the impact of the violation on the reasonable
          use of property.

     YOU SHOULD ADD ANY INFORMATION YOU RECEIVE RELEVANT  TO
THESE ISSUES TO THE REGULATEE'S CASE FILE.

     If you feel mitigation is justified, please contact  the
Director.
J.  MONITORING REPORT
ASSESSMENT LIST	

     The first Monitoring Report Assessment List will  be  found
on pageV-53.  It will  be used  by the  Department in calculat-
ing civil assessments  for monitoring  report requirement viola-
tions pursuant to  §22a-6b-504(d)(1) of  the proposed Regulations,

-------
                                V-52
The List has been prepared in accordance with the requirements of
that section on the basis of a cost survey of companies with
permits that have been monitoring and a price survey of state
approved fee-basis water laboratories.

     The List can be modified by the Commissioner in accordance
with conditions and procedures set out in the Regulation
(§22a-6b-504(d)(1)} to keep it in line with changing costs.

     As required by §22a-6b-504(d)(2), this List, and subsequently
any modified Lists, will be published in the Connecticut Law
Journal before they are used.

-------
                                     V-53
               MONITORING REPORT ASSESSMENT  LIST
                            (September 1975)
Monitoring Requirement
(A) Sarroling
j. . grab sample*
2. composite sample**
(E) Delivery***
(C) Reporting****
(D) Analysis*****
General
1. Alkalinity
2. Biological oxygen demand
3. Chemical oxygen demand
4. Total solids
5. Total dissolved solids
6. Total suspended solids
7. Total volatile solids
8. Ammonia (as N)
1 9. K^eldahl nitrogen (as N)
10. Nitrate (as N)
11. Total phosphorus (as P)
12. Acidity
13. Total organic carbon
14. Hardness
15. nitrite (as N)
16. pH
Trace Metals

17. Aluminum
18. Antimony
19. Arsenic
20. Barium
21. Beryllium
22. Boron
23. Cadmium
24. Calcium
25. Chromium VI
26. Chromium total
27. Cobalt
28. Copper
29. Gold
30. Iron
31. Lead
$

8
15
4
7


4
20
15
8
8
8
7
11
15
7
10_j
4
24
5
7
3

12
12
14
12
15
16
11
8
11
11
12
10
7
9
11
Monitoring Requirement

32. Magnesium
33. Manganese
34. Mercury
35. Molybdenum
36. Nickel
37. Potassium
38. Selenium
39. Silver
40. Sodium
41. Thallium
42. Tin
43. Titanium
44. Vanadium
45. Zinc
Nutrients, Anions, and Organics

46. Organic nitrogen (as N)
47. Ortho-phosphate (as P)
48. Sulfdte (as 303)
49. Sulfide (as S)
50. Sulfite
51. Bromide
52. Chloride
53. Cyanide
54. Fluoride
55. Chlorine-total residual
56. Oil and grease
5'7. Phenols
58. Surfactants
59. Algicides
60. Benzidine
61. Chlorinated organic com-
pounds (except pesticides)
62. Pesticides
Physical and Biological Parameters
63. Color
64. Specific conductance.
65. Turbidity
66. Fecal streptococci bacteric
67. Coliform bacteria (fecal)
68. Coliform bacteria
69. Other analyses
s

9
9
18
11
12
10
18
11
9
13
14
16
17
11-

lS
8
6
6
7
10
5
16
11
6
15
17
12
26
36
36
32
4
6
4
114
13
12
12
* For every grab  sample required by  the permit or order for which no analyses
  are reported  on or before the due  date or the end of the  reporting interval
  specified in  the permit or order.
** For every composite sample required by the permit or order  for which no
   analyses are reported on or before the due date or the end  of the reporting
   interval specified in the permit  or order.
*** For every report not submitted on or before the due date of the end of the
    reporting interval specified in  the permit or order.
.**** For every  report not submitted  on or before the due date  or the end of
     the reporting interval specified in the permit or order.
***** F0r every analysis required by the permit or order for which no results
      are reported.

-------
                               V-54
K.  FORMS AND LETTERS:
SECTION 504 ASSESSMENTS

     The following forms and letters should be used in apply-
ing the assessments for violations of monitoring report require-
ments.

     *  Section 504 Assessment Checklist

     *  General Notice of Civil Assessment Letter
        (CA-502/503/504-GN)

     *  Assessment Warning Letter  (CA-504-W)

     *  Civil Assessment Notice of Violation
        (CA-504-NV)

     *  Civil Assessment Final Order
        (CA-504-FO)

     *  Collection Letter  (CA-504-C)

     *  Transfer Letter  (CA-504-T)

     Copies of these forms and letters may be found on the
following pages, with the exception of the General Notice
Letter which may be found in the §502 Forms and Letters section.

-------
                                        V-55
 Discharger:
                Name
           CIVIL ASSESSMENT  CHECKLIST:   SECTION  504


                  	            Order  No.  	

                                        DEP/WC No._

                                        NPDES  NO.
                Address
                Town
 Instruction  Manual  Reference
                                                          Initials
                                                                         Date
 IV(B)




 IV(E)

 IV(E)




 IV(C,E)


 IV(c,E>





 IV(D)

 IV(D)

 IV(D)




 IV(E)



 IV(E)

 IV(E)




 IV(F)

 IV(F)
 Due  Date  of  Report:
  /   /  Not  Submitted   /  /   Incomplete

 Computer Warning  Sent On: 	
Adequate  Report  Received Within  Two Weeks

  Yes  /7   No  /7

Warning Letter CA-504-W Sent On:	

Warning Letter CA-504-W Sent For Same
Violation on Earlier Report
 Yes //    No 	

Assessment Amount From List
Considered  Lowering Assessment  §504(e)

Recommend: / / Lowering by 	

 No Lowering /  /

Notice of Violation Sent Certified
On ..	

Date Return Receipt Returned 	
Hearing Requested Within  20 days.

 Yes /~~7   No /~7

Hearing Held On

Civil Assessment Final Order  Issued
On: 	

The Order  requires:
IV(G)



IV(G)


IV(G)
Payment Received On:
  On Schedule / /     Late /~7

Collection Letter CA-504-C Sent
On:
         Collection Referred To:
         On
         Assessment Mitigated?

           Yes £7     No £7

         Amount Mitigated	
         Amount of Assessment
         Reasons Recorded and Filed

-------
                               V-56

                STATE  OF  CONNECTICUT

        DEPARTMENT OF ENVIRONMENTAL PROTECTION
              STATE OFFICE BUILDING     HARTFORD, CONNECTICUT 06115
                                     Date
                            Notice No.

                            Order No.

                            DEP/WC No.

                            NPDES NO.
Dear

     The Commissioner of Environmental Protecti6n has  determined
that you failed to submit a monitoring report on:  	
that fully satisfies the requirements of your permit in that  the
report:	

The Commissioner may levy a civil assessment pursuant  to §22a-
6b(a)(1) of the General Statutes and §22a-6b-504  of the Depart-
ment's Regulations.   The maximum monthly assessments that could
be levied can be determined by reference to §22a-6b-504(f).

     If you take prompt action to come into compliance,  the
Department may decide not to impose this assessment.   We hope
not to have to take  such action.

     If you have any questions concerning this warning,  please
contact Mr. 	of the Water Compliance and
Hazardous Substances Unit at 566-3245.

                                 Sincerely,
                                 Director,
                                 Water Compliance and
                                 Hazardous Substances
                                 (CA-504-W)

-------
                                                  V-57

                             STATE  OF  CONNECTICUT

                 DEPARTMENT  OF  ENVIRONMENTAL  PROTECTION
                          STATE OFFICE BUILDING
                                                     HARTFORD, CONNECTICUT 06115
                                                                            CIVIL ASSESSMENT
                                                                                NOTICE OF
                                                                                VIOLATION

                                                                            No.  504-
lo:
        (Premise Name)


        (Premise AddressT
                                                                  Re:   Order  No.

                                                                  DEP/WC NO.  	

                                                                  NPDES
The Commissioner of Environmental  Protection has determined  that you are now in violation of the terms
of the above-mentioned ("1PDFS permit)  (Order).  This is a  Notice of Violation pursuant  to §22a-6b(d) of
the General  Statutes and Department  Regulations 
-------
                                                   V-58
                              STATE   OF   CONNECTICUT
                  DEPARTMENT OF ENVIRONMENTAL  PROTECTION
                          STATE OFFICE BUILDING
                                                     HARTFORD, CONNECTICUT 06115
To-
          (Premise Name)
          (Premise Address)
                                                                             CIVIL ASSESSMENT
                                                                                FINAL ORDER

                                                                            No. 504-
                                                                    Re:  Order No.

                                                                        DEP/WC No.

                                                                        NPDES NO.
Th= Commissioner of Environmental Protection has  determined, pursuant to  the finding of the Hearing
Officer  in  the civil assessment hearing held on _^__^_____^________	that the monitoring requirements
of iho above-mentioned (NPDES  permit) (order)  were violated,and hereby levies a civil assessment.
VIOLATION:
              Your permit  binds you to comply with the monitoring report requirements embodied  in  it.
              You have failed to comply with the  requirements in that  you  failed to submit a report
              required on  or before	/  /; you submitted a report that did not  include
              all the required data/  /.
              You are hereby  assessed S
                                                   for this violation.
AS^FSSMENT:

PAYMENT:       Payment of this civil assessment is due upon receipt of  this order.  Payment should be
              made by check  to the order of "Conn. Department of Environmental Protection" and  should
              be delivered  to:

                                         Director, Water Compliance and Hazardous Substances,
                                         Department of Environmental  Protection,
                                         165 Capitol Avenue — Room 129,
                                         Hartford, Connecticut 06115.

ArpnAL:        You have a right to appeal this civil assessment final order to the Superior Court for
              Hartford County.  This appeal must be taken within thirty days of the issuance of this
              order and shall be taken pursuant to the provisions of §4-183 of the General Statutes.

If you  have any questions concerning this ordar, please contact the Director of Wat^r Compliance and
Hj^ardous  Substances at the  above address or,  by phone, at 566-3245.  All correspondence should  be
identified with the Civil Assessment Final Order Number (see top right-hand corner).
   Siqned  (Director)
                                      Date
                                                               Commissioner
                                         SERVICE

  ropv of  the foregoing Order  was submitted to the  above-named ds indicated below:
      Ff>rc,onally delivered  to
                                                            Recipient's Signat»re


_'._7  Certified mail to the  usual place of business or residence.   Registration No.:
                                                                                           _/	/_
                                                                                            Date
                                                                                            RPD
                                                                           (CA-504-FO)

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                              V-59

                STATE OF  CONNECTICUT

       DEPARTMENT OF ENVIRONMENTAL PROTECTION
             STATE OFFICE BUILDING    HARTFORD, CONNECTICUT 06115
                                       (Date)
                      Subject:  Order No.
                               DEP/WC NO.
                  Notice of Violation No.
                                NPDES No.
Dear

    The Department of Environmental Protection has determined
that you were not in compliance with the monitoring report re-
quirements of an NPDES permit or order of the Commissioner and
has consequently imposed a civil assessment on you pursuant to
Department Regulation 22a-6b-504.   The Notice of Violation or
the Civil Assessment Final Order and the consequent civil  assess-
ment was delivered to you by personal  service or certified mail,
and payment of the assessment was due on 	.  Payment
is now over thr°e weeks late.

    The law provides that if the assessment is not promptly paid,
it may be enforced in the. same manner as a judgment of the Superior
Court.  Accordingly, if we do not receive your payment promptly,
the Commissioner will file his final order with the Clerk  of the
Superior Court.   Upon such filing, the order will have the same
stat-us as a judgment of the Superior Court and will be enforced
by the Sheriff accordingly.

    We expect to receive your delinquent payment no later  than
                       If we do not receive payment from you
by that time, we will be compelled to institute proceedings
with the Superior Court.

    If you have any questions concerning this letter,  please
feel free to contact me at 566-3245.

                                    Sincerely,
                                    Director
                                    Water Compliance and
                                    Hazardous Substances

                                    (CA-504-C)

-------
                              V-60

               STATE  OF  CONNECTICUT

       DEPARTMENT OF  ENVIRONMENTAL  PROTECTION
             STATE OFFICE BUILDING    HARTFORD, CONNECTICUT 06115
                                     (Date)

                      Permittee:
           Notice of Violation No.

           Amount of Payment:   $
Mr. (Anthony Montano)
Bureau of Administration,  Financial  Services
Department of Environmental Protection
Room 	

Dear (Mr. Montano),

    The attached check represents  payment  by  the  above-named
source for a civil  assessment imposed  pursuant  to the Depart-
ment's regulations  22a-6b-101 et.  seq.

    /  /  There remains a  possibility  that all  or part
          of this check may have to  be paid back  to  the
          issuer with  interest.   Therefore, please deposit
          this check into  the civil  assessment  pending
          receipts  fund and return a receipt  of such
          deposit to me.

    /	/  The issuer of this check has no  further oppor-
          tunity to appeal or seek correction of  the
          assessment that  gives  rise to this  payment.
          Please deposit the check into the General  Fund
          and return a receipt of  cuch deposit  to me.

                              Sincerely,
                              Water  Compliance  and
                              Hazardous  Substances
                              Enforcement Section
                              (CA-504-T)

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                               V-61
                        CHAPTER V
                  HOW TO CONDUCT HEARINGS
                 IN CIVIL ASSESSMENT CASES
    Disc^araers who receive notices imoosing civil assess-
ments have 20 days from the date of receipt to request an
administrative hearing on the assessment action.  Contested
assessments are likely to be extremely rare.  This Chapter
discusses the likely scope of any such hearings, the role of
the hearing examiner, and the issues and types of evidence that
will be important in hearings under §§502, 503 and 504.
THE SCOPE
OF HEARINGS
    The scope of civil assessment hearings and the burden on
the Department will depend in large part on the issues raised
in the request for a hearing.  There are two basic issues that
can be raised in civil assessment hearings:

    *  Whether the underlying violation of the Clean
       Water Act, Department regulations, an order,
       or a permit in fact occurred.  Questions will
       vary for each civil assessment regulation,
       because the underlying violations addressed
       by each differ.

    *  Whether the civil assessment was calculated
       properly.

    The Department can and should make every effort in the
pre-hearing period to get the person requesting a hearing to
state his grounds for r-ontesting the assessment as specific-
ally and in as much detail as is possible.  This will enable
the Department to dispose of all relevent issues at the
hearing efficiently.  If a hearing request asserts broadly
that the Notice of Violation is invalid, the Department may
have to shov.T at ^he hearing that the underlying violation
occurred and that the assessment was properly calculated in
all respects.   In contrast, if the hearing request can be
narrowed to specific reasons why the Notice of Violation is
claimed to be invalid, the parties can focus more efficiently
on the real issues.

-------
                            V-62
     The Department can use the Rules of Practice to help
define issues for hearing.  Section 22a-6b-8-2(a) directs
that answers to orders be both specific and detailed, and
that facts or assertions in an order that are not specific-
ally denied are deemed admitted.  If the Department is faced
with a vague request, it can ask the hearing officer — before
hearing -- to require a more detailed answer and to strike
vague claims.
     Constitutionality And
     Other Legal Issues

     Persons assessed may challenge the constitutionality
of the Enforcement Act or the legality of the Civil Penalty
Regulations in a hearing.  These questions are decided in
court, not in the administrative hearing room.  Neverthe-
less, the conduct of hearings can have an important bearing
on the final outcome of such challenges.  No case can get to
court without first going through a hearing.  The statute and
regulations have been carefully designed to avoid constitutional
and other legal objections.  IF THE HEARING OFFICER MAKES
CERTAIN THAT THE DEPARTMENT HAS FULFILLED ALL THE REQUIREMENTS
OF THE ACT AND REGULATIONS, SUCH LEGAL CHALLENGES AND SUB-
SEQUENT RISKS WILL BE KEPT TO A MINIMUM IF NOT AVOIDED COM-
PLETELY.
SECTION 502
ASSESSMENTS

    The following paragraphs discuss specific issues and
related evidence that will be critical in §502 hearings.
    Liability For
    An Assessment

    There are two aspects to the liability question:

    (1)  Is or was there a discharge to the waters of
         the state (started after May 1, 1967 if by
         a person or after April 10, 1973 if by a
         municipality)?

    (2)  Is or was a valid permit issued for the dis-
         charge in question under §25-54i of the
         General Statutes?

    On the question of the existence of a discharge, the
Department can produce:

    *  Reports or testimony by Department field in-
       spectors or engineers showing the date of
       initial detection of the discharge.

-------
                              V-63
     *  Correspondence from or notes on conversations
        with the discharger indicating the date the
        discharge was initiated.

     *  Testimony by the discharger, if the issue is
        not contested.

     *  Evidence such as building permit applications
        that show the date of construction of the
        facility that is or was the source of the
        discharge, in cases of new facilities.

     *  Reports or testimony by Department field
        inspectors or engineers that show that the
        discharge was not in existence on some date
        after the 1967 or 1973 deadline in cases of
        new discharges from old facilities.

     *  Rejected applications for §25-54i permits.

     The issue of a valid permit can be settled easily by
checking the permit files and having an engineer testify that
he checked the files and found no permit record.
     Correct Calculation
     of Civil Assessments

     If the Department must defend the specific assess-
ment levied, it will have to show that it calculated the
economic assessment correctly and that it followed all other
assessment calculation requirements in the statute and regula-
tion .

     With regard to the economic assessment calculation, the
Department must establish these facts:

     (1)  That the number of non-permitted discharges
          identified is reasonable.This number in part
          determines the maximum assessment that can be
          levied.   Neither the Clean Water Act nor §502
          sets a rule for determining what are separate
          discharges, leaving for the Department to
          define the number of discharges according to
          administrative practice.  That practice is
          subject to a reasonableness test, however.
          If the Department is not careful to identify
          all legitimately separate discharges, it will
          find in some cases that the civil assessment
          large enough to eliminate the economic benefit
          of maintaining a non-permitted discharge is
          unnecessarily greater than the statutory
          minimum.  Testimony by Department field inspectors

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                        V-64
     and engineers  that have inspected the non-
     permitted discharger  and documents such as
     inspection reports, engineering reports,  etc.,
     can be used to show that the number of dis-
     charges identified is correct.

(2)   That any flow  data, discharge analyses,  plant
     layouts and other  information used in estimating
     the cost of compliance were  accurate.  This can
     be  done with(TJreports of  sampling and analysis
     and (2)  testimony  by  those who prepared layout
     descriptions,  etc.

(3)   That the Department's cost estimating procedures,
     if  used,  were  properly carried out.  The Depart-
     ment should produce a copy of any cost curves
     used to calculate  the assessments,  plus back-up
     materials from Chapter VI of this Part,  and a
     file of any calculations that have been done
     to  update the  curves.   Special note should be
     made of the sources upon which the cost curves
     were drawn. If ad hoc estimates were used, the
     engineer making them  should  testify and/or
     introduce the  records of his work into the
     record.

(4)   That any cost  estimates prepared by represent-
     atives of the  non-permitted  discharges were
     reviewed and that  any modifications made in those
     estimates for  assessment calculation were reason~
     able.This can be done with testimony by the
     engineers who  reviewed the cost estimates.
     Price lists used in correcting cost estimates
     should be presented as should memos reporting
     on  phone checks of prices with equipment manu-
     facturers,  etc.

(5)   That the inflation rate,  cost of capital,  equip-
     ment life figures  and tax rate used to calculate
     the assessment are reasonable.   The hearing
     officer's task is  to  judge  fa")  whether the infla-
     tion rate was  selected and calculated in accordance
     with §502(b)(8)  using either the Wholesale Price
     Index or another recognized  index,  (b)  whether  the
     non-permitted  discharger is  a member of the class
     covered by the cost of capital figure used in the
     Department's calculations,  (c)  whether the average
     equipment life of  the control equipment,  if the
     Department has used a figure different from the
     15-year period specified in  the regulation, is
     reasonable, and (d) whether  the tax rate used is
     reasonable.

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                         V-65
     The Department should present a copy of the
     materials on inflation,  cost of capital, and
     equipment life in Part III of this Volume,
     together with testimony  explaining how they
     were used in the particular case at issue.

(6)   That the Department made an accurate assessment
     calculation using the above numbers.The hear-
     ing officer's job is to  judge whether the Depart-
     ment properly calculated the monthly assessment.
     The Department should present a copy of the WANG
     calculator print-out recording the calculation
     of the assessment level.  A copy of the detailed
     explanation of the formula used to determine
     assessments found at the beginning of the
     Economics Part of this Volume should also be
     included in the record.

(7)   That the Department considered the seven factors
     spelled out in §22a-6b(c)  of the General Statutes
     (regarding whether or not to levy the economics-
     based assessment,  or a lower one).   The first  and
     most heavily stressed of the seven factors  is
     "immediate and continued compliance."  Because the
     economics-based assessment is designed to be the
     lowest that wil]  generally ensure such compliance,
     the Department should show,  if it decides to lower
     the assessment, that the factors that led it to do
     so are either particularly compelling or that  a
     lower assessment will not slow compliance in the
     case at hand.   The Department should present any
     information used in evaluating the seven factors.

(8)   The length of the violation.   The hearing officer
     must determine whether the Department has ade-
     quately demonstrated when the non-permitted
     discharge began or was first assessable.   A show-
     ing that the source was  in operation at the time
     claimed and was discharging without a permit will
     generally be adequate.   The Department must also
     show that the assessment period does not include
     any time prior to  the effective date of §502 or
     more than two years prior to the date the viola-
     tion was detected  and the regulatee so notified.
     (The types of evidence that can be presented to
     show the date of  the start of the non-permitted
     discharge are outlined above in the discussion
     outlining the scope of liability for an assess-
     ment.)   The  continuing nature of the discharge
     can be  shown by testimony of Department field
     inspectors or engineers  who  inspected the dis-
     charge,  reports on samples taken,  etc.

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                               V-66
           After the Department presents its evidence on
           length of violation, the regulatee may try to
           show that the Department has included in the
           assessment period unreasonably long processing
           time.  Proof that the assessment period does
           not include delay that is the Department's
           fault should not be difficult to make.  The
           Department can produce testimony or statements
           to the effect that a report was processed as
           quickly as is generally done with reports of
           similar complexity and that a processing time
           of roughly the same duration was figured into
           the order schedule.   The information found in
           Part II  of this  Volume,  the  "Baseline,"  provides
           a firm basis  for such claims.
      Deferring Calculation
      Of  An Assessment	

      The Department may take the position at the hearing
 that not enough information is  available at that time to
 calculate the monthly assessment with reasonable certainty,
 and it may accordingly request  that the question of assess-
 ment calculation be deferred until more data becomes avail-
 able (e.g.,  from estimates based on an approved engineering
 report).   In this situation, the hearing officer may make
 findings  regarding other issues  (such as the existence of an
 illegal  discharge)  in the case and postpone any decision re-
garding the amount of the assessment under §502  (f)(3)(ii).

      Deferring part of a hearing under §502(f)(ii)  postpones
 a final  decision by the Commissioner,  and thus also postpones
 a regulatee's right to appeal.   Postponement provides valuable
 time for the Department to gather cost information  to demon-
 strate the reasonableness of a  proposed assessment.  This
 extra time also brings costs:   the Department cannot collect
 any assessment without a final  decision.   Furthermore, the
 maximum  assessment that can later be collected for  the entire
 time of  violation prior to the  reconvening of the hearing and
 issuance of a civil assessment final order is  $25,000.  These
 conflicting pressures — more time at the cost of delayed
 collection and a reduced maximum -- will probably work to keep
 the Department's use of postponement in balance.  Nevertheless,
 since excessive delay can seriously impair a regulatee's right
 to appeal,  the hearing  officer must be  sensitive to  granting
 unnecessary delay.  Generally,  (1) waiting until an  engineering
 report is available is reasonable,  (2) delays  over  a  year are
  suspect and require strong  justification.

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                             V-67
    Correction
    of Assessment

    The hearing officer  should also be made aware of the
correction procedure in  §502 (h).  This enables a discharger
that  is assessed to obtain adjustment of any final assessment
if  it can demonstrate that its cost of compliance or the length
of  the assessment period were less than initially assumed to
be  the case  in calculating the assessment.  The correction
procedure works to the benefit of the regulatee by authorizing
adjustment of an otherwise final assessment up to six months
after final  compliance.  If overpayments have been made, re-
funds are guaranteed with interest at the cost of capital
rate used in calculating the assessment.  This procedure
means that an error in the estimate of the  cost  of  compliance
used  in calculating the  initial assessment cannot have any long
term negative impact on  the discharger.   The availability of
this procedure allows the hearing officer to give the Depart-
ment more leeway in calculating the monthly assessment and
determining  the assessment period, since both can be corrected
later.  It is a useful alternative to the hearing deferral
device.
SECTION  503
ASSESSMENTS

     The following paragraphs discuss  specific  issues  and
related  evidence that will be critical  in  §503  hearings.


     Liability For
     An Assessment

     There are two aspects to the liability question

     (1)  Is there an abatement order or permit in
          effect?

     (2)  Has any term of the order or  permit been
          violated?

     The first question is a simple one to answer.  The Depart-
ment need only produce a copy of the order or permit in ques-
tion and testimony or a signed statement from the engineer in
charge of the case to the effect that the order  or permit has
not been revoked, etc.

    The second question is also rather simple to answer in
the most common type of case involving failure to comply with
the compliance time schedule specified in an order.  The sched-
ule generally requirec submission to the Department of reports or
verifications that actions have been taken by specific dates.  The
Department need only produce testimony or a statement by the engineer

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                              V-68
in charge of the case that the report or verification was
not received on time.  In cases in which a verification was
submitted/ but the step was not actually done, proof is easy
because these steps can generally be checked easily in the
field.  A field inspector's testimony or statement that the
verified step had not in fact been completed would be
adequate.

     In cases involving violations of permit terms  (primarily
operating and maintenance requirements) the problems of proof
will be more difficult.  The Department must show that the
requirement was violated, and for how long.  It has been sug-
gested that §503 only be used for permit O&M cases when there
is clear evidence of continuing non-operation or maintenance.
To make such a case, the Department might produce (1)  sampling
information indicating a continuing level of pollutants in
the discharge so high as to be inconsistent with effective
treatment and/or  (2) chemical purchase records or energy bills
indicating that enough key chemicals or power had not been
purchased to operate the treatment system.  Alternatively, it
night produce testimony or statements to the effect that fre-
quent inspections had been made over a period and that illegal
discharges were being made throughout the period.  Other relev-
ant evidence could include correspondence, memos from phone
conversations, and so on.
     Correct Calculation
     of Civil Assessments

     Whether the amount of the civil assessment is correct
or not turns on exactly the same issues and should be handled
in exactly the same way as a challenge to a §502 assessment
amount would be.  See the discussion of this above.
SECTION 504
ASSESSMENTS

     The following paragraphs discuss the issues and related
evidence that will be critical in §504 hearings.
     Liability For
     Assessments

     There are four aspects to the question of §504 liability:

     (1)  whether the challenger is subject to a valid
          order or permit that includes a monitoring re-
          port requirement.

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                             V-69
     (2)  whether the regulatee failed to comply with
         that requirement in such a way as to make it
         liable for a §504 assessment.

     (3)  whether the regulatee received a timely warning
         letter as required by §504 (c) (3).

     (4)  whether the assessment was levied within one
         year of the due date of the report(s) in
         question.

    To deal with the first aspect of this question, the
Department can produce the permit or order in question and
testimony or a statement by the engineer in charge of the
case to the effect that the permit or order was in effect
and valid at the time the violation occurred.

     For the second aspect of §504 liability, the Department
can produce any incomplete reports received and compare them
with the requirements in the permit or order.   It can show
that no report was received with the testimony or a statement
from the person responsible for logging in reports for the
discharge in question.

     The question concerning the warning letter can also be
readily answered.

     *  The Department must show that the §504 Notice
        of Violation was received by the regulatee
        within 90 days of the due date of the report(s)
        in question.   This can be done with the return
        receipt from the Notice of Violation which is
        sent  certified mail and the permit or order;  OR

     *  The Department must show that the regulatee
        received a §504 warning letter within 90 days
        of the due date of the report(s)  in question.
        This can be done with the return receipt from
        the warning letter and the order or permit; OR

     *  The Department must show that, although the
        assessment was  not levied within 90 days and no
        warning letter  was sent concerning the report
        in question,  the regulatee  had adequate notice
        from a prior  warning letter.  This requires a
        showing that  a  warning letter was sent concern-
        ing a previous  report and the report  and all in-
        tervening  reports had the same basic  shortcoming(s)
        as  the report(s)  covered by the  assessment.
        The Department  must produce a copy of the warning
        letter,  the report(s)  covered by it and all sub-
        sequent reports up to the report(s)  causing the

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                              V-70
        assessment.  It must also produce a record of
        the inadequacies of each report in this series
        to show that all failed to provide flow data OR
        all failed to report analysis for any other
        parameter covered in the Assessment List.  If
        no reports were submitted between the warning
        letter and the assessment, the Department should
        produce testimony or a statement from the person
        responsible for logging in the reports to that
        effect.

        The Department must show that less than one year
        elapsed between the due date of the report in
        question and the receipt by the challenger of the
        Notice of Violation.  The order or permit, and the
        Notice of Violation return receipt should be
        sufficient for this.
     Correct Calculation
     Of An Assessment

     Section 504 assessments are calculated simply by ident-
ifying the inadequacies of a report and adding up the approp-
riate assessment components from the "Monitoring Report
Assessment List-" To show proper calculation, the Department
need only:

      (1)  identify the separate deficiences  (sampling
          delivery, analysis, reporting) for which
          assessments are being made;

      (2)  produce the Assessment List used in the cal-
          culation and testimony or a statement by the
          person in charge of updating the list to the
          effect that the list used was the correct one;

      (3)  produce a worksheet matching the deficiences
          with entries in the Assessment List and summing
          the separate assessments.

      (4)  show by testimony or statements that the seven
          factors of §22a-6b(c) of the General Statutes
          were considered in regard to the question of
          possibly levying a lower assessment than is
          called for by the Assessment List.  Statements
          or testimony by the persons responsible for
          setting the assessment amount in the Notice
          of Violation should be sufficient.

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                              V-71
                         CHAPTER VI
              HOW TO USE AND UPDATE THE TOOLS
                EMPLOYED IN LEVYING ECONOMIC
                     CIVIL ASSESSMENTS
     This Chapter exolains (I)  how to obtain the information
•>ou will need to calculate economic civil assessments and
(2) how to use the Wang Calculator to simplify the process
of calculating assessments.  Tt is divided into four major
sections:

     *  Section A:  Determining the Cost of Compliance

     *  Section B:  Determining the Applicable Cost of Capital

     *  Section C:  Using Inflation Indexes

     *  Section D:  Estimating the Sources Income Tax Rate

     *  Section E:  Operating the Wang Calculator

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                              V-72
                         SECTION A
                    DETERMINING THE COST
                        OF COMPLIANCE
     Determining the cost of compliance is a critical step in
calculating economic civil assessments.  The cost of compliance
is broadly defined in the civil assessment regulations to in-
clude virtually every expense a discharger will have in meet-
ing treatment requirements established by the Department.  If
those costs are not accurately determined, the economic ration-
ality of the civil assessment program will be lost.  This would
make the assessments ineffective in some cases, and open the
Department to charges of arbitrary penalty setting which could
lead to serious legal problems.

     It must be possible to determine the cost of compliance
quickly and easily as well as accurately.  The process must
not take too much staff time:  the Water Compliance Unit is
already overburdened.

     The civil assessment regulations provide for a costing
approach that will provide accuracy at low administrative cost.
Moreover, this approach is backed by a provision in the regula-
tions that guarantees the regulatee the right to have the
assessment corrected once it comes into compliance — and any
overassessment returned with interest.  This allows the Depart-
ment to make relatively crude estimates initially when it does
not have much information to go on.

     This Section discusses:

          *  alternative procedures that can be used to
             determine the cost of compliance.  Different
             procedures will be most useful depending on:

                - how much information is available,
                  chiefly a function of how near the
                  regulatee is to compliance.  (It will
                  be easier to estimate costs after plans
                  and specs are available than when the
                  treatment approach has not yet been
                  defined.)

                - what costs must be estimated, chiefly
                  a function of what steps are required
                  to comply.  This in turn depends on
                  the nature of the water pollution
                  problem.  Treating metal finishing
                  wastes is quite different from limit-
                  ing runoff from a construction site.

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                              V-73
          *  sources of cost information and the short-
             cuts which may be used (1) to check cost
             information submitted by regulatees and
             (2) to estimate costs when little or no
             cost documentation is available.


PROCEDURES FOR DETERMINING
THE COST OF COMPLIANCE

     The Water Compliance Unit will have to use a variety of
different procedures to calculate the cost of compliance.
The types of water pollution control facilities or measures
it requires vary widely.  Furthermore, the required installation
and/or operation and maintenance reauirements can differ
significantly even among otherwise similar pollution control
cases.  To facilitate the determination of the appropriate cost
cf compliance for a civil assessment case and to achieve the
best accuracy for each particular case, the Department can
require the submission of vouchers, contractors' bid estimates,
r>.r.d preliminary and detailed engineering estimates.  In lieu
of such cost documentation, the Department can estimate the
probable costs based on completed engineering designs and
•••lans.  When neither cost information nor plans are available,
the Department can make rcugh estimates using generalized
costs and technological designs for particular types of water
pollution control cases.  The probable accuracy of the cost
of compliance determination in individual cases will vary
greatly depending on what and how much cost and design informa-
tion is available to the Department.

     The facility costs* and annual operation and maintenance
expenses vary greatly for different types of water pollution
control installations or procedures.   The facility costs
include equipment costs, installation costs  (including labor
and materials for piping, electrical wiring, site preparation,
and other activities), engineering services, contractors' fees,
and other items.  The annual operation and maintenance costs
include such items as chemicals, electricity, lab analysis,
labor for operation and repair, spare parts, and sludge hauling.

     The following subsections outline what you should do if
you must estimate the cost of compliance if good regulatee
cost estimates are available, if only preliminary data is
available, and if you must do all the work yourself.
    "Facility costs"  is the. term used in the §§502 and 503
    regulations to include all capitalized costs.

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                              V-74
     A.  If Cost Estimates
         Are Available	

     If the Department can get the regulatee to provide de-
tailed cost estimates, especially if backed by equipment lists
and component by component price quotes, its task will be
enormously eased.  It can require the regulatee to give it
such information under the regulations.  However, the regulatee
must be reasonably far along in the process of complying to be
able to provide such information.

     If such information is available:

          *  Verify the completeness of the cost itemiz-
             ations based on your knowledge of the pollu-
             tion control facilities generally required in
             such cases and adjust for the dimensions of
             this particular case.

          *  Spot-check current prices of major items with
             manufacturers, suppliers, contractors, or
             consultants.

          *  Compare the submitted costs, either for the
             entire pollution control project or for
             individual cost items, with the costs for
             comparable items in other cases.

          *  Estimate the costs of any omitted items
             using methods similar to those for verify-
             ing submitted costs and add them to the
             regulatee's estimate.

          *  Add on an appropriate percentage as a
             margin of error to hedge against the prob-
             ability of under-estimation.

               - Add 10 percent to contractors' bid
                 estimates.

               - Add 20 percent to detailed engineering
                 estimates based on finalized plans and
                 specifications.

               - Add 30 percent to "ball-park" engineer-
                 ing estimates developed in conjunction
                 with the preparation of preliminary
                 control/treatment designs.

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                              V-75
     B.  If Approved Plans and Specifications or Engineering
         Reports Contain Little or No Cost Information	

     (1)   If the regulatee does not provide much cost informa-
tion, first consider whether to prepare an itemized estimate of
the cost of compliance or rely on less case-specific alternatives,
Base the decision on the following criteria:

      *    Whether the cost items — either facility
           costs and/or operation and maintenance
           costs — are specified in such a way as
           to facilitate an itemized cost estimate;

      *    The time required to prepare an itemized
           estimate; and

      *    The availability of quick-estimating devices,
           such as cost curves and tables for the particu-
           lar type of pollution control requirements.

           — If an itemized estimate can be prepared
              with reasonable effort and administrative cost,
              determine the cost of compliance using the
              steps outlined in B (2) and B (3) .

           — If a quick-estimating device is avail-
              able for a case in which an itemized
              estimate would entail substantial
              administrative costs, use the quick-
              estimating device as outlined in C( 2)
              below.

           — If no quick-estimating device is avail-
              able in a case in which an itemized
              estimate would entail substantial
              administrative costs, use either of  the
              approaches outlined in C(3)and C (4) below
              for determining the cost of compliance.

      (2)  To estimate the facility costs based on  approved
engineering reports or plans:

       *    Determine current prices for the specified equip-
           ment, instrumentation, excavation and other
           facility cost items by:

            - referring to published cost curves,  or
              tables,

            - calling manufacturers, suppliers,  con-
              tractors, and consultants, and

            - using cost information compiled  in Depart-
              ment  files for the  same or similar items
              installed in other  pollution  control
              facilities.

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                               V-76
      *  Determine an appropriate add-on for installation.
         It will fall between 50 and 250 percent of the pur-
         chase price of equipment and instrumentation.  How
         large this add-on percentage should be depends on how
         much piping, electrical work, and site preparation are
         required in each individual case.  Relatively
         simple projects with few automatic controls and
         easy access to the outfall location will have
         relatively low installation costs.

      *  Determine the costs of any additional building
         which may be required on a square foot basis.*

      *  Add-on appropriate amounts for any other in-
         stalled cost items — e.g., easements for piping
         to a discharge location.

      *  Review your work to make sure you have not left
         out any major cost items.

      (3)  To estimate the annual operation and maintenance costs
based on engineering plans, either:

      *  Prepare an itemized estimate by:

          - listing the particular expense items in
            the individual case, and

          - determining the current cost of each item.

      *  Estimate the annual costs as a percentage of the
         installed capital costs using a factor typical
         for similar pollution control facilities.

      *  Estimate the annual costs by analogizing to the
         experience of sources with similar pollution
         control requirements.

      (4)  Add 20 percent to estimates prepared from detailed
plans and specifications and 30 percent to estimates prepared
from approved engineering reports to hedge against the possi-
bility of underestimation.
*  For most cases, a cost of $20/sq. ft. (in 1975 dollars) will
   suffice for estimating building costs.  This is an add-on
   rule of thumb often used by consulting engineers.  If you
   know that the building costs will be exceptionally high or
   low, adjust the figure accordingly.

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                              V-77
     C.  No Regulates Cost
         Data Available

     If little or no cost of design work is complete or
available, your job will be more difficult.

     (1)  Determine whether any quick-estimating devices -- i.e.,
cost curves or tables -- are available for either the facility
costs or the annual operation and maintenance costs for the
particular type of pollution control technology.  If such aids
are available, make an initial estimate of the cost of compliance
as outlined in C (2)below.  If no curves or tables are available,
estimate the costs by analogizing to similar pollution control
cases  (C(3))or by making a rough original control design or
prescription for the particular source and estimating its cost
(C(4)). If quick estimating aids are available for only part
of the total cost of compliance — i.e., for either the facility
costs or the annual operating and maintenance costs; or for
only a portion of the required pollution control facilities or
measures -- use the curves or tables for that portion of the
total cost for which they are available and estimate the re-
mainder using C(3)or C (4 ) .

     (2)  To use cost curves and tables:*

          *  Determine the appropriate values for the key
             cost variables in the particular case.

          *  Derive the facility costs and/or annual
             operation and maintenance costs from the
             curves and tables.

     An example will help illustrate this approach:  A metal
finishing plant with an untreated 60 gpm flow containing both
cyanide and chrome fails to submit an engineering report as
required in an order to install a treatment facility.  A set
of curves and tables is available (see "Sources of Cost Inform-
ation," below) which allows Department staff to estimate the
installed costs of metal waste treatment facilities, both with
and without cyanide and/or chrome treatment modules, quickly
and reliably.  To use the curves and tables, it is necessary
co determine:

     a.  the flow volume in gallons per minute of the
         cyanide rinses, the chrome rinses, and the
         total metal waste stream, and
  The  rationale behind the development and use of  costing
  curves and tables is discussed in Part III of this  Volume.
  The  Appendices of this Chapter outline the methodology of
  developing cost curves.

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                               V-78
     b.  which sludge dewatering mechanism is appropriate	
         for the purpose of costing based on two criteria:
         the flow volume and the availability of land for
         a sand drying bed.  If a sand drying bed is
         appropriate, determine the number of different
         metals and the total concentration of metals in
         the waste stream.

      If the cyanide rinse flow is 10 gpm and the chrome rinse
flow is 5 gpm, the following cost curves will allow Department
staff to estimate that the installed treatment facility, not
including provisions for sludge dewatering, would be $212,000.
The $212,000 figure is the sum of the costs of each treatment
module:
    Module                       Flow Rate   Installed Cost

    Cyanide Destruction            10 gpm     $  69,850
    Chrome Treatment                5 gpm        35,350
    Neutralization/Settling        60 gpm       107,000
                                              $ 212,200

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                                KEUFFEL a ESSER CO
(000
   Installed  Facility
   Costs*
   (Thousands of  Dollars)
   1           2     3    4567891
Treatment Module  Curves
                                                               1.
  10
              2      3    456789 10         20
    * Installed Costs =  2.75  x Equipment Costs
           30   40  50 60  0 80 9» 100
           Design Capacity

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                              V-80
     The staff would then go on to estimate the cost of sludge
iewatering from cost tables available for this function.  If
sufficient land is available for a sand drying bed and if the
total concentration of the four inetals in the waste stream is
43 mg/liter, the installed costs of the sludge dewatering
aechanism would be $13,820.  Thus the total estimated installed
cost for the metal waste treatment facility is $226,020.*

     The CEP, working closely with and relying heavily on Mike Harder
of the Water Compliance staff, has only developed a few such
curves and tables for Water Compliance.  This work has, however,
confirmed that this approach will work.  Additional cost curves
T-.-id tables can be developed as needed,  for some types of cases.

     (3)  To estimate the cost of compliance based on the costs
in one or more similar cases:

          *  identify one or more similar cases;

          *  identify the important differences between
             the assessment and reference cases that may
             have a significant impact on costs; and

              adjust  the costs  from the reference  cases  accordingly
              to  reflect the  particular characteristics  of  the
              assessment case.   To determine  the appropriate  amount
              of  any  adjustments or the cost  of  any  unique  cost
              items  in  the  assessment  case,

              -  contact manufacturers,  suppliers, contractors,
                 or consultants, or

              -  refer  to available curves, tables,  and  other
                 sources of current price  information  for the
                 particular cost items.

      (4)  To  estimate  the  cost  of compliance  based  on an original
control design,  it is  necessary first  to  determine  the  cost  itens
in the  particular case and,  second, to estimate the costs  for
each item.
* From  the  Sludge  Dewatering  Tables:

  A.  If the  flow  rate  is  less  than  200  gpm and  if  sufficient
      land  is available, use  the  costs for  a sand drying bed
      for calculating the  cost  of compliance.

  B.  Flow  (F) = 60 gpm
      Concentration  (C) =  40  mg/1
      Number  of Metals  (N) =  4

      The Installed Cost of a Sand Drying Bed  =
      $5.76  (F)  (C-N) + 1375
      $5.76  (60)  (40-4) +  1375
      $13,820

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                         V-81
*  To estimate the FACILITY COSTS:

     —  determine a probable control design adequate for
         the particular source;

     —  identify the equipment and other capital cost
         components which require specific pricing as
         distinct from those which may be subsumed in
         an installation add-on percentage;

         define the size, capacity, material,
         and other basic specifications re-
         quired in order to obtain current prices
         for the individual cost components;

         determine the costs of the specified items by:

         - using equipment and construction industry
           cost curves and tables;

         - calling manufacturers, suppliers, con-
           tractors, and consultants; or

         - using cost information from similar cases;

         - referring to cost lists kept in the unit.

         select an appropriate percentage add-on of between
         50 and 250 percent of the purchased equipment cost '
         to cover installation materials and labor —
         including piping, electrical wiring, and site pre-
         paration — engineering services, contractors'
         overhead and profit, and contingencies; and

         estimate additional building costs on a square
         foot basis.

*  To estimate OPERATING AND MAINTENANCE COSTS:

         itemize the annual expenses required to ensure
         adequate continued operation and maintenance, and

         determine the annual amount of each expense item by:

         - using information about current labor rates,
           chemical costs, electricity charges, and other
           costs;

         - using itemized accounts of the operation and
           maintenance expenses of similar pollution
           control facilities;

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                              V-82
            -  calling chemical suppliers,  electrical  power
               companies,  sludge haulers  and  other  suppliers
               of operating and maintenance materials  and
               services.

            -  using established contractors'  add-ons  where
               available.


     Staff Responsibility
     For Calculating Costs

     The Department will probably have to impose very few
assessments each year.  And, when it does,  the staff will
usually either be able to work from regulatee cost information
or use cost curves or tables.  However, a few difficult cases
will from time to time require the Department to invest con-
siderable staff time in order to make a reasonably reliable
cost estimate.

     Estimating costs, especially when there is little client
cost information available, requires engineering skill and ex-
perience.  Since only a small case load is  at all probable,  the
only way the Water Compliance Unit can develop such staff
skills would be for it to have two of its engineers handle all
such cost estimating.  (We suggest two be assigned this job
to cover for sickness, absences from the  office on field in-
spection, and staff turnover.)
SOURCES OF COST
INFORMATION

     There are four major types of sources of cost information
which may be used for determining the cost: of Compliance:


     (1) Manufacturers, suppliers, and distributors  of pollution
        control systems, equipment,  and  services;

     (2) Information on costs in other pollution  control cases;

     (3) Curves, tables, and other information  contained in
        Pollution Control, Chemical Engineering,  and other trade
        or industrial journals, EPA publications, independent
        research documentation, and other literature;  and

     (4) Curves, tables, and other quick-estimating  aids developed
        specifically for civil assessment costing.

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                             V-83

This section outlines how Unit engineers can estimate costs
using each of these sources of information.

     (1)  Manufacturers and Suppliers

     Most manufacturers, suppliers, and distributors of pollu-
tion control equipment, materials,  and services; most construc-
tion contractors and sub-contractors; and most consulting
engineers are willing to supply current price information or
to suggest sources of information upon request.  Due to the
current high rate of inflation, few publish price catalogues;
rather they prefer to quote prices  case-by-case using in-house
pricing guidelines.

     To minimize the administrative burden of phone calls to
manufacturers, suppliers, and distributors, the Department
should try to keep current price lists and cost information
from other cases on file.  Keeping  a list of supplier contacts
will also help when surveys are required.

     Similar
     Case Costs

     Cost data from similar cases is an excellent and easy
basis upon which early cost estimates may be built.  Un-
fortunately, the Department has very little cost data now in
its files.  It should begin routinely to collect such informa-
tion from its regulatees.  It has the authority to require
its regulatees to provide cost estimates and/or actual cost
information at every step of the enforcement process.  Doing
so would both create the data base to make cost estimation by
analogy possible and it would allow the Department to work
from the regulatee's data sooner in more cases than would other-
wise be possible.  When working from regulatee data, the De-
partment could use the cost information on file for analogous
cases or processes as one means of doublechecking the relia-
bility of the regulatee's estimates.*

     Published
     Sources

     There is a significant and rapidly growing body of pub-
lished material that can eliminate much of the work of the
cost-estimating.   This  section lists only  a few key sources;
the Department engineers assigned responsibility for making
cost estimates will have to keep on  top of developments in
this area.**
     When using cost data from analogous cases or processes,
     Department engineers should adjust for the  inflation  (de-
     flation) that has occurred between the date of the comparison
     case data and the current.  Either the Marshall and Swift
     Equipment Cost Index or the Chemical Engineering News Record
     Indexes  are particularly good yardsticks for this purpose.

     The CEP  has deposited an extensive collection of such materials
     with the Water Compliance Unit's  library.

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                              V-84
     Total
     Facilities Costs

     Because water pollution abatement controls typcially must
be tailored to fit the pollution-producing process closely,
there are relatively few cost curves or generalizable cost tables
that can be used for estimating the total installed facility
costs for either particular types of pollution control problems
or control technologies.

     There are, however, several important exceptions.  Several
cost studies have been done for municipal sewage treatment
facilities.  In addition, EPA sponsored the development by the
ICARUS Corporation of the BICEP program (Brief Input Cost Estim-
ating Program)  for the costs of sewage treatment plants and
the SICEMS program for estimation of the cost of sewer systems.
Further, some of EPA's Development Documents used in preparing
Effluent Guidelines  (and other studies) include curves which
relate total installed costs for actual installations to key
operating parameters.*


     Equipment
     Module Costs

     It is much easier to find reliable cost curves and tables
for components or "modules" commonly used in the many, varied
customized water pollution control facilities than it is for the
facilities themselves.  Computer programs have been developed
which give the installed costs of equipment modules and a few
types of pollution control systems.  See for example, the follow-
ing description of the computer program developed and owned by
ICARUS Corporation:  Capital and Operating Costs of Pollution
Control Equipment Modules - Volume I - User Guide, EPA-R5-73-023a,
July,1973.Volume II contains curves plotted for most of the
modules using data points generated by the program.

     Control modules cost curves and data are also published
periodically in trade journals and chemical engineering texts
and treatises.**
*    See, e.g.,EPA, Development Document...for Metal Finishing
     Segment of the Electroplating Point Source Category, EPA-
     440/1-75/040-a, April, 1975, p. 143.

**   See, e.g., Max Peters and Hans Timmerhaus, Plant Design and
     Economics for Chemical Engineers (New York:  McGraw-Hill,
     1967) pp. 435-510, 760-66; and K. M. Guthrie, "Capital Cost
     Estimating", in Chemical Engineering, March 24, 1969, pp.
     114-142.

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                              V-85
     Especially during or after periods of rapid inflation,
the cost estimates taken from such sources must be corrected
for inflation.  The Marshall and Stevens equipment cost index
is a reliable index to use for this purpose.   Similarly,
estimates must be adjusted uniformly to include installation
and other indirect costs that may not be included in some
module cost data.*
     Operations
     and Maintenance

     Operating and Maintenance cost estimates can usually be
derived from the same sources used to estimate either total
facilities or module costs.  They are typically expressed as
a percent of installed capital costs.  See, for example, the
operation and maintenance cost analyses in the EPA Development
Documents for specific industrial categories.
     Cost
     Curves

     It is possible to develop cost curves for broad classes
of cases.   Such curves would relate easily measured or typically
readily available variables   (such as the flow of water re-
quiring treatment and the concentration of particular pollutants
in the flow) to the cost of control.  Once such curves were
available, all that Department staff would have to do to estimate
costs would' be to plot the flow/concentration data on a graph
and read off the results.  The time required for estimating
costs would be cut to a tiny fraction of what it would other-
wise be.

     These cost curves would usually be for particular types of
pollution, e.g. metal wastes.  They would be drawn assuming
that control began outside the regulatee's plant, i.e. that
control was to be accomplished with add-on equipment rather
than tailored process adjustments.   Such an add-on approach
to control would be more expensive in most cases than individ-
ually tailored approaches -- but  (1) the approach would accurate-
ly reflect major differences between the amounts different
regulatees would have to pay to comply and (2) any overcharge
the Department collected could be returned after the mandatory
post-compliance correction guaranteed in the regulations.
     See  Peters  and  Timmerhaus  99-116  and Guthrie 114-116,

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                              V-86
     Industry- or module-specific curves would also be possible,
and some curves might well be based on plots of particular case
costs rather than those developed from an engineering model.
Mike Harder of the Water Compliance engineering staff and the
CEP developed a prototype set of model-based cost curves that
will allow Department staff to estimate installed facilities
costs in metal waste cases (roughly 40 percent of the recent
caseload).   Separate curves allow estimates for sources with
and without cyanide and/or hexavalent chrome among their metal
wastes.  See Chapter II of Part III [and the Appendix] of this
Volume for a fuller treatment of these curves.

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                            V-87
                         SECTION B
         DETERMINING THE APPLICABLE COST OF CAPITAL


    The cost of capital is defined as the price demanded by
tomorrow's suppliers  of capital.  Simply, it is the aggregate
cost of borrowing or otherwise raising money.  Also by defini-
tion, it is the minimum rate of return required to justify a
capital investment.

    The cost of capital is an important variable in the civil
assessment calculation for two reasons.  First, it is used to
discount the costs of compliance to a present value; and,
second, it is used to determine the assessment amount that, if
imposed monthly over the full life of a project, will equal the
present value of the costs of compliance.  In both cases it
works as a measure of the value to the regulatee of money over
time — how much it costs to make an expenditure now rather than
later  (and vice versa).

    This Section (1) discusses how to determine the appropriate
cost of capital rate for a particular case and  (2) outlines how
to update the table of cost of capital rates used in setting
individual assessments from time to time.
DETERMINING THE COST OF CAPITAL
FOR AN INDIVIDUAL REGULATEE

    To find the cost of capital for an individual source,

    A.  Locate the regulatee in the alphabetical listing
        of manufacturers in the Connecticut Manufacturing
        Directory and note the two-digit code next to its
        name.  This is the Standard Industrial Classifica-
        tion code number.  A sample source entry follows
        at the end of this explanatory section.

    B.  If a source is not listed by name in the alphabet-
        ical listing of the Directory, find the Standard
        Industrial Classification which most closely ap-
        proximates the type of regulatee with which you
        are concerned.  A description of these classifica-
        tions is found at the front of the Connecticut
        Manufacturing Directory, and is reproduced at the
        end of this section.  Note the two digit code.

    C.  Once you have the two-digit code, find the cost
        of capital from the following cost of capital
        table:

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                              V-88



         INDUSTRY-WIDE COST OF CAPITAL AVERAGES (1975)
SIC CODE
19
20
21
22
23
24
25
26
27
28


29
30
31
32
33

34
35
36
37
38
39

TYPE OF INDUSTRY COST
Ordnance & Munitions
Food & Kindred Products
Tobacco Manufacturers
Textile Mill Products
Textile Apparel Products
Lumber and Wood
Furniture
Paper and Allied Products
Printing and Publishing
Chemicals & Allied Products
Industrial Chemicals &
Synthetics
Drugs
Petroleum and Coal Products
Rubber and Misc. Plastic Products
Leather Goods
Stone, Clay, Glass & Concrete Products
Primary Metals Industry
Non-Ferrous Metals
Iron and Steel
Fabricated Metal Products
Machinery, except Electrical
Electric and Electronic Equipment
Transportation Equipment
Instruments and Related Products
Other Manufacturing Products
Non-Durable
Durable
OF CAPITAL
11.5 %*
11.46
11.28
11.57
10.79
10.69
12.26
11.17
11.67
11.86

11.37
12.65
11.96
11.28
11.17
11.57
10.98
10.78
11.17
11.76
12.26
11.57
12.06
12.83
11.96
10.69
*  Because no debt/equity ratio for this industry was available,
   this figure assumes the average debt/equity ratio for all
   industries.

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                            V-89
UPDATING THE COST OF
CAPITAL TABLE _

    The cost Of capital figures in the preceding table repre-
sent industry-wide averages derived from a weighted cost of
capital methodology.  This methodology will be explained in
some detail so that the table can be updated on an annual or
semi-annual basis to reflect changes in capital structures
and capital markets.

    To derive a weighted cost of capital for any industry
requires:

    (a)  the industry debt/equity ratio

    (b)  the industry cost of debt

    (c)  the industry cost of equity


    Finding The
    Debt/Equity Ratio

    The best source for determining the ratio between debt and
equity for any industry is the Federal Trade Commission's
Quarterly Report for Manufacturing Corporations.  To calculate
the debt/equity ratio for the various standard industrial class-
ifications listed in the cost of capital table:

    (1)  locate the balance sheet for a given SIC code

    (2)  add up all liabilities other than current liabil-
         ities (this is the debt component)

    (3)  locate the item "stockholders1 equity"

    (4)  calculate the ratio between debt and equity

    EXAMPLE;

    Debt;  From the balance sheet for "Stone, Clay, Glass Prod-
           ucts" which is reproduced at the end of this section,
           add up all liabilities other than "current liabilities'

                             932
                            2951
                             915
                              35
                                 * DEBT
    Equity;  From the balance sheet for Stone, Clay, Glass
             Products, find the entry, stockholders' equity.

                   Stockholders' equity = 11,064 = EQUITY

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                            V-90
   Debt/Equity Ratio
                             %
        DEBT      4833      30   (15,897 divided by 4833)

        EQUITY   11064      70   (15,897 divided by 11064)

        TOTAL    15897     100

        For this industry, the debt/equity ratio is .3/.7

    The FTC Quarterly Reports may not include all the industry
groupings that are needed to complete the cost of capital table.
If an industry is not included in the FTC report, there are two
alternative sources to use:

    (1)  Financial Dynamics, a business looseleaf publica-
        tion, gives annual financial analyses for selected
        industries.

    (2) The Internal Revenue Service's Corporation Income
        Tax Returns, a publication which includes industry-
        wide balance sheets.

Reproductions of the balance sheets from these two sources follow
at the end of this section.  Note that although the IRS publica-
tion date is 1969, an updated 1974 version will be available soon.
If you use either of these alternative sources of debt and equity
structure, calculate the debt/equity ratio in the same manner as
described above.
    Finding The
    Cost of Debt

    The cost of debt varies with (1)  changes in national interest
rates and (2) the risk of lending to each particular debtor.  Ex-
cept for a small number of extremely risky situations, most of
the variation in the cost of debt is a function of the first of
these factors.

    Consequently, for most cases the Department should simply
assume that a commercial regulatee has an "A" bond rating, the
statewide industrial average, and apply the interest rate then
prevailing on "A"-rated bonds to determine that regulatee's
debt cost.  The cost of debt to most companies does not vary
widely from the rate charged "A"-rated firms.  Assuming an "A"
rating in other words, does not cause the resulting assessments
to be significantly inaccurate.   it still allows the debt cost
component of the cost of capital to reflect the major swings in
interest costs, and it simplifies calculating the cost enormously,

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                            V-91
    All a member of the Department need do is determine what
interest "A"-rated corporate bonds yield in the market at the
time.  This information is available in the financial press
(e.g. Barron's), over the phone from a bank or brokerage house,
or from Standard and Poor's monthly bond summary.

    Very small or obviously risky companies may have a signific-
antly higher cost of debt.  In these cases, the Department can
require the company to report what it has had to pay for recent
loans, check its claims with the creditor, and use this figure
for the cost of debt.  This is clearly a much more time-consum-
ing option than simply applying the cost of issuing "A"-rated
bonds.

    Note that the cost of debt is the cost of raising debt now,
not the average cost of all a firm's outstanding debt.  Large
firms with long-term bonds issued years ago at 2 and 3 percent
rates of interest will have a low average cost of debt, but they
will not be deceived by this fact.  They know that they will have
to be paying current rates for any new investments they make.

    However, the time cost of debt must be adjusted for the
income tax deduction for interest payments allowed by the tax
code.  Thus, it will be necessary to multiply the interest rate
paid on "A" bonds by the reciprocal of the regulatee's income
tax rate (in most cases assumed to be 48 percent for corporations:
see Part III, Chapter IV).  After 48 percent of every dollar of
interest cost is returned to a firm as a reduction in taxes, only
52 percent (1-.48) of the pre-tax cost of debt remains.  For
example, if "A" bonds pay 9.03 percent interest before tax, to
determine a firm's true, after tax cost, one would multiply 9.03
by .52 to get a 4.7 percent debt cost.


    Finding The
    Cost of Equity

    Obtaining an exact cost of equity figure is difficult:
financial theorists do not agree entirely on the best method of
measuring it, and the effort to apply any measure to individual
regulatees can very easily become a dark and deep quagmire if
the issue is litigated.  Consequently, the Department will use
a very simple but well established approach.*  This approach
applies two simple rules of thumb:

    *  During periods of economic stability, investors
       expect an equity yield of from 2-4 percent above
       the cost of debt in order to compensate them for
       the added risk entailed in owning equity.  Given
    See, e.g.,Weston and Brigham's Managerial Finance.

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                            V-92
       the 9.03 percent example cost of debt,  this would suggest
       a cost of equity in the range of 11.03  - 13.03 percent.
       For ease of calculation, we will use a  simple rule:
       in periods when inflation is less than  6 percent per year,
       the cost of equity will be calculated as 3 percent above
       the then-current cost of debt.

    *  During periods of economic uncertainty, when pessimism
       is deep,interest rates high,and financial markets
       unstable, investors typically expect a  15 percent
       rate of return.  For ease of calculation  (and to
       err, if at all, on the conservative side) we will
       use a simple rule:  in periods of high  economic in-
       stability (as now —high inflation,low stock market)
       the cost of equity will be .calculated as 14.5 percent.


    Calculating A Weighted
    Cost of Capital	

    To arrive at a weighted cost of capital, it is necessary only
to multiply the cost of equity and of debt by  their respective
percentages of the industry's  (or regulatee's) capital structure.
Thus:

   {Percentage]  (Cost of ]  (Percentage"N  /Cost of]
   \  of Debty  V^Debt  J  \ of Equity^/  ^Equity ) = COST OF CAPITA:

In our example, this works out as follows:

     (.30)  (4.7) + (.70)  (14.5) = 11.57% = COST OF CAPITAL

    The above calculations should be repeated  for each industry
listed in the cost of capital table.  A sample worksheet, in-
cluding the example carried through in the above sections follows.
Similar worksheets should be used for each calculation.

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                             V-93
                 WORKSHEET FOR CALCULATING

              AN INDUSTRY WIDE COST OF CAPITAL




INDUSTRY:  Stone, Clay & Glass Products

SIC Code:  22                Percent of Total
                               Capitalization
DEBT:*

EQUITY:*

TOTAL:

COST OF DEBT:

COST OF EQUITY: 14.5%

COST OF CAPITAL: (%Debt) x (Cost of Debt) +  (%Equity) X  (Cost of Equity]

                   .30   x      4.7%      +    .70    x     14.5%

                   COST OF CAPITAL = 11.57%
4833
11064
T58~37
9.08% X
3£
70
TM
.52 = 4.72%
 * Source:  Federal Trade Commission:  Quarterly Financial
   Report.

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                                     V-94
State of Connecticut
THOMAS J. MESKILL
Governor
                                                               CONNECTICUT
                                                           MANUFACTURING
                                                                  DIRECTORY
                                                                          1973
                                                      Connecticut Labor Department
                                                          200 Folly Brook Boulevard
                                                      Wethersfield, Connecticut 06109
                                                                JACK A. FUSARI
                                                              Labor Commissioner

                                                             THOMAS J. HAGUE
                                                             Deputy Commissioner
                                                               Five Dollars Per Copy

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                                                   V-95
     SAMPLE ENTRIES  FROM THE CONNECTICUT MANUFACTURING DIRECTORY:
(•)  Tiny Features, Inc.
    637 Firmmgton Ave.. Hartford 06105
      Children's tabloid 	   27
(a)  Tipping Industries, Inc.
.   75 Schooiground Rd.. Branford 06405
      Water purifiers   ....         	  35
(•)  Til an Tool Co.
    113 Jetland St. Bridgeport 06605
      Plastic mold die*	  35
(a)  Tilan Tool 6r Die Co., Inc.
    3 Marshall St. Wallmgford 06492
      Tools; dies, gages;  stamping]  	   35
(•)  To-L« Machine Shop
    362 New Haven Ave , Milford 06460
      Machine shop                   	  35
(a)  Tober, A. W., Co.
    25 No Parade St, Stratford 06497
      Commercial printing               .      ....  27
(e)  Todd-C. E. A., Inc.
    Subsidiary of Combustion Equipment Associates
 .  61 Taylor Reed PI .  Stamford 06902
      Pollution control  systems           	     34
(a)  Tolland Fabrics, Inc.
    8 School St., Stafford Springs 06076
      Upholstery, drapery fabrics       	    22
(a)  Tolland Machine Co.
    Rt. 30, Rockville 06066
      Machine shop        .    	   35
(b)  Tollman Spring Co., Inc.
    Ronzo Rd., Bristol 06010
      Springs,  wire forms           	   34

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                                             V-96
          MAJOK  INDUSTKY CLASSIFICATIONS USED  IN  DIRECTORY
                    Based on the I9G7 Standard Industrial Classification Manual

            MANUFACTURING INDUSTRIES  IN SECTION II OF DIRECTORY
MAJOR INDUSTRY  19-OKDNANCE
Establishments engaged  in  manufacturing artillery,
small arms and related equipment; ammunition; tanks
and specialized tank  parts; sighting and  fire control
equipment, and miscellaneous  ordnance  and acces-
sories.

MAJOR INDUSTRY  20-FOOD
Manufacturing foods  and  beverages for human  con-
sumption and related  products, such as manufactured
ice, vegetable and animal fats and oils, and prepared
feeds for animals and fowls.

MAJOR INDUSTRY  21-TOBACCO
This major group includes firms engaged in manufac-
turing cigarettes, cigars and stemming  and redrying
tobacco.

MAJOR INDUSTRY  22-TEXTILES
Establishments engaged in any of the following opera-
tions:  (1)  preparation of fiber and subsequent manu-
facturing of yarn,  thread, braids, twine and cordage;
(2) broad woven fabric, narrow woven fabric,  knit
fabric and carpets and rugs from yarn; (3) dyeing
and finishing fiber, yarn, fabric and knit apparel; (4)
coating, waterproofing or  otherwise treating  fabrics;
(5) the integrated manufacture of knit apparel  and
other finished articles from yarn, and (6) felt and lace
goods, bonded-fiber fabrics and miscellaneous textiles.

MAJOR INDUSTRY  23-APPAREL .
Manufacturers of clothing and fabricating products by
cutting and sewing purchased  woven or  knit textile
fabrics and related materials such as leather,  rubber-
ized fabrics, plastics and furs. Also included are (1)
the "regular" or inside  factories; (2) contract factories,
and (3) apparel jobbers Regular factories perform all
of the  usual manufacturing  functions in their own
plant;  contract factories  manufacture  apparel  from
materials owned by others and apparel jobbers per-
form such  functions as buying raw materials, design-
ing and preparing samples, arranging for the manu-
facture of  garments from their materials and selling
the finished apparel.

MAJOR INDUSTRY 24-LUMBER AND WOOD
This group includes logging camps engaged in cutting
timber and pulpwood, merchant sawmills, lath, shin-
gle, cooperage stock, pinning and plywood mills  and
veneer mills engaged in producing lumber and wood
xii
 basic materials; and establishments engaged in manu-
 facturing  finished  articles made of wood  or  wood
 substitutes.
MAJOR  INDUSTRY 25-FURNITURE AND
  FIXTURES
Manufacturers of household,  office,  public building
and restaurant furniture, and office and store fixtures.


MAJOR  INDUSTRY 26-PAPER
The manufacture of pulps from wood and other cellu-
lose fibers and rags;  paper and paperboard, and the
manufacture of paper and papei board into converted
products  such as paper coated off the paper machine,
paper bags, boxes and envelopes.

MAJOR  INDUSTRY 27—PRINTING AND
  PUBLISHING
Establishments engaged  in printing by one or more
of the common processes, such as letterpress, lithog-
raphy, gravure, or screen; firms performing services
for the printing trade such  as bookbinding, typeset-
ting, engraving, photoengraving and electrotyping and
establishments  engaged  in publishing  newspapers',
books and  periodicals, regardless of whether or not
they do their own printing.


MAJOR  INDUSTRY 28-CHEMICALS
This major  group includes establishments producing
basic  chemicals and  others  manufacturing products.
by predominantly chemical processes. Products manu-
factured  by these firms are  in three  general classes:
(1) basic chemicals such as acids, alkalies, salts  and
organic chemicals; (2) chemical products to be used
in further manufacture such as synthetic  fibers, plas-
rlc materials,  dry colors  and pigments, and (3)  fin-
ished chemical products  to be used for ultimate con-
sumption such as drugs, cosmetics and soaps or to be
used as materials or supplies in other industries such
as paints, fertilizers and explosives.


MAJOR CROUP 29—PRODUCTS OF
  PETROLEUM AND COAL
This  major  group  includes  establishments primarily
engaged in manufacturing paving and roofing materi-
als and compounding  lubricating oils and greases from
purchased materials.

-------
                                                V-97
MAJOR  INDUSTRY 30-KUBHER AND
  PLASTICS
Mamifacliiring  from natural, synthetic or reclaimed
rubber products such as lues, rubber footwear, me-
chanical  rubber goods, licch and soles. Mooring and
nibber sundries. This group  also includes establish-
ments  manufacturing tires   Automobile  tire  repair
shops engaged in recapping and retreading automobile
tires are  classified in Srction  III, Auto Hep.iir Shops.
This group  also includes  establishments engaged  in
molding primary plastics for the trade and manufactur-
ing miscellaneous finished plavtic products.
MAJOR  INDUSTRY 31-I.EATHER
Tanning, currying  and  finishing hides  and skins and
establishments manufacturing finished leather and arti-
ficial leather products and similar products made  of
other materials. Leather convertors are also included.
tat liable motors ordinarily are included in this major
group, with the exception of electrical household ap-
pliances  (Major  Industry 36). Portable tools, both
electric and pneumatic powered, arc included  in this
major  group but  hand  tools  are  classified in  Major
Industry 34.
MAJOR  INDUSTRY 36—ELECTRICAL
  EQUIPMENT
This major group includes establishments engaged in
manufacturing machinery, apparatus and supplies for
the generation, storage, transmission, transformation
and utilization of electrical energy.  The manufacture
of household appliances is included  in this group, but
industrial machinery and equipment  powered by built-
in or detachable electric motors  are classified in Ma-
jor Industry 35.
MAJOR  INDUSTRY 32-STONE, CLAY, GLASS
  AND CONCRETE PRODUCTS
This major group includes establishments engaged in
manufacturing  flat  glass and  other  glass products,
cement,  structural clay products,  pottery, concrete
and gypsum products, cut stone, abrasive and asbestos
products, etc., from materials taken principally from
the earth in the form of stone,  clay and sand.
MAJOR  INDUSTRY 37-TRANSPORTATION
  EQUIPMENT
Manufacturing of equipment for transportation of pas-
sengers and cargo by land, air and water.  Products
include motor vehicles, aircraft, ships, boats, railroad
equipment and  miscellaneous  transportation  equip-
ment such as motorcycles, bicycles, trailers and mobiki
homes.
MAJOR  INDUSTRY 33-PRIMARY  METAL
       INDUSTRIES
Smelting and refining of ferrous and nonferrous metals
from ore, pig or scrap, rolling, drawing and alloying
of ferrous  and nonferrous  metals,  castings,  forgings
and other  basic products  of ferrous  and nonferrous
metals and the manufacture of nails, spikes and insu-
lated wire  and  cable. This major group also  includes
the production  of coke.
MAJOR  INDUSTRY 34-FABRICATED METAL
  1'HODUCTS
Fabricating ferrous and nonferrous  metal  products
nidi as mctaJ  cans, tinware, hand tools, cutlery, gen-
rral  hardware, non-electric heating  apparatus, fabri-
oli-d structural metal products, metal stampings  and
• variety of metal  and wire  products not  classified
cltvwlicre.
MAJOR  INDUSTRY 35-MACHINERY
Ktl:il>li
-------
            V-98
          uarterly
                  r
           SECOND QUARTER
               1974
             FEDERAL TRADE COMMISSION
sai
/at

-------
                                    V-99
ESIC    INDEX TO FINANCIAL STATISTICS BY INDUSTRY
                                                          Table -       Page
                     All Manufacturing Corporations         A           18


             Nondurable Manufacturing Corporations          I,J         66,72

20.          Food and Kindred Products                      A           18
21.          Tobacco Manufactures                           A           18
22.          Textile Mill Products                          A           18
26.          Paper and Allied Products                      C           30
27.          Printing and Publishing                        B           24
28.          Chemicals and Allied Products                  B           24
28.1              Industrial chemicals and synthetics       B           24
28.3              Drugs                                     B           24
29.          Petroleum and Coal Products                    c           30
30.          Rubber and Miscellaneous Plastics Products     C           30
             Other Nondurable Manufacturing Products        C           30
             Durarble Manufacturing Corporations             I,J         66,72

32.          Stpne, Clay and Glass Products                 D           36
33.          Primary Metal Industries                       D           36
33.1,2            Iron and steel                            D           36
33.5,6            Nonferrous metals                         D           36
34.          Fabricated Metal Products                      E           42
35.          Machinery, except Electrical                   E           42
36.          Electrical and Electronic Equipment            E           42
37.          Transportation Equipment                       F           48
37.1              Motor vehicles and equipment               F           48
37.7              Aircraft, guided missiles and parts       F           48
38.          Instruments and Related Products                E           42
             Other Durable Manufacturing Products           F           48
             Appendix Table                                             79
JL/  Each lettered table includes, in successive order, an income statement,
    balance sheet and ratio formatted balance sheet.

-------
                                                       V-100
                                                                               TABLE  D-2   BALANCE SHEET  FOR
                                                                                                           KSIC INDUSTRIES
                                                                                                                    (Million
                                                                                        Stone, Clay and Class Products
   4Q     1Q
  1973   1974
                                                                                                                       *)
                                                                                                                      1974
                                 ASSETS
Cash and demand deposits In th*  U.S	
Time deposits in the U.S.,  including negotiable certificates of deposit  ....
Deposits outside the U.S	

     Cash on hand and In  banks   	

                             !(1)  Subject  co agreements to sell	
                            (11)  Other, due In 1 year or less  	
                           (ill)  OcSer. due in more than 1 year  	
                               !(1)  Subject to agreements to sell	
                              (11)  Other. du« in 1 year or less  	
                             (iii)  Other, due in more than 1 year  	
Commercial and finance company piper of U.S. issuers  	 .....
State and local government  securities dug in 1 year or less	
Foreign securities due in 1 year  or less	 .   .  •
Other short-tern financial  investments including bankers' acceptances 	

     Total cash, U.S.  Government  and other securities 	

Trsde receivables from U.S. Government 	
Other trade account* and trade notes receivable (less allowances for doubtful
  receivables) 	

     Total receivables	

Inventories 	
Current assets"not elsewhere specified 	

     Total current assets  	

Depreciable/and amortizahle fixed assets, including construction in progress .  .
Land and mineral rights  	
Deduct:  Accumulated depreciation,  depletion, and amortization 	

     Net property, plant, and equipment   	

Non-current assets not elsewhere  specified, including Investment in non-
consolidated entities, other long-tern Investments, intangibles, etc.  .....

     Total assets 	


            LIABILITIES AND STOCKHOLDERS' EQUITY

                                                      Is. Loans from banks . .  .
                                                      b. Commercial paper . .  .
                                                      c. Other short-terei loans
Advances and prepsyments by U.S.  Government 	
Trade accounts and trade notes paysble 	 ....

Income taxes accrued,  prior and current vears. ner of paymentsj ' ...       ' *

Installments, due in 1 year or lefts,  on long-term la.  Loans from banks  ....
debt                                             (b.  Other long-tern debt   .  .
Current liabilities not elsewhere specified. Including excise and sales taxes,
and accrued expenses	

     Total current liabilities 	
Long-term debt due in more  than I year   j ••  Loan« '«• eanks	
                                        | b.  Other long-term debt	
Non-current liabilities not elsewhere specified. Including deferred Income taxes
Minority stockholders'  Interest in  consolldsted domestic corporations	

     Total liabilities 	

Capital stock and other capital   	
Retained earnings 	
Deduct:  Trcssury stock,  at  cost  	

     Stockholders'  equity 	

     Total liabilities and  stockholders'  equity 	


                     NET WORKING CAPITAL

Excess ef current assets  over current liabilities 	
   642    424
   217    J56
     3	3
   (62
    12
    44
    12
     0
    17
     1
   237
    *4
     7
    38
   6S3
     0
    45
     9
     1
     7
     0
   122
    39
     «
    31
 1.27S    965
 3.248  3.433
 3.252  3.442
 2,930
   540
 3,302
   594
 8.017  8.302
16,640
   738
 8.422
16,974
   805
 8,543
 8,956  9,236
 2.127  2.189
19.101 19.727
   469    142
   197    133
    39     52
     0      0
 1.314  1.281
   311    328
    45     51
   162    149
   227    214

   916  1,058
 3,681  3,829
   116    932
 2.763  2,951 .
   842    915
    46     3S
 8,148  8,663
 3,362  3,441
 7.863  7,902
   272    279
10.953 11.064
19.101 19,727
                                                                                                   4.336   4.473
             396
             197
   602
     2
    36
     4
     0
     2
     4
    69
    33
  '   2
    20
                    775
                     35
                  3.730
                  3.765
 3,510
   523
                  8,572
16,924
   879
 8,531
                  9,273
                  2,181
                 20,026
             686
             181
              58
               1
           1,402
             277
              45
             144
             274

           1.122
           4,190
             913
           3,040
             916
              34
                  9.094
           3.419
           7.806
             292
                  10,933
                  20.0.26
                                                                                                                      4,382
    Included in Primary Ceta.1 Industries.

-------
Financial
DYNAMICS
  C..^-J VtU-Cicw
 NOUSIRt RELATIVES
  EKnl P S Pr«
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          -INDUSTRIALS-
ANNUAL FINANCIAL ANALYSIS
                                                                                                    •UltOINC HT«tS-CIHENT
                                                                                                    AMCOKD INC
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SO. 43 45
1974 STATEMENT OF FI*COND— 1965
2 III N,I Incline! till/On Dpi 5.8
Nl II] OlpiKillion& Amort 6.8
51 5 Chj.nLTOiPId -2.0
T2 7 fclf olP.oo Punii Equ.p Nl
12 1 Pld On.oinoi 0.7
127 .120 C.B.m E.o.ndn^ri 5.4
6 121 Cnq in Invtmninti Nl
219 122 Ch.mWorkmt CioiUl -0.2
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3J 0 Ol 0 124 NeitiPiiibit NA
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61 8
62 63
160 154
10 17
1.4 1.4
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451 42
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12| 12
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391 41
9 7
6 4
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18 125 Currfnl Portion 1 TO Nl
9 125 LTD 22 .4
67 Ul PtiiVtiui Ltw Obln Nl
121 UnldPtntL.'-VMltn Nl
164 129 Unlit 'mi ij-KC Nl
|9 UO Toul ll>tt»4 Oftl 22,4
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3 139 Pn-Bn-A,,G.AB.li 4,.7t
3 140 I/T Rtl-l«i|Gi Anu 3.21
0.571 0.75| 0.92 INVESTED CAPITAL 	
15-11' 9- 5'5- 3 1*1 Y-Elnvemi!C.p,lii'/3 23.03
11 6 3 142 SilH Pti I A*) inv C» 0.64
146 168; 190 143 PT flu on A^ In. CM |.U
1.83, 1.97
3i 2
0. 55J 0.55 0.55' O.SSi 0. 28 0.00; 0.00 0.20
7 Or 40X) 461. 98t' «0t! Ot OX Ot
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7.4
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56. 66
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AS \ OF SAP INDE
41| 291 19
4* 21 '34
102 2071 102
91 137! 66
8 130
1.94 144 A,T AclonAv; in, C«B 6.6X
L_ 2 145 l-l Common Eqiy P/S 13.66
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NA 1S6 Si'«P«r $ A«9 RcccMbllt 9,80


NA 160 MMVXSMlO/SlSM.1) 46
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51
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5.8
5.8
u DOLLARS -000.000-
19691 19701 1971
-4.0J 4.3! 2.8
a.i! a.oj 7.-
-7.4J Nil NA
5.7^ 2. B 0.0
Nlj Nl NA
Ni, NA' NI
3.3) l.T
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Nlj Nl
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NA
Nl
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14721 1913
4.6l 5.»
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Nl, Nl
-4. a! -7.3
Nil -2.2
Nl1 1.0
o.oj o.o o.o
14. l| 11.81 1.9
Nl| Nil -1.4
0.5. 5.7 -1.5
16.3. 22. Si 12.51 1.5
7.3 5.4) 7.3 6.4
75.2 75. 81 71.3 64.6
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Ni, Nl
Nl| Nl
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Nli Nl^ Ntt
Nl| Nl' 5.0
Nl Nl. 10.0
103.8 41. l! 84.5
Nl Nl 23.2
Nl, Nl. 35.1
26.9, 21, T 18.8
2.4J 2.3 2.Z 2.4. 2.5
1.9l l.S1 1.51 l.ai 1.9
305i 311 315- 303 299
255i 267 281J 274i 276
2. 41 2.81 1.8C 3.5X, 4.3X
3.21J S.6X 2. 71 4.1< 4. It
1.4X1 1.4X< 0.91 1.41. l.lt
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198| 211! ' 222 215; 218
55.51 54.it! 56. tt 54.71 54.41
0.691 0.65! 0.611 0.661 0.74
4. It 3.9*1 3.4t J.4.T, 3.3X
1.6C 14.8V 6.5t S.4X' 4. It
6,95) 6.01' 6.42: 7.37; 8.34
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NH -0.451 -4.10I 2.961 UK
5S 44) 33, 171 24
21 12 I O 8 3
35.7 26.4 26. fc| 21. 81 12.9
6.0 6.0 6.0 6.1, 5.7
6.0 6.7 6.0 6.01 5.4
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7.9X
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7.29
17
2
10.2
J.7
6.4

-------
                       V-102
MOODY'S
 INDUSTRIAL
 MANUAL
                                          1974
                                          VOL.1
                                          A-I
            ROBERT H. MESSNER, Publisher
            HENRY PORRECA, Ass't Publisher

            ROBERT P. HANSON, Editor-in-Chief
            Editorial Board

            ROBERT W. BURKE
            KENNETH W. CLIFFORD
            BRIAN T. COFFEY
            RICHARD B. DAVIS
            ALFRED C. ELL1NCHAM
            ALBERT C. ESOKAIT
ERWIN W. KAUFMAN
HOWARD C. KIEDAISCH
JOSEPH B. LEIGH
JOSEPH J. NESTO
FRANK R. PLATAROTE
MICHAEL A. RABBIA
                       FOUAD F. SHAFIK
         MOODY'S INVESTORS SERVICE, INC.
         99 CHURCH STREET, NEW YORK, N. Y. 10007 (212) 267-8800
                  SEE FOLLOWING PACE FOR COMPLETE LIST OF OFFICES
              Copyright © 1974 by
              MOODY'S INVESTORS SERVICE. INC New York
              All right* reserved.

-------
                                                               v-103
                                       J/OOUl  A  IMJL'MHIAL  MA\UAL
                                                                                                                                        615
 t*l-Att  •««  »»»«»*ert*ea: Comp«r\j  und  i\»b-
 Ji^rics  ofnrair •  iiMnl ol «I plants  having
  inmL>nt.d   fl.'Or  «p»ee  o(  *b.,ui  5 (Mb (H*
 (.i.-»rr ut-i  pluiiit mrv Ji-.-m'-d M. riden  Wal-
 .(.furij   Hi id i.«-port   t Otm   Cim .HO,   111 .
 hoi IMX  Aru  JliTimnrri.in.  Ala  rto^ al  Oak.
 irh   Tipion  Butler,  M.i'.r.t;   Lafa>ette.
 .4     Ca.i*hirhoi  ken    \\ttkrs Rarre     Pa ,
 A«e»*ilie  RohlM-nMille N  C  \r-fi. er»  Port
 • •.h.ngton  Ml \ernon Wt.'f-lo  .V  Y  Dil-
 S  «an  Ans--io   El  Haio   7e**l   Covlna.
 inoca Park  L<'.  Angi In  C»H(   Hol.iw.ontl.
 tt>  FU  Psj.-rton N J   LouiixiMe Kv  Si
 juu. Mo  Old !..  T. nn   Virneapotts.
 inn ,   Barne   Ontario.   Hot yoke.   Mass ;
 hatham  Va  and  Taiwan
 Companj al«o operales 19 re-»n stores for
 attribution  ol H*  coaling *nd -. J-n-r*..cat prod-
 CU m major cil.o In Iowa.  Wisconsin,  Mil-
 mrl. California and HaualL


 Times  Wire It  Cable  Co   (wholly-owned I
 •anufactures conxial  cable  for  community
 llenna  television and  engin< '•red  v% ire  and
 ible  and  conn«-ctors  for  «jp--ri»iiit*d  elec-
 •C-ntc appliC4itlnn«  plants  located In Walltng-
 jrd  Conn  and  Pho»nui  ArU
 '*   H  Hutch.nton  A Son  Inc   (wholly-
 w-ned!  Pnnci?«l  prod-icl \i tiottl* cac»  AJso
 o«s  corr-mercial dccoratintj for  manufaetur-
 n o( ^arll>us types of  container!  loyi  and
 ther  U t h<'graphed  Hems  Plants  at  Chicago.
 1|   and  Birmingham  Ala

 f  «.rmi- fabrics ted  and  Iinlsrx d  norfi-rrou*
 ill!  prtxlucts  Massasott Trading   Company
 whollj   o*ned  by MHM  lndu«'rlesl  manu-
 actures  compnnents  used ID the  proreis ol
 ipholMerma Jurnllure
 Steel Pjrt»  Corp  (« holl> -o^nedl  V.inufae-
 ures bu-hings door htnges clutch plans (or
lUlomotiwes  tnduitry  Plant  »t  Tipion   Ind
 Peerless  V, Ire  Coodi  Co.  Inc   Lafayette.
 nd    (wholli'  o*«-ni-d)   manufactures   wire-
 oated racki  for dish washers  etc.
 Hawthorne  Ntelal  Products Co   f wholly-
•wned)  manuficturej large metal stampings
 or  automotive  Industry   plant  located  at
loval Oak  Mich
 Taylor  Publishing   Co    (vrhollr-owned*
vcrtd'i  largest  manufacturer of high  school
ind college  yeartx>otts  PUnU at Dallas  and
Un  Angelo   Te* .  Covlns,  Cal .  El  P*io.
fe*  and Juarez  Mexico
 International Graphics  Inc  'wholly-own*
                                                   D  U  BlaU. Pr*«.  and Chl.f E*«c.  Off-
                                                     icer
                                                   J  B  Si«%*-ni Evec  Vice-President
                                                   L  J D<-Ccwr«e  E«ec  X'icf Prr»ld*nt
                                                   J  D  Sh»*  \ ice-Preitdent
                                                   J  W  Tyytor  Jr   Vlrt-Pr-sldrnt
                                                   H  E  B-jruU Virc-Prcod'-nt
                                                   M W  Fil> mtan Vlcv-Pre^ldent
                                                   W  M Lynch. Vice  President
                                                   H  W  Btrtin*. Vice Pr«  & Gen. CruL *
                                                     See
                                                   D  J  (Urper  Vle^-rrr^ldrnt
                                                   A  R  \fcolff  Vtce-Prrndenl
                                                   R  E  Purilcy. V1Ce-Pr*«
                                                   W  C  ii*<-r  Controller
                                                   C  E  Pete^on.Jr Vlce-Prea. (Fin.)
                                                   W  J  Ambers. Treat.

                                                 Director?:
                                                   J  W  rtrld  ralrrteld Conn.
                                                   J  D  Shaw. Mertden  Conn.
                                                   J  B  Sle<.«nt  \ialhn«r<>rd. Conn.
                                                   D  £  Nobla  Woocter Ohio
                                                   C  C  Davis  New  York
                                                   M Q  Fiterrnan Minneapotli  Minn.
                                                   D  H  Blatt  U'alljnford  Conn
                                                   r  J  Manhelm  New  YorH.  N  Y.
                                                   J  H  Tumlin^on  Danhurj   Cunn,
                                                   J  W  Tavior  Jr   D«lUi Tex.
                                                   C  E  Lord  Hartford  Conn.
                                                   L  J  DeCeorfc. Che*hire. Conn.
                                                   W  G Dillon  New York
                                                   J  W  Taylor
                                                   A R  V.oilt, WtnneUta IU.

                                                 Audlt«ri- pHc* Waterhou** & Co

                                                 Annual M^ftlnf. Lait  Wednesday In April.

                                                 M*.  •!  Stockholder*-  Feb  22. 1974   Aeries
                                               A preferred.  1.W4.   •%  preferred,  328 com-
                                               mon   16952

                                                 N«  «f  Kmpl«ye*a:  D«C. 31.  1973. 9.5T1.

                                                 Main Office:  1000  Keieareb  Ptway . Mcr-
                                               tden. Conn  0*450
                                                                                              Net eurr  •»>«-«• ..
                                                                                                l*'I
                                                                                              Olio
                                                                                                              ....
                                                                                                     r of .0*1 Or mht
                                                                                                                       O S17 i7l 11972 US 171)
                                                                                                                       f no par *h»  .ft 42J -
                                                                                                                           Dec.  11. W3. IS.-
                                               0#*.  11  (SOOO omitted}
                                                                      1973    an
                                               Net «ale-i	    US 700
                                               Other Inc    	      4 93%
                                                  tal  ...........
                                               COM  o(  tales  ...
                                               Sell  etc . up  .
                                               D^orec   ...... ,.
*J Tsy)or  Pnhlt.hlngJ  print* postcirds  bro-  '"
:nujes  (Ir-inciaJ  publications  Plsnt In Hcl-  ^
                                                 Enc  ta»es
  Holt*  Greeting  Cards  Tnc  ( wholly -owned
ay Taylor F'J^liirifrg > produces crrrtlng c^rds
ind  penonalued  itallonary  Plant  In  C*nog«
Park Cat
  Stewart  Stamping Corp   (whoUy -o wnerf)
M»nuf»cturtj   it*mp*d   m*til  and   ulre-
formrd products  for electronic and e'fctrical
UidMitr(»-a  Plant at Yonkeri  N  Y
  American Component* Inc  ^^ holly -o-*Tted !
Manufarturet  thin  film  re«!*ton  and  chip
eapacitatot*  Plants at Conihohocken.  P« and
Ha>«vHI« N C
  World T»b)e«ire Corp (whnHy -•>«-red).
OWTH  coriirr«!Ung  irlereat  \n  lT.ier"»tlon»l
Tableware   [ndustrial  Corp  (Taiwan   Jub )
m-hieh manufactures sU Unless  iteel flatw*r«

  Enterpriie P»lnt M/e  Co  fDlv  of Insllco
Corp )  makef  paints   varnnh*^  and  related
prodjctj /or consun-er  u<* Also hobbv-rrafts
and   Industrial   maintenance  »nd craning
Chemicals  PUnU in Chicago and  Wheeling

  Sinclair  Paint  Co  (Dlv  of  Tnstlco  Corp )
manufactures  pelnt and also  ^lla wall eov-
ermgt Plant In Los Angeles  r«lU
  Red  Devil  Paints,   Inc   (Dlv   of  Insllro
Corp )  manufacture*   paint.  Plant   !n  Ml.

  McOon»ld  Products  Corp  (wholly  owned)
manufacture*  office and desk  lop accessories
PtanJ .n Puff-lo  N  Y
  Fri5rh A  Co (Dlv  of In.llco Corp )  manu-
factures paints   Plant  U  In Patcrson.  N  J
  Zephyr- American   Corp    (whoILj -owned!
makes  dr»ktr,p rotary  card flies:   Index sv»-
lem« and nther office  devices.  Plant  located
In Moca  PR                       ,  ,    ,
  Miles  Hr-mei  Co   provides  *n  1ndlvlrtu»l
with the plans,  material*  and  gutdanre  to
build Mi own home  PUni« loratrd ir. Mmn-
t«po)li.  Rtinn  , Wllkes-Bjrre.  Pa and Butler,

 ^Tobey Color Cards, Co enr«g*^ In diitrtbu-
tion  a*  color  cardi.  color book*   and fabric

  Connoisseur Sludlot Tne manufactures hnb-
by cr«fl» in P>""1 located In UouiivUi* Kf
  A A- B Tw\ Co  manufactures tooii In  plan!
In Old KlrWory Terut.
  J.inl  Venture: In Nov  1917  Times  Wire
»nd Cable Co . iubildiarr completed negotia-
Net  ,nt«r»i« . ..
Prev  ret. earn.,
l"r  p(d  divg  	
2nd  ptd  divi  ..
Com  divi  tc»sh>
Pfrt  ttk  reTired
Pool  Int  adj  ._
TDeblt   	
Retain   earn
TEarn
                                                                   371
                                                                   24S 1T«
                                                                    TIK7
                                                                     • 013
                                                                    11 4»
                                                                    15012
                                                                    4t,S12
                                                                        75
                                                                      941
                                                                  E57 121
                                                                             1U313
                                                                               300«
                                                                             341 321
                                                                             zzr vn
                                                                              72.304
                                                                               7.C32
                                                                               7.970
                                                                             ffi \.300
                                                                              12044
                                                                              45.494
                                                                                 75
                                                                                941
                                                                               t.410
                                                                                   I
                                                                                ArM
                                                                               {IS02
                                                                              49512
i  enrfe^

   HT1
 ZS7 592
   1 050
 118 422
 140.40 2
  fil 4*0
   7 5i«
   728J

   3J3RO
  106AS
  4J.33S
      71

   • 273
                             .     .               m       ecsiiSitn
                     for eornpwr Jii% «* purpusvsi.

                       i.*nfl  Term tlefcfc  Out^t«  Dec 31  I9T3 {«*-
                     chnlintf  I'm r«-«»|  portion)   3L2 ^03 OOO  mentor
                     lon« term  .1. M Comprised  of
                       (1)  HMMttmv  ii.-j  notes  pj>*hle  to  an
                     Insurance  io>Mf»«ny  due $l.5uO uuo  ar.nuaily
                     brtlnning  l*»r»
                       (21  S17M4>i<^«  ;>.% Swiss  franc loan  due
                     July  15, :*;»  l.i«n  m«y b« prepaid  at the
                     option of  t.^  at  01 57.  of  principal amount
                     from July  u, 1>f4  ^ Jury w   :37i   ,nd -t
                     101 th-rcafler
                       (31  II37MIHV  J«;^ la |%%  miscelUneoiU
                     debt due.  la l-*^

                       IwsiU*  Over»e««  Cactilal  Corp*rali*n  M.V.
                     Cu«rante««  rtMt.nf n^i,  L.»«  «t»iea  «fM*

                     AUTI1 --525.000«0.
                     f 2M nnti
                     DATi-D-JuIy  .M  i»7fl DUt-JulySI 19*0
                     iNTKKF.iiT  r\\r^  ti*lee yearly at l°i above
                     th*- s>* month  London  EurndolUr rate,  with
                     T'.jT*- minimum,  current  rat*  is  lO1^.  to July

                     DCNOMIN.\1:OV -Bearer  roupon from. $1.-
                     000 $10 000, 51>V rtX) and V>00 OOO
                     SINKING  Kl'MJ -Two  annual  payments ol
                     K&OOOOO  «-»t-h on July  31.  l'J'1 «nd 1972 «nd
                     •even annual  laments  of  SIOOOOOO  on  July
                     31  1973 thrcu^h 1979. The b«I«nce of $13 000.-
                     OOO will matutr on July 31  1WO
                     SM'l'RITY  Not secured serior indebtedness,
                     Rijit.*nt( t J t.\ "r-»i)co
                     DIVIDEND  Ht.vrRICTIOS— Co  may not pay
                     cash  dlvs   oit or  acquire  com  in excess of
                     consolidated net income after Dec.  31.  }96fi
                     plu5 net nrovrv.li from *al« of stock, or debt
                     converted Into stock after  Dec. 11. 13*7  plua
                     1 10 000 000

                       Convertible  Dvht:  t.  International Silver
                     C*.  convert ibl* tub«rd«n*t*4l  debenture  fa,
                     due  1991:
                                      Haling -••
                     AUTHOBI7FD -155775000.  outstAndlnaj. D«e,
                     31  19 73  U2 .,75 IVfl
                     DATKD— Jan  I  'ifca  DLTE-— Jan  I  1993.
                     INTrHKST  JAJl lo registered  holders.
                     THI"-TF:E -ir\ ,nr Trust Co ,  NYC
                     DKNOMlNAllON  — Fully  rugisfcr^d,  $100.
                     J5r>0  SI 900 and authorized  multiples of 91,000
                     thefeof
                     CAI.f.ART E — As •  whole  or In  part  on at
                     1e»«  notjc* to  each  Dec  31,  incl..
                     HA fntlowm
                                      I«T5...
1974  ..
1977  ..
1980   -
                                                      ,  com ih.     11 51    mil 18
                                                      ^  the ____  8 9O7 S27  9 339 7M
                TM
              454*4
              rrii 03
103'*
10?'»
101 *«
101
                                                                                                AUo  callaM
                                                                                                                          105
                                                                                                                          102';
                                                           ,..
                                                       1979 .,
                                                                                                                Afli
                                                                                                               for
                                                                                                                                        102V»
                                                                                                                                        102
                                                                                                                                        101 '.4
                                                                                                                                        100 W
                                                                                                                          100J4   11
                                                                                                                          100
                                                                                                                     nking fund (which s*«)
                                                 (U$242:6MO  not reslrlcled  CDChfs  relating
                                               to Issuance  of com  shs  In  treas  In   'pool
                                               Int "  ^Reduced  by  JS45 OOO  O972   WSS.OOO
                                               19/1, 3281 OOCP  ln\esl  Ux  credit  [i.From U  S
                                               doUar  devalui^mn  on Suits franc loan 3] As
                                               reported  on   9848000  (1972,  10 1«3 000; -1971.
                                               9394000)  aver  com  ft com  equlv sn  5] Incl
                                               Mdes  Homes  Comptnies.  from  Jun*  1, 1972.
                                               date of a?q  ilSl 31  In  1972  md Jl 07  In 1971
                                               before extraord  ch«
                                                 Note  Earn  com »h  amounted to »l 37  in
                                               1973 II II ill 12 bef  e*traord  ch« )  In  1972 At
                                               11 01 i}t OS bef exlraord  chf ) In  1171 •s*um.
                                               full  dilution
              .
tions »ith a Belgian wlr*
La5fneffr>Ur S A   lo form •  Joinl
                      ufa
                                ablr produ
                                   in
                                  d
_.»_nlisf1on  to mi
CATV c»hl«  In  Belf.um  «"d
Of the turopcan Cotnmon Market  r«u->es  —._
                                                Prepayment.1  — —

                                                   Total current  .
                                                [TNel prop  etc _-
                                                            ----
                                                Del  ch(t  --------

                                                   Totil  ....... ~
                                                 LUhllltles
                                                Notft payable ----
                                                Accu  etc .  pay —
                                                Cuslomert dep  ...
                                                Income l«*e* ---- .

                                                   Total  current .
                                                D«-b  53,is  19t» ----
                                                Deb  il IM1 ......
                                                Note! par ....... .
                                                De(  Inc  tax  etc ,
                                                1-, pld Ilk   'I2S> -
                                                t* Tnnv A pfd  .--
                                                r,irom  ]tk
                                                Retained  ea
                                                                  .
                                                  Net  stkhlil «q. .

                                                    ToUl  .........
                                                                        Sheet, sm •*
                                                                                           II
 M.413
 I221S
  1UC

202.070
 71 «4«
 13H5»
                                                                         W31M

                                                                          51 Mr
                                                                          31.WO
                                                                           7 077
                                                                                       20>«M
                                                                                        70174
                                                                                        4 Ml
                                                                                        U133
                                                                                        1.328

                                                                                       340.1 M
                                                                                               SINKING  Ft'Vn— Annually,  to retire debs.
                                                                                               at  par  each  J-»n  1  1979*2.  cash (or  debs)
                                                                                               equal to $1,750^X1 debs  oulitg  pluJ  slmJmr

                                                                                               SEr'lJHITV -No" secured; • u bor d in • 1 ed to *J1

                                                                                               CONVKRTIHLE-Into com. «t  any  tim«   118
                                                                                                Low	  SJ     «9V«  71**>  W.i  1*
                                                                                                Debenture  C««hae.f*  O'ferr  In  Apr  1974
                                                                                               com p.my  offcrert  to  exchange  S&SO  principal
                                                                                               amount of 3*4% •*•  ruled convertible  «ubord
                                                                                               debs due Apr 1. U<»» for  each $1 ORO principal
                                                                                               •mount  of  5s.  due  199J  New  debs  conv
                                                                                               Into common »t U3 3J per lh-  Offer  expires
                                                                                               May 21. 1974
                                                                                                2.  InlernitlUnal  SMwer  C*. (•nve.rtikl* a«fc-
                                                                                               •rdlN«te 1, .**| DUE—J(»n. t  '9S».
                                                                                               INT f HKST-J*Jl
                                                                                               TRUST I- E -Schrdrirr Tru*l Co  NYC
                                                                                               Dr NOMINATION  fully    re«!«i«-r-*l,   I1M.
                                                                                               $&00. |t.000 axul  «uthnTU*d muJUp.rs of Sl.OOO

-------
f
         i;pijjii!U& &ljjf»ftl|!|p!fl!ii8ps $$iws£k ;<$ff3KM *•*'«-'; ««i:"s- iPl'n'iW

-------
                                            V-105
Business ITJcek index
                                109.0  W£l07.0r  '£2 106.
          I  i  I I  i  l-'i i  I	I I  I  I  I  I  I  l-l I   I  I
100
                                    1974
1975
Th« lnde« dropped sharply lor
the weak  endod Apr 5. Altar
seasonal  adjustment,  truck
output  tell sharply  as Ford
Closed lour plants lor Inventory
adjustment. Auto  assemblies
decreased    substantially,
hampered by  a snowstorm In
Michigan  Paper  and  paper-
board production continued to .
decline lor the third consecu-
tive  week. Losses were also
posted In  Heel, lumber, elec-
tric  power. Intercity  trucking.
and rail freight Crude-oil refin-
ery (uns turned up significantly
alter three weeks ol declines.
Bituminous coal  output In-
creased slightly,  alter  adjust-
ment (or a miner*' holiday
Rgures of the week
Production


Trucks/Ward's Automotive Reports . 	
Electric power/Edison Else inst millions of kiicwall-houra 	
Crude oil, refinery njns / Amur PB( Insl , dally av . Ihous of bol . ..
Bituminous coal/Bureau ol Mines. Ihous ol nel Ions ...
Paoerboard/Amer Parser Inst thous ol tons 	
Papar/Amer Paper Insl . thous of tons 	
Lumber/WWPA1. SFPA' 225 nulls millions ol Iset
Trad*
Rail freight traffic /Assn ol Amer RRs. billions ol ton-miles . . ..
Intercity kuck tonnage -Amer Truck Assn Inc . unadj . Indei .. .
Department store sales/Census Bur . unsdj . tn millions 	
Price*
Industrial raw materials. 13 ipot commodities oC'*M««
                                 I S0>M*»nFc.ta>Mr>iQduci««U*»ClM.an

-------
                                 V-106
                                                           STATISTICS

                                                           OF INCOME
                                                                     1970
                                                         Internal Revenue Service
                                                                       ^ '6 .'4-74;
fji. .w ' •- -«»;?*  -.«  \    C*V *    • • * -   *•'" +
r&*#'.'?&'X£&£  .*. •••*;•••...:,*•."
r-v/.f ;,,^^Vvxif.;/.;.;'.  \,v/'v-  .
:r.",v^ •  .j>v, f'-;:.,'. ,;-a\: .T . ,  ,,".-•.  •..
.*.f.-/v; v.-^^J^fe^-.*** '•? "•-;•• .<•<- •-'"••..      •  • 4 .-.  -v


|l;f1S^^-:Kt;:i   y^l^
-•vJ'J*^-'--^^^'''^'^'' •- •'• • '' >.'~v .'.'--• *'• ] -*};&$.*»
iJ.tt^i'?'"'"f'.";,''"-•'<". ''.La'.v^jT '-^V^S
                                                                        »
rt1

h.
^PS^
^fc,^^
                      ;»*v
              ife^a
               fi^Sj'iJ-'M
               bTTV^ rfj.4 .*« -/- /»
i->;
              >>£.
                 •JuV
               ^
               :^
                   /; -f-
                       ?^'
^/;
 ^ f
•*?i, •
'p.
                                 j*'.
            •• * >v.
"'*

'®'
 •«^
                              -.' .*

-------
                                                                             V-107
MTURNS'WITH NET INCOMI
                           Corporation Returns/1970


TeJsl*. J.--BALANCE SHEETS AND INCOME STATEMENTS, BY MAJOR INDUSTHY--Contlnu*d
    [All flirures are es'lnwt'-s luced on samplcg—nonev amount!  are In thousanda of dollars]
                                                                                                                                                          23

1
2
3
4
3
6
7
8
10
11
12
11
14
15
16
17
IB
19
20
21
22
23
24
25
26
27
28
29
30
31
32
31
34
35
36
37
38
39
40
42
43
44
43
46
47
48
49
50
51
52
53
54
55
56
57
58
54
60
61
62
63
U
65
66
67
68
70
71
71
71
74
75


Item





La.a' Allowance for bad debts 	
InvestiMnto: In Government obligation!:






Land 	

Other assets







La..: Coat of treasury stock 	

Interest on Covernaient obligation.:






Olvldanda, dowel tic corporations 	



C * atl f ffl*






Amortisation
Decree lat Ion
Diet



Oth 1 b fit 1
Mil r ' it I f
Oth d d ti






Surcharge
Tax froet recowput in| prior year Investswflt
Additional tax for tax preferences 	
Net In row* after tax (M minus 67 plus 72)....

Major Induttry— Continued
Mamu fee t ur Ing - -Con t Inued
Tobacco
Mi«uf*e-
turaa
(in
.1
6,10«,7«8
118,641
467,64,3
6,411
,143.444
i.ooi
1,733
70,4)7
225
308
,606,353
,454,870
412.150
44,313
27,74*
6.709
1,301
364,957
,108,768
231,985
770,910
371.158
27
1,190,589
185,548
744,560
340.956
195.056
2,161,102
81,131
7,177.881
7,082.610
248
341
31,014
21,043
7.8*8
1
1,5*7
387
11, 5**
3,932
17,214
6,286.744
4,016.510
17.3*9
37,4*2
1.794
63,586
1,020.587
113.634
4,533
918
126,515
1,458
158,177
55,969
41.559
1.4*7
383,481
891,137
2,308
891.284
880.771
411.031
412,271
10.515
2*5
3,404
463.616
274,789
11
Teitile
•111
product!
(11)
4,443
12.047,391
558,076
3,197.006
38,504
2.905,488
52.149
37,729
231.943
9.907
19,258
1.027,124
7,788,074
4.024,812
141
113
77.977
17,145
6.384
192.987
12.047,391
1.454,828
1,292,401
666,359
58,514
1,581.817
176,073
1,229.995
627,707
24,711
5.089.088
154,102
17,926.476
17.673,975
5.279
1.979
63,570
26,721
10,080
63
25,105
3.818
12.146
7,311
96,177
16.955,374
13.476,955
136,476
144,915
28,400
143.809
383,818
250.328
10,936
1,554
543,167
136
115,213
95,815
49,258
7,7)8
1,4*6.776
971.102
3.590
972.713
916,457
435.432
421.764
12.745
687
11
10.016
547.317
117,123
8,017
Apparel
and other
fabricated
textile
product!
(1))
12,055
8,778,0*1
605.507
2.754,249
39.862
2.880.191
22.926
8,217
268,178
48.604
7,253
797,612
2,019.583
963,648
377
59,873
15.477
7,142
102,464
8,778.061
1.791,762
951,601
722,711
118,511
858,254
184,941
919,091
551,802
12,762
2,729,773
107,159
19,308,094
19,117,502
1,275
1,034
40,613
11,814
29,950
853
4,724
2.148
6,005
3,429
88.545
18.464,147
14.487,792
467.129
19,76*
25.971
188,114
189.610
184.110
13,519
874
165,028
231
135.068
84.786
57,587
1,047
2,221,601
841.747
1.356
845.069
748.983
319.971
330.911
8,167
218
9
1 ,440
506.537
47.142
14,115
Unbar
and wood
product. ,
except
furniture
(14)
3,410
9,217,113
369 ,844
1,396,112
21.889
1,473,032
21,944
25,617
248,436
13,776
7,641
797.317
6.022,564
2,648,605
1,069,184
41,481
186.099
5,531
2,979
296,740
9,217,123
647,802
656,218
430,472
67,050
1,989,442
465,606
1,251.819
1,050.173
7.395
2,723,309
74,443
10,611.605
10 SJ6.SO]
2,212
1,508
48,150
18,244
7,549
476
168.718
21,623
2,344
8,288
75.650
10,071,451
7,361.439
187,683
91,842
16.977
66,764
286,390
151,666
5,096
6,585
388,278
408.366
48,165
42,305
28.664
3,326
979,905
538,154
4,191
540.837
498,554
179.281
170.356
4,4*8
389
3,814
7.637
364.143
140.317
101.678
furniture
and
fixture!
(15)
4,229
.244,492
205.731
895.670
18,766
903,607
44.945
24,633
84,651
6,394
3,533
270,775
,347,621
646.713
3,088
873
56,854
4.087
2,280
59,335
,244,492
378,590
238,742
257.753
59,156
312.622
45,038
443.354
182,880
13,471
1 346.608
33,822
6,450,819
6,369,150
2,606
1,126
11,607
7,050
1,062
126
3.479
1,792
2,188
705
49,928
6,068,214
4,515,684
192,867
27,437
15.412
63,320
152,024
46,094
4,093
297
98,581
138
66,421
41,303
25.694
1.396
813,471
382.585
171
181,630
155,830
162.546
158,426
3,851
It)
1
725
214,804
43,154
5.918
Papar and
allied
product!
(16)
2,615
19,463,566
522.306
2.678.761
70,587
2,734.879
138,910
72,373
504,197
23.115
283,800
2,679,308
15,202.882
6.7*4,361
867.672
158,184
380.545
29,751
13,295
349,699
19,463.566
1,510,814
940,836
1,579,290
72,303
4,091,702
748,264
2,241,691
2.050,537
322,160
6,019,0*7
113,098
20,159,185
19,439.346
3,010
7,348
115,055
45,879
38,856
633
185,749
4,975
22,270
54,904
119,160
18,997,552
13,368.618
1*5,702
448,659
32,658
109,622
479.082
377,10*
13,318
8,936
871,469
116.690
172.573
149,286
104.544
1,001
2,4*8.113
1,161.6))
36.414
1.141.104
1,144.170
502,50*
484,26)
12.584
643
4,841
12.111
710.830
489,481
60.917
Printing
and
publlahlai
(17)
15.845
16,895,311
1 ,092,680
3,976,160
318.684
1,801,225
201.414
111,372
751,590
64,121
17,856
2.512,015
8,400,679
3,818.341
91,581
13,637
391.996
128,227
48,878
1.569,913
16,895,311
1,405.514
971.738
1.513.497
148,016
2,360,285
1,189,091
1,844.516
1,339.748
59.801
6 , 309 , 762
246,637
22,546,849
21.840,362
16.987
12,148
95,3*1
75,806
61,370
827
60,861
11,3*9
39,955
14,606
316,09*
20,742,066
13,696,827
633,087
110,169
117,909
280,381
561,812
243,940
31,735
8,518
588,106
9.341
200,679
212,701
113,476
7,797
3,904,577
1.804,783
9,107
1,801.741
1.651.490
768,655
748,34)
18.54*
1.3.0
126
11.150
1,044,117
395.604
18,080
Che.lc.1.
and allied
product!
(IB)
6,306
H. 188. 770
1.479,939
9.228,467
160,392
8,888,675
335,473
126,668
1,266,31!
26,174
10,981
7,712,557
35.910.119.
18,287,426
306,811
138,193
813,777
361.412
101.927
1,199,101
49,188,770
4,625,011
1,780.616
3.158,615
200,679
9,276,108
1.591,875
5,341,019
5.823,802
181,89*
17,647,167
438,058
33,290,247
53,321,068
25,491
12,724
251,91*
71,21*
304,381
4,131
231,574
15.888
84,265
433,307
483,281
30,350.440
32,476.424
412,718
767,850
46.140
476.895
1,094,627
736,589
65,198
7,579
2,388,177
114,128
2,147,491
615,728
245.432
6,152
8.348.712
4,419.807
2)), 181
5,160,4*4
4,981.619
2,189,830
1,311,861
53,344
10,104
4,179
83,377
1,854.011
1.941.200
89,616
Petroleum
refining
and
related
(19)
667
1.090.933
1,710,581
5,195,142
226.420
5,657.617
871,026
95,536
2,331,274
96,758
84.137
9.957,832
3,615.271
1.577,5*5
6,714,815
2,900,795
3,179,279
7,437,684
4.140,685
2,987,444
1,090,933
7.913.056
2,089,934
3,775,329
52,484
3.662.942
7,318.732
0.954.103
12,653,878
559.093
32,616,162
524.7-80
79,214,964
73.776,187
66,986
8.099
650,832
619,363
83,352
11,387
163,277
42,735
9S7.197
831,214
1.991.935
74,674,180
50,011,525
104,855
1,186,421
138,331
1.212,458
4,269,181
1,210,667
29.744
18.806
2.874,121
2,777.080
371,594
471.315
112,084
11,745
9,634,250
4,540,584
104.684
4.617.164
1.677.042
1,921.971
1.732,891
43,411
1.614
143.017
44,741
2,808.914
3,148,770
72,861

lubber and
•lacella-
neoua
plaatlce
(20)
1,154
0,065,667
411.014
2.453.635
48,711
2,276,971
39.275
36.421
88,8*8
20.619
639
1.009,606
6,426,506
3,090,218
14,541
5,817
117.114
24,322
11.658
283.576
0.065,667
1,010,726
868,922
917,165
77,391
2,011.148
211.892
615,191
995.438
33,597
3,370,648
90,l« and Limitations of th« Data."

-------
                            V-108
                          SECTION C
                   USING INFLATION INDEXES
     Fluctuations in the inflation rate affect  both the pur-
chase price of replacement equipment and annual operation and
maintenance costs.  Estimates of the cost of compliance must
be adjusted accordingly.
INDEXING
INFLATION

     The civil assessment formula already takes the rate of in-
flation into account in estimating the costs of compliance.  You
must adjust the figure used each year to reflect the averate rate
over the previous three years.  You may use any source of in-
formation deemed appropriate by the Commissioner in order to
calculate the rate.  At present, the best source is the CE Plant
Cost Index, published in the trade journal Chemical Engineering.
It contains four major components:

     1.  Equipment machinery and supports;

     2.  Construction labor;

     3.  Building materials and labor;

     4.  Engineering supervision and manpower.
             CE Plant Cost Index (1957-59 = 100)
J.3O
188
180
172
164
156
1 AO


1




1

^*


91




V
A
P










'










*










/










/










^/










f











**










nf'











•^^







               C
               10
m  n)
S  53
0<
0)
W
                                     Annual  Index

                                     1969  =  119.0

                                     1970  =  125.7

                                     1971  =  132.2

                                     1972  «  137.2

                                     1973  -  144.1

                                     1974  =  165.4
                                o
                                2

-------
                            V-109
CALCULATING THE
RATE OF INFLATION

     Using the CE Plant Cost Index, the rate of inflation  (RI)
to be used in the formula in 1975 would be 7.9 percent, calculated
as follows:

     (1)  Find the average inflation rates for each of
          the previous three years by dividing each in-
          crease in the "index" rate by the base index
          rate:


                  The 1972 inflation rate equals    ^    or 3.8%

                  The 1973 inflation rate equals         or 5.0%
                  The 1974 inflation rate equals  ,'   or  14.8%
                                                  144.4
      (2)  Average each of these inflation rates.


                  The three year average equals 7. 9%

-------
                            V-110
                          SECTION D
          ESTIMATING THE SOURCE'S INCOME TAX RATE


     You will want to adjust the 48 percent tax rate assumption
of the civil assessment formula for certain corporations and all
individuals, partnerships and municipalities.  (Regulatees with
lower income tax liability are liable to significantly higher
economic assessments than others.)
     Corporations

     There are three types of corporations that may have low
income tax rates:   (1) companies operating at a loss,  (2) com-
panies with extraordinary deductions or credits and  (3) very
small companies.

     1.  Corporations operating at a loss will be able to use
accumulated tax advantages when they become profitable.  There
is no need to adjust the formula for this type of corporation.

     2.  Corporations with extraordinary deductions or credits
are now generally confined to the extractive industries, in-
cluding oil producing companies.  In such a case, obtain the
company's effective tax rate (the percent of its total pre-tax
profit it pays in tax) and use it in the formula.

     3.  Very small corporations are taxed at lower rates
currently (1975):

         20% for the first $25,000 of taxable income;
         22% for the second $25,000 of taxable income;
         48% for taxable income over $50,000.

Unless this schedule is extended or otherwise changed, the
rates in 1976 will revert to:

         22% for the first $25,000 of taxable income;
         26% for the second $25,000 of taxable income;
         48% for taxable income over $50,000.

Where a corporation's taxable income is sufficiently low that
its overall rate deviates substantially from 48 percent, you
should obtain and use the company's actual effective tax rate.


     Individuals and
     Partnerships

     You should make an initial assumption of a 19 percent rate

-------
                            V-lll
for individuals and an 18 percent rate for partnerships.  These
figures are based on averages, and are probably low estimates
for most regulatees likely to be subject to civil assessments.


     Municipalities and
     Non-Profit Institutions

     When dealing with such entities, adjust the formula to
assume a zero tax rate.
OBTAINING
INDIVIDUAL RATES

     1.  For publicly held companies, you can find the necessary
information in Moody's Industrial Manual, Standard and Poor or
the Value Line Investment Survey.  The first two are in the
State Library.

     2.  For businesses, you should request the most recent
balance sheets and income statements — as you are empowered
to under the regulations.

     3.  For individuals, you should request the most recent
income tax statement.  An individual is not obliged to provide
this for you, but since the initial assumption is probably lower
than his actual rate, he will probably comply with your request
voluntarily.
ADJUSTING THE FORMULA FOR
CHANGES IN THE TAX LAWS

     From time to time provisions in the tax laws are changed.
If such a change comes to your attention, consult Chapter I of
Part 3 of this volume of the CEP Final Report in order to find
precisely where the appropriate adjustments in the formula
should be made.

-------
                            V-112
                           SECTION E
                HOW TO USE THE WANG CALCULATOR
     A calculator provides a rapid, accurate, and low cost
method of determining civil assessments.  Connecticut is using
a Wang Model 600 calculator for this purpose.  If you do not
have access to this machine, you can calculate assessments
by hand with the formula given in Part III, Chapter I of this
Volume.  Also, in many cases, the Wang program can be adapted
to be used on other programmable calculators.  You should consult
the User's Manual for whatever machine is available.

     This section:

     *  Summarizes how the program works

     *  Explains how to place Connecticut's civil assess-
        ment formula on the Wang Model 600 calculator tape

     *  Explains how to run the program once a civil
        assessment tape is placed in the calculator.
HOW THE
PROGRAM WORKS

     The Wang program operates in several steps:

     *  It must have or be given information regarding each
        of the following variables:

           - CCE = The cost of installed pollution
                   abatement equipment

           -  OP = The cost of operating and maintaining
                   control facilities

           -  RI = The average rate of inflation over the
                   last three years

              EL = The expected life of needed pollution
                   abatement equipment

           -  T s The tax rate applicable to the source

           - TC = The Federal tax credit for purchasing
                  pollution abatement facilities

-------
                            V-113


              DL = The shortest allowed depreciable life
                   (5 years or EL, whichever is shorter)

              CC = The cost of capital applicable to the
                   source

The variable TC is programmed onto the tape and adjusted periodic-
ally as needed.*  Other inputs, notably EL and T are typically
also fixed values, but they may be changed in particular cases.
The other inputs cannot have values entered directly onto the
tape; this information must be given the machine case by case.**
*  If the value of TC in the program is not the same as the
actual tax credit given by the Federal Government, for example,
you should change steps 0113 to 0116 so that they correctly
input the value (1-TC).  If TC was 10 percent (and (1-TC) =
90 percent), for example, these steps would read:

                           Symbol           Key       Comment

                            E10

                            E9               9

                            EO               0

                            +14              +R       Add .90
In fact, the value used in this program may now be incorrect.
As of September, 1975, the tax credit rate was 10 percent, but
because the tax credit is scheduled to revert to 7 percent in
January, 1976, the program uses the latter value.

     In the absence of reliable information about a specific
piece of equipment, assume EL to be ten years.  This represents
a reasonable approximation of estimates obtained from IRS Asset
Guideline Classes of industrial equipment for industries in
Connecticut.  Input the value of "Depreciable Life" (DL) as
either 5 years  (the period of time allowed by the Federal tax
code for write-off of pollution equipment) or the Expected
Life (EL) of the equipment, whichever is shorter.

** Although Connecticut's program does not automatically enter
the value either of DL or of RI into the calculator, the pro-
gram could be easily altered to do so.

-------
                              V-1.U'
     *  It automatically checks to make sure that:

           - The cost of capital is greater than the
             rate of inflation  (CC > RI)

           - Both the cost of capital and the rate of
             inflation have been entered in decimal
             format.

        When either of these relations is faulty, the calculator
        will place a negative number in the window and will
        print no information until all input information is
        correctly entered.

     *  It calculates the values of (1+RI)/(1+CC), PVOr PVIE,
        PVE, A, and the civil assessment, CA.   (For an explana-
        tion of the above variables and of the  input variables,
        please refer to Part III, Chapter I, of this Volume.)

     *  Finally, the program prints out the variables used in
        the formula and CA, the monthly assessment liability
        incurred by a source for failure to comply.

To aid understanding of this Section, a diagram of ..a Wang keyboard
is included on page  V-175.


PROGRAMMING
THE CALCULATOR

     To place this program in the memory banks of the Wang,
follow these steps:

     (1)  Start the calculator

     (2)  Press "Clear"

     (3)  Press "Learn Mode"

     (4)  Press "Prime"

The calculator is now ready to learn a program, and you may
enter any program step by step.  The diagram and tables that
follow in Attachment A explain exactly what steps should be
taken to enter the economic civil assessment program.

     Once you have entered the program, you may place the program
on tape:

     (1)  Press "Run Mode"

-------
                            V-115
      (2)  Place the tape in the cassette holder (label out)

      (3)  Press "Rewind"

      (4)  Press "Tape Ready"

      (5)  Press "Record Prog" (record program)

Each such tape will serve as a portable "memory",  obviating
the need to enter the program manually in the future.  Such
tapes have already been prepared, and Phil Florkoski of the
Air Compliance Unit, the person who did this programming
work, will assist you in making whatever modifications become
necessary.

     After entering the program you can check that the program
has been entered correctly by pressing "VERIFY PROG".  The
machine will total the code numbers of the steps you have entered
and will flash the sum on the screen.  The verification number
for this program is 3446.  If the calculator gives the right
answer, you have probably entered the program correctly.  You
should still check that you have entered the steps in the cor-
rect order, however; the check described above will not pick
up this mistake.

     Note that if the program is changed, the verification
number will also change.  If the program is altered to input
TC as 10 percent with the method suggested above,  the code
number of step 0118 will decrease by 3 (from 0003 to 0000)
and the verification number will become 3443.

     Three conventions have been used in this program:

     *  In some cases, one numerical operation  (e.g.
        storing a particular variable) requires two
        steps.  These two-step operations have been
        treated as one step.  For example, storing a
        number in "Register 3" is done in two steps:
        (1) pressing the store key  (ST on the keyboard)
        and (2) pressing the number of the register
        (03:  one of the low order codes).

     *  The letters L or R appearing in the "Key"
        column refer to operations performed to the
        left and right registers, respectively.  Step
        0036,  Total L means that you press the key
        "Total" on the left side of the keyboard,  thus
        clearing the left register.
        Some steps are "upper-case" keys  (e.g. the key
        "Mark"); to use them you must first press "Shift"
        on the left side of the keyboard.  This step has
        not been included.

-------
                             V-116
USING
THE PROGRAM

     Given a tape of the economic civil assessment program,
anyone can calculate assessments with ease.  Attachment B
provides a step-by-step description of how to do so.

     To obtain the input variables you need for the program,
refer to other sections of this Chapter.  You will find a test
of the needed variables in a sample worksheet attached at the
end of the Attachment.

-------
             V-117
       ATTACHMENT A
PROGRAMMING THE CALCULATOR

-------
                             V-118
FLOW DIAGRAM FOR THE CIVIL ASSESSMENT CALCULATOR PROGRAM
                 INPUT

             CCE,  OP, RI

          EL,  T,  DL,  CC
 FIND
1 + RI
1 + OC
                             FIND

                       CA = (WO + PVE)A
                           OUTPUT

                          CCE, OP,  RI
                       EL, T, DL, CC,
                        PVO, PVE, A,
                             CA
FIND.

PVO
                                                                 FIND

                                                                 PVIE
                                                                 FIND

                                                                 PVE
                         FIND

                           A

-------
                               V-119
I.   Tnput Values and Perform Checks
Step*
0000
0001
0002
0003
0004
0005
0006
0007
0008
0009
0010
0011
0012
0013
0014
0015
0016
0017
0018
0019
0020
0021
0022
Code**
09" 00
08
06
00
09
06
00
09
06
00
09
06
00
09
06.
00
06
00
02
06
01
00
09
12
00
15
03
01
15
03
02
15
03
10
15
03
11
12
15
01
15
12
15
15
03
Symbol*** Key****
*M Mark
* X2
STO
E15
* SP
ST1
E15
* SP
ST2
E15
* SP
ST10
E15
* SP
ST11
E12
ST 15
El
+15
ST12
T15
E15
* SP
2
X
ST
CLD
Stop
ST
CLD
Stop
ST
CLD
Stop
ST
CLD
Stop
ST
CHS
Store L
1
+L
ST
Total L
CLD
Stop
                                                   Comment
                                        Harks  next entry  as  identification
                                        code

                                        Identification code

                                        Store  CCE  in Register 00

                                        Clear  display

                                        Stop to enter data

                                        Store  OP in Register 01

                                        Clear  display

                                        Stop to enter data

                                        Store  RI in Register 02

                                        Clear  display

                                        Stop to enter data

                                        Store  EL in Register 10

                                        Clear  display

                                        Stop to enter data

                                        Store  T in Register 11

                                        Change sign of T

                                        Store  - T  in left register



                                        Add 1  to - T

                                        Store  1-T  in Register 12

                                        Clear  left register

                                        Clear  display

                                        Stop to enter data
   *  The step number for each step of the program.
  **  The code number of each step  (used in the User's Guide and
      in most cases, on the keyboard).
 ***  The symbol used in the Wang User's Guide for each step.
****  Keyboard symbol indicating which key is to be pressed when
      entering the program.

-------
                                V-120
Step
0023
0024
0025
0026
0027
0028
0029
0030
0031
0032
0033
0034
0035
0036
0037
0038
0039
0040
0041
0042
0043
0044
0045
0046
0047
Code
06
00
09
06
06
07
03
09
08
09
08
08
09
01
07
06
00
00
00
03
00
06
08
08
09
13
15
03
03
15
02
15
04
03
03
05
03
03
15
03
15
10
09
09
15
12
15
05
03
03
Symbol
ST 13
E15
*SP
ST3
ST15
RE2
-15
* J*
* GO
* SP
* J+
* Go
* SP
T15
RE3
ST15
E10
E9
E9
-15
E12
ST15
* J+
* Go
* SP
Key
ST
CLD
STOP
ST
Store L
RE
- L
jifyo
GO
Stop
Jif +
GO
Stop
Total L
RE
Store L
•
9
9
-L
CHS
Store L
Jif +
GO
Stop
Comment
Store DL in Register 13
Clear display
Stop to enter data
Store CC in Register 03
Store CC in left register
Recall RI
Find CC - RI
Skip next 2 steps if answer
is not zero

Stop because CC cannot equal
RI
Skip next 2 steps if answer
is positive

Stop because RI cannot be
greater than CC
Clear left register
Recall CC
Store CC in left register



Find CC - .99
Change sign
Store - (CC - .99) in left
register
Skip next two steps if answer
is positive

Stop because CC must be less
                                            than 1
0048
         01   15
T15
Total L    Clear left register

-------
                                V-121
II.  Find Value of  (1 + RI)/(1  + CO
Step
0049
0050
0051
0052
0053
0054
0055
0056
0057
0058
0059
Code
00
02
07
02
06
00
02
07
02
05
06
01
15
02
15
15
01
14
03
14
15
04
Symbol
El
+15
RE 2
+15
ST15
El
+14
RE 3
+14
*15
ST4
Key
1
+ L
RE
+ L
Store L
1
+ R
RE
+R
4 L
ST
Comment


Recall RI
Find 1 + RI
Store 1 + RI in left


Recall CC
Find 1 + CC
Find (1 + RI) / (1 +
Store (1 +RI) / (1 +





register




CC)
CC)
                                             in Register 4

-------
                                V-122
III.  Find Value of PVO
Step
0060
0061
0062
0063
0064
0065
0066
0067
0068
0069
0070
0071
0072
0073
0074
0075
0076
0077
0078
0079
0080
0081
0082
Code
08
06
00
00
04
08
00
06
00
02
01
00
02
07
02
04
07
04
06
01
07
06
07
10
15
02
00
15
11
12
15
01
15
14
01
14
03
14
15
12
15
15
14
03
14
02
Symbol
* LN
ST15
E2
EO
x!5
* ex
E12
ST15
El
+ 15
T14
El
+ 14
RE3
+ 14
x!5
RE12
x!5
ST15
T14
RE3
ST14
RE2
Key
LOGeX
Store L
2
0
x L
ex
CHS
Store L
1
+ L
Total R
1
+R
RE
+ R
x L
RE
x L
Store L
Total R
RE
Store R
RE
Comment
Find natural log of (1 + RI) /
(1 + CC)
Store in left register


Find 20 (LN (1 + RI) /
(1 + CC) )
Find ( (1 + RI) / (1 + CC) )2°
Change sign


Find 1 - ( (1 + RI) / (1+CC) )
Clear right register


Recall CC
Find 1+CC
Multiply left
Recall (1 - T)
Multiply left
Store value in left register
Clear right register
Recall CC
Store CC in right register
Recall RI

-------
V-123
Step
0083
0084
0085
0086
0087
0088
0089
0090
0091
Code
03
08
04
06
07
04
06
01
01
14
15
15
15
01
15
05
15
14
Symbol
-14
* 1/x
x!5
ST15
RE1
Xl5
ST 5
T15
T14
Key
M» TJ
1/x
x L
Store L
RE
x L
ST
Total L
Total R
Comment
Find CC - RI
Find 1 / (CC - RI)
Multiply left

Recall OP
Multiply left
Store value of PVO in Register 05
Clear left register
Clear right register

-------
V-124
IV. Find Value of PVIE
Step
<• •
0092
0093
0094
0095
0096
0097
0098
0099
0100
0101
0102
0103
0104
0105
0106
0107
0108
0109
0110
0111
0112
0113
0114
0115
0116
0117
Code
00
02
07
02
08
06
07
04
08
06
08
00
06
00
02
07
04
06
07
05
07
05
00
06
00
00
01
14
03
14
10
14
13
14
11
14
15
12
14
01
14
11
14
14
13
14

14
12
14
10
09
Symbol
El
+14
RE 3
+14
* LN
ST 14
RE13
x!4
* X
e
ST14
* 1/x
E12
ST14
El
+14
RE11
x!4
ST14
RE13
T 14
RE3
T 14
E12
ST14
E10
E9
Key
1
+ R
RE
+ R
LOGeX
Store R
RE
x R
ex
Store R
1/x
CHS
Store R
1
+R
RE
x R
Store R
RE
•J- R
RE
f R
CHS
Store R
•
9
                   Comment
        Recall  CC



        Find  1  + CC



        Find  LN (1  + CC)








        Recall  DL



        Find  DL (LN (1 + CC)  )



        Find  (1 + CC)DL








        Find  I/ (1  + CC)



        Change  sign
        Find 1 -(!/ (1+CC)DL)



        Recall T



        Multiply by T







        Recall DL



        Divide by DL




        Recall CC



        Divide by CC



        Change sign

-------
V-125
Step
0118
0119
0120
0121
0122
0123
0124
0125
Code
00
02
06
07
04
06
01
01
03
14
14
00
14
06
15
14
Symbol
E3
+14
ST14
REO
x!4
ST6
T15
T14
Key
3
+ R
Store R
RE
X R
ST
Total L
Total R
Continent

Add .93

Recall CCE
Multiply by CCE
Store PVIE in Register 06
Clear left register
Clear right register

-------
V-126
V. Find Value of PVE
Step
0126
0127
0128
0129
0130
0131
0132
0133
0134
0135
0136
0137
0138
0139
0140
0141
0142
0143
0144
0145
0146
0147
0148
0149
Code
07
06
08
06
00
00
04
08
00
06
00
02
06
07
06
08
06
07
04
08
00
06
00
02
04
14
10
14
02
00
14
11
12
14
01
14
14
04
15
10
15
10
15
11
12
15
01
15
Symbol
RE4
ST14
* LN
ST14
E2
EO
x!4
* ex
E12
ST14
El
+14
ST14
RE4
ST15
* LN
ST15
RE10
x!5
* ex
E12
ST15
El
+15
Key
RE
Store R
LOGeX
Store R
2
0
x R
ex
CHS
Store R
1
+ R
Store R
RE
S1;ore L
LOGeX
Store L
RE
x L
ex
CHS
Store L
1
+ R
Comment
Recall (1 + RI) / (1 + CC)

Find natural log



Multiply by 20
Find ( (1+RI) / (1 + CC) )
Change sign


Add 1
Store 1 + ((1+RI) /(1+CC))
in right register
Recall (1+RI) / (1+CC)

Find natural log

Recall EL
Multiply by EL
EL
Find ((1+RI) / (1+CC))
Change sign


Add 1
                                         20
                                         20

-------
                               V-127
Step
0150
0151
0152
0153
0154
0155
Code
05  14
07  06
04  14
06  07
01  14
01  15
Symbol
414
RE6
x!4
ST7
T14
T15
4- R
RE
X R
ST
Total R
Total L
         Comment
Divide left into right
Recall PVIE
Multiply by PVIE
Store PVE in register 07
Clear right register
Clear left register

-------
V-128
VI. Find Value of
Step
0156
0157
0158
0159
0160
0161
0162
0163
0164
0165
0166
0167
0168
0169
0170
0171
0172
0173
0174
0175
0176
0177
0178
0179
0180
Code
07
06
00
02
06
00
00
00
06
00
00
00
00
05
06
07
08
06
07
04
08
06
00
03
06
03
14
01
14
14
01
10
00
15
01
02
10
00
15
15
14
10
14
15
14
11
14
01
14
14
A
Symbol
RE3
ST14
El
+14
ST14
El
E10
EO
ST15
El
E2
E10
EO
415
ST15
RE14
* LN
ST14
RE15
x!4
* ex
ST14
El
-14
ST14
Key Comment
RE Recall RI
Store R
1
+ R
Store R Store 1 + RI in right register
1
•
0
Store L
1
2
•
0
4 L
Store L Store 1.0 / 12.0 in left
register
Recall R Recall 1 + RI
LOGeX Find natural log
Store R
Recall L
x R Multiply by 1.0 / 12.0
x (1/12)
e Find (1 +CC ) v
Store R
1
- R Subtract 1
Store R Store (1+CC) (1/12) -1
             in right  register

-------
V-129
Step
0181
0182
0183
0184
0185
0186
0187
0188
0189
0190
0191
0192
0193
0194
0195
0196
0197
0198
0199
0200
0201
0202
Code
01
00
00
00
06
07
02
08
06
00
00
04
08
08
00
06
00
02
05
06
01
01
15
01
10
00
15
03
15
10
15
02
00
15
11
15
12
15
01
15
14
08
15
14
Symbol
T15
El
E10
EO
ST15
RE3
+15
* LN
ST15
E2
EO
x!5
* ex
* 1/x
E12
ST15
El
+15
*14
ST8
T15
T14
Key
Total L
1
•
0
Store L
RE
+ L
LOGeX
Store L
2
0
x L
ex
1/x
CHS
Store L
1
+ L
4 R
ST
Total L
Total R
Conunent
Clear left




Recall CC
Find 1 + CC
Find natural log



Multiply by 20
20
Find (1 + CC)
Find 1 / ( (1 + CC)20)
Change sign


Find 1 - (1 / ((1+CC)20))
Divide right
Store A in Register 08
Clear left register
Clear right register

-------
                                 V-130
VII.  Find Value  of  CA
Step
0203
0204
0205
0206
0207
0208
0209
Code
07
06
07
02
07
04
06

05
15
07
15
08
15
09
Symbol
RES
ST15
RE7
+15
RES
x!5
ST 9
Key
RE
Store L
RE
+ L
RE
x L
ST
Comment
Recall PVO

Recall PVE
Find PVO+PVE
Recall A
Find (PVO + PVE) A
Store CA in Register 09

-------
V-131
VIII.
Step
0210
0211
0212
0213
0214
0215
0216
0217
0218
0219
0220
0221
0222
0223
0224
0225
0226
0227
0228
0229
0230
0231
0232
0233
0234
0235
Print
Code
07
08
07
07
08
05
07
08
11
07
08
14
07
08
08
07
08
09
07
08
06
08
00
08
00
07
Out

00
02
02
01
02
02
02
02
04
10
02
02
11
02
04
13
02
02
03
02
04
02
15
02
15
05
Values
Symbol
REO
* W
RE 2
RE1
* W
i 2
RE 2
* W
F4
RE10
* W
C2
RE11
* W
* Jo
RE13
* W
* 2
RE 3
* W
ST4
* W
E15
* W
E15
RES

Key
RE
Print
RE
RE
Print
•
RE
Print
-
RE
Print
ST
RE
Print
04
RE
Print
T
RE
Print
ST
Print
15
Print
15
RE
                 Comment
         Recall  CCE
         Print CCE with  2  decimal places ,
            label E

         Recall OC
         Print OC with  2  decimal  places,
            label C

         Recall RI
         Print RI  with 4  places,  label I

         Recall EL



         Print EL  with 2  placesf  label L

         Recall T



         Print T,  4 places, label P

         Recall DL



         Print DL with 2 placest  label G

         Recall CC



         Print CC, 4 placesf label D



         Space



         Space

         Recall PVO

-------
V-132
Step
0236
0237
0238
0239
0240
0241
0242
0243
0244
0245
0246
0247
0248 '
0249
0250
0251
0252
Code
08
00
07
08
01
07
08
02
08
00
08
00
07
08
03
09
09

02
02
07
02
02
08
02
06
02
15
02
15
09
02
02
03
14
Symbol
* W
E2
RE7
* W
T2
RES
* W
+ 6
* W
E15
* W
E15
RE9
* W
-2
* SP
* EP
Key
Print
02
RE
Print
T
RE
Print
+
Print
15
Print
15
RE
Print
-
Stop
End Prog.
Comment

Print PVO, 2 places, label X
Recall PVE

Print PVE, 2 places , label Y
Recall A

Print A, 6 places , label Z

Space

Space
Recall CA

Print CA, 2 places, label. A
Stop
Program over

-------
          V-133
    ATTACHMENT B
USING THE CALCULATOR

-------

3
RUN

L
EARN


L
F
(MODE OF OffRATI







2,
12, 14

EARN
AND LIST
RINT PROGR
ON
>«VITC
00
no

HESI
4
UM CLEAR
D I
0014
" H
01 02
01 || 02
03
03
T « - X 4
JU
01 02
_J
03 04
IHICHO
04 05
04 || OS

ST
RE
OS 06 07
1OER CODES!
06
06
SP
<> ON
DD
10 08
07
07
ft.
Sc
D
08
08
5
PRINT-
OEO ER
\ * \ PAPER
RAD ON FEED
	



09
09

6
\

1 !
RELEASE fl
10
10
11
11
12
12
10
1
9
1
JRWARD TAPE
READY
13
13
14
14

15
IS
(LOA ORDER CODES)








SM
PRIME
SIN"'
0906
SIN
0806
CO.'1
0907
COS
0807
TOTAL
0115













031S
CHANGE
SIGN
0012
7
0007
8
0008
9
0009






0314
TOTAL
0114


11



END
0914
LOAD
PROG
0814





0904
J IF 0
0804
I/O
1502
1
REWIND
PROG MACH
ERROR ERROR
oo
~iH — '
in
(J

INS
SET
PC.
                                                                                            U)
SM

PRIME

DEC, RAO
0909
RAODEG
0809


S
H


T

,
SIN"'
0906
SIN
0806
TAN'1
0908
TAN
0808
IOC,0X
0910
LOGeX
0810
INI X
0912
~»
X
0812
CO.'1
0907
COS
0807
RETURN
091S
1/X
0815
10*
0911
e"
0811
X,
0913

V' *
0813
TOTAL
0115
— 3
0515
0415
STORE
0615
031S
4-
0215
RECALL
0715
CHANGE
SIGN
0012
CLEAR
DISP
0015
SET
EXP
0011
7
0007
4
OO04
1
0001
0
oooo
8
0008
s
0005
2
0002
9
0009
6
0006
3
0003
•
0010

0314



0214
RECALL
0714
TOTAL
0114
0514

x =
0414
STORE
0614

11


16








END
0914
LOAD
PROG
0814
MARK
0900
SEARCH
0800
STOP
0903




0803
*0
0904
J IF 0
0804
ERROR
0905
J IF t
0809
STORE
0901
RECALL
0801
a
0902
PRINT
0802

I/O
1S02

GROUP
1
1513

GROUP
2
1514


INDIR
1511
INS
SET
PC.

BS
VERIFY
PROG

DEL
RECORD
PROG



STEP

                                                                                   13
17
19,
21,
23,
25,
27,
29

-------
                             V-135
STEP                      OPERATION

 1.           Turn machine ON

 2.           Press "PRIME"

 3.           Depress "RUN"

 4.           Depress "CLEAR"

 5.           Turn "PRINTER" on (switch in down position)

 6.           Depress "RELEASE"

 7.           Place tape in slot  (label facing out)

 8.           Close tape holder

 9.           Press and hold "REWIND" until tape stops

10.           Depress "TAPE READY"

11.           Press "LOAD PROG"

12.           Press "PRIME"

13.           Press "VERIFY PROG".  The number 3446 will appear.
              If the number does not appear, repeat steps 2-13,

14.           Press "PRIME"

15.           Enter Equipment Cost, left to right
              (e.g. i 5_ 0. 0. is 2500)

16.           Press "SEARCH"

17.           Press "X2"

18.           Enter Operating Cost, left to right

19.           Press "GO"

20.           Enter Rate of Inflation in decimal left to right
              (e.g.  i i 2 is 0.10 = 10%)

21.           Press "GO"

22.           Enter Equipment Life left to right

23.           Press "GO"

24.           Enter Tax Rate in decimal left to right

-------
                             V-136








STEP                      OPERATION



25.           Press "GO"



26.           Enter Depreciation Life, left to right



27.           Press "GO"



28.           Enter Cost of Capital in decimal left to right




29.           Press "GO"

-------
                             V-137
The input information will be printed out and labeled as
follows:

INPUT INFORMATION             SAMPLE OF ACTUAL PRINTOUT

Cost of Equipment             2500.00                 E
Operating Cost                1000.00                 C
Rate of Inflation                 .1500               I
Expected Life                    5.00                 L
Tax Rate                          .4800               F
Depreciation Life                5.00                 G
Cost of Capital                   .1200               D
The machine will then skip three lines and print out PVO, PVE
and A and label the values as follows:

            VALUE             SAMPLE OF ACTUAL PRINTOUT

             PVO              7152.21                 X
             PVE              4805,42                 Y
              A                   .015719             Z
The machine will again skip three lines and print the civil
assessment as shown below:

       CIVIL ASSESSMENT       PRINTOUT

                              187.96                  A
When you depress the button for "PAPER FEED"  (next to  "PRINTER")
the tape will move up and the record of the calculation may be
torn off.

To calculate a second civil penalty, repeat steps 14 to 23.

Turn the printer off by pressing the "PRINTER" switch.
Press "RELEASE", remove the tape and close the cassette unit.

-------
 COMPANY NAME:
                              V-138
 INPUT INFORMATION:
 Cost of Equipment $

 Rate of Inflation

 Tax Rate
0.
 Depreciation Life
      0.
                     Operating Cost $
      Equipment Life
         Yrs.
Cost of Capital

Yrs.
0.
 PVO = Net present value of operating costs over assessment period,
       net of any tax savings arising from operating costs.

 PVE = Net present value of equipment cost over entire assessment
       period.   (Includes discounted value of initial and
       replacement equipment, less the value of tax credits
       and deductions and of any salvage value at the end of
       the assessment period.)

  A  = Amortization factor, giving amount of monthly payment
       required per dollar of present value to be amortized.
*Civil Assessment = (PVO + PVE) A

 OUTPUT INFORMATION:
                    ATTACH CALCULATOR TAPE
 PVO

 PVE

 A
 Civil Assessment per month

 $
 *NOTE:  See Part III, Chapter I
         for an explanation of these
         terms and th«= formula.

-------
                             V-139
                         APPENDIX A
                DEVELOPING COST CURVES TO HELP
               CALCULATE THE COST OF COMPLIANCE
     Over ninety percent of the work of determining the cost of
compliance can usually be eliminated if the Department can rely
on cost curves that relate readily available information regard-
ing variables such as (a) the nature and concentration of pollut-
ants and (b) the flow of a discharge to the cost of cleaning up
that discharge.  Such curves can probably be developed that will
cover the large majority of cases.  There will, in general, be
two types of such curves:  (1) curves based on the cost of
building and operating "model" control facilities that would be
able to treat the type and concentration of pollutants and the
volume (flow) of discharge involved -- an approach that is
typically defined in terms of the type of pollutant and that
assumes relatively little process change; and  (2) curves based
on the actual costs of control experienced either by like
sources (e.g. members of an industry) or by sources with similar
pollution problems or control technologies.  This Appendix out-
lines how such curves are developed.


CURVES BASED ON
MODEL TECHNOLOGIES

     To develop a model technology cost curve for a particular
class of effluent problems,the Department would  (1) define the treatment
approach ("model") that would ensure compliance both safely and
economically for varying flow rates and concentration levels
(2) determine how expensive it would be to buy, install and
operate such a system at each of these concentration levels and
flow rates and* (3) draw a (<;et nf) curves expressing these
relationships.  The "model" can range from a simple flow volume
regulation to an elaborate system of tanks, pumps, filters,
building modification, etc.
   To develop such costs:

   *  separate those portions of the control strategy common
      to all cases and those that apply only to a particular
      sub-category of cases into separate cost modules;

   *  itemize the equipment in each module;

   *  identify the items which vary (in size, quantity, capacity,
      type, etc.) among individual cases;

   *  price each module at different size, capacity, etc. levels.

-------
                             V-140
     The Department will have to use such curves flexibly.  A
source may have a whole series of different discharges, in which
case calculating the cost of compliance may well mean adding the
estimates of several curves, i.e. assuming that several of the
model control approaches or cost modules will have to be used.
In other cases, cost curves may be available for some problems
and not others.  Then the staff will have to supplement the
curves with slower, more time-consuming methods of estimating
costs.
     A Prototype
     Curve	

     The CEP has developed a prototype set of such curves for
treating metal wastes.  They vary according to flow volume and
pounds of pollutant ( a function of flow volume and con^entra-
tion).*  The model distinguishes between sources which require
supplemental preliminary treatment for cyanide and/or hexavelent
chrome by including pre-treatment facilities as modular add-ons
to the basic metals treatment facility.  An estimate of the
facility cost component of the cost of compliance can be deter-
mined easily, after identifying values for the two variables,
by using a series of two, three, or four curves and tables.

     The basic installed costs for simpler cases  (where neither
cyanide nor chrome is present) can be calculated from the sum
of the values from the neutralization module (I) and the sludge
dewatering mechanism  (II).  The model treatment approach used
in developing this curve is explained in greater engineering
detail in Appendix B.
   See File Justification:  "The Development of a Model-Based
   Curve for the Installed Capita."! Costs of Metal Waste Treatment
   Facilities."  This document may be obtained from the Connecticut
   State Library, Hartford, Connecticut or from William Drayton, Jr.,
   c/o McKinsey and Company, 245 Park Avenue, New York, N.Y. 10017.

-------
Install-ed Facility
Costs*
(Thousands of Dollars)
LOf.ADI THMIC
7 X 1 < V I I
 KtUFFCL ft CSStn CO
           46 732O
      I Neutralization/Settling Module
                                                                 5   67891.
* Installed  Costs = 2.75 X Equipment Costs
                 ZO     3o   4O  So  6o7o809oioo
                      Design Capacity

-------
                                      V-142
                        II  Sludge Dewatering Mechanism
                  A.  Selection of Type


                      gpm  Land Available    Land Not Available

                     <15  Sand Drying Bed   Sand Drying Bed*

                    15-200 Sand Drying Bed   Vacuum Filter

                     ~>200 Vacuum Filter     Vacuum Filter
                      Installed Costs of Sludge  Dewatering
                      Mechanism

                      Installed Costs
                      For a Sand Drying Bed**

                      V = flow  (gpm)
                      C = concentration of metals  (mg/liter)
                      N = number of metals in  process effluent

                      Installed Costs = 5.76(V)(C-N)+1375

                      Installed Costs of a Vacuum  Filter***

                      Flow        Cost
                      (gpm)

                      15-100      82,500

                      100-500     96,250

                      More than    110,000
                      500
                     Plants with  less than a 15 gpm  flow, that
                     do not have  sufficient land available for
                     a sludge drying bed, generally make  the
                     economic choice to haul the wet sludge
                     rather than  install a vacuum filter.  The
                     costs for the  sand drying bed approximate
                     the incremental future operation and main-
                     tenence expenses for hauling wet, rather
                     than dry, sludge.

                     See File Justification:  "Sludge Dewatering
                     Mechanism Cost Formulae."  This document may
                     De obtained  from the Connecticut State Lib-
                     rary, Hartford, Connecticut or  from William
                     Drayton, Jr.,  c/o McKinsey & Co., 245 Park
                     Avenue, New  York, N.Y. 10017

                     The installed  costs include the costs
                     of a centrifugal pump for the filtrate
                     and an installation add-on equal to
                     175 percent  of the purchased equipment
                     costs.
If  cyanide  and/or hexavalent chrome  are  present,  the  installed
capital  costs  should include appropriate values  from  curves III
and/or  IV.

-------
Installed Facility
Costs*
(Thousands of Dollars)
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                         K*I
                         LOGARITHMIC    46 732O
                         Z X 1 ( VC LFS     w»Df IN u s »
   Installed Facility
   Costs*
   (Thousands of Dollars)
                                 IV Chrome Reduction  Module
10
       2     3

Installed Costs =
  5  6  7 8 9 10         2.0

2.75 x Equipment Costs
                                                    Design  Capacity

-------
                            V-145
A second set of curves could be developed which treat operating
and maintenance expenses as a function of the capital equipment
costs, flow and concentration.


     Explanation of the Metal Waste
     Treatment Curves

     Metal wastes, such as those from metal plating and finish-
ing processes, generally require a common set of treatment steps:
destruction of cyanide and reduction of hexavalent chrome, if
these substances are present; neutralization of the acid/alkali
solutions and precipitation of the dissolved metals; settling;
and sludge dewatering and removal.  A limited number of control
technologies are generally used to accomplish this treatment.
They include batch treatment, continuous flow-through treatment,
integrated  (closed loop) treatment, reverse osmosis, and ion
exchange.

     Continuous flow-through  (or conventional) treatment was
chosen as the technological model for the curves.  It is gener-
ally adequate for a complete range of flow volumes, though
individual plants may find an alternative control strategy more
economical or more suited to the particular plant organization
and design.  Some large manufacturing firms may find reverse
osmosis to be more practical, while most plants with very small
flows choose the cheaper batch treatment alternative.

     Conventional treatment for metal wastes includes neutraliz-
ing the acid/alkali solution and precipitating the dissolved
metals, settling the precipitate, and removing the sludge.  The
oresence of cyanide and/or hexavalent chrome requires treatment
prior to neutralization:  cyanide must be destroyed due to its
'larmful qualities and hexavalent chrome must be reduced to trival-
ent chrome before it will precipitate.  Thus the technological
'.-\odel consists of the basic neutralization and sludge dewatering
modules common to all dissolved metals treatment facilities and
cwo add-on modules for pretreating cyanide or chrome.

     The capital cost items required for a continuous flow-through
system include holding and treatment tanks, a clarifier/scttling
basin, sludge dewatering mechanism, pumps, mixers, chemical
storage tanks, controls, installation materials and additional
buildings.  The model includes the items generally required to
ensure adequate treatment for the broad category of metal wastes.
Individual installations may include fewer items — e.g. if
manual rather than automatic procedures are adopted for some of
the treatment steps.   Building needs, which defy generalization,
were excluded from the model.  For the purpose of determining
the cost of compliance, these costs may be estimated using a
consultant's per-squarc-foot building cost factor as discussed
above.

     An analysis of the individual equipment items indicates
that flow volume is the major source of cost variation.  The
size, quantity, capacity, and/or type of the equipment items

-------
                              V-146
vary chiefly in relation to flow.  Since costs vary in relation
to these specifications, differences in cost are largely func-
tions of flow volume.  The type and cost of the sludge de-
watering mechanisms adopted for particular installations de-
pends on the availability of land and the concentration  of
rtetals in the untreated discharae a? well as the volume of flow.
     In order to determine the cost variation for the model
at different design flow capacities, the specific size,
quantity, capacity, and/or type of each component was deter-
mined for each of several flow volumes from 5 to 1,000 gallons
per minute  (gpm).  The type and size of the sludge dewatering
device for different installations was related to two factors
-- availability of land and sludge production (a function of
flow volume and concentration).

     To determine the facility costs for the model with different
flov and sludge capacities, the following procedure was followed:

      (D  the current prices for each of the equipment items
          and instruments as specified for the different flow
          and sludge capacities were obtained from suppliers,
          manufacturers, and consultants;

      (2)  for each flow volume, the sum of the costs for
          all the items  (except the sludge dewatering
          mechanism ) ,  as specified for a given design flow-
          capacity, was calculated;

      (3)  the costs of installation materials (including
          piping, electrical wiring and paint), contractors'
          overhead and profit, and engineering fees were
          taken  into account by inflating equipment costs
          by 175 percent, consistent with the estimating
          procedures of chemical engineers;

      (4)  the sludge dewatering cost criteria and formulae
          were determined.

     The costs of the basic cyanide, chrome, and neutraliz-
ation/settling treatment modules have been plotted against flow
volumes.  The costs of a sludge dewatering mechanism can be
determined  from  a series of formulae and tables.  The  sum of  the
costs calculated from the curves and tables  for each of the  treat-
ment modules required for a particular metal waste discharge
represent the facility costs of a control/treatment technology
considered  adequate by the Department for a  case with  the
particular  flow  volume,  concentration, and land availability
characteristics.

     Evaluation  of Curves  Based
     On  Technological Models	

     The actual  costs in many  individual assessment cases  should
be  substantially lower  than the costs given  by the curves,  since

-------
                              V-147
the values for  flow  in the model reflect flows before the actual
treatment system is  designed.  Consulting engineers hired to
design treatment systems are usually able to lower costs by
recommending process changes in the discharger's plant.  Flows
can be reduced with  devices such as counter current rinses,
spray valves, etc.,  thereby cutting the size and costs of tanks
and pumps.

     Consulting engineers also recommend other treatment cost
saving measures, such as reorganizing production lines, eliminating
marginal lines and substituting non-cyanide rinses in the process
for cyanide-rinses which require special treatment.  Also, another
treatment approach,  e.g. batch treatment, reverse osmosis, may be
more economical.  And in many cases, savings may be possible by
using in-house labor or unused equipment.  Finally, in some cases
a treatment facility may already exist for which modifications,
rather than replacement, will achieve the effluent reduction required
by the Department.  In all these cases the Department may still rely
on the model-based curves and tables for rough estimates of the
facility cost component of the cost of compliance.  It will, however,
probably have to lower the assessment later when actual cost infor-
mation is available.

     A  second  set of curves may be developed to help estimate
operation  and  maintenance costs.  The annual expenses may  be
divided  into two groups.  Chemical and sludge disposal costs
depend  on  the  amount of metal  to be  treated, a function of  flow
and  concentration.  Labor, electricity,  repair, and other  opera-
tion and maintenance costs may be estimated using  a percentage
of the  installed equipment costs —  a factor commonly used  by
consulting engineers.  Thus, using the same information required
for  using  the  installed capital cost curves  (flow  volume and
concentration)  and  information about the installed capital  costs
 (actual  or estimated) the operation  and  maintenance component
of the  cost of compliance can  be determined easily and quickly.
Again,  if  the  rough initial estimate is  high, it can be corrected
upon submission of documentary evidence  of actual  costs.


CURVES  BASED
ON ACTUAL  COSTS

     A  second  type of curve may be developed for those categories
of pollution control problems  or types of technology for which
a  functional relationship can  be defined between the actual costs
for  completed  facilities and some variable characteristics  of
the  individual sources or discharges.  For most types of pollu-
tion problems,  the costs of an adequate  control technology vary
generally  in relation to flow  volume.  But for a particular
type of  problem, there may be  more significant determinants of
case-to-case cost variation.   If a statistically sufficient
number  of  cases with adequate  cost records is available, and  if
key  cost parameters can be identified, a curve can be drawn.

-------
 AN EXAMPLE
                              V-148
      Such a curve was plotted  by EPA for the metal finishing
 industry.*
   Investment
     Cost,
    dollars
                  Investment Costs of Waste Treatment Plants

                       With Varying Volume Capacity
                           10            10

                          Capacity Liters, hr
10
The points on the  curve represent the investment  costs typically
incurred to install  a  waste treatment facility.   The costs do
not reflect any one  type of treatment technology  or percent
effluent reduction.  Rather the costs cover work  done to accom-
plish acceptable treatment of the discharges  of a variety of
individual plants  in the broad category of the metal finishing
industry.
 * EPA  -  440/1-75/040-a, "Development  Document... for the Metal
  Finishing Segment of the Electroplatina  Point Source Category,"
  p. 143,  (1975).

-------
                                V-149
      It nay be possible to  plot more  accurate  curves that  relate
actual  costs to  volume capacity of the  treatment system  for
defined subsets  of the metal finishing  industry  or of the  several
available waste  treatment technologies.   For instance, the costs
of four types of metal finishing waste  treatment plants  — those
with  facilities  for handling both cyanide and  hexavalent chrome
wastes,  cyanide  only, hexavalent chrome only,  or neither -- may
be plotted separately.  Actual cost data for metal waste treat-
ment  facilitie^s  in Connecticut indicate that the installed costs
and the annual operating and maintenance expenses are in fact
higher  for industries which generate  wastes containing both
cyanide and hexavalent chrome than those which generate  either
one alone or neither.  Although sufficient information has not
been  gathered to establish  a curve for  any one of the four metal
waste treatment  subcategories, this relationship is evident from
the data points  plotted below.*
                        The Installed Costs of Metal Waste

                        Treatment Facilities in Connecticut
            Installed
             Costs
          (1975 Dollars)*
3600 .
500 .
400 _,
300 .
•

»
a



                    100 ^ •  ?
 Key; Type of Treatment

* Ketals Precipitation,
 Cyanide Destruction,
 and Chrome Reduction

* Metals Precipitation and
 Cyanide Destruction

o Metals Precipitation
 and chrome Reduction

a Metals Precipitation Only
                           100
                                200
                                     300
                                         —r—
                                          400
    —I—
     500
                              Design Capacity
                             (gallons per minute)
             Source: Survey of Metal Waste Treatment
                  Facilities in Connecticut
             *  Installed Costs were updated to mid-1975 using the
               Chemical Engineering Plant Cost Index annual averages.
   See  File Justification:   Actual Costs for Metal Waste  Treatment
   Facilities in  Connecticut.   Available from  the Connecticut State
   Library, Hartford, Connecticut or  from William Drayton,  Jr.
   c/o  McKinsey & Co., 245  Park Avenue,  New York, N.Y.  10017.

-------
                             V-150
     When a statistically valid sample is available for any one
of the treatment categories, a curve may be drawn that will
more closely approximate the costs for individual cases in the
particular treatment category than does the industry-wide EPA
curve which generalizes the costs for all four subcategories.


     Evaluation of
     "Actual" Cost Curves

     The costs in an individual case may be more or less than
the average amount given by the curves for roughly similar cases.
To hedge against the possibility of underestimation, the Depart-
ment may add on a correction factor to the curve-generated
estimate of the cost of compliance but not collect the increase
in the assessment due to this adjustment when imposing liability.
If submitted vouchers or other documentation show that the actual
costs are less in a particular case, the assessment can be low-
ered to the appropriate amount.
THE CURVE APPROACH —
EVALUATION AND SUMMARY

     Cost curves offer an administratively attractive way to
estimate the cost of compliance in civil assessment cases in
which little or no cost information is available.  A department
engineer can estimate the cost of compliance quickly and easily
from curves after determining the values for the cost variables,
In addition, estimates derived from curves provide effective
limits on discretionary assessment setting.  As discussed
earlier, cost of compliance estimates derived from curves are
likely to deviate from the actual costs in an individual case:
estimates from model-based curves will tend to be high for
individual cases, and estimates from curves based on actual
costs may be either somewhat high or low.  The regulatory pro-
visions for partial collection and correction ensure that
individual assessments will be accurate and equitable despite
the potential inaccuracies of these rough inital curve-based
estimates.

     There are few curves currently available which generalize
the costs of a particular control technology or the costs of

-------
                             V-151
controlling a particular class of pollution problems.*  Curves
from various economic impact analyses by EPA, independent re-
search firms, trade and industry associations and others do,
however, provide a useful but limited beginning.  Although the
number of curves currently available and usable for cost of
compliance estimating is small, additional curves may be devel-
oped for control technologies for which costs can be generalized
in relation to some variable characteristic(s) of individual
sources or discharges and for which the number of key deter-
minants of case-to-case cost variation is limited.  The proto-
type curves which relate the installed capital costs of metal
waste treatment technology to the volume of flow, the amount
of sludge protection, and the availability of land for sludge
drying beds demonstrate the rationale and methodology for devel-
oping curves based on models of specific control technologies.
*  Recent cost studies by EPA and its research contractors have
examined costs using both models and costs in actual cases.
Numerous types of waste treatment facilities have been modeled
in order to evaluate the costs of the specific control tech-
nologies required to achieve varying degrees of effluent limit-
ation.  For some industries, such as the metal finishing and
paint and ink formulating industries, treatment facilities were
modeled for several different size process plants, but in most
cases, just one average size model was used to weigh  the costs
of the alternative control technologies.  Actual cost data was
gathered for the purpose of analyzing the economic impact of
prescribed levels of effluent reduction.  For some industries,
such as the metal finishing and common and precious metals sub-
categories of the electroplating point source category, sufficient
cost data were available to plot a curve relating either in-
vestment costs or annual treatment costs to a significant dis-
charge variable.   However, since the data were collected in
order to determine the probable economic impact of expenditures
for the incremental control facilities required for a particular
effluent limitation, they might include cases in which minimal
modifications were necessary as well as cases in which entire
new facilities were installed.  In addition, the final level
of effluent reduction in individual cases might vary substant-
ially as long as the minimum level prescribed was achieved.  As
a result,  the majority of curves based on actual cost data
represents the average incremental costs experienced by the
group in order to meet a specific standard rather than the costs
of a particular type of installation or technology.

-------
                             V-152
     The Department can review the various types of pollution
problems and pollutants to determine which categories lend
themselves to a general control model and cost analysis.  For
some categories of pollution problems, such as subsurface sanit-
ary waste disposal or metal waste treatment, there is one type
of control technology which is adequate to meet Department re-
quirements for virtually all sources.  For these types of problems,
a model of the control technology can be developed and costed
for different values of the key parameters.  However, some other
classes of pollution control cases, such as siltation and run-
off control, may be so idiosyncratic as to defy generalization
and preclude development of cost curves.

     Costs can probably be  generalized and developed to cover
a substantial portion of pollution control cases which come
under order or require permits.  The prototype curve for treat-
ment of metal wastes covers approximately one-third of all non-
municipal orders issued in a recent one-year period.  Curves
may be developed which give the costs of treating dairy wastes
and disposing of sanitary sewage, problems which respectively
account for one-quarter and one-fifth of orders.  The remainder
of the orders, approximately half of the total,required treat-
ment for miscellaneous industrial waste problems or control
measures for presumably idiosyncratic siltation, run-off and
other types of pollution problems.*  Several of the industrial
waste cases may require control technologies of the sort which
lend themselves to generalized models and cost analyses.
   Analysis of 70 non-municipal orders issued from April, 1974
   to March, 1975.

-------
                            V-153
                         APPENDIX B
                       THE COST CURVE
                     TREATMENT APPROACH*
     This appendix describes in detail the treatment system
used as the basis for the prototype cost curve described in
Appendix A.  This treatment system is a typical flow-through
arrangement with all cyanide, chrome and acid/alkali wastes
being segregated.  Gravity flows are assumed within treatment
modules — that is, for example, from first stage cyanide to
second stage cyanide; and also from one treatment module to
the next -- that is, from cyanide destruction to neutraliza-
tion.  Generous equalization is provided prior to cyanide
destruction, chrome reduction and neutralization.  It is
assumed that all organic cleaners and any other solutions
containing high amounts of organics are discharged to the
sanitary sewer; however, the rinses from these solutions are
allowed to be discharged to the metal finishing waste treat-
ment system.  Cyanide destruction is performed by typical two-
stage alkaline chlorination and chrome reduction is performed
by typical one-stage acid sulfonation.


CYANIDE DESTRUCTION

     Cyanide wastes are contributed by three sources:   (1)
dilute rinses from cyanide plating solutions and cyanide dips;
(2) floor spillage from cyanide processing areas; and (3)
dumps of concentrated solutions flowing by gravity to a con-
centrate holding tank.  This holding tank is equipped with one
high level control with audible alarm.  All floor spillage is
segregated by diking, and is directed to sumps from which it
is pumped to a floor spillage collection tank.  This tank is
also equipped with one high level control with audible alarm.
The contents of both the concentrate holding tank and the
floor spill collection tank are pumped to a cyanide pretreat-
ment tank.  In this tank all cyanide from the first two sources
is destroyed prior to the solution's discharge to the neutraliza-
tion system.  All chemical additions are manual,therefore, no
pH or ORP recorders or controllers will be needed.  A portable
mixer provides good mixing during batch treatment.
   The work reported in this Appendix was done by Michael
   Harder, a member of the Water Compliance Unit's Engineering
   Staff.

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                             V-153a
     It is assumed that all dilute rinses will flow by gravity
to the cyanide equalization tank, which is sized for a 30-
minute retention time to allow good equalization and provided
with one high/low level control and one mixer.  The level control
is designed to keep the volume of contained liquids between a
minimum and a maximum.  This high/low level control controls the
discharge pump from the equalization tank to the first stage
cyanide treatment tank.  For the cyanide destruction liquid sodium
hypochlorite is used rather than gaseous chlorine because of the
smaller space requirements for the liquid hypochlorite and the greater
ease of dissolution as compared with the chlorine gas.

      The  first  stage  treatment  tank  is  sized  to provide  15
minutes retention  time.  A pH recorder  controller keeps  the pH
in this tank  at approximately 11.0.   If the pH falls  below the
set point,  the  controller  will  automatically  call for  the
addition  of liquid  sodium  hydroxide  which  is  fed in by means
of a metering feed  pump.   The addition  of  the liquid  hypochlor-
ite is controlled  by  an ORP  recorder-controller.  These  treat-
ment indicators are detected by means of a pH probe and  ORP
probe.  These probes  are connected to the  pH  and ORP  recorder-
controllers.  The  contents of this tank are mixed to  allow
complete  first  stage  reaction.

      Once the cyanide  has  been  partially destroyed to  cyanate,
the wastes  flow by  gravity to the second stage cyanide treat-
ment tank.  This tank  is sized  to provide  45 minutes  retention
time.  The  pH of this  reaction  is maintained  at approximately
8.5 by the  addition of dilute sulfuric  acid.  The cyanate in
this tank is  completely destroyed to carbon dioxide and  nit-
rogen, again  by means  of liquid sodium  hypochlorite.   As in
the first stage, the  reaction is controlled by pH and  ORP
recorder-controllers  and probes.  The only exception  is  that
in the second stage treatment,  the pH recorder-controller
controls  the  addition  of dilute sulfuric acid, whereas in the
first stage treatment  the  pH controller controls the  addition
of liquid sodium hydroxide.  Again,  the contents of the  tank
are thoroughly  mixed.  The pretreated wastes  now flow  by gravity
to the neutralization  system.


CHROME REDUCTION

      Chrome wastes  are contributed in the  same manner  as the
cyanide wastes,  that  is from dilute  rinses, floor spills and
concentrated dumps.   All concentrated dumps flow to a  concen-
trate holding tank  which is  equipped with  one high level control
with audible  alarm.   The contents of the tank are then batch
treated manually to reduce the  chrome,  using  the same  chemicals
as are used for treating the dilute  rinses below.  A mixer is
provided  to insure  proper  mixing of  the contents of the  tank

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                            V-153b
during the reaction. Progress of the reaction is monitored
by means of portable test kits.  When the reaction is complete
the contents of the tank are bled to the neutralization system
by means of a portable metering pump.  All floor spills are
directed to the acid/alkali floor spill collection tank and
treated as described below.

     All chrome-bearing dilute rinses flow by gravity to the
chrome equalization tank.  This tank is equipped with a high/
low level control and a mixer and sized for a 30-minute reten-
tion time.  The level control controls a pump in the same manner
as the cyanide equalization level control.  The equalized chrome
rinses are pumped to the chrome reduction tank which is sized
for a IS-minute rention time.  This tank is equipped with a
mixer, pH probe and recorder-controller, and ORP probe and
recorder-controller.  The pH controller maintains the pH of
the reaction from 2.5 to 3 by means of dilute sulfuric acid.
The acid is fed in by a positive-displacement, diaphram-type
pump which is activated by the pH recorder-controller.  The
chrome is reduced by sodium metabisulfite which is added by a
positive-displacement diaphragm-type pump, controlled by the
ORP recorder-controller.  The metabisulfite is contained in
a storage tank with a mixer.  Sodium metabisulfite was chosen
over sulfur dioxide gas for chrome reduction because this
chemical requires relatively little storage space and because
it dissolves easily.  The pretreated chrome wastes now flow by
gravity to the equalization tank prior to neutralization.
NEUTRALIZATION.

     As in the previous two cases, waste can originate in this
category from three sources:  dilute rinses, floor spills, and
concentrated dumps.  Dumps of spent acid or alkaline solutions
flow to the concentrate holding tank, with the exception of
spent organic cleaners which are discharged to the sanitary
sewer.  The concentrate holding tank is equipped with a high
level control with audible alarm and a mixer.  When the high
level alarm sounds, the contents of the tank are pumped at a
slow rate to the equalization tank.  All acid/alkali from chrome
floor spills are directed to the acid/alkali floor spill collec-
tion tank by a sump pump located in the processing area.  The
floor spill collection tank has a mixer and a high level control.
When the alarm is activated,the contents of the tank must
first be pretreated for chrome prior to discharge to the equal-
ization tank for neutralization.  This pretreatment for chrome
is performed in the same manner as that for the dumps of con-
centrated chrome solutions.

    In Summary, five flows enter the equalization tank prior
to neutralization:  first, bleeding of the spent acid/alkali
concentrates from the concentrate holding tank; second, bleed-
ing from the pretreated acid/alkali floor spill collection tank;
third, the pretreated dilute rinses containing cyanide; fourth,
the pretreated dilute rinses containing chrome  and last, the
dilute acid/alkali rinses.  This equalization  tank is provided
with a mixer and a high/low level control and is sized for a  30-
minute  retention time.  The contents of the equalization tank

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                              V-153C
are then pumped  to the neutralization tank which is sized
for a 15-minute retention time.   It is equipped with a mixer,
pH probe and recorder-controller.  The pH controller main-
tains the pH in the optimum range for metals precipitation by
adding either sodium hydroxide or sulfuric acid.  The chemicals
are added by a positive-displacement diaphragm-type pump which
is activated  by a pH controller.  The neutralized wastes now
flow by gravity to the flocculant addition tank which is sized
for a 5-minute  retention time.  The flocculant aid is added at
a pre-set rate.  There are no controls in this step other than
this manual setting.  The flocculant aid is held in a storage
tank which is provided with a mixer.  The wastes are next
pumped to the clarifier or settling basin.
SOLIDS REMOVAL AND
SLUDGE HANDLING

     The neutralized and precipitated wastes, containing large
amounts of suspended metal hydroxide sludge, enter the clar-
ifier.  This clarifier is designed for a two to three
hour retention time; however, a more important design parameter
is the surface overflow rate which  will  not exceed 300 gallons
per square foot per day, or 0.208 gallons per minute per square
foot.  It is assumed that some type of prefabricated clarifier
will be used rather than an in-ground settling lagoon, since
in all cases the clarifier would be more expensive.  The clear
supernatant flows over the effluent weir leaving behind the
concentrated sludge in the bottom of the settling tank.  The
sludge is collected at a central point in the settling tank
and is pumped to a sludge holding tank.  It is further assumed
that in this holding tank the sludge is compacted twofold;
that is, it becomes a two percent by weight slurry.  Any super-
natant from this tank is pumped back to the neutralization
tank.

     Two percent sludge slurry is then pumped to the solids
dewatering mechanism, either a vacuum filter or a sand drying
bed, depending on whether adequate land is available for the
latter.  If a vacuum filter is used or if underdrains are
used with the sand drying beds, then the sludge filtrate will
be pumped back to the neutralization tank.  However, in the
case of the vacuum filter, it is assumed that the  filtrate  pump
and conveyor are provided and that the vacuum filter is of the
non-precoat type.  In addition to the availability of land, the
following cut-off points are assumed in choosing between the
vacuum filter and the sludge drying bed:  less than 15 gallons
per minute, always assume a sludge drying bed will be used;
above 200 gallons per minute, always assume a vacuum filter
will be used.  If the vacuum filter is used, the following
ranges are assumed:  15 gallons per minute to 100 gallons per
minute, use a 3 foot diameter by 3 foot vacuum filter; 100
gallons per minute to 500 gallons per minute, use a 4 foot
diameter by a 6 foot wide vacuum filter; and above 500 gallons
per minute, use a 6 foot diameter by a 6 foot wide vacuum
filter.  These ranges are simply educated guesses made neces-
sary by the wide range in operating procedures and character-
istics of industries employing vacuum filters.

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                 PART VI
 THE IMPACT OF ECONOMIC CIVIL ASSESSMENTS




ON THE ADMINISTRATIVE COSTS OF ENFORCEMENT




        IN THE WATER COMPLIANCE UNIT

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                                  VI-2



      ECONOMIC CIVIL ASSESSMENTS WILL CUT  THE COST OF HANDLING THE

CURRENT WATER COMPLIANCE  UNIT'S ENFORCEMENT  COSTS ROUGHLY  20  PERCENT

$25,000 A YEAR.


                     Annual  Administrative Costs for Enforcement

                        (Current Caseload - Costs Per Year)
              Without 503 Assessment

                   5125,000
With 503 Assessment
                                                    ~l
                                 $104,000
                                        16%
                                                      22%
                                                $97,000
                                Assumes 60%
                                  of All
                                Extensions
                                  and 54%
                               of All Tablings
                                  Were
                                Unavoidable
          Assumes 30%
          of Current
          Delay is
          Unavoidable
DISCUSSION;   CEP's study of  what has happened  to voluntary complianc
in other  regulatory areas when enforcement has been strengthened,
indicates  that tightening  Water Compliance's enforcement  grip with
tools  like the 503 Assessment will  lead to fewer cases  of delayed
compliance  and less resistance to Department action when delay  does
occur.  This  improvement will  not, however,  occur immediately.   How
long it will  take regulatees to become aware of and respond to  this
change in  their situation will depend on  (1) what efforts the
Department  makes to inform them of the existence and effectiveness
of its new  enforcement tools,  and (2) how quickly it begins to  use
these tools.

For the average case, these  savings are $140 if roughly 60 percent
of all delay  now experienced is unavoidable, $175 if 30 percent of
the dealy could not be avoided.

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                                   VI-3
MOST SAVINGS  COME FROM:

     *  HAVING TO  PROCESS  FEWER EXTENSIONS,  TABLINGS  AND
        REFERRALS

     *  HAVING TO  REVIEW FEWER(AND  SOMEWHAT  BETTER PREPARED)
        ENGINEERING REPORTS  AND PLANS AND SPECS.
                               Percent of Total Savings
                   Assuming 60% of
                 All Extensions and
                 54* of All Tablings
                  Were Unavoidable
        Reviewing
        Engineering
        Report
             Assuming 30% of
            All Current Delay
             is Unavoidable
                         Tablings
                             Extensions
Reviewing
Engineering^,
Reports    \
           \
     Reviewing
     Plans and
     Specs
                                                               Extensions

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                                     VI-4
      THREE QUARTERS OF  THE  SAVINGS COME DURING  THE INITIAL

PLANNING STEPS.
                            Percent of Total Savings

                               by Step of Order
                          Assuming 60%    Assuming 30%
                         of Extensions    of Total Delay
                        54% of Tablings   is Unavoidable
                        is Unavoidable
                             100
                Final
                Compliance
                Start
                Construction
                Plans and
                Specs
                              18
                              42
                Engineering
                Report
                              35
                                           100
21
                                            34
DISCUSSION:   These  first two  steps in  most  cases  are  also  where
three quarters of all delay now occurs.

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                           VI-5
     THESE SAVINGS ARE NET OF THE ADDED COSTS OF CIVIL
ASSESSMENTS.

     *  It will cost $295 on average to impose and administer
        a civil assessment when this proves necessary.

     *  Roughly 40 percent of this cost is incurred before
        a Notice of Violation is issued - following up prob-
        lems once they are detected, deciding an assessment
        is necessary, estimating the costs of compliance,
        calculating the assessment, and issuing the notice.

     *  Another 30 percent is the result of possible hear-
        ings - 22 percent from possible hearings regarding
        the assessment and 7 percent from later correction
        hearings.  (If hearings are requested in 20 percent
        of all .civil assessment cases and held in only 10
        percent, the cost of the average assessment case
        would drop 13 percent to $256.  The $295 figure as-
        sumes 30 percent of the cases request hearings, and
        that hearings are held 20 percent of the time.)

     *  These calculations also take into account an assumed
        200 percent increase in hearings regarding orders -
        back to the level experienced just after the Depart-
        ment began issuing abatement orders - because regu-
        latees will probably be more reluctant to accept or-
        ders once they know that noncompliance may prove ex-
        pensive.  Section 502 provides the Department with an
        important means of discouraging such delay-motivated
        hearings.

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      Back-up Data
                                     VI-6
                        THE ADMINISTRATIVE COSTS OF
                          ENFORCING COMPLIANCE

              (Before CEP Tools Introduced; The Average Case)

Percent of
All Orders
Where Step
Applies
11
34
43
98
98
2.7
8
14
10
78
20
72
80
3.7
26
22
80
15
54
60
9
39
39
60
5
50
1.25
5
100
100

Number of
Times Step
Used In
Orders Using
It At All
1.0
1.1
1.5


1.0
1.0
1.5





1.0
1.3
2.4




1.0
1.0
1.2









Average Cost
of Step
When
Used
83.00
70.00
84.00
30.00
1.00
83.00
64.00
84.00
12.00
2.00
35.00
60.00
150.00
83.00
83.00
134.00
2.00
35.00
60.00
115.00
83.00
64.00
67.00
2.00
2.00
15.40
350.00
25.00
46.00
119.00
TOTAL

Cost in
the
Average
Case
9.13
23.86
36.12
29.40
.98
2.24
5.12
11.76
1.20
1.56
7.00
43.20
120.00
3.07
21.58
29.48
1.60
5.25
32.40
69.00
7.22
24.96
26.13
1.20
.10
7.70
4.37
1.25
46.00
119.00
691.88
Enforcement Steps
   With Normal
Chronology Reversed

Refer
Table
Extend
Inspect/Verify
  Compliance
Receive Notification
  cf Compliance
Refer
Table
Extend
Inspect/Request
  Evidence
Receive Start
  Construction Report
  3rd P&S Review
  2nd P&S Review
  1st P&S Review
Refer
Table
Extend
Receive Plans & Spec.
  3rd ER Review
  2nd ER Review
  1st ER Review
Refer
Table
Extend
Receive Engr.  Report
Receive Report
  re:  Hire Engr,
Respond to Enquiries
Hearing
Receive Request
  for Hearing
Issue Order
Detection
Sources:   Extensive interviews with Water Compliance staff; review of
random sample of case files; CEP flow diagram o'f steps; and simulations
The underlying data has been reviewed by Water Compliance staff.

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