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
-------
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.
-------
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%
-------
ENVIRONMENTAL PROTECTION AGENCY
-------
The Judges (detail)
John Andrew and Son (after W H Drake)
American, 19th Century
Wood engraving
Courtesy Museum of Fine Arts, Boston Ma.
-------
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
-------
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
-------
PART I
USING ECONOMIC CIVIL ASSESSMENTS
-------
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
-------
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.
-------
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)
-------
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
-------
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.
-------
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.
-------
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.
-------
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.
-------
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.
-------
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
-------
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.
-------
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.
-------
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,
-------
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
-------
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).
-------
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
-------
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.
-------
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.
-------
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.
-------
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.
-------
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
-------
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
-------
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.
-------
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.
-------
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.
-------
PART II
BASELINE PROFILE OF THE ENFORCEMENT PROCESS
FOR PRIVATE AND INDUSTRIAL SOURCES
IN THE WATER COMPLIANCE AND HAZARDOUS SUBSTANCES UNIT
-------
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.
-------
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
-------
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.
-------
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
-------
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
-------
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 ).
-------
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.
-------
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.
-------
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.
-------
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.
-------
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.
-------
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.
-------
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.
-------
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.
-------
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).
-------
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.
-------
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.
-------
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.
-------
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.
-------
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.
-------
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.
-------
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.
-------
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.
-------
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
'
-------
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.
-------
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.
-------
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.
-------
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.
-------
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.
-------
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%.
-------
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.
-------
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.
-------
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.
-------
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.
-------
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.
-------
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.
-------
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.
-------
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.
-------
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.
-------
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.
-------
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.
-------
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.
-------
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.
-------
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.
-------
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.
-------
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".
-------
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.
-------
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.
-------
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
-------
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
-------
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).
-------
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.
-------
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.
-------
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.
-------
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.
-------
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
-------
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.
-------
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
-------
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.
-------
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.)
-------
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.
-------
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
-------
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
-------
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
-------
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
-------
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.
-------
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.
-------
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
-------
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.
-------
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.
-------
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.
-------
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
-------
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.
-------
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.
-------
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.
-------
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
-------
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
-------
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.
-------
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.
-------
PART IV
PROPOSED CIVIL ASSESSMENT REGULATIONS
-------
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.
-------
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.
-------
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.
-------
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.
-------
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.
-------
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.
-------
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,
-------
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.
-------
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.
-------
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.
-------
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.
-------
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
f
X
20
it
X
X
X
X
X
X
30
X
X
X
*
X
*
*
X
X
X
f
X
X
X
X
X
X
X
40
X
'7
X
X
so
to
X
.
other
110
70
•
32. Magnasiu*
33. Manganese
34. Mercury
H. Molvbdraiai
! Nickil
37. Pot«..iu«
' 31. S«l«niu»
39. Sllv«t
40. SodttiB
41. Thalliwi
42. Tin
43. Tit«niu»
44. v.n.diu.
^ , 4S. line
JlytriABtfli AnimtVi And OTQftnloi
H. Organic nitrogen (•• M)
. Ortho-phoiob.?; (a. t\
41. iutfat. (••-fci)
• . 41. fulfill iai II1
SO. Sulfit.
SI. BroaUd*
H. Chlorid. .
. Cyanid*
54. Fluoride
55. Chlorine-total residual
5C. Oil and greaae
57. Pnenola
H, Surfacunta
. 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
X
X
20
X
X
I
X
I
X
X
X
30
X
X
X
"I™1
X
X
*
X
X
X
X
X
X
X
40
X
'"I"
— T"
X
X
X
z
X
' X
X
50
X
X
60
tl
other
70
70
•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
-------
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.
-------
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.
-------
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
-------
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.
-------
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
-------
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:
-------
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)
-------
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
-------
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)
-------
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)
-------
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)
-------
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
-------
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
-------
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-
-------
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.
-------
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
-------
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.")
-------
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.
-------
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
-------
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
-------
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)
-------
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)
-------
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)
-------
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)
-------
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
-------
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.
-------
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)
-------
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)
-------
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
-------
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.
-------
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.
-------
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.
-------
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
-------
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.
-------
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
-------
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.
-------
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
-------
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.
-------
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.
-------
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.
-------
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.
-------
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.
-------
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.
-------
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
-------
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
-------
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
-------
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;
-------
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.
-------
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.
-------
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.
-------
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,
-------
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.
-------
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:
-------
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.
-------
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
-------
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,
-------
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.
-------
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.
-------
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.
-------
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
-------
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
-------
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«
P-t -41.6-
P-E "in
y IEl t> H'0'1 0(1
•^ Aitj'n jp Avf Cofnn
'•«. t iii V i« v.«ia
4J4 KElAT.VES
' I
P (
g «fu
i •*.. '
i 0(1
-INDUSTRIALS-
ANNUAL FINANCIAL ANALYSIS
•UltOINC HT«tS-CIHENT
AMCOKD INC
\t Cjin f. EJ,,.|.«"
57 C "•*/>'" u 1 S^ IKtt
SI jtr*..uii
t! '-..iii-r- i 1 Al.jodi
fit T Bt|> l\«l| It. 10 ' ' n
6! 3 •!>« L ia '.in
59 L3r9-T«rmOtbt
10 ". si iv -'t'tn
11 fttlft: Sot»
fj Can-nan Equ.lv tBook v»w
1C Cun«"l Ring
77 Long.-Tlf rico Rll.O fll'5
II Y«H-E*d C on P'Kt-Cisn
14 Drtr'3t" ftffur
•5 0 <-ciio Y.eid-Migft
*" t4tnfl Y.t'd'Low
i ttwmi
C'Mil
CiM.I
fl
«
„»
'ms
7
Nl
9
10
1
26
4
86
0
1466
5
NA
J
9
1
2)
9
4
82
0
T
14*7
a
Nl
13
13
1
3*
DTAL
"1
Nl
1*
22
*
50
121 28
4 4
ail in
o: -2
1201 117| 132
ia
22
0
11
a
60
15
1
22
0
10
8
61
101 101
8 8
1.4 1.6
221 22
0' 0
10' 10
81 8
59' 60
" 12| 12
10 a
10 a
'1.04
12- »
10
127
2.40
5- 4
A,
0.53
51t
22X
5.7
4.5
5.3
%
77
87
87
122
1001
21
1
20
0
20?
35
XM-LA
14*4
Nl
fa
*
' 3*
11
110
2
21'
«, 4^
66. 72
20' 20 20
10 11! a
59| 661 60
1
I0t 165
13 15
1.6' 1.4
AS % or TO
19, 40
0 1
19, 12
9 7
54l 40
ft
U, 24
(1 13
It! 19
0.80 1.20: 1.16
10; 14T 16
160; 218! 181
2.34 2.58' 2.52
5- 31 6- 31 0- 5
3 61 7
ita
6
1.1
TAL IN
' 45
I
12
5
37
» SHAf
20
9
IP
0.55
is 5-17
18
L_2!S
0.54
96-17
18
us HH
1470
;!
27
60
3*
4
115
2
21'
"
»ooo-
1971
a
Nl
20
29
63
2)
5
. 2
19721 1473
•' '
Ni| Nl
201 ia
29J 31
1 M 60
22| 18
118 119
'! 1
218 205 Itl
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
53
76j 7l| 65' 7O OEITAHALYSIS
3J 0 Ol 0 124 NeitiPiiibit NA
19 14
e »
tl| 61
t
165
12
1.2
VESTE
46
37
IE OAT
7
0.55
84-11
-JL|j
4
16t
12
1.2
0 CAP
46
2
"
37
A
10
5
t
0.31
Bl-17
JLEL
1.54
4
191 U
61 8
62 63
160 154
10 17
1.4 1.4
TAL.
451 42
0 0
12| 12
5 5
391 41
9 7
6 4
6 4
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
1466
4.2
6.7
0.8
-0.8
Nt
Nl
2.4
3.3
HI
o.r
Nl
Nl
21. 9|
SI
Ni
1.4 131 \* LTD T.td 10 Pnmi Nl, Nl
132 LTOMaiuunj-S Y§« Nl Nl
43 UJ SIO.iSLTO&STO 5.9. 6.0
0 134 Inlenn Coveii^l 6.6J 5.3
11 U5 Toil! Fiaid Chf Covrfifi 4.01 3*2
41 136 Y-t Gioi; iurullM.il ( a4
5 138 PA Rel-Awq Gi Op* Aatli 4. It
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
24t 19ti 21 1, lOlt 1!« Ot; Ot! Ot
7.4
4.6
7.3
36
40
96
91
90
111
111
It 9
19 14
6fcl as
60 72
56. 66
631 44
153 187
7.4
3.4
3.4
55
6(
73
52
'H
U
21
72
7*
14
108
*.2| 5.9 0.0
2.3) 2.8 0.0
2.91 5.7 0.0
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
0.23 l«6 Prr Rtl-Ai^ Com U'v 10. 2X
241 147 A/T Rtl-i^ComEqiy 8. 31
lOt 1" *'C l» Com Eary P»S-H<» 90. 6t
14 »T
6.9
, 7.0
1.4
8.7
Nl
Nl
3.3
Nl
5.1
Nl
Nl
20.3
Nl
Nl
Nl
23.5
Nl
Nl
18.7
8.8
».7
1B> 207
173| 190
3.1X1 5.31
3.41 5.7X
2. 21 3.5X
23.091 21.44
0.67! 1.00
6.2t| 10.61
5. at T.4t
13.93) 11.51
7.1X| 14.71
5.81 10. 2t
81. 3 1! 1*31
9.1 (49 Pic ID Com Eaty P/S-Lo* 71.lt 53. 9X
4.8 I5Q IniiinGnh Km Av^CE 4. It 1.8X
151 Y-E [..Pl.nl IS Mill 149
Ni 152 »n PUnl n * Ci Pljnl 57.5X
Nl 153 SjltiPtt SA^Ci Plwil 0.45
Nl 154 Otpr Amorl Ji% Av» Ci P| 4.61
Ni 1S5 Cw E.oinauSA^Gr PI 3. 7t
NA 1S6 Si'«P«r $ A«9 RcccMbllt 9,80
NA 160 MMVXSMlO/SlSM.1) 46
Nl 16; WkiVHSIuiTidiSMill 7
Ni 162 Shu Trd AI X Shn 0/S 16.0
Nl I«J Ma ill Sun 0/S (Mil) • 4.4
153 1(4. Slin UHd m Cue EPS |Mi
10. OX
6.41
11.37
16. 7X
10.71
212X
1161
5.7t
199
59. 5X
0.71
4.4t
3.9X
a. a;
7.23
V.96
15. OT
110
51
46.2
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
3.2J 30.3
Nlj Nl
72.1
NA
Nl
Nl
72.1
14721 1913
4.6l 5.»
7.5' 7.2
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
Hi
Nl
Nl
48.8,
Ni, Nl
Nl| Nl
24. J 23.9)
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
26.53) 27.261 27.49, 26.27, 27.16
0.841 0.82' 0.89 Q.91{ 1.02
5,71 6.8X1 5. 1C 7.81 9.2t
4.5* 4.7X1 3.2C 4.TXI 5. 8X
9.87; 10.15; 10.13. 10.25 11.16
6.8V 8.2X 4.7C 9.2X1 ll.lt
5.3S S.fcS 3.0t 5.5« 7.01
199C 131C 94. 7C 83.61' 58.31
94.81; 59. 2X, 52. 2t 58. 5t 34. 7t
-13* 2.8* 3.01 5.7X1 7. OX
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
5.44| 4.90J 4.74. 5. IE] 5.34
12.97 14.92; 10. 9> 9.81 9.28
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
147*
4.3
7.4
-0.7
3.4
0.2
2.*
1.3
17.5
-6.5
2.5
37.4
10.6
70.3
Hi.
7.0
4.7
96. 1
22.6
43.4
21.1
1.7
319
302
5.3t
5.6t
2.01
28.80
1.12
10. 91
8.2X
11.84
10. at
1.21
42. 2t
22.21
6.21
227
55.91
0.80
3.3t
7.9X
10.35
4.38
10.95
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)
& i X J rv il', .
KEUFFEL » t«isin CO
III Cyanide Destruction Module
\ooo 'i
<\00
Soo
600
500
lion
"VW
300
100 •
10-
(0
en
»**
HO
«%f\
iff-
1 ^
i 1
i
-
-"
-
-
-
-
-
-
it 1 . i!:: ! i
ii
! ;i !i
! ' i
l li ! !
!
i !
7 7 T *•!
t
i
I
h iL It
--- -t4ui
-1-4 "4 j 1 I i t i { 1 1 1 1 I'll
- -
1 23
* Installed Costs
1 5 § ' 8 i l
iii , li,. ipil Jji. ic ._
: i li ';;' •'••
] \\ Tjjfj:^
i: 1|| Jj!i'i;i:
i ^ ii ii
M-jfr • ••-
i , , ; i . .
- !jj
• • !l ;: !i-
ii:;j:
; j ; ! ,!''
i . l ,.;,.':..
' rfl^T
}-: -Hi:!!1
i l i '; '
i i ! :| I
i T: Ttj |
I lit
i i I1
i ii r fi i
. ,1 .
T >i;
i ! '..
i jjj'..
4 5678
= 2.75 x Equip
:,;
1,
Ml!
i*
'T
tm
.,
i ,
ji
lit
i
i
!!
? 3 4 567891
: i
i !
! ! i
- ! !
- -I
J -
-
-
p>*
-
r
_:
"-
—
-
_
-
_
-
-
-
-:
••
-
—
—
-
-
-
oi=:
I-
f
i
I
i
ill
, ' i .
1 : : 1
! j j :
jlil
I1'1
— i ', • |
i i
i i '•
i i .
i !
j i :
t - .
, ,
1 i •
i i i ;•
3 10 i
>ment Costs
i jij
i
_ i —
^
i : ,
! ! ' j
• • t •
| , ;.
jjji
i : ; :
:
1 . .
i . .
' i !
•»•! 1**
Ki
.),; i!,
i j • *
1 1 •
»
1 1 . \
1 1 • r
.
_
,
p . i
'i.'
, ,
iii
• i
....
IV
^ *•
i;.
.;
o 3o 1J
Desic
: ' •
r •
.Tl*
i 1 '
44 i
iin
Mi
• rt '
1 i •
i I
1 .1
i '
i i
* -•
-t- -
I I .
t < •
i i 1
i
*
' t r •
0
jn C
. . »
uti
l . .
trt
1 li J
i -
, ,
it ! i
l ;J
i i
• i 1 *
Hi
t i i
M 1
i-i 1
Hi I.
: ; i i
IN
Iij i
t ;
III
! t
;
1 1
ili"'
SO 60
:apai
:: it;;
;, i.,
i ' j ' t •
i p ! '
( i '
11 " '
|, if:
1 "
*j
r i;;;
i t:i:
4 it;-
t' 111
j] II;.
I: ill,
1 iii;
li iHt
fl
111!
1 It)1
i! |
' li'1
i '
il It •
il iii,
•— •
;i '
;r
In
;;.
44
i '
1. 1
i .
i:
ji
i
,
B-d
i.
j
1
2
-
I
. - . : r
— i — T — t- 1-
-H
1 i
i i
i ,
;- :: : .: ]
-l-l J
_J
' 1 . "1
-
-
-
..L
t_
-.-
*
-
-
—
-
-
-
-
i i
, ,
t ' -
,
' '
.; : : i
• ; ; •
iji;
:.i ||
jti !
llrj
! 1 '
70 80 90100
sity
3 4 567891,
•t"
t
i
i 1 '
i
! !
— •"•
: r i :
: r'
f
: .; :.:
— i-
t
:it;
fj-t
.p:
[iii
fj_
It
j J
J
1
all
' j
*ii i
*~~
-i- f t .
ii!;
tra
ill'.
!ji:
ft;;
•rr
, , i t
i .
T^"
....
nc:
r±
un
«rfr
;!;
. I
H:
**..
! *_!_
nt:
""
.+^.
.1..
.!(..
'f
k*° '°° 4
..:-: :
....
^
1
T~*
--i
|
--t
*
I1'!-"
£
r=f^
r*4
j-
J3:
T'
fi
tilj
:ii;
• t-t*
: 1 1.
- - i •
0» 1
y
* -
iir
i •
.1
Uir
t"P *
T^:
tfrt
r!ir.
i ii ,
.u.
tit:
.iii
1 1
rjij
. 1 1..
i
boo 4
..f.
it-
;ii:
1 1
...
:*::
:r,:
T!-
f TOO
:..
r
rtik
c
•I'1
w
.^.
— •
:™
....
E
....
M»
9
g
7
6
5
3
2
l—
1 CJ
9
•8
7
6
^
3
i
000
-------
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.
-------
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
-------
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
-------
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.
-------
PART VI
THE IMPACT OF ECONOMIC CIVIL ASSESSMENTS
ON THE ADMINISTRATIVE COSTS OF ENFORCEMENT
IN THE WATER COMPLIANCE UNIT
-------
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.
-------
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
-------
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.
-------
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.
-------
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.
------- |