EPA-230/1-73-DE1
AUGUST 1973
           ECONOMIC ANALYSIS
                     OF
    PROPOSED EFFLUENT GUIDELINES
  THE INDUSTRIAL  PHOSPHATE  INDUSTRY
                    QUANTITY
      U.S. ENVIRONMENTAL PROTECTION AGENCY
           Office of Planning and Evaluation

              Washington, D.C. 20460
                        \
                         UJ
                         O

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  This document is available in limited quantities through the
U. S. Environmental Protection Agency,  Information Center,
Room W-327 Waterside Mall, Washington, D. C. 20460.

  The document will subsequently be available through the
National Technical Information Service,  Springfield,  Virginia
22151.

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        ECONOMIC ANALYSIS
               OF
   PROPOSED EFFLUENT GUIDELINES
THE INDUSTRIAL PHOSPHATE INDUSTRY
            August 1973
          EPA-230/1 73-021

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This report  lias  been reviewed by  the  Office of
Planning and Evaluation, 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 products
constitute endorsement  or recommendation for
use.

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                                     PREFACE

     The attached document  is a contractors' study prepared for the Office of Planning and
Evaluation of the Environmental Protection Agency ("EPA"). The purpose of the study is
to analyze the economic impact which  could result from  the application of alternative
effluent limitation guidelines  and standards of performance to be established under sec-
tions 304(b) and 306 of the Federal Water Pollution Control Act, as amended.

     The  study  supplements  the  technical study  ("EPA Development  Document") sup-
porting  the issuance of proposed regulations under sections  304(b) and 306. The Develop-
ment  Document  surveys  existing  and  potential waste  treatment  control methods and
technology within particular  industrial  source categories and  supports  promulgation of
certain effluent limitation guidelines and standards of performance based  upon an analysis
of the feasibility of these guidelines and standards in accordance with the requirements of
sections 304(b)  and 306  of  the  Act. Presented  in  the  Development Document are the
investment and operating  costs associated with various alternative  control and  treatment
technologies. The attached document supplements this analysis by  estimating the broader
economic  effects which  might result from the required application of various control
methods and technologies. This study investigates  the effect ot alternative approaches in
terms of produce price increases, effects upon  employment  and the  continued viability of
affected plants, effects upon foreign trade and other competitive eltects.

     The study has been prepared with the supervision and review of the Office of Planning
and Evaluation of EPA.  This report  was submitted in fulfillment  of Task Order No. 7,
Contract 68-01-1541 by Arthur D. Little, Inc. Work  was completed as of August 1073.

    This  report  is being  released  and  circulated at  approximately the  same  time as
publication in  the Federal Register  of a notice of proposed rule making under  sections
304(b) and 306  of the Act for the subject point source category. The .study  has not been
reviewed by KPA and  is not an official EPA publication. The study will be considered  along
with the information contained in the Development Document and any comments received
by EPA  on either document before or during proposed rule making proceedings necessary to
establish final  regulations.  Prior to final promulgation of regulations, the accompanying
study shall have standing in any EPA proceeding or court proceeding only  to the extent that
it represents the views of the contractor who studied the subject industry.  It cannot be
cited, referenced, or represented in  any respect  in any such proceeding  as a statement of
EPA's views regarding the  subject industry.

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                    TABLE OF CONTENTS




                                                      Page




List of Tables                                             iv




SECTION I SUMMARY                                       1




 I.  SCOPE                                               1




 II.  SEGMENTATION                                       2




III.  COSTS                                               3




IV.  IMPACT ANALYSIS METHODOLOGY                        4




 V.  ECONOMIC IMPACT ANALYSIS                            5




SECTION II DESCRIPTION OF INDUSTRIAL PHOSPHATE INDUSTRY   6




 I.  OVERALL INDUSTRY                                   6




    A.  SEGMENTATION                                    7




    B.  RELATIVE IMPORTANCE OF EACH SEGMENT             9




    C.  TYPES OF FIRMS                                   9




    D.  TYPES OF PLANTS                                 11




    E.  FINANCIAL CONSIDERATIONS                        11




 II.  PHOSPHORUS                                         13




    A.  SEGMENT DESCRIPTION                             13




    B.  PLANTS AND COMPANIES                           13




    C.  FINANCIAL PROFILE                                15




    D.  PRICES AND MARKETS                              18

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               TABLE OF CONTENTS (Continued)




                                                       Page




III.  FURNACE PHOSPHORIC ACID                             21




    A.  SEGMENT DESCRIPTION                              21





    B.  PLANTS AND COMPANIES                            21





    C.  FINANCIAL PROFILE                                23





    D.  PRICING                                          24





IV.  DERIVATIVES OF ELEMENTAL PHOSPHORUS                27





    A.  SEGMENT DESCRIPTION                              27





    B.  COMPANIES AND PLANTS                            27





    C.  FINANCIAL PROFILE                                28





    D.  PRICE EFFECTS                                    33




 V.  DERIVATIVES OF PHOSPHORIC ACID                      34




    A.  SEGMENT DESCRIPTION                              34




    B.  PRODUCING COMPANIES AND PLANTS                  34




    C.  FINANCIAL PROFILE                                36




    D.  PRICE EFFECTS                                    41




SECTION III ECONOMIC IMPACT ANALYSIS                      43




 I.  INTRODUCTION                                        43





 II.  IMPACT ANALYSIS                                     44




    A.  WATER POLLUTION CONTROL COSTS                  44





    B.  IMPACT ON PRICES                                 47




III.  LIMITS OF THE ANALYSIS                               50





                            iii

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                           LIST OF TABLES

Table No.                                                            Page

     1        Cost of Achieving Zero Discharge                           3

     2       Price Increases Related to GTC Proposed Costs of
             Achieving Zero Discharge                                  4

     3       Producers of Phosphate Products                            8

     4       Company Data                                          10

     5       Phosphorus Producers                                    14

     6       Estimated Cost of Elemental Phosphorus Manufacture        17

     7       Sensitivity of Phosphorus Profitability                      19

     8       Recent Phosphorus Prices                                 19

     9       Location of Furnace Acid Plants                           22

   10       Estimated Cost of Manufacturing Phosphoric Acid From
             Elemental Phosphorus                                    25

   11        Estimated Cost of Manufacturing Phosphorus Oxychloride    29

   12       Estimated Cost of Manufacturing Phosphorus Pentasulfide    30

   13       Estimated Cost of Manufacturing Phosphorus Pentoxide      31

   14       Estimated Cost of Manufacturing Phosphorus Trichloride     32

   15       U.S. Producers of STPP                                   35

   16       U.S. Producers of Calcium Phosphates                      36

   17        Estimated Cost of Manufacturing Sodium Tripolyphosphate   37

   18       Estimated Cost of Manufacturing Dicalcium Phosphate        39

   19       Estimated Cost of Manufacturing Dicalcium Phosphate
             Dihydrate                                               40
                                  IV

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                      LIST OF TABLES (Continued)

Table No.                                                            Page

   20        Plant Location Sites - Phosphoric Acid Derivatives           46

   21        Price Increases Related to GTC Proposed Costs of
              Achieving Zero Discharge                                 48

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                         SECTION I  SUMMARY

                               I. SCOPE

    The purpose of this report is to assess the economic impact of the 1972
Federal Water Pollution Control Amendments on the industrial phosphate indus-
try. The specific products analyzed are as follows:

    Phosphorus
    Phosphoric acid produced from phosphorus
    Phosphorus pentoxide
    Phosphorus trichloride
    Phosphorus oxychloride
    Phosphorus pentasulfide
    Sodium tripolyphosphate (STPP)
    Calcium phosphates (excluding fertilizers, and defluorinated phosphates)

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                           II. SEGMENTATION

     The industry producing the products listed above was segmented for analysis
on the basis of process similarity. This was considered  a  more valid basis than
geographic location, age or size of plant, or other possible criteria.

     The four segments selected were as follows:

     1.    Elemental phosphorus

     2.    Phosphoric acid

     3.    Anhydrous  derivatives  of phosphorus (phosphorus pentoxide,
          pentasulfide, trichloride, and oxychloride)

     4.    Derivatives of phosphoric acid (STPP and calcium phosphates)

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                               III. COSTS

     Manufacturing costs were estimated for each of the products under consider-
ation, based on available information on investment and operating costs for plants
producing each of the products. Representative plant sizes were selected on the
basis of typical plants currently operating, but it was also realized that substantial
variation  in costs do exist, depending not  only on plant size and age, but also on
other factors, such as whether or not the production units are included in large
multiproduct complexes, or operated independently.

     The  costs of water pollution control were taken, at the request of EPA, from
an effluent guideline development document prepared for that agency.1 It  was
not within the scope of this impact analysis study to confirm or modify the water
pollution   control  costs  presented  in  the effluent  guidelines  development
document.

      It was concluded in the guideline  document that for all
products under consideration, it  was possible  to  achieve zero
discharge  on the basis  of best  practicable  control technology
currently  available.   These two products  phosphorus
oxichloride and  pentoxide  however,  are  required to achieve
zero water discharge by 1983.   For the  purpose  of analysis,
these two  products  were analyzed  for the impact of zero
discharge,  realizing that the actual cost  for  1977 will be
lower.

      The costs to  achieve zero  discharge,   as presented in
the effluent guideline  development document, are  summarized
in Table  1.

                                 TABLE 1

                   COST OF  ACHIEVING ZERO DISCHARGE

             Product                          Cost
                                            ($/ton)

             Phosphorus                       $4.60
             Phosphoric Acid (75%)               0.65
             Phosphorus Pentoxide                1.40
             Phosphorus Pentasulfide              1.70
             Phosphorus Trichloride               1.40
             Phosphorus Oxychloride              1.25
             STPP                             0

             Dicalcium phosphate (animal feed)       1.40
 	Dicalcium phosphate (food grade)       1.50
 I.Cosf Information for the Waterborne Wastes in the Non-Fertilizer Phosphorus Chemicals
   Industry, Supplement A, prepared by General Technologies Corporation.

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                  IV.  IMPACT ANALYSIS METHODOLOGY

     In assessing the economic impact of the zero discharge costs, as presented in
the effluent guideline development document, we took into consideration the fact
that some of the  products were raw materials  for  the manufacture of other
products  covered  in  this  report.  Therefore, we included  not only the zero
discharge  costs associated directly with the production of each chemical, but also
those arising from zero  discharge costs for those raw  materials used to make
derivative products, where they were included in  the list of chemicals covered in
this report.

     For  example, food-grade calcium phosphate is produced from phosphoric
acid, in turn manufactured  from elemental phosphorus. Thus, we considered the
total  cost increases  arising from  the  cost  of achieving zero discharge in the
production  of calcium phosphate, in  the  production of phosphoric acid, and in
the production  of phosphorus, in analyzing the economic  impact of zero dis-
charge on calcium phosphate.

     The  total costs of achieving zero discharge for each of the products, based on
the costs presented in the effluent guideline development document, are sum-
marized in  Table 2.  Also  included in  this table is  a  calculation  showing the
relation of zero-discharge costs, to current sales prices, for each of the chemicals.

                                TABLE 2
           PRICE INCREASES RELATED TO GTC PROPOSED COSTS
                     OF ACHIEVING ZERO DISCHARGE
    Product
  Pollution   Raw Material^
Control Cost  Cost Increase
Phosphorus
Furnace Acid
Phos. Pentoxide
Phos. Trichloride
Phos. Oxychloride
Phos. Pentasulfide
STPP
Feed-grade Dical
Food-grade Dical
($/ton)
4.60
0.65
1.40
1.40
1.25
1.70

1.40
1.50
($/ton)

1.10
1.09
1.09
1.83
1.32
1.90

1.35
Total Cost
 I ncrease
 ($/ton)

  4.60
  1.75
  2.49
  2.49
  3.08
  3.02
  1.90
  1.40
  2.85
Current
 Price
 ($/ton)
                                                                1
1. Prices based on Chemical Marketing Reporter, 7/23/73.

2. Based on following usages:
          0.24 tons phos/ton acid        1.09 tons acid/ton STPP
          0.24 tons phos/ton pentoxide   0.77 tons acid/ton food-grade dical
          0.24 tons phos/ton trichloride   0.29 tons phos/ton pentasulfide
          0.19 tons pentoxide + 0.55 tons trichloride/ton oxychloride
Percentage
 Increase
380
168
400
,220
245
267
162
87
257
1.2
1.0
0.6
1.1
1.2
1.1
1.2
1.6
1.1

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                    V.  ECONOMIC IMPACT ANALYSIS

     Based on the fact that the costs of achieving zero discharge, as presented in
the effluent guideline document, are relatively insignificant in relation to selling
price   in no case  more than  1.6% of selling price   we conclude that cost
increase of this magnitude would have no measurable impact on the production of
any of the products covered in this report.

     However, one product - STPP - faces the prospect of a substantial decline
in market volume, as the use of this product in detergent  formulations appears
likely  to  continue to decline.  Therefore  it  is likely that some reduction in
productive capacity will  take place, primarily due to reduction in demand, that
may result in some plant closings. Decisions  regarding such plant closings may be
influenced by investments that are necessary to achieve zero  discharge.

     While the effluent guideline development document indicates no net increase
in operating cost  for achieving zero discharge in the production of STPP, it does
assume that some new investment may be necessary, which would be offset over a
period of time by recovery  of a salable product. Faced with declining markets,
certain STPP producers may be reluctant to make this mandatory investment, and
this may influence decisions regarding plant shutdowns.

     Apart from this factor, the costs presented in the effluent guideline develop-
ment  document would not appear to have  any significant economic impact on
any of the  products  covered.  Cost increases of this  magnitude will either be
absorbed,  or, more likely, passed on to consumers through price increases. The
products covered in  this report  have rather specific use  requirements  based on
their chemical properties, and are not  easily  susceptible to replacement or substi-
tution by other products.

     If actual  costs to achieve zero discharge are  significantly  higher than indi-
cated in the effluent guideline development document, as a number of producers
believe to be the  case, significant economic impacts may be felt. However, based
on  zero-discharge  costs used for this report,  we do not expect them to cause
directly any  plant closings,  to  lead to unemployment in  any  of the  segments
examined, or to have any significant  impact on communities where production
facilities are located.

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   SECTION II.  DESCRIPTION OF INDUSTRIAL PHOSPHATE INDUSTRY

                         I. OVERALL INDUSTRY

     That sector of the  phosphate industry  which is covered  by this study
generally consists of phosphorus and its principal nonfertilizer derivatives. Specifi-
cally, the products include the following, grouped into the four segments we have
selected:

     1.   Phosphorus (P4 )

     2.   Anhydrous Derivatives of Phosphorus
         a.  Phosphorus Pentoxide (P2 O5)
         b. Phosphorus Trichloride (PC13)
         c.  Phosphorus Oxychloride (POC13)
         d. Phosphorus Pentasulfide (P4 S, 0)
         e.  Ferrophosphorus

     3.   Phosphoric Acid Derived from Phosphorus (Furnace Acid)

     4.   Major Derivatives of Furnace Acid
         a.  Sodium Tripolyphosphate (STPP)
         b. Calcium Phosphates (excluding fertilizers, and
            defluorinated phosphates).

     The sector  of the  chemical  industry  producing  these products has the
following significant characteristics:

        For the most part, the derivatives of phosphorus are manufactured
         by the  same companies that produce elemental phosphorus.

        The producers of elemental phosphorus are, with two exceptions,
         large chemical or petroleum companies for whom phosphorus and
         derivatives represent only a small percentage of total sales.

        A  large proportion of the products in this sector are used intern-
         ally within the producing company for  the production of other
         products and  are not sold on the open market.

     This last factor  the largely internal use of many  of the  products  in
this sector  makes it difficult to  estimate the  specific profitability  of individual
products, even for  the companies producing them. They are generally included in
a much  larger range of products grouped together as a profit center and individual
profitabilities are often  not calculated for these specific products in this sector.

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     To give some perspective  to the industrial phosphate sector, we have pre-
pared a company - product matrix, in Table 3.

A. SEGMENTATION

     Primarily because of similar technology, we have broken down the industry
sector which  is the subject  of this proposal into four segments,  by product
groupings. They are as follows:

1. Phosphorus

     This  is produced  in an electric furnace  operation. Except for size, there is
relatively  little difference among the several furnaces  operating in  Florida, in
Tennessee, and in the western United States.

2. Anhydrous Phosphorus Derivatives

     The  technology  for  producing phosphorus  pentoxide,  phosphorus  tri-
chloride, phosphorus oxychloride, and phosphorus pentasulfide, is generally simi-
lar in that all involve reaction with other chemicals under anhydrous conditions.
The volumes involved in the production of these products are comparatively small
in relation to other chemicals examined.

3. Furnace Phosphoric Acid

     This is  by far the largest volume use  for elemental phosphorus. The produc-
tion  of acid involves an oxidation  and absorption step. Plants for producing
furnace acid are fairly standard and similar.

4! Derivatives of Furnace Acid

     The production  of sodium tripolyphosphate, and of  the various calcium
phosphates,  are generally similar and involve the aqueous reaction of phosphoric
acid  with inorganic chemicals such as soda ash or lime. With the exception of one
plant using  wet process acid, all STPP is manufactured  from furnace acid. Most
feed-grade dicalcium phosphate is manufactured  from wet process  acid, while
most  technical calcium phosphates and all  food grades are produced from furnace
acid.

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                                                                      TABLE 3
                                                      PRODUCERS OF PHOSPHATE PRODUCTS
                                               Phosphorus   Phosphorus   Phosphorus   Phosphorus   Furnace
                                  Phosphorus   Pentoxide    Trichloride   Oxychloride   Pentasulfide    Acid
                  Feedstock Technical
    Sodium       Dicalcium   Calcium
Tripolyphosphate   Phosphate Phosphate
      Holmes Company
      FMC Corporation
      Mobil Corporation
      Monsanto Company
      Occidental Petroleum Corp.

      Stauffer Chemical
      TVA
oo    Olin Corporation
      Goodpasture, Inc.
      American Cyanamid Co.
      Borden, Inc.
      Eastman Kodak Co.
      Farmland Industries
      International Minerals & Chemical Corp.
      Knox Gelatine, Inc.
      Richardson-Merrell, Inc.
0
0
0
0
0 0
0 0
0

0
0
0
0
0


0

0
0
0




0
0
0


0
0
0
0
0
0

0
0
0
0
0

0


0
0
0


                    0

                    0

                    0
                    0
                              0
                              0

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B.  RELATIVE IMPORTANCE OF EACH SEGMENT

     The following table gives some perspective on the relative production capac-
ity  for each of the major segments and products as well as the number of plants in
operation.

                             Product Volume

Product Segment      Approximate Production, 1971    Number of Plants
                             (000/tons)

Phosphorus                       545                     10
Furnace Acid                     954                     21
Anhydrous Derivatives             151                     20
Furnace Acid Derivatives
 STPP                          1040                     15
 Feed-Grade
  Dicalcium Phosphate            592                      8
 Technical Calcium
  Phosphates                      50                      6

     It should be noted that there is some duplication in the location of plants, in
that many of these  products are produced  in  integrated  chemical complexes
which  in many instances produce more than one of the products listed above.
Therefore, in  terms of plant locations, there are fewer than would be indicated by
simply adding the number of plants for the product segments included above.

C. TYPES OF FIRMS

     For the  most part, the  products included in this section of the phosphate
industry  are  produced  by divisions  of large chemical  or oil companies. The
principal companies involved in the  manufacture of most of these products are
characterized  in Table 4,  in  terms  of annual  sales, total number of plants,
indicative estimate of the number of major products produced, and the number of
employees. It can  be  appreciated that the products involved in this sector in the
case of all of these  companies represent only  a small fraction of their total
manufacturing operations.

     We discuss in the following section individual characteristics of  each of the
four segments chosen. However, it should be appreciated that there is an unusu-
ally  close interrelationship between  the  segments.  There  may  be  production
facilities  for products from two  or three of the segments  in a single chemical
complex.

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     Furthermore, a very large part of the production of the chemicals included is
used by a single producing company for the production of other of the chemicals
discussed.  Therefore,  a major  volume of the  product is transferred internally
within a single company rather than being sold commercially on a company to
company basis.
                                   TABLE 4

                               COMPANY DATA

                                        No. of Products
1972 Sates   No. of Plants
($ million)
No. of Employees
FMC
Mobil
Monsanto
Occidental
Stauffer
Olin
Cyanamid
Borden
IMC
1,497.7
10,295.1
2,225.4
2,720.8
544.2
1,098.3
1,358.9
2,192.9
491.2
85
120'
85
92'
103
80
109
147
71
                                     220 major products                46,000

                                     More than 200 major products,       75,600
                                     plus a full line of petroleum products

                                     71 major products                 63,000

                               92*    More than 200 major products,       33,000
                                     plus a full line of petroleum products.

                                     62 major products                 10,300

                                     300 major products                29,000

                                     120 major products                41,400

                                     200 brands                       48,000

                                     60 principal products               7,000
 'Excluding pipeline and drilling facilities.
                                      10

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     These  two  facts  make  it  particularly difficult to determine  individual
product profitabilities. This is true not only because it is impossible to determine
individual companies transfer pricing  policies  but  also because the companies
themselves in many instances do not look at the individual products as separate
profit  centers, and do not attempt to calculate  or keep track of the profitability
of the  individual product or product segment.

     Nevertheless, we have presented indicative cost data in the following sections
to give an approximate idea of the  economics of manufacture and sale of the
specific products.

     It should be pointed out that we  have  not discussed ferrophosphorus as an
individual product.  This is a by-product in  the manufacture of elemental phos-
phorus. According to information from the  producers, there are no water pollu-
tion problems uniquely  associated with   ferrophosphorus  since no  water is
involved in  its recovery or handling. The general aspects relating to the use  and
disposal of water in  electric furnace operations are discussed under Phosphorus.

D.  TYPES OF PLANTS

     For the most part, the types of plants operated in each of the four segments
discussed  in  this report are generally  similar from company  to company  with
principal variations  occurring  in size of  plant,  and age. More specific character-
istics of the plants are discussed under the individual segment sections.

     The one major exception to the generally uniform nature of plants is the  fact
that one  plant,  that operated by Olin  Corporation, produces sodium tripoly-
phosphate from  wet process acid rather than from furnace acid. The use of the
wet process  for producing phosphoric acid in this plant, presents quite a different
range of water pollution problems, compared to a plant for producing phosphoric
acid from  phosphorus.

     We  have discussed the number  of employees  involved in  each segment
section. For this overall sector of the industry,  it seems clear that  the number of
employees in the phosphorus segment is an order of magnitude higher than the
employees involved  in the production of the other three product segments. Total
employment  in the  phosphorus  segment may  exceed 3,000 employees, while
employment  in  each of  the  other segments  is estimated  to be substantially
under 1,000.

E. FINANCIAL CONSIDERATIONS

     It is  important to  note the  highly integrated nature of that sector of the
industry in which these four product segments  are involved. The high degree of
interrelationship  between the various  product segments makes a  profitability
analysis of any one segment difficult.
                                     11

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     Sensitivity  to price increases  arising from water pollution control costs
would have two major aspects. The first would be the differential increases among
individual  companies. Companies with  above  average pollution control costs
would be put at a competitive disadvantage to those companies with lower costs.

     The second aspect to price sensitivity would relate to the vulnerability of the
specific products or class of plants to substitutable materials. In almost all cases,
there is a very specific requirement for the final derivatives covered in this report,
and  it is unlikely that there would  be direct substitution by alternate products.
However, there is the  possibility  that some of these products could  be produced
in new plants from wet process acid at prices that would  be competitive with
furnace  acid, particularly  if there  are  substantial cost  increases arising from
pollution control measures.

     There is only one plant in the United States producing industrial phosphates
from wet process acid - the plant of Olin at Joliet, Illinois. This plant is about 40
years old and uses a  rather conventional series of crystallization and  filtration
steps to produce products of a desired purity.

     An alternative type of process  has  been  under consideration by a number of
companies. This involves the purification of wet process  acid  via the  solvent
extraction route. There are  indications that these processes, which are still under
development, may permit the production of the  industrial phosphates at costs
competitive with productions from furnace acid. Interest in these processes would
be greatly  stimulated if there were indications that the cost of products produced
via the furnace acid  route  were to increase substantially because  of pollution
control measures.

     However, since  these  processes are still under development and are of  a
highly proprietary and confidential  nature, it is  difficult to get information with
any  precision on the  costs of this alternate route to the derivatives with which we
are concerned in this report.
                                      12

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                             II. PHOSPHORUS

A. SEGMENT DESCRIPTION

     Phosphorus is universally produced in an  electric furnace operation, from
phosphate  rock. Phosphate rock, sometimes processed into nodules, is blended
with coke and occasionally with silica. This mixture is then added to the electric
furnace.  Electric  power is introduced  through  vertical electrodes and serves  to
provide the heat  necessary for the reaction to take place. The coke reduces the
phosphate  content of the phosphate rock to elemental phosphorus which passes
from the furnace  as a gas along with carbon monoxide. Phosphorus is condensed
by cooling, is filtered, and stored.  Because it oxidizes on contact with the air,
phosphorus is generally stored and transported under a water blanket.

     A small amount of iron  is contained in the phosphate rock, and combines
with phosphorus  to  form ferrophosphorus.  This  sinks  to  the  bottom of the
furnace crucible and is tapped periodically as a molten material. It solidifies, is
cleaned, graded, and stored for future shipment.

     A slag forms in the process, consisting of the non-phosphatic components  of
the phosphate rock, and silica. This is also tapped as a liquid, cooled and broken
up by water cooling, and used as a construction aggregate material.

     Phosphorus is used entirely for the production of various phosphate chemi-
cals, most of which are included in the other segments of this report.

     Phosphorus is a solid at normal temperatures but is readily liquefied by
heating to approximately 45 centigrade.

     Phosphorus furnaces in the United States are generally of quite similar design
although they range in size from smaller units with a capacity of approximately
10,000 tons of phosphorus per year, to the larger furnaces producing as much as
45,000 tons per year. In many instances several phosphorus furnaces are grouped
together  in a production complex  although  single furnace installations are  in
operation.

B. PLANTS AND COMPANIES

     There  are  six  companies producing phosphorus in the United States.  In
addition, the Tennessee Valley Authority (TVA) an agency of the U.S. Govern-
ment is also a major producer.

     Table  5 lists  those  companies producing  phosphorus,  together with the
number of furnaces estimated in operation together with their capacity.
                                    13

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                                  TABLE 5

                          PHOSPHORUS PRODUCERS

                                               Number        Operating Furnace
Company            Location                Operating Furnaces   Capacity, Tons P4

Holmes Company     Pierce, Florida                   2                 20,000
FMC Corporation     Pocatello, Idaho                  4                145,000
Mobil Chemical       Nichols, Florida                  1                  5,000
Monsanto Company   Soda Springs, Idaho               3                110,000
                   Columbia, Tennessee              6                135,000
Hooker Chemical      Columbia, Tennessee              3                 60,000
Stauffer Chemical     Silver Bow, Montana              2                 42,000
                   Tarpon Springs, Florida           1                 23,000
                   Mt. Pleasant, Tennessee           3                 45,000
TVA               Muscle Shoals, Alabama           3                 40,000
                                                                  658,000

     It can be  seen  that phosphorus production is concentrated in  three general
areas, associated with the nearby  availability  of phosphate rock.  These are  in
Florida, in Tennessee, and in the  Idaho-Montana area.

     Because phosphorus plants are generally  located  because of raw material
considerations rather than market locations, and because phosphorus is the most
economic form in which to transport phosphate values,  production  of the deriva-
tives  of phosphate is  generally undertaken at locations other than where the
electric  furances are located. The exceptions to this are Stauffer Chemical Com-
pany  at Silver Bow, Montana, Occidental at Columbia, Tennessee, and the TVA at
Muscle Shoals, Alabama. At these locations, phosphoric acid is also produced.

     However, as shown in the company-product matrix in  the previous section,
five of the six companies producing phosphorus  also produce at other locations
phosphoric acid, sodium  tripolyphosphate,  and certain of the anhydrous phos-
phorus   derivatives.  The Holmes  Company, which acquired  their phosphorus
furnace from Continental Oil, is  the only company which produces only phospho-
rus and no derivatives.

     It is important to note  that  because of this configuration of the industry,
most  elemental phosphorus is  shipped substantial distances after manufacture  to
locations where it is processed into derivatives. As mentioned, it must be shipped
under a  blanket of water. The volume of water which  is used to blanket  the
phosphorus  both  in transportation and  handling  becomes contaminated with
phosphorus, and is therefore one aspect  of water pollution concern which must  be
kept in mind.
                                     14

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     In the manufacture of phosphorus, there appear to be two general water
pollution  problems. The  first  involves so  called "phossy"  water  water con-
taining suspended phosphorus. Several water streams in the plant that pick up
phosphorus are combined and generally treated by means of settling ponds.

     A more serious problem in the production of phosphorus relates to the water
treatment  effluent  both from the  burden preparation facilities and also from
water  scrubbing  of the effluent gases. Fluorides are  a  particular problem.  The
incoming phosphate ore contains about 3% fluoride. Approximately 20% of this is
volatilized both in the burden preparation and in the furnace itself, and ends up in
the waste treatment water. The remaining 80% of the  fluorine is contained in the
by-product  slag. It is believed that there are some  plants  which  have  a total
recycle for the scrubber water whereas others may go only part way and  may be
in fact discharging some fluorine.

     It is  difficult to generalize on the types of firms  or plants that would be
particularly affected by water pollution control measures. With the exception of
the Holmes Company in Florida, phosphorus is manufactured as a minor portion
of much  larger enterprises and thus corporate characteristics would have little
relevance to water pollution control impact.

     As to the location of the phosphorus furnaces  generally  concentrated in
Florida, Tennessee,  and the Idaho-Montana regions - it is also difficult to identify
one area or another that would expect a moderately different impact from water
pollution control  measures. It is true that phosphate rock mined in Tennessee is
generally beneficiated by washing, and effluent wash water has been identified as
a major pollutant. However, these mining operations are generally quite separate
from production  of phosphorus, and do not lie within the scope of this segment.

     The labor force in  a phosphorus furnace operation is relatively high per unit
of product, compared with other operations in the chemical industry. It appears
that the labor force at a typical multifurnace phosphate operation will range from
250 to 600. Preliminary estimates would indicate that at the 10 locations where
phosphorus is  produced, involving some 26 furnaces, somewhere in the neighbor-
hood of 3,000 men might be employed directly associated with the production of
phosphorus, but  not including mining operations. This would appear to be the
largest labor force by far of the four segments included  in this study.

C. FINANCIAL PROFILE

     Since  phosphorus is produced  at  locations where, with one exception, no
other products are manufactured, the complications of attempting to allocate
costs  to  calculate profits in  a large multiproduct complex are  not  a factor in
examining the financial profile for phosphorus. However, a very large proportion
                                     15

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of phosphorus produced is consumed at other locations by the  same company.
Therefore,  the profitability of phosphorus production in these instances should
probably be  judged by examining  the  transfer price, which  generally is  not
available for individual companies. The proportion being sold on the open market
is  sufficiently small that  it does not represent a  meaningful indication of the
average  income  being received  by  the  phosphorus  producing  unit. However,
lacking  other data, this is probably  the best available measure of income for a
phosphorus production unit.

     As a preliminary  indication  of  the financial profile for the production of
phosphorus we  present in Table 6,  an  estimate of the cost of manufacturing
phosphorus in Tennessee including depreciation, and typical  input costs.

     There is a fairly wide range in cost of the major variable costs for phosphorus
production particularly regarding electric power. These range from 2.3 mills per
kwh for power  from  the  Bonneville Power Administration in Montana to an
estimated 7.26 mills for power supplied by the Tampa Electric Company to some
of the operations in Florida. This  difference of 4.93  mills per kwh is equivalent to
about $59.00/ton of phosphorus.

     The cost of phosphate rock   is another  cost  which varies  substantially
between one operation and another.  This cost is much more difficult to ascertain
because for the  most part phosphate rock is  mined by the  phosphorus producer
and transferred at an unknown price to the phosphorus furnace operation.

     There is less variation in the cost of coke, but this again will lead to some
variation in the  cost of production.  Producers in the Tennessee and Florida  area
are believed  to  be  paying around $23.00 to $26.00 per ton of coke delivered.
Producers  in  Idaho and  Montana   are paying an  estimated  $35.00  per  ton,
currently.

     The  price  of phosphorus  is  obviously the  most important  single  item
affecting profitability. Factors affecting price will be discussed  in more detail  in
the following section. However, the fact that over 90% of phosphorus produced is
transferred  within  the producing company  to other  chemical manufacturing
facilities, makes it extremely difficult  to ascertain what in effect was the net
income for the individual plants.

     The Department of Commerce,  in its statistics on inorganic chemical produc-
tion, permits calculation of an average annual f.o.b. price tor phosphorus. This is
probably the best indication of price, but still leaves the possibility open that the
transfer prices established by the companies  on the one hand might be somewhat
arbitrary and artificial in nature.
                                     16

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                                     TABLE 6

          ESTIMATED COST OF ELEMENTAL PHOSPHORUS MANUFACTURE

                Basis:   Three (3) electric furnaces rated at 35,000 KW each,
                       producing a total of 72,700 tons of P4 per year
                       Location:  Tennessee

Capital Investment: $45 million

Manufacturing Cost

Cost Item               Units        Units/Ton P4      Cost/Unit       Cost($)/Ton P4

Raw Materials:

   Tennessee matrix      tons             10.0             5.20              52.00
     (26%P205)
   Silica                tons              0.45             1.98               0.89
   Coke                tons              1.42           25.00              35.50
   Electrodes            Ibs                .42             0.32              13.44
Utilities:

   Electricity
   Water
   Fuel
kwh
Mgal
MSCF
12,500
20
12
0.0068
0.05
0.23
85.43
 1.00
 2.76
Salaries, Wages, and Overhead
Operating Supplies
Maintenance
Taxes and Insurance (2% of investment)
Depreciation (6.67% per year)
   Total
   By-products credits
Net manufacturing cost
                       Cost($)/Year

                         3,500,000
                          400,000
                         4,000,000
                          900,000
                         3,001,500
                            Cost($)/Ton P4

                                  48.14
                                    5.50
                                  55.02
                                  12.38
                                  41.29
                                                 353.35
                                                 -19.00
                                                 334.35
                                        17

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     Using the cost figure indicated above, plus an arbitrary charge forGS&A of
$35.00/ton the profitability can be estimated  for various phosphorus prices. This
is presented in Table 7. This shows that with an average cost of $370 per ton of
phosphorus as a manufacturing cost, including GS&A, the profitability after taxes
ranges from $5  with  a $380/ton phosphorus price, f.o.b. plant, to $25/ton at  a
$420/ton selling price. Using  an  estimated  fixed investment of  $620/ton,  the
after-tax return, as a percentage of fixed assets, ranges from 0.8%  at $380 phos-
phorus, to 4.0% at $420 phosphorus.

     This table is useful only to indicate the sensitivity of profitability to price of
phosphorus. Our estimates of the cost of manufacture have been for one specific
hypothetical furnace operation in Tennessee, and wide variations between plants
can be  expected on the basis of increases in power costs, coke costs, phosphate
rock costs, operating  rate, etc. This table  is not in any sense to  be taken as  a
representative estimate of the profitability of the phosphorus industry.

     As an indication  of the wide swings which prices have taken in recent years,
we  present in  Table 8 the average value of phosphorus shipment as reported by
the U.S.  Department of Commerce  in their publication, "Current  Industrial
Reports  Inorganic Chemicals," series M28 A-14.

     More  recent trade information indicates that  phosphorus prices have risen
sharply recently. Current commercial  sales are reportedly being made at a level of
2\i per pound, equivalent  to $420.00/ton.

     As can be seen from the figures in Table 6, raw material and utility cost present
about  57% of the total direct  manufacturing costs  for phosphorus. This  means
that the portion of total costs which would be affected by added water pollution
costs  would be  less than 50% of the  total. Thus, the leverage on total manufac-
turing costs of added investment and operating costs necessary for water pollution
control would be less  than in processes where the raw materials were not  such  a
major factor in manufacturing costs.

     The salvage value of a phosphorus installation  is likely to be negative   that
is, the  cost of  dismantling and  disposing of the  facilities would probably be
greater than any credits for equipment re-use or resale.

D.  PRICES AND MARKETS

     It  is important in examining the pricing situation regarding  phosphorus to
appreciate the largely  captive nature of phosphorus movements. Over 90% of the
phosphorus produced by the six companies, and the TVA, is  used  within  the
producing organization (although generally at  other locations) for the production
of phosphoric acid and phosphorus derivatives.
                                     18

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                            TABLE 7

          SENSITIVITY OF PHOSPHORUS PROFITABILITY
                          (dollars per ton)

Price of Phosphorus/Ton                 $380      $400      $420
Cost of Manufacture
  Direct Cost             $335.00
  GS&A                    35.00
                                      370       370       370

Profit Before Taxes                       10        30        50
Prof it After Tax                           5        15        25
After Tax Return                          0.8       2.4        4.0
  (% on assets)1
1.  Basis: $620/annual ton
                            TABLE 8

                  RECENT PHOSPHORUS PRICES
                        ($/ton f .o.b. plant)

                    All Shipments1          Commercial Shipments2

   1968                   $336                    $300
   1969                   356                     329
   1970                   358                     287
   1971                   381                     356

   1. Both intracompany and intercompany.
   2. Intercompany only.

   Source:  U.S. Department of Commerce "Current Industrial Reports -
          Inorganic Chemicals," Series M28A-14.
                               19

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     The Department of Commerce in its Bulletin M28-14, reports monthly and
annual movements  of phosphorus both in total, and for commercial sales alone.
These have been presented earlier in Table 8. Along with tonnages, total values are
indicated. This  is generally considered a good  measure of the actual  prices at
which phosphorus does move.

     In  Table 8, we have listed  the average value per ton of phosphorus for the
period from  1968 to 1971 for both total shipments and for commercial sales. It is
interesting  to note that  the value of commercial sales has been consistently below
the value of total  shipments.  Since  90%  of the total  is represented  by  intra-
company  shipments, the value for  total  movements is very close  to that  of
intra-company movements.

     Because they  represent only a small portion -  less than 10%  of total
phosphorus production    commercial  sales can  expect to  show, fairly wtde
fluctuation  in  prices since  this small sector of the total production would  be
expected to reflect  any  overall supply/demand imbalance that might develop. In
other words in periods  of  over-capacity, prices on the open  market would  be
expected to drop substantially and in periods of shortages to rise significantly.

     The prices for  intra-company shipments as in most internal transfer situa-
tions, is arbitrary to a degree.  Often such transfer prices particularly between
separate divisions of a company,  are set by policy at  the prevailing price in the
open market. However,  this does  not  appear to be the case in phosphorus since
intra-company  shipments have consistently been substantially higher than open
market prices.

     Because of the somewhat  arbitrary nature of intra-plant transfer values, it
will  be difficult to assess the  effect of water pollution control costs on  this
particular price.  Increases in  costs will undoubtedly be reflected in  increased
prices of the ultimate derivatives, although not necessarily properly reflected in
the reported transfer prices, as in the Department of Commerce Series M28 A-14.

     There  is no alternative to  phosphorus in the production of its derivatives.
Therefore, there is no sensitivity  to price in the direct demand for phosphorus
itself. There may however, be some sensitivity to price in the demand for some if
its derivatives,  and this will be reflected ultimately in the demand for phosphorus.
                                     20

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                            TABLE 7

          SENSITIVITY OF PHOSPHORUS PROFITABILITY
                         (dollars per ton)

Price of Phosphorus/Ton                 $380      $400      $420
Cost of Manufacture
   Direct Cost             $335.00
   GS&A                    35.00
                                      370       370       370

Prof it Before Taxes                       10        30        50
Prof it After Tax                           5        15        25
After Tax Return                          0.8       2.4        4.0
  (% on assets)1
1.  Basis: $620/annual ton
                            TABLE 8

                  RECENT PHOSPHORUS PRICES
                        ($/ton f .o.b. plant)

                    All Shipments'          Commercial Shipments2

   1968                  $336                    $300
   1969                  356                     329
   1970                  358                     287
   1971                  381                     356

   1. Both intracompany and intercompany.
   2. Intercompany only.

   Source:  U.S. Department of Commerce "Current Industrial Reports 
          Inorganic Chemicals," Series M28A-14.
                               19

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     The Department of Commerce in its Bulletin M28-14, reports  monthly and
annual movements  of phosphorus both in total, and for commercial sales alone.
These have been presented earlier in Table 8. Along with tonnages, total values are
indicated. This  is generally considered a good  measure of the actual prices at
which phosphorus does move.

     In  Table 8, we have listed  the average value per ton of phosphorus for the
period from  1968 to 1971 for both total shipments and for commercial sales. It is
interesting  to note that the value of commercial sales has been consistently below
the value of total  shipments. Since  90%  of the total  is represented by  intra-
company  shipments,  the value for  total  movements is very  close  to  that  of
intra-company movements.

     Because they  represent  only a  small portion  less than 10%  of total
phosphorus production    commercial  sales can  expect to show fairly wide
fluctuation  in  prices  since  this small sector of the total production would be
expected to reflect  any overall supply/demand imbalance that might develop. In
other words in periods  of  over-capacity, prices on the open market would be
expected to drop substantially and in periods of shortages to rise significantly.

     The prices for intra-company shipments as in most internal transfer situa-
tions, is arbitrary to a degree.  Often such transfer prices particularly between
separate  divisions of a company,  are set by policy at the prevailing price in the
open market. However,  this does  not appear to be the case in phosphorus since
intra-company  shipments have consistently been substantially  higher than open
market prices.

     Because of  the somewhat  arbitrary nature of intra-plant  transfer values, it
will  be difficult to assess the  effect of water pollution control  costs on  this
particular price.  Increases in  costs will undoubtedly be reflected in increased
prices of the ultimate derivatives, although not necessarily properly reflected in
the reported transfer prices, as in the  Department of Commerce Series M28 A-14.

     There  is no alternative to  phosphorus in the production of its derivatives.
Therefore,  there is no Sensitivity  to  price in the direct demand for phosphorus
itself. There may however, be some sensitivity to price in the demand for some if
its derivatives,  and this will be reflected ultimately in the demand for phosphorus.
                                     20

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                    III. FURNACE PHOSPHORIC ACID

A. SEGMENT DESCRIPTION

     Phosphoric acid can be produced by two quite different processes. The first
-  the  "wet process" route  - involves the treatment of phosphate rock with
sulfuric acid and the subsequent filtration of solid gypsum, to produce a relatively
crude phosphoric acid. The second route, which produces a purer acid, involves
burning elemental phosphorus to form phosphorus pentoxide, and then absorbing
this in water to form  phosphoric acid.

     With minor exceptions, wet process acid is generally used  for the production
of various liquid and solid fertilizer materials while phosphoric acid produced
from phosphorus or  "furnace acid" is predominantly used for the production of
various  industrial phosphate products. Nevertheless, there is  one plant in  the
United States  producing industrial phosphates from wet process acid, and some
small use of furnace acid in  liquid mixed fertilizers.

     Almost all of the furnace acid  produced in the United States is manufactured
by the producers of phosphorus. All producers except the Holmes Company also
produce furnace acid and other derivatives.

     Furnace acid  is  used  primarily for the production  of  a  wide variety  of
phosphate  chemicals, principally salts  of sodium,  potassium, and calcium. The
material  produced in largest volume from furnace acid  is sodium  tripolyphos-
phate,  for the detergent  market.  Its production  and that of  other  calcium
phosphates is covered in the fourth  segment of this industry sector.

     Only two furnace acid plants  are located adjacent to a phosphorus furnace;
that  of Stauffer in  Silver  Bow, Montana,  and Occidental's plant at Columbia,
Tennessee. All other phosphorus production used to make acid is shipped to other
locations.

B. PLANTS AND COMPANIES

     There are estimated to be 23  furnace  acid  plants in the United  States.
Twenty-one of these are operated  by basic phosphorus producers. One plant in
Texas uses purchased  phosphorus. Acid plants are listed in Table 9 with their
locations, and  total company capacity.  Individual plant capacities were  not
available at the time of writing this  draft.

     As in the  case of phosphorus, it is difficult to identify types of firms or types
of plants, involved in the production of furnace acid, that would be impacted to a
greater or lesser degree by  water pollution control  measures. Furnace acid plants
                                     21

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Producers
FMC Corporation
               TABLE 9

LOCATION OF  FURNACE ACID PLANTS


           Plant Location
Mobil Oil Corporation


Monsanto Company
Occidental Petroleum Corp.
Stauffer Chemical Company
TVA

Goodpasture, Inc.
 Total
           Carteret, New Jersey
           Lawrence, Kansas
           Newark, California
           Green River, Wyoming

           Carteret, New Jersey
           Fernald, Ohio

           Augusta, Georgia
           Carondolet, Missouri
           Kearny, New Jersey
           Long Beach, California
           Trenton, Michigan

           Dallas, Texas
           Jeffersonville, Indiana
           Columbia, Tennessee

           Chicago, Illinois
           Chicago Heights, Illinois
           Morrisville, Pennsylvania
           Nashville, Tennessee
           Richmond, California
           Silver Bow, Montana
           South Gate, California

           Muscle Shoals, Alabama

           Brownfield, Texas
Grouped Company
    Capacity
   (tonsP2O5)


       340,000



       115,000



       455,000
                                                                         85,000
                                                                        250,000
        75,000

        45.000
      1,365,000
                                        22

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are generally located close  to concentrated markets and thus tend to be placed in
more densely populated areas than phosphorus furnaces for example.

     The labor force for an individual furnace acid  plant is not large. If operated
as an independent unit and not as part of a complex, the labor force for a furnace
acid plant  might vary  from 20 to 40 people depending on size. If included in a
complex of several  plants,  the  labor  component might  be significantly  less.
Assuming an average of 30 men  per plant, with some 20 furnace acid plants in
operation,  a total industry force  in this segment of some 600 could  be approxi-
mated.

     The technology is generally quite  similar for all of the  furnace acid  plants
with the major difference lying in the lining of the furnace in which phosphorus is
burned  to phosphorus  pentoxide.  In  the older  plants, these were lined with
carbon bricks, which were  cooled by dribbling cooling water over them. This led
to some pickup of the phosphorus pentoxide in this  cooling water resulting in
contamination of this water with phosphoric acid.

     All of the more recent plants that have been built substituted a stainless steel
water cooled jacket for the carbon brick,  and cut down to a very high  degree on
this contamination of the cooling water. In all other aspects we believe that all of
the furnace acid plants are generally quite similar.

C. FINANCIAL PROFILE

     As pointed out previously, in the entire group of phosphorus based products
being examined in this report, there is a great deal of vertical integration with
most  products  being produced by companies that  either manufacture the basic
raw materials or consume the products themselves in the further manufacture of
other derivatives. (Thus, we  are  faced  with the problem of estimating or ascer-
taining intra-company transfer values rather than examining open market prices.)
This is particularly confusing in the case of the products like furnace acid, where
both the raw material input  in this case phosphorus  and the final product -
furnace acid  are generally transferred on an intra-company basis.

     On  the other hand, the financial  analysis of furnace acid manufacture  is
greatly simplified by the fact the  cost of the basic raw material  phosphorus 
the overwhelmingly most important cost component in the overall manufacturing
cost  of  furnace  acid, comprises approximately 94% of the final cost. Thus, any
increases in process  costs  that might  arise because of water pollution control
measures, even if relatively substantial,  would have only a minor effect on the
overall cost of manufacturing furnace acid.
                                    23

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     We show in Table 10 the representative breakdown of the cost of making
furnace acid. We have used the current  list price for open  market purchases of
phosphorus  of  $380.00  per ton although we believe that current spot sales are
actually being made substantially above this.

     Prices  for  furnace acid currently are well  below  this calculated  cost of
manufacture and have been for recent years. This suggests that  phosphorus is
being transferred into the  furnace acid plants at substantially below the list price,
although the Department of Commerce  figures  for intra-company do seem to
indicate the transfer at essentially list.  This would indicate that the furnace acid
plants are operating at or below the manufacturing cost on this transfer basis.

D. PRICING

     As in  the  case  of phosphorus, only a small percentage of furnace  acid
produced  is sold on  the  open  market to other companies. Almost all is used
internally by the producer for the manufacture of other derivatives. Furthermore,
only about 25% of production is shipped from the point of production to another
plant. It is only this portion that is reported by the Department of Commerce in a
way  in which its value f.o.b. plant can be calculated. However, we have extracted
these figures for the years of 1968 to 1971, summarized below:

                            Furnace Acid Values
                          ($/tonP2Os, f.o.b. plant)

                                      Value per Ton P2O5

                   1968                      142.00
                   1969                      165.00
                   1970                      156.00
                   1971                      168.00

     It is interesting to note that all of these prices are substantially below the
direct  manufacturing cost of  furnace  acid,  calculated from a typical  recent
transfer value of phosphorus of  $380.00.  This underlines again, the somewhat
arbitrary and unreliable nature  of the reported intracompany transfer figures as a
reflection of true price and realistic profitability.

     For two reasons, it is unlikely that the  effects of water pollution control
costs will be  major or significant  in terms of furnace phosphoric acid. In the first
place, over 90% of the cost of  furnace acid, as mentioned above, consists of the
cost of phosphorus and the effect of major changes of water pollution control
costs associated directly with the manufacture of acid would not be particularly
significant.  Furthermore,  since  most   of furnace  phosphoric  acid  involves
                                     24

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                                     TABLE 10
            ESTIMATED COST OF MANUFACTURING PHOSPHORIC ACID
                         FROM ELEMENTAL PHOSPHORUS

                  Basis:   54%P2O5  Phosphoric acid equivalent to
                          45,000 tons/year of P2 05
                          Plant located in Midwestern U.S.A.
                          Phosphorus cost (f.o.b. furnace plant) at
                          $380.00 per ton P4; freight, $5.00 per ton P4

      Capital Investment:   $1 million  (includes storage for 3,000 tons P2OS;
                          no P4 storage)
Manufacturing Cost

Cost Item
Utilities
   Electricity
   Water
 Units    Units/Ton P2O5    Cost/Unit    Cost($)/Ton P2O5
Raw Materials and Freight:
   Phosphorus              Tons P4
   Freight                 Tons P4
Kwh
Mgal
               0.44
               0.44
60
23
             380.00
               5.00
0.0068
0.05
               167.20
                 2.20
0.41
1.15
Salaries, Wages, and Overhead
Operating Supplies
Maintenance (4% of investment)
Taxes and Insurance (2% of investment)
Depreciation (6.67% per year)
                  Cost($)/Year

                     180,000
                       5,000
                      40,000
                      20,000
                      67,000
                      Cost($)/TonP2O5

                             4.00
                             0.10
                             0.89
                             0.45
                             1.48
                           177.88
                                        25

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intra-company transfers of both  raw material and finished product,  its pricing  is
somewhat academic.

     As in the case of phosphorus with only a small  portion of total production
moving in  open market sales, it is likely that there would be relatively  wide
fluctuation in the price of this  small open market segment reflecting  changing
supply/demand conditions. As has happened in the  past, when there have  been
substantial  surpluses  of furnace  phosphoric  acid, these have moved at relatively
low prices primarily into the liquid  fertilizer market, to maintain capacity opera-
tion  at phosphorus furnaces, where  costs are quite sensitive to the operating rate.
In the  same vein, during periods  of  short supply, quantities available on the  open
market would be limited and would  undoubtedly rise sharply in price. Thus,  price
fluctuations in open market phosphoric acid are much more likely  to depend on
the  factors  related to  the supply/demand  situation, than on water pollution
control costs associated with the  acid manufacture.
                                     26

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            IV. DERIVATIVES OF ELEMENTAL PHOSPHORUS

A. SEGMENT DESCRIPTION

     Four of the products comprising this segment are produced from elemental
phosphorus  (POC13, PaS5, P2O5, and  PC13). The  fifth, ferrophosphorus, is a
by-product of the phosphorus furnace. In fact, ferrophosphorus is not impacted
by water pollution abatement considerations and may be appropriately excluded
from  this segment.1  The  first  four derivatives, however,  do merit common
consideration  as a  segment  because all  four are  produced under  anhydrous
conditions and are  similarly  impacted  to the extent that any water pollution
aspect exists. Further community of consideration is warranted because several of
the four elemental phosphorus derivatives are frequently produced at  a common
site for both merchant sale or further processing as chemical intermediates.

B. COMPANIES AND PLANTS

     The primary producers of the elemental phosphorus derivatives are major
components of the U.S. chemical industry, namely  FMC Corporation, Hooker
Chemical Corporation (subsidiary of Occidental  Petroleum Corporation), Mobil
Chemical Company  (subsidiary of Mobil Oil Company), Monsanto Company, and
Stauffer Chemical Company.  All of these are integrated  back to production of
elemental phosphorus.  In general these  producers are also integrated  forward,
with  the derivatives as  intermediates,  for synthesis of  such end products as
pesticides, plasticizers, lube oil additives,  flotation agents, and surfactants.

     There  are also several small specialty chemical  producers of the products,
primarily for electronic markets, but these represent such a minor part of the
segment that their separate consideration is unwarranted.

     Two  of the five integrated producers of elemental phosphorus  derivatives
have  a single producing location. The others have multiplant locations for the
derivatives but may produce only one of  the derivatives at a given location. Of the
four derivatives considered (POC13 , P2 S5, P2 Os,  and PC13 ), both Hooker Chemi-
cal Company and Stauffer Chemical produce all four. The other major producers
manufacture one to three of them.

     The primary plant sites are Nitro,  West Virginia; Niagara Falls, New York;
Sauget, Illinois;  Anniston, Alabama; Charleston, South Carolina;  Morrisville,
Pennsylvania; Mt.  Pleasant,  Tennessee;  Nashville, Tennessee; and Cold Creek,
Alabama.
1. Ferrophosphorus  is drawn  off before the slag and it is important that  it not come into
  contact with  water with which  it may  react explosively at this point in the furnace
  production cycle.
                                    27

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                                     Derivatives Manufactured
         Producing Company     PQC13    P2SSP2O5     PC13

         FMC                     X                         X
         Hooker                  X       X        X       X
         Mobil                                               X
         Monsanto                XX                 X
         Stauffer                  X       X        X       X

     Because most  of the plant sites are large multiproduct, integrated operations
producing fifty or a hundred individual chemical products,  the derivatives of
elemental phosphorus within  the sector constitute  only a small fraction of the
plant site output, plant site employment, or  plant site water pollution impact.
Furthermore, this segment represents only about 5% of the total tonnage of the
nonfertilizer phosphate industry which is analyzed in this report.

C. FINANCIAL PROFILE

     Because industry manufacturing costs were not made  available  to us on the
derivatives of elemental phosphorus, these were calculated based primarily on our
internal engineering  estimates.  As  such,  they are  presented in the following
Tables 11 through  14 for POC13, P2SS, P2OS, and PC13. It is important to note
that  for production of  PzSs, P2OS, and PC13, the phosphorus is introduced into
the reaction at a market price of $380 per ton delivered. In the case of POC13, the
two  phosphorus derived raw materials are also introduced at the published market
prices, i.e.,  $400 per ton P2OS and $220 per ton for PC13. It is assumed that both
these raw materials for POC13 are produced at the same plant as the POC13 and no
freight costs are involved.

   .  Using  current published  selling prices for the four derivatives  of elemental
phosphorus considered herein, the  following estimated plant cash flows may be
developed in cents per pound at the plant site.

                        POC13        P2S5          P2O5          PC13

Selling Price             12.25*        14.20**       20.00**       11.00*
Plant Cost               12.70         10.30          9.90          9.20
Plant Margin             (0.45)          3.90         10.10           1.80
Depreciation             4.10           3.41          4.55          2.53
Plant Cash Flow           3.65           7.31         14.65          4.33

  *in bulk
**in carloads of drums.
                                    28

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                                     TABLE 11

       ESTIMATED COST OF MANUFACTURING PHOSPHORUS OXYCHLORIDE
Variable Costs

Phosphorus Pentoxide
Phosphorus Trichloride
Chlorine
Power
Cooling Water
Steam
Operating Supplies
Plant Location
Annual Production
Fixed Investment

Quantity

0.189 T
0.548 T
0.283 T
25kwh
11.1 Mgal
 0.73 M Ibs
                                            Eastern United States
                                            10,000 tons
                                            $900,000'
$/Unit
$/Ton
400
220
70
0.01
0.03
1.40

75.60
120.56
19.81
0.25
0.33
1.02
0.50
                                                                            218.07
Semi-Variable Costs

Operating Labor
Supervision

Maintenance
Labor Overhead
2 men/shift                           4.50/hr
1/2 of 4 foremen                      13,000/yr
1/2 of 1 super.                        17,000/yr
71/z% of Investment/yr
30% of Op. Labor and Supervision
               7.88
               2.60
               0.88
               3.75
               3.41

               18.52
Fixed Costs

Plant Overhead
Depreciation
Local Taxes and Insurance
70% of Op. Labor and Supervision
9.1% of Investment/yr
T/2% of Investment/yr
               7.95
               8.19
               1.35

               17.49
Total Cost of Manufacture, Bulk Liquid
                                                  254.08
1. Assumes part of complex receiving cooling water, steam, services, etc. from central facility.
                                        29

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                                    TABLE 12

       ESTIMATED COST OF MANUFACTURING PHOSPHORUS PENTASULFIDE

                          Plant Location     East Coast
                          Annual Production 10,000 tons
                          Fixed Investment   $750,000*
Variable Costs

Phosphorus
Sulfur
Power
Water
Steam
Operating Supplies
Drums, 450 Ib ea.
Semi-Variable Costs

Operating Labor

Supervision

Maintenance
Labor Overhead
Fixed Costs

Plant Overhead
Depreciation
Local Taxes and Insurance
Quantity

0.287 T
0.736 T
7.8 kwh
1.95Mgal
0.08 M Ibs

4.45
3 men/shift
2 men days
1/2 of 4 foremen
1/2 of 1 super.
8% of Investment/yr
30% of Op. Labor and Supervision
70% of Op. Labor and Supervision
9.1% of Investment/yr
1.4% of Investment/yr
$/Unit
$/Ton
380
35
0.01
0.03
1.40

5.73
109.06
25.76
0.08
0.06
0.11
0.50
25.46
                                                                           161.03
4.50/hr
4.50/hr
13,000/yr
17,500/yr


11.83
1.87
2.60
0.87
3.20
5.15
Total Cost of Manufacture, 450 Ib drums
                                                                            25.52
               12.02
               6.83
               1.13

               19.98

             206.53
 1. Assumes plant part of complex with steam, water and other services supplied from central
   facilities.
                                       30

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                                    TABLE 13

         ESTIMATED COST OF MANUFACTURING PHOSPHORUS PENTOXIDE
Variable Costs

Phosphorus
Steel Cans
Power
Water
Steam
Operating Supplies
Semi-Variable Costs

Operating Labor

Supervision

Maintenance
Labor Overhead


Fixed Costs

Plant Overhead
Depreciation
Local Taxes and Insurance
Plant Location
Annual Production
Fixed Investment

Quantity

0.237 T
6.15
85kwh
0.6 M gal
nil
                                            Eastern United States
                                            5,000 tons
                                            $500,000
S/Unit

380
5.40
0.01
0.03
1.40
2 men/shift
5 men, 200 days
1/2 of 4 foremen
1/2 of 1 super.
7% of Investment/yr
30% of Op. Labor and Supervision
   4.50/hr
   3.00/hr
13,000/yr
17,500/yr
70% of Op. Labor and Supervision
9.1% of Investment/yr
1.5% of Investment/yr
$/Ton

 90.06
 33.21
  0.85
  0.02

  0.50
124.64
 15.77
  4.80
  5.20
  1.75
  7.00
  8.26
  42.78
               19.26
                9.10
                1.50

               29.86
Total Cost of Manufacture, Drums
                                                  197.28
                                        31

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                                     TABLE 14

        ESTIMATED COST OF MANUFACTURING PHOSPHORUS TRICHLORIDE

                          Plant Location     Eastern United States
                          Annual Production  9,000 tons
                          Fixed Investment   $500,000'
Variable Costs

Phosphorus
Chlorine
Power
Cooling Water
Steam
Operating Supplies
Quantity

0.237 T
0.815 T
24.5 kwh
22.6 M gal
0.76 M Ibs
$/Unit

380
 70
  0.01
  0.03
  1.40
$/Ton

 90.06
 57.05
  0.25
  0.68
  1.06
  0,30

149.40
Semi-Variable Costs

Operating Labor
Supervision

Maintenance
Labor Overhead
2 men/shift                             4.50/hr
1/2 of 4 foremen                      13,000/yr
1/2 of 1 super.                        17,500/yr
71/2% of Investment/yr
30% of Op. Labor and Supervision
               8.26
               2.89
               0.97
               4.17
               3.64

               19.93
Fixed Costs
Plant Overhead
Depreciation
Local Taxes and Insurance
70% of Op. Labor and Supervision
9.1% of Investment/yr
11/2% of Investment/yr
Total Cost of Manufacture, Bulk
  8.48
  8.48
  5.06
  0.83
  14.37

 183.70
1.   Assumes plant part of complex receiving cooling water, steam, services, etc., from central
     facility.
                                        32

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     Actual salvage values of the  assets  of these plants were not determined. It
may be expected that specific items such as pumps, piping, centrifugal equipment,
etc., will have some salvage value. In general, however, we expect that such salvage
value will be less than 25% of capital cost, and frequently much less than 25%.

D.  PRICE  EFFECTS

     The published prices of P2 S5  and PC13 have remained stable for the past five
years. Those of POC13 and P2 O5 have risen in  the past 2-3 years.  The published
price of  POC13 increased about 15% in  1972; that  of P2O5 about 25%over the
longer period of 1971-1973.

     While  LCL transactions tend to be at published  prices, it can be expected
that larger volumes are  sold at negotiated  contract  prices covering extended
periods of  time. Because much of the industry has an internal  requirement for
part of its  capacity  to  produce the elemental  phosphorus derivatives, merchant
contract  sales may be more advantageous to one seller than another at any given
time depending upon that seller's internal requirements. So in general the prices
of significant volumes are negotiated prices  while lesser volumes are published
price transactions.

     Published price increases are usually initiated by a  major producer and either
followed or not by  the  other producers. If price changes are not followed, the
initiator  rescinds the price.  Because  the elemental  phosphorus  derivatives are
produced in large integrated chemical plants where the impact of water pollution
control is not readily isolated on a product-by-product basis, the cost of pollution
control will result  in price increases for selected products  only where  the general
competitive situation permits such increases.  Over  extended periods increased
manufacturing costs of any type generally exert an upward pressure on chemical
prices,  but  changes take place only at those points in time when the competitive
aspects permit. In the case of the  derivatives of elemental phosphorus, specific
price increases directly attributable to pollution  control are not expected.
                                    33

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                 V. DERIVATIVES OF PHOSPHORIC ACID

A. SEGMENT DESCRIPTION

     The segment is restricted to (1) the largest volume sodium salt of phosphoric
acid, sodium tripolyphosphate, and (2) those calcium phosphates used industrially
or in the  manufacture of animal feeds.1 The phosphoric acid from which these
derivatives are made can be of either furnace or wet process origin.

     Sodium  tripolyphosphate (STPP)  is generally produced from furnace grade
phosphoric acid because of the improved color of its salts. However, there is one
major producer, Olin Corporation, which uses  wet process acid to produce STPP.

     For the  production of feed-grade dicalcium phosphates, the general practice
is  to use  wet process  phosphoric acid and limestone as the primary reactants.
Dentifrice and food-grade calcium phosphates generally use furnace acid.

     The traditional market for STPP has been as a detergent builder. Historically,
the  detergent manufacturers have been responsible for 90% of the STPP con-
sumed in  the United  States, most of it in household laundry formulations. This
market is  now threatened  by various state and local legislative measures designed
to restrict the phosphate content of detergent formulations.

     In  the case of the calcium phosphates considered within  the definition of
this  segment  more than 90% of the consumption is  for animal feeds. In  addition
there are specialty grades  suitable for use in dentifrices and as leavening agents in
baking.

B. PRODUCING  COMPANIES AND PLANTS

1. Sodium Tripolyphosphate (STPP)

     Table 15 indicates the manufacturers, their plant locations, and estimated
plant capacities for STPP production.

     With the exception of  the Olin plant at Joliet,  Illinois, each  of these
locations  is also a location for furnace acid production. Thus the plants may be
considered as integrated operations. The plant locations are determined to a major
degree by the amount of freight equalization required to be paid on shipments to
major detergent  producing plants. Thus the  freight on STPP tends to  associate
 1. Specifically excluded are fertilizer grades of calcium phosphate and defluorinated phosphate
   rock.
                                     34

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specific STPP producing locations with specific detergent plants. In fact proxim-
ity to the market is the most important factor in determining the  location for a
furnace acid and STPP complex.

                                  TABLE 15

                           U.S. PRODUCERS OF STPP

          Company         Plant Location                    Capacity1
                                                        (thousands ST/yr)
          FMC             Carteret, New Jersey                  100
          FMC             Green River, Wyoming                  75
          FMC             Newark, California                     50
          FMC             Lawrence, Kansas                      75
          Mobil             Fernald, Ohio                         50
          Monsanto         Augusta, Georgia                      50
          Monsanto         Kearny, New Jersey                   125
          Monsanto         Long Beach, California                  75
          Monsanto         Trenton, Michigan                      75
          Monsanto         Carondelet, Missouri                   100
          Occidental         Dallas, Texas                          35
          Occidental         Jeffersonville, Indiana                 100
          Olin              Joliet, Illinois                        150
          Stauffer           Chicago,  Illinois                       40
          Stauffer           Morrisville, Pennsylvania                75
                                                             1175
          1. Subject to significant variation, depending on grades produced.

     There  is a significant  water pollution aspect to the production of STPP
because of the wet scrubbing of the dust at various points in the process. To the
extent that such water is returned to the system, water pollution is minimized. To
the extent which it is not, lime precipitation and clarifiers are required.

2. Calcium Phosphates

     Among the  nonfertilizer  types,  dicalcium phosphate,  primarily  used for
animal feed, predominates. Table 16 identifies major producing locations, most of
which are located  in proximity to either a wet phosphoric acid producing location
or the primary feed markets. Capacities are not readily identified because part of
the plant capacity in some  cases can be utilized for fertilizer grades of calcium
phosphate.

     The water pollution aspects of feed grade dicalcium phosphate are similar to
those of STPP for  which  wet scrubbing  operations  are required. Where wet
process acid  has  not  been  defluorinated  there is the additional problem  of
                                      35

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fluorsilicate disposal. With purified grades for dentifrice  and  human consump-
tion, the impact is amplified by larger water requirements for manufacture and in
the case of anhydrous product, the dewatering process.

                                  TABLE 16

                  U.S. PRODUCERS OF CALCIUM PHOSPHATES

                 Company                 Plant Location

                 Cyanamid                 Weeping Water, Nebraska
                 Cyanamid                 Alden, Iowa
                 Cyanamid                 Hannibal, Missouri
                 Borden                   Plant City, Florida
                 Central States*            Weeping Water, Nebraska
                 Eastman Kodak            Peabody, Massachusetts
                 Farmland                 Hannibal, Missouri
                 IMC                     Bonnie, Florida
                 Monsanto                 Carondelet, Missouri
                 Occidental                Davenport, Iowa
                 Occidental                White Springs, Florida
                 Stauffer                  Chicago Heights, Illinois
                 Stauffer                  Nashville, Tennessee

                 'destroyed by fire but currently being rebuilt.


C.  FINANCIAL PROFILE

     Because industry manufacturing costs were  not made available to us for
either STPP or feed  grade dicalcium phosphate, these have been calculated on the
basis of our internal knowledge of the production costs involved.

1. Sodium Tripolyphosphate (STPP)

     Table 17 establishes a manufacturing cost of $224 per ton  for an STPP plant
operating at  a production rate of 50,000 tons per year  utilizing furnace acid
produced at the same site.  The acid transfer price as indicated is $ 149 per ton. On
this cost  basis and using a published selling price of $ 162 per ton and $3 of freight
equalization, the estimated plant cash flow is as follows:

                        Selling Price           159 $/ton
                        Plant Cost            224 $/ton
                        Plant Margin          (65) $/ton
                        Depreciation            4 $/ton
                        Plant Cash Flow       (61)$/ton
                                      36

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                                    TABLE 17

       ESTIMATED COST OF MANUFACTURING SODIUM TRIPOLYPHOSPHATE
Variable Costs

Phosphoric acid, 75%
Soda Ash
Operating Supplies
Power
Fuel
Plant Location
Plant Capacity
Annual Production
Fixed Investment

Quantity/Ton

1.087T
0.735 T

38.9 kwh
13.9 MM Btu
                                            Midwest
                                            150 T/SD
                                            50,000 T
                                            $2,440,000
$/Unit
$/Ton
149.00'
44.502

0.01
0.80
161.96
32.71
0.50
0.39
11.12
                                                                          206.68
Semi-Variable Costs

Operating Labor
Supervision

Maintenance
Labor Overhead
4 men/shift                            4.50/hr
4 foremen                           13,000/yr
1 super.                             17,500/yr
5% of Investment/yr
30% of Op. Labor and Supervision
               3.15
               1.04
               0.35
               2.44
               1.36
               8.34
Fixed Costs
Plant Overhead
Depreciation
Local Taxes and Insurance
Total Cost of Manufacture
70% of Op. Labor and Supervision
9.1% of Investment/yr
1.5% of Investment/yr
               3.18
               4.44
               0.73

               8.35

             223.37
1.  FOB plant value, assumes STPP plant at same site as acid plant.
2.  $35.50 FOB plant plus $9.00 freight.
                                        37

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     However, if the phosphoric acid made in the same plant is transferred at
cost, or $96 per ton, a plant cash flow close to breakeven results.

                        Selling Price           159 $/ton
                        Plant Cost            165 $/ton
                        Plant Margin          (6) $/ton
                        Depreciation            4 $/ton
                        Plant Cash Flow       (2) $/ton

     If a reasonable GS&A charge of $3.50 per ton is applied, there is a net loss
before taxes of $10  per ton.  Furthermore, the bulk of the sales to  the large
household detergent producers are generally made below list. For these a net back
after  freight equalization of $153 is  more  realistic than  $159. Under such
conditions the net loss before taxes becomes $7-8 per ton.

     Actual salvage values of the STPP were not determined. In general, however,
we  expect  that  such salvage value will be less  than 25% of capital cost, and
frequently much less than 25%.

2. Calcium Phosphates

     Table  18 develops the manufacturing cost of a plant  manufacturing 65,000
tons per year of feed grade (18.5% P) dicalcium phosphate. Currently this product
is in short supply and from  Midwest manufacturing locations is priced at $87.25
per ton in bulk,  freight equalized with competitive locations. In order to calculate
a typical plant cash flow and profit before tax  we have  taken $4.25 as typical
freight equalization with a net back to the plant  of $83 per ton. The plant cash
flow then becomes:

                 Selling  Price                 $83 per ton
                 Plant Cost                    70 per ton
                 Plant Margin                   13 per ton
                 Depreciation                   2 per ton
                 Plant Cash Flow                15 per ton

     If the GS&A allowance is $3 per ton, the profit before tax is $ 10 per ton.

     Table 19 similarly develops the manufacturing cost for dicalcium phosphate
dihydrate which is one of the refined grades. This and other refined grades serve
the  dentifrice  and human  food  markets.  The  plant cash  flow  for dicalcium
phosphate  dihydrate  is  characteristically higher than for feed grade dicalcium
phosphate.
                                    38

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                                     TABLE 18

          ESTIMATED COST OF MANUFACTURING DICALCIUM PHOSPHATE
                                (Feed Grade 18.5% P)

                          Plant Location     Midwest
                          Annual Production 65,000 T
                          Fixed Investment   $1,200,000
Variable Costs

Defluorinated Phosphoric
 Acid, PjOs basis
Ground Limestone
Power
Water
Fuel
Operating Supplies
Quantity
0.458 T
 .728 T
18.2 kwh
0.06 Mgal
0.1  MM Btu
$/Unit
$/Ton
1 25.00 '
9.002
0.01
0.05
0.80

54.59
6.55
0.18

0.08
0.10
                                                                           61.50
Semi-Variable Costs

Operating Labor

Supervision

Maintenance
Labor Overhead
2 men/shift                             4.50/hr
2 men days                             4.50/hr
4 foremen                            13,000/yr
1 superintendent                      17,500/yr
5% of Investment/yr
30% of Op. Labor and Supervision
              1.21
              0.29
              0.80
              0.26
              0.92
              0.77

              4.25
Fixed Costs

Plant Overhead
Depreciation
Local Taxes and Insurance
70% of Op. Labor and Supervision
9.1% of Investment/yr
1.5% of Investment/yr
Total Cost of Manufacture, Bulk
              1.79
              1.68
              0.28

              3.75
             69.50
T.  $V10/TPjO5 plus $15 freight
2.  $4/ton plus $5 freight.
                                        39

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                                    TABLE 19

   ESTIMATED COST OF MANUFACTURING DICALCIUM PHOSPHATE DIHYDRATE

                          Plant Location      Midwest
                          Annual Production  20,000 tons
                          Fixed Investment   $730,000
Variable Costs

Hydrated Lime
Phosphoric Acid 75%
Cooling Water
Power
Water, Process
Fuel
Operating Supplies
Bags
Quantity

0.453 T
0.774 T
2.3 Mgal
37kwh
1.25 Mgal
1.1 MM Btu

20.1
$/Unit
$/Ton
28.00'
159.002
0.03
0.01
0.03
0.80

0.20
12.68
123.07
0.07
0.37
0.04
0.88
0.50
4.02
                                                                           141.63
Semi-Variable Costs

Operating Labor

Supervision

Maintenance
Labor Overhead


Fixed Costs
3 men/shift                           4.50/hr
5 men, 250 days                       4.00/hr
4 foremen                           13,000/yr
1 superintendent                      17,500/yr
5% of Investment/yr
30% of Op. Labor and Supervision
               5.91
               2.00
               2.60
               0.88
               1.83
               3.42
              16.64
Plant Overhead
Depreciation
Local Taxes and Insurance
70% of Op. Labor and Supervision
9.1% of Investment/yr
1.5% of Investment/yr
Total Cost.bf Manufacture, Bagged
               7.97
               3.32
               0.55
              11.84
             170.11
1.  $22 fob plus $6.00 freight
2.  $149 fob plus $10.00 freight
                                        40

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                                     TABLE 18

          ESTIMATED COST OF MANUFACTURING DICALCIUM PHOSPHATE
                                (Feed Grade 18.5% P)

                          Plant Location     Midwest
                          Annual Production  65,000 T
                          Fixed Investment   $1,200,000
Variable Costs              Quantity

Defluorinated Phosphoric
 Acid, P2 05 basis          0.458 T
Ground Limestone           .728 T
Power                     18.2 kwh
Water                     0.06 Mgal
Fuel                      0.1 MM Btu
Operating Supplies
                                    $/Unit
$/Ton
125.00'
9.002
0.01
0.05
0.80

54.59
6.55
0.18

0.08
0.10
                                                                           61.50
Semi-Variable Costs

Operating Labor

Supervision

Maintenance
Labor Overhead



Fixed Costs
2 men/shift
2 men days
4 foremen
1 superintendent
5% of Investment/yr
30% of Op. Labor and Supervision
4.50/hr
4.50/hr
13,000/yr
17,500/yr


1.21
0.29
0.80
0.26
0.92
0.77
                                                  4.25
Plant Overhead
Depreciation
Local Taxes and Insurance
70% of Op. Labor and Supervision
9.1% of Investment/yr
1.5% of Investment/yr
Total Cost of Manufacture, Bulk
 1.79
 1.68
 0.28

 3.75
69.50
1.  $110/T P2OS plus $15 freight
2.  $4/ton plus $5 freight.
                                        39

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                                    TABLE 19

   ESTIMATED COST OF MANUFACTURING DICALCIUM PHOSPHATE DIHYDRATE

                          Plant Location     Midwest
                          Annual Production 20,000 tons
                          Fixed Investment   $730,000
Variable Costs

Hydrated Lime
Phosphoric Acid 75%
Cooling Water
Power
Water, Process
Fuel
Operating Supplies
Bags
Semi-Variable Costs

Operating Labor

Supervision

Maintenance
Labor Overhead



Fixed Costs

Plant Overhead
Depreciation
Local Taxes and Insurance
Quantity

0.453 T
0.774 T
2.3 Mgal
37kwh
1.25 Mgal
1.1 MMBtu

20.1
S/Unit
3 men/shift
5 men, 250 days
4 foremen
1 superintendent
5% of Investment/yr
30% of Op. Labor and Supervision
 4.50/hr
 4.00/hr
13,000/yr
17,500/yr
70% of Op. Labor and Supervision
9.1% of Investment/yr
1.5% of Investment/yr
$/Ton
28.00'
159.002
0.03
0.01
0.03
0.80

0.20
12.68
123.07
0.07
0.37
0.04
0.88
0.50
4.02
Total Cost of Manufacture, Bagged
                                                                           141.63
  5.91
  2.00
  2.60
  0.88
  1.83
  3.42
  16.64
               7.97
               3.32
               0.55
              11.84

             170.11
1. $22 fob plus $6.00 freight
2. $149 fob plus $10.00 freight
                                        40

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                 Selling Price                 $230 per ton
                 Plant Cost                    170 per ton
                 Plant Margin                   60 per ton
                 Depreciation                    3 per ton
                 Plant Cash Flow                63 per ton

     With GS&A costs of $30 per ton the profit before tax is $33 per ton.

D. PRICE EFFECTS

     The  published prices of STPP as sold in bulk and shipped in hopper cars,
freight equalized with competitive  locations, have increased from $135 per ton in
1967 to $152 per ton in 1972 to a current level of $162. Over this same period
the  major detergent  producers have  generally  paid $140-$ 155.  With freight
equalization and a generally low level of profitability, most producing plants rely
on one or two major volume detergent plants for a majority of their STPP sales
and these  one or two plants are those for which freight equalization is minimal.

     Prices for STPP have been traditionally established  by highly competitive
bidding for the large annual requirements of such  major detergent plants. This
bidding process has resulted in low margins and a reluctance on the part of the
producers to expand capacity. Currently STPP is in short supply, but because  of
price controls cannot rise to levels where return on investment is adequate  to
stimulate expanded production.

     If pollution  considerations significantly reduce the  use of STPP in deter-
gents, the current tight supply situation would be alleviated, and excess capacity
might appear. This would produce a downward pressure on prices.

     The  pricing  of calcium phosphates  for feed  use is complex with major
differentials based on geographic location  and freight equalization. Thus for the
producing point of Bonnie, Florida, which is distant from  the major Midwest
markets,  the  price of feed grade dicalcium phosphate is  $74.00 per  ton freight
equalized. Similarly, at Weeping  Water, Nebraska, for a plant much closer to the
major markets the price is $87.25 per ton freight equalized. This combination  of
price differentials and  freight equalization  permits  a high degree  of market
selectivity.

     The purified dentifrice and human food grades of calcium phosphates, which
are more costly to produce, command premiums ranging from  $140 to $170 per
ton over feed grades.

     The prices of the  calcium phosphates, when not in short supply, are deter-
mined by  competitive processes in  the marketplace. Currently, however, they are
in short supply and would rise if there were no controls.

                                    41

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     Because of the low margins of profit currently generated by STPP, it can be
expected that producers  will attempt to pass  on any cost increases that result
from  water pollution control measures. This  is also probable  with feed grade
dicalcium phosphate, but  the  results will be somewhat dependent  upon the
supply-demand situation at the time of increased costs.
                                     42

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                               SECTION III

                      ECONOMIC IMPACT ANALYSIS

                            I. INTRODUCTION

     This  section assesses  the economic impact of water pollution control costs
on the production of the following nonfertilizer phosphate products:

              Phosphorus
              Phosphoric Acid produced from phosphorus
              Phosphorus Pentoxide
              Phosphorus Trichloride
              Phosphorus Oxychloride
              Phosphorus Pentasulfide
              Sodium Tripolyphosphate
              Calcium Phosphates (except defluorinated phosphate
               and fertilizer phosphate).

     As requested by EPA,  this  impact  analysis is  confined  to  those  water
pollution  control costs submitted to EPA in Supplement A of a report entitled
"Cost Information for the Water-borne  Wastes  in the Nonfertilizer Phosphorus
Chemicals Industry" prepared by General Technologies Corporation, referred to as
the effluent guideline development document. In this report, it was  concluded
that zero discharge is  a reasonable and achievable goal, and it was recommended
that this guideline be established for all of the products covered in this report.

     At the same time, the effluent  guideline  development document acknowl-
edges that there may  be substantial  variation from  the  costs presented in their
report, to  achieve zero discharge for individual plants in the industry. That such
variations  are likely was confirmed in  our discussions with some  of the major
producers  of several of the products in this category. If such variations from the
costs presented in the effluent guideline development  document are significant for
individual  plants, then the impact of water pollution control costs  to achieve
discharge may be significantly  different than those presented in this analysis.

     Because we were unable  to quantify the variations for individual plants, we
did confine ourselves, as requested by EPA, to assessing  the impact of the costs
presented  in the effluent guideline  development document. It was not within the
scope of our assignment to evaluate or confirm  the validity of the  technical and
economic  information presented in this document.
                                    43

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                          II.  IMPACT ANALYSIS

A. WATER POLLUTION CONTROL COSTS

     The effluent guideline development document states that  zero water dis-
charge is either being currently achieved, or could be achieved with little diffi-
culty, in exemplary plants now operating in each product category, and therefore
have  recommended  that this  be established as  the  pollution  guideline. The
technology proposed by the effluent guideline development document for each
product segment, and the estimated costs, are presented below.

1. Phosphorus

     Three companies are producing phosphorus in separate locations in Florida
with a total of four furnaces, three companies are  operating in Tennessee with a
total  of ten furnaces, and three  companies are operating in Idaho and  Montana
with  a total of nine  furnaces.  In addition the TVA operates three furnaces in
Alabama.

     There is at least one existing plant that is reported in  the effluent guideline
development  document to achieve zero discharge  by using complete recycle of
phossy water, evaporation  of some process water, lime treatment and sedimenta-
tion of remaining process water prior to discharge. Other plants were estimated to
be able to achieve 100% recycle of process waste water back to the head end of
the plant by installing pumps, piping, and appropriate controls.

     The cost of achieving zero discharge through installation of the equipment
described  above is estimated in the effluent guideline development document to
be $4.60 per ton of phosphorus.

2. Furnace Phosphoric Acid

     There are an estimated 21  plants producing  furnace phosphoric acid from
phosphorus, operated  by  six  companies, and  the  TVA.  Many  of these have
associated with them  units for the production of various sodium and potassium
phosphates.  A number of these are in urban areas; their  location, particularly
when  associated with the production of  sodium  tripolyphosphate, has been
dictated by proximity to major detergent factories.

     The  measures necessary to achieve  zero discharge at furnace acid plants,
according to  the effluent  guideline  development document, are generally asso-
ciated with improved housekeeping and maintenance. Costs  included construction
of dikes and dams around pipes, valves, tanks, etc., the provision of sumps  and
sump pumps, and treatment with lime.  The resultant sludge is used for landfill.
                                    44

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     In  the effluent guideline development document, it is estimated that the cost
of achieving zero  discharge in furnace acid  plants is $0.65 per ton  of 75%
phosphoric acid.

3. Anhydrous Derivatives of Elemental Phosphorus

     The four derivatives comprising  this segment are  phosphorus oxychloride,
phosphorus  pentasulfide, phosphorus  pentoxide, and phosphorus trichloride. All
four are produced under anhydrous conditions and the water pollution aspects are
limited  to disposal of water used for wet scrubbing of air emissions. However, the
disposal of such water is critical because there  is no remedy available  through
return of this water to the reaction process because of  the anhydrous conditions
of manufacture.

     The primary plant sites are Nitro, West Virginia; Niagara Falls, New York;
Sauget,  Illinois; Anniston,  Alabama; Charleston, South  Carolina; Morrisville,
Pennsylvania;  Mt.   Pleasant,  Tennessee; Nashville, Tennessee; and Cold Creek,
Alabama. In general these are large multiproduct, integrated operations producing
dozens  of individual chemical products  of which the volume  represented by the
derivatives of elemental phosphorus may be only a portion of the chemical output
of the site.

     In  general the process  water  used for wet scrubbing of air emissions is
commingled with  plant  effluent water and  not treated separately  to remove
dissolved or participate impurities.  In some cases water from the wet scrubbing
may be used as process  water  in other processes where  such opportunities are
available but this is not a practical general solution.

     In  the  case  of the  four derivatives of elemental  phosphorus, the  effluent
guideline development document recommends the attainment of zero discharge
via (1) concentration  of  impurities  through  reuse of wet scrubbing effluent by
return to the wet scrubbing process; (2) lime treatment of concentrated effluent;
(3) settling tanks; and  (4) land fill of sludge.

     The costs presented in the effluent guideline development document for
total treatment of effluent to achieve zero discharge are as follows, on the basis of
$/per ton of product manufactured.

            Product                       Zero Discharge Cost

            Phosphorus oxychloride             $ 1.25/ton
            Phosphorus  pentasulfide               1.70/ton
            Phosphorus  pentoxide                 1.40/ton
            Phosphorus  trichloride                1.40/ton
                                    45

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4. Derivatives of Phosphoric Acid

     This segment is  restricted  to  sodium  tripolyphosphate (STPP) and those
calcium phosphates used industrially or in the manufacture of animal feeds. The
latter category  of calcium phosphates, i.e., those used  for  the manufacture of
animal feeds, accounts for more than 90% of the calcium phosphates included in
the segment.  Excluded  from  the segment is  fertilizer consumption of calcium
phosphate.

     The primary plant  sites are indicated in  Table 20. The STPP locations and
several  of  the  calcium  phosphate  locations  are large multiproduct integrated
operations  producing a number of individual  chemical products. This  is less
typical  of  the feed grade  calcium  phosphate plants which are sited for either
proximity  to  wet process acid or the animal feed compounders representing the
market.

                                  TABLE 20

           PLANT LOCATION SITES - PHOSPHORIC ACID DERIVATIVES

            STPP                          Calcium Phosphates

            Carteret, New Jersey              Weeping Water,* Nebraska
            Green River, Wyoming             Alden,  Iowa
            Newark, California                Hannibal,* Missouri
            Lawrence, Kansas                 Plant City, Florida
            Fernald, Ohio                    Peabody, Massachusetts
            Augusta, Georgia                 Bonnie, Florida
            Kearny, New Jersey               Carondelet, Missouri
            Long Beach, California             Davenport, Iowa
            Trenton, Michigan                White Springs, Florida
            Carondelet, Missouri              Chicago Heights, Illinois
            Dallas, Texas                     Nashville, Tennessee
            Jeffersonville, Indiana
            Joliet, Illinois
            Chicago, Illinois
            Morrisville, Pennsylvania
            * Location of more than one plant.

     To a considerable degree  the water used for wet scrubbing of dust at various
points in the process is returned to process. Where such return  to  process is not
readily  accommodated, lime  precipitation and  clarification are  required.  The
purified  grades of  calcium phosphates  in particular require large  volumes  of
process water. Special problems  relate to the disposal  of water removed from
anhydrous calcium phosphate  and the disposal of fluosilicates from those calcium
phosphate plants using wet process acid which has not been defluorinated.
                                      46

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     In the case of the derivatives of phosphoric acid only the calcium phosphates
have costs associated with the achievement of zero discharge as reported in the
effluent guideline development document. This asserts that dry  dust  collection
filters  constitute an  investment  which obviates water pollution in the case of
STPP  and the  investment  per se  is compensated  for by savings in product
recovery.

     In the case of dicalcium phosphate  manufacture, the costs associated  with
zero discharge are generally related to (1) lime treatment, (2) settling or filtration,
(3) recycle of  clarified  water to the  process, and (4) land  fill  of  sludge  or
filter cake.

     The costs  presented in the effluent guideline development document for
total treatment of effluent to achieve zero discharge are as follows on the basis of
dollars per ton of product manufactured.

        Product                                    Zero Discharge Cost
                                                       ($/ton)
        STPP
        Dicalcium phosphate - Feed  Grade                 1.40
        Dicalcium Phosphate -Food Grade                 1.50

B.  IMPACT ON PRICES

     We have summarized in Table  21  the increases in prices  that would result
from  the costs  of achieving zero discharge that  are presented in the effluent
guideline development document. It should be noted that we have  included  not
only the costs  of water pollution control for  individual products, but also the
increases in the costs  of the raw materials covered in this segment which are used
for the production of derivatives, arising  from the same water  pollution control
considerations. For example, the overall increase in prices for Food Grade calcium
phosphate  would result not only  from the cost of water pollution control in the
dicalcium phosphate  plant, but  also the increase  in the cost  of furnace grade
phosphoric acid arising from water pollution control considerations  in that plant,
and also the increase in cost of phosphorus used to make the furnace acid, arising
from water pollution control considerations in the phosphorus plant.

     The price  increases that would  result from passing on the cost of achieving
zero discharge,  as presented in the effluent guideline development document, are
of such  small magnitude that we  do not believe there will be any significant
impact  on  profitability arising from  these increases. The maximum  increase as a
percent of current selling price was 1.6% for Feed Grade Dicalcium Phosphate. All
other increases were 1.2% of sales price or less. Incidentally, we have used in these
calculations the current list prices for the various products, realizing that in some
                                     47

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instances actual sales are being made at somewhat different prices. However,  for
the purposes of relating the magnitude of the cost increases arising from achieving
zero discharge, the use of the list prices is not significantly in error.


                                   TABLE 21

              PRICE INCREASES RELATED TO GTC PROPOSED COSTS
                        OF ACHIEVING ZERO DISCHARGE
Product
Phosphorus
Furnace Acid
Phosphorus Pentoxide
Phosphorus Trichloride
Phosphorus Oxychloride
Phosphorus Pentasulfide
STPP
Feed-grade Dical
Food-grade Dical
Pollution
 Control
  Cost
 ($/ton)

  4.60
  0.65
  1.40
  1.40
  1.25
  1.70

  1.40
  1.50
Raw Material
Cost Increase
   ($/ton)
     1.10
     1.09
     1.09
     1.83
     1.32
     1.90

     1.35
Total Cost
 Increase
  ($/ton)

   4.60
   1.75
   2.49
   2.49
   3.08
   3.02
   1.90
   1.40
   2.85
Current1
Price
($/ton)
380
168
400
220
245
267
162
87
257
Percentage
Increase

1.2
1.0
0.6
1.1
1.2
1.1
1.2
1.6
1.1
 1. Prices based on Chemical Marketing Reporter, 7/23/73.

 2. Based on following usages:

        0.24 tons phos/ton acid              1.09 tons acid/ton STPP
        0.24 tons phos/ton pentoxide         0.77 tons acid/ton food grade dical
        0.24 tons phos/ton trichloride          0.29 tons phos/ton pentasulfide
        0.19 tons pentoxide + 0.55 tons trichloride/ton oxychloride.

     Our conclusion  that  the  cost  increases of the magnitude indicated in the
 effluent guideline development document would be of insignificant consequence,
 is further supported by  the nature  of the markets for the  products in question.
 The uses of the products in this segment are such that there is little if any ability
 to  substitute other products, should  price increases  so  suggest. Because of the
 specific requirements  for  the  individual  products in this  segment,  it is almost
 certain that the price increases, particularly  of the small magnitude which appar-
 ently would result, would be passed on to the ultimate consumer.

     The one possible exception  is Feed Grade Dicalcium Phosphate, where there
 is a  possibility  of  substituting  other phosphate materials  without too  much
 difficulty, if the price increase in the  dicalcium phosphate were substantial. Such
 materials  as defluorinated phosphate rock could be  used  although there are
 specific advantages which  the dicalcium phosphate  does  have  for certain feed
                                      48

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formulations. Even in the case of this product, however, the price increase is so
small that we do not foresee any impact of a major nature on profitability.

     If the  premise is  accepted that  the  costs  of  achieving zero discharge as
presented in the effluent guideline development document would have a negligible
effect on profitability,  then it follows that no production curtailments or plant
closings  would be foreseen for  any  of  these  products  nor  would there  be
restrictions  on industry growth,  as  a direct result of the  cost increases  for
achieving zero discharge.

     No  significant impact  would then be expected on employment in the plant
producing these products or on  the communities in which  they  are located, as a
result of  the cost increases to achieve zero discharge.
                                    49

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                      III.  LIMITS OF THE ANALYSIS

     The cost increases for achieving zero discharge, as presented in the effluent
guideline  development  document,  have  been shown to  be relatively  small in
relation to current sales prices - in no case more  than  1.6%. This  order of
magnitude of cost increase  is substantially below the variations which we believe
exist  among  the individual plants producing these products, in their cost of
manufacture,  and also  less than the cyclical variation  in prices which may be
expected  as  market  conditions change.  Therefore the  range  of  error in the
conclusions drawn from the cost presented is believed to be small and would be
overshadowed by uncertainties  in the estimates of the cost of manufacturing, and
in the variation in manufacturing costs from plant to plant.

     The critical question concerning these conclusions is of course the extent to
which the costs presented in the effluent guideline development document can be
realistically used  as a basis  for estimating the costs  that  will be incurred by
specific individual plants within the industry. In several cases, producers felt that
the costs presented in the effluent guideline development document were unreal-
istically low, and  also that in certain  cases, the technology  to  achieve  zero
discharge  was of questionable validity. Preliminary  contacts with major producers
of several of the products examined have confirmed that  major variations do
occur among individual plants regarding the applicability of both the technology,
and  the cost estimates as presented in the effluent guideline development docu-
ment. It was not within the scope of our report to evaluate or confirm the validity
of either the  technology or of the estimates of the investment and operating costs
to achieve zero discharge, which were presented in  the effluent guideline develop-
ment document.
                                    50

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  II CIINK AI  Kl I'OKI
     DA I A 1'AC.I
I Report No
EPA-230/1-73-021
  4  I III, .liid Siililillc
    Economic Analysis  of  Proposed  Effluent Guidelines
    Industrial Phosphate  Industry
1  ')  IVi Inn mil-' OrjMMiAition N.imc and Address
\      Arthur D.  Little, Inc.
j      Acorn Park
,      Cambridge, Massachusetts 02140
i
!  12. S|.iisorinj; Oij;ani/ation Name and Addiess
j      Office of Planning and Evaluation
'      Environmental Protection Agency
!      Washington, B.C.  20460
                                                                   .  Recipient's Accession No.
                                         5 Report IXile
                                              August 1973
                                         6.
                                                                   8. Performing Organization Kepi. No.
                                                                     C-75906
                                         10. Project/'l ask/Work Unit No
                                           Task Order No. 7
                                         II. C'ontruct/Crant No.
                                           68-01-1541
                                         13. Type ol Report & Period C ou-ieii
                                            Final
                                         14
     Sui'i'leiiu-ntary Notes
  Id  Ahstr.Kls
       An initial analysis of the  economic impact of proposed water effluent guidelines
     upon  certain products in the industrial phosphate industry.   This analysis was base
     on abatement cost  data supplied by the EPA.   The products covered included phos-
     phorous, phosphoric acid produced from phosphorous, and  anhydrous phosphorous
     derivatives, and certain derivatives of phosphoric acid  but  not including fertilize
       The effluent guideline development document supplying the abatement costs used
     in this analysis indicated  that zero discharge was a practical goal  and that the
     cost  of achieving  zero discharge did not  exceed 1.6% of  the  selling  price of any
     of the products studied.  On the basis of these costs, it was concluded that there
     would be no significant economic impact on the products  studied.
  17. Key Words .ind Ooumicnt Analysis.   I7a. Descriptors

    Economic Analysis
    Effluent Guidelines
    Industrial Phosphates
    Phosphorous
    Phosphoric Acid
    Industrial Phosphate Industry
  17b. Identifiers/Open-Knded Terms
  I7i- COSAI1 I ield/Croup
  IK. Availability Stulfincnl
    Limited availability through U.S. Environmental!
    Protection Agency Information Center; Room
    W-327, Waterside Mall, Washington, D.C.  20460
                                                   	L. _
19. Security Class (I his

           II I)
                             20. Souintt ( l.iss t This

                                llM'l \SSII II I)
                                                                           2], No.ol
                                                         55
                                                                           2 2 Price
  IORM N11S XS (RI-V V72)
                                                                                USCOMM-IK- I4952P7>

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