EPA-E30/1-73-OZ4
SEPTEMBER 1973
          ECONOMIC ANALYSIS
                   OF
   PROPOSED EFFLUENT GUIDELINES


THE  RUBBER PROCESSING INDUSTRY
                  QUANTITY
      U.S. ENVIRONMENTAL PROTECTION AGENCY
          Office of Planning and Evaluation
             Washington, D.C. 20460
I
5
                      \
                      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 RUBBER PROCESSING INDUSTRY
         September 1973
         EPA-230-1-73-024
                               ov~i.--

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This report has  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  of 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 effects.

     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. 3,
Contract 68-01-1541 by Arthur D. Little, Inc. Work was completed as of September  1973.

     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 EPA 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                                         jjj

List of Figures                                         iv

EXECUTIVE SUMMARY                                 1

INDUSTRY SEGMENTATION                              5

DESCRIPTION OF SYNTHETIC RUBBER INDUSTRY SEGMENTS   8

DESCRIPTION OF THE TIRE AND TUBE INDUSTRY           15

FINANCIAL PROFILES                                 17

WATER TREATMENT COSTS                             21

ECONOMIC IMPACT ANALYSIS                           30

APPENDIX A	ESTIMATION OF PLANT COSTS FOR
               EFFLUENT GUIDELINES                 43

APPENDIX B  -- SAMPLE CALCULATION OF SYNTHETIC
              RUBBER PLANT POLLUTION CONTROL
              COSTS                               46

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                            LIST OF TABLES




Table No.                                                      Page




     1      The Synthetic Rubber Industry                          3




     2      The Tire and Tube Industry                             4




     3      Comparison of Economic and Technical Segmentation      6




     4      Markets                                              9




     5      Capacity of U.S. Synthetic Rubber Plants                 14




     6      Tire Products and Plant  Locations                       16




     7      1972 Profile - Synthetic Rubber                        17




     8      1972 Profile - Tires and Inner Tubes                     18




     9      Rubber and Plastics Products:  Financial Ratios 1967-72    19




   10      1972 Financial Profile for Segments                      20




   11      Water Effluent Guidelines Meeting                       29




   12      B.P.T. Costs                                          34




   13      B.P.T. Costs                                          35




   14      B.A.T. Costs                                          36




   15      B.P.T. Costs and B.A.T.  Costs                           37




   16      Synthetic Rubber Companies                            38




   17      Tires and Tubes Companies                             38




   18      Synthetic Rubber + Tires and Tubes                     39




   19      Synthetic Rubber (SIC 2822)                            39




   20      Tires and Inner Tubes (SIC 3011)                        40
                                   in

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                                LIST OF FIGURES

Figure No.                                                                  Page

    1      Location of Synthetic Rubber and Tire and Inner Tube
           Plants (1972)                                                      7

    2      Emulsion Synthetic Rubber Plants; Water Treatment Costs
           versus Waste Water Flow                                           25

    3      Solution Synthetic Rubber Plants; Water Treatment Costs
           versus Waste Water Flow                                           26

    4      Latex Rubber Plants — Water Treatment Costs versus Waste
           Water Flow                                                       27

    5      Tire Plants — Water Treatment Costs versus Waste Water Flow          28

    6      Capital Cost versus Waste Water Flow                                44

    7      B.P.T. — Yearly Operational Costs versus Waste Water Flow            45
                                          IV

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                              EXECUTIVE SUMMARY

     Tliis final report is submitted in compliance with Phase HI of Contract No. 68-01-1541
with the Environmental Protection Agency on the  "Economic  Impact of Water Pollution
Control on  the  Rubber Processing Industry." Using the effluent guidelines development
document as prepared by  Roy F.  Western, Incorporated and supplied  to us by EPA, we
evaluated the economic impact of pollution control  costs on the synthetic rubber  and tire
sectors of the rubber processing industry.

                                    Methodology

     In  determining the effects of pollution control on the industry, an estimation was made
of the costs that would be  likely to be incurred, based on the effluent guidelines document
and information received from the industry. Conclusions were drawn from an analysis of the
way  in  which these  costs  would affect prices, production, employment, profits and other
economic  variables,  based  on a 70-100  percent  coverage of the manufacturing  facilities
associated with each category.

     The Contractor assumed the  increased costs will be passed on in the form of higher
prices to maintain the companies1 historical return  on stockholders' equity. Most of the
plants were assumed to be working at their 1972 capacity, except EPDM, which will expand
to 80-85 percent of current 1972 capacity by  1977. The industry demand curves for these
products are assumed  essentially inelastic; there are no substitutes  (other than  natural
rubber) for most of the rubber products.

                                    Segmentation

     The synthetic rubber industry has been segmented by product rather than by process,
and  tires and tubes was considered as a separate segment.  Because of market and price
considerations, this segmentation was more useful in considering economic impact.

                               Financial Considerations

     The Contractor  determined  the  costs associated  with meeting the Best Practical
Technology  and Best Available Technology Economically Achievable for the various seg-
ments of the industry.  The investment, annualized costs and estimated  price increases as a
percent  of sales are summarized in Tables I and 2, averaged for the synthetic rubber and tire
and tube segments.

                                      Impacts

     The Contractor does not  expect these additional costs to exert a significant impact on
the market and prices of the respective products.  It  is not  expected  that any plants will be
closed in either the synthetic rubber or tire and tube segments. There are, however, a small

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number of small  latex plants that have not been covered in our analysis. Most currently
discharge into municipal systems and represent an insignificant portion of the industry.

     Industry sources in the tire  and tube segment of the study indicate  there may be a
short period of plant shutdown, particularly in the older plants, while changes are made in
order to segregate their effluent lines. The Contractor has no way of evaluating the validity
of these statements or the magnitude of the economic consequences.

     This analysis indicates no adverse effects on the growth of the  industry due to B.P.T.,
B.A.T.,  and N.S.P.S.  In  addition, the costs should  not significantly affect either the
domestic market  competitiveness or the international market situation — the dollar deval-
uation  far overshadows the insignificant price increases involved. However, it  is impossible
to know what the strength of the United States dollar will be in 1977 and 1983.

                                     Limitations

     When  interpreting the findings of this study, it is  important to be aware of  the
limitations  of the cost data used for calculating investment and annual operating costs. The
Contractor has  defined these as direct  incremental investment and  annual operating costs
required to achieve environmental standards. These costs were provided to the Contractor
by industry and  the effluent guidelines development  document, and thus the Contractor
cannot verify  their  accuracy.  The  scale-up factors  used in estimating  investment and
operating costs for those  plants other than those considered  in the guidelines are given in
Appendix A. The calculated price increases for pollution guidelines  (B.A.T. and B.P.T.) are
maximum expected increases. Certain companies and certain plants  meet B.A.T. guidelines
and may not increase their prices at all. Other companies may be constrained to follow suit.

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                                 TABLE t

                   THE SYNTHETIC RUBBER INDUSTRY
               (Butyl, EPDM, Neoprene, Nitrite, Polybutadiene,
                   Polyisoprene, SBR Emulsion + Solution)

                              SIC Code: 2822
            No. of synthetic rubber operations specifically evaluated
       for B.P.T. = 36 (90% of industry), for B.A.T. = 39 (98% of industry)
I mpacts

Costs
 Investment
  Total for segment
  Per plant (average)
  Percent of average annual
   investment in segment

 Annual
  Total for segment
  Per plant average
  Percent of sales

 Price increase
  (varies from product
   to product)

 Plant closings
  Percent of total in segment

 Displaced workers
  Percent of total in segment

 Number of community impacts

 Impact on industry growth

Direct balance of payment effects
   B.P.T.
$22.5 x 106
$625,000
N.A.
$7.94 x 106
$221,000
0.8%

0-1.5%
   B.A.T.
$9.90 x 106
$254,000
N.A.
$4.40x 106
$114,000
0.7%

0-1.5%
N.S.P.S.
0
0
0
0
0
None
None
0
0
0
0
0
None
None
-
-
-
None
None

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                                TABLE 2
                     THE TIRE AND TUBE INDUSTRY

                             SIC Code: 3011
                  Number of plants specifically evaluated:49
                        Percent of total plants: 88%
I mpacts

Cost
 Investment
  Total for segment
  Per plant (average)
  Percent of average annual
    investment in segment

 Annual
  Total for segment
  Per plant (average)
  Percent of sales

 Price increase
 Plgnt closings
  Percent of total in segment

 Displaced workers
  Percent of total in segment
 Number of community impacts
  B.A.T.
  1977
Standards
  B.P.T.
  1983
Standards
  N.S.P.S.
New Source
 Standards
        $31.5 x 106
        $790,000

        N.A.
        $12.56 x 106
        $310.000
        0.3%

        0-0.45%
        0
        0

        0
        0

        impossible to evaluate
Impact on industry growth              None

Direct balance of payments effects       None
                                             None

                                             None

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                            INDUSTRY SEGMENTATION

     The segmentation of the rubber proeessing industry used by the Contractor differs
from  that described in the effluent guidelines development  document. In the guidelines
document, industry segmentation was based on technical considerations such as the quan-
tity, characteristics, and applicability of control and treatment to the wastewater generated
by  the  specific plants. The technical segmentation of the synthetic rubber industry was
based on manufacturing processes. Basically, there  are two processes  in common use in the
industry: emulsion polymerization and solution polymerization. Emulsion polymerization is
used to  produce both emulsion crumb rubber (dry form) and latex rubber (water-suspended
form). According to the effluent guideline  development document,  however, crumb and
latex  production  should  be considered  separately  both from operational  and wastewater
points of view. Solution  polymerization plants are different  from emulsion facilities not
only in  terms of process, but also in terms of the quantity and character of the  wastewater.
As a consequence, three segments based on manufacturing process variations were specified
in the  guideline  document: emulsion  polymerization  to form  crumb  rubber,  solution
polymerization  to form crumb rubber, and emulsion polymerization to form  latex.

     For the tire and  inner tube  industry,  the  guidelines document  used  age of the
production facility as  the  basis for segmentation. In the effluent guideline development
document,  it  is  stated that  plants built prior to 1959 tend to be  multi-storied, with
production lines located on many floors  and confined to small  areas. In such  plants, process,
non-process, and domestic  wastewater  are  combined  in  a common sewer,  thus making
process  contaminants difficult to locate and  treat. The document states  that the newer
plants have  the benefit of modern  design criteria in both the sanitary and maintenance
engineering fields. Sewers are no  longer combined, thus making process sewer  wastewaters
easier to locate and treat.  As a consequence, the  process wastewater  streams from these
post-1959 plants are generally smaller in  volume and contain lower loadings of both oily and
solid  materials -  thus making treatment less  costly than for older  plants with similar
production.

     The technical segmentation used in the guideline documents is useful  for categorizing
processes and pollution, but  it is  not  appropriate for assessing  the economic impact  of
pollution control costs. An assessment  of the economic impact of pollution control must
take into account  the financial and economic characteristics of the business, and similarities
in technology do not imply similarities in business.

     Therefore, to permit an analysis of how pollution control costs would affect produc-
tion,  employment, profits, prices,  and other economic variables that are critical  to  an
industry, the Contractor segmented the  synthetic rubber industry by product. The tire and
inner tube industry was treated separately. The relationship between segmentation used by
the contractor and that used in the guidelines is shown in Table 3.

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                                       TABLE 3

               COMPARISON OF ECONOMIC AND TECHNICAL SEGMENTATION

       Industry                    Economic                          Technical
                                  Neoprene
                                  Nitrile
                                  Polybutadiene
                                  Styrene-butadiene (SBR)
       Synthetic Rubber           ]  Butyl
                                  EPDM
                                  Polybutadiene
Emulsion crumb
Solution crumb
                                  Polyisoprene
                                  Styrene-butadiene (SBR)
                                  Styrene-butadiene (SBR latex) |       Latex
                                  Nitrile latex                j
       Tires and Inner Tubes          Tires and inner tubes         "i       Old tire and inner tube
                                                                   New tire and inner tube

     In a preliminary review of the information available on  these economic segments, the
Contractor concluded that  one segment -  SBR latex  - could not be independently evalu-
ated.  SBR latex  represents about  9?r of the SBR produced. Production  is so small, and
prices, profitability and outlook are so difficult to estimate that the Contractor deleted SBR
latex from further consideration.

                                    Plant  Locations

     An analysis  of plant locations for the  manufacture of synthetic rubbers and tires and
tubes shows they are located in heavily  industrialized areas. In the case of synthetic rubber
they are located near sources of raw materials and  refineries. Figure 1  shows the locations of
the different plants.

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FIGURE 1   LOCATION OF SYNTHETIC RUBBER AND TIRE AND INNER TUBE PLANTS (1972)

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          DESCRIPTION OF SYNTHETIC RUBBER INDUSTRY SEGMhNTS

                               Butyl Rubber-Solution

     Technology. Butyl rubber is a copolymer of isobutylene and  isoprcne and contains
\.47f to 4.5'/f of isoprene. The rubber is prepared by polymeri/ation in an organic solvent,
using aluminum  chloride as the catalyst. After polymerization, the rubber, which is in the
form of a finely divided slurry, is recovered by vaporizing the organic  solvent with hot water
and steam. The  resulting aqueous slurry  of rubber crumb is dewatered and dried by the
methods used for the other synthetic rubbers.

     Plant  Location.  Sizes and  Ages.  There are only two domestic  producers of butyl
rubber.  Exxon and Cities Service's Columbian Carbon Division. Exxon operates two widely
diversified facilities, one at  Baton Rouge with a capacity of 46,000 It/year, and the other at
Baytown,  Texas, witli  a  capacity of 80,000 It/year. Synthetic rubber operations in these
plants began  during World  War II.  Cities Service began operating their Lake Charles.  La..
facility in  1963.  They report  a capacity of 37,500 It/year.

     Uses.  About 80'/ of total production is used in tires and tire products. This applica-
tion  is expected  to continue to show slow but steady increase.  The use of butyl in adlie-
sives and sealants is growing well in excess of the overall market but is still small.

                        Ethylene-Propylene Elastomers-Solution

     Technology. Ethylene-propylene elastomers (EP) arc synthetic  polymers prepared by
the solution eopolymerization of ethylene and propylene. Two basic forms of the rubber are
produced, EPM (a saturated, peroxide vulcanizable polymer) and EPDM  (an unsaturated
conventional  sulfur  curable polymer). EPDM accounts for aboul  95% of the total  produc-
tion  of ethylene-propylene elastomers, and has been used by the Contractor to represent the
entire class of EP elastomers.

     Plant Locations,  Sizes and Ages.  Five  plants operated by five different companies are
engaged in the production of EPDM. These plants are located in Louisiana (3) and Texas
(2), and range from 25-56,000 long tons of annual production capacity. All the plants were
built between 1963 and 1971.

     Uses.  Table 4 illustrates the variety of end-use markets in which EPDM is used:

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                                     TABLE 4

                                     MARKETS
                                            Percent of Domestic Consumption

            Automotive Parts (non-tire)                        35.0%
            Tires and Tire Products                           32.0
            Wire and Cable Insulation                          7.0
            Appliance Parts                                  6.5
            Hoses                                          6.0
            Gaskets, Seals, and O-Rings                         4.5
            Coated Fabric and Sheeting                         2.0
            Other                                          7.0
                                                        100.0%

            Source:  Chemicals Economic Handbook, Stanford Research Institute, May 1972.

     Since  the introduction of EPDM in 1 963, the forecast of demand for the rubber has
consistently exceeded actual demand. As a result production in 1972 averaged only about
50% of capacity. This excess  capacity has created a marketing environment  where the
rubber price is often discounted 10-20% below list (28-30^/lb).

     However, despite  excess capacity,  some producers say that EPDM supplies are tight.
They explain that they now produce so many different types and grades of the elastomer
that their effective capacity is reduced.

     New  emphasis in automotive  safety  and pollution control equipment has boosted
demand for EPDM for such applications as bumpers and high-temperature-stable hoses and
belts. These and other growing markets are causing domestic consumption to grow at a brisk
10-15% per year.

                                 Neoprene-Emulsion

     Technology.  Neoprene is  one  of the  oldest synthetic rubbers in  existence - having
been first introduced on a commercial scale in 1931 by Du Pont. Until relatively recently,
neoprene was made commercially  from chloroprene  monomer produced from  acetylene
feed stock.  Today, a more economical butadiene route to the monomer is being utilized.

     Plant Locations, Sizes, Ages. Only two companies in the United States - Du Pont and
Petro Tex — make neoprene.

     Du Pont presently operates  two neoprene  plants. The Louisville, Kentucky, facility,
with a capacity for  125,000 It/year,  is a diversified complex, most of which was constructed
during World War II.  The chloroprene monomer used here  is supplied from a  newly
constructed plant in Victoria, Texas.

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     Du Font's facility in La Place, La., produces both chloroprcne monomer and neoprene,
with a neoprene capacity of 40,000 It/year. This facility went on-stream in 1970.

     Petro Tex's Houston  plant went on-stream-in  1970. Its capacity is estimated* at 44,000
It/year. The Houston  facility  also contains Petro Tex's butadiene monomer facility, one of
the largest in the United States.

     Uses.  Automotive,products (fan belts, hosing, etc.). account for about 45r/ of market;
industrial/aerospace/consumer products (conveyor belts,  >vet suits, etc.), about 20r/; wire
and  cable,  10% and  declining;  adhesives,  12%-  with  an annual growth rate of 10%. The
remaining 13f/f is used in a variety of other products, none  of which is large enough to be of
interest.

                         Nitrile-Emulsion (Crumb and Latex)

     Technology.  Nitrite rubber, a copolymer of  acrylonitrile  and butadiene, is produced
by  emulsion polymerization in a manner similar to that used in  making emulsion SBR. The
basic steps  involved  in the  manufacture of dry rubbers  are polymerization, coagulation,
washing and drying.  In case a latex is desired,  the steps are polymerization, stabilization,
and usually concentration

     Plant Locations, Sizes, Ages.  Six  companies produce nitrile rubber in nine plants; one
is located   in Delaware, one in Kentucky, two in Louisiana, four in Ohio, and one in Texas.
Nitrile plants have the smallest production  capacity of all  the plants in the synthetic rubber
industry, exhibiting an average annual capacity of less than 15,000 long tons.

     Most  of these plants were built  before or during World  War II, and very little new
technology has been developed since then.

     Uses.  Because of its  outstanding resistance to oil and solvent, nitrile rubber is utilized
for a number of "under-the-hood" automotive applications; these account for about 25'/<- ot
all nitrile produced. Other applications  include mechanical  goods, belting, rollers, etc.

                           Polybutadiene-Solution/Einulsion

     Technology.  Poly butadiene, a homopolymer of butadiene, accounts for 12% of total
U.S. synthetic rubber production.

     In the commercial production of polybutadiene elastomers, the exact nature of  the
final product  depends on several  factors, the  most important of which  are  the catalyst
system and  the  reaction medium (solution  or emulsion polymerization).
                                         10

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     Only one plant - Texas-U.S. in Port Neches, Texas - produces polybutadiene by the
emulsion process. This plant accounts for less than  10% of the domestic capacity for the
production of polybutadiene. The remainder  is accounted for by six other polybutadiene
plants producing the rubber by solution polymerization.

     Plant Locations, Sizes and Ages. At the present time there are seven plants producing
polybutadiene: one  in Louisiana, one in Kentucky, and five in Texas.

     There is quite  a variation in plant size  with the smallest having a capacity of about
20,000 long tons, the largest 110,000 long tons, and the average being about 64,000 long
tons.

     The polybutadiene  plants are relatively  new,  having been built  between  1961  and
1963. From 1965 to 1968, the plants increased their capacity at a rate of about \67r per
year, through new construction.  Over the last  years  the rate of growth has slowed to about
13.5%  per year and has been the result of both new construction and  the  "dcbottleneck-
ing" of existing operations (primarily in the drying and finishing areas).

                                Polyisoprene-Solution

     Technology. Polyisoprene  elastomers  are  synthetic,  predominantly  stereoregular,
polymers which closely resemble natural rubbers in both molecular structure and properties.
Two basic types are  currently being produced: cis-polyisoprene and trans-polyisoprene.

     Cis-polyisoprene is used in many of the same applications as natural rubber: tires and
tire products, foam  rubber, hoses, gloves, etc.

     Trans-polyisoprene, on the  other hand, has  quite different properties and is used  in
specialty applications such as golf ball covers, cable and wire covering, and adhesives.

     All  polyisoprene elastomers are produced  by  solution polymerization,  in  a manner
quite similar to  that used  to produce polybutadiene. The  polymers are sold  both in dry
rubber and latex form.

     Plant  Locations, Sizes,  and  Ages.  There are two polyisoprene plants. The  first was
built by  Goodyear  in Beaumont, Texas in 1962. This plant has a capacity of 62,000 long
tons. The second was built by Goodrich in Orange, Texas in  1968. The Goodrich plant has a
capacity of 62,500 long tons.

     Uses. The growth of polyisoprene demand has been slow. However, it is believed that a
more general acceptance of radial ply tires in  the United States would  very likely increase
the demand for  polyisoprene, since  good building  tack and green  strength — qualities  of
natural rubber — are essential in the construction of  radial ply tires. Because of its similarity
to natural rubber, polyisoprene could become the logical replacement for this application.
                                         11

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                               SBR-Emulsion/Solution

     Technology. SBR, a copolymer of styrene and butadiene, typically contains about 25
parts styrene to  75 parts butadiene. SBR accounts for over 607, of all the synthetic rubber
manufactured in  the United States.

     Most of the SBR produced is  manufactured by the so-called  cold  emulsion  process
which was developed just after World War II and is used with few modifications even today.
Most process modifications have been concerned with alleviating bottlenecks in the  poly-
merization,  drying  and finishing operations and  with  increasing  the volume  produced
through extension of the rubber with oil and carbon black. The same  basic process is used to
produce both dry rubber and latex (a suspension of SBR in water).

     An alternative  to the emulsion  process is a solution process used by Firestone Tire &
Rubber Company, and Phillips Petroleum, Co. Solution SBR exhibits better abrasion and crack
resistance than emulsion SBR, but at present is priced 10-1 5% higher  than the emulsion type.

     As far  as  water pollution  is  concerned, the emulsion process is  by far  the  more
troublesome. Water is used as the suspending medium  during the  polymeri/ation, and it
must ultimately be removed to produce dry rubber.

     Plant Locations, Sizes, and Ages.  The plants in which SBR is made  are located either
adjacent  to  butadiene-producing plants  or near the markets. For example, during World
War II, SBR plants using  butadiene derived  from petroleum  were located in Louisiana,
Texas,  and  California; those using  butadiene  made from alcohol  were located  in  West
Virginia, Pennsylvania, and  Kentucky. Those serving specific markets were located  in Ohio
and Connecticut. At the present time there are eleven plants producing emulsion crumb
SBR, with an average annual production capacity of over 140,000 long tons. However, the
plants are by no means of uniform size, exhibiting a range of capacity from  28,000 long
tons to 410,000 long tons.

     The newest plant was built in  1957, while the others were built between 1941 and
1945.

     Us_es. An estimated 65-70% of  SBR production goes into the tire industry; 7-8% goes
for mechanical  goods, 9% for exports, 1-2% for footwear,  and   12% for miscellaneous
products.

     Growth in  demand for emulsion SBR has slowed to 1-3%/year, reflecting the mature
status of this 30-year-old product.
                                        12

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                     Summary of U.S. Synthetic Rubber Capacity

     Table  5 lists the synthetic rubber production in the plants of concern in this study. Of
the 28 plants listed here, 18 produce only one rubber type, 9 produce two types, and one
plant produces three different rubber types. In addition, most of the  18 plants producing a
single rubber are part of diversified plant complex manufacturing other products such as
rubber processing chemicals,  plastics,  and basic and intermediate organic  chemicals. As a
consequence, the wastewater effluent from  the synthetic rubber operations is generally
combined with  other plant effluents and treated in  a common facility. The implication of
this common treatment  in regard to pollution cost allocation to the  individual products is
covered in a later section of this document.
                                        13

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               TABLE 5




CAPACITY OF U.S. SYNTHETIC RUBBER PLANTS
Company
Name
American Synthetic
Rubber
Ashland
Cities Service
Copolymer

DuPont


Exxon

Firestone



Gen. Tire
Goodrich



Goodyear


Petrotex
Phillips

Texas-US
Uniroyal




Location
Louisville, Ky.

Baytown
Lake Chas., La.
Addis, La.
Baton Rouge, La.
Beaumont, Tex.
La Place, La.
Louisville, Ky.
Baton Rouge, La.
Baytown, Tex.
Akron, Ohio
Lake Chas, La.

Orange, Tex.
Odessa, Tex.
Akron, Ohio
Louisville, Ky.
Orange, Tex.
Port Neches, Tx.
Akron, Ohio
Beaumont, Tex.
Houston, Tex.
Houston, Tex.
Borger, Tex.

Port Neches, Tex.
Baton Rouge, La.
Geismar, La.
Naugatuck, Conn.
Painesville, Ohio
Production Capacity
Butyl EPDM Neoprene Nitrile Polybutadiene Polyisoprene SBR
75,000 125,000

80,000
37,500
25,000
5,500 127,000
56,000
40,000
1 25,000
46,000 35,000
80,000
2,500 50,000
20,000 230,000 emuls.
23,000 sol.
75,000
110,000
35,000
35,000
25,000 87,000 62,500
178,000
1 1 ,000
110,000 65,000
11,000 410,000
44,000
50,000 77,000 emuls.
2,300 sol.
30,000 148,000
15,500
50,000
28,000
15,500

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                 DESCRIPTION OF THE TIRE AND TUBE INDUSTRY

     Fifty-six  plants in the  United States produce tire and tube products. Of these, 40 are
operated by Firestone, General Tire, Goodrich, Goodyear and Uniroyal.

                                     Technology

     The technology of the production of tires is very similar in all plants. Basically, the raw
rubber is compounded with oil, carbon black and various curing ingredients. The compound
is then calendered onto fabric which forms the tire plies. Special tough stocks are made into
tread stock and sidewall stock and are extruded to shape.  The tire is then built up on a
drum, one kind of drum for bias and belted bias tires, and another for radial tires.

     In recent years each change  in tire structure  has resulted in more costly tires with
better wear and stability. Tread  wear has been increased by  50% in going from the bias to
the belted bias, and by another 5Q'/r in going from  the belted bias to the radial tire. Thus the
radial tire can be expected to provide from 40,000 miles of tire life versus 20,000 miles for
the conventional bias tire.

     The change from bias to belted tires took place between 1968 and 1970 and required a
major investment by  the  tire companies for  new equipment.  A rough  rule of thumb for
switching to radials (as companies are now doing) is that for a 10,000-passenger-tires-per-day
plant, an additional investment  of about $7-8 million will  be  required. If there  is a  60%
replacement to radials in the seventies, this will require a $280  million dollar investment by
the industry.

                                      PJajitJSize

     Tire plants vary widely in capacity; the largest produce some 30,000 tires per day, and
the smaller ones less than  5,000 per day. Production depends to a great extent on the tire
mix.  For example,  the building of a  passenger car tire requires about  one minute, while
many off-the-road tires require as long as an hour.

                               Plant Age and Location

     The specific problems  of pollution control depend  in part  on the  age  and general
upkeep of the plant because much of the pollution  comes from washdown of facilities and
blowdown of cooling  water. However, most tire plants have been expanded and modernized
since  1967, when the belted bias tires went into production.

     Table 6 lists the  tire plants and  their location. The  Akron area is a heavily built-up
industrial section with little  land available  for water treatment facilities. Newer plants are
located  in  less confining areas where sufficient land  is generally  available for ponds and
lagoons.
                                        15

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                                      TABLE 6

                      TIRE PRODUCERS AND PLANT LOCATIONS
     Company


Armstrong Rubber


Carlisle Rubber
Cooper Tire & Rubber


Dunlop Tire & Rubber

Firestone Tire & Rubber
Gates Rubber

General Tire & Rubber


Goodrich



Goodyear
Mansfield Tire & Rubber

McCreary Tire & Rubber

Mohawk Rubber

Uniroyal
                     Plant Locations and Annual Passenger
 Headquarters        	Car Tire Production	
                              (number of tires)

W. Haven, Conn.       W. Haven, Conn.; Natchez, Miss.; Des
                     Moines, Iowa; Hanford, Calif.
                        Total Production 14,700,000
Carlisle, Pa.           Carlisle, Pa. Total Production approx. 1,200,000
Findlay, Ohio         Findlay, Ohio; Texarkana, Arkansas,
                     Mississippi
                        Total Production, 8,000,000
Buffalo, N.Y.         Buffalo, New York
                        Total Production 2,000,000
Akron, Ohio          Akron; Des Moines; Los Angeles; Mem-
                     phis; Nashville; Noblesville,  Indiana;
                     Pottstown, Pa.; Dayton Barberton,
                     Ohio; Oklahoma City
                        Total Production 49,100,000
Denver               Denver; Nashville
                        Total Production 7,500,000
Akron                Akron; Mayfield, Kentucky; Waco, Texas;
                     Byran, Ohio; Charlotte,  N.C.
                        Total Production 12,300,000
Akron                Akron; Ft. Wayne; Los Angeles; Miami;
                     Oklahoma;Tuscaloosa, Alabama;
                     Valley Forge, Pa.
                        Total Production 21,400,000
Akron                Akron; Gadsden, Alabama; Conshohocken,
                     Penn; Jackson, Michigan; Los Angeles;
                     St. Mary's, Ohio; Topeka, Kansas;
                     Cumberland, Maryland Fayetteville,
                     N.C.; Union City, Tenn.; Freeport,
                     III.; Tylor, Texas.
                        Total Production 57,950,000
Mansfield, Ohio       Mansfield, Ohio
                        Total Production 3,000,000
Indiana, Penn.         Indiana, Pennsylvania
                        Total Production 2,500,000
Akron                Akron; West Helena, Arkansas
                        Total Production 6,000,000
N.Y.C.               Detroit; Eau Claire, Wisconsin;
                     Indianapolis; Los Angeles,; Ardmore,
                     Oklahoma; Opelika, Alabama, Spring-
                     field, Massachusetts
                        Total Production 32,000,000
                                           16

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                                FINANCIAL PROFILES

      Most manufacturers are large  firms  with a high level of integration, and most  are
 committed to the manufacture of synthetic rubber products. The financial position of these
 companies is relatively strong.

      There are, however, a  few small  producers  of synthetic rubber, some of which  are
 owned by the petroleum industry, and some of which are not involved in the manufacture
 of consumer rubber products. These producers would probably shut down if costs increased
 significantly.

      In 1 972 the synthetic rubber industry shipped  5,650 million pounds of rubber, having
 an estimated value of $1.1  billion. Customers for synthetic rubber are mostly manufacturers
 of components for transportation  equipment.  While this market  has been expanding,
 synthetic rubber shipments are increasing only moderately because of depressed prices and
 substitution  of  plastics for rubber in non-tire uses. Table 7 gives a profile of the synthetic
 rubber industry  in 1972.

                                       TABLE 7

                          1972 PROFILE - SYNTHETIC RUBBER

          SIC Code                                                  2822
          Value of industry shipments (million)                           $1,125
          Number of establishments                                       50*
          Total employment (thousands)                                    13
          Exports as percent of product shipments                            12.8
          Imports as percent of apparent consumption                         4.6
          Compound annual average rate of growth 1967-72 (percent):
            Value of shipments  (current dollars)                              3.9
            Value of exports (current dollars)                                0.7
            Value of imports (current dollars)                                19.9

          'Contractor data shows 56 plants

          Source: Bureau of Domestic Commerce.

     In 1972, the tire industry produced 225 million tires and  tubes, valued at an estimated
 $4.8  billion.  Rising  business activity  and growth in  new  car  sales  have been providing
 impetus to the growth of tire shipments. Original equipment tires on new cars jumped  from
 38 million  tires  in  1970 to 49 million in 1971 and to 54 million in 1972.  Replacement tires
have grown from 129  million tires in 1969 to 135  million in 1971 and to  142 million in
 1972. The  slower growth rate in  replacement tires of 3.5% a year reflects a combination of
 factors. The comparatively poor year for original equipment tires in 1970 led to a  smaller
market  for replacements in  1972 and 1973.  Longer lasting tires are extending the tradi-
tional two-year  replacement  cycle.  Growth in snow  tire  demand has slowed, reflecting
maturity in the market. Table 8 gives a profile of the  tire and inner tube industry for 1972.

                                          17

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                                        TABLES

                        1972 PROFILE - TIRES AND INNER TUBES

          SIC Code                                                   3011
          Value of industry shipments (millions)                           $5,625
          Number of establishments                                        200*
          Total employment (thousands)                                    115
          Exports as a percent of product shipments                             2.0
          Imports as a percent of apparent consumption                          8.2
          Compound annual average rates of growth 1967-72 (percent) :
            Value of shipments (current dollars )                               8.6
            Value of exports (current dollars)                                  6.5
            Value of imports (current dollars)                                 36.8

          *Total includes contributions of recappers and tire related products.

          Source: Bureau of Domestic Commerce.

     The major  producers  of synthetic rubber and tires and tubes also produce plastics, and
thus the two  are considered together in reviews of financial performance. Table 9 shows
financial performance  of manufacturers of rubber and plastic  products from 1967 to 1972.

     According  to the  U.S. Industrial Outlook* published by the Department of Commerce,
corporate profits after taxes, for manufacturers of rubber and plastics products, rose from
$456 million in  1970 to $664 million in 1971 and to almost $900 million  in 1972. Profits in
1970 were exceptionally low; ratios of profits to sales and to capital investment returned in
1972 to 4:5 and 7:5, about the levels of the mid-1960's.

     "Because of the  poor financial returns in  1970 and early 1971, new capital expendi-
tures for plant and equipment dropped from $857 million in 1969 to $812 million in 1970
and to $726 million in 1971. Rising sales and improved operating ratios in 1972 resulted in
a 33% increase  in new capital expenditures to $970 million, the largest one-year increase
ever recorded for the  rubber and plastics industries. Most of the capital spending was for
new tire plants to meet increasing demand for tires in general and radial tires in particular,
plus new facilities for the rapdily growing plastic products industry." Table 10 gives  finan-
cial profiles for the various industry segments in  this report.
 *U.S. Industrial Outlook; U.S. Department Commerce.
                                          18

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                                           TABLE 9

                RUBBER AND PLASTICS PRODUCTS: FINANCIAL RATIOS 1967-72
                                           (Percent)
                                                                                 First Half
                                        1967    1968   1969   1970   1971    1971    1972

Ratios:
  Profit after taxes/sales                    4.0     4.5     3.8     2.8     3.6      3.5      4.1
  Profit after taxes/investment               7.5     8.5     6.9     4.6     5.9      6.1      7.4
New capital expenditures/gross plant         8.7    10.3     9.7   '  8.2     6.6      NA      NA
Depreciation/gross plant                    6.8     6.2     5.8     6.0     5.8      6.1      6.2
Depreciation/sales                          3.4     3.2     3.1     3.6     3.5      3.5      3.4
Sales/total assets                         140     136     133     123     120     126     130

Note — NA — not available.

*U.S. Industrial Outlook; U.S. Department Commerce.

Sources:  Federal Trade Commission, Securities and Exchange Commission, and Bureau of the Census.
                                              19

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                                      TABLE 10

                     1972 FINANCIAL PROFILE FOR SEGMENTS
                                                                    Anticipated Annual
Product
Butyl
E.P.D.M.
Neoprene
Nitrile
Polybutadiene
Polyisoprene
Estimated
Price1
$0.25/lb
0.26
0.35
0.45
0.165
0.19
Relative Product
Profitability2
Moderate
Variable
Moderate -
High
Moderate -
High
Low -
Moderate
Low -
Moderate
Production as
Percent of Capacity3
80%
50%
87%
66%
83%
93%
Rate of Growth
for Next 5 Years4
2-5%
5-15%
0-4%
3-7%
3-5%
5-8%
SBR              0.13
Tires (general     21.24
 average)
Tires (passenger
 car tires)        14.43
Low
 Moderate
85%
85%
0-3%
6-8%
1. The actual prices vary considerably depending on grade, type, and volume purchased. These
   figures only approximate the average prices and are based on U.S. Tariff Commission data,
   industry quotations, and Arthur D. Little, Inc., estimates.
2. Comments of  industry  spokesmen regarding profitability of segments compared to industry
   as a whole.
3. Industry sources; Chemicals Economic Handbook, Stanford Research Institute (CEH).
4. Industry sources;  Rubber World,  Feb. 1973, CEH.
                                          20

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                            WATER TREATMENT COSTS

     Water treatment cost data for a typical plant in each of the technical segments were
 furnished to the Contractor in the form of two  reports: "Development Document for
 Effluent Limitations Guidelines and Standards of Performance for the Rubber Processing
 Industry," and "Supplement A" to this document. These documents establish a composite
 average-sized plant for each  segment  on the basis of an analysis of  EPA  documents,
 applications for Corps of Engineers Permit to Discharge, and individual company treatment
 data. These documents identify: the raw waste characteristics of these composite plants, the
 supply and volume of water used in the process, the sources of waste and wastewaters in the
 plants, the constituents  of all wastewaters, and those contaminants which are toxic or result
 in taste, odor, or color in water or aquatic organisms. The constituents of wastewaters which
 should be subject to effluent  limitations  guidelines and standards of performance were
 established.

     The  range of control and treatment technologies  within  each segment was also
 identified and  assessed. This involved an  evaluation of  both in-plant and  end-of-pipe
 technologies which are existent or capable of being designed for each segment. The energy
 requirements of each of the control and treatment technologies were estimated as well as
 the cost of the application of such technologies.

     This information was then evaluated to  determine what levels of technology consti-
 tuted the  "best practicable control technology  currently available" (B.P.T.), the "best
 available technology economically achievable" (B.A.T.), and the  "best  available demon-
 strated control  technology, processes, operating  methods, or  other alternatives for new
 sources" (N.S.P.S.).
                                                            I
     We  concentrated our analysis on  an  evaluation of those costs associated with the
 technologies designated  as meeting the B.P.T., B.A.T., or N.S.P.S., as appropriate. Less
 costly, less effective technological alternatives were considered, but these  played no role in
 the ultimate assessment of economic impact.

                                 Capital Investment

     In  the derivation  of "typical plant" investment costs,  the  guideline development
documents include all  capital expenditures required to bring the treatment or control
technology into operation.  The capital costs were generated on  a unit basis, with the
following  "percent add-on" figures applied to the total unit process costs  to develop the
total installed capital cost requirements.
                                         21

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                                                               Percent of Unit
     Item                                                    Process Capital Cost

     Electrical                                                       12
     Piping                                                          15
     Instrumentation                                                  8
     Site Work                                                        3
     Engineering Design and Construction Supervision Fees              10
     Construction Contingency                                        15

Since land costs vary appreciably between plant locations, land costs are not included in the
estimates, and must be added on an individual case basis.

                                    Annual Costs
     Annual costs for the technological alternatives include capitalization, depreciation,
operating and maintenance, and power costs. Utilizing the base investment supplied by the
documents,  the contractor  assessed the capitalization  on an  individual  company basis,
assuming that  new investments in pollution control equipment are financed by debt and
equity. The ratio of debt to equity was determined by the present capitalization ratios of
the companies  that own these plants. Interest costs were assumed to be 10%  per year on
that portion of investment financed by debt.

     Depreciation was figured on a five-year straight-line basis with zero salvage value,
according  to currently  acceptable practices under Internal Revenue Service  Regulations
pertaining  to  pollution  control  equipment. Operating  costs,  which include labor  and
supervision, chemicals, sludge hauling and disposal, insurance and taxes, were computed in
the effluent guideline development documents at 2 percent of the capital cost. Maintenance
cost was computed at 4 percent  of capital  cost. Power  was based  on $0.01 kw-hour for
electrical power. Operating, maintenance and power costs were  adjusted by the Contractor
for treatment facility capacity, as is given below.

     All costs  were  computed in terms of August 1971  dollars, which corresponds to an
Engineering News Record Index (ENR) value of 1580.

                             Treatment Cost vs Plant Size

     Table  11   lists the  capital investment and  operating,  maintenance, and power costs
associated with the typical plants for the various levels of treatment. Using as a basis the
capital investment of the typical plant facility, the corresponding investments for other size
treatment units within the range evaluated were derived as follows:

                                                     T  Capacity of Unit X   ~| ° -5
     Capital Cost of Unit X = Capital Cost of Typical Unit	
                                                     [.Capacity of T ypical Unit J
                                          22 .-

-------
where  X is the unknown  treatment  facility.  This relationship, which deviates from the
well-known "six-tenths pale," was found to provide a better estimation of the capital costs
involved  in the construction of treatment facilities handling organic  wastes. Appendix A
details the justification for this relationship.

     Likewise,  an analysis  of  operating and maintenance costs (see Appendix A) showed
them to be  related to capacity of the treatment  facility as follows:
                                                                                0.5 8
                                                                              u
   Operating and Maintenance _ Operating and Maintenance f   Capacity of Unit X
   Cost for Unit X             Cost for Typical Unit      [capacity of Typical Unit

 In the absence of a detailed cost breakdown, the Contractor assumed that the power costs
 also vary in the same manner as the operating and maintenance costs.

     The relationships describing the variation of capital investment and operating, mainte-
 nance, and power costs as a function of treatment capacity were graphed for each technical
 segment. These graphs are shown in Figures 2 through 5. In the case of tire and tube plants.
 we have also related the costs to raw material consumption. In the case of synthetic rubber
 plants, we have related costs to annual rubber production. The primary assumption we made
 here is that raw material consumption or rubber production is directly proportional to water
 usage.  We realize  that water usage is mainly a function of water availability at low cost, and
 consequently varies significantly with geographic location; nevertheless we believe that firms
 will  be increasingly concerned with water conservation because of  the necessity  of con-
 trolling their own waste. As a result, our assumption of a one-to-one relationship should be a
 good first approximation.

                                Plant Cost Calculations

     Synthetic Rubber Plants. The estimation of waste treatment costs for synthetic rubber
 was complicated by the fact that many of the plants in the industry produce more than one
 rubber  type. In addition,  a number of synthetic rubber  facilities  are portions of large
 diversified  plant complexes manufacturing  organic chemicals as well as  other products.
 Since,  in these cases, the  wastes from the synthetic rubber operations are combined and
 treated  in  a common waste treatment facility,  the pollution control costs allocated  to
 specific rubber products become a matter of corporate policy.  The  contractor calculated
 costs  on the assumption  that  the  effluents from the  synthetic rubber operations were
 combined  and treated  independently  of the effluents  from other  plant  manufacturing
 operations.

     In  cases where a single plant contained synthetic rubber operations producing rubber
 types of more than one  technical  segment  (e.g:, emulsion  crumb  and  solution  crumb,
emulsion crumb and latex, etc.), costs were estimated by assuming the emulsion crumb and
latex effluent streams would first be coagulated independently and then combined with the
effluent from any solution  polymer operations for further treatment (Table 11).


                                         23

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     Total pollution control costs for plants were allocated back to the individual products
on the basis of production capacity.

     Tire  and  Tube Plants. Waste treatment cost estimates  for specific tire and tube plants
were based on the guideline documents and on data reported to us by the various companies
involved.  Raw material consumption was used as a basis  for cost calculations  in lieu of
effluent discharge rates, which were typically not available to us.
                                          24

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    5.5
    5.0
    4.5
    4.0
  = 3.5
  o
  Q
    3.0
  S2.5
    2.0
    1.5
    1.0
    0.0
             Legend:  ©  Denotes "Typical"
                          Plant for Segment

                                                 X
                 / B.A.T.
                     Capital Investment

                                           Capital Investment
                    B.A.T. Operating,
                    Maintenance, and
                    Power Costs
                  B.P.T. Operating,
                  Maintenance, and
                  Power Costs
                                      (
                                              1
               0.5
1.0     1.5     2.0     2.5
Flow, Millions of Gallons/Day
                                                    3.0
                          i
                                  _L
                                           1
               50,000  100,000  150,000  200,000  250,000
                       Production, Long Tons/Years
FIGURE 2   EMULSION SYNTHETIC RUBBER PLANTS: WATER TREATMENT
            COSTS VERSUS WASTE WATER FLOW
                                  25

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           2.0
           1.8
           1.6
           1.4
            -
         Q
           1.0

           0.8
           0.6
           0.4
           0.2
           0.0
                    Legend:   0 Denotes "Typical"
                                Plant for Segment
                    «
                    a/
<^.
  Capital Investment
                                    «
                                *
                           B.P.T.
                           Capital Investment
                           B.A.T Operating,
                           Maintenance, and
                           Power Costs
                         B.P.T. Operating,
                         Maintenance, and
                         Power Costs
0.1     0.2     0.3     0.4    0.5
       Flow, Millions of Gallons/Day
                                                          0.6
                     10,000   20,000   30,000   40,000   50,000
                             Production, Long Tons/Year
FIGURE 3   SOLUTION SYNTHETIC RUBBER PLANTS:  WATER TREATMENT COSTS
            VERSUS WASTE WATER FLOW
                                         26

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l.U
0.9
0.8
0.7
lo.6
o
Q
"o
V)
i
§0.4
o
0.3
0.2



0.1


0 0
Legend: y B AT
© Denotes / Capital Investment
' "Typicat" Plant /
for Segment /
/ /B.P.T.
/ / Capital Investment
/gf
f
/
j
1 /
.
- I/
1
-

B.A.T. Operating,
^ ^-^"^ Maintenance, and
. -®-***" " Power Costs
.^^ 	 	 B.P.T. Operating,
*^^^^.. — "^ Maintenance and
--— Power Costs
i i i i i i
0 0.04 0.08 0.12 0.16 0.20 0.24
                    Flow, Millions of Gallons/Day
            5,000    10,000   15,000   20,000
                    Production, Long Tons/Year
25,000
FIGURE  4   LATEX RUBBER PLANTS - WATER TREATMENT COSTS
           VERSUS WASTE WATER FLOW
                               27

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   1.0
   0.9
   0.8
   0.7
j|  0.6
o
Q
c  0.5
8 0.4
o
   0.3
   0.2
   0.1
   0.0
Legend:
0 Denotes
"Typical" Plant
for Segment
    Capital Investment for    /
    Old Tire Plant        •
    (to 1958)         /
                             f
                          /
                                                4
/


                                Capital Investment
                                for New Tire Plant
                                (1959 to Present)
                       Operating Cost
               Old Plants
                                           New Plants
                                      I	|	I
              20      40     60      80     100    120     140
             Process Effluent Flow, Thousands of Gallons/Day
            I	|	|	|	|	|
           50       100     150      200      250      300
                Raw Material Consumption, Metric Tons/Day
  FIGURE  5  TIRE PLANTS-WATER TREATMENT COSTS VERSUS
              WASTE WATER FLOW
                                    28

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to
Daily Raw Material
Consumption, metric tons
Annual Production,
metric tons
Estimated Total Effluent Flow,
thousands of gallons per day
Estimated Process Effluent
Flow, thousands of gallons per day
Total Capital Investment - Level I
Operating and Power Maintenance
Cost - Level I
Total Capital Investment
Level II
Operating and Power Maintenance
Cost- Level II
                                                                      TABLE 11

                                                       WATER EFFLUENT GUIDELINES COSTS
Old Tire
and Inner
Tube Plant
205
-
2,004
86
$ 808,000
$ 56,000
*
*
New Tire
and Inner
Tube Plant
205
-
2,004
86
$ 628,000
$ 45,000
*
»
Emulsion
Crumb
Plant
-
128,000
1,483
$ 2,002,000
$ 250,000
$ 2,993,000
$ 425,000
Solution
Crumb
Plant
-
30,000
353
$ 810,000
$ 72,000
$ 1,182,000
$ 151,000
Latex
Plant
-
10,000
101
$ 637,000
$ 60,000
$ 784,000
$ 120,000
                  'Level I  and Level II have identical guideline requirements for tire and tube plants.

                  Source:  Roy F. Weston, Inc.

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                          ECONOMIC IMPACT ANALYSIS

                                   Methodology

     One of the key  issues in  determining  the effect  of pollution control costs on the
economy is the question of how much of the  cost will be passed along in the form of higher
prices. In order to determine the relative price increases of the various rubber types and of
tires, the contractor assumed that most  of the plants studied in this report will be working
at  their 1972  production levels during the  years  1977  through  1983,  and that certain
plants — e.g.,  those which are  making EPDM  — will increase their production to about
80-85%  of 1972 capacity by  1977.  This better capacity utilization will be  due to the
expanding demand  for EPDM products.  (Growth rate estimates for the various products are
quoted on the "financial profile" tables in this report.)

     The Contractor also  assumed that  the industry demand curves for these products are
inelastic. This  assumption is based  on the facts that there are no substitutes for most of
these rubber products (other than natural rubber) and that because of the recent devalua-
tion  of  the dollar there will be little influence of imports on domestic demand for these
products.

     At present, most  rubber and tire companies are feeling the pressure of increasing costs.
During the last year labor and raw materials costs have increased, and most companies have
not been  able to  pass along these higher  costs because of  various governmental price
regulations. The Contractor has  therefore assumed that  most of the rubber and tire plants
will try to pass along most pollution  abatement costs to  the  consumer; in  fact, many
companies have told the contractor that  they will try to do so.

     Many companies have stated that they would calculate price increases  by looking at the
annual pollution control costs, and  that they  would require a return on their investments in
pollution  equipment of  between 6%  and   12% after  taxes. By thus  capitalizing  their
investments, many  firms  would in reality be increasing the return on equity  to  their
stockholders, since their present average  return on investment is lower than 6%.

     In  other  words, many companies  would try  to become  more profitable because of
pollution control equipment than they would be without  the pollution control equipment.
The contractor considers the maximum price increase to be determined  not by return on
investment criteria, but  by maintaining a  constant return on  stockholders' equity. A
summary analysis of the mathematics of our methodology follows, and it relates different
criteria for judging price increases.

                     Price Increases Under Different Assumptions
     Maintain Return on Stockholders' Equity (ROE). If a company increases its price in
order to maintain  ROE, this price increase will  be given  by the following  equations,
assuming that production remains constant.

                                        30

-------
     Profits before pollution control:
                                    1
     Profits after pollution control:
             TT + ATT = [ (pQ + ApQ) - (c + Ac) - (1 + AI) - (d + Ad) ] ( 1-t)
                     = 7r + (ApQ- Ac- Al -Ad) (1-t)
In order to maintain ROE:
                                      TT     TT + Air
                                            E +AE
AE =
                                                   N.B.
                                                   AI = interest rate x
                                                                 x Inv.
and after simplification:
                        ApQ     Inv.     1
                          pQ   D + E (1-t)
                           '  ir  I   |"Ac + AH-AD "1
                              pQj+L     PQ      J
                                           or
          unit price increase
            Inv.
           D + E
x [Pre-tax profit margin] + unit cost increase
Maintain After-tax Profit Margin
     Margin before pollution control:
                                       profits
                                 pQ-c
                                   PQ
     Margin after pollution control:
                                      revenues
                    c now denotes total costs, including taxes.
                                       profits         (p + Ap) Q - (c + Ac)
                                      revenues
                                       (p + Ap) Q
                                                                                     (D
                                                                  (2)
                                                                                     (3)
                                                                                     (4)
                                                                                     (5)
                                                (6)
                                                                  (7)
1. 7T = profits after taxes; p = unit price; Q = volume of production; c = total operating costs; I = interest on
  debt; d = depreciation; t = marginal tax rate; E = stockholders' equity; D = debt; Inv. = new investment
  in pollution control equipment; A = designates an increment in revenues or cost.
                                           31

-------
After simplification:
                                      Ap     , Ac
                                     -  =  ~                                <8>

     Prices increase in the same ratio as costs.

Satisfy a Specified Return on Investment (ROI)
                           Ap    Ac       Inv.          1
                            p  ~ pQ    (l-t)xpQ X ROI rate                     (9)

     c.now denotes total costs, including taxes.

                     Relationship Between the Various Assumptions

Return -on Stockholders' Equity and After Tax Profit Margin

         1         Inv.        Ap
     If 77-7   '———  = 	  then maintaining ROE or the                     (10)
        (1-t)     D + E       p
after-tax profit margin will give us the same price increase
               1       Inv.      Ap
                             > 	  -»•  profit margin will decline
            (1-t)    D + E       p

              1         Inv.      Ap
            (i-t)  'D + E       p
profit margin will increase
Return on Stockholders' Equity and Return on Investment
        profits after taxes         1
     if	 =  	                                           (i
            D + E           ROI rate                                           v

then the two assumptions will give us the same price increase.
                                     Base Data

     Annual operating costs due to pollution control equipment were calculated  in the
following manner: Annual operating and maintenance costs were established for each of the
plants in our survey by adjusting the tentative cost estimates given to us in the effluent
guidelines development document. Depreciation is straight line over a period of five years.
The new investments in pollution control equipment are financed by debt and equity. The
ratio of debt to equity was determined by the present debt to capitalization ratios of the
companies  that own these  plants. Interest  costs are 10%  per  year on  that portion of the
investment financed by debt.

                                         32

-------
     The base price for  the various synthetic rubbers is based on U.S. Tariff Commission
prices, industry  source information, and the contractor's own internal data. Most of these
prices are substantially  below list price because  the contractor has taken in  account the
discounts given by manufacturers. Also, substantial quantities of many synthetic rubbers are
sold, not on the open market, but internally within the large tire and rubber manufacturers.

     The average price of tires (passenger, truck  and bus) was established using Bureau of
Domestic Commerce data industry sources and estimates. The unit value of a passenger tire
in 1972 was $14.43 whereas the average price of all tires was $21.24.

     Tables 12  through  15  on the following pages summarize product sales, B.P.T., B.A.T.
and B.P.T.  + B.A.T. investment and annual costs  for the various industry segments studied
in this report. The last two columns of these tables indicate what the expected annual costs
as a percentage of sales  will be both for each segment on average, and the range of this ratio
for plants in each segment.

     Tables 16,  17, and  18 summarize investment and  annual  costs as a percent of sales for
various synthetic rubber  and tire companies both for B.P.T. and B.A.T. pollution abatement
levels.

                                     Price Effects

     The range of calculated  price increases by plant for each of the rubber types and for
tires  is  given  in Tables 19 and 20. This range is based not only on the effluent guideline
document figures, but also on the amount each plant has already invested  to  attain B.P.T.
pollution standards. The probable price  increase for  each rubber  type and for tires  was
computed  by  taking into consideration the  range of possible price increases, the relative
position  of the various plants  and companies within the industry, whether or  not there are
any price leaders, and the relative growth of this industry as well as  its market position
vis-a-vis other rubber types and imports.

     Our unit price increases  were  calculated using formula (5) in  the  methodology. Unit
cost  increases have been summarized in Tables 12 through 15. The term Inv/D+E (pre-tax
profit margin) varied between 0.1  and  0.3% for synthetic rubber manufacturers  and between
0.06 and 0.44% for tire and tube manufacturers.

     The price increases  that could be expected to attain B.A.T. pollution control standards
for the  synthetic rubbers are  based  on 1972 prices. They were computed by taking into
consideration the incremental  annual  costs over and above B.P.T. costs. However, by 1983,
companies  will have fully depreciated their 1977 pollution control equipment. This is the
basic reason for which we find  in Table 19 that the price increases due to attaining B.A.T.
standards will not be higher than those necessitated for attaining B.P.T. standards.
                                          33

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U)
                                                                                TABLE 12

                                                                               B.P.T. COSTS
                                                                  (based on effluent guideline document data)
Product
Butyl
E.P.D.M.
Neoprene
Nitrile
Polybutadiene
Polyisoprene
S.B.R.
Tires & Tubes
No. of Plants
Process in U.S.A.
solution
solution
emulsion
emulsion & (
latex \
emulsion
solution
solution
emulsion & (
solution i
-
3
5
3
9
1
6
2
11
56
No. of Plants
in Sample
3
5
3
8
if
2
11
48
Total
Investment
( millions of $)
3.0
3.5
4.0
4.5
6.8
1.4
19.5
35.2
Average
Investment
per Plant
1.0
0.7
1.3
0.6
1.0
0.7
1.8
0.7
Total
Annualized
Costs
( millions of $)
0.950
1.100
1.300
1.500
2.400
0.470
7.400
14.400
Average
Annualized
Cost per
Plant
0.320
0.220
0.430
0.210
0.340
0.230
0.670
0.300
Total
Product Sales
(millions of $)
72
90
142
93
144
51
406
5,069
Total
Annualized Costs/ Plants Range
Total Sales (%) (%'s)
1.3
1.2
0.9
1.6
1.7
0.9
1.8
0.3
1.2-1.5
0.7-1.5
0.7-1 .2
0.5-2.4
1.2-2.2
0.9
1.3-4.7
0.2-0.5

-------
           TABLE 13

          B.P.T. COSTS
(band on industry incremental costs!
Product
Butyl
E.P.D.M.
Neoprene
Nitrile
Polybutadiene
Polyisoprene
S.8.R.
Tires & Tubes
No. of Plants
Process in US.A.
solution
solution
emulsion
emulsion & /
latex (
emulsion
solution
solution
emulsion & (
solution (
-
3
5
3
9
1
6
2
11
56
No. of Plants
in Sample
2
5
3
8
l\
2
10
40
Total
Investment
(millions of $)
2.7
2.1
4.30
2.6
1.8
0.4
8.6
31.5
Average
Investment
per Plant
1.3
0.4
1.4
0.3
0.3
0.2
0.9
0.8
Total
Annualized
Costs
(millions of $)
0.850
0.730
1.600
0.840
0.700
0.170
3.050
12.560
Average
Annualized
Cost per
Plant
0.430
0.150
0.530
0.110
0.120
0.090
0.310
0.310
Total Total
Product Sales Annualized Costs/ Plants Range
(millions of $) Total Sales (%) (%'s)
53
90
142
93
121
51
386
4,681
1.6
0.8
1.1
0.9
0.6
0.3
0.8
0.3
1.2-2.3
0 -2.1
0.3-1.5
0 -3.5
0 -1.4
0 -0.7
0 -7.4
0.2-0.4

-------
ON
                                                                               TABLE 14

                                                                              B.A.T. COSTS
                                                                    (based on effluent guideline document data)
No. of Plants
Product in U.S.A.
Butyl
E.P.D.M.
Neoprene
Nitrile
Polybutadiene
Polyisoprene
SBR
Tires & Tubes
3
5
3
9
7
2
11

No. of Plants
in Sample
3
5
3
8
7
2
11

Total Average
Total Average Annualized Annualized Total Total
Investment Investment Costs Cost per Product Sales Annualized Costs/ Plants Range
(millions of $) per Plant (millions of $) Plant (millions of $) Total Sales (%) (%'s)
1.4
1.6
2.0
1.1
3.2
0.6
10.2

0.5
0.3
0.7
0.1
0.5
0.3
0.9
B.A.T. standards are
0.610
0.580
0.750
0.700
1.500
0.300
4.000
the same as B.P
0.200
0.120
0.250
0.090
0.210
0.150
0.360
.T. standards
72
90
142
93
144
51
406

0.9
0.6
0.5
0.8
1.0
0.6
1.0

0.7-1.0
0.4-0.9
0.4-0.7
0.2-1.1
OB-1.5
0.6
0.5-2.6


-------
         TABLE 15

        B.P.T. COSTS
      (industry response)
            AND
        B.A.T. COSTS
(effluent guideline document data)
No. of Plants
Product in U.S.A.
Butyl
E.P.D.M.
Neoprene
Nitrile
Polybutadiene
Polyisoprene
SBR
Tires & Tubes
3
5
3
9
7
2
11

No. of Plants
in Sample
2
5
3
8
6
2
10

Total
Total Average Annualized
Investment Investment Costs
(millions of $) per Plant (millions of $)
3.6
3.7
6.4
3.6
4.4
1.0
IBS

1.8
0.7
2.1
0.5
0.7
0.5
1.9
B.A.T. standards are
0.740
1.010
1.700
1.120
1.600
0.330
5.000
the same as
Average
Annualized Total Total
Cost per Product Sales Annualized Costs/ Plants Range
Plant (millions of $) Total Sales (%) (%'s)
0.370
0.200
0.570
0.140
0.270
0.150
0.500
B.P.T. standards
53
90
142
93
121
51
386

1.4
1.1
1.2
1.2
1.3
0.6
1.3

1.2-1.7
0.4-1.4
1.1-1.4
0.2-2.4
0.9-1.9
0.6-0.7
0.5-4.7


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                                  TABLE 16

                        SYNTHETIC RUBBER COMPANIES

                  Investment as a Percent of Sales     Annual Costs as a Percent of Sales
Company*
1
2
3
4
5
6
7
8
9
10
11
12
B.P.T.
9.9
3.0
5.1
2.2
3.0
4.3
1.7
0.8
0.4
0
0
0
B.A.T.
2.5
1.4
1.8
1.6
2.6
2.5
2.1
2.5
2.7
3.1
2.4
3.3
B.P.T,
3.1
0.6
1.7
0.7
1.1
2.1
1.0
0.3
0.1
0
0
0
B.A.T.
1.2
0.3
0.8
1.2
1.1
1.0
1.0
1.2
1.1
0.7
0.5
1.3
'Ranked by size of B.P.T. investment.
                                  TABLE 17

                         TIRES AND TUBES COMPANIES

                   Company     Investment/Sales      Cost/Sales

                        I            0.7               0.2
                       II            0.8               0.2
                      III            1.0               0.3
                      IV            1.3               0.4
                       V            0.5               0.2
                                     38

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                                        TABLE 18
                        SYNTHETIC RUBBER + TIRES AND TUBES
Company

   A
   B
   C
   D
   E
   F
   G
   H
   I
   J
   K
   L
    B.P.T.
 Investment
(millions of $)

     13.6
     12.6
     10.0
      6.0
      5.7
      4.1
      3.5
      2.0
      1.5
      0.3
      0.2
      0
     B.P.T.
Investment/Sales

     0.9
     1.0
     0.9
     1.2
     0.8
     3.0
     5.1
     4.3
     1.7
     0.8
     0.4
     0
    B.A.T.
Investment/Sales

     0.2
     0.2
     0.1
     0.2
     0.4
     1.4
     1.8
     2.5
     2.1
     2.5
     2.7
     2.4
  B.P.T.
  Annual
Cost/Sales

   0.3
   0.3
   0.4
   0.3
   0.2
   0.6
   1.7
   2.1
   1.0
   0.27
   0.1
   0
  B.A.T.
  Annual
Cost/Sale*

   0.1
   0.1
   0.1
   0.1
   0.2
   0.3
   0.8
   1.0
   1.0
   1.2
   1.1
   0.5
                  Range1
                                        TABLE 19

                             SYNTHETIC RUBBER (SIC 2822)
Price
B.P.T.
Probable Effect
<1.2%
<0.5%
1%-1.5%
<0.6%
1%-1.5%
<0.6%
<0.8%
Effects

Range1
0-1.6%
0-1.6%
0-1.7%
0-2.5%
0-2.0%
0-0.8%
0-4.7%
Other Effects
B.A.T.
Probable Effect
<1.2%
<0.5%
1%-1.5%
<0.6%
1%-1.5%
<0.6%
<0.8%
Price Effect
on Tires

No


Yes
No2
Yes
Plant
Shutdown
None
None
None
None
None
None
None
  Butyl
  E.P.D.M.
  Neoprene
  Nitrile
  Polybutadiene
  Polyisoprene
  S.B.R. Crumb
  1. Based on E.P.A. tentative costs and industry response.
  2. Polyisoprene competes with natural rubber, the price of which can be expected to be higher
    in the U.S.A. than that of polyisoprene in the coming 5 years.
                                           39

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                                      TABLE 20

                          TIRES AND INNER TUBES (SIC 3011)


                       Price Effects                            Other Effects
    Based on Revised   Based on Industry     Probable       Plant
      E.P.A. Figures       Response         Effect      Shutdown          Other

      0.3-0.6%         0.45-0.6%        <0.45%        None      Lowering of profit
                                                                margins of small tire
                                                                manufacturers rela-
                                                                tive to the large inte-
                                                                grated companies


                                   Secondary Effects
     Synthetic Rubber Industry (SIC #2822).  We do not consider that there will be any
major changes in this industry  because  of the  small  changes in  the relative prices of the
synthetic rubbers. However, synthetic rubbers are a major component of tires (SIC #3011),
and  therefore  we expect that  tires  will increase in  price not only because  of the costs
incurred in controlling the pollution of tire plants, but also because of the increased cost in
synthetic rubbers due to pollution control.

     If the rubber content of a  tire is approximately 25 percent of the total value of a tire
then we can expect a 1 percent increase in rubber raw material cost and therefore a tire cost
increase of 0.25 percent.

     Tire and Tube  Industry  (SIC #3011). Within the tire  industry there may be certain
small changes. Because of plant size, age and already existing pollution abatement equip-
ment, the large companies will increase their  prices relatively less than the small companies
would like  to increase their prices. In other words, the profitability of the smaller firms will
decrease relative  to  the larger firms.  (It should  be noted that this effect is not due  to our
method of calculating price increases: in  equation 5, the term "Investment Over Debt plus
Equity," was held constant and equal  to 0.02 for all tire plants.)

                      Financial Effects (SIC #2822 and SIC #3011)

     If prices  are raised in order to maintain the return on equity  for the various companies
and  plants, there should  not  be any major financial  effects for  the industry  as  a whole.
However, certain of  the smaller firms Would like to raise their prices more than their larger
competitors would. In other words, their profit margins will decrease as compared to that of
their competitors.   In the long run this could  slightly change  the  structure  of these
industries.
                                          40

-------
     Capital Availability.  Of all the companies that we  interviewed for this  study, we
consider that there is only one  that could have problems raising the necessary capital in
order to meet pollution guidelines. However,  we feel that  this company  will be  in a much
stronger financial position by 1976 and that it should not have  any  problems at that time.
Our survey covered all the major tire manufacturers. It is possible that some of the smaller
companies will have capital availability problems.

                               Production Curtailment

     Synthetic Rubber.  We do not expect to  see any production curtailment in  any  of the
synthetic rubber plants because of the new guidelines.

     Tires and Tubes.  Many  tire manufacturers  feel that  they  would have  to shut down
their plants temporarily in order to segregate their process effluent lines from their other
effluent lines. We have no way of evaluating the validity of these statements nor what their
true economic consequences may be.

                                   Plant Closings
     Synthetic Rubber (SIC #2822). On the basis of our data and industry response we do
not expect any plant to be closed down.

     Tires and Tubes (SIC #3011).  On  the basis of our data and industry response we do
not expect any plant to be closed down.

                                Community Impacts

     Synthetic Rubber (SIC #2822).  None

     Tires and Tubes (SIC #3011).  If plants have to be temporarily shut down to segregate
process effluent lines from other lines, there would probably be lay-offs of workers in the
plants thus affected. It is presently impossible to evaluate such effects.

                     Industry Growth (SIC #2822 and SIC #3011)

     We do  not feel that the economic effects of the  B.P.T. or of the B.A.T.,  N.S.P.S.
guidelines will adversely affect the growth  or the growth potential of either the synthetic
rubber or the tire  industries. Industry  spokesmen have said  that  their plant  expansion
decisions will not be affected by the new guidelines.

                International Trade Effects (SIC #2822 and SIC #3011)

     The recent devaluations of the U.S. dollar have made U.S. produced tires and synthetic
rubbers much more competitive on the international scene.  The relatively small  increase in
                                         41

-------
prices required to meet pollution guidelines should hardly change this position. The price of
natural  rubber imported into the United States has increased substantially more  than, for
instance,  polyisoprene, its  synthetic substitute.  Even if there  were  large surpluses  of
synthetic  rubbers in other countries, it is doubtful that foreign manufacturers could dump
their products on the U.S. market at a competitive price given the recent U.S. devaluations.
However,  we must  qualify these statements by saying it  is impossible to  know  what the
position of the United  States  dollar will  be in 1977 and  thereafter  relative  to other
currencies.

                                Limits of the Analysis

     When interpreting the findings of this study, it is important to be aware of the nature
and  limitations of  the cost  data  specifically as regards  B.P.T. guidelines  and  the key
assumptions which were used.

     The investment costs of pollution control equipment were defined to include the direct
incremental investment required  to  attain environmental standards. The operating costs for
pollution control equipment were defined to be incremental costs.

     The establishment of the pollution standards  as well as the determination  of the cost
basis  for  investment and operating costs was provided  to  us in  the  effluent  guideline
development document. In the appendix to our report we have listed the cost data as well as
the scale-up factors we used  in estimating the investment and operating costs for  plants with
capacities  other than those on which the data is based. Additional data input to our study
was provided through field  interviews with and questionnaires to industry  representatives.
This data was used to supplement the information.

     Only  water pollution abatement  costs associated with Federal standards were  con-
sidered; and these costs were assumed to be independent of air and solid waste control
requirements.

     The  calculated  price effects on the various rubber types and  tires of the pollution
guidelines (B.A.T. and B.P.T.) are maximum expected price increases. Certain companies
and certain plants already meet B.P.T.  guidelines. Because of this, they may not increase
their prices at all. And other companies within the industry may follow suit.
                                        42

-------
                                   APPENDIX A

          ESTIMATION OF PLANT COSTS FOR EFFLUENT GUIDELINES
     The typical plant costs given in the effluent guidelines development document do not
provide any information indicating how the costs vary as a function of treatment facility
capacity. At the recommendation of Dr. David Day of Roy F. Weston, Inc., we utilized the
data provided in the "Development Document  for  Effluent Limitations Guidelines and
Standards of Performance for the Organic Chemicals  Industry, Supplemental  Data." The
pollution control technology described in this document was considered to be  comparable
to that utilized in treating the wastes of the rubber processing industry.

     In Figures  6 and  7 are plotted the appropriate data points given  in  the organic
chemicals document. Figure 6 shows that a curve generated according to the equation


     CapitalCostofPlantX = CaPitalCostofBasePlant  x  [   Waste water flow  of Plant X "I 0.5
                                                      I Waste water flow of Base PlantJ
(where X designates an unknown plant) correlates very well with the actual data.

     Likewise, Figure 7 shows that the operating, maintenance, and power costs (designated
as "Operating Costs" in the figure) vary as a function of capacity according to

         Operating,             Operating,
         Maintenance, and       Maintenance, and
         Power Costs of     =   Power Costs of    x I" Waste water flow of Plant X "10.58
         Plant X                Base Plant           [Waste water flow of Base Plant]

     Although specific categories of treatment were chosen for the purposes of illustration
in these figures, the equations described  above were found to apply for all the categories in
the organic chemicals document, and were found to provide reasonable cost estimates for
the rubber processing industries.  Therefore, the Contractor used these  relationships for
generating pollution control costs for specific plants.
                                       43

-------
2.5



•;2.0
03
"o
Q
"o
£ 1.5
o
'—
rf
S1.0
ra
"5.
03
0.5
0 0
0 Data Points from "Supplemental Data for Organic
Chemicals Guidelines," Roy F. Weston, Inc.
A Data Point Representing "Typical" Emulsion ^,
Polymerization Plant from Supplement A of ^ 	
~ Development Document for Rubber .^^"^
Processing Industry „ 	 '
-, -^"^
^, ****^
, —
Q^^
jS* 1 Curve Generated According to
^ — ». ( Flow >j
0 ^ Capital Costs $1.410.000^ )
/ ^
. ' Selected
0X^ Data Base


o/
i i i i 1 i i i
0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6


. — '








0.5





I
1.8
             Flow, Millions of Gallons/Day
FIGURE 6   CAPITAL COST VERSUS WASTE WATER FLOW
                     44

-------
    60
    50
o
D
 T3
 |  30
 o
 H
6  20
d.
O
    10
           O  Data Points from "Supplemental Data
          for Organic Chemicals Guidelines,"
          Roy F. Weston, Inc.
                                          »•
               Selected v
               Data BaseX

                        -/
           0
            /
               /*
                Curve Generated According to
                  t
                            i
                                     i
                 0.2       0.4       0.6
                Flow, Millions of Gallons/Day
FIGURE 7   B.P.T. - YEARLY OPERATIONAL COSTS VERSUS
            WASTE WATER FLOW
                          45

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                                  APPENDIX B

                SAMPLE CALCULATION OF SYNTHETIC RUBBER
                      PLANT POLLUTION CONTROL COSTS

    The annual B.P.T. pollution control costs,  for example, of a plant with the hypotheti-
cal  production of  100,000  long  tons of emulsion crumb, 40,000 long tons of solution
crumb, and 8,000 long tons of latex are calculated as follows.

    Through reference to the  information summarized in Figures 2, 3. and 4, we would
generate

                                        B.P.T.               B.P.T. Operating,
                                      Investment        Maintenance & Power Costs

100,000 It       Emulsion crumb        $1X,760,000               $215,000
  8,000 It       Latex                    570,000                 53,000
     And these would be the cost estimates of each if these effluent streams were to be fully
treated independently. However, we assume that after pretreatment to chemically coagulate
the suspended rubber  in these  streams they are  then combined with the effluent stream
from the solution crumb operation (which does not have to be  chemically coagulated) for
further treatment - thus benefitting from  the economies inherent in treating the combined
effluents. Thus, instead of sizing the solution crumb waste treatment facility to handle the
effluent represented by 40,000 long tons of production,  we  size  it to handle the load
represented by 100,000 + 8,000 + 40,000 = 148,000 long tons.

     From Figure 3 we find the costs associated with such a facility are

                                       Operating, Maintenance,
                Investment                and Power Costs

                 $1,780,000                 $180,000

We then apportion the various costs developed above according to actual effluent load, as
follows:

                        100,000                  40,000
Total Plant Investment  = - x  $1,760,000 + TTT    $1,780,000
                           Emulsion Crumb         Solution Crumb
                              Treatment              Treatment
                          8,000
                            Latex Treatment
                      -  $1,700,000
                                       46

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     Likewise,

     Total Operating, Maintenance, and Power Costs (O.M.P.) =


         1J}_01OC)CL   x   $215,000   +	   x  $180,000
         148,000                    148,000

                             x   $53,000  =  $197,000
                   148,000

    A comparison of the costs generated by this technique with those generated by assuming
that each of the effluent streams at the plant are treated in separate facilities is given below:

                  Cost Apportionment by Assuming    Cost Apportionment by Assuming
                    Combined Effluent Treatment           Separate Treatment
Investment
$1,190,000
480,000
30,800
O.M.P.
$145,000
49,000
2,900
Investment
$1,760,000
935,000
570,000
O.M.P.
$215,000
85,000
53,000
Emulsion crumb
Solution crumb
Latex
Total Plant Cost   $1,700,800        $196,900       $3,265,000        $353,000
     On the basis of our discussions with industry spokesmen, our assumption of the use of
combined treatment is valid, and, as a consequence, we believe our cost estimates based on
this assumption are more accurate indications of the costs that will actually be incurred.
                                          47

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                             SBR - LATEX
                            Addendum to the
                         ECONOMIC ANALYSIS
                                  OF
                  PROPOSED EFFLUENT GUIDELINES
                 THE RUBBER PROCESSING INDUSTRY

                            INTRODUCTION

     In the preliminary review of information available on the various synthetic
rubbers, the Contractor contended that one segment -  SBR - could not be
evaluated in a valid fashion. SBR latex represents about 9% of the SBR produced.
Production is so small,  and prices, profitability and outlook  are so difficult to
estimate that the Contractor deleted SBR latex in the main report.

     In the course of  his work, the Contractor  did, however, gather  some
information on SBR latex, information  which is presented in this addendum to
the "Economic Analysis of Proposed  Guidelines - Rubber Processing Industry,
September 1973, EPA - 230 - 1 - 73 - 024."

                            TECHNOLOGY

     SBR latex, a copolymer of styrene and butadiene, is produced by the same
polymerization process used in the manufacture of SBR crumb rubber. The steps
required to produce a  latex  are polymerization followed by stabilization and
usually concentration.

                 PLANT LOCATIONS, SIZES AND AGES

     Fifteen companies  presently produce SBR latex  in 23 plants located  in 14
different states. The production capacity of the 12 plants  for which this data is
available ranges from 5,000 to  35,000 long tons per year.

     Plants vary widely in age. The older plants date from World War II; the  latest
plant was built in 1972.

                                USES

     SBR latex is  used primarily  in carpet backing,  dipped  rubber goods and
adhesives.

     Approximately 15% of the 1972 U.S. production (158,000  long tons) was
exported.
                                                                  Arthur D little hie

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     The projected growth  for SBR latex is less than that of most other latices
and  is expected  to  be less  than  4% per year through 1975 (Chemical and
Engineering News, 8/21/72).

                      PRICE AND OTHER EFFECTS

     Most latex plants belong to large corporations and are but small contributors
to overall profits. Because of the lack of data on the SBR industry, the Contractor
is not able to make good predictions of how pollution abatement costs will affect
this segment of the synthetic rubber industry.

     In the following tables he has, however, shown the available data in a fashion
consistent with that in  the main body  of the report. The Contractor believes that
the  conclusions in the main  report also apply to SBR latex,  although further
study would be necessary to validate this opinion.
                                                                      Arthur D Little, Inc

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I
D
*•+"
«•*•
ft
R
                                                                     EXHIBIT 1: COSTS OF PROPOSED EFFLUENT GUIDELINES
                                                                                           EXHIBIT 1:  COSTS OF PROPOSED EFFLUENT GUIDELINES
                   Product     Process
                    S.B.R.       Latex
No. of Plants      No of Plants
                                                23
                                                                             Simple Plants
                                                                            Production as a %
                                                                             of 1972 Totil
                                                                               Production
                                                                                  70%
    Total
 Investment
(millions of $)
 Average
Investment
 per Plant
    Total
 Annualized
    Costs
(millions of $)
                                                                                                                 Bf.T. Costs
                                                                                                    (band on effluent guideline document data)
                                                                                                      3.6
                                                                                                                     06
                                                                                                                                    1 21
  Average
Annualized
 Coitper
   Plants
                                                                                                                                                    020
Product Sales
ImiMiom of t)
                                                                                                                                                                   373
      Total         Plant
Annuitized Costs/     Range
 Total Sales <%)       (%'s)
                                                                                                                                                                                      32
                                                                                                                                                                                                   1552
                    S.B.R.       Latex
                                                23
                                                                                  38%
                                                                                                                 B.P T. Costs
                                                                                                       (based on industry incremental costs)
                                                                                                      1 0
                                                                                                                     03
                                                                                                                                    038
                                                                                                                                                    013
                                                                                                                                                                   202
                                                                                                                                                                                      19
                                                                                                                                                                                                    05.2
                    S.B.R.       Latex
                    S B.R.       Latex
                                                23
                                                23
                                                                                  70%
                                                                                  38%
                B.A.T. Costs
       (based on effluent guideline data)

     18             03             0.56

                B.P.T. Costs
             (industry response)
                   and
                B.A.T. Costs
         (effluent guideline document)

     1 4             0.5              41
                                                                                                                                                    0.19
                                                                                                                                                      14
                                                                                                                                                                   373
                                                                                                                                                                   202
                                                                                                                                                                                      1 5
                                                                                                                                                                                      20
                                                                                                                                                                                                   0424
                                                                                                                                                                                                   0448

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             EXHIBIT 2:  PRICE EFFECTS1


     B.P.T.                        B.A.T.
Range2    Probable Effect     Range2     Probable Effect
                                                   5

0-5.4          <2.1          0.6-5.0         <2.2
1.  The validity of these price effects is limited due to the small
   size (3) of the sample.

2.  Based on  E.P.A. tentative costs and industry response.
                                                                  Arthur D Little Inc

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j   II ( IINKAI  Kl POR'I
1      DA'I A I'ACI
                          1  Ucport No.
                            EPA-230-1 -73-024
  4  I ilk- .iiul Subtitle
     Economic Analysis of Proposed Effluent Guidelines -
     The Rubber Processing Industry
Aiilhoils)
John T. Howarth    John A. Carter
                                           Kenneth R. Sidman
  ')  I'lMhinnmg Organization Name anil Address
     Arthur D. Little, Inc.
     Acorn Park
     Cambridge, Mass. 02140
  I J  Sponsoring Oigani/alion Name and Addres
     Office of Planning and Evaluation
     Environmental Protection Agency
     Washington, D.C. 20460
                                                                                3. Recipient's Accession No.
                                                                                5. Report Dale
                                                                                  September 1973
                                                                                     6.
                                                                                     8. Performing Organization Rept No.
                                                                                        C-75903
                                                                                10. Project/Task/Work Unit No.
                                                                                   Task Order No. 3
                                                                                11. Contract/Grant No.

                                                                                   68-01-1541
                                                                                13. Type of Report & Period Covered

                                                                                   Final
                                                                                14
  I *>  Supplementary Notes
   Id  Abstracts
    An initial analysis of the economic impact of proposed water effluent guidelines upon the Rubber Processing Industry
    (SIC #2822 and SIC #3011) was performed, based on the abatement cost data supplied by EPA. On this basis, with better
    than 88% coverage of the industry, none of  the plants appears to be severely affected in  meeting either the B.P.T. or
    B.A.T. requirements.  For the Synthetic Rubber segment, capital investment for pollution control will be an estimated $23
    million through 1977, and $10 million from 1977 through  1983. Annual operating costs will  be $8 million higher through
    1977,  and $4 million higher from 1977 through 1983. The Tire and Tube segment will meet both B.A.T. and B.P.T. in one
    step; investment will be an estimated $32 million, and annual operating costs will be roughly $13 million higher through
    1977.  The impact on  prices will be no greater than 1.5% for B.P.T. and B.A.T. for the Synthetic Rubber segment,  and
    about 0.45% for the Tire and Tube segment.
   17. Key Words and Document Analysis.
      Economic Analysis
      Effluent Guidelines
      Rubber Processing Industry
      Synthetic Rubber
      Tires and Tubes
  17b. Identificrs/Open-Knded Terms
                                17a. Descriptors
   I7c COSATI Held/Croup
   IS. Availability Statement
                                                                19. Securitj Class (This
                                                                   Report)
                                                                    IINCI.ASSIHM)
                                                                     2(1. Security ( lass ( This
                                                                        Paw)
                                                                         UNCLASSiril  I)
21.  No of Pane
                                                                                          2:  Price
  I ORM NT1S 35 (Rl V. 3-72)
                                                                                                USCOMM-IX' 1495 2-l'7 2

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