EPA-23D/l-74-03o
JULY 1974
          ECONOMIC ANALYSIS
                  OF
     PROPOSED EFFLUENT GUIDELINES

      THE ASBESTOS  PRODUCT
     MANUFACTURING  INDUSTRY
                  QUANTITY
      U.S. ENVIRONMENTAL PROTECTION AGENCY
          Office of Planning and Evaluation
             Washington, D.C. 20460
                 3)

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              ECONOMIC ANALYSIS
                     OF
         PROPOSED EFFLUENT GUIDELINES

THE ASBESTOS PRODUCTS MANUFACTURING INDUSTRY


                  Report to


    U.S. ENVIRONMENTAL PROTECTION AGENCY


                  July 1974
             ;,cj. Protection


             'Vh^is  6060H

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This report has been reviewed by the 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.
         PPOTECTION AGENCY

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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 re-
           sult from the application of alternative effluent limitation guidelines
           and standards of performance to be established under sections 304 (b) and
           306 of the Federal Water Pollution Control Act, as amended.

                The study supplements the technical study ("EPA Development Document")
           supporting the issuance of proposed regulations under sections 304(b) and
           306.  The Development Document surveys existing and potential waste treat-
           ment control methods and technology within particular industrial source
           categories and supports promulgation of certain effluent limitation guide-
           lines and standards of performance based upon an analysis of the feasibil-
           ity of these guidelines and standards in accordance with the requirements
           of sections 304(b) and 306 of the Act.  Presented in the Development Docu-
           ment are the investment and operating costs associated with various alterna-
 """"*         tive control and treatment technologies.  The attached document supplements
          Lied viability of affected plants, effects upon foreign trade and other
rxj         competitive effects.

\TJ              The study has been prepared with the supervision and review of the
;x         Office of Planning and Evaluation of EPA.  This report was submitted in
 3         fulfillment of Contract No. 68-01-1541, Task Order No. 18, by Arthur D.
           Little,  Inc.  Work was completed as of June 24, 1974.

                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 in-
           formation 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 pro-
           ceeding 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.
                                              m

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                            TABLE OF CONTENTS

                                                                    Page

PREFACE                                                              111

LIST OF TABLES                                                        vi

LIST OF FIGURES                                                       vi

EXECUTIVE SUMMARY                                                    vii


PART I:  INDUSTRY STRUCTURE

         A:  ASBESTOS TEXTILES                                        1

             A-l:  MANUFACTURING PROCESS AND TECHNOLOGY               1
             A-2:  FIRMS                                              1
             A-3:  PLANTS                                             3
             A-4:  EMPLOYMENT                                         5
             A-5:  PRODUCTION                                         5
             A-6:  WATER UTILIZATION AND DISCHARGE                    6
             A-7:  FINANCIAL PROFILE                                  6

                   1.  Manufacturing Economics                        6
                   2.  Salvage Values of Assets and Constraints
                       on Financing Additional Capital  Assets         7

             A-8:  PRICES                                             8

         B:  ASBESTOS FRICTION MATERIALS                             10

             8-1:  MANUFACTURING PROCESSES AND TECHNOLOGIES          10
             B-2:  FIRMS                                             12
             B-3:  PRODUCTION                                        12
             B-4:  EMPLOYMENT                                        16
             8-5:  PLANTS                                            16
             8-6:  WATER UTILIZATION AND DISCHARGE                   16
             B-7:  FINANCIAL PROFILE                                 16

                   1.  Manufacturing Economics                       16
                   2.  Prices                                        18

         C:  ASBESTOS GASKETS, PACKING AND INSULATING MATERIALS      20

             C-l:  FIRMS                                             20
             C-2:  PLANTS                                            20
             C-3:  WATER UTILIZATION AND DISCHARGE                   22
             C-4:  FINANCIAL PROFILE                                 22

                   1.  Manufacturing Economics                       22
                   2.  Prices                                        23

                                     iv

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                       TABLE OF CONTENTS (Continued)
PART II:   EFFLUENT CONTROL COSTS

           II-A:  WATER UTILIZATION AND DISCHARGE                     24
           II-B:  CURRENT EFFLUENT TREATMENT PRACTICES                25
           II-C:  PROPOSED EFFLUENT STANDARDS AND TREATMENT TECH
                  TECHNOLOGIES                                        26
           II-D:  EFFLUENT CONTROL COSTS                              31

                  1.  Capital  Investments fof Representative Sources  31
                  2.  Annual Costs for Representative Sources         31
                  3.  Costs to Operating Plants                       31


PART III:  ECONOMIC IMPACT ANALYSIS

           III-A: METHODOLOGY                                         36
           III-B: ECONOMIC IMPACT ANALYSIS                            37

                  1.  Financial Impact                                3^
                  2.  Price Effects                                   39
                  3.  Production, Employment, Community, and Other
                      Effects                                         41
                  4.  Impacts of NSP Standards                        41
                  5.  General                                          41
PART IV:   LIMITS OF ANALYSIS

           LIMITS OF ANALYSIS                                         43

           ASBESTOS TEXTILES MANUFACTURING:  SUMMARY OF ECONOMIC
                  IMPACT                                              44

           FRICTION MATERIALS MANUFACTURING:  SUMMARY OF ECONOMIC
                  IMPACT                                              45

           GASKETS/PACKING/SEALING DEVICES MANUFACTURING:  SUMMARY
                  OF ECONOMIC IMPACT                                  46

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                             LIST OF TABLES

Table
 No.                                                                Page
-^— — ^^— —         t                                                        f~f ____

 A-l     U.S. Asbestos Textiles Manufacturing Firms and Plants        2

 B-2     Trend in Value of Shipments of Asbestos Friction
         Materials                                                   11

 B-3     U.S. Manufacturers of Asbestos-Bearing Friction Materials   13

 B-4     Estimates of Distribution of 1973 Sales of Asbestos
         Friction Materials by the Major Manufacturing Companies     15

 C-5     Major U.S. Manufacturers of Asbestos Gaskets, Packings,
         and Insulations                                             21
 D-6     Description of Effluent Sources in Asbestos Products .
         Manufacturing                                               25

 D-7     Proposed Effluent Quality Standards for BPT, BAT, and
         NSP Standards                                               27

 D-8     Effluent Treatment Technologies for Attaining the
         Proposed Standards                                          29

 D-9     Effluent Generation Rates from Representative Source
         Categories                                                  30

0-10     Capital Investment Estimates for Effluent Source
         Categories (Representative Sources)                         32

D-11     Annual Costs for Representative Sources of Asbestos
         Manufacturing Effluents                                     33

D-12     Cepitsl Investments Required by Effluent-Discharging
         Plants                                                      34

D-7 3     Annual Ccsts Incurred by Effluent-Discharging Plants        34

D-14     Annual Costs of Achieving BPT Standards as Function of
         Sales of Relevant Products                                  38

D-15     Annual Costs of Achieving BAT Standards as Function of
         Sa!"5s of Relevant ^roducts                                  38

0-16     Impact of Proposed Guidelines on Return on Investment       40


                             LIST OF FIGURES

Figure
 No-                                                                Page

 A-l     Geographical Distribution of U.S. Asbestos Textile
         Manufacturing Plants                                         4

 B-2     Geographical Dispersion of U.S. Friction Materials
         Plants                                                      17
                                    VI

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                           EXECUTIVE SUMMARY
     The potential economic impact on the asbestos textiles,  friction ma-
terials, and gaskets/packings/sealing devices segments of the asbestos
products manufacturing industry were assessed on the basis of effluent
treatment technologies and the corresponding incremental  costs presented
in the relevant Draft Development Document for Proposed Effluent Limita-
tions Guidelines.  A survey conducted by an EPA-sponsored contractor pur-
suant to the preparation of the above document identified only nine man-
ufacturing facilities in the above segments of the industries that gen-
erated any disposable effluents.  Two of these plants are producers of as-
bestos textiles, one is involved in sheet gaskets manufacture, and six
plants manufacture friction products.  Both textile plants discharge their
effluents into municipal sewer systems, and two of the friction products
plants have no discharge into surface waters.  All four plants are ex-
cluded from consideration in this study since they are not covered by the
provisions of the proposed standards.

     With respect to the "Best Practicable Technology" (BPT)  standards,
only one sheet gaskets manufacturing plant is expected to incur additional
costs to comply with the guidelines.  Its incremental capital expenditures
(1973 dollars) are projected to be $80,000, and its "annualized" water
treatment costs amount to $35,500.  To meet the "Best Available Technol-
ogy" (BAT) standards, the above sheet gaskets and four friction materials
manufacturing plants are expected to incur total additional capital costs
of $632,900 and "annualized" water treatment costs of $139,200.

     In assessing the potential economic impact of the standards, the pri-
mary determinant of impact severity was taken to be the ratio of the in-
cremental "annualized" costs incurred by an effluent-discharging plant as
a percentage of its estimated annual sales of the base products.  A plant
was adjudged to be threatened with closure if the incremental annual ef-
fluent treatment costs approached the pre-tax profit margins  derived for
the various subcategories, i.e.:

           Asbestos textiles 	 5.8 percent
           Friction materials  	 6.0 percent
           Gaskets/packings/sealing devices  . .  11.0 percent

     On the basis of this criterion, none of the effluent-discharging
plants was judged to be in danger of production curtailment or plant
closure as a direct consequence of the proposed standards.

     While it is recognized that there are competitive materials on the
horizon which could substitute for the subject asbestos products in cer-
tain specialized applications, and while it is further recognized that,
with respect to friction materials, the existence of large captive manu-
facturers (the automotive companies) may tend to dampen price increases
by the non-captive producers, it is nevertheless concluded that these
price-moderating factors will not deter the passing-on of additional


                                   vii

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costs incurred by the industry segment due to the proposed standards.
Accordingly, a price increase on the order of 1  percent is deemed likely
in the friction materials sub-category as a result of the BAT standards.
No industry-wide price increases are expected to occur as a consequence
of the BPT standards.

     Furthermore, no adverse impacts are expected on the production and
market growth of the various sub-categories.  Similarly, the historical
balance of trades, with respect to the subject products, in favor of the
United States is expected to continue, unaffected by the proposed effluent
standards.

     The "New Source Performance" (NSP) standards involve very minimal
additional capital expenditures to a proposed new plant.  Accordingly,
these expenditures should not deter investments  in new facilities, and
neither are they considered a significant adverse factor in any decision
regarding the preferential location (domestic versus foreign) of a new
plant.
                                   VT11

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PART I:   INDUSTRY STRUCTURE
     A:   ASBESTOS TEXTILES
     B:   ASBESTOS FRICTION MATERIALS
     C:   ASBESTOS GASKETS/PACKINGS/INSULATIONS

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                        A:  ASBESTOS TEXTILES
     Asbestos textiles include asbestos-bearing yarn,  cord-,  thread,  cloth,
roving, Iap3 wick, ropes tapa, carded fibers,  etc.   It is estimated  that
about 3 percent of the 1972 U.S.  consumption of asbestos fibers,--a  total
of 792,000 short tans.,—went to textile? manufacturing.   Preliminary
1973 statistics indicate a total  fiber consumption  (for all  purposes)  of
8 to 10 percent above the 1972 level.  Assuming a yearly escalation  in
value of textilss shipments equivalent to about 8 percent (per year)
above the 1971 level of $38.2 mill ion, (which  accounts for both price  in-
flation and tha normal growth in  business level), 1973 shipments  could
then be prcdsctfid ?.t about $44.5  Kill lion.  By  comparison, 1967 and 1963
shipnsnt valwes noro 530,9 raillion  and $26 Dillon,  respectively.   It  is
probable ttet tlio ahove estimates sxclisde the  value  of interplant trans-
fers of textiles within the same  corporate organization, where the trans-
ferred material undergoes additional  processing for  transformation Into
other finls^d products such as friction materials.

A-l:  MANUFACTURING PROCESS AND TECHNOLOGY

     Textiles raanyfacture generally begins with rallied fibers which  are
delivered to vibrating screens where the fibers are  removed  and graded
by an air aspiration system.  Either in a preliminary  mixing process or
during carding tte separated fibers are blended with  organic fibers such
as cotton rayon, which act as carriers and supporting  agents for  the
shorter asbestos fibers, thus improving their  spinning characteristics.
The usual organic fiber content is  batween 20  and 25 percent.  The blended
fibers undergo an additional opening/cleaning  process  by the carding ma-
chine which combs the fibers into a parallel arrangement to  form  a co-
herent mat of material.  Strips ars separated  from the mat and mechani-
cally comprassed between oscillating surfaces  into untwisted strands
which are then wound onto spindles  to form the roving  from which  asbestos
textile yarn is made.

     Through tha twisting and polling operations performed by a spinning
machine, the relatively weak roving is transformed into a stronger yarn.
Asbestos twine or cord is produced  by twisting together two  or more  yarns
on a spinning frame.  Braided textile products are manufactured on various
types of pr.ckistj arcc! ^raiding machines.  Asbestos yarns are  woven into
fabric on looms that opertts similarly to those that produce conventional
cloth cpod?.

A-2:  FJ_RM5

     Listed in Table A-l ara the  major U.S. asbestos textile manufacturing
firms, their plant locations* and the estimated number of production em-
ployees involved in textiles manufacture at the respective plants.

     The firms listed probably account for 95  percent  of the nation's
shipments of asbastos textiles.  Furthermore,  the so-called  "Big  Three"

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                                 TABLE A-l
           U.S. ASBESTOS TEXTILES MANUFACTURING  FIRMS AND PLANTS
            Firm
Raybestos-Manhattan, Inc.
Southern Asbestos Company

Amatex Corporation

Uniroyal, Inc.
Un1royal Fiber & Textile Co.
Johns-Manville Corp.
Atlas Textile Co.
Asbestos Textile Co.
Asten-Hi 11 Mfg. Co.
Garlock, Inc.
Nicolet Industries, Inc.

          TOTAL
      Location

Mannheim, Pa.
Marshville, N.C.
N. Charleston, S.C.
Charlotte, N.C.
Bennettsville, S.C.
Meredith, N.H.
Norristown, Pa.
Hogansville, Ga.
Winnsboro, S.C.
Manville, N.J.
N. Wales, Pa.
N. Brookfield, Mass.
Philadelphia, Pa.
Palmyra, N.Y.
Ambler, Pa.
 Estimated Number of
Production Employees1'
          300
          200
          500
          300
          200
          200
          300
          300
          200
          150
          125
          100
          100
           75
           50
                               3,100
 Contractor's  Estimates

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of the in^?tr;v5"~Faybestos^anhattan, Inc.,  Southern Asbestos Company
(subsidiary of H.K. Porter, Inc.), and Amatax Corporation,  are probably
responsibls for 75 to 80 percent.

     Virtually all the firms listed in Table  A-l  munufacture other prod-
ucts in addition to textiles,   For instance.,  Raybestos-Manhattan is in-
volved in seven business lines,--friction materials,  engineered textiles,
rivets and rivet-setting machinery., rubber-covered rolls,  packing and
sealing products, reinforced plastics, and bowling balls.   For this firm,
asbestos textiles manufacture  is usually an intermediate step in its
production of ZQXQ Unas of friction and engineered textile products.
In generel 9 it; can be stated that for most of the firms involved in as-
bestos tc-xVHa manufacture, this product contributes  less  than 25 percent
of the arm;sl business; furthermore, there are indications  that this ratio
is declining KS the trend towards diversification into other more profit-
able non-.?,5r>estos products end manufacturing  intensifies.

     Wh"''ie most of the textile-producing firms utilize raw fiber not pro-
duced at f.beir own mines, three of the listed major firms  are integrated
backvards to varying degrees into fiber mining and mining, and as such,
consume some captive"!y-produced fibers.  Raybestos-Manhattan owns a par-
tial intorant (550,000 shares) in Cassiar Asbestos Corporation, Ltd., a
Canadian supplier of 1 one-length asbestos fiber,  with annual fiber produc-
tion capacity of about HG,Q09 tons.  H. K. Porter, the parent firm of
Southern Asbestos Company, owns about 75 percent  of the common stock of
Pacific Asbestos Corporation,  Coppsropolis, California, with a rated
fiber-producing capacity of about 50,000 tons per year,  Johns-Manville
is the worlds largest producer of asbestos fiber, with mines in Canada
and California.  Canadian Johns-Manville Company, Ltd., has a fiber-pro-
duction capacity of about 850,000 tons, and Coalinga  Asbestos Corporation,
in which •Johns-Many?'!"!e owns 80 percent interest, is  rated at about
15,000 tons of fiber per year.

A-3:  PLArlTS

     It can be observed from Table A-l that,  in general, an asbestos tex-
tile plant is ssrall in comparison with other  manufacturing facilities.
Of the 15 ^If.n'js 11 stod, orHy  five are thought, to employ 300 or more pro-
duction workers,   The remaining plants average only about 135 per plant,
Inclusive r-" other- salaried and supervisory/management personnel, an
average ?>,r!; vc-uU! etsoloy betv/een 200 and 250, with  annual sales on the
order of 1-6.5 million.

     Gecc^sphicaliy, all the major plants are located in the Northeastern,
Mid-Atlantic, and Southeastern states, (Figure A-l),  with significant
clusters around the Philadelphia and Charlotte, N.C.   areas.  It can be
surmised that their market perimeters are similarly limited to these re-
gions, and shipments to the Western states are probably few and far be-
tween.  The West is primarily  a consumer of finished  rather than inter-
mediate •'•}'*o<:!ucts s'ich as textiles.

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FIGURE A-l:  GEOGRAPHICAL DISTRIBUTION OF U.S.  ASBESTOS
             TEXTILE MANUFACTURING PLANTS

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     By all accounts, the asbestos textiles industry is very mature,  most
of the operating plants being over 50 yeprs old,  with equipments,  machin-
ery, and technology of the same age.   The Norristown, Pa.  plant of Amatex,
the Ambler, Pa, plant of Nicolet Industries, Southern Asbestos Company at
Bennettsvilles S.C. and Raybestos-Manhattan at Marshville, N,C. are prob-
ably the youngest crop of plants, and they average over 25 years of age.
All things being equal, it is expected that very  few, if any, new plants
will come on-stream in the next 5 to  10 years.  Similarly, no major tech-
nological breakthrough is anticipated that would  alter the general com-
plexion of the industry.

     As indicated previously., a number of the major plants manufacture
textiles for captive consumption at the same plant or another plant within
the same corporate family.  However,  where such internal consumption occurs,
it is generally restricted to the manufacture of  friction or packing ma-
terials.  For instance, Southern Asbestos Company's facilities in
Charlotte, N.C. and Bennettsville, S.C. are sources of raw materials for
friction material plants in Huntington, Indiana and Richmond, Ky.   Except
in cases of such internal consumption, most asbestos textile plants sell
their products to manufacturers of finished products that are resistant
to heat, fire, acids and mechanical abrasion.

A-4:  EMPLOYMENT

     Total employment in the asbestos textiles industry has been derived
from the basic data in Table A-lI, adjusted by a factor of about 1.3 to
account for salaried and supervisory/management employees.  Total  indus-
try employment is estimated at 4,000  to 4,500 with the following distri-
bution:

     # of EmpJoyees/PIant    # of Plants    Total Employment Ira Range

     Less tfean 150                5                     585
     150-299                      5                   1,235
     300-500                      5                   2,210

Plants with 300 or more employees, while accounting for only 33 percent
of the manufacturing facilities, contribute about 55 percent of the in-
dustry employment, whereas the five smallest plants (33% of total  number)
account for only about 15 percent.

A-5:  PRODUCTION

     The valua of 1973 shipments of asbestos textiles is estimated at
about $44.5 million.  The following represent judicious estimates of its
breakdown by companies:

     Raybestos-Manhattan, Inc.       $13.4 million        (30%)
     Southern Asbestos Company       $13.4 million        (30%)
     Amatex Corporation               $8.0 million        (18%)
     Uniroyr.l                         $2.2 million        (5%)
     All others                       $7.5 million        (2Q%)

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Thus, in terms of shipments, the four largest firms  (operating 8 plants)
account for 83 percent, while the remaining 7 plants have an average
annual shipment of $1  million each in asbestos textiles.

A-6:  WATER UTILIZATION AND DISCHARGE

     Compared to most manufacturing operations, asbestos  textiles produc-
tion involves relatively little water consumption.   In fact, neglecting
sanitary waste water,  the largest potential sources  of water effluents
are the wet air pollution control devices,  such as  scrubbers, which are
employed in a limited number of plants to control  dust emissions from the
plants to the atmosphere.  Fortunately, wet scrubbing is  becoming increas-
ingly superseded by fabric filtering devices which  are considered superior
from a performance as well as environmental standpoint.

     One of the few phases of textiles manufacture  that involve signifi-
cant utilization and discharge of process water is  in cloth finishing
(coating) operations where water-soluble coatings  are involved.

     The aggregate potential effluent discharge (sanitary, process, and
emissions control) from asbestos textiles manufacturing probably averages
about 250 gpd/ton of product, equivalent to an annual rate of about 5
million gallons for the entire industry.

     Except for textile plants that are part of large multi-product fa-
cilities, whose composite effluents are treated within the plant premises
prior to discharge or recirculation, the usual industry practice is to
discharge most raw effluents, at some fee,  into adjoining municipal sewer
systems for treatment.  In such cases, the economics apparently do not
justify installation and operation of an independent water treatment sys-
tem.

A-7:  FINANCIAL PROFILE

      (1)  Manufacturing Economics:  It is recognized that the costs of
manufacturing in the asbestos textiles industry, as in most other manu-
facturing activities, would depend on, among other factors, the plant
size  in question, its product mix  (including non-textiles and non-
asbestos manufacturing), sources of raw materials,  and corporate organi-
zational structure.

      Recognizing but discounting the probable deviations from the norm
due  to the above effects, the following synthetic financial balance is
postulated as probably representative of the 1973 experience of an "aver-
age"  asbestos textiles manufacturing plant:

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TOTAL SHIPMENT   -   5 million !bs.

REVENUE     '                                             $6.65 million

COSTS:
     Materials & Supplies          $3.26 million
     Labor It Maintenance            1.05 million
     S.G.feA.*                       1.75 million
     Total Operating Costs ....  $6.06 million         $6.06 million

OPERATING MAR8IN                                         $0.59 million

DEPRECIATION « AMORTIZATION                              $0.20 million

NET PRE-TAX MARGIN                                       $0.3-9 million

Pre-Tax Margin as Percent of Sales                          5.8 percent

TAXES (50%)                                              $0.20 million

AFTER-TAX MARGIN                                         $0.20 million


As Percent of Sales                                        3.0 percent

On the basis of the above estimates, It is apparent that raw materials
and labor contribute a high percentage of the cost of manufacturing as-
bestos textiles^ —71 percent.  Secondly, since most plants and  equip-
ments are over 25 years old, the depreciation allowance is low,  --3 per-
cent of revenue.  Thirdly, it is evident that asbestos textiles  manufac-
turing is a low cash-flow low-profit enterprise, and any adverse economic
perturbation, (including higher labor and materials costs and the costs
of environmental control), which increases manufacturing costs by over
6% without a corresponding product  price increase may threaten the sur-
vival of the industry.

      (2)  Salvage Values of Assets  and Constraints on Financing  Addi-
          tional Capital Assets; The discussions 1n this section are gen-
eral  in nature and are applicable to all three asbestos products segments
which for^ ths subject of this study.  Accordingly, the Issues discussed
here will not be considered again in the friction materials and  gaskets/
packings/ insulations sections.
                             ^

      There 1s littHe information available which could be directly and
meaningfully applied to the question of salvage values of assets in the
event of possible shut-down of facilities arising from the Incremental
pollution abatement investment and  operating costs.

      Some perspective on maximum possible salvage values of plant and
equipment per unit of production capacity may be obtained by examining
                rr?d Administrative expenses, including corporate over-
 head expanse-?™.

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 census date en ret pUnt and equipment book value,  updated and refined In
 conjunction with actual company financial  statements,  including an allow-
 ance for working capital tied up in individual  plant operations.   Prelimi-
 nary indications are that salvage value would be on the order of 10-15% of
 the value of shipment.

      As for the constraints on financing additional capital  assets, these
 fall into several categories, namely managerial, financial,  competitive,
 and regulatory.

      With respect to managerial constraints, it is  management's task to
 choose from among investment alternatives  and to decide on the optimum
 utilization of ths corporation's resources and  borrowing power, and to
 formulate and implement plans accordingly.  The funds  available to the
-corporation include, of course, its total  cash  generation, its borrowing
 power, and ability to raise additional equity capital.   The realistic
 constraints here are tha costs of capita]  vis-a-vis the expected  rates
 of return on its Investment.

      With respect to financial constraints, a corporation's  earnings and
 cash flow are generally programed to meet dividend,reinvestment  and
 debt service requirements.   Mhen external  financing is required,  there
 are many considerations dictating the type and  amount—e.g., existing
 commitments which carry with them an obligation with respect to mainte-
 nance of certain ratios.

      Concerning competitive constraints, a process  breakthrough which
 significantly lowers production costs may dictate that capital invest-
 ments be made defensively by competitors and offensively by the innova-
 tive firm.  If pollution costs are so onerous and if competitive  market
 conditions do not perait pass-on to customers or taxpayers,  a firm may
 elect not to spend the money, assuming it could achieve a greater return
 elsewhere.

      Finally, with respect to regulatory constraints,  the financing of
 additional capital assets may be, and usually is, influenced by tax laws,
 particularly those regarding accelerated depreciation, depletion, and
 foreign ownership versus tax considerations. Pollution control regula-
 tions add a ne**f dimension.

 A-8:  PRICES

      As discussed previously, the after-tax profit  margin associated with
 asbestos textiles production is only on the order of 3 percent of sales.
 Such low margins may be due, in part, to the fact that textiles,  for most
 applications, are regarded as intermediate rather than final products with
 the high value-added phase of fiber-to-product  conversion still downstream
 of the textile stage.  Secondly, the advent of  some man-made substitute
 materials that are price-performance-competitive with  asbestos textiles
 in some of its applications has helped to restrain  price escalations,
 even in the face of rising materials and labor  costs to the textiles

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manufacturers.  Such Competitive materials include fiberglass,  which is
available in the form of continuous filament at a cost quite comparable
to that of the better grades of spinning asbestos fiber.

     Given the escalating raw materials costs now impacting the textiles
industry, and recognizing the industrial value of the products  of this
industry, and the fact that the industry cannot afford to absorb future
cost increases, it is likely that such additional costs (which  include
the cost of environmental quality control) will be passed-on to textiles
consumers.  This assertion in no way contradicts the previously acknow-
ledged existence of potential substitute materials, in view of  the fact
that the market appeal of these substitutes is presently very limited.
Moreover, current upward price pressures on both asbestos textiles and
the aforesaid potential substitutes have not changed the price-performance
factor in favor of the substitutes.

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                    B:   ASBESTOS FRICTION MATERIALS
     The friction materials segment of the asbestos  manufacturing indus-
try includes products that find extensive use in the fields  of transpor-
tation, mining, and heavy construction.   Specific applications are of
drum, disc, outer jaw, and hand brakes,  dry and oil-immersed clutches,
and facings for automatic transmission discs.

     The various types of friction materials can be  classified according
to structure and method of fabrication.   Molded brake linings or clutch
facings encompass all products that are preformed under pressure in molds
or between rolls.  Paper and millboard friction materials include plied
asbestos papers that are impregnated prior to or subsequent  to plying and
asbestos papers that are formed from pulp to which friction  compounds
have been added.  Woven linings are constructed of resin-impregnated woven
asbestos fabrics that are hot-pressed or calendered  and baked to form
linings.

     Estimates by the U.S. Bureau of Mines and the Asbestos  Information
Association of North America (AIA/NA) place the annual  U.S.  requirement
of asbestos fiber for this application at around 10 percent  of the total
consumption,--equivalent to about 80,000 short tons  in 1972.  The recent
trend in the value of shipments of asbestos friction materials is shown
in Table B-2.

B-l:  MANUFACTURING PROCESSES AND TECHNOLOGIES

     Many materials, including some whose exact roles are regarded as pro-
prietary knowledge, are used in varying quantities in the manufacture of
friction materials.  Dry processes normally begin in ribbon  blenders
where bonding agents, metallic constituents, and asbestos fibers are mixed
for production of molded linings.  The major binder is a "b" stage resin
that is thermoset when fully cured, but is also intermediately set in the
partially-cured condition.  A uniform layer of the material  is heated suf-
ficiently, under pressure, to cause the resin to flow and set but not be
fully cured.  The resulting flat sheet is removed, cut into  product-sized
segments, reheated to soften the resin, and formed to the proper arc by
cold molding.  A final baking of the segments in compression molds at
1,000 to 4,000 psi to retain the shape converts the resin to a thermoset
or permanent condition.

     In a variation of the wet-board process, wet-mixed molding materials
are usually combined in a blender from which the mixture is  fed to a
paper machine where the material is placed in a preform which carries a
perforated metal screen on one side.  When suction is applied to the
outside of the screen, solvent is removed and a deposit of the molding
mixture remains on the screen.  This is then transferred to  a revolving
cylinder, where it builds up to the desired product thickness.  The de-
posit is removed from the cylinder, dried, cut into product-sized seg-
ments, saturated in a liquid binder, and either air-dried or oven-dried
to remove the solvents.

                                   10

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                              TABLE B-2
      TREND IN  VALUE OF SHIPMENTS OF ASBESTOS FRICTION MATERIALS


          Year                    Value of Shipments ($106)
          1963                              117.7
          1967                              144.4
          1971                              179.1
          1972                              181.6
          1973                              205*
*Preliminary
SOURCES:  U.S.  Bureau of the Census, AIA/NA, and Contractor's Estimates
                                   11

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     Woven brake "linings and clutch faces are made in several  ways.   One
method is to weave a heavy tape of desired width and in considerable
length, impregnate it with resins and other materials to impart the  de-
sired frictional characteristics, and supply it in rolls to distributors
and users who can cut it to suit their requirements.  Another  method is
to weave the asbestos yarn into sheets of fabric up to a few feet wide
and of the desired thickness, impregnate the sheets, and fix the impreg-
nate by heat treatment and then slit the sheets into long strips of  the
desired width which are then supplied to the trade in the form of rolls.

B-2:  FIRMS

     No reliable statistics are available regarding the number of firms
involved in asbestos friction materials manufacture.  The larger firms
include not only the essentially captive producers such as the Delco-
Moraine and Inland Divisions of General Motors Corporation and The
Cycleweld Division of Chrysler Corporation, but also diversified indus-
trial product manufacturers such .as Raybestos-Manhattan, Inc.  and Bendix
Corporation.  In addition, several smaller, typically single-plant firms
manufacture friction products for both the original equipment  and replace-
ment markets.

     Table B-3 is a listing of the important firms in the industry,  along
with their plant locations and the estimated number of production employ-
ees involved in friction materials manufacturing.

B-3:  PRODUCTION

     As shown in Table B-2, the 1973 value of domestic shipments of as-
bestos friction products was about $205 million, up about 13 percent from
the prior year.  The estimated distribution of these sales among the major
manufacturers is depicted in Table 8-4, along with the percentages of
corporate sales represented by friction materials.  Clearly, Raybestos-
Manhattan, Inc., with annual friction materials sales estimated at about
$115 million, is the industry leader.  The exact order of the other major
producers is not so certain, but they are thought to be as follows:

              Bendix Corporation
              Delco-Moraine Division of General Motors
                Corporation
              Abex Corporation
              H. K. Porter Company
              Cycleweld Division of Chrysler Corporation

The above firms probably account for 90 to 95 percent of the total pro-
duction of friction products.  This ratio is consistent with the histor-
ical pattern for the industry, which indicates that in the 1954 to 1967
period, the eight largest firms accounted for between 86 and 91 percent
of  the  industry's value of shipments.  Furthermore, these historical data
suggest that about 99 percent of the shipments were usually made by the
20  largest companies.


                                   12

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        U.S. MANUFACTURERS OF ASBESTOS-BEARING FRICTION MATERIALS
Company
Raybestos-Manhattan, Inc.


Bendix Corporation

General Motors Corp.


Abex Corporation


H. K. Porter Co.

Chrysler Corporation

Borg Warner Corporation

Maremont Corporation

Carlisle Corporation
Forcee Mfg. Corporation
World Bestos Co.
Scandura, Inc.
Gatke Corporation
Mar Pro Corporation

Standee Industries
Auto Friction Corp.
Brassbestos Mfg. Corp.
Southern Friction
  Material Co.
L. J. Miley Co.
Auto Specialties Mfg. Co.
Plant Location
Stratford, Conn.
Mannheim, Pa.
Crawfordsville, Ind.
Fullerton, Calif.
Troy, N.Y.
Cleveland, Tenn.
Delco-Moraine Div.
 Dayton, Ohio
Inland Division
 Dayton, Ohio
Cleveland, Ohio
Troy, Michigan
American Brakeblok Division
 Winchester, Va.
Huntington, Indiana
Richmond, Ky.
Cycleweld Division
 Trenton, Michigan
Spring Division
 Be11wood, 111.
Grizzly Products Division
 Paul ding, Ohio
Ridgeway, Pa.
Tappahannock, Va.
New Castle, Ind.
Charlotte, N.C.
Warsaw, Ind.
Grizzly Brake Division
 Chicago, 111.
Houston, Texas
Lawrence, Ma.
Patterson, N.J.

Charlotte, N.C.
Chicago, 111.
St. Joseph, Mich.
Approximate Number of
Production Employees*
        1,000
          900
          500
          200
          600
          250

          300
          200
          200
          175
          150
          200
          225

          200

          150

          150
          125
          100
          100
          100
          100

          100
          100
           75
           75

           75
           75
           75
                                    13

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                           TABLE B-3 CONTINUED
        U.S. MANUFACTURERS OF ASBESTOS-BEARING FRICTION MATERIALS
Company
National Friction
  Products Corp.
Reddaway Mfg. Co.
Molded Ind. Friction Corp.
Royal Ind. Brake
  Products, Inc.
Lasco Brake Products Co.
California Blok Co.
MGM Brakes, Inc.
Wheeling Brake Block
  Mfg. Co.
Baldwin-Ehnet Hill, Inc.
Thiokol Chemical Corp.
Plant Location

Logansport, Ind.
Newark, N.J.
Prattville, Ala.

Danville, Ky.
Oakland, Calif.
Gardena, Calif.
Cloverdale, Calif.

Bridgeport, Ohio
Trenton, N.J.
Trenton, N.J.
Approximate Number of
Production Employees*
           70
           50
           50

           50
           50
           50
           50

           40
           40
           30
Contractor's estimates of number employed in friction materials manufac-
 ture in 1973.
                                    14

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                               TABLE B-4
ESTIMATES OF DISTRIBUTION OF 1973 SALES OF ASBESTOS FRICTION MATERIALS
BY THE MAJOR MANUFACTURING COMPANIES
Estimated 1973 Sales* of Friction
Company Sales, $MM Materials, $MM
(all
Abex Corp.
Bendix Corp.
Del co-Morai ne/ Inl and
Divisions of
General Motors
H. K. Porter Co.
Raybestos-
Manhattan, Inc.
All others
TOTAL
products)
25
2,212
N/A
270
175
14

20+
33
20-25
16
115
24
228-233
% of Firm's
Total Sales

>80%
<2
N/A
6
66

N/A - Not Available


SOURCE:  Contractor's estimates
*May differ from value of shipments as reported by the Bureau of the
 Census due to differences in definition and reporting coverage.
                                   15

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B-4:  _EjjPLOvMEKT

     About 77 percent of the estimated 7,000 production workers listed
in Tsbls 8-3 ^£ thought to be employed by the eight largest firms.
Again, this %:s quits consistent with the U.S.  Bureau of the Census sta-
tistics indicating historical figures over 70 percent.   Inclusive of sal-
aried and ether nianagemant personnel, the friction materials industry
probably eraplnys a total of about 9,100.

B-5:  PLANTS

     The average total number of employees per plant is on the order of
225, indicating that the typical friction materials manufacturing facil-
ity is re'atn"v2ly sn?al* In comparison with other industrial manufacturers.
Its annual r^l^nis would be valued at about $5.4 million, yielding an
average shfppsit par employee of about $24,000 per year.
     As WQwTM bo sxpar.ted of a mature industry, most of the plants and
equipments are old., usually over forty years of age with the possible ex-
ception of ne^ar captive facilities belonging to the automobile manufac-
turers.  Production processes have changed only marginally over the years,
and labor rather than capital intensity appears to be the norm in most
of the older plants.

     Figure B~2 shows the geographical dispersion of friction materials
plants in the U.S.  Not surprisingly, they tend to be concentrated in
and around the aajor metropolitan centers of the Northeast and the Mid-
wast, with a few plants located in California to primarily cater to the
needs of the automobile assembly plants in that part of the country..

B-6:  WATER UTILIZATION AND DISCHARGE

     To all Intents and purposes, the friction products industry may be
conceived as an essentially dry industry, generating no significant pro-
cess waste water.  What water is generated is likely to be either of the
non-contact (cooling) typs, or sanitary waste water, or waste water from
wet particulars (dust) collection systems such as scrubbers.  A few
plants may also generate waste water from solvent recovery operations.

     Perhaps tf?~   nrfr>c1pls    exceptions to these generalizations would
be those? ^srctn t"^: ?>r« Integrated backward into paper and millboard
friction porduct nanufsct'jrlng.  However, such plants are more aptly con-
sidered as primarily paper and millboard producers and are therefore out-
side the sccpe rif  the present consideration.

B-7:  FINANCIAL PROFILE

     (1)  Manufacturing Economics:  The following synthetic annual profit/
loss statement has been developed as probably applicable in 1973 to an
average friction materials manufacturing plant.  In considering these
data, it is important to bear in mind that( the total revenue and the


                                  16

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FIGURE B-2:   GEOGRAPHICAL DISPERSION OF U.S.  FRICTION MATERIALS PLANTS

-------
contribution of each cost item to the total  manufacturing  cost is a strong
function of the product mix and therefore the manufacturing practices of
a given plant.  For instance, it is recognized that the proportion of
total cost due to materials and supplies would, of necessity,  vary de-
pending on whether a plant's output is weighted in favor of woven as op-
posed to molded products, or brake linings rather than clutch  and trans-
mission facings.
REVENUE

COSTS:
     Materials & Supplies
     Labor & Maintenance
     S.G.&A.

     Total Operating Costs

OPERATING MARGIN

DEPRECIATION & AMORTIZATION

NET PRE-TAX MARGIN

Pre-Tax Margin as Percent of Sales

TAXES (50%)

AFTER-TAX MARGIN

As Percent of Sales

     (2)  Prices:
                                                         $5.4   million
                                  $2.59 million
                                  $1.24 million
                                  $1.08 million

                                  $4.91 million
$4.91  minion

$0.49  million

$0.162 million

$0.328 million

   6.0 percent

$0.164 million

$0.164 million

   3.0 percent
          	   The above balance  suggests  that  there  1s  relatively
little profit in the manufacture  of friction products.  In addition  to
escalating materials and labor costs,  there are  important market  factors
serving to moderate product prices.  For instance,  it might  ordinarily
be expected that profitability would  be much higher than  indicated above,
especially since a high proportion  of the demand for friction  products
(75-90% for some plants, depending  on product  mix)  goes to after-market,
rather than original equipment sales.   This is not  necessarily the case,
and it would appear that the profits  are made  by mark-ups at the  next
higher (distributor and dealer) levels.   Furthermore, the fact that  major
automobile manufacturers are involved in the business could  tend  to  estab-
lish a defacto price ceiling which  independent producers  would not ordi-
narily violate without jeopardizing their shares of the market.

     In addition to the foregoing general considerations, sales of auto-
motive friction products are obviously dependent on Detroit  product  design
and OEM specifications, captive manufacturing  vs. outside procurement
strategy, and, of late, federal transportation safety standards and  regu-
lations.  But these factors notwithstanding, it  is  believed  that  as  long
as the demand for friction products remains strong, especially 1n the
                                   18

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after-market sector, most manufacturers could conveniently pass-on  cost
increases of the size associated with meeting effluent control  guidelines.
                                   19

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     Asbestos has been widely used for several  decades  as  a  constituent
of gasketlng. (pointing) materials for joining non-moving parts,  such  as
pipeline flanges and valves and for various  forms  of packings  In such ap-
plications as steals hydraulic and superheater systems  where its high
temperature, hot pit  and acid resistance, etc., are advantageous.

     Figures published by the Asbestos Information Association of North
America (AIA/NA) show that the 1971 value of shipments  of  these  products
and the asbestos tonnages consumed are as follows:

     Gaskets and packings           25,000 tons           $  99.5 million
     Insulation's                    15,000 tons             40.9 million

                                                          $140.4 million

Apoarently, thes^ statistics are consistent  with the 1967  Census of Man-
ufactures d&t'-i which showed the following breakdown of  value of  shipments:

     Asbestos, asbestos-metallic, and
      asbestos-rubber gaskets                             $  62.1 million

     Asbestos packing and insulations                       63.2 minion

                                                          $125.3 million

     The tempo of industrial activity, especially  in the heavy mechanical
machinery and chemical manufacturing sectors, would suggest  a growth  rate
of about 3 to 5 percent per year in shipments of gaskets,  packing,  and in-
sulating materials.  Accordingly, 1973 aggregate sales  are placed at  be-
tween $148 million and $155 million.

C-l:  FIRMS

     As with most other sectors of the asbestos products manufacturing
industry, no complete and reliable roster of the firms  involved  in manu-
facturing asbestos gaskets, packing, and Insulating materials is availa-
ble.  Nevertheless, an incomplete list of some of  the major  manufacturers,
is presented 1n Table C-5 with the eight most important members  listed
first, a? though not necessarily in order of size.   It is estimated that
the?G parti c^ar flrns probably account for  55 to  65 percent of  the total
produ

C-2:  PLANT
     The estimated staployment roster distribution of Table'C-5 suggests
 that the average plant in this sector employs fewer than 100 production
 employees.   Inclusive of other salaried and management personnel, total
 employment  is about 110, although it should be noted that other manufac-
 turing activities at a given plant (both asbestos- and non-asbestos-
 related) generally tend to exaggerate the importance of the gaskets/
                                   20

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                                  TABLE C-5

                    MAJOR U.S. MANUFACTURERS OF ASBESTOS
                     GASKETS. PACKINGS. AND INSULATIONS
            FIRM
Raybestos-Manhattan, Inc.
Nicolet Industries
Johns-Manville Corp.
Garlock, Inc.
Felt Products Mfg. Co.
McCord Corp.
Amatex Corp.
Gatke Corp.
Anchor Packing Co.
Velliimoid Division
Green, Tweed
Crane Packing
F. D. Farnum
Sterling Packing & Gasket Co.
Detroit Gasket & Mfg. Co.
A. W. Chesterton
Hercules Div. of Richardson
  Corp.
Braiding & Packing Works of
  America
Sacomo Packing Co.
Sepco
Quality Gasket & Mfg. Co.
Armstrong Cork Co.
  TOTAL
      LOCATION
Stratford, Conn.
Ambler, Pa.
Manville, N.J.
Palmyra, N.Y.
Skokie, 111.
Wyandotte, Mich.
Norristown, Pa.
Chicago, 111.
Philadelphia, Pa.
Worcester, Mass.
N. Wales, Pa.
Morton Grove, 111.
Lyons, 111.
Houston, Texas
Detroit, Mich.
Everett, Mass.

Alden, N.Y.

Brooklyn, N.Y.
San Francisco, Calif.
Birmingham, Ala.
Clawson, Mich.
Braintree, Mass.
 ESTIMATED NUMBER OF
PRODUCTION EMPLOYEES*
          150
          150
          150
          125
          105
          100
          100
          100
           75
           75
           75
           75
           75
           75
           50
           50

           50

           50
           50
           40
           35
           30
                                1,785
Contractor's estimates.
                                      21

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packings/insulations sector.   Value of shipments  per  average  plant is  es-
timated at about $4.2 million.

     Because the listing of Table C-5 is  considered far  from  exhaustive,
representing only about 60% of the total  shipments, any  discussion of  the
geographical dispresion of plants based on Table  C-5  is  apt to  be  mis-
leading.  It can, however, be said that plants  in this segment  are concen-
trated in and around the major industrial  centers.

C-3:  WATER UTILIZATION AND DISCHARGE

     Gaskets are conventionally manufactured by dry  (non-water  consuming)
processes.  After opening and cleaning, the fibers are mixed  with  the  cor-
rect proportion of rubber and other mineral ingredients  to a  dough-like
consistency and rolled out in calendars,  where  heat drives off  the solvent
and the action of the rollers compounds the constituents into a homogen-
eous sheet.  Woven asbestos gaskets are preferred in  cases where soften-
ness and pliability are desirable.  In such cases, they  are woven  from
yarn reinforced with fine brass wire and,(usually  contain 10 to  20  percent
of organic fibers.  The porous woven fabric is  subsequently impregnated
with either rubber or plastic compounds.

     Similarly, packings require no process water.  Asbestos  yarn  is sim-
ply worked up into twisted or braided forms that  are  compressed into
rings or into cloth which is subsequently coated  with rubber  compound  and
folded or bound into various forms of packing for high-pressure steam  work.

C-4:  FINANCIAL PROFILE

     (1)  Manufacturing Economics:  Of the three  major asbestos products-
manufacturing segments considered,—textiles, friction materials,  and  gas-
kets/packings/insulating materials,—indications  are  that the gaskets
group is probably the most economically profitable.   The 1973 synthetic
profit/loss statement for an average plant is postulated as follows:

REVENUE                                                     $4.2 million
COSTS:

     Materials & Supplies            $1,676,000
     Labor & Maintenance               $890,000
     S.G.&A.                         $1,040,000

OPERATING MARGIN                                                $594,000

DEPRECIATION AMORTIZATION                                       $126,000

NET  INCOME BEFORE TAXES                                         $468,000

Pre-Tax Margin as Percent of Sales                            11 percent
TAXES  (50%)                                                     $234,000

AFTER-TAX MARGIN                                                $234,000
As  Percent of  Sales                                          5.5 percent
                                  22

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     The estimated after-tax margin of 5.5 percent of sales, in compari-
son with the lower margins indicated for friction materials and textiles,
is probably traceable to the high proportion of product sales that goes
to after-market applications in high-value equipment.   Accordingly, de-
mand tends to be relatively price-insensitive, a factor which,  under nor-
mal conditions should make cost pass-on easy to accomplish.

     (2)  Prices:  In projecting future price trends, it is essential  to
recognize the existence on the horizon of substitute non-asbestos mate-
rials whose price-performance posture might tend to improve as  the price
of asbestos-based gasketing/insulating materials increases.  Graphitic
packings, which are now used only in special applications,  represent one
such example.  Furthermore, over the last few years, there  has  been a
significant erosion of the braided seal packings market by  mechanical
seals, especially in nuclear power pump applications.  These factors not-
withstanding, it is thought that demand for asbestos gaskets/packing ma-
terials will continue to be brisk and at least commensurate with the level
of growth in industrial activity projected for the rest of  this decade.
Accordingly, gaskets and insulating materials manufacturers should be able
to pass-on moderate cost increases which could be attributed to compliance
with the proposed effluent guidelines.
                                   23

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 II-A:   HATER UTILIZATION AND DISCHARGE

     Manufacture  of  the asbestos products which comprise the subject of
 this study,  - asbestos textiles, asbestos friction materials, and asbestos
 gaskets,  packing  and insulating devices, - generally requires very little
 consumption  of process water.  For example, the only significant Instances
 of process water  utilization in textile manufacturing are the addition of
 moisture  during weaving or  braiding, and in the textile coating operations.
 Only in the  latter process  is any waste water generated.  In friction
 products  manufacturing, water is not a necessary process Ingredient and
 is not directly used in manufacturing.  Waste water may be generated in
 a  few  friction materials plants as a consequence of solvent recovery op-
 erations  and 1n wet  dust collection facilities used for air quality con-
 trol in product finishing areas.

:    However", the latter waste water source 1s decreasing in significance
 as the popularity of dry dust collection units increases.  As for gaskets/
 packings/insulations manufacturing, little or no process water is gene-
 rally  involved.   Sheet gasket manufacturing may, however, include cooling
 and solvent  recovery operations that generate waste waters.

     Liquid  effluent from asbestos textile coating generally results from
 clean-up  and dumping of unused coating materials at the end of a run.
 Only two  textile  plants are known to generate such wastes, and in quanti-
 ties not  normally exceeding about 200 gallons per day.  Both plants dis-
 charge their wastes  into adjoining municipal sewer systems.  Furthermore,
 one of these plants  employs vapor absorption facilities for scrubbing sol-
 vent fumes from its  drying  oven exhausts.  Such units, which generally
 use caustic  soda  solutions, are normally operated Intermittently (once or
 twice  a month) and require  about 60,000 gallons of water per operation.

     Solvent recovery effluents are known to be generated at only one
 sheet  gasketing plant and one friction products plant.  Waste volumes
 vary,  depending on the type and size of equipment.  The discharge is gen-
 erally steady although not  a direct function of the plant (asbestos ma-
 terials)  production  rate.   An effluent generation rate of about 10,000
 gallons per  day may  be considered typical of such operations.

     Wet  dust collector effluent discharge rates generally range from
 about  50,000 to 150,000 gallons per day for the asbestos products manu-
 facturing industry.   Four friction materials plants have been identified
 as sources of such effluents;

     In addition  to  the above sources of liquid effluents, there are two
 known  pilot-plant operations that employ the so-called "dispersion pro-
 cesses" for  asbestos yarn manufacturing and represent potential waste
 water  sources. These are not commercial operations and are therefore ex-
 cluded from  further  consideration on the premise that the lack of data
 relative  to  their potential commercial viability and effluent character-
 istics precludes  any reliable comments as to the potential Impact of the
 proposed  effluent standards on these plants when and 1f they achieve com-
 mercialization.

                                   24    I

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PART II:   EFFLUENT CONTROL COSTS

-------
  II-B:  CURRENT EFFLUENT TREATMENT PRACTICES
       The industry characterization section of this  study indicated  the
  following approximate breakdown of plants  involved  in  the manufacture of
  the subject asbestos products:

            - Textiles:               11  firms       15 plants
            - Friction Materials:     30  firms       38 plants
            - Gaskets, etc.:           22  firms       22 plants

  Of these facilities, it is  believed that only eight commercial-scale
  plants could routinely discharge any liquid effluents  from a total  of 10
  different sources.  As shown in Table D-6, three of these sources are
  ascribable to textiles manufacturing (representing  13% of the known plants
  in this segment), one to sheet  gaskets  production (4%  of the plants), and
  the balance to friction materials fabrication (equivalent to 17% of the
  plants).  It should be observed also that  one textiles plant and one fric-
  tion materials plant have no water treatment  facilities whatsoever; and
  two of the friction products plants have zero discharge.  The two textiles
  plants (T-l & T-2) and a friction material plant (FM-5) discharge their
  wastes into municipal sewer systems. For  purposes  of  subsequent discus-
  sion and analysis, zero discharge plants and  plants using municipal sewers
  (for which no effluent guidelines have  yet been evolved) are removed from
  further consideration.

                                   TABLE  D-6

      DESCRIPTION OF EFFLUENT SOURCES IN  ASBESTOS PRODUCTS MANUFACTURING

Plant
Code

 T-l
 T-2
Product
Textiles
Textiles
Effluent
Source
Coating
Coating and
Current
Treatment
None
Effluent
Discharge Point
Municipal sewer
 S-l

FM-1

FM-2

FM-3

FM-4

FM-5


FM-6



SOURCE:
   Sheet gaskets
Friction Materials
  fume scrubber

Solvent recovery

  Wet scrubber
                    Solvent recovery
                     Dust scrubber

                     Dust scrubber
Two-stage lagoon

     Lagoon

     Lagoon

 Sedimentation

Two-stage lagoon

     Lagoon

      None
     Lagoon

Chemical precip-
itation with
other wastes
Municipal sewer
 Surface water

Zero discharge

 Surface water

 Surface water

 Surface water

Municipal sewer
Zero discharge

 Surface water
  Draft Development Document for Proposed Effluent Limitations Guide-
  lines and New Source Performance Standards for the Textile,  Friction
  Materials and Sealing Devices Segment of the Asbestos Manufacturing
  Point Source Category.

                              25   ,

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II-C:   PROPOSED EFFLUENT STANDARDS AND TREATMENT TECHNOLOGIES

     In formicating the effluent treatment standards and treatment tech-
nologies applicable to the subject segments of the asbestos products man-
i"Tactur1~c -'nd-iGt^y, the Draft Developnent Document for Proposed Effluent
Llmitaticns Sidelines did not consider It meaningful  to propose individ-
ual standards for the textiles, friction materials, and gaskets/packings/
insulations categories.  Since the effluent characteristics are more a
function of product *inishinc and peripheral  operations, rather than the
primary manufacturing acti»ities, a guidelines system based on these fin-
ishing and ns-ipboral processes was deemed more appropriate.  Accordingly,
standard?, and mn^licaMe technologies were developed on tha basis of the
following unit operations:

           -  Coating or finishing of asbestos textiles
           -  Solvent recovery operations
           -  Vapor absorption (fume scrubbing)
           -  Wet dust collection
     The proposed standards considered the chemical, physical, and bio-
logical characteristics of the effluents associated with each of the above
operations, including:

           -  Suspended solids
           -  pM
           -  Effluent temperature
           -  tMolcnical oxygen demand (BOD)
           -  Dissolved solids
           -  Heavy metals
           -  Phenols
           -  Nitrogen
           -  Phosphorous
           -  Hhemical oxygen demand  (COD)
Suspended solid? and cherr.cal oxygon demand (COD) are probably the most
important par?:Pste>*s of asbestos  products manufacturing effluents.  The
proposed standards  did not include suspended asbestos particles  in the
list of important effluent parameters because  it  is not generally present
in the- wastes under consideration, except perhaps for the wet dust col-
lection category.   Evr.n in this case, it  is thought that the asbestos
fibers ere net f**eoly  dispersed in the effluent,  but are encased firmly
within tha dust particles and as  such cannot be detected by normal micro-
scopic techniques.  Furthermore,  pollutants in other non-process wastes
such as non-contact cooling water, boiler blowdown, steam condensate,
and wastes from water  treatment facilities, are specifically excluded.

     Shewn r«i Tab!a  D-7 are the effluent  quality  standards  proposed under
the best  practicable  control  technology  (BPT), best available control
technology  (BAT;, and  new source  performance  (NSP)  standard^ provisions
of the  1972  Federal  Water Pollution  Control Act Amendments.  BPT and  BAT
standards must be achieved by  existing point  sources by July 1,  1977,
and July  1,  1983 respectively.   The  new  source standards apply  to  those
sources of warte water whose  construction commenced after  the  publication
of those  standards.

                                    25

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                                TABLE D-7

                 PROPOSED EFFLUENT QUALITY STANDARDS FOR
                      BPT.** BAT. AND NSP STANDARDS
         Waste Source
                           Discharged Effluent Standards*

                        COD (mg/1)        Suspended      j
                                        Solids (mg/1)
  I.  BPT
 II.  BAT
III.  NSP
Solvent recovery
Textile coating
Vapor absorption
Wet dust collection

Solvent recovery
Textile coating
Vapor absorption
Wet dust collection

Solvent recovery
Textile coating
Vapor absorption
Wet dust collection
     50               30         6-9
   Zero discharge of process wastes
   Zero discharge of process wastes
Not applicable        30         6-9

      5                5         6-9
   Zero discharge of process waste
     50               30         6 -
   Zero discharge of process wastes
            Not applicable
            Not applicable
SOURCE;  Draft Development Document for Proposed Effluent Limitations
         Guidelines and New Source Performance Standards ror the textile,
         Friction Materials and Sealing Devices segment ot the Asbestos"
         Manufacturing Point Source Category.Sverdrup and Parcel  and
         Associates, Inc., St.Louis, Mo.: May 1974.
*Maximum average of daily values for any period of 30 consecutive days.

**BPT = Best practicable technology currently available;
  BAT = Best available technology economically achievable;
  NSP = New source performance standards.
                                    27

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     Table D-8 shows the technologies proposed for attainment of the above
standards.  For textile coating effluents, the BPT and BAT standards can
bo achieved by containment of dumped and spilled coating materials and
by adeptly c* dry techniques for equipment, cleaning and other house-
leaping activities.  All wa?te would be containerized for salvage, used
as a fuel substitute, or disposed in a controlled sanitary landfill. NSP
standards ira.y be attained by designing new facilities for containment of
all wastes.

     Treatment of solvent recovery effluents for compliance with the BPT
e.nd NSP standards you Id involve, in sequence, cooling where necessary,
addition of supplemental nutrients, treatment by the extended aeration
version of the activated sludge process, ar.d disposal of excess sludge
in a KiuRicipal sewage treatment plant.  A somewhat similar technology in-
volving cooling, addition of nutrients, and extended aeration is recom-
mended for attaining the BAT standards.  In addition, the effluent from
the biological treatment process is subjected to activated carbon treat-
ment.

     The control technology required to achieve the BPT and BAT standards
in the vapor absorption subcategory is fume incineration.  This would in-
volve replacement of vapor absorption units with fume incinerators to
oxidize the vapors in air exhausted from the drying ovens.  NSP standards
would require recovery of all vapor and fume emissions for reuse or as
fuel substitutes.

     For the wet dust collection subcategory, sedimentation is the rec-
ommended technology for achieving the BPT standards.  To meet the BAT
and MSP standards, it is recommended that in place of wet scrubbers,
baghouses, or other effective dry collection devices, should be adopted
for dsjst canted ourooses.

     An inportsnt parcmater necessary for subsequent estimation of the
cost Q* meeting the proposed effluent standards is the representative ef-
fluent generation rate characteristic of each source subcategory.  These
are shown In "^able D-9.
                                   28

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                               TABLE D-8
                  EFFLUENT TREATMENT TECHNOLOGIES FOR
                   ATTAINING THE PROPOSED STANDARDS
STANDARD       WASTE SOURCE
  BPT*      Textile Coating

            Solvent Recovery

            Vapor Absorption
            Wet Dust Collection
Waste containerization for salvage, sub-
sequent fuel use, or landfill disposal.
Cool wastes (if necessary), add supple-
mental nutrients, and extended aeration
version of activated sludge process.
Fume incineration.
Sedimentation.
  BAT*      Textile Coating
            Solvent Recovery

            Vapor Absorption
            Wet Dust Collection
Same as for BPT.
Same as for BPT, plus activated carbon
treatment of resulting effluent.
Same as BPT.
Replacement of wet scrubbers with bag-
houses or other dry collection devices.
  NSP*      Textile Coating
            Solvent Recovery
            Vapor Absorption
            Wet Dust Collection
Original plant design for waste contain-
ment.
Either biological treatment (as for BPT),
or carbon absorption, or reverse osmosis.
Recovery for reuse (or as fuel substitute)
of all vapor or fume emissions.
Baghouse or other dry dust collection
devices.
SOURCE;  Draft Development Document for Proposed Effluent Limitations
         Guidelines and New Source Performance Standards for the Textile,
         Friction Materials and Sealing Devices Segment of the Asbestos
         Manufacturing Point Source Category.Sverdrup and Parcel and
         Associates, Inc., St.Louis, Mo.: May 1974.
*BPT - Best practicable technology currently available;
 BAT * Best available technology economically achievable;
_ NSP = New source performance standards.
                                   29

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                          TABLE D-9

        EFFLUENT GENERATION RATES FROM REPRESENTATIVE

                      SOURCE CATEGORIES
  Source Category
Textile Coating
Solvent Recovery
Vapor Absorption
Wet Dust
Collection:
small
medium
large
Waste Discharge Rate
     (gals./day)

        200
     10,000
     60,000*
     50,000
    100,000
    150,000
SOURCE:  Draft Development Document for Proposed Effluent Limita-
         tions""Guidelines and Hew Source Performance Standards for
         the Textile, Friction Materials and Sealing Devices Segment
         of the Asbestos Manufacturing Point Source Category.
         Sverdrup and Parcel and Associates, Inc., St. Louis, Mo.:
         May 1974.
 *Total discharge per operating period (2 periods per month)
                               30

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II-D:  EFFLUENT CONTROL COSTS

     The basic cost estimates associated with meeting the BPT,  BAT, and
NSP effluent standards by the asbestos products manufacturing industry
are taken from the Draft Development Document for Proposed Effluent Limi-
tations Guidelines for this industry.   Effluent treatment cost  estimates
were based on the premise that the only basic variable determining the
costs to each plant and effluent source was the volume of waste water gen-
erated.  The age and size of the production facilities, level of implemen-
tation of in-plant control, and local  non-water quality environmental fac-
tors were important only insofar as they might determine the volume of
generated effluents.

1.  Capital Investments for Representative Sources:   Table D-10 shows the
investment cost estimates for the various representative effluent sources.
Investment costs are defined as the capital expenditures required to
bring the effluent treatment or control technology into operation.  They
include, as appropriate, the costs of excavation, concrete, mechanical
and electrical equipment installed, piping, engineering design  services,
construction supervision and related costs.  The costs of the control fa-
cilities were estimated on the basis of minimal space requirements.  As
such, no additional land costs were included.

2.  Annual Costs for Representative Sources:  These  costs are shown in
Table D-ll and include:

          t  Capital costs, calculated as 8% of the  total
             capital investment.

          •  Depreciation on a straight line basis,  the
             applicable duration being a function of the
             treatment system involved.

          •  Operation and maintenance costs, which  include
             labor, materials, solid waste disposal, effluent
             monitoring, administrative expenses, taxes, and
             insurance.

          •  Energy and power costs estimated on the basis of
             $0.025 per Kwh.
3.  Costs to Operating Plants:  The cost estimation  methodology discussed
above was applied specifically to effluent-discharging plants in each
asbestos product sub-category, taking cognizance of  each plant's existing
effluent treatment facilities (if any) and the volume of effluents gene-
rated.  Zero-discharge facilities and plants discharging into municipal
sewer systems are excluded from consideration.

     Tables D-12 and D-13 show respectively the capital investment and
annual costs incurred by the relevant effluent-discharging plants in
meeting the proposed standards.  Since all the relevant friction materials
plants currently meet the BPT standards, only the gasket plant  would incur
                                   31

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                               TABLE  D-10
                CAPITAL INVESTMENT  ESTIMATES  FOR  EFFLUENT
                SOURCE CATEGORIES (REPRESENTATIVE SOURCES)
   Effluent Source

Textile Coating
Solvent Recovery
Vapor Absorption
Wet Dust Collection:  small
                      medium
                      large
Capital Investment (1971-$) to Satisfy;
   BPT Standards

        2,000
       73,000
      152,000
       44,000
       64,000
       83,000
BAT Standards
(in addition
to BPT costs)
      0
   146,000
      0
    43,000
    94,000
   146,000
SOURCE;  Draft Development Document for Proposed Effluent Limitations
         Guidelines and New Source Performance Standards  for the Textile.
         Friction Materials and Sealing Devices Segment of the Asbestos"
         Manufacturing Point Source Category.Sverdrup and Parcel  and
         Associates, Inc., St.Louts, Mo.:  May 1974
                                     32

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                                TABLE D-11

                  ANNUAL COSTS FOR REPRESENTATIVE SOURCES

                    OF ASBESTOS MANUFACTURING EFFLUENTS
  Source Category


Textile Coating
Solvent Recovery
Vapor Absorption
Wet Dust Collection:

       Small
       Medium
       Large
       Cost Item


Capital
Depreciation
Operating & Maintenance
Energy & Power

   TOTAL

Capital
Depreciation
Operating & Maintenance
Energy & Power

   TOTAL

Capital
Depreciation
Operating & Maintenance
Energy & Power

   TOTAL
Capital
Depreciation
Operating & Maintenance
Energy & Power

   TOTAL

Capital
Depreciation
Operating & Maintenance
Energy & Power

   TOTAL'

Capital
Depreciation
Operating & Maintenance
Energy & Power

   TOTAL
        Annual Costs  (1971 $) to Satisfy:
           BPT Standards   BAT Standards
                          (In addition to
                           BPT costs)
               8,360

               5,900.
               2,900*
              12,500
              11,000

              32,300

              12,200.
              15,200'
               1,800
              16,800

              46,000
                                                   32,700
11,700,
10,500*
20,600
 1.000

43,800
3,500,
1 ,8004
7,700
4,000
17,000
5,100.
2,600*
12,000
5,200
24,900
6,600. •
3,3004
16,000
6,500
3,400
1 ,7003
4,300
0
9,400
7,500,
4,700J
6,100
0
18,300
11,700,,
7,3003
8,500
0
                             27,500
SOURCE:  Draft Development Document (previously cited)
1
  10-year depreciation period
  14-year depreciation period
                  3-yea»
* 20-year depreciation period
  25-year depreciation period
                                     33

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                             TABLE D-12
CAPITAL INVESTMENTS REQUIRED BY EFFLUENT-DISCHARGING PLANTS
*
Plant Code
Capital Costs ($) To Meet:
BPT Standards BAT
S-1
m-?.
FM-3
• FM-4
FM-6
TOTAL

(1971 $)
73,000
0
0
0
0
73,000

Standards ( 1 ncremental )
(1973 $)* . (1971 $)
80,300
1 '0
- o
0
0
80,300
TABLE D-13
146,000
146,000
94,000
43,000
146,000
575,000

(1973 $)*
160,600
160,600
103,400
47,300
160,600
632,500

ANNUAL COSTS INCURRED BY EFFLUENT-DISCHARGING PLANTS
Plant Code
Annual Costs ($) To Meet:
BPT Standards BAT
S-1
FM-2
FM-3
FM-4
FM-6
TOTAL

SOURCE:
iliZUl
32,300
0
0
0
0
32,300

Draft Development
(1973 $)*
35,, 500
0
0
0
__JL_
35,500
%
Document, (previously
Standards
(1971 $)
43,800
27,500
18,300
9,400
27,500
126,500

cited) .
(incremental)
(1973 $)*
48,200
30,300
20,100
10,300
30,300
139,200

•
*T9T3TTgures assume an average cost escalation of 10 percent over 1971
                                   34

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any capital and annual operating expenditures in meeting these standards.
As for the BAT standards, all the listed plants would incur some costs.

      In the aggregate, capital  investments for these segments of the as-
bestos manufacturing category would equal $80,300 to meet the BPT stan-
dards, pi us $632,500 to meet the BAT guidelines.  As for annual costs,
these amount to $35,500 and $139,200 respectively (all figures in 1973
dollars).
                                     35

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PART III:  ECONOMIC IMPACT ANALYSIS

-------
III-A:  METHODOLOGY

     Previous anelysi.i of  tho  financial  : TO Tiles of t:r ••-•>r-.'o'^  foment
of the ar-bestos products ra:iuf?ct'«r1r^- 1r-<-' •.'.".':-;' 3y~ ^r^ r/sr1  •>•:  followi
profit margins (35 ?  percentage of 5 ale:' ):

                                             Pro-tsx      A^tcr^ '**-''> v
     Asbestos textiles                         5.£?          .7.^;;
     Friction materials                        5. OS          C.C;
To a first approximation.  it  is  a.?s;mri that t!ic.-r; fir • -"-.s ;;•*'•  ^.prl
across the board  to  each  iterri of the product, mix Ta.r!r? -::'•.":">-; ,-t  -  p]r,nt.
Thus, a textiles  plant  is  assumed to realize an identic-;"! ir-irrin  ^ 5.8
percent of sales  on  yarn,  cord,  rope, thread, tape, wicks, *p?  «?riou:>
fabrics.

     Furthermore,  it ir» assumed  that any ?J,dit;or,?" zr-s*  f. •* ,"-:*z~-.c  Auc to
the proposed effluent standards, which the manufacturer Cc,rr~t  par. --on to
the customer and  therefore must  absorb, ultimately comes  out of the above
profit margins.   Clearly,  as  such cost increases approach zr,rl excc;d these
margins, the plent must make  a determination as to the cr.oncT> ••'\-doro of
continued operation, taking account also of several other -r:ip-!neinci factors.

     Indications  are that, in genar?i, tho a.v^rag^ ;?rcntaM'ii \v  4n these
segments of the asbestos  products manufacturing industry  TL, "ow vr-^pa^d
with the returns  achieved by  other manufacturing industries.   It  is there-
fore reasoned, for purposes of this analysis, that any additional  "-ate*"
treatment costs closely approaching the above ors-tax fii'""ginn wou'd in
general oresent a  throat  to th«  contirued operation ov 4  P1a".'.  <-••" product.
line.  (Disr.us.iii ""^r,  viuh  5 one vn^'.^try ^ourc»r< r.^pfrif-1"; ;«^rr;-,ps  en oven
greater nonsltivity  t-::.n  this for r.'.l product Vines),  "h'jr. . •''.""•  f'-^'ction
material fscilitiss, if the projected additional anr.y?,'' -^.t-,'-  tr "=?,-' "lent
costs necessary to meot any of the proposed standards '-pprcs-h  6«G ?e^-
cent of a plant's  value of sales of friction materials, that plant's con-
tins^sd production  of thess products would be recorded re  jor,.vrd-f^c.

     In those plants whare the watar treatment costs cannot be  easily .-nd
directly  attributed to  a given product line or operation tlT-r-a c:sts
are assigned uniformly  to all of the plant's products.  Thus,  -in  such cir-
cumstances. the additional costs associated with trentinor.t of  solvent re-
covery, vapor absorption, and wet dust collection effluents are distributed
equally among all  th« products manufactured at those plr.r.tc .

     Tables D-14  end u->15 present estimates of th.; ay^ra^c ?."nuo,1  "ilje of
sales of the basa products ?.t the ror.psctivn s^fluent-d^.ch^rrin',, p'ants,
as well as a representation of the additional annual costs  (as  P  pe^crn-
tage of these sales) of meeting the BPT and BAT standards «"srpRCt'vely.
As indicatad in Tablo D-13, water treatment costs, -'n  I'll".  Hdl-^s, are
derivod by escftlatlon of  the  19"'l costs by 10 pe^ce^t  '''•(•  rr.*"'!cct cost in-
flation  bf!':;vv2.:n  "071  end "9
                                    36

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     To ascertain and isolate specific financial  impacts, one would ideally
wish to examine the expected profitability of present or "baseline" ope-
rations versus that projected under BPT and BAT,  other conditions initially
held constant.  One would also wish to compare the required capital ex-
penditures with the cash flows available, and compare the ordinary capi-
tal investment which would be expected to be made over the same period
with the expenditures made to meet BPT and BAT standards.

     Additionally, one would then wish to examine the results in the con-
text and from the perspective of each company's total business.

     An effort was made to examine the various plant situations from these
standpoints, to the extent that data and information were available.  This
examination included estimates of both operating  margin and return on in-
vestment effects, as cross checks on the findings.


III-B:  ECONOMIC IMPACT ANALYSIS

     (1)  Financial Impact:  The indications are  that if any plants would
be significantly impacted, it would probably be plants FM-2, and/or
S-l.  Such impacts would be only in respect to BAT standards, which im-
plies that the time frame for capital expenditure is, approximately, 1980-
1983, and the accounting for annual charges related to BAT would be post-
1980.

     To put this in some perspective at the plant level, the estimated
incremental annual costs for these plants are on  the order of $30,000-
$48,000 per year, in 1973 dollar terms; and each  plant has 100 or more
employees and annual pre-tax operating earnings estimated to significantly
exceed one hundred thousand dollars.  Indications are that other things
being equal the diminution of earnings, given present sales and earnings
levels, could be in the range of 7 to 21 percent  for these plants.
However, assuming pre-tax profit margins in the range of 5 to 12 percent,
Indications are that the earnings diminution could be offset by very
minor price Increases (less than 2 percent).  Moreover, the Impact will
be lower to the extent that there is real growth  in the business Into the
1980's since the level of earnings (in constant dollar terms) would be
higher.

     It is believed that the additional capital expenditure required to
achieve the BAT standards at these plants would represent a minor portion
of the existing investment; furthermore, indications are that the rate of
expenditure in general will not be large in comparison with normal pat-
terns.

     On the basis of the estimates in Tables D-14 and 0-15 and impact se-
verity criteria set forth in Section III-A (I.e., costs should not too
closely approach margin of sales), none of the discharging plants is re-
garded as being in danger of curtailing Or terminating operations as a
direct result of the proposed effluent limitation guidelines.


                                   37

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                               TABLE D-14
ANNUAL COSTS OF ACHIEVING BPT STANDARDS AS A
FUNCTION OF SALES OF RELEVANT
Estimated Average
Annual Sales* of
Plant Base Product Hasa Products
; •• (in trillions)
0?73J)
S-l Sheet Gaskets 5.0
FM-2 Friction Materials 2.4
FM-3 " " 3.6
FM-4 " " 1.7
FM-6 " " 60.0
TABLE D-15
PRODUCTS
Additional Costs
to Me@t BPT
Standards
U973JJL
$35,500
0
0
0
0

Costs
(1973$) as
% of Sales
0.7
0
0
0
0

ANNUAL COSTS OF ACHIEVING BAT STANDARDS AS A
FUNCTION OF SALES OF RELEVANT
Estimated Average
Annual Sales* of
Plant Base Products Base Products
(in mi SI ions)
(1973$)
S-l Sheet Gaskets 5.0
FM-2 Friction Materials 2.4
FM-3 " " 3.6
FH-4 " " 1.7
FM-6 " " 60-0
SOURCE: Company and Trade Reports and Contract
!
PRODUCTS
Additional Costs
to Meet BAT
Standards
(1973$)
$48,200
30,300
20,100
10,300
30,300
ar's Estimates.
Costs
(1973$) as
% of Sales
1.0
1.3
0.6
0.6
0.05

*In cases where products are consumed captiyely,  estimates  reflect  internal
 transfer prices.
                                    38

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     Table D-16 presents a summary in terms of estimated Impact on return
on investment, given the data available.   The indications are that there
is likely to be little financial  impact from the proposed standards.

     (2)  Price Effects:  On the  basis of discussions with asbestos pro-
ducts manufacturers and other followers of the industry, there appear to
be no legal or market constraints in the way of passing-on to the consumer
cost increases of the magnitudes  estimated as attributable to the proposed
standards (maxima of 0.7 percent  and 1.3 percent of sales to meet the BPT
and BAT standards respectively).

     It is reasoned that the industry segments will not be disposed to ab-
sorb these added costs in the face of other margin-depleting costs, such
as those for energy, and given the already low after-tax margins realized.
Accordingly, a price increase on  the order of one percent may be imposed
without serious customer resistance by the one gaskets plants incurring
additional expenses to meet the BPT guidelines (Table D-14).  But since
no industry-wide follow-the-leader price increases are expected to ma-
terialize from this limited price action, the price effect of the BPT
standards are projected to be nil.  As for the BAT standards, since more
friction materials plants must expend funds to comply with the guidelines
(Table D-15), it is estimated that an industry-wide price rise on the
order of 1.0 percent (for friction materials only) could occur as a result
of these standards   Other asbestos products segments should witness no
price increases.

     Additional justification for the original contention that no serious
constraints to increased cost pass-on exist may be obtained from the fact
that the asbestos products in question are in fact specialty items, con-
sumed in most cases by industries for whom the cost of asbestos products
constitutes a very low percentage of the manufacturing cost of their end-
products.  In other markets, (e.g., the aftermiarket sale of friction pro-
ducts), sales of asbestos products are relatively insensitive to price
increases in the order of 1 percent.

     Another factor which often tends to discourage price increases is
the availability of imports and/or substitute products.  Regarding imports,
the U.S. traditionally has been a net exporter of .asbestos products, as
illustrated by the following statistics for 1973:
        Product                Value of Imports        Value of Exports

Gaskets                     ,      Negligible              $ 1,442,446
Packing                               "                     9,040,541

Heat or Sound Insulation              "                     2,850,444

Textiles & Yarns                  $5,584,866                6,454,182

Clutch Facings & Linings          Negligible                1,870,055

Brake Linings                  	H_	             7.862.805

     TOTAL                     About $6,000,000           $29,500,000
                                   39

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                              TABLE D-16
         If'3ACT 0~ P^OS
                                       OM 3E7UPJ)



Plant
S-l
FM-2
FM-,3
FM-4
FM-6

Plant
Investment
for Asbestos
Products s
Range ($KM)
n.,.3
0.7 -1.4
0.9 - 1.4
0.5 - 1.0
18.0 -30. Q
Average and
Mew invest- Range of
"lent for ROI for
BAT as % for "otal
of Current Corpor?-
Range (%} ROI (%)2
n.a. n.a
11 - 23 n.a.
7-11 9 + 100%
5-9 7 i 40%
0.5 - ] 7 i 50%

Range of Rotwr-
^or Arbos^r. r't
Baseline Br'i
n.a. n.a.
n.a. n,a.
8-12 8-12
5-10 B-10
6-10 6-^0

1 op
rrfucto
<§.
n.a.
n.a.
7-10
4- 8
6-10
Basis:
Notes:
        Recent Industry supply-demand and pricing environment, present ope-
        rating standards with respect to other than the guidelines under
        study.

        1P1c.nt '"nvestront ar^ vorVfnf" capital  associated with rc'^'ant as-
         bestos products rnanufa
        2Average of the annual  aftsr-tax earnings divided by stockholders'
         equity at beginning of the year for the last five years.  Variabi
         lity expressed as e. percentage around the average value.  F7';;vros
         roundsd .

        3"n.a." denotes data for meaningful  estimates not available.
SOURCE:  The information presented above represents contractor estimates
         derived in part from Information presented in comp&r,y reports,
         SEC filings 9 statistical services, Industry studies, and other
         sources believed reliable.  The accuracy and completeness of such
         sources and information are not guaranteed.
                                     40

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The aggregate statistics clearly suggest that import volumes  are not suf-
ficiently high as to deter justifiable cost pass-through to the domestic
asbestos products consumers.  Even in the textiles category where imports
nearly equal exports, the supply/demand balance is such that domestic con-
sumers are not expected to resist payment of price increases of the order
of one percent.  As for substitute products, no currently available substi-
tutes enjoy the price-performance advantage of the asbestos products in
each of the applications under consideration.  For instance, graphitic pack-
ings and mechanical seals have only succeeded in capturing smeT highly-
specialized segments of the packing/sealing devices markets.

     (3)  Production, Employment, Community, and Other Effects:  Since,
as stated before, production curtailments and plant closures are not ex-
pected to occur as a direct consequence of the proposed effluent quality
standards and since it is believed that additional costs incurred as a
result of the BPT and BAT standards can be readily recouped by passing
them on to product consumers in the form of higher prices, it is there-
fore concluded that there will be no direct impact (of these standards)
on the production and market growth of the subject asbestos products.
Accordingly, no adverse employment and community effects will result,
and, other things being equal, the United States' favorable balance of
trades position with respect to manufactured asbestos products should con-
tinue for the foreseeable future.

     (4)  Impacts of NSP Standards:  As shown in Table D-8, new plants
to which the NSP Standards are applicable will be designed, in most cases,
on the principles of zero effluent discharge, achievable by either total
waste containment, recovery, or use of dry dust collection systems.  Only
in the instance of solvent recovery operations are any treatable effluents
expected, and for such operations, the effluent standards applicable are
similar to those proposed as achievable by 1977 (BPT).

     The above considerations, supplemented by the judgement that a no-
discharge design philosophy (for new plants) will not significantly add
to the initial and/or operating costs of a new plant, lead to the con-
clusion that there will be zero impact of the NSP Standards on new plant
construction (and therefore, industry growth), product prices, plant lo-
cation perferences  (domestic versus overseas), and the national balance
of payments posture.  In other words, the costs associated with the minor
manufacturing flowscheme redesign or waste handling and treatment altern-
atives called for in these standards will not act as a deterrent to the
construction of new plant capacities for the subject asbestos products;
neither will the standards, of themselves, be a significant constraint
that could force a prospective plant to be preferentially located outside
the United States.

     (5)  General:  It should be stressed that, in arriving at the above
conclusions with respect to the potential impacts of the proposed effluent
guidelines only the direct effects of these guidelines have been taken
into consideration.  It should be recognized that the subject segments
                                   41

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of the asbestos products industry are concurrently being impacted by
other factors including economics (e.g.  escalating energy,  materials,
and labor costs), other governmental  regulations (air pollution,  health
and safety}, and social and public relations factors.  Thus, whereas
lhc; incronantal costs of meeting the effluent limitations guidelines may
be of rcinor significance by themselves,  the combination of all  the above
factors may, in fact, produce the adverse impacts that are not antici-
pated if only the effluent guidelines were in effect.
                                    42

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PART IV:   LIMITS OF ANALYSIS

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                          LIMITS OF ANALYSIS

     The above estimates of the potential  economic impact of the proposed
BPT, BAT, and NSP effluent standards for the asbestos textiles,  friction
materials, and gaskets/packings/sealing devices segments of the  asbestos
products manufacturing industry are predicated on basic technology and
cost estimates contained in the Draft Development Document for Proposed
Effluent Limitations Guidelines for these segments.   Accordingly, the
analysis contained herein is accurate only to the extent that the
document truly reflects the efficacy of the proposed technol-
ogies, as well as their associated costs.   No effort has been made by
this contractor to independently verify the data.

     Additionally, the list of effluent-discharging plants in these sub-
categories (which is the basis for aggregate cost estimates) is  taken from
the said document and has not been independently verified.

     It should be indicated that while the methodology of impact assess-
ment adopted in this study is judged to be meaningful for identifying
impact-sensitive facilities, the final decision to curtail or discontinue
operations at a given plant is governed by a number of interacting factors.
No actual financial data for specific plants were made available for this
study, and hence the analysis of financial impact is based on necessarily
imprecise estimates.  While additional water treatment costs may, on the
surface, appear as manageable additional burdens in light of a given
plant's apparent sales volume and profit margin, the decision to continue,
curtail, or terminate operations is generally made in light of corporate
goals and expectations, present and future market conditions, etc.
                           /

     Finally, as alluded to 1n prior discussion, the judgment 1n this
study regarding the probable impact of the proposed effluent limitation
guidelines has not taken into account the often concurrent and reinforcing
effects of other legislations and governmental controls (specifically,
air pollution, occupational health and safety, etc.) which, with the addi-
tional water treatment costs, may create a "last straw" effect,  even
though the water treatment costs may, by themselves, be negligible.
                                   43

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               ASBESTOS TEXTILES MANUFACTURING:   SUMMARY
                          OF ECONOMIC  IMPACT

".nc'j'st-" - Asb^rtes Products Manufacturing
  SIC Cod- - 3292

•'/ n"ants in segment -  15 plants
f, Tou~1 pltrts in industry - 20  percent

•' ^c.r:':s c'-rect discharging -  None
% ">£:;" D?ar«t.% ~n seament - 0
* Plants with BDT  treatment  in  place - 15 plants
% Tot?,] plants  in  segment  -  100 percent
:OST OF POLLUTION ABATEMENT
                                                BPT            BAT
  Capital costs  for segment
    Total capital  cost                          0              0
    Iotas capital  expenditures
     as  % o*  average annual
     investment                                  0              0
    Tot?.!1 capital  expenditures
     55  % of  total  capital  in
     place                                       0              0

              costs for segment
     Tr^ta'  Incremental  increase
      sTr.~vr*~.a capital charges                  0              0
     "a';?.'  ^crc^sntal  increase
      axc'i'cJins capital charges                  0              0
     Total  incremental  increase
      including capital charges
      r.s % o^ sa'es                              0              0

 HXPF.CTED "R:CF, INCREASE
   Expcctsc! increase due to
    pollution control      ,                    None            None

 PLANT CLOSURES
   Tote1 /:cs vires anticipated                  None            None
   % reduction of segm«;nt capacity
    due to closures                              0               °

 EMPLOYMENT
   Tote" >? of  employees affected                 0               0
   % o" tctr":!  employees in segment               0               0
 OO^1 '":,"" "-"-ICTS                      |        None
 IM-AC™ 0?\ :7:D!.?".TRV  GROWTH              '        None           None

 BALANCE OF TRADE EFFECTS                      None           None

                                     44

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              FRICTION MATERIALS MANUFACTURING:
                          OF ECONOMIC IMPACT
                                                 SUMMARY
                                                BPT
Industry - Asbestos Products Manufacturing
  SIC Code - 3292

#Plants in segment - 38 plants
XTotal plants in industry - 51 percent

#Plants direct discharging - 4 plants
%Total plants in segment - 11 percent

#Plants with BPT treatment in place - 38 plants
%Total plants in segment - 100 percent


COST OF POLLUTION ABATEMENT

   Capital costs for segment
      Total capital cost   7	      0
      Total capital expenditures as
       % of average annual investment  ...      o
      Total capital expenditures as
       % of total capital in place 	      o

   Annualized costs for segment
      Total incremental increase
       including capital charges 	      o
      Total incremental increase
       excluding capital charges 	      o
      Total incremental increase
       including capital charges
       as % of sales	      0

EXPECTED PRICE INCREASE

   Expected increase due to
    pollution control  	      0
PLANT CLOSURES

   Total closures anticipated  	    None
   % reduction of segment capacity
    due to closures	      0
EMPLOYMENT

   Total # of employees affected 	    None
   % of total employees in segment 	      0

COMMUNITY EFFECTS  	    None
IMPACT ON INDUSTRY GROWTH  	    None

BALANCE OF TRADE EFFECTS 	  None
   .   BAT



   $471,900

  7.4 percent*

  < 1 percent



    $91,000

    $83,720


  0.04 percent



About 1 percent


     None

       0


     None
       0

     None

     None

     None
*Based in part on the average New capital  expenditure-to-value of ship-
 ments ratio for SIC 3292 in the 1958-67 period (U.S.  Bureau of the Census)
                                   45

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        i'^FJSyPACKI NG,^EAl JNG .DEVICES MANUFACT!JR I m •
Irdustry - Asbestos  Products  Manufacturing
  SIC Code -  3293

i;-'.J-;r:t3 -in segment -  22  plant,-,
",Fc ';.-,! plrrts in industr-  - r-i'J  percent

^Plants direct discharging -  ]  plant
;' Total Diane.; in segment - 4.5  percent

-'Hants with  BPT treatment in place -  21  plants
.1"ota'' p"^r,t.> in segment - 95.5 percent
COST OF POLLUTION ABATEMENT

      i?! '.ont^u

PLANT CLOSUKtS

                                             None
  $160,600

3.7 percent*

 < 1  percent


   $48,200

   .MA, 300
                                                            0.03 percent
    Non'
Total c
"!- reciuc
due to
EMPLOYMENT
% of to
COMMUNITY
>!1PAC~r ON
BALANCr OF
losirres anticipated 	
tion of segment capacity
closure'

of rjtip Joyces affected ....
U! '.Miployoes in segment . . .
EFFECTS 	
INDUSTRY hRiWH
TRAOr F>FECTS . . . ,
None
C
None
0
None
None
None
None
0
Hone
0
None
None
Nnnp
       in p-irt on the average  New  capital  expenditure-- to-value of ship-
       rotio r>r SIC 3293  in the 1962-67  period (U.S.  Bu»-oau of the Census)
                                    46

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