EPA-E30/l-74-059a
JULY 1976
ECONOMIC ANALYSIS
OF
INTERIM FINAL AND PROPOSED
EFFLUENT GUIDELINES
MINERAL MINING AND
PROCESSING INDUSTRY
SAND AND GRAVEL
CRUSHED STONE
INDUSTRIAL SAND
PHOSPHATE ROCK
QUANTITY
U.S. ENVIRONMENTAL PROTECTION AGENCY
Office of Planning and Evaluation
Washington, D.C. 20460
\
o
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This document is available in limited copies through the
Environmental Protection Agency, Effluent Guidelines
Division, Washington, D.C. 20460. Attention: Distribution
Officer, WH552.
This document will subsequently be available through the
National Technical Information Service, Springfield, VA 22151.
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ECONOMIC IMPACT
OF
INTERIM FINAL AND PROPOSED EFFLUENT GUIDELINES
MINERAL MINING
AND PROCESSING INDUSTRY
Construction Sand and Gravel
Crushed Stone
Industrial Sand
Phosphate Rock
U.S. Environmental Protection Agency
Office of Planning and Evaluation
Washington, D.C. 20460
U.S. Environmental Protection Agency'
Region V. Library
230 South Dearborn Street
3go, Illinois 60604
I Vdt
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This report has been reviewed hy the Office
of Planning and Evaluation, EPA, and ac-
proved for publication. Approval does not
signify that the contents necessarily reflect
the views and policies of thf> Environmental
Protection Agency, nor does mention of trade
names or commercial products constitute en-
dorsement or recommendation for use.
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PREFACE
The attached document is a contractor's study prepared with the super-
vision and review of the Office of Planning and Evaluation of the U.S.
Environmental Protection Agency (EPA). Its purpose is to provide a
basis for evaluating the potential economic impact of effluent limitations,
guidelines and standards of performance established by EPA pursuant to
section 304(b) and 306 of the Federal Water Pollution Control Act.
The study supplements an EPA technical Development Document issued in
conjunction with the promulgation of guidelines and standards for point
sources within this industry category. The Development Document surveys
existing and potential waste treatment and control methods and technologies
within this category and presents the investment and operating costs
associated with various control technologies. This study supplements that
analysis by estimating the broader economic effects (including product
price increases, continued viability of affected plants, employment,
industry growth and foreign trade) of the required application of certain
of these control technologies.
The study has been prepared with the supervision and review of the
Office of Planning and Evaluation of EPA. This report was submitted in
fulfillment of Contract No. 68-01-1541, Task Order No. 24 by Arthur D.
Little, Inc. Work was completed as of July, 1976.
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.
This report represents the conclusions of the contractor. It has
been reviewed by the Office of Planning and Evaluation and approved for
publication. Approval does not signify that the contents necessarily
reflect the views of the Environmental Protection Agency. The study has
been considered, together with the Development Document, information
received in the form of public comments on the proposed regulation, and
other materials in the establishment of final effluent limitations, guide-
lines and standards of performance.
m
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TABLE OF CONTENTS
Page
List of Tables xiii
List of Figures xix
I. SUMMARY i-i
A. PURPOSE AND SCOPE 1-1
B. APPROACH 1-3
1. Price Effects 1-4
2. Financial Effects 1-4
3. Production Effects 1-5
4. Employment Effects 1-5
5. Community Effects 1-5
6. Balance of Trade Effects 1-5
7. Industry Growth Effects 1-5
C. CONCLUSIONS 1-7
1. Construction sand and gravel 1-9
a. Internal Costs 1-9
b. External Costs I-10
(1) Price Effects I-10
(2) Production Effects I-10
(3) Employment Effects I-11
(4) Community Effects I-11
(5) Industry Growth Effects I-11
(6) Balance of Trade Effects I-11
2. Crushed Stone I-11
a. Internal Costs 1-11
b. External Costs 1-12
(1) Price Effects 1-12
(2) Production Effects 1-12
(3) Employment Effects 1-13
(4) Community Effects 1-13
(5) Industry Growth Effects 1-13
(6) Balance of Trade Effects 1-13
3. Industrial Sand 1-13
a. Internal Costs 1-13
b. External Costs 1-13
(1) Price Effects 1-13
IV
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TABLE OF CONTENTS (CONTINUED)
Page
(2) Production Effects 1-14
(3) Employment Effects 1-14
(4
!5
6
Community Effects 1-14
Industry Growth Effects 1-14
Balance of Trade Effects 1-14
4. Phosphate Rock 1-15
a. Internal Costs 1-15
b. External Costs 1-15
(1) Price Effects 1-15
(2) Production Effects 1-15
(3) Employment Effects 1-15
(4) Community Effects 1-15
(5) Industry Growth Effects 1-15
(6) Balance of Trade Effects 1-16
II. CONSTRUCTION SAND AND GRAVEL (SIC-1442) II-l
A. PRODUCTS, MARKETS AND SHIPMENTS II-l
1. Product Definition II-l
2. Production Processes II-l
3. Shipments 11-2
4. End Uses II-5
5. Possibilities of Substitution II-5
6. Future Growth II-9
7. Marketing and Distribution 11-10
B. INDUSTRY STRUCTURE 11-12
1. Types of Firms 11-12
2. Types of Plants 11-13
3. Industry Segmentation 11-21
C. FINANCIAL PROFILES 11-25
1. Industry Performance 11-25
2. Model Plants 11-25
3. Constraints on Financing Additional Capital 11-25
D. PRICES AND PRICE SETTING 11-30
1. Historic Prices 11-30
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TABLE OF CONTENTS (CONTINUED)
Page
2. Current Prices 11-30
3. Price Elasticity and Pricing Dynamics 11-33
E. POLLUTION CONTROL REQUIREMENTS AND COSTS 11-37
1. Effluent Control Levels 11-37
2. Effluent Control Costs 11-37
3. Current Levels of Control 11-45
a. Dry Process 11-45
b. Wet Process 11-47
c. River Dredging 11-47
4. Total Control Costs 11-47
F. ANALYSIS OF ECONOMIC IMPACT 11-55
1. Incremental Control in a Major Metropolitan
Market (Case 1) 11-57
a. Price Effects 11-57
b. Financial Effects 11-58
c. Production Effects 11-59
d. Employment Effects 11-59
e. Community Effects 11-60
2. Level C Control for Small Plant in a Major
Metropolitan Market (Case 2) 11-60
a. Price Effects 11-60
b. Financial Effects 11-60
c. Production Effects 11-61
d. Employment Effects 11-61
e. Community Impacts 11-61
3. Level D or G Control for Small Plant in a Major
Metropolitan Market (Case 3) 11-61
4. Level C Control for Large Plant in a Major
Metropolitan Market (Case 4) 11-62
a. Price Effects 11-62
b. Financial Effects 11-62
c. Production Effects 11-62
d. Employment Effects 11-63
e. Community Effects 11-63
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TABLE OF CONTENTS (CONTINUED)
Page
5. Level D or G Control for Small Plant in a Small
Metropolitan or Rural Market (Case 5) 11-63
a. Price Effects 11-63
b. Financial Effects 11-63
c. Production Effects 11-64
d. Employment Effects 11-64
e. Community Effects 11-64
6. Aggregate Impact Summary 11-64
a. Summary Price Effects 11-68
b. Summary Financial Effects 11-68
c. Summary Production Effects 11-68
d. Summary Employment Effects 11-69
e. Summary Community Effects 11-69
f. Summary Balance of Trade Effects 11-69
g. Summary Industry Growth Effects 11-69
G. LIMITS OF THE ANALYSIS 11-70
III. CRUSHED STONE, [SIC-1422, SIC-1423, SIC-1429] III-l
A. PRODUCTS, MARKETS AND SHIPMENTS III-1
1. Product Definition III-l
2. Production Processes III-2
3. Shipments III-4
4. End Uses III-8
5. Possibilities of Substitution III-9
6. Future Growth III-11
7. Marketing and Distribution 111-12
B. INDUSTRY STRUCTURE III-16
1. Types of Firms 111-16
2. Plant Characteristics 111-20
3. Industry Segmentation 111-30
C. FINANCIAL PROFILES II1-38
1. Industry Performance II1-38
2. Representative Plants 111-38
3. Variations by Segments III-41
vn
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TABLE OF CONTENTS (CONTINUED)
Page
D. PRICES AND PRICE SETTING 111-45
1. Historic Prices 111-45
2. Current Prices 111-48
3. Price Elasticity and Pricing Dynamics 111-48
E. POLLUTION CONTROL REQUIREMENTS AND COSTS III-53
1. Effluent Control Levels 111-53
2. Effluent Control Costs 111-53
3. Current Levels of Control 111-56
a. Dry Process III-62
b. Wet Process 111-62
c. Flotation Process 111-64
4. Total Control Costs 111-64
F. ANALYSIS OF ECONOMIC IMPACT 111-70
1. Incremental Discharge Control in a Major
Metropolitan Market (Case 1) 111-72
a. Price Effects 111-72
b. Financial Effects 111-74
c. Production Effects 111-74
d. Employment Effects 111-74
e. Community Effects II1-74
2. Small Plants, From Total Discharge to
Total Recycle (Case 2) III-74
a. Price Effects II1-74
b. Financial Effects 111-74
c. Production Effects 111-75
d. Employment Effects III-75
e. Community Effects 111-75
3. Small Plants, From Total Discharge to Total
Recycle in a Small Metropolitan or Rural
Market (Case 3) 111-76
a. Price Effects 111-76
b. Financial Effects 111-76
c. Production Effects 111-76
VI 1 1
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TABLE OF CONTENTS (CONTINUED)
Page
d. Employment Effects III-77
e. Community Effects II1-77
4. Aggregate Impact Summary 111-77
a. Summary Price Effects 111-78
b. Summary Financial Effects 111-78
c. Summary Production Effects 111-78
d. Summary Employment Effects III-81
e. Summary Community Effects 111-81
f. Balance of Trade Effects 111-81
5. Flotation Process Segment III-81
a. Price Effects II1-82
b. Financial Effects 111-82
c. Production Effects II1-82
d. Employment Effects III-83
e. Community Effects 111-83
f. Balance of Trade Effects 111-83
G. LIMITS TO THE ANALYSIS 111-84
IV. INDUSTRIAL SAND (SIC-1446) IV-1
A. PRODUCTS, MARKETS AND SHIPMENTS IV-1
1. Product Definition IV-1
2. Production Processes IV-3
a. Dry Processing IV-3
b. Wet Processing IV-4
c. Flotation Processing IV-4
3. Price, Shipments IV-6
4. End Uses IV-10
5. Possibility of Substitutes IV-10
6. Future Growth IV-11
7. Market and Distribution IV-11
B. INDUSTRY STRUCTURE IV-13
1. Types of Firms IV-13
2. Types of Plants IV-14
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TABLE OF CONTENTS (CONTINUED)
Page
3. Industry Segmentation IV-17
C. FINANCIAL PROFILE IV-26
D. PRICING IV-32
E. POLLUTION CONTROL REQUIREMENTS AND COSTS IV-33
1. Effluent Control Levels IV-33
2. Current Levels of Control IV-33
3. Effluent Control Costs IV-37
4. Total Control Cost IV-48
F. ANALYSIS OF ECONOMIC IMPACT IV-50
1. Price Effects IV-50
2. Financial Effects IV-52
3. Production Effects IV-55
a. Potential Plant Closures IV-55
b. Effects on Industry Growth IV-55
4. Employment Effects IV-55
5. Community Impacts IV-56
6. Other Impacts IV-56
G. LIMITS OF THE ANALYSIS IV-57
V. PHOSPHATE ROCK (SIC-1475) V-l
A. PRODUCTS, MARKETS AND SHIPMENTS V-l
1. Product Definition V-l
2. Shipments V-l
a. Reserves V-l
b. Trends in Domestic Supply V-5
3. End Uses V-8
4. Possibilities of Substitution V-8
5. Future Growth V-8
B. INDUSTRY STRUCTURE V-l3
1. Types of Firms V-13
2. Types of Plants V-13
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TABLE OF CONTENTS (CONTINUED)
Page
3. Distribution of Plants and Employees, by
Size and Location V-15
4. Relationship to Total Industry V-17
5. Industry Segmentation V-22
C. FINANCIAL PROFILES V-24
1. Industry Performance V-24
2. Model Plants V-26
D. PRICES AND PRICE SETTING V-28
1. Present V-28
2. Projected V-30
E. POLLUTION CONTROL REQUIREMENTS AND COSTS V-33
1. Effluent Control Levels V-33
2. Effluent Control Costs V-33
3. Current Levels of Control V-36
4. Total Control Costs V-38
F. ANALYSIS OF ECONOMIC IMPACT V-40
1. Price Effects V-40
2. Financial Effects V-42
3. Production Effects V-43
4. Employment Effects V-43
5. Community Effects V-43
6. Balance of Trade Effects V-43
G. LIMITS OF THE ANALYSIS V-44
APPENDIX - ANALYSIS OF SURVEY DATA FROM CRUSHED STONE AND
CONSTRUCTION SAND AND GRAVEL INDUSTRIES A-l
A. SURVEY COVERAGE A-l
B. SURVEY TABULATIONS A-6
1. Employment, Payroll Characteristics by Site A-6
2. Cost Structure Characteristics by Site A-6
3. Pricing Characteristics by Site A-9
4. Potential vs. Actual Operating Capacity by Site A-17
XI
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TABLE OF CONTENTS (CONTINUED)
Page
5. Expected Life Cycles of Production by Site A-20
6. Gross Capital Outlays A-20
7. Company Financial Statements A-23
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LIST OF TABLES
Table No. page
II-l Construction Sand & Gravel Sold, 1965 - 1974 II-4
II-2 Construction Aggregate Sold or Used by Producers in the
United States for Commercial or Publicly Funded Con-
struction Projects, or Products (103 Short Tons and TT f
103 Dollars) II-6
II-3 Construction Sand and Gravel Used in the United States
in 1974, by State and by Use I/ (103 Short Tons and
103 Dollars) ~ II-7
I1-4 1972 Bureau of the Census and Bureau of Mines
Statistics Compared 11-15
I1-5 Number and Production of Construction Sand and Gravel
and Industrial Sand and Gravel Operations, by Size 11-16
II-6 Sand and Gravel Production in 1974, by State, and
Source ]_/ (103 short tons and 103 dollars) 11-18
II-7 Production of Sand and Gravel in 1974, by State, by
Method of Mining ]_/ (103 short tons and 103 dollars) 11-19
11-8 Production of Sand and Gravel in 1974, by State, and
Land Ownership (Wet or Dry Operation on Land) ]_/
(103 short tons) 11-20
II-9 General Statistics by Employment Size of Establish-
ment 1972 11-22
11-10 Summary - Construction Sand & Gravel Segments, 1972 11-24
11-11 Financial Profile - Revenues for Construction Sand
& Gravel Operations 11-26
11-12 Financial Profile - Cash Flow for Construction Sand
& Gravel Operations 11-27
11-13 Estimated Capital Investment in 1974, in the Producing
Sand and Gravel Industry by State, and Source ]_/
(103 dollars) 11-29
11-14 Construction Sand and Gravel Prices, 1965 - 1974 11-31
11-15 Sand and Gravel Prices FOB City, March 1976
(Dollars Per Short Ton) 11-32
11-16 Sand and Gravel and Crushed Stone Operations Providing
Construction Aggregates for the Washington, D.C.,
Metropolitan Area 11-34
xm
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LIST OF TABLES (CONTINUED)
Table No. Page
11-17 Recommended Limits and Standards for BPCTCA, BATEA,
and NSPS - Construction Sand and Gravel Industry 11-38
11-18 Cost of Compliance for Model Construction Sand and
Gravel Facility 11-40
11-19 Cost of Compliance for Model Construction Sand
and Gravel Facility 11-41
11-20 Cost of Compliance for Model Construction Sand
and Gravel Facility 11-42
11-21 Cost of Compliance for Model Construction Sand
and Gravel Facility 11-43
11-22 Incremental Control Costs for Construction Sand
and Gravel Facilities, Segments and Total Industry
(BPCTCA, BATEA) 11-48
11-23 Summary - Construction Sand & Gravel Segments, 1972 11-49
11-24 Wet Process Sand & Gravel Distribution of Plants
Requiring Discharge Control Facilities by Annual
Production 11-52
11-25 Sand and Gravel Industry Segmented by Size of Plant
and Required Discharge Control Process 11-54
11-26 Cost Components for the Sand and Gravel Industry 11-56
11-27 National Summary of Economic Impact Sand and
Gravel Industry 11-66
III-l Crushed and Broken Stone Shipped or Used by Producers
in the United States 1965-1974 III-5
III-2 Crushed Stone Shipped or Used by U.S. Producers
by Region, 1972 III-7
III-3 Crushed and Broken Stone Shipped or Used by U.S.
Producers by Major Use, 1974 III-10
III-4 Crushed Stone Shipped or Used in the United States 111-14
III-5 1972 Bureau of the Census and Bureau of Mines
Statistics Compared 111-23
III-6 General Statistics: 1972 and Earlier Years 111-24
III-7 Detailed Statistics by Geographic Area (1972) 111-26
III-8 Percent Distribution of Establishments and
Shipments (1972) 111-27
xiv
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LIST OF TABLES (CONTINUED)
Table No. Page
II1-9 Number and Production of Crushed-Stone Quarries in
the United States by Size of Operation 111-29
111-10 Quarry and Plant Characteristics by Size of
Operation (Limestone and Dolomite, 1973) 111-31
I11-11 Quarry and Plant Characteristics by Size of
Operation (Traprock and Granite, 1973) III-32
111-12 General Statistics, by Employment Size of
Establishment (1972) III-33
111-13 Selected Averages by Establishment, 1972
Industry 1422 (Crushed and Broken Limestone) III-34
111-14 Summary - Crushed Stone Segments 111-36
111-15 Financial Profiles - Revenues for Crushed Stone
Operations 111-39
111-16 Financial Profiles - Cash Flow for Crushed Stone
Operations 111-40
111-17 Variations in Plant Economics 111-44
111-18 Relative Wholesale Price Indexes for Crushed Stone
and Related Products, 1964-1974 II1-46
111-19 Value per Short Ton of Crushed Stone Shipped,
1964-1973 111-47
111-20 Crushed Stone Prices FOB City 111-49
111-21 Recommended Limits and Standards for BPCTCA, BATEA,
and NSPS 111-54
II1-22 Cost of Compliance for Model Wet Process II1-57
111-23 Cost of Compliance for Model Wet Process 111-58
111-24 Cost of Compliance for Model Wet Process 111-59
III-25 Cost of Compliance for Model Wet Process 111-60
111-26 Cost of Compliance for Model Flotation Process 111-61
111-27 Summary - Crushed Stone Segments 111-65
111-28 Incremental Control Costs for Crushed Stone
Facilities, Segments and Total Industry (BPCTCA
& BATEA) III-67
xv
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LIST OF TABLES (CONTINUED)
Table No. Page
111-29 Crushed Stone Industry Segmented by Size of Plant
and Required Discharge Control Process. Non-Dry
Process Only 111-69
II1-30 Cost Components for Crushed Stone Industry II1-71
111-31 National Summary of Economic Impact 111-79
IV-1 Industrial Sand Sold or Used by All Producers in
the United States, 1974 IV-2
IV-2 Average Selling Price for Various Types of Industrial
Sands, 1974 IV-7
IV-3 Value of Shipments for Industrial Sand (1963-1972) IV-8
IV-4 Industrial Sand Firms IV-15
IV-5 Estimated Outputs for Various Size Plants IV-16
IV-6 Summary - Industrial Sand Segments, 1972 IV-19
IV-7 Estimated Operating Cost for Industrial Sand
Processing Plants IV-20
IV-8 Estimated Industrial Sand Mining Costs IV-22
IV-9 Summary of Segmentation Rationale IV-24
IV-10 Income Statement for Segment Ift Facilities, 1974 IV-27
IV-11 Income Statement for Segment ID Facilities, 1974 IV-28
D
IV-12 Income Statement for Segment II Facilities, 1974 IV-29
IV-13 Annual Cash Flow for the Various Segments, 1974 IV-30
IV-14 Balance Sheet for Typical Plant Producing Industrial
Sand IV-31
IV-15 Recommended Limits and Standards for the Industrial
Sand Industry IV-34
IV-16 Cost of Compliance for Model Dry Processing Plant IV-38
IV-17 Cost of Compliance for Model Dry Processing Plant IV-39
IV-18 Cost of Compliance for Model Dry Processing Plant IV-40
IV-19 Cost of Compliance for Model Wet Processing Plant IV-41
IV-20 Cost of Compliance for Model Wet Processing Plant IV-42
IV-21 Cost of Compliance for Model Wet Processing Plant IV-43
xvi
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LIST OF TABLES (CONTINUED)
Table No. Page
IV-22 Cost of Compliance for Model Acid and Alkaline
Flotation Plant IV-44
IV-23 Cost of Compliance for Model Acid and Alkaline
Flotation Plant IV-45
IV-24 Cost of Compliance for Model Acid and Alkaline
Flotation Plant IV-46
IV-25 Cost of Compliance for Model Hydrofluoric Acid
Flotation Plant IV-47
IV-26 Incremental Control Costs to Meet Effluent Guidelines
for Industrial Sand Facilities IV-49
IV-27 Cost Components for Industrial Sand Industry IV-51
IV-28 Summary of Effluent Guideline Impact on the
Industrial Sand Industry IV-53
V-l Estimate of World Marketable Phosphate Rock Reserves
U.S. Price Per Recoverable Ton V-3
V-2 U.S. Known Marketable Phosphate Rock Reserves at
Two Price Levels V-4
V-3 Total U.S. Production Capacity, 1974-1980 V-6
V-4 Phosphate Rock Export/Import Balance for the United
States, 1968-1974 V-7
V-5 History of World Phosphate Rock Production and
Consumption V-10
V-6 History of U.S. Phosphate Rock Production and
Consumption V-ll
V-7 U.S. Phosphate Rock Industry, 1974 V-14
V-8 Distribution of Production Capacity at one Location,
by Region, 1974 V-18
V-9 Marketable Production of Phosphate Rock in the
United States, 1968-1974 V-20
V-10 Production Cost for Representative Eastern and
Western Phosphate Rock Facilities V-25
V-ll Financial Profile for Model Florida Phosphate Rock
Mining and Beneficiation Operation (per metric ton) V-27
xvn
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LIST OF TABLES (CONTINUED)
Table No. Page
V-12 Export Prices of Moroccan and Florida Phosphate Rocks V-29
V-13 World Supply-Demand Balance World Demand at Various
Growth Rates, 1974-1980 V-31
V-14 Recommended Limits and Standards for BPCTCA, BATEA,
and NSPS-Phosphate Rock Mining and Beneficiation* V-34
V-15 Cost of Compliance for Model Eastern Phosphate Rock
Mining and Beneficiating Facility V-35
V-16 Incremental Effluent Control Costs for Model Phosphate
Rock Mining and Beneficiating Facility, and the Total
Phosphate Industry (BPCTCA, BATEA) V-39
V-17 Revenues, Normal Costs, and Control Costs Phosphate
Rock Industry V-41
A-l Survey Coverage by Association A-2
A-2 Annual Production and Sales Covered by Survey Responses A-3
A-3 Sample Survey Coverage of Crushed Stone Industry and
Sand and Gravel Industry, 1974 A-4
A-4 Average Wages and Production Per Employee by
Association A-7
A-5 Average Production, Costs, and Employment within
Production Segments by Association A-10
A-6 Average Cost Per Ton by Size of Plant A-l2
A-7 Energy Costs Per Ton of Production A-l6
A-8 Average FOB Price/Ton and Internal Transfer Price/
Ton by Association A-18
A-9 Actual vs. Potential Operating Capacity by Association A-19
A-10 Annual Production Segmented into Expected Site Life
by Association A-21
A-ll Annual Net Cash Flow Per Capital Outlay Dollar and
Capital Outlays per Dollar Sales A-22
A-l2 Aggregate Company Financial Statements by Association A-24
A-13 Aggregate Company Financial Statements by Association A-25
xvm
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LIST OF FIGURES
Figure No. Pa9e
II-l Distribution of Construction Sand and Gravel
Facilities by Processing and Current Control Level
Categories - 1972 11-46
III-l Crushed Stone Production Per Plant 1959-1973 111-19
111-2 Location of Crushed Stone Operations, 1971 II1-28
III-3 Distribution of Crushed Stone Facilities by Processing
and Current Control Level Categories 111-63
IV-1 Dependence of Industrial Sand on the Glass and
Foundry Industry IV-9
IV-2 Industrial Sand Deposits IV-18
IV-3 Industrial Sand Mining-Processing Alternatives IV-23
IV-4 Distribution of Industrial Sand Facilities by
Processing and Current Control Level Categories, 1972 IV-36
V-I Agricultural and Industrial End Uses of Phosphate
Rock V-9
V-2 Distribution of Phosphate Rock Mines Versus Mine
Production Size, 1973 (Total of 42 Mines) V-16
V-3 Phosphate Rock Industry Employment Trends V-19
V-4 Phosphate Deposits in Florida V-21
V-5 Distribution of Phosphate Rock Facilities by Geographic
and Current Control Level Categories, 1974 V-37
A-l Crushed Stone Integrated with Portland Cement
Manufacture Costs Per Ton by Level of Plant Production A-l3
A-2 Comparative Unit Production Costs for Crushed Stone,
by Level of Plant Production A-14
A-3 Construction Sand and Gravel Costs Per Ton by Level
of Plant Production A-15
xix
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L
I '
L I. SUMMARY
L
L
L
i
L
i
i.
L.
A. PURPOSE AND SCOPE
The purpose of this study was to assess the economic Impact of meet-
ing the United States Environmental Protection Agency regulations for
I pollution abatement applicable to the discharge of water streams from
point sources of the mineral mining and processing industry.
i The specific, industry categories included in this report are:
L
• SIC 1422 - Crushed and Broken Limestone
L • SIC 1423 - Crushed and Broken Granite
• SIC 1429 - Crushed and Broken Stone, not elsewhere classified
i
L
t SIC 1442 - Construction Sand and Gravel
0 SIC 1446 - Industrial Sand
0 SIC 1475 - Phosphate Rock
1 Compliance with water pollution standards may require the industry
L- to install new physical facilities in its present operations, modify its
current technical operations, or incorporate specialized facilities in
L new installations. Furthermore, the industry may have to Install equip-
ment and facilities capable of the following three levels of effluent water
i treatment:
! 0 Level I - by 1977, for current industry installations,
the best practicable control technology currently avail-
able (BPCTCA) will be used to control the pollutant
content in the streams discharged by the industry;
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t Level II - by 1983, for current industry installations,
the best available technology that is economically achiev-
able (BATEA) will be similarly used; and
• Level III - new source performance standards (NSPS) for
new industry installations discharging directly into
navigable waters (constructed after the promulgation of
applicable guidelines for water pollution abatement) will
incorporate facilities that will be capable of meeting the
guidelines.
1-2
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B. APPROACH
The Increased costs of operation caused by the Imposition of effluent
guidelines will generate an Internal conflict within companies. Depending
on various factors, a firm can Increase prices, thereby passing on cost
Increases to consumers; or a firm may absorb Increased costs and suffer a
reduction in net revenue. The latter step may force a plant to cease
operations.
Another cost component will be the amount of capital required for
effluent control procedures. A plant may be able to protect net revenues,
but then face such difficulties in raising the capital required, that the
investment cannot be funded. In general, the question of capital constraints
1s more likely to impact those plants that cannot pass on increased costs
but must remain marginally profitable. Should owners require a substantial
capital investment to remain in operation for reduced net revenues, they
may decide to cease operation.
The analysis of internal conflicts provides a means of estimating
conditions in the industry that may lead to plant closures. The aggregate
of possible plant closures then provides an estimate of total economic
Impact on the industry, and from that the secondary impact of lost employ-
ment and incomes in affected communities can be evaluated.
Each of the Industries considered consist of many plants with a wide
range of characteristics. The analysis must account for the different
characteristics that exist in each industry, as such differences pertain
to the economic impact of effluent controls. The plants of each industry
have been placed into various segments and the impact of the effluent con-
trol guidelines on each segment is analyzed. The basic criterion for
forming an industry segment is that the individual segments exhibit differ-
ing response to the guidelines. The actual segmentation is specific for
each industry, but in general is developed on the following lines:
1-3
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t Plant cost structure - a single industry may have very
different cost structures on the basis of plant size,
product type, or other factors;
t Type of product - demand, particularly the price elasticity
of demand, for those products is different than for other
segments;
t Nature of the market served - whether the plants sell to
national, regional, or local markets has a direct bearing
on the industry's competitive structure; and
• Differential effluent control costs
This structure provides a basic hierarchy of segmentation in each industry.
The actual tesselation of the segmentation was developed to represent
the internal impact of the guidelines on the industry.
The impact in each industry segment is analyzed by means of a model
plant which describes the financial structure (revenues, normal operating
costs, capital employed, net revenues, etc.) and the control costs required
to meet the guideline standards. The model plants are used to estimate
the impact for each segment. The following six levels of impact are
analyzed:
1. Price Effects - the segment is analyzed in terms of
competitive structure, price elasticity, availability
of substitutes, etc., all of which will determine the
ability,of the plants in the segment to pass on the
increased costs of operation;
2. Financial Effects - the expected shift in net revenues
and capital requirements are analyzed to estimate the
1-4
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number of plants 1n the segment which would be expected
to close;
3. Production Effects - the impact of expected closures on
production in the segment is analyzed;
4. Employment Effects - the employment impact of plant closures
is assessed from the anticipated closures;
5. Community Effects - any expected employment or income loss
because of plant closures is analyzed for its adverse impact
on the region in which the closing plants are located; and
6. Balance of Trade Effects - a substantial shift in production
or prices could hamper exports and/or encourage imports.
Any such events would impact the nation's balance of trade.
Most of the industries produce relatively low-value products
that are not a significant part of the nation's foreign
trade. Only phosphate rock has any potential impact on
balance of trade.
The application of a general analysis to the specific problems
of those industries is not without limitations. This study
has attempted to recognize the limitations and to make assump-
tions that would overstate adverse economic impact generated
by the imposition of the effluent guidelines.
7. Industry Growth Effects - any expected change in the projected
industry growth rate is assessed from the impact of expected
closures, which incorporates the expected shift in net
revenues, capital requirements, and prices.
1-5
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One of the principal limitations of the analysis 1s that the natural-
resource base Industries' costs of operations and control will depend on
the specific site for each plant. To a certain extent, each plant in the
industry is a special case. The use of a model facility cannot take such
specificity into account. Thus, the actual financial situation and control
costs for any given plant may be different from the model used to represent
it.
In many cases, information on the exact numbers of plants in each
required analytical segment has not been available. Therefore, estimates
were made as to the numbers of firms in each segment and those estimates
are a significant factor in determining the expected economic impact.
All these limitations must be considered in light of the results.
Very little adverse economic impact is anticipated; so small, in fact, that
a doubling or tripling of impact would not make the national aggregate
impact significant. However, each plant closure causes a significant
adverse impact for its employees and potentially for the community that
loses the jobs and incomes generated by the plant.
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C. CONCLUSIONS
The economic Impact of the Interim final effluent guidelines has been
assessed for the following segments of the nonmetalUc mineral mining and
processing Industry:
• Construction sand and gravel,
t Crushed stone,
• Industrial sand, and
• Phosphate rock.
It 1s expected that a total Investment of approximately $24 million will
be required to Install BPT In 1977, with an associated total annual cost
of $10 million. No additional costs will be Incurred in order to meet
BAT. The total cost (in 1974 dollars) of meeting the effluent guidelines
is shown below.
BPT BPT
Investment Annual Costs
Sand and Gravel 7,460,000 2,283,000
Crushed Stone 12,420,000 6,548,000
Industrial Sand 644,000 169,000
Phosphate 3,340.000 1,056,000
Total 23,864,000 10,056,000
j For the sand and gravel, crushed stone, and industrial sand segments,
the BPT guidelines are based on a technology of settling and complete
recycle of process water. For the phosphate segment, settling ponds with
discharge is the basis for the BPT guidelines.
1-7
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• Construction Sand and Gravel
Economic analysis of the sand and gravel industry Indicated that the
only technology which 1s economically viable is a settling pond with recycle.
More extensive treatment which involves additional ponds or flocculation
may be feasible for some plants, but is considered to be economically im-
practical in general. Therefore, the BPT limitations are based on a
technology of settling and recycle. The price of sand and gravel may
increase from $0.04 to $0.20 in small cities or rural areas. Up to 26
plants in major metropolitan areas which have to absorb control costs may
close. These plants represent a total of 0.3% of present national produc-
tion number plants—a very small proportion of the 5,150 operations in the
industry. The closures could result in the loss of work for up to 86
persons, but are not expected to affect local economies.
• Crushed Stone
Overall production of the crushed stone industry will not be affected
by the guidelines. Several hundred plants which presently have no treat-
ment and which are unable to pass control costs on are likely to shift
from production of both dry processed and wet processed stone to entirely
dry processing. Depending on the local market characteristics, the price
for crushed stone could remain stable or increase up to 8%. No closures
are expected to occur.
t Industrial Sand
The price of industrial sand will increase less than 1% over present
levels of about $5 to $7. Because plants requiring mechanical thickening
with no treatment at present could be seriously impacted, it has been
determined that this option is economically infeasible and that settling
with recycle is the only technology upon which the BPT guidelines are based.
Therefore no closures are predicted, and local economies, unemployment,
1-8
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Industry growth and the balance of trade will not be significantly af-
fected.
• Phosphate Rock
I The Impact of the regulations on phosphate mining and processing are
L not expected to be significant. Prices may Increase about $0.11 per ton,
or less than 1% over mid-1974 levels of $12.10 per ton. No plants are
expected to close, and effects on the balance of trade will be minimal.
I 1. Construction sand and gravel
a. Internal Costs
There are approximately 5,150 facilities in the sand and gravel in-
dustry. Of these, about 750 are dry processors and have no effluent
discharge, and the remaining 4,400 use water in the processing. It 1s
estimated that 1,088 plants with wet processing are not presently meet-
Ing the BPT requirement of total recycle of process water.
Some 978 facilities already have some treatment in place. These
plants will incur additional annual costs of less than 0.5% over present
annual expenditures, or less than $0.01 per ton. The incremental Invest-
ment required to meet BPT will be less than 3% of the book value of assets,
For the 110 plants with no treatment in place, the annual effluent
control costs could Increase current expenditures by as much as 10.7%.
The required investment to meet BPT will be high: 18% to 34% of the book
value of assets.. Although there are several treatment options available,
only settling and recycle of process water (Level C) appears economically
viable.
1-9
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b. External Costs
(1) Price Effects. Because construction sand and gravel are sold in
very localized markets, the effects of the effluent guidelines on prices
will vary throughout the country. Prices could increase about. $0.04 (2.5%)
in large markets, where larger plants require additional expenditures to
meet BPT. In small metropolitan or rural markets, where plants need to
install effluent controls, prices could increase up to 10%.
(2) Production Effects. It is expected that the 978 plants with some
treatment in place will not close or reduce production significantly. If
they were unable to pass costs on, the profitability of the operation would
not decline significantly. (In the case of the model 91,000 metric ton
plant, profit on sales before taxes would fall from 8.9% to 8.6%.) These
plants are not expected to have any difficulty financing the required invest-
ment.
Some of the remaining 110 facilities with no treatment in place could
close. In particular, small plants which are in large metropolitan markets
will probably be unable to pass control costs on. Three treatment options
were examined: "Level C" is a settling pond with recycle of process water;
"Level D" is two silt-removal ponds, a settling pond, and recycle; and
"Level G" involves flocculatiori, settling, and recycle. The economic
analysis indicated that if a plant needed to install Level D or G treat-
ments, and was unable to pass the costs on, they could not continue operations
due to a negative cash flow. However, if the Level C technology was in-
stalled, the cash flow would remain positive although profitability would
fall by one-third from present levels. Due to the serious economic impacts
predicted for plants requiring technologies D and G, the effluent guideline
is based on Level C technology. Because of these factors—the uncertainty
of whether or not plants will be able to finance the needed investment, even
assuming use of a Level C treatment—it is estimated that up to 26 plants may
close. At most, these plants represent 0.3% of present national production.
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(3) Employment Effects. It 1s estimated that closure of up to 26
facilities could result 1n the unemployment of, at most, 86 people. Plant
closures will occur 1n large metropolitan areas and 3 to 4 persons will be
displaced per plant closure.
I (4) Community Effects. Because 1t 1s predicted that most closures
L will occur in large metropolitan areas, and will be spread through the
country, it is not expected that these guidelines will have a significant
!_ effect on local economies.
j (5) Industry Growth Effects. It is not anticipated that industry
growth will be significantly affected by these guidelines. Sand and gravel
facilities will tend to incorporate the land required for settling ponds
*~ Into future siting specifications.
i
L (6) Balance of Trade Effects. Sand and gravel is not exported or
Imported, so the guidelines will have no effect on the balance of trade.
L
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2. Crushed Stone
a. Internal Costs
There are approximately 4,808 crushed stone facilities, of which
3,200 have completely dry processing and thus have no effluent. About 502
of the 1,608 wet processors are already in compliance with the BPT require-
ments. The remaining 1,106 non-compilers will be discussed here.
The highest costs will be incurred by the 336 facilities that have
no treatment in place at present. The annual costs of operation could
increase from 7.3% to 8.3% over present annual costs of about $2.00 per
metric ton. An investment of $12,000 to $26,200 would be required, which
represents about 9% to 14% of the book value of assets. The 770 operations
with some treatment in place would have to Increase annual expenditures by
1-11
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about 1%, and would require an investment of about $2,900 to $15,200.
The six flotation plants that presently discharge would incur additional
costs 0.7% higher than current levels.
b. External Costs
(1) Price Effects. With the exception of flotation processed stone,
the effect of the guidelines on crushed stone prices will vary throughout
the country, because of the very localized nature of the market for stone.
Prices are most likely to be affected in small metropolitan or rural
markets where there are crushed stone plants requiring either additional
or complete effluent controls. A price increase of as much as 8% could
occur in these situations. Prices are not likely to increase in large
metropolitan markets. The six flotation processors will probably be able
to pass the effluent control costs on, and this is expected to increase the
selling price of $22.50 per metric ton by about 0.5%.
(2) Production Effects. It is not expected that the regulations
will significantly affect the overall production of crushed stone. Plants
that will be unable to pass price increases on will have a lower profit-
ability and may shift production to dry processed stone. In this category,
those operations with some treatment in place will have a small drop in
profitability. For example, the model 91,000 metric ton, wet process
plant's profit on sales before taxes would fall from 7.5% to 7.0%.
Although many of these plants produce both wet process and dry process
stone, they probably will not shift from their current mix of production.
However, those crushed stone plants with no treatment in place, which are
unable to pass control costs on, will probably shift all of their production
to dry process. The profitability of flotation processors will not decline,
because it is expected that they will be able to pass control costs on.
For those plants which add effluent treatment, there should be no difficulty
in financing the required expenditures. Therefore, no closures are
predicted.
1-12
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(3) Employment Effects. Because no closures are predicted, the
guidelines will not have an effect on employment.
(4) Community Effects. Because no closures are predicted, the guide-
lines will not have a detrimental effect on local economies.
(5) Industry Growth Effects. It 1s not anticipated that Industry
growth will be significantly affected by the guidelines. Crushed stone
processors will tend to Incorporate the land required for settling ponds
Into future siting specifications.
(6) Balance of Trade Effects. Crushed stone 1s not generally ex-
ported or Imported, so the guidelines will have not effect on the balance
of trade.
3. Industrial Sand
a. Internal Costs
Of the 168 Industrial sand.facilities, 128 are judged to be 1n com-
pliance with the Interim final guidelines. The remaining 40 plants would
have additional annual costs to meet BPT of 0.4% to 5.1% over present
annual expenditures. The highest relative costs will be Incurred by wet
processors, with no treatment in place, who are expected to need mechanical
thickening. The Incremental Investment represents between 0.6% and 2.6%
of present Investment In plant and equipment.
b. External Costs
(1) Price Effects. It 1s expected that most industrial sand
producers will be able to pass the incremental control costs on to con-
sumers befause of the price inelasticity of demand for their products.
Therefore, the price of low cost sands would increase by only about 0.8%
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from present levels of about $5.00 per ton, and the price of more expen-
sive sands will increase by a lesser percentage.
(2) Production Effects. Those industrial sand producers with some
treatment are expected to be able to pass control costs on without suffer-
ing a decline in revenues, so there will be no change in their financial
strength. Capital requirements to fund effluent control equipment are
fairly modest, and probably can be financed through retained earnings or
as a part of regular borrowing. However, those who don't yet have treat-
ment will probably only be able to pass on $0.04 of the $0.24 control costs
to install Level C (mechanical thickening). Present profits on sales
before taxes of about 8.0-8.5% could decline by half. Such plants would
be likely candidates for closure. Therefore, because of the serious
economic impacts predicted for plants requiring Level C treatment, the
guideline is based on Level B technology. Hence, no closures are antici-
pated. Overall production levels should not fall because of the slight
increase in prices for industrial sand, so no plant closures are predicted.
(3) Employment Effects. Because no closures are predicted, no
changes in employment will occur.
(4) Community Effects. Because no closures are predicted, local
economies will not be affected.
(5) Industry Growth Effects. Industry growth is not expected to be
slowed by the effluent guidelines.
(6) Balance of Trade Effects. Because of the very minimal increase
in the price of industrial sand, it is not expected that the balance of
trade will be affected.
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4. Phosphate Rock
a. Internal Costs
Of 26 existing phosphate operations, 1t 1s estimated that only four
facilities 1n Florida are presently out of compliance. BPT Investment
costs for a model representing these facilities are $910,000 or about 4%
of present Investment 1n plant and equipment. Incremental annual costs
to meet BPT are about $.11 per ton or an addition of about 1.5% to current
annual expenditures. BAT limitations will not require additional expenses
to be incurred or demand more Investment.
b. External Costs
0) Price Effects. These guidelines will have a minimal effect on
phosphate prices. If the four non-complying plants are able to pass the
effluent control costs on, prices would Increase by about .9% from mid-
1974 levels of $12.10 per ton. Present phosphate prices are higher, so the
commensurate effect would be even less.
(2) Production Effects. No closures are expected to result from the
imposition of the interim final guidelines. Even if the facilities were
unable to pass costs on, profits after taxes would fall from 12.1% to 11.6%.
No financing difficulties are anticipated.
(3) Employment Effects. Employment levels will not change since no
closures are predicted.
(4) Community Effects. Local economies will not be affected since
no closures are predicted.
(5) Industry Growth Effects. Effluent guidelines are not expected
to affect the growth of the phosphate Industry significantly.
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(6) Balance of Trade Effects. Because effluent treatment costs are
expected to cause an Increase in prices of less than 1%, it is not antici-
pated that present export quantities will be reduced.
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II. CONSTRUCTION SAND AND GRAVEL (SIC-1442)
A. PRODUCTS, MARKETS AND SHIPMENTS
1. Product Definition
Sand and gravel are predominantly silica, with other minerals such as
iron oxide, mica, and feldspar usually present in varying amounts, either
as impurities or as useful constituents.* Sand and gravel are products
of the weathering of rocks. Sand has a size range of 0.0625 to 2 milli-
meters and consists primarily of silica. The term "sand" can also be used
to describe fine particles of rocks, minerals, slag, and other materials
in addition to silica. The size range for gravel is from 4 millimeters
to less than 64 millimeters in diameter. Although gravel is primarily
silica, other rock constituents are also present. Although these des-
criptive terms and size ranges are rather arbitrary, some standards have
been established. For most sand and gravel applications there are specif-
ications for size, physical characteristics, and chemical composition.
Specifically, for construction uses, the specifications depend on the type
of construction (concrete or bituminous roads, dams, or buildings),
geographic area, architectural standards, climate, and the type and quality
of sand and gravel available.
2. Production Processes
/
Sand and gravel are recovered from both wet and dry land-based pit
operations and the dredging of rivers, bays or oceans.
The mining equipment used varies from small, simple units such as
tractor-mounted high-loaders and dump trucks to sophisticated mining
*This discussion on product and processing is adapted from Mineral Facts
and Problems. 1970, Bureau of Mines.
II-l
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systems involving large power shovels, draglines, bucket-wheel excavators,
belt conveyors and other components. Increasingly, mining systems are
being designed to provide for efficient and economical land rehabilitation.
Sand and gravel is also dredged from river and lake bottoms that are rich
in such deposits.
Processing may consist of simple washing to remove clay and silt and
screening to produce two or more products, or it may involve more complex
heavy-media separation of slate and other lightweight impurities, and com-
plex screening and crushing equipment designed to produce the optimum mix
of salable sand and gravel sizes. Conveyor belts, bucket elevators, and
other transfer equipment are used extensively. Ball processing is often
required for production of small-size fractions of sand. Permanent instal-
lations are built when large deposits are to be operated for many years.
Semi-portable units are used in many pits that have an intermediate working
life. Several such units can be tied together to obtain large initial
production capacity or to add capacity as needed. In areas where large
deposits are not available, use is made of mobile screening facilities
that can be quickly moved from one deposit to another without undue
interruption or loss of production.
Major technologic developments have helped the sand and gravel industry
to maintain adequate production at stable or slightly declining real costs.
The industry has adopted larger operating units, more efficient portable
and semi-portable plants, unitized plants for versatility of plant capacity,
new prospecting methods utilizing aerial and geophysical surveying methods,
and greatly increased rehabilitation and resale of mined areas for
recreational or land-use applications where economically advantageous.
3. Shipments
Domestic shipments of construction sand and gravel, as reported by
the Bureau of Mines showed little change from 1965 to 1974
II-2
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II. CONSTRUCTION SAND AND GRAVEL (SIC-1442)
A. PRODUCTS, MARKETS AND SHIPMENTS
1. Product Definition
Sand and gravel are predominantly silica, with other minerals such as
iron oxide, mica, and feldspar usually present in varying amounts, either
as impurities or as useful constituents.* Sand and gravel are products
of the weathering of rocks. Sand has a size range of 0.0625 to 2 milli-
meters and consists primarily of silica. The term "sand" can also be used
to describe fine particles of rocks, minerals, slag, and other materials
in addition to silica. The size range for gravel is from 4 millimeters
to less than 64 millimeters in diameter. Although gravel is primarily
silica, other rock constituents are also present. Although these des-
criptive terms and size ranges are rather arbitrary, some standards have
been established. For most sand and gravel applications there are specif-
ications for size, physical characteristics, and chemical composition.
Specifically, for construction uses, the specifications depend on the type
of construction (concrete or bituminous roads, dams, or buildings),
geographic area, architectural standards, climate, and the type and quality
of sand and gravel available.
2. Production Processes
t
Sand and gravel are recovered from both wet and dry land-based pit
operations and the dredging of rivers, bays or oceans.
The mining equipment used varies from small, simple units such as
tractor-mounted high-loaders and dump trucks to sophisticated mining
*This discussion on product and processing is adapted from Mineral Facts
and Problems, 1970, Bureau of Mines.
II-l
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systems involving large power shovels, draglines, bucket-wheel excavators,
belt conveyors and other components. Increasingly, mining systems are
being designed to provide for efficient and economical land rehabilitation.
Sand and gravel is also dredged from river and lake bottoms that are rich
in such deposits.
Processing may consist of simple washing to remove clay and silt and
screening to produce two or more products, or it may involve more complex
heavy-media separation of slate and other lightweight impurities, and com-
plex screening and crushing equipment designed to produce the optimum mix
of salable sand and gravel sizes. Conveyor belts, bucket elevators, and
other transfer equipment are used extensively. Ball processing is often
required for production of small-size fractions of sand. Permanent instal-
lations are built when large deposits are to be operated for many years.
Semi-portable units are used in many pits that have an intermediate working
life. Several such units can be tied together to obtain large initial
production capacity or to add capacity as needed. In areas where large
deposits are not available, use is made of mobile screening facilities
that can be quickly moved from one deposit to another without undue
interruption or loss of production.
Major technologic developments have helped the sand and gravel industry
to maintain adequate production at stable or slightly declining real costs.
The industry has adopted larger operating units, more efficient portable
and semi-portable plants, unitized plants for versatility of plant capacity,
new prospecting methods utilizing aerial and geophysical surveying methods,
and greatly increased rehabilitation and resale of mined areas for
recreational or land-use applications where economically advantageous.
3. Shipments
Domestic shipments of construction sand and gravel, as reported by
the Bureau of Mines showed little change from 1965 to 1974
II-2
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(Table II-1J. Shipments have fluctuated from a low of 871 million short
tons (793 million metric tons) in 1972 to a high of 950 million short tons
(865 million metric tons) in 1974. (Industrial sand is reported concur-
rently by the Bureau of Mines, but this analysis focuses on construction
sand and gravel. There were 118 operations in 1974, producing industrial
sand and 101 producing both industrial sand and construction sand and
gravel.)
Caused mainly by price inflation, this essentially flat pattern of
shipments is not reflected in the value of construction sand and gravel
sold, which increased at an annual rate of 4.7% from $871 million in 1965
to $1.31 billion in 1974. The value of shipments is expected to have
remained about the same for 1975, but output in that year probably dropped
to a low for the past decade. The sharp drop in 1975 reflected the reces-
sionary impact on the construction industry. In fact, a closer examination
of the data for 1974 indicates that the increased production in Alaska—up
93 million metric tons from 1973 to 106 million metric tons—more than
accounted for the total increase of 15 million metric tons for the United
States and made that state the most productive in the nation. Excluding
Alaska, U.S. production declined from 835 million metric tons in 1973 to
757 million metric tons in 1974. Foreign trade in construction sand and
gravel is negligible and primarily limited by transportation costs.
As a later table shows, all states share in the national production of
construction sand and gravel. Apart from the short-term phenomenon caused
by the Trans-Alaska Pipeline, California is generally the most productive
state, with nearly twice the production of its closest rival, Michigan.
Other states that are important producers include Ohio, Wisconsin, Illinois
and Texas.
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Table II-l CONSTRUCTION SAND & GRAVEL SOLD,
1965 - 1974
Short Tons $_
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
877.7
903.2
874.5
885.3
902.0
906.1
883.3
871.3
933.1
949.7
870.8
891.6
887.5
919.6
958.2
1003.0
1044.9
1070.6
1222.4
1312.3
Source: U.S. Department of Interior/Bureau of Mines,
"Mineral Industry Surveys" Sand and Gravel
II-4
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4. End Uses
U.S. end uses and volume distribution of sand and gravel as con-
struction aggregates are summarized in Table II-2 and, for each state, in
Table II-3. Commercial projects accounted for 76% of total weight sold--
864.2 million metric tons in 1974. It is apparent from Table II-2 that
the principal single use for sand and gravel is as a concrete aggregate
and that the non-residential and residential building construction sectors
together account for 24$ of all aggregate sold. Other end uses for con-
crete aggregate include highway and bridge construction, concrete products
such as block and pipe, and bituminous paving. About 24% of all sand and
gravel 1s unprocessed and is used either as a fill or for road bases and
subbases. In 1974, the average value for processed sand and gravel was
$1.78 per metric ton, while the unprocessed material averaged only $0.58
per metric ton. The average value of sand and gravel for publicly funded
projects was higher—at $1.56 per metric ton—than that for commercial
projects at $1.46 per metric ton.
5. Possibilities of Substitution
The sand and gravel industry has found that changes in zoning and
environmental issues have limited its opportunities to participate in the
growth of the construction industry and has made it vulnerable to sub-
stitution. Historically, sand and gravel operations have been located
close to urban or developing areas, partly because of suitable geological
conditions existing in the localities, but also because of the low-value-
added characteristics of the product and the high weight-to-total-value
ratio. As the communities served by these operations have grown, pit
operators have found themselves increasingly limited by zoning regulations
and by the unavailability of contiguous deposits to be developed once
existing deposits are depleted. In many highly urbanized areas, this has
led to the gradual movement of sand and gravel sources away from the urban
II-5
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Table 11-2 CONSTRUCTION ASSREGATE SOLD OR USED BY PRODUCERS IN THE UNITED STATES FOR
COMMERCIAL OR.PUBLICLY FUNDED CONSTRUCTION PROJECTS, OR PRODUCTS
(TO3 SHORT TONS AND 10d DOLLARS)
1973
1974 i/-
Comerclal Publicly funded project* Commercial
Quantity Value Quantity Value Quantity Value
Processed
Concrete aggregate
(including use in Ready Mixed Concrete)
Nonresidential and
Highway and bridge
Other construction (dams.
Bituminous paving
Road base and
Unprocessed
Road base and
376,890
50,472
23,646
125,002
129,487
110,323
32,277
19 ,408
58,006
46,123
971,635
Publicly funded projects
Quantity Value 2/
10,001
44,128
6,373
3,504
62,708
76,220
5.283
3,240
10,065
15,050
236.572
16,974
72,169
10.834
6,465
101,897
105,811
6.133
4.695
7.223
8,536
340,737
I/ Data not directly comparable with those of previous years because of changes in canvass form.
21 Unit value of construction aggregate may be higher than unit value of sand or gravel.
3_/ Includes unprocessed sand and gravel (1973).
4/ Incluuus Railroad ballast, Miscellaneous, some unprocessed sand and gravel (1973).
J/ Data may not add to totals shown because of independent rounding.
Source: Bureau of Mines "Mineral Industry Surveys" Sand and Gravel in 1974
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TABLE M-3
CONSTRUCTION SAND AND GRAVEL USED IN THE
UNITED STATES IN 1974, BY STATE AND BY USE \J
(103 SHORT TONS AND 103 DOLLARS)
I 1
I
212
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S. S « » I X I S ft. R f | | | £. 5. J 2 I B | « | t. I. «. I I I f. E | S | i 8. s E S £ S i
HSlfi^*SEC!u^SAS?lft*~Rt'|11"5!2lC9('* ^'cvl*S!mE*C< mrnrs»«^4 t- t O
JR3Xi*AK»itSJi)cic9.5JPr^ClTlS^f~"^E^4Pi?tti'fi^'*19tl'4rit
^ ^ ^ n rt ^ 'nn^-"#in^tv>>4virv^4OK^^KiJi9^i<~fr.bl~V<-4
-------
TABLE 11-3 (oont.)
•A
i:
5 0i j & a
5 * . S «L I
I * S £ 5
s
S S M
S S 8 I.
!*:",*. fj I , . s i j5«*cs;s,;,
s**
*
S S J * 3 8
* 3 , £ a £ < § S 2 6 S S I I * « * S S » S * S 8 « £ S s 3 - £ i B i S » * £ . 8 » 8 §
M ^^ ^,4^ -7 Ifl ^ (M - tW -J-'"^
3 8 , £ 1. R B « I S 8 I i $ S * 3 I S * I S * f * * tS. * E S s 5 £ § R 3 J S t . § s » I
V ^ «T MMM •*,,?,*'«.-- ^-i-ij-i g
: a 2
t S 8 * S
4 » J^ -« R «
s 3 P £ ? S
2 » a
i i *
15 S f S
s
'•-«,,
* - * , ,
s S , " s
as ™ 4
A X %
2 4
s . 5 *
2 i 8 S « i 8 5 S 5 * 3 S 5 * S «= 2 5 5 S S S S S I S 8
* s
i i ft S * S i * i i 2 ? S S S S I g S 3 s M. S 8 « * 8 5 S \ S a S e ? S 2 a g
- ^ j v !«•::«-•« • - - « - ------
I 1 * * 8 S
£ : »
1 S
fi i i g 8 * I » e S S S I S S § S 5 * I S S a
- i ! « - «" • " •• - ••
§ -
§ s *. " * * i
f E « S « S , i , 8 * 5 $ S 3 » « S 5 f. S S |
^jj«^'^-* «*^p4«t-« ^J|»»*^
5 3. E S | £ , P , 3 § « I 1. 5 S S 3 » S. J | |
S S 8 2 I. S | | S *. » | § 1 , I J. § §«§*->§*
^^-*»l
8 S. S ft S 5 « S S 2 f 2 . * *
i ,.!lli
11-8
-------
areas, 1n some cases necessitating Increased use of rail transportation
to maintain competitive economics.
As a result of these trends, users of sand and gravel have explored
more economically available alternative materials. In some cases, users
have substituted fine-ground crushed stone or cinders; a reverse substitution
favoring sand and gravel has also taken place but not as frequently. These
substitution trends have taken place at a slow rate and have been stimulated
more by Increases in relative freight costs (as sand and gravel pits have
moved away from urban areas to more remote locations) than in relative
processing costs. The use of crushed stone as a substitute does, however,
require at least an additional crushing step to reduce the size of the
aggregate in order to conform with sand and gravel specifications. This
increased processing does increase processing costs.
6. Future Growth
Historically, construction sand and gravel demand has been very closely
correlated with constant-dollar Gross National Product. As a function of
real GNP, for the 1959-1974 period, R2 = 0.822. These relations provided
a better fit than constant dollar expenditures on new construction,
housing starts, or the Federal Reserve Board Industrial Production Index.
Thus, by using annual GNP forecasts* of 2.8% for 1975-1980 and 3.3%
for 1980-1985 the following demand forecasts were calculated:
*Forecasts and projections in this document are by Arthur D. Little, Inc.,
unless otherwise stated.
II-9
-------
Construction Sand and Gravel
Year (106 short tons) (106 metric tons)
1974 actual 950 864.5
1980 1000 $10
1985 1100 1001
With the high correlations to 6NP growth, demand growth for these
products should generally be highest in the regions with the best economic
growth potentials. Such high growth areas are expected to be the South
and Western states. The Northeast and North Central regions will grow at
or below the national average. Within regions, we predict stronger
growth in demand to occur on the fringes of urban areas. However, the
supply of sand and gravel will become more remote to the points of demand
as pits are depleted or zoned out of the close-in locations.
On a yearly basis, 1976 is expected to be a recovery year with strong
growth in real GNP (6%) and housing starts (29%). Thus, 1977 should show
continuing good growth in GNP and housing starts and a recovery in non-
residential building construction. Another downturn in the business cycle
is predicted for the 1978 to 1979 period and, so, they will be years of
declining demand for crushed stone and sand and gravel. Another recovery
is expected in 1980, with real growth in GNP reaching 4.7%.
7. Marketing and Distribution
The marketing intensity of the construction sand and gravel industry
is relatively low at the operator level, although national trade associa-
tions or similar, local groups do expend a limited amount of marketing and
promotional effort. Although some pit operators are multi-location or
multi-division companies who assist customers with technical problems,
the typical pit is a single-location operation serving a restricted geographic
market and has marketing efforts limited to order-taking and delivery service.
11-10
-------
Distribution of construction sand and gravel* as with crushed stone,
is direct from the pit to the end user with no intermediary involved.
Production levels closely match anticipated demand, and inventories are
only sufficient to ensure uniform production rates over a predetennined
length of time. The seasonality of the industry in many Northern regions
typically restrict operators to nine months a year, so some stockpiling
does take place for winter use.
The Bureau of Mines estimates that over 90% of sand and gravel is
moved by truck, with the next most common mode of transportation being
rail.
11-11
-------
B. INDUSTRY STRUCTURE
1. Types of Firms
The construction sand and gravel industry is characterized by the
prevalence of a number of small firms operating sand and gravel pits as
their primary or only business. In 1972, the total construction sand and
gravel shipped by all industries in the United States had a value of
$921.8 million. The special construction sand and gravel industry alone
provided approximately 86% of this value. The sand and gravel Industry
produces other products and services in addition to construction sand and
gravel. In 1972, the total value of shipments and receipts (the combination
of construction sand and gravel and all other products and services of
the construction sand and gravel industry) totaled $879.6 million. About
$814 million of the total value is classified by the Burea of the Census
as primary products—construction sand and gravel--and relates to the major
revenue contributors to the sector, while much of the remaining value of
shipments was for secondary products such as industrial sand. The Bureau
of Mines, which uses different survey methods than the Census and has a
different coverage, indicates that $1.07 billion of construction sand and
gravel was sold or used by producers in 1972.
No comprehensive data on the number of firms in operation were avail-
able until 1974, when the Bureau of Mines estimated that about 4,750 firms
operated 6,849 plants. Many of the firms, as in the crushed stone indus-
try, are small, locally owned proprietorships and private corporations
which together account for a large proportion of total U.S. shipments but
individually may not even be significant producers in their own local
marketplace. Many of the operators are farmers or landowners who exploit
the less-productive portion of their landholdings for its natural resources.
In addition to the smaller companies, a number of larger firms are
also active in the industry. Such firms include companies that are
11-12
-------
horizontally diversified Into the production of other construction aggre-
gates; for example, Vulcan Materials, FUntkote, G1fford-H1ll, and Dravo.
However, sand and gravel represents a far less significant part of the
business for most of these larger, nationally based corporations which
are also diversified into non-construction-related businesses.
A third type of firm operating in the construction sand and gravel
Industry is the owner of a commercial, portable, processing plant. This
type of firm will either service municipal, state or federal projects on
a contract basis or supply stone to commercial contractors for specific
construction projects.
A fourth group of firms includes those that operate sand and gravel
plants as parts of other manufacturing establishments. The 1972 Census
reported that only 266 such establishments were in operation in that year,
continuing a steady decline that has apparently taken place since 1963.
These plants are vertically integrated and usually provide aggregate,
through internal corporate transfer, for the manufacture of ready-mixed
concrete or other concrete products. These firms are invariably included
in SIC's other than 1442, as the bulk of their revenues come from the
non-sand-and-gravel products.
2. Types of Plants
Data on plants operating in the construction sand and gravel industry
are available from two principal sources: the Bureau of Census and the
Bureau of Mines. Industry 1442, Construction Sand and Gravel, is described
in the 1972 minerals census as being represented by establishments
primarily engaged in operating sand and gravel pits and dredges, and in
washing, screening or otherwise preparing sand and gravel for construction
uses. The Bureau of Mines reports production and shipments data for
operating units in the Minerals Yearbook and also in the Mineral Industry
Surveys.
11-13
-------
Data from these two sources are not entirely comparable regarding
production volume and they vary considerably with respect to the number
and characteristics of operating units. The most nearly comparable ship-
ments statistics (for both construction sand and gravel and industrial
sand) are shown in Table II-4. The primary differences occur because the
Bureau of Mines numbers include federal, state and local government
operations, while the Bureau of the Census excludes these operations.
As was indicated earlier, the disparity is widened when plant data
are examined. The Bureau of the Census reports that 2,762 establishments
produced construction sand and gravel in 1972, while the Bureau of Mines
reports about 5,275 plants in operation in that year. Because the Bureau
of Mines survey methods obtain a higher coverage, that agency's data
will be used in this analysis principally to characterize the production-
related elements of the construction sand and gravel industry, while the
Bureau of Census data will be used to derive financial operating ratios
for the industry.
The number of construction sand and gravel operations increased from
about 5,275 in 1972 to 5,575 in 1973 and 6,849 in 1974. (It should be
pointed out that the EPA Development Document was prepared prior to the
release of Bureau of Mines data for 1974 and was based on the 1972 analy-
sis.) Much of the increase is due to increased survey coverage of the
industry. In 1974, approximately 4,750 companies operated the 6,849
operations. About 82% of the operations had processing plants associated
with their land or dredging operations, while the remaining 18% had no
processing plant and the material was sold as mined. Table II-5 describes
the number and production of domestic commercial sand and gravel plants
by size of operation for 1973 and 1974. The data clearly indicate that
about 30% of the plants in 1974 produced about 2% of domestic output and
that this 30% represents plants with an annual production of less than
25,000 short tons (22,750 metric tons).
11-14
-------
4. Phosphate Rock
a. Internal Costs
Of 26 existing phosphate operations, it is estimated that only four
facilities in Florida are presently out of compliance. BPT investment
costs for a model representing these facilities are $910,000 or about 4%
of present investment in plant and equipment. Incremental annual costs
to meet BPT are about $.11 per ton or an addition of about 1.5% to current
annual expenditures. BAT limitations will not require additional expenses
to be incurred or demand more investment.
b. External Costs
(1) Price Effects. These guidelines will have a minimal effect on
phosphate prices. If the four non-complying plants are able to pass the
effluent control costs on, prices would increase by about .9% from mid-
1974 levels of $12.10 per ton. Present phosphate prices are higher, so the
commensurate effect would be even less.
(2) Production Effects. No closures are expected to result from the
imposition of the interim final guidelines. Even if the facilities were
unable to pass costs on, profits after taxes would fall from 12.1% to 11.6%.
No financing difficulties are anticipated.
(3) Employment Effects. Employment levels will not change since no
closures are predicted.
(4) Community Effects. Local economies will not be affected-sinee
no closures are predicted.
(5) Industry Growth Effects. Effluent guidelines are oot expected
to affect the growth of the phosphate industry significantly.
1-15
-------
Table I1-5 NUMBER AND PRODUCTION OF CONSTRUCTION SAND AND GRAVEL
AND INDUSTRIAL SAND AND GRAVEL OPERATIONS, BY SIZE
1973
Operations Production
Construction-Industrial
9S fiOO fn SO OnO------
100,000 to 200,000
200, one to 300,000
300,000 to A00';000
AOO.OOO to 500,000
500,000 to 600,000
600,000 to 700,000
700,000 to 800,000
800,000 to 900,000
900,000 to 1,000,000—
1,000,000 and over — --
Number
1,655
884
1,053
904
450
230
134
78
79
48
42
24
100
5,681
Percent
of total
-
29.1
15.6
18.5
15.9
7.9
4.1
2.4
1.4
1.4
.8
.7
.4
1.8
100.0
Thou-
sand
short
tons
18,054
32,244
75,822
129,084
109,976
79,468
59,977
42,472
51,306
35,345
35,708
22,635
154,713
846,805
Percent
of total
2.1
3.7
9.0
15.2
13.0
9.4
7.1
5.0
6.1
4.2
4.2
2.7
18.3
100.0
1974
Operations Production
Construction
•
Number
2,149
1,141
1,262
1,085
436
209
135
97
59
44
21
31
79
6,748
Percent
of total
31.8
16.9
18.7
16.1
6.5
3.1
2.0
1.4
.9
.6
.3
,5
1.2
100.0
Thou-
sand
short
tons
21,387,,
41,439
90,435
152,907
105,074
70,924
60,534
53,013
38,043
32,825
17,701
28,428
209,295
922,005
Percent
of total
2.3
4.5
9.8
16.6
11.4
7.7
6.6
5.7
4.1
3.6
1.9
3.1
22.7
100.0
Operations Production
Construction-Industrial
Number
13
8
17
27
8
6
2
5
1
3
3
1
7
101
Thou-
Percent sand
of total short
tons
12.9 17.8.
7.9 ' 308
16.8 1,228
26.7 3,915
7.9 1,890
.5.9 2,115
2.0 952
5.0 2,740
1.0 653
3.0 2,269
3.0 2,504
1.0 908
6.9 9,634
100.0 29,294
Percent
of total
.6
1.0
44.2
13.4
6.4
7.2
3.2
9.4
2.2
7.8
8.6
3.1
32.9
100.0
I/ Data may not add to totals shown because of independent rounding.
Source: Bureau of Mines "Mineral Industry Surveys" Sand and Gravel in 1974
-------
The Bureau of Mines changed its surveying techniques in developing
the 1974 industry survey and sought to develop more comprehensive Information
on the operating characteristics of the plants, Approximately 82% (5,636)
of the operations completed the 1974 supplemental survey form, an analysis
of which is contained in Tables II-6 through II-8. These tables indicate
the following distribution of production and number of operations by source
of aggregate:
Percentage of Percentage of
Source Operations Operations
Dry Pit on Land 70.5 62.3
Wet Pit on Land 20.6 27.4
River Bed 8.3 9.6
Lake, Bay or Ocean 0.6 0.7
The majority of operations (58.5%) utilize a shovel or a front-end
loader to recover the mineral, while 22% use a drag line and 14% dredge
the aggregate. The data also indicate that 42% of operations mine their
own land, 39% lease private land and pay royalties, and the majority of the
remainder lease mineral rights and pay royalties.
The use of portable plants is a common occurrence in the construction
sand and gravel industry, particularly to service federal, state and local
pits, but the frequency of use and the proportion of production represented
by such portable units is not documented. Portable plants are used to
supplement the productive capabilities of permanent installations, to
serve remote locations where the quantity of aggregate required is in-
sufficient to justify a permanent plant, or to provide aggregate to
projects (such as highways) that are progressively moving.
Although the level of integration with other manufacturing businesses
is not high, many pit operators are also producing ready-mixed concrete or
11-17
-------
Table II-6 SAND AND GRAVEL PRODUCTION IN 1974, BY STATE, AND SOURCE I/
(10J short tons and 103 dollars) ~
CD
lUDas*.
Keilco
k. York
Worth CarollTa--
Rorth Daxats — >
Ohio
Oklsrna
Pennsylvsrls
Rhode Islsivl
ioutt, Carolina--
South Dakota
Uten
Vermont
Vlrjlnl.
Veer. lr*f'.L>n
Vest Vlrglala---
Vlsconsln
Total 11
i/ lesed on 5,*!
b
ai
tautit
5.kl6
22,510
7,309
6,776
68,191
Ik, 198
k.56k
1.875
H
2,222
¥
"•.k31
17,lkk
8,963
• .923
2,190
I,ok3
3.13k
3.050
10.33)
Ik, 195
kk.009
29,210
«.k5)
1.999
2,782
669
6.893
5,666
9,620
6,597
22, *9
5 ,k5k
3,518
17.1-81
2,190
9,155
8.913
2.593
2,511
6,jui
6,165
22,795
7,819
2.076
8. Mi
13.557
tf
23,125
ry pit
J '",.!„.
7.253
18,225
. 13,970
15.78k
Ilk. 655
25,08k
8,026
2,552
W
2,991
¥
6.051
25,68k
13.3k6
7,070
1,82k
1,162
7,kkk
k.kok
26.780
22,kOk
58,690
33,k23
10,kk8
5,930
3,5^
7O5
11,111
7,50k
?k,68l
8,ki7
33.005
8.365
k,k?k
30,007
2.671
Ik, 588
22,735
k.!29
k,6fc6
6,603
9.657
W..U10
8.986
3.127
18.075
2o.oaa
v
27,801
7,903
773.082
H-ter
at
opera-
tions
36
91
6k
Ik8
203
115
51
6
3
12
3
6k
103 -
7k
116
6k
19
17
kk
kk
Ilk
299
325
33
12
k)
30
5k
k7
k8
98
182
62
k7
186
3a,
82
76
18
19
Ilk
37
113
58
k6
66
Ik9
2
251
k8
3.972
\ operstln*
a which co»p
iated the
Vat pit
m land
i.Mf k,885
7,ki5 5.5*2
II V
637 1.055
11,583 18,223
II W
¥ u
21.koo 29,5kO
1,50k k.lkfi
..... .....
¥ V
15,531 23,0k7
Ik.7k7 19,368
10, OM 15,5kk
5,k88 5,586
1,976 2,817
7,603 15,620
H ¥
V ¥
¥ V
9,lk5 15,k6l
k.375 5.772
k,6O2 6,31.7
1,180 2,275
U u
10,k53 13.85k
1,379 2,733
5,857 17,5k3
U V
2,629 k.kSo
k,k97 7,079
V H
20,2k7 32,153
3,k83 7,003
3,602 6,390
5.982 lk,?91
II II
k.3l8 7.35k
193 335
5k7 959
16,297 31.lk9
w w
3,305 7.676
1.933 3,325
7 25
1,587 2,319
25 ¥
216,313 3k9,370
1*7* auppleawatal fo
__»r
of
tlooa
21
31
2
U
26
33
3
2
50
15
3
55
79
123
k6
7
kO
1
3
3
57
22
16
10
2
Ikk
k
IB
2
12
kk
2
107
27
19
11
1
11
5
k
kl
1
16
Ik
1
17
1
1,163
m.
fct m
¥
¥
12,285
1,221
18,676
2,k29
..
H
.....
¥
¥
¥
¥
1.158
¥
2,182
38k
¥
3*7
6k5
381
2.262
88k
659
26k
¥
1 628
k5,k05
'yl*».iL
¥
¥
I8,k78
3l|6k5
.....
-.*-.
. .
¥
.....
¥
¥
¥
V
1.532
¥
.....
.....
3.211
362
¥
1,387
909
595
2,992
1,073
1,679
3k6
u
¥
¥
¥
k9
¥
72,176
llrer
of
opera-
tions
k
2
k5
11
96
26
._...
-.-.-
1
2
1
2
3
U
1
.....
.....
19
9
1
6
25
6
21
19
5
5
1
3
3
3
3
k
338
bed
«-nuJj
,
•----
¥
3.133
¥
If
.....
.....
" ¥
¥
.....
¥
T9k
k52
1.599
k.779
100
.....
.....
.....
¥
k.832
¥
¥
¥
¥
3,kkl
¥
1.102
¥
¥
382
3,k05
¥
30,128
^"•ii..
¥
¥
«.0k3
¥
¥
.....
¥
V
.....
¥
1,09k
k87
226
2,261
7.153
253
.-_-
.....
.....
¥
6,287
¥
¥
¥
¥
6.256
¥
2.351
¥
k3
¥
6,288
¥
50.78k
or
lions
3
1
12
3
2
.
2
1
2
a
i
5
a
10
i
.....
.....
._
i
29
1
7
2
2
10
3
k
3
2
1
6
1
131
'•*• *• *•' —7 -l-*irr Oraan •_•-,
Ve rf " •'^
U01" tll»a tlaa
. . "J •
"III ".'." ".'.'.'. "»" "V — —
___.. ___._ _. .!«.-. •"- .....
„„. ..... ... _ ^ -----
..... ...» ..... .. • --«-a.j»_ _____
___»„ ..... _. , ..... .... — -- __-— ..
_____ ..... ... ..... _ -••-•
_„__ . ..... ..... -----
_____ ..... ..... .. * -----
W H J .
..... ..
V V 2 — .. ..... ..... ,
w * l
..... . . _
V H k H « 2
_».._ ..... . .....
..___ ..... .. ._.
____„ ..... ._ .....
...
W 73 2 _,
V H 1
763 1>18 8 w V i
H W 2 ..... ..... .....
12^ _86 i — , .
162 797 l
k!l'S7 9!512 25 I,'o87 2!*7 6 3 kk " i
tfc "Co— laalawata".
Source: Bureau of Mines "Mineral Industry Surveys" Sand and Gravel in 1974
-------
TabJe II-7 PRODUCTION OF SAND AND GRAVEL IN 1974, BY STATE,
Y METHOD OF MINING I/
short tons and lO^dollars)
Dt.dl.
California
Connect leu t
Massachusetts -
Mississippi
Vcw Hampshire -
*€» Jer>cy
Be* Mexico
Horth Carollna-
•orth Dakota --
Pennsylvania --
Ihode Island —
South Carolina-
South Dakota --
Tennassee — ---
T*H4ff
Vermont - —
Washington ----
West Virginia -
Concealments --
Total 2/
3.767
3)25"*
1.0U6
W
13,"«95
2,827
W
I2,5kl»
7,kl9
k,752
8,1*1*1
6,101
8.787
w
5,781
1,170
5,008
6,5^0
7k
10,801
20
78
5,5k3
1,272
922
k,o8l
5)826
1,1*89
W
1,900
7,622
w
w
3,397
162
1,932
Ik9,8k7
6,613
6,09k
6,029
1,826
W
18,912
k,6U3
W
• 17,53k
10,011
7,721
9,568
9,039
19,906
723
W
10,689
1,690
7,o6l
8,917
165
Ik ,221
88
88
20,k36
2.089
1,501
6,8k6
6,0kk
8,81*0
15,280
1,771
H
3,279
13,068
W
933
V
6,290
1,332
757
k,008
25"*,012
of
opara-
tlona
19
Ik
8
9
2
21
1
33
ko
6k
k5
2
3
23
5
19
1
Ik9
1
2k
k
17
28
kl
11
12
11
3
9
Ik
3
5
6
k
1
785
•HtlU*
OuaacltT ?alue
'w
5.376
28,337
6,3fil
907
w
9.U63
320
12,11*0
10,251
8,91*9
U
W
2,6*9
U
2,kl7
2k,7k7
3,693
3,k02
1,090
U
375
k,566
kl9
i,kk2
8,lk8
U
18,309
1.396
1,650
3,220
3.295
33>-
1,390
25.953
W
8.358
k.113
Ik
1,367
U
3.1k6
213,7fck
7,k35
1,728
If
9.0k8
50,252
10.1U6
1,33k
U
12,605
U
739
18.583
13,376
12.105
U
w
5,593
If
6,9*
5,'8k3
k 962
2)039
W
11, kn
1,507
2,809
13,267
W
28,763
1,088
2,9kk
6,172 '
6,136
583
1,523
*w
I8,lk6
5,568
30
1,615
U
5,76o
351,110
of
15
9
71
82
36
3
13
2
k
56
70
165
3
2
12
1
11
16
2
2
2
1
7
13
83
2
101
11
20
13
9
5
11
96
3
33
20
1
29
1.235
Stun
1,792
8,072
2k, 21k
66
U
W
368
577
1,036
W
H
237
2 36k
3)127
393
V
906
1,177
2,232
103
110
1.990
U
3.528
1,695
W
W
H
1,399
2,907
612
H
733
672
W
2 kkk
' 29
"095
wl
1.300
10,161
132
36.516
111
1,137
w
k89
1,591
1,385
W
U
299
965
672
2,520
2 U61*
w
355
1,116
2,131
I,8k8
3,52k
85
82
3,8k2
W
3,838
k.Olk
W
U
u
I,k06
5,805
W
V
1,316
I,k20
W
2 Ut*2
' 23
6,8k8
101,836
•wkcr
of
•t*rm-
tlma
7
1
Ik
2
37
1
6
3
1
6
6
7
3
1
k
19
8
1
2
2
3
6
1
2k
2
20
18
2
1
2
8
Ik
2
3
k
6
1
30
2
328
Ouacltr
1,180
22.190
9>3k
28)397
H
169
8)513
k.372
1,57k
1.739
1.016
If
2,813
7,683
13.762
21,123
18,789
k,737
2,081
2,028
592
5.125
4,636
k)772
19.255
2)336
l)l7k
6)k05
2,538
2,333
3)326
3.109
5,658
1,875
1,690
9.930
H
19,717
k.OMJ
2,602
306)706
l~*r
1,817
18.823
16,979
2,573
22)873
'if
H
68
H
5.208
12,ki5
6,801
2,559
I,k30
1,222
W
18)878
20,976
29,903
21,505
5,0k8
6,128
2,690
9,k95
7)60k
26)220
1,602
3,390
l)6ki
10.775
17,226
k)793
6)977
7.981
6,55k
2.639
15)273
H
23.832
6.393
10.191*
k67,650
•f
Clona
22
85
81
93
156
ko
2
2
U
3
56
65
k6
. 35
56
19
3
33
108
177
229
20
19
37
26
kl
29
at
150
33
33
153
27
71
5k
16
15
88
18
31
k5
k2
131
k
203
32
2.967
Ofl
OoMtltT
6,163
2,587
If
W
w
H
1,181
122
257
6,806
7k
2,168
H
W
V
1.137
309
w
1.326
w
1.581
&
U
681
V
907
IMT
TaU.
79
If
H
6.379
•j
7
268
636
1.739
86
132
1,001
1,125
H
kk3
W
H
U
1,088
V
95
if
3.77k
U
kk
V
If
V
1.3*5
U
960
U
62.66C
ftZ.TOfc
•f
1
30
13
2
k6
6
1
k
1
1
3
3
2
3
71
7
11
2
11
3
3
k
2
9
1
21
5
6
8
3
15
321
U withheld Co avoid dlicloilng Individual coop.ny confidential data; Included with "ConcaaUenci".
y Baaed on 5,636 operation, which completed the 1974 luppleaentil forv.
l_l Data way not add to totala thovn btcauae of ladcpeodcnt xouadlog.
Source: Bureau of Mines "Mineral Industry 5>urvpv<;"
-------
Table 11-8 PRODUCTION OF SAND AND GRAVEL IN 1974, BY STATE, AND UNO
OWNERSHIP (WET OR DRY OPERATION ON LAND) I/
(W3 short tons)
ro
O
Own H>o MuBtxr
land of
operation!
Quantity
Alabaaa
Arltooa ------
Arkansas -----
California - —
Colorado -----
De I aware -----
Georgia ------
Hawaii
Illinois -----
Louisiana — --
Massachusetts-
Michigan -----
Minnesota
Mississippi --
Missouri -----
Nebraska
New Hampshire-
M«u Kexlco ---
North Cdi-ollna
North Dakota -
Oklahoma
Pennsy tvania -
Rhode laljnd -
South Carolina
South Dakota -
Utah
Vermont
Washington
West Wrginla-
Ulscon^in
UyooLng
Concealments -
711
5,824
7.179
2,947
45,209
11,250
3,528
U
12,093
2,842
4
3,000
21,245
13,046
5,818
4,021
1,907
2,314
1,784
6,253
10,379
29,224
16,456
4,079
3,892
2,297
4,734
4,868
4,101
12,259
3,120
16,034
4,267
1.573
25,352
2,795
8,446
11,192
1,031
2,201
2,537
1,055
8,365
6,460
1,650
3,824
10,800
U
12,160
2,969
2,169
371,763
7
33
34
18
104
76
43
3
27
16
1
41
75
83
68
34
6
15
31
30
82
170
163
13
22
31
46
23
38
53
26
127
42
18
172
20
68
57
10
12
51
12
37
37
24
36
114
3
111
17
2,380
Own BuBb«r
•inaral of
rlfhta oparatlona
U
55
40
V
96
U
w
72
W
U
W
W
1.175
W
U
W
208
U
77
W
941
603
W
U
U
w
185
W
U
67
W
W
W
W
9,468
12,988
1
2
2
3
1
2
1
I
1
3
3
1
6
3
1
1
2
2
4
2
10
6
1
1
2
1
5
2
2
1
1
1
1
1
77
Icaac Blnara!
right! and pay
royalties
Quantity
3,319
447
3.540
2.348
13,606
2,561
W
1,378
W
W
3,170
2,537
1.918
1,887
U
525
1,092
1,282
5,207
4,430
970
383
177
1.680
1.017
945
U
W
1,979
339
633
4,698
1,724
2,108
1.030
991
792
2,093
6,335
137
26
3. 548
1,280
W
4,175
421
2,521
89,044
•Va.be r
of
Optra dona
10
6
20
27
42
14
3
7
2
3
24
13
37
26
2
4
6
11
29
54
9
5
5
40
7
4
3
3
17
7
7
50
14
16
10
a
21
12
23
4
1
13
10
1
83
8
721
I«a*a prlvaca
land and pay
royaltiaa
Quantity
7,146
948
5,162
4,579
35.073
7,249
729
W
10.093
783
329
1.492
9,543
8.411
7.521
3.915
3,801
8,602
1,266
3,707
1.692
18,432
12.015
7,862
5,085
409
5,035
1,894
W
2,143
2,960
4,713
5,147
1,300
7,933
3,428
3,168
2,849
397
3.688
3.024
3.781
24.626
1,414
400
4,803
3.065
W
7,246
1,590
3,606
264.057
of
oavratlona
47
3
37
126
158
77
5
5
21
10
1
22
68
55
129
64
23
40
13
10
17
154
127
27
37
10
96
18
3
9
54
48
73
23
79
49
37
21
5
15
42
17
95
16
21
37
38
2
70
20
2.174
Ua>* public
land and pay
royaltiaa
Quantity
U
22,655
4,314
1,855
J.316
1.215
344
W
27S
U
W
174
612
309
17
W
3
1.3W
W
235
832
34
U
522
U
849
U
U
592
180
3.343
1,910
W
w
U
U
650
l.»2*
1»5
245
3,006
51.711
of
ofvratlooa
1
12
1*
9
21
8
I
1
4
2
1
13
5
6
I
1
I
6
3
1
i
I
2
U
1
16
6
1
5
1
9
S
2
3
3
1
5
6
4
a
284
W Withheld to avoid disclosing individual company confidential data. Included with "Concealmenta".
I/ Based on 5,616 operations which completed Che 1974 supplemental fora.
2~/ "jla may not add to totals shown because of Independent rounding.
Source: Bureau of Mines "Mineral Industry Surveys" Sand and Gravel in 1974
t i \ I ( I I 1 l I { '
-------
other concrete products such as block at the same location and consuming
some of the sand or gravel they produce in those manufacturing operations.
General statistics for the construction sand and gravel industry, as
reported by the Bureau of the Census, is shown in Table II-9 by employment
size of establishment for 1972. The 2,762 establishments covered by this
table averaged:
• A total employment of 11 workers;
• Value added equivalent to 78% of the value of shipments
and receipts; and
0 Capital expenditures of $44,000 per plant, or 14% of
shipments.
The distribution of establishments by number of employees is heavily
skewed to the lower end, with 46% of the establishments employing four or
fewer workers. Only 3% employ more than 50 workers. The sand and gravel
industry, as a seasonal one, experiences peaks and troughs in employment
levels for production, development and exploration workers. Consequently,
the quarterly distribution of manhours for such workers is 21%, 26%, 28%
and 24%.
3. Industry Segmentation
The construction sand and gravel industry included about 5,150 plants
producing an estimated 697 million metric tons of commercial product in
1972. The Development Document considered various factors in subcategoriz-
ing this industry and concluded that, with the exception of the manufacturing
process employed, no factors are of sufficient significance to justify
their use in the segmentation process. Consequently, the following sub-
categories were selected:
11-21
-------
Table II-9 GENERAL STATISTICS BY EMPLOYMENT SIZE
OF ESTABLISHMENT, 1972
1BT2
GO*
1443
lum
COHSTROCTIOH SARD AKD GRAVEL
Sftc^liftemti, total O
•sttbll.it.Mat* with U avcrtr* of —
SO to 99 ••ploy*** . ,E1
1OO to 249 nploj*** El
a»0 to 499 **plor».r»*
ItM
Intimma
(numb*)
2,782
1,29*
563
547
312
63
1«
3
859
All imployMS
Number
0.000)
29.7
2.2
3.9
7.4
9.0
4.0
2.3
.9
1.3
Piyroll
(million
doll»ti)
2«i. a
1».4
37.0
71.4
S5.5
38.2
22.8
7.5
Production, dnttapmtnt,
and txplorltion worker]
Number
(1.000)
23.3
2.
3.
S,
1.
Mm-hourl
(millont)
50.4
3-»
6 5
12 4
15 7
6 7
3 8
1 8
Wejei
Inn linn
dolljri)
2O5.7
15.3
28.
51.
64.
26.
13.
5.
Vikiooddid
m mmm|
(million
dollvt)
684.6
54.
89.
174.
200.
91.
49.
18.
33.T
CO« 01 MO-
pliei. ttc.,
•no puritaeal
methMionr
HUM
(milton
dolliri)
317.0
».
43.
81.
100.
38.
18.
8.5
15.4
Villa of
rfiipmtmt
•no rttttpts
(million
doited
179. •
70.4
117.7
225.
272.
109.
59.
23.
42. T
Cepial
•xpenditurtt
(millon
dollvtl
122.0
10.3
15.5
30.
33.
20.
7.
3.
6.3
Iteta:
Til* payroll and sal** data for avail •atablliH.ients ((«B«i-alljr *lmcl*-wiit eompanl*** vlth !*•• than 9 ••ploy**.,) vvrw obtain**! from adalm-
latrat.,9*, neard* of other KOv*rnB*nt agenda* in*t«ad ot from a C*uus rvpoit fora. Th««* data .r«>r» th-m us^d in eoajunctloo with ladiutrr
mn&m to ••ti..,*t« th« balaac* of th»» itent ihown In th* tabl« for tb**« small •*tabll*hm*nt*. Thia t«cluilqu* wu al*o u**>d for a email n4.Bb.ir
«f ettcr ••tabllabJMQta *ho*« rvport* v»r* not neelred at th« tim* th« data w»r» tabulated. Th« follovinc tjmbolm ar» ihown for tbon* al.w cl**««a
*tjST» ..dDimlatrativa rvcord* data war* u**d and account for 10 p*>rc*tnt or morm of tb« tl&irt* ahovn:
U—10 to 19 percent
•2—20 to 29 percent
E3—30 to 39 percent
M--40 to 49 percent
E5—50 to 59 percent
M--00 to (9 percent
17—70 to 79 percent
n—80 to »» percent
W percent
EO—100 percent
(B) Vtthbeld. tc avoid dlecloalnf fl8Vree for Indlvidoel canpanlee. Data for tble Iten are Included 1» the underaeered flcuree above.
C) l*f* than naif of the unit of neaeurenent ahoen.
'llepon foraa eere not cenerallr nailed to oonpanlea with leee than 3 eetploreea that operated only 1 eetahliehnent. Parrall aad ealee for 1972
COK> obtained frea edaUletratlTe reoorda eupplied to other a«eacie> of the federal Ou.eiueeut. Theee perroll and aalea data were then used In
with InduetiT arerefee to eetuute the balance of the iteau) thorn la the table. Data are also Included In the reepeetlre alie cle«ee«
for tfcia InduetiT.
Source: Sand and Gravel, 1972 Census of Mineral Industries,
MIC72(1)-14B, Bureau of the Census, Dept. of Commerce
11-22
-------
1. Dry excavation and dry processing;
2. Wet or dry excavation with wet processing;
3. Dredging in navigable waters with on-land processing; and
4. Dredging in navigable waters with on-board processing.
Table 11-10 summarizes the distribution of plants, production and
employment by each process. The Development Document modeled a single
representative plant with an annual production of 227,000 metric tons
(250,000 short tons). Because of the distribution in plant size within
this industry, described earlier, it is necessary to examine the potential
impact on smaller plants, having an annual production of about 91,000
metric tons (100,000 short tons). It is believed that many of the plants
in operation today that do not have effluent controls in-place are at
the lower end of the size distribution in this industry. Those that are
above 227,000 metric tons in size would incur lower unit costs by imple- ,
menting effluent controls and presumably would face a lower relative impact.
11-23
-------
Table 11-10 SUMMARY - CONSTRUCTION SAND & GRAVEL SEGMENTS, 1972
1.
PO
-F*
c Production
Process
4)ry
Wet
Dredging
(on-land
processing)
Dredging
(on-board
processing)
IDUSTRY TOTAL
Plants 10W Short
Number % Tons
750 14.6 143
4,250 82.5 573
50 1.0 16.7
100 1.9 33?
5,150 100.0 766
10° Metric
Tons %
130.1 18.8
521.4 74.7
15.19 2.2
30 4.3
697 100.0
Average
Production
103 Short
Tons /Plant
191
135
334
334
149
Average
Production
183 Metric
Tons/Plant
173.8
122.8
303.9
303.9
135.5
Empi oyment*
103 %
6.4 18.7
25.5 74.7
0.8 2.2
1.5 4.3
34.2 100.0
*At an estimated production rate of 22,500 short tons/employee.
Source: Development Document and Arthur 0. Little, Inc., estimates
-------
C. FINANCIAL PROFILES
1. Industry Performance
The construction sand and gravel industry has a financial profile
similar to the crushed stone industry with which it competes. Average
industry profitability is about 7% after tax on sales, while the return on
equity is 8 to 10%. The industry is vulnerable to the cyclicality of
construction activity and has, along with most construction materials
industries, experienced poor years in 1974 and 1975. However, both market
growth and profitability are basically healthy and should remain so.
2. Model Plants
Financial profiles for two model plants—having a production of 91,000
metric tons and 227,000 metric tons respectively—are displayed in Tables 11-11 and
11-12. Variable costs account for about 65% of net revenues, with fixed
costs another 27%. Net profit after tax is about 8%. As with the crushed
stone industry, depreciation and depletion represent significant sources
of funds and can exceed the contribution by net income for the medium-to-
large facilities. Average annual capital expenditures (for expansions and
to maintain existing assets) are 12 to 15% of net revenues, while the ratio
of total assets to sales is about 1.3 for both sizes.
Although there do not appear to be any economies of scale with respect
to net income, the ratio of cash flow to net revenues is higher for the
medium-sized facility.
3. Constraints on Financing Additional Capital
Many of the points made with respect to the crushed stone industry
(Section III.C.3) about the likely distribution of each of the financial
parameters also apply to the sand and gravel industry.
11-25
-------
Table 11-11 FINANCIAL PROFILE - REVENUES FOR CONSTRUCTION SAND & GRAVEL OPERATIONS
SMALL
MEDIUM
I
ro
en
Production
Price per short ton
metric ton
REVENUES
Variable Costs
labor
materials
repair and
maintenance
Total
Fixed Costs
SG&A
depreciation
depletion
interest
Total
Profit before Taxes
taxes
100,000 short 91 ,000 short
tons/year tons/year
$ 1.50
$ 1.64
$150,000
$ 30,000
32,000
35,000
$ 97,000
97,000
8,000
2,000
3,000
$ 40,000
$ 13,000
2,000
250,000 short
tons /year
$ 1.50
$ 70,000
80,000
85,000
60,000
35,000
5,000
8,000
6,000
227,000 me
tons/year
$ 1.64
$375,000
$235,000
$108,000
$ 32,000
net profit
$ 26,000
-------
Table 11-12 FINANCIAL PROFILE - CASH FLOW FOR CONSTRUCTION SAND & GRAVEL OPERATIONS
SMALL
MEDIUM
Production
Price per short ton
metric ton
CASH FLOW
100,000 short
tons/year
$1.50
91,000 short
tons/year
$1.64
Total $26,000
Book Values of Assets $65,000
Source: Arthur D. Little, Inc., estimates.
250,000 short
tons/year
$1.50
Cash In -
net profit
depreciation
depletion
debt increase
Total
Cash Out -
capital
expenditures
land purchase
increase working
capital
dividends
$11,000
8,000
2,000
5,000
$26,000
$18,000
2,000
4,000
2,000
$ 26,000
35,000
5,000
13,000
$ 59,000
5,000
10,000
5,000
$200,000
227,000 metric
tons/year
$1.64
*79,000
$79,000
-------
To summarize: the smaller and older plants, and those operated by
a proprietorship as opposed to a larger corporation, have relatively less
capital available for capital expenditures than the larger and newer plants;
profits after tax are generally lower for the smaller facilities, but return
on investment is often greater or equal to those enjoyed by the larger
plants.
Table 11-13 shows the estimated capital investment in place in 1974,
based on 5,636 operations that responded to a Bureau of Mines survey.
The following summarizes these data:
Type Number Average Investment
Dry Pit on Land 3,909 $243,000
Wet Pit on Land 1,227 593,000
Non-Navigable River Bed 337 736,000
Navigable River Bed 131 402,000
Lake 25 216,000
Bay 6 329,000
Ocean 1_ 50.000
TOTAL 5,636 $352,000 Average
The average investment in place--$352,000 for 1974--compares to the average
incremental capital expenditures of $44,000 in 1972.
11-28
-------
Table 11-13
ESTIMATED CAPITAL INVESTMENT IN 1974, IN THE PRODUCING SAND
AND GRAVEL INDUSTRY BY STATE, AND SOURCE ]_/
(103 dollars)
I
ro
UD
Alabasu
Alesu
Arizona
Arkansas
California
Colorado
Connecticut
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kentucky
Louisiana
Maine
Maryland
Massachusetts*
Michigan
Minneaota
Mississippi---
Missouri
Nevada
Sew HaTtpshire-
Kew Jersey
Hew Mexico
Hew York
Berth Carolina
Rorth DaKota--
Ofcio
Ore^cn
Penns/l/anla--
Bhode Isla.-.i--
Soutr, Carclln*
South Daftote--
T*nr.easee
Texas — •
Utah
Verm >nt
Virglrla
Washington
Weat Vlrirlnla-
Wlsconaln
Wyooi 1 rv
Total V
I/ Based on 5,
Bnr pit
00 land
Talus
.-. 7.068
26,831
17.U66
*1,372
100,037
— - 23,566
7,115
2,700
1,176
--- 2,727
8fc9
-- 10,391.
2»,359
11,169
9,099
U.829
a. in
»,255
6,991
19. UJ.
31,223
70,?5^
66,f^-
9.865
2.1.11.
5.658
7.U/7
13.596
9.529
2O.611
17,3*5
36,939
9,171
56,5r>
29,19c
3,323
17,1=1
28,1-23
»,252
8.99?
M.^-O
g,*^
28,3^;
12.>9
6, CM
16,'ic
27,669
9.500
11*. 5LO
e. lie
%o3''6
636 operations wtllch cam
•UBber
of
opera-
tion*
36
90
6U
158
187
Ilk
50
6
3
12
3
63
101
7U
115
61
20
17
"•3
«3
110
296
32U
32
12
UU
31
53
1*6
"•5
92
179
61
U6
183
3k
79
75
18
19
113
*
110
57
•5
63
1U7
2
250
U7
3,909
Wat pit
oa land
Value
3,568
10,580
36U
91,665
15,836
8,261
U30
250
29.02U
23,573
-----
397
19,335
2>». 5^5
18.1.66
150,778
3.669
1»,955
50
3.759
1,»35
1U.276
fc.778
It. 935
1.65k
U95
"•5.013
952
12,208
673
U,98l
6,793
111*
27,830
"i,l>30
10,361.
128,996
2UO
5.01.0
525
1.350
20,166
592
105
3, 3^7
3,056
70
3.1-26
68
727, M9
•iaaber
of
opera -
tlocu
20
31
2
11
39
33
3
2
50
15
-----
5
62
79
123
k5
hO
1
3
6
57
2k
16
10
3
1UO
5
20
7
15
U
3
113
27
22
11
1
11
5
5
1.6
6
1
19
19
1
18
1
1,227
tot
t»vl-
g«bl«
Value
305
100
27.685
1.921
27,317
6.789
20
_ — -.
375
250
200
369
1,659
50
"I"
3.301
„
W20
51
,_
7^6
-----
1.353
"563
2,086
1,792
168.527
270
300
205
.....
130
180
116
1,059
2W8.1U.
Hl.er
•uBber
at
opera-
tions
d
2
•5
11
96
26
-----
1
-----
2
1
2
3
11
I
.....
19
.....
9
1
6
-----
25
6
21
18
5
-----
5
.....
1
3
.....
3
3
3
a
337
bed
•avi-
•*£le
Value
2,162
250
5,825
880
125
5U2
50
280
1,106
1.00
995
1,203
11.562
50
50
7.791
200
~~~~"
350
192
250
6,727
2,250
795
1.5OO
.....
k5
225
6.890
12
52,707
•UBeMV •••WiT
"aVaaber Lake of «ay of
of agun- oa»ra-
opera- tloo* Uoo»
tlooa-
Value Valoe
3 TOO 3
2 ..... - — ..
1
8 226 3 —
5 133 2
8 — — - — «
!0
1 1,200 1
1,225 k 775 2
1 .. — . — .....
29 - -
90 2
.
1 50 1
__ -
7
2 1.238 8 500 1
2
10 .....
3 567 2
200 1 — --
..... ..... ..... .... .
It . ..... — — - .....
3
2
6
1 -- — •"
1.78 1
131 5,'«07 25 1,975 6
.taber
Ocean of
overa-
tlona
Value
50 I
.<.___ * ~~
"
.....
**"""" -----
-- —
.....
*"
.....
*
50 I
placed tht 1974 supplemental fan.
causa of Independent rounding.
Source: Bureau of Mines "Mineral Industry Surveys" Sand and Gravel in 1974
-------
D. PRICES AND PRICE SETTING
1. Historic Prices
FOB prices for construction sand and gravel increased about 40% from
1965 to 1974, reaching an average value of $1.50 per metric ton in 1974
(Table 11-14). Prices maintained parity on a constant-dollar basis (using
the GNP implicit price inflator) until 1971, but has since lost ground;
i.e., prices of construction sand and gravel have increased at a rate less
than that of inflation over the past four years. However, it is note-
worthy that the FOB price for construction sand and gravel, while still
lower than that for crushed stone, has increased at a relatively faster
rate since 1967. This historic relative price stability and relative
decline in constant dollars is not only due to intra-industry competition
at local and regional levels in an inflationary period, but also because
some companies in the industry have had to control their FOB prices in
order to remain competitive when faced with rapidly escalating freight
costs.
2. Current Prices
Quotations in Engineering News Record for sand and gravel as of March
1976 are shown in Table 11-15. These prices (given for short tons)
represent FOB city values, except where noted, and range from $2.34 per
metric ton to $8.18 per metric ton gravel, and $1.47 per metric ton to
$7.58 per metric ton for sand. As FOB prices are normally very much the
same between locations, and might amount to about $1.90 per metric ton
currently, the FOB-city prices reflect the great variations that exist in
freight costs, which might average $2.18 to $2.45 per metric ton.
II-30
-------
Table 11-14 CONSTRUCTION SAND AND GRAVEL PRICES,
1965-1974
Year
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
$/Short Ton*
0.99
0.99
1.01
1.04
1.06
1.11
1.18
1.23
1.31
1.38
Pri ce
(1967
Actual
96.1
97.8
100.0
104.6
108.8
115.3
120.6
123.3
127.6
139.1
Indexes
= 100)
Relative**
102.0
100.9
100.0
100.6
99.8
100.3
100.3
99.3
97.3
96.1
*Plant shipments value, short tons
**Actual price index * GNP implicit price inflator
Source: U.S. Department of Interior/Bureau of Mines
U.S. Department of Labor/Bureau of Labor Statistics
11-31
-------
Table 11-15 SAND AND GRAVEL PRICES FOB City, March 1976
(Dollars Per Short Ton)
Gravel
e =
f =
Ez =
Eb =
a =
P =
pv =
City
Atlanta
Baltimore
Birmingham
Boston
Chicagg
Cincinnati
Cleveland
Dallas
Denver
Detroit
Kansas City
Los Angeles
Minneapolis
New Orleans
New York
Philadelphia
Pittsburgh
St. Louis
San Francisco
Seattle
1-1/2"
2.55
4.00
2.15
5.05
2.25
2.45f
6.353
4.25
31.05a
2.70p
7.50
4.30d
5.15kF
6.80e
6.15
5.80Bn
2% disc. , 10 days
5% disc., 5 ton or more 10 days
2% disc., 15th prox. , pea gravel
2% disc., 15th prox., trucklots
per cu. yd.
10
-------
3. Price Elasticity and Pricing Dynamics
The demand for construction sand and gravel is price inelastic on an
industry basis; i.e., when prices increase, even though quantity demanded
1 may decline, total revenues increase. The cost of sand and gravel is still
a very small percentage of the total price of materials and products of
which it is a component (10-15% of the FOB price of ready-mixed concrete
and a very low proportion of the cost of building construction to which
I the concrete is being supplied, for example.)
Markets for sand and gravel tend to be geographically limited and
plants serving them are generally clustered around one or more population
centers. On a plant-by-plant basis within a particular market, competition
1 can be severe and tends to be oligopolistic. The sand and gravel business
is also reasonably capital-intensive (the ratio of total assets to net
i revenues being about 1.3) and producers need to maintain production volume
to provide for the amortization of their capital investments. A "typical
g market" will have a number of potential suppliers competing for the avail-
able business and doing so on the basis of a delivered price. These com-
petitors may have a wide range of characteristics, from a small proprietor-
ship to a large public corporation, and from a large to a small plant.
* A model regional market for sand and gravel has been constructed for
the Baltimore-Washington area separately from the non-existant national
n market portrayed by examination of national aggregate statistics.
y The size distribution of firms within the local market is one of the
most important characteristics of that market. Table 11-16 summarizes the
\ number of firms by size which were considered to serve the Washington, D.C.
Metropolitan area.
L
L
L
L
The size distribution in the D.C. Metropolitan area is quite different
than that for the national aggregate industry. The Metropolitan area shows
11-33
-------
Table 11-16 SAND AND GRAVEL AND CRUSHED STONE OPERATIONS
PROVIDING CONSTRUCTION AGGREGATES
FOR THE WASHINGTON, D.C., METROPOLITAN AREA
Operation Size
Number
Estimated Annual
Production Share
(Annual Production)
Less than 91,000 metric tons
91,001 to 227,000 metric tons
227,001 to 454,000 metric tons
Over 454,000 metric tons
TOTAL
4
7
10
8
29
0.92
8.6%
26.8%
63.7%
100.0%
Source: Arthur D. Little, Inc., estimates
11-34
-------
a much greater concentration of operations 1n the larger production
classes. It seems likely that the bulk of smaller operations In the nation
would serve small urban areas and rural areas. It would appear to be
appropriate to analyze the economic impact of the effluent standards in
two hypothetical model markets, the larger metropolitan area and the smaller
urban-rural area. The large market represents one extreme of competitive
situation with large and small firms operating in a large market. The
small market is composed of a few small firms each of which could dominate
the smaller market.
Individual quarries in the typical market will establish a desired
FOB selling price based on the production costs they experience in order
to achieve a "reasonable" return on investment. What is "reasonable" will
vary depending on the type of company; a proprietorship or a private
corporation is normally more concerned with cash flow than is a large
public company, which is attempting to achieve an acceptable return on
investment for its stockholders. However, selling prices that are estab-
lished by this mechanism are then liable to adjustment based on the
perceived competitive environment and transportation costs.
Prices for different sizes/products can be quoted on a delivered
basis per short ton for a truckload or on an FOB plant basis with customer
pick-up. Both methods are frequently employed, but in both cases the
physical transportation is usually carried out by independent truckers
working on an on-call or contract basis. Because of price competition,
many suppliers to a city will quote a standard FOB city price (a zone
price) which will not normally vary between sources or with ultimate
destination. Consequently, the customer may sometimes be located close
enough to an individual quarry to make it worth his while to arrange pick-up
on an FOB plant basis and thus save on freight equalization.
The effects of transportation costs on delivered price can thus be
large. Sand and gravel are commodity products which are low in value,
11-35
-------
and have a high specific gravity. As a result, the pricing of the product
for the majority of its applications depends greatly on the distance from
the source of supply to the consumer. Transportation costs for the material
currently average over 8£ per metric ton per mile. Given the presumed
FOB plant price of $1.63 per metric ton, the effective price to the con-
sumer will double at a distance of approximately 20 miles. The average
selling price for sand FOB city is $4.47 per metric ton implying an average
shipping distance of 35 miles. A company with a significantly lower total
cost structure will eventually be able to obtain a larger market share, if
all other factors (such as transportation costss etc.) are equal. Any
operator able to gain a transportation advantage should be able to control
a larger share of the market. The actual pricing mechanism, however,
is influenced more by such factors as: the rate charged by the independent
trucker; access to highways vs. secondary roads; whether return loads can
be obtained; the amount of congestion over the route of travel and the
customer-supplier-trucker relationships.
Delivered prices normally move in small increments in response to
the leadership of one or other of the suppliers. In a typical market, this
price leadership will change from time to time, as it does in the other
basic industries, and no discernable pattern can be discovered. Because
price increases are normally relatively small and are tied to changes in
costs which are incurred by all producers, it is highly likely that the
other competitors will follow the leader's example. If the leader makes a
price increase that is considered unnecessary, or if his competitors wish
to gain a strategic advantage and larger market share by holding back on
similar price increases, the leader may be forced to roll back his increase.
However, there is room in a typical market for a modest spread in FOB
prices between suppliers of similar products. The picture is more clouded
by inter-industry competition resulting from substitution, but this depends
very much on the geology of the region and on product specifications.
11-36
-------
L
E. POLLUTION CONTROL REQUIREMENTS AND COSTS
L
• 1. Effluent Control Levels
if Table 11-17 presents the EPA regulations for point source discharge
of water effluents from the construction sand and gravel industry. These
I regulations require no discharge, either for a maximum average for 30
consecutive days, or a maximum for any one day, at all three levels:
BPCTCA, BATEA, and NSPS. Any effluent originating as mine dewatering
is to be limited to a maximum total suspended solids (TSS) of 30 mg/1 for
any one day.
I
2. Effluent Control Costs
The effluent control costs for process water from the construction
sand and gravel industry are associated totally with the treatment and
storage of suspended solids. The recommended level of control is no dis-
charge, which requires the use of settling ponds and the total recycle
of clarified process water, which is withdrawn as an overflow from the
upper level of a settling pond. The ancillary equipment required consists
primarily of a water handling system (e.g., pump, piping, etc.). The
Development Document indicates that a flocculating agent might be necessary
to enhance the settling rate of the suspended solid particles.
The Development Document presents the fixed capital and operating costs
for several different compliance levels of a construction sand and gravel
operation. (This is presented on Table 17, found on page 209 of
Volume I of the October 1975 Development Document.) The wet process con-
struction sand and gravel model plant size is 227,500 metric tons per
year (250,000 short tons per year). The base year for the dollar value
used for the development of this compliance cost table was mid-1972.
11-37
-------
Table 11-17 RECOMMENDED LIMITS AND STANDARDS
FOR BPCTCA, BATEA, AND NSPS -
CONSTRUCTION SAND AND GRAVEL INDUSTRY
Concentration in Effluent
30-Day Average 24-Hour Maximum
Process Waste Water No Discharge No Discharge
Mine Dewatering TSS 30 mg/1
Source: Development Document for Interim Final Effluent Limitations
Guidelines and New Source Performance Standards, Mineral Mining
and Processing Industry: Point Source Category. EPA 440/1-75/059
(Vol. I) and 0596 (Vol. II)
11-38
-------
I
L
The following economic Impact analysis 1s based on mid-1974 dollar
| value. The costs shown in the Development Document have, therefore, been
modified by using the GNP inflator of 16.5%*. Mine dewatering costs are
, either negligible or are included in the costs presented in the Development
\
* Document.
i Control costs at all levels were developed for three additional plant
sizes, to determine the sensitivity of control costs to plant size. The
j four plant sizes used as the basis for the development of control cost
are:
• 100,000 short tons per year (91,000 metric tons per year);
1 t 250,000 short tons per year (227,000 metric tons per year);
t 500,000 short tons per year (454,000 metric tons per year); and
t 950,000 short tons per year (862,000 metric tons per year.
Fixed capital costs were varied by the appropriate ratio of annual
production costs raised to the 0.9 power, based on the 227,000 metric.
ton-per-year model size plant shown in the Development Document. Operating
costs were varied as a direct function of plant capacity. These control
costs are presented in Tables 11-18 through 11-21. A comparison of the
cost per ton for compliance at any level among tthe four different plant
sizes shows that control cost is very insensitive to plant size.
The characteristics of the four levels of control which were used in
the impact analysis are summarized below:
>urvey j
). S-l.
*Survey of Current Business, Department of Commerce, Jan. 1975, Part I,
P-
11-39
-------
Table 11-18 COST OF COMPLIANCE FOR MODEL CONSTRUCTION SAND AND GRAVEL FACILITY
Plant Size: 91,000 Metric Tons Per Year of Product
Plant Age: 5 Years Plant Location: Near Population Center
Base Year: Mid-1974
Level
ABC
Invested Capital Costs: (min)
Total 0 16,900 18,900 22,000 11,100
Annual Capital Recovery 0 2,800 3,100 2,700 1,300
Operating & Maintenance Costs:
Annual 0 & M (excluding power & energy) 0 800 900 9,800 13,100
Annual Energy and Power 0 200 300 300 200
Total Annual Costs 0 3,800 4,300 12,800 14,600
Cost/Metric Ton Product 0 0.042 0.047 0.141 0.160
Waste Load Parameters Raw
(kg/metric ton of Waste
Product) Load
Suspended Solids 100 100 0.4 0 0 0
Level Description:
A - direct discharge
B - settling, discharge
C - settling, recycle
D - two silt-removal ponds, settling pond, recycle
G - flocculant, settling basin, recycle
Source: Development Document and Arthur D. Little, Inc., estimates
-------
Table 11-19 COST OF COMPLIANCE FOR MODEL CONSTRUCTION SAND AND GRAVEL FACILITY
Plant Size: 227,000 Metric Tons Per Year of Product
Plant Age: 5 Years Plant Location: Near Population Center
Base Year: Mid-1974
Level
A B CD G
Invested Capital Costs: (min)
Total 0 38,400 43,100 50,200 25,200
Annual Capital Recovery 0 6,300 7,000 6,100 3,000
Operating & Maintenance Costs:
Annual 0 & M (excluding power & energy) 0 1,900 2,300 24,500 32,700
Annual Energy and Power 0 400 700 700 500
Total Annual Costs 0 8,600 10,000 31,300 36,200
Cost/Metric Ton Product 0 0.038 0.044 0.138 0.159
Waste Load Parameters Raw
(kg/metric ton of Waste
product) Load
Suspended Solids 100 100 0.4 0 0 0
Level Description:
A - direct discharge
B - settling, discharge
C - settling, recycle
D - two silt-removal ponds, settling pond, recycle
G - flocculant, settling basin, recycle
Source: Development Document and Arthur D. Little, Inc., estimates
-------
Table 11-20 COST OF COMPLIANCE FOR MODEL CQNSTrTCTIUJI 3Ai!D Ai/.5 GPAVEL FACILITY
Plant Size: 454,000 Metric Tons Per Year of Product
Plant Age: 5 Years Plant Location: Near Population Center
Base Year: Mid-1974
Level
BCD
Invested Capital Costs: (min)
Total 0 71,700 80,400 93,700 47,000
Annual Capital Recovery 0 11,800 13,100 11,400 5,600
Operating & Maintenance Costs:
Annual 0 & M (excluding power & energy) 0 3,800 4,600 49,000 65,400
Annual Energy and Power 0 800 1,400 1,400 1,000
Total Annual Costs 0 16,400 19,100 61,800 72,000
Cost/Metric Ton Product 0 0.036 0.042 0.136 0.159
Waste Load Parameters Raw
(kg/metric ton of Waste
product) Load
Suspended Solids 100 100 0.4 0 0 0
Level Description:
A - direct discharge
B - settling, discharge
C - settling, recycle
D - two si It-removal ponds, settling pond, recycle
G - flocculant, settling basin, recycle
Source: Development Document and Arthur D. Little, Inc., estimates
-------
Table 11-21 COST OF COMPLIANCE FOR MODEL CONSTRUCTION SAND AND GRAVEL FACILITY
Plant Size: 862,000 Metric Tons Per Year of Product
Plant Age: 5 Years Plant Location: Near Population Center
Base Year: Mid-1974
Level
CO
Invested Capital Costs:
Total
Annual Capital Recovery
Operating & Maintenance Costs:
Annual 0 & M (excluding power & energy)
Annual Energy and Power
Total Annual Costs
Cost/Metric Ton Product
Waste Load Parameters Raw
(kg/metric ton of Waste
product) Load
Suspended Solids 100
(min)
0
0
0
0
0
0
B
127,600
20,900
7,200
1,500
29,600
0.034
143,200
23,300
8,700
2,700
34,700
0.040
166,800
20,300
93,000
2,700
116,000
0.135
83,70.0
10,000
124,200
1,900
136,100
0.158
100
0.4
0
0
Level Description;
A - direct discharge
B - settling, discharge
C - settling, recycle
D - two si It-removal ponds, settling pond, recycle
G - flocculant, settling basin, recycle
Source: Development Document and Arthur D. Little, Inc., estimates
-------
Level B - Settling with complete recycle given partial recycle
at present, a move to process control C below, cost
margins to achieve complete recycle from partial .025
acres of pond per 1,000 metric tons annual capacity.
Level C - Settling, recycle; requires approximately .025 acres
of pond area per 1,000 metric tons annual capacity.
Level D - Two silt-removal ponds, settling pond, recycle;
requires approximately .025 acres of pond area per
1,000 metric tons annual capacity.
Level G - Flocculant, settling basin, recycle; requires approxi-
mately .004 acres of pond-basin area per 1,000 metric
tons annual capacity.
Although control levels E and F were included in the Development
Document, they were not employed in the following economic impact analysis.
These two control levels are for facilities which have such limited land
available at the mining and processing site that appropriately sized
settling ponds could not be installed.
The field survey of construction sand and gravel facilities which was
conducted to provide some of the background and data base for the Develop-
ment Document identified no construction sand and gravel operations which
employ either of these two control levels.
Level E uses a mechanical thickener plus a flocculant, and Level F
employs an inclined plate settler and a flocculant to affect settling in
a relatively small area. The underflow from the thickener or inclined
plate settler would consist of a semi-solid sludge of settled solids which
would then be transported to a separate disposal area located where land
would be available for this purpose. The total land area including the
11-44
-------
disposal site for Levels E and F is approximately equal to that of Levels
C, D, or G, all of which employ settling ponds.
3. Current Levels of Control
Figure II-l shows the distribution of the total 5,150 construction
sand and gravel facilities, and the way in which they are subdivided into
the three main process categories—dry, wet and dredging. The wet and
dredging processing categories are further subdivided into groups having
the same current effluent control status—-100% recycle, discharge from
ponds and direct discharge).
Figure II-l shows that of the total 4,250 wet processing facilities
3,187 (75%) are currently operating on 100% recycle of effluent water all
of the time, or during normal operation. The remaining 1,063 facilities
(25%) are discharging process water. Of this last category, 956 facilities
operate settling ponds, but discharge effluent wastewater streams. The
remaining 107 facilities presently discharge their process water directly,
and don't operate settling ponds.
The construction sand and gravel industry in the United States can
be divided along process technological lines into three subcategories:
a. Dry Process
Table 11-10 shows that in 1972, there were 750 dry operations in the
construction sand and gravel industry. This represents 14.6% of the total
5,150 sand and gravel operations in the United States. The Development
Document indicates that not only is there no process water associated
with these dry operations, but that there is no mine dewatering as well.
Therefore, because there is no water at all associated with these operations,
there is no control either.
11-45
-------
_J
UJ
tu
-J
"Number of Facilities.
Source: Development Document
FIGURE 11-1 DISTRIBUTION OF CONSTRUCTION SAND AND GRAVEL FACILITIES
BY PROCESSING AND CURRENT CONTROL LEVEL CATEGORIES - 1972
-------
b. Wet Process
In 1972, there were a total of 4,250 wet process construction sand and
gravel operations in the United States, representing 82.5% of the total
number of plants, and producing 74.7% of the total annual production.
c. River Dredging
The Development Document indicates that there were a total of 150 con-
struction sand and gravel operations employing dredging in 1972. These
are divided into two main subcategories, based on the location of the
processing operations. One hundred of the dredging operations use on-board
processing and are regulated under Section 404 of the Federal Water Pollution
Control Act Amendments. The remaining 50 dredging operations employ on-
shore processing. Of the latter facilities, 25 are presently operating
with 100% recycle of process water, and thereby comply with the proposed
regulations. Some 22 more operations presently employ settling ponds, but
operate with some discharge. The remaining three facilities presently do
not have ponds.
4. Total Control Costs
Table 11-22 indicates the number of plants, etc., requiring no, partial,
or full effluent treatment. In summary, about 79% of all plants, represent-
ing about 75% of production, either require no treatment because they
utilize a dry process or have already implemented BPT/BAT by recycling
their process water. Of the remaining facilities, 19% (978 plants)
settle their process water before discharging, while 2.2% (110 plants)
presently have no controls. These facilities represent 22.9% and 2.4% of
total production, respectively.
Table 11-23 presents the total fixed capital, and the annual costs
associated with the additional required control for the individual segments
11-47
-------
Table 11-22 INCREMENTAL CONTROL COSTS FOR CONSTRUCTION SAND AND GRAVEL FACILITIES,
SEGMENTS AND TOTAL INDUSTRY (BPCTCA, BATEA)
TREATMENT
REQUIRED
None
TOTAL
00
TOTAL
Full
TOTAL
PROCESS
-Dry
-Wet
-Dredging
(OLP)*
-Dredging
(OBP)**
T Partial -Wet
-Dredging
(OLP)*
-Wet
-Dredging
(OLP)*
CURRENT EFFLUENT
CONTROL STATUS
No Process Water
100% Effluent Recycle
100% Effluent Recycle
No Discharge
Ponds and Discharge
Ponds and Discharge
No Ponds
No Ponds
INDUSTRIAL TOTAL
CURRENT
CONTROL
LEVEL
_
C
C
-
B
B
A
A
FUTURE
CONTROL
LEVEL
_
C
C
-
C
C
C/D/G
C/D/G
NUMBER
OF
PLANTS
750
3,188
25
100
4,063
956
2£
978
107
3
no
iiM
PRODUCTION
THOUSAND
METRIC TONS
563,899
174,995
22,106
761 ,000
ADDITIONAL CONTROL COSTS
REQUIRED FOR COMPLIANCE
TOTAL CAP. ANNUAL COST
MILLION $ S/METRIC TON
3.47
3.99
7.46
0.006
0.058
0.003
*(OLP) = On-Land Processing
*(OBP) = On-Board Processing
Source: Development Document and Arthur D. Little, Inc., estimates
-------
Table 11-23 SUMMARY - CONSTRUCTION SAND & GRAVEL SEGMENTS, 1972
Production
1.
2.
3.
i— i
ID
4.
Process Treat-
ment Required
Dry - none
Wet - none
- partial
- full
Dredging
(on-land
processing)
- none
- partial
- full
Dredging
(on-board
processing)
INDUSTRY TOTAL
Plants
Number
750
3,187
956
107
4,250
25
22
3
50
100
5,, 150
%
14.6
61.9
18.5
2.1
82.5
0.5
0.4
0.1
1.0
1.9
100.0
10J
Short Tons
143
387
168
18
573
8.35
7.35
1.00
16.70
33?
766
10-*
Metric Tons
130.1
352.1
152.8
16.3
521.4
7.59
6.68
.91
15.19
30
697
18.8
50.5
21.9
2.3
74.7
1.1
1.0
0.1
2.2
4.3
100.0
Average
Production
103 Short
Tons/Plant
191
121
176
168
135
334
334
334
334
334
149
Average
Production
103 Metric
Tons/Plant
173.8
110.1
160.1
152.8
122.8
303.9
303.9
303.9
303.9
303.9
135.5
Employment*
10^ %
6.4
17.2
7.5
0.8
25.5
0.4
0.3
0.1
0.8
1.5
34.2
18.7
50.5
21.9
2.3
74.7
1.1
1.0
0.1
2.2
4.3
100.0
*At an estimated production rate of 22,500 short tons/employee.
Source: Development Document and Arthur D. Little, Inc., estimates
-------
of the construction sand and gravel industry. The major fixed capital
costs are associated with the wet processing segment, which consists of
956 facilities that are currently at the B level of control, through use
of settling ponds with some discharge. (From Tables 11-18 through 11-21,
the appropriate incremental control cost is the difference between Level C
and Level B.) The final two columns of Table 11-22 show total fixed
capital and annualized cost, in dollars per metric ton of product for each
of the aggregated control segments of the industry. These costs are
developed for each of the process segments in the following impact analy-
sis section.
The entire industry will not be subjected to increased costs of
operation to meet the discharge standards. The majority of wet process
operations already completely recycle, only about 1,100 will experience
any increase in costs and about 1,000 of those plants will have to go only
from partial recycle to total recycle at small marginal cost,, To analyze
the economic impact of the required controls each segment of discharge
control process and plant size must be analyzed.
The total number of operations which are currently discharging all
their process water is known. The total number of plants which are
operating settling ponds but have some discharge is also known. In order
to incorporate these present levels of control into the plant size seg-
mentation with the available data, several assumptions were required.
First, any plant which is already using a settling pond with partial dis-
charge is assumed to be able to use control level C and achieve zero
discharge.
Second, the operations which are currently discharging without treat-
ment will be able to use control level C if their annual production is
greater than 91,000 metric tons per year. The only reason for using any
of the more expensive control technology is due to insufficient land area
available at the facility site. Any large producer would have the
11-50
-------
necessary area available for the required settling ponds. The operations
which could be forced to use the higher cost control processes would be
the smallest of the model plant sizes.
The estimates of normal costs of operations for the larger model
plants have been made with the assistance of Information developed from
an industry trade association survey of plants in this industry and in the
crushed stone industry. This survey is described in the appendix.
To distribute the plants that must shift from total discharge to 100%
effluent recycle (total-control plants) and the plants that must shift
from ponds and discharge to 100% effluent recycle (Incremental-control
plants), we have used the national distribution of plants by size. These
distributions are shown in Table 11-24. Using these distributions we
have assigned the plants requiring additional control expenditures into the
following classes:
Class I - Plants requiring incremental discharge control
segmented by plant size. Costs of control are
based on the total costs for these plants
estimated by the Development Document.
Class II- Plants which must shift from total discharge to
total recycle have been distributed by plant size
on the basis of the total industry size distri-
bution.
Class II is further decomposed into estimated numbers of plants which
must utilize the various discharge control processes.
Class II-C - The plants which have sufficient land to utilize
settling ponds for complete recycle, which is
control level C. All plants over 91,000 metric
11-51
-------
Table 11-24 WET PROCESS SAND & GRAVEL DISTRIBUTION OF PLANTS
REQUIRING DISCHARGE CONTROL FACILITIES
BY ANNUAL PRODUCTION
All Plants Incremental Control Total Control
Total Plants 4,301 978 110
Less than 100,000 2,900 659 75
100,001-250,000 830 189 21
250,001-500,000 360 82 9
Over 500,000 211 48 5
Source: Arthur D. Little, Inc., estimates and Bureau of Mines
11-52
-------
tons annual production will fall into this class
because the size of the operation presumes that
they have sufficient area. The smallest class plants
will probably have site constraints due to their
lack of land from worked-out areas or areas avail-
able for pit expansion. It is unlikely that all
would require other than Level C control processes.
We have presumed on the basis of field information
that 1/3 of the small plants will be able to utilize
Level C control.
Class II-_D - Of the remaining 50 small plants, site limitations
will force 25 to use Control Level D.
Class II-G - The remaining 25 plants will have to use discharge
Control Level G which requires the least land.
For the purpose of analyzing economic impact, the industry is seg-
mented on the basis of size and required discharge control process in
Table 11-25.
11-53
-------
Table 11-25. SAND AND GRAVEL INDUSTRY SEGMENTED BY SIZE OF PLANT
AND REQUIRED DISCHARGE CONTROL PROCESS
Class I
Class II-C
Class II-D Class II-G
Number
Estimated Annual
Production (xlO3)
Employment
Aggregate Control Cost (annual)
Aggregate Capital Required
Net Revenue Per Ton
Annualized Control Cost
Per Ton $/Ton
Cost Per Ton
Plants
Currently at
Total Recycle
4,063
563,889
25,171
0
0
.121
0.000
1.648
Incremental Control (B To C)
<91 ,000
659
36,485
1,630
177,360
779,604
.121
0.005
1.648
91,001-
227,000
189
49,000
2,190
285,840
986,375
.141
0.006
1.648
227,00V
464,000
82
44,150
1,973
257,526
822,495
.145
0.006
1.648
>454,000
48
50,360
2,250
273,772
<91 .000
25
1,554
69
73,038
886,087 322,753
.145
0.006
1.648
.121
0.047
1.648
Type A to C Control
91,001-
227.000
21
6,114
273
269,016
1,160,852
.141
0.044
1.648
227,001
454.000
9
5,440
243
223,480
963,383
.145
0.042
1.648
>454,000
5
5,890
263
235,600
978,478
.145
0.040
1.648
Type A-D
Control
<91 ,000
25
1,554
69
219,114
375,692
.121
0.141
1.648
Type A-G
Control
<91 ,000
25
1,554
69
248,640
189,554
.121
0.160
1.648
Total
5,150
766,000
34,200
2,288,386
7,465,277
Source: Arthur D. Little, Inc., estimates
-------
F. ANALYSIS OF ECONOMIC IMPACT
The basic result of the Implementation of the effluent guidelines on
the construction sand and gravel industry will be to increase costs of
operation. The impact on the industry and the general economy will depend
on the resulting changes 1n prices and production in the industry and any
secondary impact those primary changes might generate. Table 11-26 shows
the normal operating costs of operation for the model industry plants and
the cost of required levels of discharge control for each of the described
industry segments. (These costs have been developed in Sections C and E,
respectively.)
The table shows the costs of operation for various model plants and
the annual costs required to meet effluent standards. The various levels
of control costs are associated largely with land area required for various
settling ponds or basins. As less land is available for settling ponds,
the higher the costs of compliance as more equipment and chemical inputs
are required.
Table 11-26 demonstrates that the higher control costs are associated
with the discharge control procedure which must be applied to sites with
limited areas available for settling ponds. The variation of both general
operating costs and discharge control costs is quite insensitive to plant
size. There are some economies of scale 1n discharge control costs, but
there appear to be only minor scale effects in the normal operating costs.
The costs do vary considerably among different operations, but those
variations.appear to be the result of site specific costs such as land
values, specific mining consideration such as depth of overburden, isolation
of specific sands and gravels in the deposit, land rehabilitation costs,
etc.
Table 11-26 Indicates that the additional cost on any operation
requiring additional discharge control varies considerably.
11-55
-------
Table 11-26 COST COMPONENTS FOR THE
SAND AND GRAVEL INDUSTRY
Industry Size Segments
Production level fst)
(mt)*
Revenues ($)
Normal Operating Costs ($)
Variable Costs
Labor
Materials
Repair & Maintenance
Fixed Costs
SG&A
Depreciation
Depletion
Interest
Net Revenues (pre-tax)
Net Revenue per mt*
Compliance Costs ($)
Level C - Total Costs
Variable
Fixed
Compliance Cost per mt*
Capital Requirement
Level D - Total Costs
Variable
Fixed
Compliance Cost per mt*
Capital Requirement
Level G - Total Costs
Variable
Fixed
Compliance Cost per mt*
Capital Requirement
Incremental Level B-C - Total Costs
Variable
Fixed
Compliance Cost per mt*
Capital Requirement
100,000
91 ,000
150,000
137 .000
97 ,000
30 ,000
32,000
35,000
40 ,000
27,000
8,000
2,000
3,000
13,000
0.143
4,300
1,200
3,100
.047
18,900
12,800
10,100
2,700
.141
22,000
14,600
13,300
1,300
.160
18,900
800
500
300
.005
2,000
250 ,000
227.000
375,000
343 ,000
235,000
70,000
80,000
85,000
108,000
60,000
35,000
5,000
8,000
32,000
.141
10.000
3,000
7,000
.044
43,100
31 ,300
25,200
6,100
.138
50,200
36,200
33,200
3,000
.159
25,200
1,400
700
700
.006
4,700
500,000
454,000
750,000
684 ,000
469,000
1 40 ,000
160,000
169,000
215,000
1 20 ,000
70 ,000
10,000
15,000
66 .000
.145
19,100
6,000
13,100
.042
80,400
61 ,800
50,100
11,400
.136
93,700
72,000
66 ,400
5,600
.159
47,000
2,500
1,200
1,300
.006
8,700
1 ,000,000
862,000
1,500,000
1,375,000
942,000
281 ,000
321 ,000
340,000
433,000
240,000
140,000
20,000
33,000
125,000
.145
34,700
11,400
23,300
.040
143,200
116,000
95,700
20,300
.135
166,800
136,100
126,100
10,000
.158
83,700
5.100
2,700
2,400
.006
15,600
*Metric ton
Source: Arthur D. Little, Inc., estimates
11-56
-------
Because of the value and transport cost of construction sand and
gravel there is no national market but rather a series of local markets.
The industry would appear to be very competitive on the basis of aggregate
national figures, i.e., the existence of many small processors. However,
transport costs place definite limits on the area any producer can serve
which means each producer is an oligopolist in a very localized market and
faces little competition from any other producers 50 to 100 miles from that
local market. (Evidence of the highly local structure of markets is seen
in the wide disparity of prices shown in Table 11-15.)
The basic market for sand and gravel is various forms of construction,
an activity which is largely concentrated within major population aglom-
erations; that is, within metropolitan areas or at the fringes of
metropolitan areas. The economic impact of the effluent controls in this
industry will depend on the structure of the local market which the
impacted firms serve.
The economic impact of the effluent guidelines on a plant and market
will depend on the type of plant affected, the control process required,
and type of market the plant serves. The following economic impact analy-
sis has been made for two types of markets: the major metropolitan market
such as for the Baltimore-Washington area, and the small metropolitan or
rural market. The rationale for the use of these model markets was
developed earlier in Section D.3 (Prices and Price Setting).
1. Incremental Control in a Major Metropolitan Market (Case 1)
a. Price Effects
In this case, the additional cost of operation due to the guidelines
is very slight, at $0.006 per metric ton. If large plants in the market
11-57
-------
were required to install controls they would possess the market power in
the large market to pass costs on. Sand and gravel is an essential com-
ponent of construction either directly or in other products such as
concretes or concrete products. The only substitute products are in the
form of crushed stones which are generally significantly more expensive.
(Crushed stone prices have been estimated in Chapter III at $2.00 per
metric ton or 25% higher than sand and gravel.)
The price elasticity of demand for sand and gravel is very nearly zero
in the range of present prices up to the price per ton of the substitute,
crushed stone. Sand and gravel is a very small component of total con-
struction costs, so that a price increase in sand and gravel results in a
much smaller increase in total construction cost. (Nationally, $135 billion
worth of construction required $1.3 billion worth of sand and gravel
directly or through other materials such as ready-mix concrete, paving
materials, concrete block, etc. Thus a 10% increase in sand and gravel
costs would translate into a 0.1% increase in construction costs.)
The $0.006 per ton control cost in this market could be easily passed
on to consumers by a plant requiring additional effluent controls. But a
small plant in a large market would have to absorb the cost increase,
because it would face competition from other plants in the large market.
For this case, the price impact would range from zero to $0.006 per ton,
or an estimated maximum price increase of 0.3%.
b. Financial Effects
For any large plants requiring incremental control in this case, the
rates of return and cash flow position would be unaffected, because they
would be able to pass on the cost increase. The essentially zero price
elasticity of demand means that these firms would not suffer a decline
of sales in the face of a small price increase. Net revenues would be
maintained in the face of the cost increase.
11-58
-------
Small plants which could not pass on a price increase would have to
absorb the $0.006 per ton, a 0.5% decline in net revenues per ton.
Because additional investment is required in the plants that must add
effluent controls,, not only must net revenues after the increase controls
be sufficient to maintain reasonable rates of return, but capital must be
made available to fund the required investment. The incremental capital
requirements for the change from Control Level B to C for the model firms
appears relatively modest. One measure of current capital employed in
these plants is the normal depreciation charge. The total required in-
vestment for pollution control is 11% or less of annual depreciation.
This relatively small addition to capital stock for the model plants should
result in little funding difficulty. The smaller plants would have more
difficulty raising capital, require a smaller relative investment level,
so even though their net revenues could be adversely affected, the small
and large plants should be able to fund the required investment from
retained earnings or as part of normal borrowings.
c. Production Effects
All 978 plants in this first case are all currently at Control Level
B, and therefore, only a relatively small incremental control cost will be
needed to meet the guidelines,, Consequently even the smaller plants are
not expected to experience adverse price and financial effects.
No closures of plants are anticipated, so there is no anticipated
change of production for this case.
d. Employment Effects
The lack of expected plant closures for this case would leave employ-
ment levels unaffected.
11-59
-------
e. Community Effects
The community would face no loss of jobs or incomes.
2. Level C Control for Small Plant in a Major Metropolitan Market (Case 2)
a. Price Effects
As discussed above, the small plants in the major metropolitan market
would not be able to pass on the increased costs of compliance. These
plants could not raise prices in the face of competition from other firms
who did not face control costs. For this case, we shall consider prices
unchanged.
b. Financial Effects
The small plants would have to absorb the entire additional control
cost or about $0.045 per ton. The impact is a decline in net revenues
of about 33%. This decline would be a significant drop in net revenues
and a significant deterioration of return on sales and capital. Although
the capital required for the small plants is not large, the significant
decline in net revenues would make it unlikely that the required invest-
ment could be supported by future earnings. The result would be that small
plants in larger markets would be expected to close. The closure of such
firms is predicted on a rather narrow economic criterion of viability. The
plants could continue to operate if their owners were willing to accept
lower returns. In cash flow terms, the viability of these operations looks
a little better, and if the owner had few alternate opportunities he could
continue in operation.
11-60
-------
c. Production Effects
The position of the smaller plants in the model large market would
indicate that the lost production would be very slight. If all the very
small plants (under 91,000 metric tons) were to close in a model market,
less than 1% of annual production would be lost from such closures. It is
expected that the unaffected plants in the market could easily increase
output to make up for the loss. The net effect would be no change in the
market's total available production.
d. Employment Effects
The jobs associated with the closed plants would be lost. Estimating
employment in our model market via the national employment per ton of
production, the closure of these firms would result in the loss of 5 to
10 jobs. This loss would be insignificant in a large market area.
e. Community Impacts
The insignificant employment loss under this case should not generate
any significant adverse community impacts.
3. Level D or G Control for Small Plant in a Major Metropolitan Market (Case 3)
Case 3 is a variation on Case 2. In this case, smaller plants would
be required to use the much more expensive control procedures of Level
D or G. In either case, they would be forced to close. The cost of
control to these plants is high enough to almost eliminate net revenues,
so they appear to have no choice but to close under the guidelines. The
economic impact would be identical to that in Case 2.
11-61
-------
4- Level C Control for Large Plant in a Major Metropolitan Market (Case 4)
a. Price Effects
In this case, the larger plants in a large market would have sufficient
market power to pass on the increase in price. The $0.04 per ton control
cost translates to a 2% price increase. That is not enough to bring com-
petition from crushed stone substitutes, and the virtually zero price
elasticity of demand would mean that the cost increase could be passed on
with no loss of demand.
b. Financial Effects
The ability to increase prices would mean that net revenues would not
be affected, so cash flow return on sales or capital would not be reduced.
Because additional investment is required in the plants which must add
effluent controls, not only must net revenues after the controls be suf-
ficient, but capital must be made available to fund the required investment.
The capital requirements for control process capital costs for the model
plants are significant. Using depreciation as a measure of the capital
employed in the normal production process, the total investment would be
greater than annual depreciation. The normal cash flow of such plants
would likely not generate sufficient retained earnings to fund the invest-
ment internally. However, because the larger plants are located in larger
market areas, they should have access to funds from regional banks. The
capital requirements for a single plant would not be a large share of
total regional bank loans, so it should be possible for the industry to
fund the required investment.
c. Production Effects
No plant closures are anticipated, so there would be no production
changes due to the guideline implementation.
11-62
-------
d. Employment Effects
No jobs would be lost through plant closures.
e. Community Effects
There would be no adverse impact on the community in this case.
5. Level D or G Control for Small Plant in a Small Metropolitan or Rural
Market (Case 5)~~~
a. Price Effects
In the small market, small firms would not face much competition and
would be able to pass cost increases on to consumers. The cost increase
due to the effluent controls will be substantial for small firms. Level
G, the most expensive, would increase prices by just over 10%. The increase
is not expected to be enough to bring about substitution of crushed stone
for sand and gravel, and the value of sand and gravel costs in total con-
struction costs would mean only a 0.1% increase construction cost (see
Case 1, above), so the costs would probably be passed on.
Because the highest control cost could be passed on, should plants in
small market areas require any of the lower-cost control procedures, they
certainly should be able to pass on the smaller price increases involved.
In small markets with plants facing compliance, sand and gravel costs could
be expected to increase 2% to 10%, depending on the actual control required.
b. Financial Effects
Net revenues are expected to be maintained through the anticipated
price increases. The capital required is substantial for small firms.
Using depreciation as a measure of capital presently used in the model
11-63
-------
plants, the additional capital required for control is two to three times
annual depreciation. It seems likely that the required funds could not
come from retained earnings. While capital requirements appear to be a
burden on plant finances, the necessary funds should be available from
the local banking system. The biggest total capital required even for a
moderately sized plant ($50,000) is equivalent to the loan for one sub-
stantial single family house. The ability to raise prices should mean
that the banking system would consider the loan favorably.
c. Production Effects
No plant closures are anticipated, so that there would be no effluent-
control-cost-induced production shifts.
d. Employment Effects
No jobs would be lost through plant closures.
e. Community Effects
There would be no anticipated adverse impact on the community in
this case.
6. Aggregate Impact Summary
There are approximately 5,150 facilities 1n the sand and gravel
industry. Of these, about 750 are dry processors and have no effluent
discharge, and the remaining 4,400 use water in the processing. It is
estimated that 1,088 plants with wet processing are not presently meeting
the BPT requirement of total recycle of process water.
Some 978 facilities already have some treatment in place. These
plants will incur additional annual costs of less than 0.5% over present
11-64
-------
annual expenditures, or less than $0.01 per ton. The incremental invest-
ment required to meet BPT will be less than 3% of the book value of assets.
For the 110 plants with no treatment in place, the annual effluent
control costs could increase current expenditures by as much as 10.7%.
The required investment to meet BPT will be high: 18% to 34% of the book
value of assets. Although there are several treatment options available,
only settling and recycle of process water (Level C) appears economically
viable.
The analysis incorporates an estimate must be made as to the numbers
of each class of plant falling into each market model. Small firms appear
to be located generally in the smaller markets. Also, a small market
would not support larger size plants. It has been assumed that 50% of the
less than 91,000 metric ton capacity plants are in small markets, and 25%
of the 91,000 to 227,000 ton capacity plants are in small markets. Given
this size distribution, the national economic impact can be estimated.
Table 11-27 shows the numbers of plants, production, and employment by
the three summary impact groups:
• unimpacted,
• plants that will increase prices but remain open, and
• plants which are expected to close.
The only plants expected to close are the smaller plants that must
shift from total discharge to total recycle and also operate in large
markets. An estimate is also included for plant closures should all the
plants which are marginal candidates for closure remain open. This is a
lower limit of the anticipated adverse economic impact. It appears
unrealistic to expect operators to remain in business at the Ir.iar returns,
but there may well be special cases where operation would be continued.
IJ-65
-------
Table 11-27 NATIONAL SUHMARY OF ECONOMIC IMPACT SAND AND GRAVEL INDUSTRY
rl
cn
IMPACT CATEGORY
Effect Characterization
ffected Dry Process or
100% Effluent Recycle
ffected Pass on Cost
Increase
ted Control Level C
ted Control Level D
ted Control Level G
of Plants High
ct to
re Low
TAL*
Number of
Plants
4,063
1,033
31
12
12
55
26
5,150
%
78.9
20.0
0.6
0.2
0.2
1.1
0.5
100.0
Erod.uctioh
103 Metric Tons
563,899
195,685
13,635
776
776
6,916
1,942
766,000
%
73.6
25.5
1.8
0.1
0.1
0.9
0.3
100.0
Employ-
ment
25,171
8,720
616
34
34
309
86
34,200
%
73.6
25.5
1.8
0.1
0.1
0.9
0.3
100.0
Based on high end of closure range
-------
a. Summary Price Effects
Of the plants expected to increase prices, just under 2% of production
would be subject to a price increase of more than 2%. Only 25% of industry
output would be subject to any price increase. Because of the local
structure of the sand and gravel markets, the price increases would be
absorbed within each local market and the impact on national sand and
gravel prices would be negligible.
b. Summary Financial Effects
The plants which remain viable economic units in their respective
local markets -are expected to be able to raise the necessary capital. The
total ($7.5 million) capital required (Table 11-22) is not a significant
share of total national investment, so there is no national financial impact
for the sand and gravel effluent guidelines.
c. Summary Production Effects
The anticipated closure of range of 26 to 55 smaller sand and gravel
plants nationally would reduce output by 0.3 to 0.9% respectively. However,
in each market this lost production is expected to be made up by increased
production at other plants. The net impact on total production would be
negligible. The economic analysis indicated that if a plant needed to
install Level D or G treatments, and was unable to pass the costs on,
they could not continue operations due to a negative cash flow. However,
if the Level C technology was installed, the cash flow would remain
positive although profitability would fall by one-third from present levels.
Due to the serious economic impacts predicted for plants requiring tech-
nologies D and G, the effluent guideline is h^ed rn Le"el r •< ,ohnc1o~iy
Because of these factors—the uncertainty of whether o> not tVl&"-ts will
II- 67
-------
be able to finance the needed Investment, even assuming use of a Level C
treatment—1t is estimated that up to 26 plants may close. At most,
these plants represent 0.3% of present national production.
The additional capital for discharge control for new facilities in
the Industry should not be a limitation on the future expansion of pro-
duction. The capital requirements may mean that new facilities will tend
to be larger, but plant size appears to be a function of local market
size rather than economies of scale. The guidelines should not alter the
patterns.
d. Summary Employment Effects
The anticipated plant closures are estimated to reduce employment in
the industry by 86 to 309. Even the maximum job loss is negligible in
terms of national employment impact.
e. Summary Community Effects
Each affected market area should be able to absorb the job loss due
to expected plant closures. No further impact is expected to be felt by
other areas which do not experience plant closures, because each market
constitutes a closed system.
f. Summary Balance of Trade Effects
The highly local nature of sand and gravel markets because of high
transportation costs means that expected price increases would not induce
any measurable competition from imports. National balance of trade would
be unaffected.
g. Summary Industry Growth Effects
It is not anticipated that industry growth will be significantly
affected by these guidelines. Construction sand and gravel facilities will
tend to incorporate the land required for settling ponds into future
siting specifications.
11-68
-------
G. LIMITS OF THE ANALYSIS
In addition to the general limits imposed by the overall method used
for the economic analysis, the sand and gravel industry raises some
additional limitations.
The structure of the industry requires analysis of local markets and
ye^ inly scanty information is available concerning the actual structure
of t*5Cie markets. The impact of the guidelines would be shifted if plants
t exist in the classes of markets that have been assumed. The
assumptions used are believed to err on the side of overstatement of the
adverse economic impact. In this analysis it has been assumed that a
larger share of small plants are in large markets than is likely to be the
case, but there 1s no real way of testing this hypothesis.
A narrow definition of economic viability has been used. Individual
operations may be willing to accept lower rates of return because of property
v-ilues of the site, future potential land values 2 etc. The sand and
grave; plant may be a means of just meeting the holding costs for an
appreciating asset. As long as the operation can meet its costs of
operation, it will be kept going. This error would again lead to an over-
statement of the economic impact of the guidelines. An estimate has been
prepared as a low range for plant closures should this acceptance apply
to the plants which are potentially marginally profitable. Other than
for the small plants in large markets the highest effluent control costs
can be either passed on or are sufficient to virtually eliminate profit-
ability. The incremental control costs are sufficiently small that if
they were in error by a factor of two or even three, the impact would not
be altered.
There are also discharge situations where the cost of zero discharge
is effectively infinite. Some pits experience instrusion of water from
springs, which means that the water level rises until it naturally runs
11-69
-------
off Into nearby streams. Should zero discharge be rigidly applied to these
operations, they would require an ever-increasing pond area to hold the
net Inflow of ground water. In like manner, hydraulic dredging sand and
gravel operators who process on land would eventually have to store all
the water they ever took out of the river. Control 1n these cases 1s
physically Impossible. Since these constitute special cases it 1s expected
that they will be handled Individually when the permit is written.
While there are limits to the analysis, the basic approach taken
has been to make assumptions which would overstate the adverse economic
impact. Within this context the expected impact for sand and gravel is
of such magnitude that even increased by a factor of ten it would remain
negligible.
11-70
-------
III. CRUSHED STONE, [SIC-1422, SIC-1423, SIC-1429]
A. PRODUCTS, MARKETS AND SHIPMENTS
1. Product Definition
Stone is an inclusive term that covers products and materials rang-
ing from highly finished exotic marbles, through other finished dimension
building stone, dimension slate, stone rubble, and the many varieties of
crushed and broken stone. The stone industry is the largest non-fuel,
non-metallic mineral industry in the United States from the standpoint of
total value of production and is second only to sane! and gravel in volume
produced. The crushed stone industry, examined by this study, is regionally
highly dispersed and produces a low-value commodity product in locations
close to urban areas. Because of the latter, the industry has been facing
acute land use and environmental problems that have9 in certain cases,
added considerable cost burdens above normal operating costs. Some urban
and suburban quarries are now only permitted to operate within limited
daily hours; some have had to file and implement redevelopment plans for
depleted quarries.
Crushed stone is a term used, to describe a rock that has been reduced
in size after mining to meet various consumer requirements. The rock may
meet any one of many minerological definitions, such as limestone, granite,
or trap rock. Specifications are also numerous because of the diversity
of stone types, the variations in physical and chemical characteristics
within each type, and the large number of different end uses. The
specifications are prepared and established by various organizations, such
as the American Society for Tes-ting and Material*, and the American
Association of State Highway Officials; further specifications exist to
control the use and performance of crushed stone in different applications,
such as concrete, highway construction, etc. For example, specifications
for stone used in highway concrete normally insist that the product be
washed.
III-l
-------
2. Production Processes
Crushed stone 1s normally mined from open quarries using surface
mining equipment that varies with the type of stone, planned rate of
extraction, size and shape of the deposits and other factors. After the
stone face 1s exposed by removing the overburden, holes are drilled for
Inserting various blasting mixtures (normally ammonium-nitrate/fuel-oil
mixtures). Drilling 1s commonly done with percussion machines that drill
4- to 6-1nch holes some 15-'to 20-feet deep In a 15-to-20 foot pattern.
Drilling rates in limestones are around 35 feet per hour and 1n the hard
stones about 20 feet per hour.
Depending on the size of the fragmented stone, additional (secondary)
breakage of up to 102 of the stone 1s carried out either at the quarry
face by further blasting, with mechanical equipment such as drop hammers,
or at the crushing plant.
Transportation and conveying equipment used In the quarry Includes
track-mounted bulldozers and shovels, pneumatic-tire trucks, or conveyor
belts at the crushing plant. After the blasting operation, the stone is
front-end loaded into 15-to-35 ton capacity off-the-road vehicles that
transport the large pieces to crushers for processing. The stationary
crushing plants are located both near access roads (so that the finished
product may be shipped to consumers) and also at a central location con-
venient to the quarry faces being worked. Stone is always size-reduced;
the plant has at least two crushing stages to get the required size
reductions, as well as various screening, conveying, and loading equip-
ment. Primary crushing is usually carried out with jaw crushers, gyratories,
or impact crushers; secondary or tertiary crushing uses cone crushers,
gyratories, or hammer mills. Rod mills are used where fine grinding is
required.
III-2
-------
Screening of the crushed stone to separate the product into different
size gradations is carried out by a combination of horizontal or inclined
vibrating screens; heavy, punched-steel plates are used for large size
separations and woven wire screens are used for smaller material.
After crushing and classifying, highway concrete stone is washed and
all grade stone is then conveyed to stockpiles close to the crushing
plant. Some plants make only two or three finished sizes, while others
make up to 20. It is from such stockpiles that trucks, barges, or rail-
cars are loaded for delivery to the customer.
Portable aggregate plants are being used increasingly to supplement
stationary plants. Such plants are smaller and more mobile editions of
stationary facilities and can be established either by a contractor or a
commercial producer. Commercial producers may operate portable plants
to extend their operating radius or to expand the capacity of fixed equip-
ment.
Contractors may decide to establish a plant at a deposit local to a
specific project to reduce the delivered cost of stone for that project
or to ensure a steady supply of material. This situation may occur when
a specific construction project is an uneconomical distance from commercial
quarries so that transportation costs might be prohibitively high. Also,
the demand for crushed stone from such a project might be so great as to
strain the operating capacities of commercial quarries in the locale,
yet not justify expanding the latter capacities to serve a one-time need.
Good examples of such an occurrence might be the construction of a major
highway, such as the Interstate Highway System, or of a dam that requires
significant volumes of materials for a short time period and would thus
justify a contractor's investing in portable equipment and operating a
local deposit.
III-3
-------
Over the past few years, a number of changes 1n production technologies
have resulted from the desire to make operations more efficient, more cost
effective, and more environmentally acceptable. Such changes Include: the
design and Installation of larger units of equipment to Increase operating
capacities and the Introduction of automatic and centralized control systems
to produce the optimal product mix and to eliminate many of the labor-in-
tensive tasks in the quarry. Finally, the Industry has taken some steps
to alleviate environmental problems (involving air and noise pollution, as
well as aesthetic considerations) by implementing pollution control measures,
new blasting techniques and schedules, land rehabilitation and reuse
policies, and even by carrying out a limited amount of underground mining
close to urban areas.
3. Shipments
Domestic shipments of crushed stone as reported by the Bureau of
Mines Increased at an average annual compound rate of 3.3% from 707.7
million metric tons in 1965 to 947.8 million metric tons in 1974 (Table
III-l). Mainly because of price inflation, total value of shipments in-
creased at a greater rate of 7.2% annually from 1965 to 1974. In 1974,
the value of shipments of crushed stone reached a high of $2.1 billion.
Foreign trade in crushed stone is negligible and largely limited by
transportation costs. The 1973 exports totalled $10 million (0.5% of
domestic production) and imports, $5.5 million. Shipments (value and ton-
nage) since 1972 have been:
c fi Quantity.,
Year Value (10°$) 10° Short Tons" KT Metric Tons
1973 1904 . 1060 965
1974 2086 1042 948
1975 1900 856 779
III-4
-------
TABLE III-l CRUSHED AND BROKEN STONE SHIPPED OR USED BY PRODUCERS IN THE UNITED STATES 1965-1974
SANDSTONE, QUARTZ
LIMESTONE &
DOLOMITE
QUANTITY VALUE
(105short tons) (103$)
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
Compound
Growth
Rate
554,204
568,849
568,902
603,136
628,362
625,313
628,035
671,496
774,397
751,515
3.4
748,755
776,009
783,135
857,361
919,923
946,087
1,016,088
1,090,707
1,321,932
1 ,428,232
7.4
GRANITE
QUANTITY
59,242
65,262
62,443
69,830
75,189
86,133
92,912
106,266
120,606
118,558
8.0
VALUE
88,012
94,711
94,664
105,236
116,102
137,795
156,177
182,930
216,874
238,144
11.7
TRAPROCK
QUANTITY
75,503
88,586
68,430
73,099
78,901
77,217
75,303
80,462
83,959
96,885
2.8
VALUE
120,491
146,899
116,301
124,749
142,360
146,391
160,281
170,823
177,671
217,897
6.8
& QUARTZITE
QUANTITY
28,701
27,088
26,903
26,698
27,145
23,768
30,398
26,817a
30,351
31 ,090
0.9
VALUE
50,923
46,934
50,152
52,382
53,293
48,526
74,521
57,994a
69,647
77,815
4.8
OTHER*
QUANTITY
60,189
61,262
56,904
44,775
51 ,424
55,197
47,849
37,320
49,228
43,579
-3.5
VALUE
103,415
106,348
100,520
79,741
94,369
95,642
93,866
90,115
118,340
123,749
2.0
TOTAL
QUANTITY
777,839
811,047
783,582
817,538
861 ,021
867,628
874,497
922,361
1,058,541
1 ,041 ,627
3.3
VALUE
1,111,596
1,170,901
1,144,772
1,219,469
1,326,047
1,374,441
1,500,933
1,592,569
1,904,464
2,085,837
7.2
*0ther, includes marble, shell, slate, calcareous marl, and other stone.
a Excludes stone used in manufacture of industrial sand in 1972.
Source: U.S. Department of the Interior, Bureau of Mines; Minerals Yearbook, Volume I (various years)
-------
The sharp drop 1n 1975 reflected the recessionary impact on the con-
struction industry.
The advance 1n domestic shipments during the 1965-1974 period was
led by a 3.4% increase 1n the output of limestone and dolomite to 684.3
million metric tons valued at $1.4 billion and a 8.0% rate of increase in
the output of granite to 108.2 million metric tons valued at $238 million.
Shipments of trap rock increased 2.8% annually over the decade reaching
88.3 million metric tons valued at $218 million in 1974. Offsetting the
increased shipments in these kinds of stones was a small decrease in other
types of stone—a category which includes marble, shell, calcareous marl,
slate, and miscellaneous other stone.
Shipments of saadstone, quartz, and quartzite increased 0.9J from
1965 to 1974 to 28.2 million metric tons while dollar value of shipments
increased at a rate of 4.8% to $78 million in 1974. Shipments of other
crushed stone declined 3.5% annually, in tonnage terms, mainly because
of decreasing output in the calcareous marl and shell subsectors.
In 1972, limestone and dolomite accounted for 73% of total tonnage
of crushed stone shipped or used by U.S. producers; granite (12%); trap
rock (9%); sandstone, quart?, and quartzite (3%); and other stone (3%)
as shown in Table III-2. Data on a regional basis was not available for
1974.
Regionally, shipments vary significantly with the type of stone con-
sidered, but because limestone captures such a large percentage of the
total, its distribution dominates. All regions contributed to the output
of limestone in 1972. The proportion of limestone shipments among regions
was consistent with the population breakdown. However, granite shipments
were much more concentrated regionally. The South Atlantic region accounted
for 75% of total granite tonnage shipped in 1972. Traprock shipments came
primarily from the Northeast and Pacific regions. The New England, Middle
III-6
-------
r
TABLE III-2 CRUSHED STONE SHIPPED OR USED BY U.S. PRODUCERS BY REGION, 1972
Sandstone,
Limestone I Quartz.
Dolomite Granite Traprock Quartz He Other lotal
1 of X of X of I of I of X of
Region Quantity U.S. Quantity U.S. Quantity U.S. Quantity U.S. Quantity U.S. Quantity U.S.
New England
1000 short tons
percent
Middle Atlantic
1000 short tons
Percent
East North Central
1000 short tons
percent
West North Central
1000 short tons
percent'
South Atlantic
1000 short tons
percent
East South Central
1000 short tons
percent
West South Central
1000 short tons
percent
Mountain
1000 short tons
percent
Pacific
1000 short tons
percent
Undistributed
1000 short tons
percent
»
2,371 0.4
15.1
90,833 13.5
74.0
185.323 27.6
98.1
93,824 14.0
96.6
103,390 15.4
54.6
86,743 12.9
99.8
65,783 9.8
75.8
14,630 2.2
64.0
20,385 3.0
30.0
8.214 1.2
19.5
1
474
3.0
2.884
2.4
1,267
0.7
«
—
79,562
42.0
—
—
—
—
1,529
6.7
6,610
9.7
13,940
33.1
i 1
0.4 12,849
81.6
2.7 23,333
19.0
1.2 --
--
97
0.1
74.9 4.561
2.4
—
--
39
--
1.4 4,424
19.3
6.2 29,312
43.2
13.1 5.848
13.9
1
16.0 51
0.3
29.0 44.279
3.5
2.064
1.1
0.1 1,162
1.2
5.7 1.896
1.0
57
0.1
6.764
7.8
5.5 1,420
6.2
36.4 6.396
9.4
7.3 2.728
6.5
, .
0.2 9
0.1
16.0 1.340
1.1
7.7 347
0.2
4.3 25
—
7.1
—
0.2 152
0.2
25.2 14,254
17.4
5.3 864
3.8
23.9 5.185
7.6
10.2 11.381
27.0
1 ' 1
15,754
100.0
4.0 122.669
100.0
1.0 189.001
100.0
0.1 95,108
100.0
189,409
100.0
0.5 86,952
100.0
42.5 86,840 '
100.0
2.6 22.867
100.0
15.5 67,888
100.0
33.9 42,111
• 100.0
1.7
13.4
20.6
10.4
20.6
9.5
9.5
2.5
7.4
4.6
United States
1000 short tons 671.496 100.0 106,266 100.0 80.463 100.0 26.817 100.0 33.557 100.0 918,599 100.0
percent 73.1 11.6 8.8 2.9 3.7 100.0
Source: U.S. Department of the Interior, Bureau of Mines; Minerals Yearbook. Volume I, 1972.
-------
Atlantic, and Pacific regions account for 81% of traprock shipments. All
regions ship some sandstone, quartz, and quartzite, but the Paeific and
West South Central regions combined account for about 50% of the total.
4. End Uses
The end uses for crushed stone are many and varied, but construction
and construction-related applications account for at least 80% of total
shipments. Crushed stone is either used directly in its natural state or
is shipped for further processing into miscellaneous manufactured products.
In its natural state, stone is an 'important ingredient for highway
and street construction where it can form the road base, be included in
the concrete or bituminous pavement as an aggregate or to be used as an
anti-skid material for surface treatment. (The Development Document
estimates that about 136,5 million metric tons (15%) of the total stone
produced is washed for highway concrete use.) As an aggregate In other
types of concrete, stone is sold to ready-mix and precast concrete manu-
facturers as a basic ingredient for structural concrete. Still in its
natural state, crushed stone is employed as railroad ballast, as riprap,
or for jetty construction. (Riprap is large irregular stone used chiefly
in river, lake, and harbor work to inhibit soil erosion and protect high-
way embankments.)
Crushed stone also finds many applications in manufacturing industries,
It is a basic ingredient for cement manufacture, where it is burned in
kilns with other materials to form a cement "clinker" which is then fine
ground into cement powder. It is also used for a variety of agricultural
purposes, including soil conditioners, lime, poultry grit, and mineral
food; as a flux stone in steel manufacture; in refractory manufacture; as
an ingredient in glass; and as a mineral filler, extender or whiting in
rubber, paper, or other products, etc.
iII-8
-------
Table III-3 shows the quantities of crushed stone shipped or used by
U.S. producers in 1974. The major application, accounting for 23.6% of
-—
all crushed stone, was as a dense graded road base; concrete aggregates
accounted for 13.4%; other construction aggregates and road stones, for
I
*"" 12.4%; and cement manufacture, for 11.1%. (The table identifies only
those end uses that accounted for at least 5% of the volume and/or value
*- of shipments for each stone type. It can thus be seen that approximately
24% of total production in 1972 was accounted for by miscellaneous
L_ applications that are each insignificant (less than 5%) relative to the
total crushed stone production, but which together represent a sizeable
i
^ proportion. The Bureau of Mines, in its Minerals Yearbook, does identify
many of the miscellaneous applications, but the detailed breakdown is
considered unnecessary for the purposes of this study.)
w_
Limestone and dolomite, together representing 72.1% of total crushed
*- stone shipments in 1974, found use in a similar pattern to that for all
, crushed stone. A larger proportion (29.7%) of crushed granite was used as
u_ a road base, with less than 3% in non-aggregate applications. Traprock,
representing 9.3% of all crushed stone, was similarly distributed but
^_ represented the largest proportion of the total (9.1%) going into riprap
and jetty stone consumption of all minerological types. The uses for
sandstone, quartz, and quartzite are more varied than those of other
types of stone and include a large proportion of feedstocks for ferro-
silicon, glass, flux, and refractory applications. Finally, miscellaneous
^" stone types, including shell, calcareous marl, crushed marble, etc.,
represented only 4% of all crushed stones and found diverse applications
*— in end markets.
L_
5. Possibilities of Substitution
! Limited substitution of alternative products can and does occur
depending on the geographic location of an operation. Sand and gravel,
! blast furnace slag, and lightweight aggregates can be used interchangeably
L_
I III-9'
L
-------
TABLE II1-3 CRUSHED AND BROKEN STONE SHIPPED OR USED BY U.S. PRODUCERS BY MAJOR USE, 1974
Limestone and
Dolomite Granite
End Use
Dense Graded Road Base
Stone
Cement Manufacture
Concrete Aggregate (coarse)
Unspecified Construction
Aggregate & Roadstone
Bituminous Aggregate
Surface Treatment Aggregate
Agricultural Purposes
Railroad Ballast
Riprap and Jetty Stone
Flux Stone
Mineral Fillers, Extenders
and Whiting
Glass
Other Uses— Identifiable
Other Uses—Unidentifiable
TOTAL
Percent by Type
Includes lime manufacture
Source: U.S. Department of
1,000
Short
Tons
.168,469
105,246
105,188
76,563
62,239
46,603
34,400
9,677
19,382
30,663
2,565
1,714
78,687
10.119
751,515
72.1
the Interior
Percent 1 ,000
of Short
Total Tons
22.4 35,137
14.0
14.0 21,518
10.2 16,998
8.3 18,123
6.2 5,144
4.6
1.3 7.816
2.6 2,761
4.1
0.3
0.2
10.5 8,336
1.3 2,725
100.0 118,558
11.4
, Bureau of Mines,
Percent
of
Total
29.7
18.2
14.3
15.3
4.3
6.6
2.3
7.0
2.3
100.0
Traprock
1,000
Short
Tons
22,485
8,530
24,375
14,598
4,808
2,155
8,771
7,982
3.181
96,885
9.3
Percent
of
Total
23.2
8.8
25.2
15.0
5.0
2.2
9.1
8.2
3.3
100.0
Mineral Industry Surveys/Stone
Sandstone, Quartz,
and Quartzite
1,000
Short
Tons
8,082
2,135
6,178
3,207
1,168
2,481
1,126
1,423
3,547
1.743
31 ,090
3.0
in 1974.
Percent
of
Total
26.0
6.9
19.8
10.3
3.8
8.0
3.6
4.6
11.4
5.6
100.0
Other
1,000
Short
Tons
11,392
10,158
1,922
4,755
4,678
2,137
1,638
1,019
1,897
1,495
1,232
1.256
43,579
4.2
Percent
of
Total
26.2
23.3
4.4
10.9
10.7
4.9
3.8
2.3
4.4
3.4
2.8
2.9
100.0
Total
1,000
Short
Tons
245,565
115,404
139,293
128,869
102,845
58,692
36,038
21,835
35,292
31 ,789
4,060
3,137
99,784
19,024
1 ,041 ,627
100.0
Percent
of
Total
23.6
11.1
13.4
12.4
9.9
5.6
3.4
2.1
3.4
3.0
0.4
0.3
9.6
1.8
100.0
-------
with crushed stone and many specifications accept or even encourage
substitutions. An important criterion considered in making such a decision
are the relative distances of available materials sources from the user.
Thus, sand and gravel pits may prove to be favored as concrete aggregates
if the geology and extraction location shows them to be more economic than
stone quarries. Blast furnace slag (readily available where steel mills
are located) and gravel can often be an economic source of aggregate, and
can also offer distinct performance advantages when used as an anti-skid
highway surfacing material. Lightweight aggregates, such as expanded
shale or clay, perlite, or vermiculite can result in considerable reductions
in concrete density, and thus building load, when substituted for crushed
stone, but the economic availability of these aggregates is limited.
Oyster shells from the Gulf of Mexico and aragonite from the Bahamas have
both substituted effectively and economically for limestone in the manu-
facture of cement in the southern states from Texas to Georgia.
However, while each of the substitute materials has and will continue
to show considerable growth over the remainder of this decade, their total
impact on the demand for crushed stone will probably remain small because
specifications are changed slowly and the relative economics are unlikely
to vary.
6. Future Growth
Historically, crushed stone has been very closely correlated with con-
stant-dollar Gross National Product. For crushed stone, as a function of
2
real GNP, over the 1959-1974 period the R = .960. This relationship
provided a better fit than constant-dollar expenditures on new construction
housing starts, or the Federal Reserve Board Industrial Production index.
Thus, by using GNP forecasts of 2.8% for 1975-1980 and 3.3% for
1980-1985, the following demand forecasts were calculated:
III-ll
-------
Crushed Stone
Year IP6 Short TonsIP6 Metric Tons
1974 actual 1042 948.2
1980 1100 1001
1985 1300 1183
With the high correlations to the stated 6NP growth,* demand growth
for these products should be highest in areas with the best economic growth
potentials. Therefore, the high growth areas will be the South and Western
states. The Northeast and North Central regions will grow at or below the
national average. Within regions, stronger growth is predicted for demand
to occur on the fringes of urban areas as the most likely locations for
industrial and population growth.
On a yearly basis, 1976 1s expected to be a recovery year, with strong
growth 1n real GNP (6%) and housing starts (29%). The year 1977 is expected
to show continuing good growth in GNP and housing starts and recovery in
non-residential building construction. Another downturn in the business
cycle 1s predicted for the 1978 and 1979 period, which will also be years
of declining demand for crushed stone and sand and gravel. Another recovery
is expected in 1980, with real growth in GNP then reaching 4.7%.
7. Marketing and Distribution
Although some major multi-location or multi-division companies have
significant marketing efforts for the promotion of crushed stone, the
typical quarry is a single-location operation serving a restricted
geographic market. Its marketing efforts are limited t order-taking and
delivery service, with some technical support for quality and specifications
control. In such cases, marketing and promotion is frequently the
*Unless otherwise stated, estimates and predictions are by Arthur D. Little,
Inc.
111-12
-------
responsibility of national trade associations or similar local groups.
They maintain contacts with highway and state or local agencies to develop
appropriate product requirements and to insure that performance specifica-
tions are met.
Some companies, especially the major ones, operate an effective sales
force and have good technical support. In fact, salesmen are frequently
qualified engineers who are capable of providing a customer with special
design assistance (for example, in modifying standard asphalt paving or
ready-mix concrete design mixes) and in problem-solving when the need
occurs.
In addition, there may also be corporate technical staff assistance
to develop new product applications or improve existing ones; to tackle
process, geological, or mining problems; or to design special plant equip-
ment. Because of the ready availability of crushed stone close to most
metropolitan areas, the transportation and distribution of stone is
predominately by truck. As shown in Table III-4, 79% of all shipments
were by truck in 1974, with 9% by rail and 8% by waterways. However, a
study of transportation methods* indicates that individual quarries ship
from 300 to 100,000 rail cars per year and that the distribution mix from
individual shipping points ranges from all truck to over 75% rail.
Although the volume of aggregates moved by rail has remained almost con-
stant for the last 40 years, the railroads' share of the market shrank
from 30% in the 1930's to about 7% in 1970, but then increased to the
current 9%. It is possible that further increases will occur as quarries
are located further from population centers.
*Rail Distribution of Construction Aggregates, prepared by A.T. Kearney &
Company, Inc., for the Construction Aggregate Rail Shippers Conference,
February 1, 1972.
111-13
-------
Table III-4 CRUSHED STONE SHIPPED OR
USED IN THE UNITED STATES
Method of
Transportation
Truck
Rail
Waterway
Other
Unspecified
TOTAL*
1973
Thousand
Short Tons
830,372
98,771
77,741
31,746
19,911
1,058,541
Percent
of Total
79
9
7
3
2
100
1974
Thousand
Short Tons-
828,558
94,439
80,672
28,795
9,164
1 ,041 ,627
Percent
of Total
79
9
8
3
_L
100
*Data may not add to totals shown because of independent rounding.
Source: U.S. Department of the Interior, Bureau of Mines, Mineral Industry
Surveys. Stone in 1974.
111-14
-------
Distribution of crushed stone 1s direct from quarry to end user with
no Intermediary Involved. Inventories are held almost entirely at the
quarry location, because double handling would be prohibitively expensive,
and customers maintain only sufficient inventory to insure uniform prod-
uction rates over a predetermined length of time. Crushed stone production
and shipment is a very seasonal business in many northern regions.
Northern producers typically operate plants for nine months a year and
stockpile sufficient stone to cover greatly reduced shipments during the
winter months.
111-15
-------
B. INDUSTRY STRUCTURE
1. Types of Firms
The Bureau of the Census does not compile statistics on patterns of
ownership 1n the mining Industries as 1t does for some of the manufacturing
sectors of the economy. Thus, 1t 1s difficult to precisely characterize
the crushed stone Industry by type of firm. However, it is possible to
draw certain valid conclusions based on Industry contacts and past experi-
ence.
The crushed stone Industry consists primarily of a large number of
small, locally owned firms which together account for a significant
proportion of'national production. In addition, a few larger firms, which
are regionally or nationally diversified, individually account for a small
percentage of national production. The relationships for plants by size
as depicted later in this report is also a reasonable description for the
relative distribution of firms in the Industry.
In 1967, the Bureau of the Census began to exclude data about estab-
lishments without paid employees. In 1972, 911 firms operated the 1573
limestone quarries covered by the Census (of which 199 quarries were
associated with manufacturing establishments); 74 firms were active in 155
granite quarries; while 291 firms operated 408 quarries producing other
types of stone. Thus, the overall average number of quarries operated by
the firms is 1.67. This average would be further reduced by including
the firms and establishments not covered by the Census.
Patterns of firm ownership are similar to those in other sectors of
the construction-oriented basic materials industries. At one extreme
there are small local operations, often operated as proprietorships, where
the plant manager and the owner are one and the same person. At the other
extreme are plants owned by major public corporations for whom the crushed
111-16
-------
stone business 1s but one part of a number of fields of enterprise. Plant
managers for the latter firms rarely have an equity interest in the firm.
for which they work, and are regular employees whose tenure at a particular
quarry may be temporary in nature. Some of the larger companies in the
industry following this pattern are Vulcan Materials, Martin-Marietta,
Lone Star Industries, General Crushed Stone, United States Steel, Kaiser
Cement and Gypsum, and Materials Service. Many of these larger firms
also operate captive quarries to supply their other manufacturing business--
steel mills, lime plants, cement mills, etc. In 1972, the Bureau of the
Census estimated that 199 of the 1573 limestone plants were part of manu-
facturing establishments. About 132 of these were probably associated
with cement mills, 41 with lime plants, and the remainder mainly with
steel-manufacturing operations.
The larger firms are certainly multi-quarry, are usually in a number
of geographic regions, and are diversified into non-aggregates industries.
A certain amount of vertical product integration (for example, into ready-
mixed concrete, highway construction) also takes place, but not as signi-
ficantly as does the business diversification. The size and business
diversification of the large, public companies frequently puts them in a
better position to raise capital at competitive rates of interest than
can the smaller and independent operators. However, the latter firms,
because crushed stone usually is their primary business, allocate a larger
proportion of their total capital to those operations.
Between the two extremes in company size are firms which are less
diversified in terms of geography and business, yet which can compete
effectively with the larger firms on a regional basis. In such firms,
the plant manager is likely to be a professional manager, but also more
likely to have a minority equity position in the firm for which he works.
An attempt was made to establish whether or not there has been a
historical trend toward greater concentration in the crushed stone industry,
111-17
-------
at either the quarry and/or the company level. Historical data show that
the number of plants and production volumes steadily Increased from 1959
to 1973, except for occasional reversals 1n production volume due to
economic conditions. Further analysis of the data 1n terms of average
production per location, and the graphical representation of this ratio in
Figure III-l, very definitely shows that the average production per location
has been Increasing over time, thus leading to greater concentration at the
quarry level. (Note: The Bureau of Mines changed its reporting methods
1n 1968, and now provides data on the number of "quarries", when previously
1t reported on the number of "plants". Hence, the sudden apparent in-
crease apparent in the number of plants from 1967 to 1968.)
In other words, although production and number of establishments have
both been increasing over time, the average output per location has been
increasing at a faster rate than either. Exceptions to this general con-
clusion have occurred in individual years—for example, in 1960/61,
1963/64, 1966/67, and 1970/71—in which the stone Industry experienced
little or no growth.
All current Indications suggest that the Industry will continue to be
more concentrated at the quarry level and that the average size of new
quarries will continue to increase.
Finally, there are the operators of portable plants who sometimes
compete effectively against the stationary ones. They include:
t Highway contractor operations (SIC-1611) to supply their
own construction needs at or close to the site;
• Independent operators who move their equipment from quarry
to quarry and prepare sufficient material to supply a rural
county or township for a certain period; and
111-18
-------
Production/Plant (m tons)
co
o
10
o
o
NJ
CO
O
t
CO
Ol
co
s -
o
c
3)
m
O
3)
co
I
m
•o
3)
§
O
•o
m
3D
00
• s
8
n> "D _»
" I' 1
i-f
O
CO
S" 05
^ 05
zr
CD ->
SCO
>^j
CO
->J
CO
-------
• Local public authorities who operate their own portable
plants.
Portable plant operators generally have no landholdlngs, but either
lease mining rights on a royalty basis or hire out their men and equipment
for quarrying a landowner's stone. The macro-economic factors affecting a
portable plant operator's business are similar to those for a stationary
plant operator; his cost structure will be different, but margins and
returns on investment are usually better.
2. Plant Characteristics
Typically, crushed stone facilities produce dry, or dry and wet
crushed stone product. Wet crushed stone is typically produced by
adding a water washing step to the end of a dry crushed stone processing
line. Wet crushed stone is typically produced to meet specifications
such as for aggregate used in concrete or asphalt paving on a major road
building project.
The percentage of total crushed stone output from a plant which is
referred to as a wet process crushed stone facility can range from a minor
amount up to 100% wet crushed stone. There is no "typical" mix of wet
versus dry crushed stone from such a plant in the process sense, since the
mix of wet and dry crushed stone is determined by the demands of the market.
Therefore, in any year, there would be a broad spectrum of wet versus dry
product mix from all of the plants producing wet crushed stone in the
United States. Due to market demand variations with time, the mix of
wet versus dry crushed stone from any of the individual plants would also
change on a year-to-year basis. There are presently insufficient data
available to interrelate annual plant production, mix of wet versus dry
crushed stone and geographic or market location.
111-20
-------
There are currently slightly over 4,800 crushed stone quarries in the
United States as reported by the Bureau of Mines. Of these, approximately
2,000 are considered by the Bureau of the Census (SIC's 1422, 1423, and
1429) to be commercial operations primarily concerned with the production
of crushed stone. The remaining 2,800 plants consist of quarries operated
by federal, state, and local governments; quarries that are part of
integrated (cement, lime, etc.) operations, quarries operated on a temporary
basis by establishments not concerned primarily with the production of
stone (e.g., highway contractors, SIC-1611); and small quarries operated
without paid employees, but proprietor-operated. Some of the latter
categories enter and re-enter the market. The 4,800 quarries are served
by approximately 3,600 plants. The approach used for the impact analysis
has been to overstate the adverse economic impact. Therefore, the analysis
is based on the assumption that there are 4,800 quarry/plant facilities.
While this study is concerned with all the quarries in operation, for
the purposes of characterization it deals with those quarries for which
data is available in aggregate form, or those covered by Bureau of the
Census records. It also identifies and discusses any significant differences
1n the characterization derived from the Census records from the industry
as a whole.
The basic differences between Bureau of Mines data and that compiled
by the Bureau of the Census relates to the purposes of the two organizations.
The Bureau of Mines is concerned primarily with measuring production of
various minerals to determine policy regarding the availability, extraction,
and exploration for mineral products. On the other hand, the Bureau of the
Census is concerned with developing data on the industry's contribution to,
or demands on, the various components of the U.S. economy. Thus, the
primary focus of the latter is on economic factors such as value of ship-
ments, value added, and employment, rather than production on a unit basis.
111-21
-------
Included 1n the Bureau of Mines data (but not 1n the Census data) are
single-unit establishments without paid employees, all stone produced and
used 1n the same establishment, and portable crushing plants. The 1,700
portable plants constitute a good portion of those plants referred to above
which are attached to federal, state or local governments, or highway
contractors, and which may enter or re-enter the market on an Irregular
basis. They also service small quarries 1n rural areas for a short period
each year, sufficient to crush and stockpile a community's immediate
needs.
While the number of plants not included in the Census statistics is
proportionately large, their production in relation to the industry totals
is much less 59. Table 111-5 is a comparison of the Census and Bureau of
Mines data for 1972. It indicates that approximately 90% of the total
production of the industry is represented by shipments reported to the
Bureau of the Census, and that these shipments represent over 85% of the
value of the industrywide production.
Of the 1,937 establishments (plant locations) covered by the 1972
Census 1,374 (71%) primarily crush limestone, 155 (8%) crush granite, and
408 (21%) miscellaneous materials such as trap rock, quartzite, sandstone,
and volcanic materials. In addition, the Census reports 199 limestone
quarries, and 33 producing other stones, that are associated with
manufacturing establishments. Table III-6 lists selected characteristics
for each of three SIC's for 1972 and preceding Census years. Some high-
lights of this data include:
• A steady and healthy increase in value added (up 67% from
1963), value of shipments (up 65%), and capital expenditures
(up 124%) in all segments of the industry;
111-22
-------
Table III-5 1972 BUREAU OF THE CENSUS AND
BUREAU OF MINES STATISTICS COMPARED
Product
Oimtnsion itom tottl
Rough (nit)
OrtMd ,
Limestone totil .*
Rough (net)
Omnd , . , , ! .
Granite tool
Rough (nit)
Oreswd
Rough (mt)
Dreotd , , . ,
Excluding Federal, SUN, and local government
Limestone'
Granite* .
StOM, n.ex.J
Bureau of the Cinsus statistics
Production'
(quantity)
(million
s. tons)
(X)
(NA)
(X)
(X}
(NA)
(X)
(X)
(NA)
(X)
(X)
(NA)
(X)
(NA)
837.2
602.4
109.8
125.0
Shipments including
interolant transfers
Quantity
(million
s. tons)
(X)
1.9
(X)
(X)
.5
(X)
!X)
.4
(X)
(X)
.9
(X)
(NA)
823.S
598.0
107.5
118.0
Valut
(million
dollars)
89.0
34.3
54.8
15.7
7.9
7.8
41.1
134
28.0
32.1
13.1
19.0
(NA)
1,319.5
883.7
180.4
255.4
Burtw of Minas statistics
Stona sold or usad
by producers
Quantity
(million
s. tons)
1.5
.9
£
.4
J
2
J
.4
J.
.4
.2
.2
2 905.8
(NA)
671.5
106.3
'128.0
Value
(million
dollars)
90.8
23.1
67.6
14.4
5.2
9.2
42.6
14.1
28.6
33.6
3.8
29.8
2 1,563.0
(NA)
1,090.7
182.9
2 289.4
(X) Not applicable. (NA) Not available. -
1 Represent* ttone ahipmenn plus stone mined and used in the tarn* establishment in nwkmg cement, lima, and othar manufactured products.
'excludes shell.
*Camu< flgurai axcluda operation! by Federal, State, and local govern menu. Bureau of Minee figuret represent tot*l» «or all none «old or uted by
commercial, government, and contractor operation*.
111-23
-------
Table III-6 GENERAL STATISTICS: 1972 AND EARLIER YEARS
Year
Establishments
Total
(Number)
Kith 20
Employees
or More
(Number)
All Employees
Number
(1,000)
Payrol 1
(Million
Collars)
Production, Develops
and Exploration Work
Number
(1,000)
Man-Cours
(Hi 11 ions)
ent
ers
•Wages
(Million
Dollars)
Value Added
in Mining
(Million
Dollars)
Cost of
Supplies
Etc. and
Purchased
Machinery
Installed
(Million
Dollars)
Value of
Shipments
& Receipts
(Million
Dollars)
Capital
Expenditures
(Million
Dollars)
I
ro
INDUSTRY 1422. — CRUSHED AND BROKEN LIMESTONE
1972 ..
1967
1963
1972......
1967 ,
1963
1972 ,
1957. ...
1963
... 1,374
, .. 1,484
,.. 1,612
... 155
149
... 150
408
400
494
476
510
491
94
80
65
99
124
112
30.0
30.8
31.1
4.5
4.5
4.1
7.0
7.7
8.1
278.8
197.5
150.6
24.3
25.8
26.3
54.3
58.5
59.4
209.2
153.6
126.8
INDUSTRY 1423. — CRUSHED AND BROKEN GRANITE
38.5
27.1
19.8
INDUSTRY U29.
7C.4
56.2
48.7
4.0
3.9
3.4
— CRU-SHED
5.4
6.1
6.4
9.5
8.9
7.9
AND BROKEN
11.8
13.3
13.6
32.5
22.0
16.0
STONE, N.E.C.
49.6
40.1
35.0
690.4
492.2
408.5
119.8
80.1
61.7
172.0
132.4
111.5
349.5
253.1
194.0
82.2
47.1
35.2
91.3
68.2
66.7
906.8
666.6
542.9
172.1
114.2
89.7
240.5
179.8
162.2
133.1
78.7
S9.5
30.0
13.0
7.2
22.8
17.8
16.0
Source: 1967 and 1972 Censuses of Mineral Industries, Table 1; U.S. Department of Commerce, Bureau of the Census.
-------
0 A decline in both number of establishments (from 2,256 to 1,937)
and employment (from 43,300 to 41,500) over the last ten
years;
t No significant changes in the relative importance of larger
establishments (those with 20 or more employees); and
t Substantial increases in productivity and wages per employee.
Table III-7 lists selected characteristics on a regional basis for
the establishments covered by the Census for 1972. It can be seen that
the production of crushed limestone is heaviest in the North Central and
South regions; crushed granite industry is concentrated in the South; and
miscellaneous crushed stone facilities are dispersed fairly evenly geog-
raphically. In general, the larger facilities tend to be located in the
Northeast and the South. This is also shown in Table III-8, which com-
pares, on a regional basis, the percentage of the national totals for
establishments to that for value of shipments for the various products.
Figure III-2 demonstrates the distribution of all quarries in the industry
by state for 1971, totaling over 4,700.
Table III-9 lists the Bureau of Mines breakdown of quarries by
production tonnage, and shows the large number of low-annual-output
quarries in existence and the relatively heavy percentage of total ship-
ments accounted for by the small number of larger quarries. In 1973, about
5% of the quarries in operation accounted for 39.5% of production; 33%
accounted for only 1.3%. The ten largest quarries in the United States
range from 12.74 million metric tons per year (U.S. Steel at Rogers City,
Michigan) to 4 million metric tons (Bethlehem Mines at Hanover, Penn).
111-25
-------
TABLE III-7. DETAILED STATISTICS BY GEOGRAPHIC AREA (1972)
Industry 1422 (Crushed and Broken Limestone)
Geographic Area
United States
Northeast
North Central
South
West
Total
Number of
Establishments
1,374
200
675
422
77
Total
Number of
Employees*
30.0
5.3
12.7
10.4
1.5
Total
Number of
Production,
Development &
Exploration
Workers*
24.3
3.9
10.3
9.0
1.1
Industry 1429 (Crushed and Broken
Geographic Area
United States
Northeast
North Central
South
West
Geographic Area
United States
South
Total
Number of
Establishments
408
80
90
115
123
Total
Number of
Establishments
155
112
Total
Number of
Employees*
7.0
2.0
1.0
2.8
1.1
Industry 1423
Total
Number of
Production,
Total
Number of
Employees*
4.5
3.7
Total
Number of
Production,
Development &
Exploration
Workers*
5.4
1.4
0.6
2.4
1.0
Value Added
by Mining**
690.4
126.6
294.4
236.6
33.2
Stone, n.e.c. )
Value Added
by Mining**
172.0
57.1
15.2
69.8
29.9
Value of
Industry
Shipments**
906.8
170.3
382.2
311.0
43.2
Value. of
Industry
Shipments**
240.5
79.0
23.5
95.9
42.5
Capital
Expenditures**
133.1
24.0
55.5
48.4
5.3
Capital
Expenditures**
22.8
4.7
(D)
11.9
(D)
(Crushed and Broken Granite)
*
Development &
Exploration
Workers*
4.0
3.2
Value Added
by Mining**
119.8
96.3
Value of
Industry
Shipments**
172.1
141.9
Capital
Expenditures**
30.0
30.2
*Thousands.
**M1ll1ons of dollars.
(D)W1thheld to avoid disclosing figures for individual companies.
SOURCE: 1972 Census of Mineral Industries, Table 3A; U.S. Department of Commerce, Bureau of the Census
111-26
-------
Table III-8 PERCENT DISTRIBUTION OF ESTABLISHMENTS AND SHIPMENTS (1972)
Region
Northeast
North Central
South
West
National Total
Crushed Limestone (1422)
Number of Value of
Establishments Shipments
Crushed Granite (1423)
Number of Value of
Establishments Shipments
Miscellaneous (1429)
Number of Value of
Establishments Shipments
14.6%
49.1
30.7
5.6
100.0
18.8%
42.1
34.3
7.8
100.0
(D)
(D)
72.3
(D)
100.0
(D)
(D)
82.5
(D)
100.0
19.6%
27.1
28.2
30.1
100.0
32.8%
9.8
39.9
17.5
100.0
ro
(D) Withheld to avoid disclosing figures for individual companies
Source: 1972 Census of Mineral Industries; Table 3A, U.S. Department of Commerce,
Bureau of the Census
-------
ALASKA
to
OO
HAWAII
Scale: %" = 50 Plants
Source: Pit and Quarry Publications, Inc.
FIGURE 1112 LOCATION OF CRUSHED STONE OPERATIONS, 1971
-------
Table III-9
NUMBER AND PRODUCTION OF CRUSHED-STONE QUARRIES IN THE UNITED STATES
BY SIZE OF OPERATION
1972
1973
I
ro
Annual Production
(Short Tons)
Less than
25,000 to
50,000 to
75,000 to
100,000 to
200,000 to
300,000 to
400,000 to
500,000 to
600,000 to
700,000 to
800,000 to
900,000 to
25-.000
49,999—
74,999—
99,999
199,999-
299,999-
399,999-
499,999-
599,999-
699,999-
799,999-
899,999-
and over-
Number
of
Quarries
1,756
521
350
245
536
336
225
160
105
84
55
43
211
Production
Thousand
Short Tons
14,885
18,809
21 ,400
21,316
76,667
82,870
78,252
71,911
57,761
54,051
41 ,030
36,578
343,401
Percent
of Total
1.6
2.1
2.3
2.3
8.3
9.0
8.5
7.8
6.3
5.9
4.5
4.0
37.4
Number
of
Quarries
.1 ,600
660
33
253
634
308
233
182
126
98
76
51
248
Production
Thousand
Short Tons
13,603
24,221
20,485
21,941
90,974
75,868
80,946
80,956
68,903
62,730
56,694
42,718
418,502
Percent
of Total
1.3
2.3
1.9
2.1
8.6
7.2
7.6
7.7
6.5
5.9
5.4
4.0
39.5
Total*-
4,627
918,933
100.0
4,808
1,058,541
100.0
*Data may not add to totals shown because of independent rounding.
SOURCE: U.S. Department of the Interior, Bureau of Mines; Minerals Yearbook. 1973. Volume I
-------
Estimates (summarized in Tables 111-10 and III-ll for limestone, and
for granite and traprock, respectively) based on unpublished data, provided
by the Bureau of Mines in response to a request by the EPA, indicate that
portable plants account for about 36% of those operating in limestone quarries
and 28% of those in granite and traprock; stationary plants account for
43% and 25%, respectively. The balance of operations are normally not
serviced by either. Some 1,974 companies own the 3,051 limestone quarries,
while 481 operate the granite and traprock quarries.
Establishments covered by the Bureau of the Census may be distributed
by average number of employees as listed in Table 111-12. The great
majority of plants covered by the Census are open quarries with crushing
plants, as opposed to underground quarries with crushing plants, or crush-
ing plants located and operated separately from the quarry supplying the
rough stone.
' Table 111-13 summarizes selected averages for limestone quarries.
Average employment ranged from less than 2 to 400 per establishment, and
output from 32,800 to 6 million metric tons in 1972. While the average
tonnage/employee was 17,000 metric tons in that year, the smaller operations
appear to have better productivity because they probably tend to optimize
on their use of part-time and/or owner labor.
3. Industry Segmentation
The Development Document examined various factors in categorizing the
crushed stone industry and concluded that the principal segmentation should
be on the basis of crushing processes. Therefore, the Document categorized
the industry into the subcategori.es:
• Dry,
111-30
-------
Table 111-10 QUARRY AND PLANT CHARACTERISTICS BY SIZE OF OPERATION
(Limestone and Dolomite, 1973)
co
Total
Production
Quarries
Type of Plant
Size of
Operation
(TYP)
Up to 299,999
300-499,999
500,000+
Short
Tons
(000 's)
186,630
119,260
468,510
Metric
Tons
(OOO's)
169,833
108,523
426,344
Stationary Portable
%
24.1
15.4
60.5
#
2,309
305
437
% # %
75.7
10.0
14.3
655
273
391
21.
8.
12.
#
5 1,093
9
8
%
35.8
0
0
Other
#
561
32
46
%
18.4
1.0
1.5
774,400 704,700 100.0 3,051 100.0 1,319 43.2 1,093 35.8 639
20.9
Source: Arthur D. Little, Inc., estimates developed from unpublished Bureau of Mines data.
-------
CO
ro
Table III-ll QUARRY AND PUNT CHARACTERISTICS BY SIZE OF OPERATION
(Traprock and Granite, 1973)
Total
Production
Quarries
Type of Plant
Size of
Operation
(TPY)
Up to 299,999
300-499,999
500,000+
Short
Tons
(OOO's)
42,340
25,480
136,740
Metric
Tons
(OOO's)
38,530
23,190
124,430
Stationary Portable Other
% # % t %
20.
12.
66.
7
5
8
908
65
V
126
82.6
5.9
11.5
105
56
113
9.
5.
10.
#
6 312
1
3
% 1
28.4 491
9
13
%
44.7
0.8
1.2
204,560 186,150 100.0 1,099 100.0
274 24.9 312 28.4 513 46.7
Source: Arthur D. Little, Inc., estimates developed from unpublished Bureau of Mines data
-------
Industry 1422 (Crushed and Broken Limestone)
Establishments (Total)
Establishments With
An Average of:
0. to 9 employees
10 to 19 employees
20 to 49 employees
50 employees or more
Establishments (Total)
Establishments With
An Average of:
0 to 9 employees
10 to 19 employees
20 to 49 employees
50 employees or more
Establishments (Total)
Establishments With
An Average of:
0 to 9 employees
10 to 19 employees
20 to 49 employees
50 employees or more
Number of
Establishments
1,374
492
406
358
118
Total
Number of
Employees*
30.0
1.7
5.7
10.8
11.8
Value Added
In Mining**
690.4
43.2
127.4
252.3
267.5
Value of
Shipments
& Receipts**
906.8
58.7
167.8
317.8
362.5
Capital
Expenditures**
133.1
11.3
24.8
50.4
46.6
Industry 1423 (Crushed and Broken Granite)
Number of
Establishments
155
24
37
72
22
Industry 1429
Number of
Establishments
408
209
100
71
28
Total
Number of
Employees*
4.5
0.1
0.5
2.2
1.7
(Crushed and
Total
Number of
Employees*
7.0
0.7
1.4
2.2
2.7
Value Added
In Mining**
119.8
4.9
11.4
62.1
41.4
Broken Stone, n.-e.
Value Added
In Mining**
172.0
15.9
35.2
56.8
64.1
Value of
Shipments
& Receipts**
172.1
4.9
17.5
88.7
50.3
c.)
Value of
Shipments
& Receipts**
240.5
22.5
46.3
75.7
95.9
Capital
Expenditures**
30.0
9.0
13.2
7.8
Capital
Expenditures**
22.8
2.5
4.0
8.0
8.1
*Thousands
**Millions of dollars
Source: 1972 Census of Mineral Industries; Table 4, U.S. Department of Commerce, Bureau of the Census
111-33
-------
TABLE II1-13 SELECTED AVERAGES BY ESTABLISHMENT, 1972
Industry 1422 (Crushed and Broken Limestone)
Number of
Establishments
320
172
406
358
83
32
3
1374
Average per Establishment
Employment
1.6
7.0
14.0
30.2
68.7
153.1
400.0
21.8
Value of Shipments
($000' s)
58
233
413
•888
1990
5150
10.800
660
Equlv. Short Tonnage*
(OOO's)
36
144
255
548
1230
3180
6666
407
Metric Tonnage
(OOO's)
33
131
232
499
1118
2895
6067
370
Average Short
Tonnage/Empl oyee
22,500
20,500
18,200
18,100
17,900
20,800
16,700
18,700
Average Metric
Tonnage/Enpl oyee
20,475
20,475
16,562
16,471
16,289
18,928
15.197
17,017
*at $1.62/short ton, the average for 1972.
Source: Arthur D. Little, Inc., estimates based on Bureau of Mines data
-------
• Wet,
t Flotation, and
• Shell Dredging;
but defined effluent guidelines for only two—wet and flotation processlng--
that discharge process water. (Shell dredging has no on-land processing.)
Other potential factors were considered in the Development Document as
possible justifications for industry subcategorization, including type of
raw materials, facility age or location, type of pollutants, and size of
the facility. However, it was concluded that these other factors do not
offer significant differences and were not used in the Document.
Table 111-14 summarizes the segmentation of the crushed stone industry
based on process and control level required.
The employment characteristics of the industry are confused by the
prevalence of portable plants that work either alongside stationary plants
in a quarry or move from quarry to quarry with their personnel. Investi-
gations over the past two years suggest that the average output per
employee in the crushed stone industry is about 17,000 metric tons, so
allocation of employment by segment is carried out on this basis.
The extent of any impact on a specific wet process quarry will depend
on a number of factors, including:
• Whether it is competing directly against one or more dry
facilities;
• Present competitive advantage and financial performance;
t Ability to raise capital; and
• Size
111-35
-------
TABLE III-14. SUMMARY - CRUSHED STONE SEGMENTS
Process Quarries Production Average Production Employment"
# p^ - — - = — -— -
*
_ t
Percent Million Short Tons Million Metric TonsPercent Thousand Short Tons/Quarry Thousand Metric Tons/Quarry OOP'sPercent
Dry 3200 66.6 700 637 70 219 199.3 37.4 70
Wet 1600 33.3 300 273 30 188 171 16.0 30
Flotation 8 0.1 0.5 .45 — 63 57.3 0.03
INDUSTRY TOTAL 4808 100.0 1000 910 100.0 208 189.3 53.4 100.0
Note: As a large proportion of the quarries are serviced by portable plants, there is only an indirect relationship between quarries and employment.
It is estimated that each employee outputs an average of 18,700 tons per year. The estimated range of tonnage/employee was 16,700 to 20,800
in 1972.
Source: Development Document and Arthur D. Little, Inc. estimates.
-------
The Development Document characterized a representative crushed plant
having an output of 182,000 metric tons per year. While this size is
representative of the average in the industry and also for all wet process-
ing plants, it tends to overstate the apparent average 91,000 metric tons
for wet processing plants that have yet to implement effluent controls.
It is believed that the smaller facilities will be the most affected;
larger-than-average plants generally enjoy better economies of scale.
Consequently, the wet process category is further segmented into two
sizes--91,000 and 182,000 metric tons per year. While Bureau of Mines data
indicate that 58% of all crushed stone quarries operating in the United
States are equal to or smaller than 91,000 metric tons per year, the
analysis of this industry suggests that most of the smaller quarries are
dry operations operated by portable plants.
111-37
-------
C. FINANCIAL PROFILES
1. Industry Performance
The crushed stone industry has had a variable performance record over
the past several years, but has remained generally profitable relative to
all U.S. firms. Net profit,margins for this industry are about 7%, while
returns on stockholders' equity are about 8-11$. The industry is capital-
intensive and moderately leveraged, with debt representing about one-third
of total capitalization. A major portion of the industry's assets is
tied up in working capital, primarily inventories and accounts receivables,
while depreciation and depletion represent major sources of funds for
capital expansion.
2. Representative Plants
Most companies operate only one quarry; those that do are always
proprietorships that do not issue financial statements for public examination.
Consequently, financial data on the industry are extremely limited and are
generally available only for large, diversified companies with multiple
quarries and multiple businesses. Consequently, the typical financial
profiles for the two representative plants, having 91,000 metric tons and
182,000 metric tons capacities, respectively, have been prepared from an
analysis of Bureau of Census data, available financial statements, and
proprietary information made available during the course of this study.
The profiles are presented in Tables 111-15 and 111-16. The larger of
the two plants corresponds to the representative plant analyzed in the
Development Document-, the smaller plant is similar in size to the average
in the "wet process - partial treatment" segment.
The smaller of the two plants profiles has net revenues, after dis-
counts and freight, of $200,000 and a gross margin of 33%. Its net .
profits after tax totals $13,000 and is equivalent to 6.5% of net revenues.
111-38
-------
Table 111-15 FINANCIAL PROFILES - REVENUES FOR
CRUSHED STONE OPERATIONS
SMALL MEDIUM
production 100,000 st/yr 200,000 st/yr
(91,000 mt/yr) (182,000 mt/yr)
price/short ton $2.00 $2.00
price/metric ton 2.18 2.18
REVENUES $200,000 $400,000
Variable Costs
labor 44,000 90,000
materials 40,000 80,000
repair and
maintenance 50,000 90,000
Total $134,000
Fixed Costs
SG&A 35,000 55,000
depreciation 8,000 30,000
depletion 4,000 8,000
interest 4,000 12,000
Total $ 51,000
Profit before
tax 15,000
tax 2,000
$260,000
$105,000
35,000
7,000
net profit $ 13,000 $ 28,000
111-39
-------
Table I!1-16 FINANCIAL PROFILES - CASH FLOW FOR
CRUSHED STONE OPERATIONS
SMALL
MEDIUM
CASH FLOW
Cash In
net profit
depredation
depletion
debt increase
Total
Cash Out
capital
expenditures
land purchase
Increase working
capital
dividends
Total
Book Value of Assets
$ 13,000
8,000
4,000
6,000
$ 31,000
$ 19,000
4,000
6,000
2.000
$ 31,000
$100,000
$ 28,000
30,000
8,000
14.000
$~30,000
$ 56,000
8,000
12,000
4.000
$ 80,000
$250,000
Source: Arthur D. Little,. Inc. estimates
111-40
-------
A significant proportion of the sources of funds ($12,000) comes from
depreciation and depletion allowances; on average, $19,000 of the $31,000
in funds used annually is for capital expenditures both to maintain existing
assets and to increase capacity. To finance this, the typical operator
increases his long-term debt by an average of $6,000 annually. The salvage
value of the facility is about $100,000.
The profile for the 182,000 metric tons per year plant is similar,
except that gross margins are slightly less and net profits corresponding-
ly more. While the smaller plant utilizes the equivalent of 15% of its
revenues in annual capital and other expenditures, the medium-sized
facility expends up to 20%. Both plants would have a ratio of total assets
to sales of about 1.25 and a debt-equity ratio of 30%. Return on equity
for the small plant is about 7.5%; that for the medium-sized plant, about
8%.
3. Variations by Segments
For individual plants, these figures may vary significantly according
to certain parameters, which would include:
• Plant Size: Larger plants may enjoy economies of scale which
should enable them to improve labor utilization. Labor as a
percentage of revenues may be reduced by 30-40% (to 12-15% of
revenues) for modern plants of the 910 metric tons per hour
variety.
• Plant Age: Newer plants will have proportionately larger
depreciation charges, offset by smaller expenses for repairs
and maintenance. With higher investment bases, newer plants
will have lower returns on net assets and shareholders' equity.
111-41
-------
• Plant Location; Costs will differ between plants in different
locations based on the supply/demand relationships for labor
and materials. In the Northeast, for example, the costs of
materials (primarily fuel) and labor will be higher, relative
to other costs than in the South. In addition, the market
environment in which a plant operates will determine the
realizable revenue for each plant. Plants which are favorably
located relative to their competition will realize greater
profit margins.
Financial profiles should also vary by firm size (irrespective of
plant size or age) but these variations should be minor. Plants owned
and operated by larger firms ($100,000 in revenues or more) should have
slightly lower unit selling, general, and administrative costs than those
owned by smaller firms because they are able to spread such costs over a
number of plants. Larger firms should also have lower interest costs
(presuming equal debt/equity ratios) because of their ability to tap
institutional (banks, insurance companies, etc,} capital markets, but
higher tax rates. However, the effects of these differences are not
major.
In summary, the smaller and older plants inherently have relatively
less capital available for capital expenditures than "larger and newer
plants. For the older plants, this is true even though their after-tax
profit margins should be greater, on average, than larger plants. There
should be no regional variation in capital requirements, however, as
higher (or lower) regional cost structures should be equal among competing
plants and thus lead to higher (or lower) revenues. AI: ;, although some
operating cost differences between dry and wet process facilities might
exist, these differences can be exceeded when comparing two wet process
plants or two dry process plants of identical sizes.
111-42
-------
The variations in plant economics are shown on an index basis (revenues
equal 100) in Table 111-17. Comparisons between groups of data (for
example, size vs. age vs. location) should not be made from this table;
only comparisons within groups are valid.
111-43
-------
Table II1-17 VARIATIONS IN PLANT ECONOMICS
Revenues
Cost of Production
Depreciation & Depletion
SG&A
Interest
Profit Before Tax
Sources of Funds (Excluding Debt):
Net Income
Depreciation
Depletion
Use of Funds:
Capital Expenditures
Land
Working Capital
Dividends
Debt Required
Size
(000 short
tons/yr]
Age
Location
100
100
67
6
17
2
200
100
65
9
14
3
400
100
64
10
14
3
2,000
100
52
14
14
5
15 Yrs. Old
100
66
6
12
2
New
100
50
16
16
8
South
94
52
12
14
4
Northeast
106
64
12
14
4
8 8
15
14
10
12
12
6
4
_2_
12
9
2
3
J_
15
3
7
8
_2
17
14
2
3
_L
20
3
7
8
_2
17
14
2
3
J_
20
3
9
12
2
23
21
2
3
J_
27
4
8
4
_2
14
12
2
3
J_
18
14
6
14
_2
22
19
2
3
_1
25
3
7
10
_2
19
16
2
3
J_
22
3
7
10
_2
19
16
2
3
J_
22
3
Source: Arthur D. Little, Inc. estimatess based on public and confidential data
-------
D. PRICES AND PRICE SETTING
1. Historic Prices
For the period 1964-1974, the increase in the wholesale price index
for crushed stone (SIC-142) was compared with indexes for all commodities,
all construction materials, and all concrete ingredients (Table 111-18).
The price of crushed stone has increased at a slower rate than any of
the other categories. From 1964 to 1974, annual price increases for all
construction materials averaged 5.4%; all commodities, 5.4%; concrete
ingredients (including sand, gravel, crushed stone, and Portland cement),
4.4%; and crushed stone, 3.2%. While current-dollar prices of crushed
stone have increased from 1964-1974, the constant-dollar prices, derived
by using the 'All-Commodities Index as a base, have actually declined.
No wholesale price information is available from the Bureau of Labor
Statistics at a more detailed product level than crushed stone as a group.
Therefore, to approximate the price history of the individual categories,
we have used dollar value of shipments per short ton of product. The
results, shown in Table 111-19, are consistent with the Wholesale Price
Index—both show an annual price growth of about 3.0% in current dollars
for the combined categories of crushed stone. Limestone and granite price
increases were above the average rate; with limestone at 3.2% per year,
and granite at 4.2%. Levels of 1973 dollar value of crushed stone at the
quarry ranged from $3.04 per metric ton for other stone (which includes
High-value specialty-type stone) to $1.88 per metric ton for limestone.
The value for all crushed stone averaged $2.04 per metric ton in 1973.
This historic relative price stability (and relative decline in con-
stant dollars) is believed to be partly a result of intra-industry
competition at local and regional levels which has resulted in lower
profits and returns on investment, and also because the industry has become
more efficient in utilizing its equipment and reducing or eliminating
labor-intensive activities.
111-45
-------
Table 111-18 RELATIVE WHOLESALE PRICE INDEXES FOR
CRUSHED STONE AND RELATED PRODUCTS, 1964-1974
(1967 * 100)
All
Commodities
1964
1965
1966
1967
1968
1969
1970
1971 .
1972
1973
1974
94.7
96.6
99.8
100.0
102.5
106.5 •
110.4
113.9
119.1
134.7
160. 1
All
Construction Materials
Actual Relative*
94.8
95.9
38.8
100.0
105.6
111.9
112,5
119.5
126.6
135-5
160.9
100.1
99.3
99.0
100.0
103.2
105.1
101. 9
104.9
106.3
102. R
100.5
&i •>
n i <
Concrete Increments
Actual Rolatlva*
97.0
97. *
38.1
100.0
103.2
106.7
•14.6
12i. S
126.9
131.2
lAfi.7
102.4
loo. a
93.3
100.0
S00.7
100.2
103.8
107.0
106.6
97.4
92.9
All
Crushed Stone
(SIC 142)
Actual Relative*
97.4
97.5
97,7
100.0
1Q? 9
106,8
112.4
117.7
120.2
122.7
133.0
102.9
100.9
97.9
100.0
100.4
100.3
101.8
103.3
100.9
91.1
83.1
Annual
Compound
Growth
Rate 1964-1974
5.4%
5.4%
4.4%
3.2%
e wholesale price index is derived, by dividing the "actual" price index
by the "all commodities" price index.
Source: U.S. Department of Labor, Bureau of Labor Statistics.
111-46
-------
Table 111-19 VALUE PER SHORT TON OF
CRUSHED STONE SHIPPED, 1964-1973
(in dollars per short ton)
Limestone &.
Dolomite Granite
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1.36
1.35
1.36
1.38
1.42
1.46
1.51
1.62
1.62
1.73
Annual
Compound
Growth
Rate 1964-1973
3.2%
*Includes
Source:
marbl
Arthur
Mi nes ,
1
1
1
1
1
1
1
1
1
2
4
e, sh^ll ,
.45
.49
.45
.52
.51
.54
.60
.68
.72
.17
.2%
slate,
D. Little, Inc. ,
Mineral Yearbook
Traprock
1.64
1
1
1
1
1
1
2
2
2
.60
.66
.70
.71
.80
.90
.13
.08
.12
2.5%
calcareous
estimates
Sandstone
Quartz &
Quartzite Other*
1
1
1
1
1
1
2
2
2
2
3
marl
deri
.86
.77
.73
.86
.96
.96
.04
.45
.16
.55
1
1
1
1
1
1
1
1
2
2
.61
.72
.74
.77
.78
.84
.73
.96
.41
.79
Total
1
1
1
1
1
1
1
1
1
1
.44
.43
.44
.46
.49
.54
.58
.72
.82
.88
.2% 5.6% 2.8%
, and other stone.
ved
from Bureau
of
111-47
-------
Data on 1974 average prices are not yet available, but it can be antic-
ipated that significant price increases took place during the year, mainly
due to inflation because demand was weaker. (To make comparative relative
cost calculations, an average 1974 FOB price of $2.00 per short ton was
developed from Table II-l.)
2. Current Prices
Quotations in Engineering News Record for 1-1/2 inch crushed stone as
of May 1975, ranged from $7.35 per metric ton in Minneapolis to $1.96 per
metric ton in St. Louis. These prices are on an FOB city basis (not
allowing for some cash discounts) and are summarized in Table 111-20. The
average price for the 18 cities shown in the table is $4.58 per metric
ton. For 3/4 inch crushed stone, the prices range from $7.57 per metric
ton in Pittsburgh to $1.96 per metric ton in St. Louis. The average is
$4.64 per metric ton.
These price quotations include transportation costs, which might
range from $0.54 to $1.68 per metric ton from the quarry to the city, and
vary depending upon distance and whether the transportation is provided by
the supplier or customer.
3. Price Elasticity and Pricing Dynamics
On an industry basis, the demand for crushed stone is price inelastic;
i.e., when prices increase, even though quantity demand may decline, total
revenues increase. As the product is a necessary component of a number of
building materials (concrete, asphalt) and products (roads, airport run-
ways, etc.), then demand is based primarily on the demand for those
products, irrespective of the end price. The fact that there generally
does not exist significant competition from substitution products (discussed
earlier), and the price of stone as a percentage of the total price of the
materials and products of which it is a component is low (for example, 15%
111-43
-------
Table 111-20 CRUSHED STONE PRICES FOB CITY
Region/City
NEW ENGLAND
Boston
MIDDLE ATLANTIC
New York
Philadelphia
Pittsburgh
EAST NORTH CENTRAL
Chicago
Cincinnati
Cleveland
Detroit
WEST NORTH CENTRAL
Kansas City
Minneapolis
St. Louis
SOUTH ATLANTIC
Atlanta
Baltimore
EAST SOUTH CENTRAL
Birmingham
WEST SOUTH CENTRAL
Dallas
PACIFIC
Los Angeles
San .Francisco
Seattle
Price Range as of May 1975
($ per short ton)
1-1/2" Stone 3/4" Stone
3.30*
5.10
4.15
6.60
4.50
2.55,
5.08C
2.70
3.30
6.75
1.80
3.80
3.15
1.90
2.25
6.65
6.20
5.90
3.50C
5.10
4.15
6.95
4.50
2.55,
5.08C
2.80
3.30
6.75
1.80
4.00
3.60
1.90
2.50
6.15
6.20
5.90
Traprock Trucklots, delivered
Source: Engineering News Record. Pages 58-59, May 8, 1975
111-49
-------
of the FOB price of asphalt; less than 1% of the price of a highway for
which the asphalt is being supplied), variations in the price of crushed
stone do not affect basic demand.
Markets tend to be geographically limited, so plants serving them are
generally clustered around one or more population centers. On a pi ant-by-
plant basis within a particular market, competition could be severe or else
may tend to be oligopolistic. The crushed stone business is reasonably
capital intensive (the ratio of total assets of net revenues is about 1.25)
and producers need to maintain production volume to provide for the
amortization of their capital investments. A "typical market" will have a
number of potential stone suppliers competing for available business and
doing so on the basis of a delivered price. These competitors may have a
wide range of characteristics, from a small proprietorship to a large
public corporation, and from a large to a small plant.
Individual quarries in the typical market establish a desired FOB
selling price based on the production costs they experience to achieve a
"reasonable" return on investment. What is "reasonable" depends on the
type of company; a proprietorship or a private corporation is normally
more concerned with cash flow than is a large public company, which is
attempting to achieve an acceptable return on investment for its stock-
holders. However, selling prices that are established by this mechanism
are then liable to adjustment based on the perceived competitive environ-
ment and transportation costs.
Prices can be quoted on a delivered basis per short ton for a truck-
load, or on an FOB plant basis with customer pick-up. Both methods are
frequently employed, but in both cases the physical transportation is
usually carried out by independent truckers working on an on-call or
contract basis. Because of price competition, many suppliers to a city
will quote a standard FOB city price (a zone price) which will not normally
vary between sources or with ultimate destination. Consequently, the
111-50
-------
customer may sometimes be located close enough to an individual quarry to
make it worth his while to arrange pick-up on an FOB plant basis and save
on freight equalization.
Thus, the effects of transportation costs on delivered price can be
large. Crushed stone is a commodity product that is low in value, and has
a high specific gravity. As a results the pricing of the product for the
majority of its applications depends greatly on the distance from the
source of supply to the consumer. Transportation costs for the material
currently average over 8<£ per metric ton per mile. Given the presumed FOB
plant price of $2.18 per metric ton the effective price to the consumer
will double at a distance of approximately 30 miles. Alternatively, a
plant which is located 10 miles closer to a customer than a competing
plant would theoretically be able to realize a price up to 76$ per metric
ton higher than its competitor without a loss of market share. A company
with a significantly lower total cost structure will eventually be able
to obtain a larger market share, if all other factors (such as transport-
ation costs, etc.) are equal.
However, such situations rarely exist and the actual pricing mechanism
is influenced more by such factors as: the rate charged by the independent
trucker; access to highways vs. secondary roads; the amount of congestion
over the route of travel; and the customer/supplier/trucker relation-
ships.
Delivered costs are not as sensitive to the costs of transportation
for higher-value products. These include crushed stone serving refractories,
flux, glass, and agricultural markets. There, the customers know, in ad-
vance what their approximate needs will be over a period of time and
what specific product performance standards are required. They-will evaluate
product offerings from potential suppliers, establish specifications for
their purchases, and seek competitive long-term prices on a pre-set
delivery schedule. In these situations, stone may be shipped considerable
111-51
-------
distances if it has certain desirable chemical or physical properties and,
in fact, the limited amount of crushed stone imports generally falls into ^
this category. The freight costs are also irrelevant when the stone is
being moved only a limited distance from a captive quarry to an integrated,
and generally contiguous, operation such as a cement plant.
Delivered prices normally move in small increments in response to the ^
leadership of one or other of the suppliers. In a typical market, such
price leadership changes from time to time, as it does in the other basic •*
industries, and no discernable pattern can be apparent. Because price in-
creases are normally relatively small and are tied to changes in costs that j
are incurred by.all producers, it is highly likely that the other com-
petitors will follow the leader's example. If the leader makes a price J
increase that is considered unnecessary, or if his competitors wish to gain
a strategic advantage and larger market share by holding back on similar
price increase, the leader may be forced to roll back his increase.
However, there is room in a typical market for a modest spread in FOB "*
prices. Surveys carried out in the past indicate that the spread might
be as much as $0.25 without disturbing the supply/demand equilibrium that «^
exists. Another factor that limits the opportunity for the crushed stone
industry to make limitless price increases, seemingly in concert, is that ^
crushed stone can also compete against sand and gravel in certain conditions
and for specific applications. Interindustry competition depends very
much on the geology of the region and the product specifications, but some
substitution can take place.
111-52
-------
E. POLLUTION CONTROL REQUIREMENTS AND COSTS
1. Effluent Control Levels
Table 111-21 presents the EPA regulations for point-source discharge
of water effluents from the crushed stone industry. These regulations
require no discharge, for either a maximum average for 30 consecutive days
or a maximum for any one day, at all three levels: BPCTCA, BATEA, and
NSPS. Any effluent originating as mine drainage or pit pumpout is to be
limited to a maximum total suspended solids (TSS) of 30 mg/1 maximum for
any one day.
2. Effluent Control Costs
The effluent control costs for process water from the crushed stone
industry are associated totally with the treatment and storage of suspended
solids. The recommended level of control is no discharge, which requires
the use of settling ponds and the total recycle of clarified process
water, which is withdrawn as an overflow from the upper level of the pond.
The required ancillary equipment primarily consists of the water handling
system (e.g., pump, pipe, etc.). In some specific cases, a flocculating
agent might be necessary to enhance the settling rate of the suspended
solid particles.
In the six crushed stone facilities that employ the flotation process,
the flotation water cannot be directly recycled because of the complex
chemical processes involved. Although the wash water can be combined with
the flotation water effluent and recycled for the washing process, the
flotation process requires fresh water input. The Development Document
indicates that flotation water is approximately 5% of the process water,
and assumes that the combined effects of percolation and evaporation
associated with the settling ponds for wash water treatment would result
in the loss of approximately 5% of the total process and flotation water
111-53
-------
Table 111-21 RECOMMENDED LIMITS AND STANDARDS
FOR BPCTA, BATEA, AND NSPS
Crushed Stone Industry
Concentration in Effluent
30-Day Average 24-Hr. Maximum
Process Wastewater No Discharge No Discharge
Mine Dewatering TSS 30 mg/1
Source: Development Document for Interim Final Effluent
Limitations Guidelines and New Source Performance
Standards, Mineral Mining and Processing Industry:
Point Source Category, EPA 440/1-75/059 (Vol. I) and
0596 (Vol. II)
111-54
-------
effluent, which would permit a totally closed recycle loop to be success-
fully employed for the flotation operations. This analysis embodies this
assumption.
The Development Document presents the fixed capital and operating
costs* for four different compliance levels of a typical work process
crushed stone facility. The wet process, crushed stone model plant size
is 180,000 metric tons per year producing 50% wet product and 50% dry
product. The base year for the dollar value used for the development of
this compliance cost table was mid-1972.
The following economic impact analysis is based on mid-1974 dollar
value. The costs shown in the Development Document have been modified by
using a GNP fnflator of 16.5%.** Mine dewatering costs are either negli-
gible or are included in the costs presented in the Development Document.
Control costs at all levels were developed for three additional plant
sizes to determine the sensitivity of control costs to plant size. The
four plant-sizes used for the basis of development of control costs are:
• 100,000 short tons per year (91,000 metric tons per year)
0 200,000 short tons per year (182,000 metric tons per year)
• 1,400,000 short tons per year (1,270,000 metric tons per
year)
• 2,400,000 short tons per year (2,180,000 metric tons per
year)
*See Table 16, page 204, Volume I, of the October 1975 Development Document
**U.S. Department of Commerce Survey of Current Business, Part I, Jan 1975.
111-55
-------
Fixed capital costs were varied by the appropriate ratio of annual
production costs raised to the 0.9 power, based on the 182,000 metric ton
per year model sized plant shown in the Development Document. Operating
costs were varied as a direct function of plant capacity.
The basis for the development of the compliance cost for crushed stone
operations employing the flotation process was developed from information
on page 206 of the Development Document. The assumptions which form the
basis for developing the compliance costs are:
• $200,000 total fixed capital (mid-1972 costs) for the
six flotation operations with discharge;
• All eight flotation operations of equal size; and
• All other operating costs necessary to reach the equivalent
of Level C (no discharge) are equivalent to the wet process
crushed stone operations, and were derived from Table 111-22
through appropriate use of previously described scaling
factors and the GNP inflator.
These control costs are presented 1n Tables 111-22 through 111-26.
A comparison of the cost per ton for the compliance at any level for the
four different plant sizes shows that control cost is very insensitive to
plant size.
3. Current Levels of Control
The crushed stone industry-in the United States can be divided along
process technological lines into three subcategories:
• dry process,
111-56
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Table 111-22 COST OF COMPLIANCE FOR MODEL WET PROCESS
Crushed Stone Facility
Metric Tons Per Year of Product
Plant Size: 91,000 Total
(45,500 wet)
Plant Age:
Base Year:
40 Years
Mid-1974
Plant Location: Rural Location Near Population
Center
Level
Invested Capital Costs:
Total
Annual Capital Recovery
Operating and Maintence
Costs:
Annual 0 & M (excluding
power and energy)
Annual energy and power
Total Annual Costs
Cost/Metric Ton/Wet Process
Waste Load Parameters RAW
(kg/metric ton of WASTE
product) LOAD
Suspended Solids 60
A
[MITT
o
o
9,100 12,000 14,200
1,400 1,800 2,200
0
0
0
0
3,800
600
5,800
0.128
3,800
1,200
6,800
0.150
4,300
1,200
7,700
0.170
60
0.2
Level Description:
A - direct discharge
B - settling pond, discharge
C - settling pond, recycle
D - flocculant, settling pond, cycle
Source: Development Document and Arthur D. Little, Inc., estimates
111-57
-------
Tail* III-23 CC~7 n- nCMPLIAKCE FOR f>'CDE!. H'ET PROCESS
Cashed 3tcr° Fsc*nt,v
Plant Size: HO,000 To*.*"! M^tri-: Tons Dfir Y«:ar of P-r^uct
'*»0.n?Q w«rt}
5)1 flirt j'.rtc^t.1?n: ^,,'ra' Location near
Plant Age: ^,"1 v^arc Center
Base Veer: Mia-137-
Love!
A _ B____ __£__ _D _
THIN;
Invested Capital Ccsts:
Total 0 ]6,90G 22,100 2S.200
Annual Capital Recovery 0 2,800 2*600 ^,300
Oosratirc a*>d Maintenance
Costs:
.Annual OSM (excluding
power and energy) 0 7,500 7,500 8,600
l energy and power 0 1 ,?OG 2,300 2,300
Total Annual Cor.tr 0 11,500 13,400 15,200
Cost/Metric Ten/Wet Process 0 0.128 0,148 0.168
Waste Load Parameters RAW
-:kg/!r-etnc ton of WASTE
product) LOAD
Sur.DfiTJed Solids 60 60 0.2 0 0
Level Des c r i p t i on :
A~- direct discharge
B - srttlirg pond, discharge
C - settling pond, recycle
P - flocculant, settling pond, recycle
Source: pj».veIppment Document and Arthur D. Little, Inc. estimates
111-58
-------
Table 111-24 COST OF COMPLIANCE FOR MODEL WET PROCESS
Crushed Stone Facility
Plant Size: 1,270,000 Total Metric Tons Per Year of Product
(635,000 wet)
Plant Location: Rural Location Near Population
Plant Age: 40 Years Center
Base Year: Mid-1974
Level
A
ffiflT
Invested Capital Costs:
Total
Annual Capital Recovery
Operating and Maintenance
Costs:
Annual O&M (excluding
power and energy)
Annual energy and power
Total Annual Costs
Cost/Metric Ton/Wet Process
Waste Load Parameters RAW
(kg/metric ton of WASTE
product) LOAD
Suspended Solids 60
0
0
98,000 128,300 152,000
19,800 25,400 30,300
0
0
0
0
52,900 52,900 60,700
8,500 16,200 16,200
81,200 94,500 107,200
0.128 0.148 0.168
60
0.2
Level Description:
A - direct discharge
B - settling pond, discharge
C - settling pond, recycle
D - flocculant, settling pond, recycle
Source: Development Document and Arthur D. Little, Inc. estimates
111-59
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Table 111-25 COST OF COMPLIANCE FOR MODEL WET PROCESS
Crushed Stone Facility
Plant Size: 2,130,000 Total Metric Tons Per Year of Product
(1,067,500 wet)
Plant Location: Rural Location Near Population
Plant Age: 40 Years Center
Base Year: Mid-1974
Level
A
TOT
Invested Capital Costs:
Total
Annua-1 Capital Recovery
Operating and Maintenance
Costs:
Annual 0 & M (excluding
power and energy)
Annual energy and power
Total Annual Costs
Cost/Metric Ton/Wet Process
Waste Load Parameters WET
(kg/metric ton of WASTE
product) LOAD
Suspended Solids 60
0
0
159,500 208,600 247,300
26,400 34,000 40,600
0
0
0
0
90,800 90,800 104,200
14,500 27,900 27,900
131,700 152,700 172,700
0.120 0.140 0.158
60
0.2
Level Description:
A - direct discharge
B - settling pond, discharge
C - settling pond, recycle
D - flocculant, settling pond, recycle
Source: Development Document and Arthur D. Little, Inc. estimates
111-60
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Table 111-26 COST OF COMPLIANCE FOR MODEL FLOTATION PROCESS
Crushed Stone Facility
Plant Size: 62,500 Metric Tons Per Year of Product
Base Year: Mid-1974
\~.
Level
A B
MTNT
L. Invested Capital Costs:
Total 0 38,800
t
^_ Annual Capital Recovery 0 6,300
Operating and Maintenance
Costs:-
Annual 0 & M (excluding
power and energy) 0 2,200
c_ Annual energy and power 0 700
Total Annual Costs 0 9,200
Cost/Metric Ton/Wet Process 0 0.147
Waste Load Parameters RAW
*- (kg/metric ton of WASTE
product) LOAD
w~ Suspended Solids 60 60 0
Level Description:
A - direct discharge
"~ B - settling pond, recycle
Source: Development Document and Arthur D. Little, Inc. estimates
111-61
-------
• wet process, and
• flotation process.
Figure III-3 shows the distribution of the total 4,808 crushed stone
facilities operating in the United States in 1972, and the way in which they
are sub-divided into the three main process categories indicated above.
The initial subcategorization is based on process technology, and the further
subcategorization derives from the nature of the current control levels at
which the process categories are currently operating.
a. Dry Process
Table lTl-14 showed that in 1972 there were 3,200 dry crushed stone
facilities operating in the United States. This represents 66.6% of the
total 4,808 crushed stone operations in the United States. There is no
process water used in a dry crushed stone operation. The Development
Document states that about half of all of the stone quarries which are
operated by the crushed stone industry in the United States employ mine
dewatering either continuously or periodically to maintain a sufficiently
dry quarry to facilitate its operation.
b. Wet Process
In 1972 there were a total of 1,600 wet process crushed stone operations
in the United States, representing 33.3% of the total number of plants,
producing 30% of the total annual production.
Figure III-3 shows the subTdivision of these wet process operations
into two main subcategories having the same current effluent control status
(i.e., 100% recycle, and discharge). Neither the data presented in the
Development Document nor any other information in the available literature
indicates the distribution of the 1,100 facilities which are presently
111-62
-------
i
IU
i
O -i
K Ul
"Number of Facilities.
Source: Development Document
FIGURE 1113 DISTRIBUTION OF CRUSHED STONE FACILITIES BY PROCESSING
AND CURRENT CONTROL LEVEL CATEGORIES
-------
discharging, Into Control Levels A and B. Undoubtedly, some of these
facilities operate with direct discharge with no removal of suspended
solIds.
Because the available data do not Illuminate the distribution of the
1,100 facilities between Level A and Level B, we have considered the case
where all 1,100 facilities are at the minimum Level A, which is direct
discharge. This maximizes control cost, and represents the limiting case
in the economic impact analysis in the following section.
The remaining 500 facilities are reported in the Development Document
to be currently operating with 100% recycle, which meets the proposed
regulations, and will add no incremental control cost to their present
level of operating costs.
c. Flotation Process
There are only eight flotation process crushed stone facilities
reported operating in the United States in 1972. Two of these operations
are reported by the Development Document to be operating with 1002 recycle
of the process water, so they comply with the proposed regulations. The
remaining six are reported to have some discharge, and will require addi-
tional fixed capital and operating costs to comply with the proposed guide-
1i nes.
4. Total Control Costs
Table 111-27 indicates the number of plants, etc., requiring no, partial,
or full effluent treatment. In summary, about 77% of all plants, represent-
ing about 90% of production, either require no treatment because they
utilize a dry process or have already implemented BPT/BAT by recycling
their process water.
111-64
-------
r
r
r
r"
TABLE 111-27. SUMMARY - CRUSHED STONE SEGMENTS
Process/Treatment
Required
Dry - None
Wet - None
Wet - Partial
SUBTOTAL
Flotation - None
Flotation - Partial
SUBTOTAL
INDUSTRY TOTAL
Quarries
#
3200
500
1100
1600
2
6
8
4808
Percent
66.6
10.4
22.9
33.3
0.1
100.0
Million
Short Tons
700
200
100
300
0.1
0.4
0.5
1000
Production
Million
Metric Tons
637
182
273
0.9
.36
.45
910
Percent
70
20
30
--
..
100.0
Average Production
Thousand Short
Tons/Quarry
219
400
91
188
63
63
63
208
Thousand Metric
Tons/Quarry
199.3
364
82.8
171
57.3
57.3
57.3
189.3
Employment*
000 's
37.4
10.7
5.3
16.0
--
0.03
53.4
Percent
70
20
30
—
100.0
*Note: As a large proportion of the quarries are serviced by portable plants, there is only an indirect
relationship between quarries and employment. It is estimated that each employee outputs an average
of 18,700 tons per year. The estimated range of tonnage/employee was 16,700 to 20,800 in 1972 (see
Table ).
Source: Development Document and Arthur D. Little, Inc., estimates.
-------
The entire wet process industry will not be subjected to increased
costs for effluent control. It is estimated that 500 of the 1,600 facilities
in this segment of the industry are already on complete recycle. About
1,100 are currently on various levels of partial discharge. The Development
Document indicates that these facilities will be subject to a wide range
of discharge control costs, the average of which is about $0.05 per metric
ton. There is no precise information available about the numbers of plants
requiring control, or the size of plants requiring control. The Development
Document indicates that the average capacity for the operations requiring
additional discharge control are on average smaller (91,000 metric tons
per year) than those already in compliance (400,000 metric tons per year).
Thus, for this industry segment, it would not be appropriate to assume
industry-wide size distribution for the plants requiring additional ex-
penditures to meet the standards. Instead, it is assumed that 50% of
the plants are in the less than 91,000 metric tons per year size class and
the other 50% are in the 91,000 to 182,000 ton size class. Within each
size class, it has been assumed that 70% of the plants can meet the required
standards by an incremental step from Level B to Level C control, while
the remaining 30% will have to effectively move from total discharge to
total recycle. Of the latter plants,.it is assumed the one half will use
Level C control procedures and the other will use Level D control. Of
the plants requiring incremental control 10% are assumed to require a Level
B to Level D control process. These assumptions will probably result in a
slight overstatement of the estimated total control costs.
Table 111-28 presents the total fixed capital, and the annual costs
associated with the additional required control for individual segments of
the crushed stone industry. The major fixed capital costs are associated
with that segment of the wet processing operations represented by the 1,100
facilities which presently discharge, and are at Control Levels A and B.
The final two columns of Table 111-28 show total fixed capital and
the annualized cost, in dollars per metric ton of product for each of the
111-66
-------
Table 111-28 INCREMENTAL CONTROL COSTS FOR CRUSHED STONE FACILITIES,
SEGMENTS AND TOTAL INDUSTRY (BPCTCA & BATEA)
Additional Control Costs
Treatment
Required -Process
NONE -Dry
-Wet
-Flota-
tion
TOTAL
PARTIAL -Wet
^ -Flota-
~ tion
en TOTAL
FULL -wet
TOTAL
uur rerii
Current Effluent Control
Control Status Level*
No process water
100% effluent re-
cycle
100% effluent re-
Ponds and discharge
Ponds and discharge
No ponds
-
C
C
B
A
A
ruuur e
Control
Level
-
C
C
C/D
B
C/D
nuiiiutM r i uuui, i IUH
of Thousand Total Capital
Facilities Metric Tons Million $
3,200
500
2
3,702 835,046 0
770
6
776 72,375 4.81
330
330 28,000 7.61
Annual Cost
$/Metric Ton
0
0.024
0.158
INDUSTRIAL TOTAL 4,808 935,421 12.42 0.007
*Refers to Tables 111-22 through 111-26.
Source: Development Document and Arthur D. Little, Inc. estimtes
-------
aggregated segments of the industry. These costs are developed for each of
the process segments in the following Impact Analysis Section.
For the purpose of analyzing economic impact, the industry is segmented
on the basis of size and required discharge control process, as shown in
Table 111-29.
111-68
-------
TABLE 111-29. CRUSHED STONE INDUSTRY SEGMENTED BY SIZE OF PLANT AND
REQUIRED DISCHARGE CONTROL PROCESS. NON-DRY PROCESS
ONLY
(B-C)
(B-D)
Number
Estimated Annual
Production (Wet Process
Product x 103 Metric
Tons)
Employment
Total Control Cost
(x 103 $)
Total Capital
Requirements (x 106 $)
Net Revenue Per Metric
Ton
Annualized Control Cost
$/Metric Ton
Price Per Metric Ton
Plants
Currently
at
Standard
500
200,000
10,667
0
0
.200
0.000
2.20
Incremental
Plants
91,000
345
18,000
960
396
1.15
.165
0.022
2.20
Control
91 ,000-
182,000
345
46,600
2,485
973
2.66
.194
0.020
2.20
Incremental
Plants
91 ,000
40
2,000
106
84
0.22
.165
0.042
2.20
Control
91,000-
182,000
40
5,400
2,880
220
0.55
.194
0.040
2.20
(A-C)
Plants Requiring
Type C Control
91,000-
91,000 182.000
(A-D)
Plants Requiring
Type D Control
91,000-
91,000 182,000
83
82
83
82
1.05
.165
2.43
.194
1.25
.165
2.J
.194
Total
Wet
Process
1,600
5,400 4,000 10,000 4,000 10,000 300,000
213 533 213 533 16,000
598 1,473 677 1,670 6,091
12.19
.195
0.040 0.150 0.148 0.170 0.168 0.020
2.20 2.20 2.20 2.20 2.20
Flotation
Process
375
30
55
0.23
1.940
0.147
22.00
-------
F. ANALYSIS OF ECONOMIC IMPACT
The basic result of the implementation of the effluent guidelines on
the crushed stone industry will be to increase the cost of Operation. The
impact on the industry and the general economy will depend on the result-
ing changes in prices and production in the industry and any secondary
impact those primary changes might generate. Table 111-30 shows the normal
operating costs for the model industry plants and the costs of required
levels of discharge control for each of the described industry segments.
(These costs have been developed in Sections C and E respectively.)
The variation of both general operating costs and discharge control
costs is quite insensitive to plant size. There are few economies of scale
in discharge control costs, but there appear to be minor scale effects in
normal operating costs. The costs do vary considerably among different
operations, but those variations appear to be the result of site-specific
costs such as land values or specific mining considerations like depth of
overburden, isolation of specific rock strata, the deposit, land rehabil-
itation costs, etc.
Table 111-30 indicates that the additional cost on any operation
requiring additional discharge control varies considerably. To analyze the
economic impact of the required controls each segment of the discharge con-
trol process and the plant size must be analyzed. The portion of the
industry that will require some form of discharge control of two very
distinct segments would be the wet process and flotation process. Flotation
process products are much higher-value products and the control processes
are quite distinct. This segment of the crushed stone industry is covered
separately from the wet process-segment described below.
The table also shows the costs for effluent control for the flotation
process segment of the industry, which is discussed below. Most crushed
stone--and, indeed, virtually all wet process crushed stone--is used in
111-70
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TABLE 111-30. COST COMPONTENTS FOR CRUSHED STONE INDUSTRY
Wet Process
Plant Size (short tons)
Annual Capacity (metric tons)
Price per metric ton
Annual Revenues
Normal Operating
Costs:
Variable Costs
Labor
Materials
Repair and Maintenance
Fixed Costs
SG&A
Depreciation
Depletion
Interest
Net Revenues
Net Revenues/Metric Ton (pre-tax)
Total Discharge to Total Recycle
Costs of Control
Process C - Total
Fi xed
Variable
Net Control Cost/Metric Ton
wet process product
Capital Requirements
Process D - Total
Fixed
Variable
Net Control Cost/Metric Ton
wet process product
Capital Requirements
Partial Recycle to Total Recycle
Process B to C - Incremental Costs
Fixed
Variable
Net Control Cost/Metric Ton
wet process product
Capital Requirements
Process B to D Incremental Costs
Fixed
Variable
Net Control Cost/Metric Ton
wet process product
Capital Requirements
100,000
91 ,000
2.20
$200,000
185,000
134,000
44,000
40,000
50,000
51 ,000
35,000
8,000
4,000
4,000
15,000
0.165
6,800
1,800
5,000
.149
12,000
7,700
2,200
5,500
.169
14,200
1,000
400
600
.022
1,900
1,900
800
1,100
.042
5,100
200,000
182,000
2.20
$400 ,000
365,000
260,000
80 ',000
90,000
105,000
55,000
30,000
8,000
12,000
35,000
.194
13,400
3,600
9,800
.149
22,100
15,200
4,300
10,900
.169
26,200
1 ,900
800
1,100
.021
5,200
3,700
1,500
2,200
.041
9,300
1,400,000
1,270,000
2.20
$2,800,000
2,520,600
1,795,500
621 ,500
552,500
621,500
724,100
379,300
206 ,900
55,200
82,700
279,400
.220
94,500
25,400
69,100
.148
128,300
107,200
30,300
76,900
.169
152,000
13,300
5,600
7,700
.021
30,000
26,000
10,500
15,500
.041
54,000
2,400,000
2,180,000
2.20
$4,800,000
4,255,000
3,031,000
1,049,000
933,000
1,049,000
1,224,000
641 ,000
350,000
93,000
140,000
545,000
.250
152,700
34,000
118,700
.140
208,600
172,700
40,600
132,100
.158
247,300
21 ,000
7,600
13,400
.021
49,100
41 ,000
14,200
26,800
.038
87,800
Process B -
Flotation
Process
68,800
62,500
22.00
$1,376,000
1,255,000
Source: Arthur D. Little, Inc.
111-71
-------
construction and some is in direct competition with sand and gravel.
Because of the value and transport costs of both these groups of products,
there is no national market, but rather a series of local markets. The
industry would appear to be very competitive on the basis of national figures
from the existence of many small producers.
However, transport costs define limits on the area any producer can
serve which means each producer tends to be an oligopolist in a very
localized market facing little competition from any other producers 50 to
100 miles from that local market. The highly localized structure of these
markets is evidenced by the wide disparity of prices shown in Table 111-30.
Sand and gravel prices also exhibit these wide variations in inter-market
prices. (Sand and Gravel; Table 11-15). There is in fact, a general
similarity between the relative inter-market prices for crushed stone and
construction sand and gravel. The basic market for crushed stone ex-
clusively of feedstocks and agricultural uses will be construction, an
activity which is largely concentrated in major population centers, i.e.,
within metropolitan areas or at the fringes of metropolitan areas.
A model regional market for construction sand and gravel has been
constructed for the Baltimore-Washington area separately from the non-
existent national market portrayed by examination of national aggregate
statistics. This model is useful because sand and gravel is the major
competitor of crushed stone. The development and characteristics of this
model regional market are presented in Chapter II, Section D.3.
1. Incremental Discharge Control in a Major Metropolitan Market (Case 1)
a. Price Effects
In this case, the plants requiring incremental treatment face a cost
increase of $0.02 to $0.04 per ton of wet processed product. Some operators
111-72
-------
in such smaller plants may not distinguish between dry and wet process
product in their accounts and may consider their costs to have risen less
per total production ton.
Only the smaller plants are expected to be affected by the guidelines.
In a large market, the smaller plants would not be able to increase prices,
because they would not have a large enough share of the market to function
as a price leader. Other plants would hold prices to increase sales. In
this case, prices would remain unchanged.
b. Financial Effects
Because the firms requiring additional control would have to absorb
the cost increase, net revenues would be reduced. The amount of the
reductionfor a particular plant would depend on the mix of wet and dry
process product from that plant. The greater the share of wet process,
the greater the decline in net revenues. If the total product of the
plant was wet process, or if the operator considered each product separately,
the reduction of net revenue would be about 25% for these plants requiring
the incremental control process from Level B to Level D and half that for
Level B to Level C.
The 25% reduction is a substantial change in net revenues, but many
of the operations may be much more conscious of cash flow, which would not
be so severely affected. (Consideration of depreciation and depletion
would almost double net revenues.) After-tax cash flow would be reduced
by only 20% under the most expensive increment control process. Operators
would probably be willing to absorb that reduction in earnings unless the
remaining value of the quarry was insufficient to p^y off the required
capital investment in effluent control equipment.
The capital requirements for incremental control do not appear to be
a major barrier to implementing the control. Cash flows appear to be
111-73
-------
sufficient to fund the required Investment from retained earnings. In
this case, a single year of depreciation would more than fund the required
effluent control Investment.
c. Production Effects
It is not anticipated that plants in this case will close, either
because of the deterioration of net revenues or because of difficulties in
raising the necessary capital, as developed in the proceeding section on
financial effects.
d. Employment Effects
The anticipated non-closure of plants in this case will leave unemploy-
ment levels unchanged.
e. Community Effects
The community would face no loss of jobs or income in this case.
2. Small Plants, From Total Discharge to Total Recycle (Case 2)
a. Price Effects
As in Case 1, these plants would not be able to pass on any cost in-
creases. Prices would not be changed by the imposition of guideline
effluent controls.
b. Financial Effects
The affected plants would face a substantial reduction in net earn-
ings. The control costs per metric ton are $0.15 to $0.17, while net
revenues are only $0.165 per ton for the smallest size model plant and
111-74
-------
$0.194 per ton for the next larger size model plant. These plants would
not remain economically viable and could be expected to close, or go entirely
to dry process operation.
The net effect would be a realignment of wet and dry process production,
between the producers who can produce wet process economically and those
who would have to bear additional costs to continue in wet process produc-
tion. (This realignment could conceivably shift some of the production
of washed crushed stone to washed gravel produced by the sand and gravel
industry.) A plant producing predominantly wet product would face dif-
ficulties in shifting markets, but if the option is to go out of business
or continue to get a return on already invested capital, etc., the incentives
to switch to dry production are powerful. Only if the equipment was old
and the site 'about worked out would the operator be expected to stop
producing.
c. Production Effects
It is expected in this case that the plants requiring complete control
would switch to dry process product. Total production would be unaffected,
although there would be a small realignment of dry and wet production
between producers.
d. Employment Effects
No closures are expected, so there would be no loss of employment in
this case.
e. Community Effects
The community would face no loss of jobs or incomes in this case.
111-75
-------
3. Small Plants, From Total Discharge to Total Recycle In a Small
Metropolitan or Rural Market (Case 3f
a. Price Effects
In a small market, small firms would not face much competition and
would be able to pass cost increases on to consumers. The cost increase
due to the effluent controls is substantial—on the order of 7 to 8% per
ton. However, the very low price elasticity of demand for crushed stone
would mean that such cost increases could be passed on. Crushed stone and
construction sand and gravel each account for only about 1% of total
construction costs. Thus, an 8% increase in crushed stone prices would
result in an increase of only 0.08% in total construction costs. Prices
in this market could be expected to rise to cover the full control cost.
b. Financial Effects
Net revenues are expected to be maintained, through the anticipated
price increases. The capital required is substantial for small firms.
Using depreciation as a measure of the capital presently used in the model
plants, the additional capital required for control is about equal to
annual depreciation. While capital requirements appear to be a burden on
plant finances, the necessary funds should be available from the local
banking system. The largest total capital required even for a moderate
sized plant ($26,000) is equivalent to the loan for one moderate single
family house. The ability to raise prices should mean that the banking
system would consider the loan favorably.
c. Production Effects
No plant closures are anticipated since it is expected that these small
plants in a small metropolitan or rural market would be able to pass on
the control costs to their customers through the necessary price increase.
111-76
-------
Consequently there should be no effluent control cost induced production
shifts.
d. Employment Effects
No jobs would be lost through plant closures.
e. Community Effects
There would be no anticipated adverse impact on the community in
this case.
4. Aggregate Impact Summary
None of the dry process plants are affected by the guidelines. There-
fore this impact summary applies only to plants producing wet process
crushed stone. The special flotation process segment is treated in
Section 5 following.
The economic impact on the whole nation of the events taking place in
isolated local markets will depend on the distribution of the firms among
the various classes described above. As mentioned, there is no detailed
data on the location of crushed stone plants, so an estimate must be made
as to the numbers of each class of plant falling into each market model.
Small firms appear to be located generally in the smaller markets.
Also, a small market would not support larger size plants. It has been
assumed that 50% of the less than 91,000 metric tons capacity plants are
in small markets, and 25% of 91,000 to 180,000 ton capacity plants are
in small markets. Given this size distribution, the national economic
impact can be estimated. Table 111-31 shows the numbers of plants,
production, and employment by the four impacted groups: unaffected plants
that already meet the guideline standards; plants that face a moderate
111-77
-------
decline in net revenues; plants that must shift out of wet process produc-
tion to stay in operation; and plants that can pass on their increased
costs of operation. No closures are expected for plants in this industry.
a. Summary Price Effects
Only 412 firms are expected to be in a position to pass on their cost
increases.
These firms account for 3.2% of production, so that no significant
price impact is expected from the effluent control guidelines.
b. Summary Financial Effects
Some 482 plants are expected to be in a position of having to accept
smaller rates of return and net revenues. These plants produce only 4.7%
of total product, so impact on overall industry earnings will be insignifi-
cant.
c. Summary Production Effects
No plant closures are expected in any of the model markets, so there
would be no impact of the guidelines on production levels. Some 206 plants
would have to shift to all dry process product to remain in business.
These plants produce only 1.7% of total product in the crushed stone in-
dustry.
The investment required to meet the guidelines for new or expanded
plants in this industry will not be greatly increased. The added capital
requirements would probably reduce the viability of new very small operations,
but should not hamper the growth capacity of the industry.
111-70
-------
Table II1-31 NATIONAL SUMMARY OF ECONOMIC IMPACT
Crushed Stone Industry
Impact Category
t— (
I— (
1 — t
1
^J
10
Effect
Not Affected
Not Affected
Affected
Affected
Affected
TOTAL
Characterization
Dry Process
Wet Process
Plants at Zero
Discharge
Absorb Cost
Increase
Shift to Dry
Process
Pass on Cost
Increase
Number of
Plants
3,200
500
482
206*
412
4,800
Production
% (000 tons)
66.7 700,000
10.4 200,000
10.0 49,000
4.3 19,000
8.6 32,000
100.0 1,000,000
%
70.0
20.0
4.9
1.9
3.2
100.0
Employment
37,400
10,700
2,600
1,000
1,700
53,400
%
70.0
20.0
4.9
1.9
3.2
100.0
See p 111-77 for discussion of this impact category.
-------
It is necessary to place this number of 206 plants into the
appropriate context of this analysis. This value has resulted from
calculations which have been based on a series of assumptions necessitated
by the lack of specific data concerning wet process crushed stone facilities.
The first key assumption is presented in the Development Document. This
assumption is that of the total 1,600 wet crushed stone facilities, 500
are operating at 100% effluent recycle, with the remaining 1,100 operating
with some discharge. There are presently insufficient data available to
indicate the level of effluent control presently practiced at these 1,100
discharging facilities. Also, the production size distribution of these
facilities is not available. Finally, there is insufficient information
concerning the relationship of any of these facilities to specific market
categories.
•
In the absence of these data, and in order to perform this analysis,
it has been assumed that 50% of the plants are in the less than 91,000 metric
tons per year size class, and the other 50% are in the 91,000 to 182,000
ton size class. Within each of these two size classes, it has been
assumed that 70% of the plants can meet the required standards by an
incremental step from level B to level C control, while the remaining 30%
will have to effectively move from total discharge to total recycle. Of the
latter plants, it was assumed that half will use level C control procedures
and the other will use level D control.. Of the plants requiring incremental
control 10% were assumed to require a level B to level D control process.
Finally, it has been assumed that 50% of the small class plants
(less than 91,000 metric tons per year) are located in small markets,
while 25% of the larger class of plants (91,000-182,000 metric tons per
year) serve small markets.
As previously indicated, the mix of wet and dry crushed stone product
will vary greatly from plant to plant in the industry, as well as from year
111-80
-------
to year for any one plant. Finally, the specific market situation for
these wet crushed stone producers is also subject to considerable variation
with regard to geographic location and time.
Therefore, we believe that many of the plants in this category will
be able to produce dry crushed stone only, and still remain economically
viable. However, it is not possible to predict, from this data base and
analysis how many of the plants in this category cannot successfully make
this change.
d. Summary Employment Effects
No plant closures are anticipated, so no loss of employment is
associated with the implementation of the effluent control guidelines for
the industry.
e. Summary Community Effects
There is no loss of jobs or income anticipated and no adverse com-
munity impact is anticipated from implementation of these effluent guide-
1i nes.
f. Balance of Trade Effects
The highly local nature of sand and gravel markets because of high
transportation costs means that the expected price increases would not
induce any measurable competition from imports. National balance of trade
would be unaffected.
5. Flotation Process Segment
The flotation process product is a very small proportion of total
production and a highly specialized product requiring high purity of
111-81
-------
color and fineness. It is largely used for a whitening agent in various
products. As such, it sells at a much higher price per ton, but also
incurs higher production costs. We have assumed that net revenues are
the same percentage of gross revenues as in the rest of the industry, so
gross revenues per ton are estimated at $22 per metric ton.
The economic impact on the flotation process crushed stone industry
is quite separate from the rest of the industry. The specialized nature
of the product means that it is traded in a national market, rather than
distinct local markets.
a. Price Effects
As an oligopolistic industry, any one of the few sellers would be
likely to pass on cost increases through increased prices. These crushed
stones are highly specialized products that do not have effective sub-
stitutes, so price elasticity of demand is very near zero. The full $0.145
cent per ton effluent control cost for these plants would be only a 0.7%
increase in price.
b. Financial Effects
The increased costs would be passed on, so that net revenues and returns
on sales or investment would not be reduced.
The required capital for discharge control is small in comparison to
normal capital. The total investment in control equipment is only about
6Q% of one year of depreciation, so the required investment should be
capable of being funded from retained earnings.
c. Production Effects
No plant closures are expected, so the implementation of the guidelines
should not affect production. The requirement for effluent controls on
111-82
-------
new or expanded plants will increase the required investment, but not
sufficiently to hamper growth of the industry. The ability to enter the
industry will continue to depend on the control of the special deposits
required for these products.
d. Employment Effects
No plant closures or production loss is expected, so there should be
no adverse impact on employment in the industry.
e. Community Effects
The lack of plant closures will mean no adverse community impact.
f. Balance of Trade Effects
The extent of the expected price increase is not considered likely
to harm any export potential for these products or to induce any new
competition to domestic producers from imports.
111-83
-------
G. LIMITS TO THE ANALYSIS
In addition to the general limits imposed by the overall method used
for the economic analysis, the crushed stone industry raises some additional
limitations.
The structure of the industry requires analysis of local markets,
yet there is only scanty information available on the actual structure of
those markets. The impact of the guidelines would be shifted if plants
do not exist in the classes of markets that have been assumed. The
assumptions used have been chosen to err on the side of overstatement of
the adverse economic impact. A larger share of small plants has been assumed
for large markets than is likely to be the case, but there is no real way
of testing that hypothesis.
There is also used a narrow definition of economic viability. Individual
operators may be willing to accept lower rates of return because of property
values of the site, future potential land values, etc. The crushed stone
operation may be a means of just meeting the holding costs for an appreciat-
ing asset. As long as the operation can meet the variable costs of
operation, it will probably be kept going. This error would again lead to
an overstatement of the economic impact of the guidelines.
111-84
-------
IV. INDUSTRIAL SAND (SIC-1446)
A. PRODUCTS, MARKETS, AND SHIPMENTS
1. Product Definition
Industrial sands are deposits that have been worked by nature" proc-
esses into segregated mineral fractions. Such deposits are utilized for
their contained quartz (SiOp). The deposits are found in a broad range of
locations and formations, some as loose and visible as dune sand, others
as dense and obscure as the hardest of rocks buried under a variety of
surface materials, and literally all intermediate types of formations.
They may be found as low-lying water bearing sands or as hard faced bluffs
and cliffs--as out-cropped escarpments in a level plain or as a massive
ridge or mountain face. It is believed that there is only one operating
underground mine.
The 1972 Census of Minerals Industries has four subdivisions for this
category: glass sand (SIC 14461); molding sand (SIC 14465); and industrial
sand, not elsewhere classified (SIC 14469); and not specified by kind
(SIC 14460). A more detailed breakdown of the uses of industrial sand is
given in the Minerals Yearbook. Table IV-1 is a listing of the uses of
the industrial sands and the extent to which they were used in 1974 by
quantity and dollar values. From the table it may be seen that glass and
molding sand constitute by far the two largest single uses of industrial
sand. Dollar-wise they account for 38% and 31% of the market, respectively.
These combined totals comprise about 73% of the tonnage of industrial sand
sold.
The final use of industrial sand depends chiefly on its grain size and
purity. Sand used for the glass, chemical, and silicon industries is
required to be mono-mineralic and to possess no staining materials and
essentially no iron. Glass sands are also required to be within a specified
IV-1
-------
Table IV-1 INDUSTRIAL SAND SOLD OR USED BY ALL
PRODUCERS IN THE UNITED STATES, 1974
Quantity Value
IP3 MI (IP3 ST) ($1Q3)
Unground Sand
Molding 6,939 ( 7,642) 33,328
Glass 9,116 (10,040) 46,632
Blast 1,939 ( 2,136) 11,281
Grinding & Polishing 90 ( 99) 558
Fire or Furnace 362 ( 399) 1,752
Engine 476 ( 524) 2,073
Filtration 277 ( 305) 1,639
Metallurgical 331 ( 364) 1,286
Oil (hydrofrac) 348 ( 383) 3,447
Other 1,913 ( 2,107) 8,824
Total Unground Sand 21,791 (23,820) 110,821
Ground Sand
Filter 189 ( 208) 2,865
Chemical 367 ( 404) 1,719
Abrasive 295 ( 325) 2,823
Foundry 1,902 ( 2,095) 8,627
Glass 772 ( 850) 5,004
Pottery, Porcelain, Tile 123 ( 136) 1,552
Other 169 ( 186) 1,944
Total Ground Sand 3,817 ( 4,204) 24,536
Total Industrial Sand 25,608 (28,024) 135,357
Source: 1975 Annual Advanced Summary, Minerals Industry Surveys, U.S.
Department of Interior, Bureau of Mines
•M*
IV-2
-------
size range. Foundry sands come in contact with molten metals and as such
must have a high degree of refractoriness and be highly permeable. Filter-
ing sand must be pure particles which are well rounded, so that porosity
is maximized. Metallurgical pebble employs gravel-sized quartz grains for
silicon metal production. Grinding sands are uniform in size and round so
that grain fracture is minimized, whereas blasting sand is preferred to
have angularity.
2. Production Processes
The Development Document has considered various factors in subcategor-
izing the industry and has concluded that, with the exception of the manu-
facturing process employed, no factors are of sufficient significance to
justify their use in the segmentation process. As such, the following
three subcategories were selected:
• Dry Processes,
• Wet Processes, and
• Flotation Processes.
a. Dry Processing
Dry processing of industrial sand typically involves the scalping or
screening of sand grains which have been extracted from a beach deposit
or by the crushing of sandstone prior to screening. This type of operation
*s characterized by the absence of process water for sand classification
and beneficiation. Sand obtained from beach deposits, if a specified
size, is trucked to the processing facility where it is dried, cooled,
screened to remove coarse grains and then stored. By processing beach
sand from different shoreline distances it is possible to obtain various
grain sizes and ranges, thereby permitting a firm to reach a number of
IV-3
-------
market segments. Facilities that quarry sandstone tend to have a more
limited market because of the purity requirements associated with glass
sands. However, facilities do exist in which a sandstone is quarried and
dry processed to form a product that is suitable for use as a glass sand.
As mentioned above, dry processing is characterized by the absence of
process water; however, in some facilities wet scrubbers are used for the
dust collection system at the dryer to meet air pollution control require-
ments. Both the fines and the oversize materials are used as landfill.
It is estimated that there are currently 20 plants producing indus-
trial sand by the dry process and that they comprise about 10% of the in-
dustry's output.
b. Wet Processing
Wet processing plants are operated on ore obtained by each of the
basic extraction methods: mining of sand from open pits, mining of sand-
stone from quarries, and hydraulic dredging. Water is used as the trans-
port medium in wet processing. An initial screening consisting of a system
of scalpers, trammels and/or classifiers is commonly used at most facilities
to remove foreign materials such as rocks, wood and clays. The wet process
is used for ores containing a lot of debris. Here again, solid wastes are
either stockpiled or used as landfill.
Nearly 80% of the plants producing industrial sand do so by the wet
process. It is estimated that about 130 plants use this process, and they
account for about 75% of the annual industrial sand output.
c. Flotation Processing
In the third subcategory, flotation, three techniques are possible:
• Acid Flotation,
IV-4
-------
• Alkali Flotation, and
t Hydrofluoric Add Flotation,
In acid flotation, sand is crushed to appropriate size and washed to
remove clays and other impurities, The was'ted sand is slurried with water
and conveyed to the flotation cells. SuIfuric acid, frothers and reagents
are added to the slurry to cause separation of the silica and the im-
purities. The silica settles out, #h1le the iron-bearing impurities are
floated and removed through the overflow. The reagents used in this process
include sulfamated oils, terpenes and heavy alcohols in amounts of up to
0.5 kg/kkg (1 Ib/ton) of product. The purified silica is recovered, dried
and stockpiled. All process wash and flotation waste waters are fed to
settling lagoons In which mud and other suspended materials are settled
out. The water is then recycled to the process.
Alkaline flotation is used to remove alurrnnates and zirconat.es. The
alkaline flotation process is quite similar to the acid flotation process.
Prior to being fed to the flotation cell, the slurried, washed sand is
pretreated with add. In the cell it is treated with an alkaline solution
of caustic soda, soda ash9 or sodium silicate together with frothers and
conditioners. The pH is generally maintained at about 8.5, rather than
about 2 in acid flotation. The overflow is fed to settling lagoons in
which the impurities are settled out. The water is then recycled or at
least partially recycled.
Hydrofluoric acid flotation is used to remove feldspar. This flotation
technique consists of feeding the underflow from a*; ,cid flotation cell to
a second flotation cell in which hydrofluoric acid, terpene oils and
conditioning agents are added. The underflow from this tell containing the
silica is collected, dewatered and dried. All waste waters are then com-
bined and fed to a thickener to remove suspended materials. The overflow
from the thickener is recycled to the process. The underflow, which
IV-5
-------
contains less than 7% of the water and essentially all of the suspended
materiali is fed to a settling lagoon for removal of suspended solids prior
to discharge. Only one plant has been found which uses this process.
It is estimated that there are currently 18 flotation plants in the
United States producing industrial sand, and that these plants have a """
combined output of about 15% of the total tonnage for the industry.
3. Price, Shipments
Mt1*
In 1974, the average price for industrial sand was about $5.30 per
metric ton. Filter sand was highest at $15.17 per metric ton, while
M
metallurgical sand was lowest, at $3.89 per metric ton. The large dif-
ference in prices between the two types is due to the rather exacting
physical property requirements for filter sand (i.e., round, uniform, ""
etc., to allow for maximum porosity), as opposed to the gravel-size quartz
grains which constitute metallurgical pebble. Table IV-2 summarizes the ^
average prices for the various types of industrial sand. The prices fall
essentially into two ranges. **»
Table IV-3 summarizes the quantity and value of shipments for the —
ten-year period 1963-1972. Also included is the average price per metric
ton for the same period. During this period, the consumption of industrial
MB*
sand increased at an average annual rate of 3.5% while the dollar value
grew at a rate of 5% per year. As would be expected, this industry closely
follows the combined foundry and glass industry, as shown in Figure IV-1. "*
Over the ten-year period, only in 1972 was there any significant deviation,
which was due to the "foundry recession" which occurred during 1972 and ~,
the first half of 1972 and resulted in a condition of overcapacity in
foundry sands. This, together with the supply/demand function, restricted ^
price increases at a time when labor, power and other costs were increas-
ing. Since 1972, the industry has been able to increase prices from an
average of $4.20 in 1972 to $5.30 per metric tor; in 1974, or about 25%. ~"
IV-6
-------
Table IV-2 AVERAGE SELLING PRICE FOR VARIOUS TYPES
OF INDUSTRIAL SANDS, 1974
Type of Sand
Glass
Molding
Fi re or Furnace
Engine
Metallurgical
Fi1ter
Pottery, Porcelain, Tile
Oil (hydrofrac)
Abrasives
Grinding and Polishing
Price Per Metric Ton
Price Category
($) ($/io3
5.11
4.92
4.83
4.36
3.80
$4 - 6
($5.09)
$6 - 15
($7.40)
Source: Minerals Industry Surveys, Annual Advanced Summary Report,
1975.
IV-7
-------
Table IV-3 VALUE OF SHIPMENTS FOR INDUSTRIAL SAND (1963-1972)
Unground Sand
Ground and
1963
Quantity
M.Tons
Sht.Tons
Value $106
1965
Quantity
M.Tons
Sht.Tons
Value $106
1967
Quantity
M.Tons
Sht.Tons
Value $106
1969
Quanti ty
M.Tons
Sht.Tons
Value $10^
1971
Quantity
M.Tons
Sht.Tons
Value $106
1972
Quantity
M.Tons
Sht.Tons
Value $106
Molding
6,882
7,579
20,814
8,927
9,831
26,319
8,589
9,459
26,934
9,629
10,605
30,371
6,630
7,302
21,763
6,830
7,522
24,827
Glass
6,541
7,204
23,626
7,471
8,228
26,154
8,115
8,937
28,976
9,577
10,547
36,398
8,792
9,683
36,445
9,832
10,828
41,259
Other
4
5
15
5
5
16
4
5
18
5
5
20
6
7
20
6
6
24
,790
,275
,205
,172
,696
,622
,937
,437
,962
,422
,971
,798
,595
,263
,275
,055
,668
,754
Unground
Total
18,213
20,058
59,645
21,570
23,755
69,105
21 ,640
23,833
74,872
24,628
27,123
87,567
22,017
24,248
78,483
22,716
25,018
90,840
Ground
Sand
1
8
1
1
11
1
1
10
1
1
14
1
1
12
4
4
21
945
,041
,921
,485
,636
,238
,353
,490
,983
,725
,900
,460
,735
,911
,893
,097
,512
,546
Unground
Total
19
21
68
23
25
80
22
25
85
26
29
102
23
26
26
29
112
,158
,099
,566
,055
,391
,343
,993
,323
,855
,351
,021
,026
,754
,161
,813
,530
,386
Avg.
Per
3.
3.
3.
3.
3.
3.
3.
3.
3.
3.
4.
3.
Price
Ton
58
25
49
16
73
39
87
52
85
49
19
81
Source: 1972 Census of Manufactures
IV-8
-------
Combined Glass
and
Foundry Industry
A
t5
I
m
Industrial Sand
1963
1965
1967
1969
1971
1973
Year
FIGURE IV 1 DEPENDENCE OF INDUSTRIAL SAND ON THt GLASS
AND FOUNDRY INDUSTRY
IV-9
-------
4. End Uses
Industrial sands are used primarily for their refractory properties
in the steel and foundry industries, for their chemical properties in the
glass industry, and for their physical properties in the oil, filtrating
and abrasive industries.
The end uses of industrial sand are essentially those as given in the
Minerals Yearbook breakdown given in Table IV-1. Glass sand is used as the
principal raw material in the manufacture of glass. The foundry-casting
industry makes use of core sand, runner sand, foundery sand, and molding
sand. Fire or furnace sand is used for lining and patching open hearth
and electric steel furnaces. Oil (hydrofrac) sand is used to increase
fluid production in oil wells. Metallurgical pebble is used chiefly as
a component in the preparation of silicon alloys or as a flux in phosphorous
production. Blasting sand is used to remove rust, paint, or metal in
sand-blasting operations. Abrasive sands are used to make abrasive cloths
and papers and as a polishing medium.
5. Possibility of Substitutes
In both the foundry and glass industries, industrial sand has es-
sentially no substitute. It is true that in the foundry industry such
materials as zircon, olivine, staurolite, and chromite sands are used in
special applications, but their costs of five to ten times that of silica
prohibit their extensive use. In the glass industry, silica has no sub-
stitute, as the other glass-forming oxides do not impart the necessary
working and/or durability properties required in glass applications. This
is also true in the production of silicon. In the remaining end-use
markets, silica enjoys a large price advantage over other possible sub-
stitute materials.
,
m
IV-10
-------
6. Future Growth
As mentioned previously, the industrial sand industry closely parallels
the combined glass and foundry industries. It is estimated that by 1982
the United States foundry industry will be shipping about 26 million tons
of castings, which is about a 3% annual growth rate. Growth projections
for the glass industry are similar, hence it is expected that the industrial
sand industry will also grow at about a 3% per year rate. It is not ex-
pected that any new applications for industrial sands will significantly
increase demand for these products. However, the threat of reduced con-
sumption is present, especially for the glass container industry, which
competes with metal and plastic containers, particularly if some state
legislates to ban non-returnable bottles. Sand reclamation is on the
increase in the foundry industry, and although this would tend to indicate
lower demand, it is not necessarily the case. Foundries using no-bake
resin sand usually add 20-30% new sand to each batch, which is considerably
more than the amount of new sand required for each batch of green molding
sand.
7. Market and Distribution
Foundry sands are sold mostly by direct salesmen who are located ir,
the vicinity of each firm's largest customer. The salesmen can be con-
sidered sales engineers, because they must be capable of carrying on tech
nical discussions with their customers and also be able to help diagno-
casting defects. Foundry sands are also sold by jobbers and manufacturer:
representatives who sell on a commission basis but also have the samp
technical capability as do the sand producers' direct salesmen. Sales o-
glass sands are made largely on a long-term basis. Prices, uniform^/ -
quality product, and supplier reliability are the key to sales of s?'o
into the glass industry.
IV-11
-------
J
Transportation of glass sand 1s by large 100-ton closed, hopper-
bottom rail cars and by specially equipped trucks. The competition between
rail and truck controls freight charges 1n the Industry. At one time,
foundry sands were transported mostly by water. Since most of the sand Is
dry and free flowing, pressure-truck delivery of 20 tons or more 1s
typically used for customers within a 150-mile radius, except for partic-
ularly large customers whereby freight cost dictates r*1l shipment.
IV-12
-------
B. INDUSTRY STRUCTURE
1. Types of Firms
The number of firms producing industrial sand in the United States
(SIC 1446) has declined by approximately 50% since 1963, when there were
159 firms reported. However, during this same period, the number of plants
declined by only about 16% or from 197 plants in 1963 to the present
number of 168. The reduction in the number of plants has chiefly been
caused by the closing of single-plant firms that were unable to raise the
necessary capital to upgrade equipment to produce high-quality products.
The drastic reduction in the number of firms has been due to the multiple
acquisitions of plants by large corporations and to a lesser degree by
large privately held companies, so now the types of firms producing in-
dustrial sands vary from the ownership of multiple-plant firms (by either
privately held companies or corporations of varying size) to firms having
a single plant.
All of the large producers are either owned by corporations or are
privately held. Therefore, products and sales volumes are not directly
accessible. For instance, the largest producer, Pennsylvania Glass Sand,
is owned by ITT. Sales for the production of industrial sand per se are
not given in their annual reports but rather is included with other products
in their Natural Resources Division. A report was obtained for Ottawa
Silica Company, a privately held company that reports annual sales of
$16 million. Ottawa Silica Company and Wedron Silica Company (a division
of Del Monte Properties Company) are considered to be second and third in
size after Pennsylvania Glass Sand. A reasonable estimate of annual sales
for Pennsylvania Glass Sand Company then might be about $40 million, as it
is believed to have somewhat more than double the volume of Ottawa Silica
Sand Company.
1967 Census of Minerals Industry; Sand and Gravel; U.S. Dept. of Commerce,
Bureau of the Census.
IV-13
-------
The next three largest firms whose annual sales are believed to be
1n the order of $10 million are Martin-Marietta, Arkhola Sand and Gravel
(owned by Ashland 011), and Whitehead Brothers. Together those six firms
comprise about two-thirds of the Industrial sand Industry.
All the large firms sell to both the glass and foundry Industries and
have a product range which covers essentially all the markets for Industrial
sands. The small firms sell very little, 1f any, to the glass Industry
because as they are unable to fill the large demands of the glass manu-
facturers. The smaller firms, of necessity, have a very restricted product
line. Primarily they sell to the foundry Industry. Table IV-4 lists most
of the firms producing industrial sands, and list the market segments they
supply.
2. Types of Plants
The 1972 Census data reported that 167 plants produced industrial sand.
The present 168 plants reported in the Development Document agree, but
there is a rather large discrepancy compared to the number of plants
reported in the 1974 Advanced Summary of the Minerals Industry Surveys for
Sand and Gravel. The latter publication reports 118 plants producing only
industrial sand and gravel, and 101 plants producing some industrial sand
and gravel.
The plants producing industrial sand have from 4 to 250 employees.
Specific data on production quantities per plant are not available. An
estimate of the output for various plant sizes can be estimated from a
calculation based on the industry output per employee as determined from
Census data. Table IV-5 summarizes the estimates. The calculated output
values were obtained by taking the 1972 average selling price of $4.20
per ton and then making the appropriate calculation with the published
shipment values and number of plants in each employee category. From the
calculation, it is estimated that plant sizes vary from between 20,000 to
IV-14
-------
Table IV-4 INDUSTRIAL SAND FIRMS
Company
American Gilsonite Co.
Arkhola Sand & Gravel Co.
Arrowhead Silica Corp.
Ayers Mineral Co.
Bay City Sand Co.
Bell rose Silica Co.
G.W. Bryant
C.E. Cast Equipment
Central Silica Co.
Columbia Silica Sand Co.
Continental Minerals
Processing Co.
Crystal Silica Co.
CX Products Corp.
Dawes Silica Mining Co.
Delhi Foundry Sand Co.
Del Monte Processing Co.
Downer Silica Co.
Dresser Industries
Durez-Stevens Foundry
Sand Co.
Eastern.Rock Products, Inc.
Ellwood Stone Co.
Engineering Abrasives Co.
Exner Sand & Gravel Corp.
Filtros Plant (Ferro Corp)
Foundry Materials Co.
Gopher State Silica Inc.
Great Lakes Foundry Sand Co.
Hardy Sand Co.
Harris Mining Co.
Hungerford & Terry Inc.
Illinois Sand & Ballast Co.
Independent Gravel Co.
Indiana Products Co.
Inland Refractories Co.
Inversand Co.
Kenner Sand & Clay Co.
Kings Mountain Silica Co.
Klicks Core Co.
Source: Thomas Register;
Market Directory
Location
Utah
Arkansas
Indiana
New York
Wisconsin
Illinois
New York
Ohio
Ohio
S. Carolina
Ohio
Calif.
Texas
Georgia
Ohio
Calif.
New Jersey
Texas
Michigan
New York
Penna.
Illinois
New York
New York
Michigan
Minnesota
Michigan
Indiana
N. Carolina
New Jersey
Illinois
Missouri
Indiana
Ohio
New Jersey
Ohio
N. Carolina
Calif.
Dun & Bradstreet
Company
Lewes Sand Co.
Manufacturers Minerals Co.
MDC Industries
Martin-Marietta
Millwood Sand Co.
Mississippi Lime Co.
Morie, J.S. & Co.
Moulder's Friends, Inc.
National Glass Sand Corp.
N.J. Pulverizing Co.
N.J. Silica Sand Co.
Northern Gravel Co.
Northwest-International
Ottawa Silica Sard Co.
Peerless Mineral Products
Company
Penn. Foundry & Supply Co.
Penn. Glass Sand Co.
Pettinos, G.F.
Porter Warner Industries,
Inc.
Refractory Sand Co.
Ross & White Co.
Saginaw Core Sand Co.
Sand Products Co.
Sargent Sand Co.
Silica Products Co.
Southern Processing Div.
Southern Products and
Silica Co.
Standard Sand Co., Inc.
Standard Silica Co.
Unisil Corp.
Wedron Silica Sand Co.
Western Filter Co.
Whitehead Brothers Co.
Location
Minnesota
Washington
Penna.
Illinois
Ohio
Illinois
New Jersey
Illinois
New Jersey
New York
New Jersey
Iowa
Washington
Illinois
Ohio
Penna.
Penna.
Penna.
Tennessee
Penna.
Illinois
Michigan
Michigan
Michigan
Arkansas
Alabama
N. Carolina
Michigan
Illinois
New York
Illinois
Colorado
New Jersey
Million Dollar Directory - Middle
IV-15
-------
Table IV-5 ESTIMATED OUTPUTS FOR VARIOUS SIZE PLANTS
Avg. Employees
Per Plant
0 to 4
5 to 9
10 to 19
20 to 49
50 to 99
100 to 249
250 to 499
No. of
Plants
35
31
38
46
11
5
1
Value of
Shipments
($100)
2.9
6.5
13.6
46.8
30.2
24.8
9.3+
Average Output*
Per Plant
(10J tons)
20,000
50,000
85,000
240,000
655,000
1,200,000
2,000,000*
>j
J
1
1
•*
mi
Based on an average price of $4.20/metric ton
+ADL estimates
Source: 1972 Census of Mineral Industries; ADL estimates
IV-16
-------
2 million metric tons per year. The Development Document presents a typical
plant as producing 180,000 metric tons per year. This value lies between
the calculated values of 85,000 and 240,000-ton plants, which accounts for
38 and 46 plants, respectively. These two categories account for about 50%
of the industries output and number of plants.
Based on the information in the Development Document, facilities
range in age from one year to 60 years.
Plants producing industrial sand are located in 42 of the 50 states.
Four industrial producing states account for 43% of 1974 U.S. production,
and are Michigan (17.6%), New Jersey (11%), California (7.4%), and
Illinois (7.1%). Plant locations are determined by balancing marketing and
processing costs, availability of power and fuels, and transporation cost.
A measure of the importance of these factors is shown in Figure IV-2,
which contains the geographic location of U.S. industrial sand deposits
and approximate production for a number of states. Specific data concern-
ing the number of plants in each state are not available; however, data
are available about the production per state.
3. Industry Segmentation
There are basically three methods used for processing industrial sands:
dry, wet and flotation. Table IV-6 summarizes the magnitude of each of
these basic segments. Data on operating costs for the various processing
methods are considered proprietary in the industry, so they are not directly
available. To obtain some measure of operating costs, an engineering cost
estimate was made for each of the processes. A breakdown of the cost
estimates is given in Table IV-7 for the model plant size of 180,000 metric
tons per year. From the table it is apparent that, at a given output
level, operating costs for wet and dry processes are essentially identical,
whereas the operating costs for a flotation process are significantly
higher. However, because of the interrelation between the processing
IV-17
-------
CO
From Gtess Smd and Abrariws dwrt-pg. 184
TheNttkxulAttnofTbeUSA
USGS-1970
FIGURE IV-2 INDUSTRIAL SAND DEPOSITS
-------
Table IV-6 SUMMARY - INDUSTRIAL SAND SEGMENTS, 1972
r I an iS ni*»^j..***4 —..»
Process
Dry
Wet
Flotation
(Acid/Alkali)
Flotation 1 0.6
(Hydrofluoric
Acid)
- -- - - • | | UUU^U IUII
Number % %
20
130
17
11.9
77.4
10.1
10
74
15
Industry Total 168 100.0 100
Source: Development Document; ADL estimates
IV-19
-------
j
Table IV-7 ESTIMATED OPERATING COST FOR INDUSTRIAL
SAND PROCESSING PLANTS
Annual Production: 180,000 Metric Tons
Variable Cost
Cost of Labor
Cost of Maintenance, Repair, etc.
Cost of Fuels and Supplies
Payroll Overhead
Fixed Cost
Depreciation
Taxes and Insurance
Plant Overhead
Annual Operating Cost
Manufacturing Cost ($/10 ton)
Annual Operating Cost
Dry
Process
Wet
Process
$ 84,000 $ 84,000
13,000 15,000
263,000 250,000
13,000 13.000
Flotation
Process
$207,000
31,000
325,000
32.000
$373,000 $362,000 $595,000
63,000 77,000
9,500 11,000
11.000 13.000
154,000
23,000
26.000
$ 83,500 $101,000 $203,000
$456,500 $463,000 $798,000
2.54
2.57
4.43
Source: ADL Estimates
IV-20
-------
techniques arid mining methods (dry pit, wet pit, and quarry), segmentation
of the industry based solely on processing method is not sufficient. There-
fore, an engineering cost estimate for each of the three mining methods has
also been made for the model size plant.
The estimated investment and operating cost associated with each
mining method is given in Table IV-8. The various process-mining options
are shown graphically in Figure IV-3. A summation of the operating costs
for the various mining-processing alternatives suggests a means of greatly
reducing the number of segments occurs, as all but one of the alternatives
fall into one of two operating cost levels. Table IV-2 showed that—al-
though there are at least ten identifiable market segments, all at different
prices, in the industrial sand industry—there were only two distinct price
levels or averages. Table IV-9 summarizes the combined data of Tables
IV-2, IV-7 and IV-8. Also included in Table IV-9 is an estimate of the
operating cost for a high-production (1 million metric tons per year)
facility that uses flotation. This size and type of plant has been in-
corporated in the table because, although the Development Document model
size of 180,000 metric tons per year is representative of the industrial
sand industry, it is not representative of glass sand producers. The
reason for this is that glass manufacturers require such large tonnages
that a facility having an output of 180,000 metric tons per year would be
unable to meet all of the demands of a glass manufacturer. At such a
high output level, facilities employing flotation processes are able to
sell sands into the high-volume, lower-price market.
In summary, the industrial sand industry has two segments: one
with an operating cost of nearly $4 per metric ton, that sells into a
market of slightly more than $5 per metric ton that comprises about 80%
of the industrial sand industry; and one with an operating cost of about
$5.50 per metric ton, that sells into a market of greater than $7 per
metric ton. The one mining-processing alternative at the model level--
quarry-flotation—was not included in the segmentation, because such an
IV-21
-------
Table IV-8 ESTIMATED INDUSTRIAL SAND MINING COSTS
Type of Mining Investment
Beach
Dredge
Quarry
$264,000
$280,000
$314,000
Manufacturing Cost
Fixed VariableTotal
$ 90,000
$0.50/Mton
76,000
0.42
150,000
0.83
$146,000
$0.81/Mton
106,000
0.59
365,000
2.03
$236,000
$1.31/Mton
182,000
1.01
515,000
2.86
Source: Arthur D. Little, Inc. estimates
IV-22
-------
$1.31
$2.64/Ton
Beach or Dun*
Sand
Mint
$1.01
Suction
Dredgt Mint
Hiul-1 Mile
190,000 DMT/Yr \ V
\ /
^
\ \
\\/
\ X
v / \
\ » \
v ' \
Pump - 54 Mile \ / \
190,000 DMT/Yr \ /\ /
\ I \ t
Dry Plant
Dryer +
Sizing
Product
180,000 MT/Yr
Waste
10,000 MT/Yr
$2.57/Ton
Wet Plant
Sizing +
Drying
Product
180.000 MT/Yr
\ 1 \ '
\ I \ / ««te
A.A
10,000 MT/Yr
$1.45 *2-<»6
Sandstone
Mirw
Quarry
Haul-1 Mile
190,000 DMT/Yr
$1.41 /Ton
Crushing
&
Grinding
1 ' \ \
/ \\
/
' NX
// ^\
If
$4.43/Ton
Flotation
Plant
Product
180,000 MT/Yr
Waste
10,000 MT/Yr
Alternate Routes
Source: Arthur D. Little, Inc.
FIGURE IV-3 INDUSTRIAL SAND MINING-PROCESSING ALTERNATIVES
IV-23
-------
Table IV-9 SUMMARY OF SEGMENTATION RATIONALE
ro
-P.
Segment
Designation Facility
Dry Pit -
I. Dry Pit -
Dredge -
Description
Dry Process
Wet Process
Wet Process
IR Mine - Flotation
Dry Pit -
Dredge -
1 1 Quarry -
Quarry -
Flotation
Flotation
Dry Process
Wet Process
Plant Size
(Mtons/Yr)
180,000
180,000
180,000
1,000,000
180,000
180,000
180,000
180,000
Investment
(5)
900,000
1,000,000
1,000,000
5,200,000
1,800,000
1,800,000
1,900,000
2,000,000
Operating
Cost
($/Mton)
3.85)
3.88>
3.58)
4.00
5.74)
5.441
5.40(
5.43J
Average
Oper. Cost Market Market
for Segment Segment Share
($/Mton) (Price (tons-$)
per ton)
3.77
4.00
5.50
$5.09
'
j
$7.40
J
78%-77%
> 222-23%
The operating costs include depreciation on a 10-year
basis for the plants and mining costs on an equipment
life of 5 years.
Mining costs include a royalty of 35
-------
operation is believed to exist only at the very high capacity outputs.
Therefore, because of economies of scale, its operating cost is low enough
to be competitive with the other alternatives.
L_
IV-25
-------
I'
w*
C. FINANCIAL PROFILE
Based on cost engineering estimates, annual reports, and current
understanding of other costs associated with the selling and marketing of
Industrial sands, three Income statements have been prepared to character-
ize the Industry. Table IV-10 represents those types of facilities design-
ated as segment IA; Table IV-11, segment IB; and Table IV-12, segment II.
An abbreviated annual cash flow, indicating the level of internal
funds available for other uses such as control equipment, is given in
Table IV-13 for each of the segments. The tabulation shows that the
funds available range from 2.4 to 4.2% of sales. A balance sheet of what
may be considered to be an average plant is included as Table IV-14.
IV-26
-------
Table IV-10 INCOME STATEMENT FOR SEGMENT I. FACILITIES, 1974
, rt
Annual Production: 180,000 Metric Tons Per Year
Net Sales (based on $5.09 selling price): $916,000
Less:
Cost of Labor $ 84,000
Cost of Materials, Fuels 256,000
Cost of Maintenance, Repair, etc. 14,000
Cost of Mining 218,000
Payroll Overhead 13,000
Gross Profit $331,000
Less:
Plant Overhead 12,000
Taxes and Insurance 11,000
Depreciation 72,000
Interest 17,000
Sales, Gen. & Admin. 138,000
Profit Before Taxes $ 81,000
Taxes 39,000
Profit After Taxes $ 42,000
Source: Arthur D. Little, Inc. estimates
IV-27
-------
Table IV-11 INCOME STATEMENT FOR SETMENT IB FACILITIES, 1974
B
i
Annual Production: 1,000,000 Metric Tons Per Year
Net Sales (based on $5.11 glass sand selling price) $5,110,000
Less:
Cost of Labor 595,000
Cost of Fuels 1,820,000
Cost of Maintenance, Repairs, 99,000
Etc.
Cost of Mining 740,000
Payroll Overhead 92,000
Gross Profit $1,764,000
Less:
Plant Overhead 85,000
Taxes and Insurance 75,000
Depreciation 500,000
Interest 100,000
Sales, Gen. & Admin. 500,000
Profit Before Taxes $ 504,000
Taxes 242,000
Profit After Taxes $ 262,000
Source: Arthur D. Little, Inc. estimates
IV-28
-------
Table IV-12 INCOME STATEMENT FOR SEGMENT II FACILITIES, 1974
Annual Production: 180,000 Metric Tons Per Year
Net Sales (based on $7.40 selling price:) $1,330,000
Less:
Cost of Labor $145,000
Cost of Materials, Fuel 290,000
Cost of Maintenance, Repairs, 22,000
Etc.
Cost of Mining 362,000
Payroll Overhead 23,000
Gross Profit $ 488,000
Less:
Plant Overhead 19,000
Taxes and Insurance 17,000
Depreciation 112,000
Interest 34,000
Sales, Gen. & Admin. 200,000
Profit Before Taxes $ 106,000
Taxes 51,000
Profit After Taxes
Source: Arthur D. Little, Inc. estimates
IV-29
-------
Table IV- 13 ANNUAL CASH FLOW FOR THE VARIOUS SEGMENTS, 1974
Segment Designation
'A 'B "
Source: Arthur D. Little, Inc. estimates
Pretax Profit 81,000 504,000 106,000
Plus Depreciation 72,000 500,000 112,000
Cash Flow Pretax 153,000 1,004,000 218,000
Income Tax 39,000 242,000 51,000
Cash Outlay for Capital Assets 92,000 511,000 133,000
Cash Available for Other Uses 22,000 251,000 34,000
(as % of Sales) (2.4%) (4.2%) (2.6%)
IV-30
-------
Table IV-14 BALANCE SHEET FOR TYPICAL PLANT
PRODUCING INDUSTRIAL SAND
Annual Production: 180,000 Metric Tons
Net Sales: $1,000,000
Assets:
Current Assets $ 400,000
Fixed Assets 700,000
Less: Depreciation 20,000 700,000
Other Assets 200.000
Total Assets $1,300,000
Liabilities and Net Worth:
Current Liabilities 400,000
Long Term Debt 400,000
Stockholders' Equity 200,000
Retained Earnings 300,000
Total Liabilities $1,300,000
Source: Arthur D. Little, Inc. estimates
IV-31
-------
D. PRICING
Prior to 1972, the price per ton of Industrial sands Increased at a
very low rate, and even declined 1n one year, as shown 1n Table IV-3.
Then 1n 1972, at a time when labor and energy costs were Increasing, a price
freeze was Invoked. Since the freeze was lifted, the price of Industrial
sand has Increased 26%. This large increase, although it reflects an
Inflated price, tends to indicate that the Industry as a whole 1s able to
pass on Increases.
Economies of scale would normally dictate a lower operating cost for
larger facilities, thereby reducing profit levels for smaller operations.
This condition tends not to occur in this industry, because the small
Industrial sand operations sell to a very localized market, usually within
a 100-mile radius. Because of this they enjoy a price advantage, due to
lower unit transporation costs, compared with larger distant competition.
In some specific instances, profit levels for some of these small operations
are considerably higher than the 9-12% range.
$
IV-32 **
-------
E. POLLUTION CONTROL REQUIREMENTS AND COSTS
1. Effluent Control Levels
The pollution specie present in any water effluent discharged from
either a dry or wet process industrial sand operation is small-diameter
solid particulate material, consisting primarily of silica and clay
particles. The concentration of the fine particulates in effluent water
is the key characterizing parameter for such facilities. In flotation
processes, an additional pollutant (the acid or alkali specie) is also
present and must be neutralized.
Settling ponds are quite effective in reducing the concentration of
total suspended solids in processing water discharged from wet processing
and flotation processing operations. Given sufficient residence time, the
suspended solids settle and consolidate in layers at the bottom of the
pond, from which they are periodically removed to maintain sufficient pond
depth for proper settling.
Table IV-15 presents the guidelines for point-source discharge of
water effluents from the industrial sand industry. These guidelines
require no discharge for BPT, BAT, and NSPS for dry, wet and acid/alkali
flotation processing facilities. However, the hydrofluoric and flotation
category is allowed a specific discharge for BPT. Mine dewatering is
to be limited to a maximum total suspended solids (TSS) o* 30 mg/1 for
any one day.
2. Current Levels of Control
The industrial sand industry in the United States can be divided
along process technological lines into three subcategories:
IV-33
-------
Table IV-15 RECOMMENDED LIMITS AND STANDARDS FOR THE INDUSTRIAL SAND INDUSTRY
Type of Process
Process Waste
Water
Flotation
Dry Wet Acid/Alkali HF_
BPT No No No *
discharge discharge discharge
No No No No
BAT, NSPS discharge discharge discharge discharge
co
-p.
Mine Dewatering (TSS)
30mg/l 30mg/l
30mg/l
30mg/l
Effluent
Characteristics
TSS
Fluoride
Effluent Limitation
kg/kkg of Product
Monthly Average
0.023
0.003
Daily Maximum
0.046
0.006
Source: Development Document
-------
• Dry Process,
• Wet Process, and
• Flotation Process.
Figure IV-4 shows the distribution of the 168 industrial sand facilities
and the degree of effluent control in the industry.
Dry processing plants account for about 10% of the industrial sand
plants. The Development Document indicates that of these 20 plants, about
60% use no process water at all, and 40% use water in their scrubbers for
dust control. Of the 40%, half are on total recycle of scrubber water,
leaving about 4 plants that discharge scrubber water.
The 130 wet processing plants comprise nearly 75% of the industry.
Tne Development Document indicates that apparently 98 of the plants are on
total recycle, while about 32 plants discharge after settling.
For the purposes of this analysis, it was assumed that the plants had
normal wet pits, like the ones discussed in the Development Document. It
is recognized that some pits have water entering from springs. It is
expected that such situations will be handled individually when a permit is
written. Therefore, they have not been included in this analysis.
Flotation plants account for about 15% of the industry's output. The
Development Document indicates that of the 18 plants in this category,
about 13 have no discharge, hence no associated control cost. Of the
remaining 5 plants, the 4 acid/alkali plants are currently at Level A
(neutralize, settle, and discharge). The remaining facility, with HF
flocation, is at a level in which 90% of the wastewater is removed in
thickeners and recycled to process water. Underflow from the thickener
is fed to sett!ing-pond areas for removal of tailings and pH adjustment
prior to discharge.
IV-35
-------
<
1
ON
"Number of Facilities.
Source: Development Document, and Arthur D. Little, Inc., Estimates.
FIGURE IV-4 DISTRIBUTION OF INDUSTRIAL SAND FACILITIES BY PROCESSING
AND CURRENT CONTROL LEVEL CATEGORIES, 1972
L-.
m**n> *-
-------
3. Effluent Control Costs
The effluent control costs for process water from industrial sand
facilities are associated with the treatment and storage of suspended
solids for the affected dry and wet processing facilities. Facilities
employing flotation techniques have an additional control cost necessitated
by the neutralization of the process water. The recommended level of con-
trol is no discharge, which typically requires the use of settling ponds
and the total recycle of clarified process water. The ancillary equipment
required consists primarily of a water-handling system (e.g., pumps,
piping, etc.).
The Development Document presents the fixed capital and operating
costs for the different compliance levels for the three types of processes
at mode" plant size. Mid-1972 was the base year for the dollar value used
to develop the compliance cost table. A GNP inflator of 16.5% was used to
update control consts to mid-1974. Mine dewatering costs are either
negligible, or are included in the costs presented in the Development
r-'ocument.
Control costs were developed for two additional plant sizes--20,000
and 1,000,000 metric tons per year—to determine the sensitivity of
control cost to plant size. The costs were calculated using the appropriate
ratio (i.e., 0.9 or 0.7 power factor) as indicated in the Development
Document for capital-associated costs, while operating costs were varied
as a direct function of plant size. These control costs are presented in
Tables IV-16 through IV-25 for each of the three processes and plant
sizes. A comparison of the cost per metric ton for compliance at any
level among the three different plant sizes shows that control cost is
only slightly sensitive to plant size.
IV-37
-------
Source: Development Document and Arthur D. Little, Inc. estimates,
j
J
Table IV-16 COST OF COMPLIANCE FOR MODEL DRY PROCESSING PLANT I
^
Plant Size: 20,000 Metric Tons Per Year of Product i
*
Plant Location: Near Population Center
J
Level *
A B l
WF7 J
Invested Capital Costs:
Total 0 $2,400 «*
Annual Capital Recovery 0 400
Operating and Maintenance Costs: **
Annual O&M (excluding
power and energy) 0 200 >
Annual Energy and Power 0 20
Total Annual Costs 0 620 j
Cost/Metric Ton of Product 0 $0.03
Waste Load Parameters Raw
(kg/metric ton of Waste
product) Load
Suspended Solids 135 0.044 0
Fluoride 0.45 0.005 0
Level Description;
A - Settle, discharge
B - Settle, recycle
IV-38
-------
Table IV-17 COST OF COMPLIANCE FOR MODEL DRY PROCESSING PLANT
Plant Size: 1,000,000 Metric Tons Per Year of Product
Plant Location: Near Population Center
Level
A B
Invested Capital Costs:
Total 0 $80,000
Annual Capital Recovery 0 13,200
Operating and Maintenance Costs:
Annual O&M (excluding
power and energy) 0 9,000
Annual Energy and Power 0 1,100
Total Annual Costs 0 23,300
Cost/Metric Ton of Product 0 $0.02
Waste Load Parameters Raw
(kg/metric ton of Waste
product) Load
Suspended Solids 135 0.044 0
Fluoride 0.45 0.0005 0
Level Description:
A - Settle, discharge
B - Settle, recycle
Source: Development Document and Arthur D. Little, Inc. estimates.
IV-39
-------
Table IV-18 COST OF COMPLIANCE FOR MODEL DRY PROCESSING PLANT
Plant Size: 180,000 Metric Tons Per Year of Product
Plant Location: Near Population Center
Level
A B
Invested Capital Costs:
Total 0 $17,000
Annual Capital Recovery 0 2,800
Operating arid Maintenance Costs:
Annual O&M (excluding
power and energy 0 1 ,600
Annual Energy and Power 0 200
Total Annual Costs 0 4,600
Cost/Metric Ton Product 0 $0.03
Source: Development Document and Arthur D. Little, Inc. estimates
J
Waste Load Parameters Raw i
(kg/metric ton of Waste "*
product) Load
Suspended Solids 135 0 0 J
Fluoride 0.45 0 0
,j
Level Description:
A - Settle, discharge
B - Settle, recycle i
IV-40
j
-------
Table IV-19 COST OF COMPLIANCE FOR MODEL WET PROCESSING PLANT
Plant Size: 20,000 Metric Tons Per Year of Product
Plant Age: 10 Years Plant Location: Near Population Center
Base Year: Mid-1974
Invested Capital Costs:
Level
A
(MiTT
Total $11,000 $13,000
Annual Capital Recovery 1,300 1,750
Operating and Maintenance Costs:
Annual O&M (excluding
power and energy) 400 400
Annual Energy and Power 150 250
Total Annual Costs 1,850 2,400
Cost/Metric Ton Product $0.09 $0.12
Waste Load Parameters Raw
(kg/metric ton of Waste
product) Load
Suspended Solids 35 0.7
Level Description:
A - Settle, discharge
B - Settle, recycle
Source: Development Document and Arthur D. Little, Inc. estimates.
IV-41
-------
Table IV-20 COST OF COMPLIANCE FOR MODEL WET PROCESSING PLANT
Plant Size: 180,000 Metric Tons Per Year of Product
Plant Age: 10 Years Plant Location: Near Population Center
Base Year: Mid-1974
Invested Capital Costs:
Total
Annual Capital Recovery
Operating and Maintenance Costs:
Annual O&M (excluding
power and energy)
Annual Power and Energy
Total Annual Costs
Cost/Metric Ton of Product
(M1n)
$80,400
9,300
Level
B
$92,600
12,500
$180,600
29,400
3,300
1,200
13,800
$0.08
3,700
2,300
18,500
$0.10
25,500
2,300
57,200
$0.32
Waste Load Parameters Raw
(kg/metric ton of Waste
product) Load
Suspended Solids 35
0.7
0
Level Description:
A - Settle, discharge
B - Settle, recycle
C - Mechanical thickener with coagulant, overflow is recycled to
process. Underflow 1s passed through a settling basin. Effluent
from the settling basin is also recycled to process.
Source: Development Document and Arthur D. Little, Inc. estimates,
IV-42
-------
Table IV-21 COST OF COMPLIANCE FOR MODEL WET PROCESSING PLANT
Plant Size: 1,000,000 Metric Tons Per Year of Product
Plant Age: 10 Years Plant Location: Near Population Center
Base Year: Mid-1974
Level
(Min)
Invested Capital Costs:
Total $376,000 $433,000
Annual Capital Recovery 43,500 58,500
Operating and Maintenance Costs:
Annual O&M (excluding
power and energy) 18,000 21,000
Annual Energy and Power 7,000 13,000
Total Annual Costs 68,500 92,500
Cost/Metric Ton Product $0.07 $0.09
Waste Load Parameters Raw
(kg/metric ton of Waste
product) Load
Suspended Solids 35 0.7
Level Description:
A - Settle, discharge
B - Settle, recycle
Source: Development Document and Arthur D. Little, Inc. estimates,
IV-43
-------
j
Table IV-22 COST OF COMPLIANCE FOR MODEL ACID
AND ALKALINE FLOTATION PLANT
Plant Size: 20,000 Metric Tons Per Year of Product
Plant Age: 30 Years Plant Location: Southeastern U.S.
Level
A B
(Min) ^
Invested Capital Costs: {
J
Total $29,000 $34,000 *
Annual Capital Recovery 4,700 5,500
J
Operating and Maintenance Costs:
Annual O&M (excluding J
power and energy) 2,500 2,800 «*
Annual Energy and Power 150 250 f
J
Total Annual Costs 7,350 8,550 -
Cost/Metric Ton of Product $0.37 $0.43 |
Waste Load Parameters Raw J
(kg/metric ton of Waste
product) Load
Suspended Solids 100 0.4 0 *
Level Description: |
lize, settle, discharge •*
A - Neutralize, settle, discharge
B - Neutralize, settle, recycle
J
Source: Development Document and Arthur D. Little, Inc. estimates. j
IV-44 j
-------
Table IV-23 COST OF COMPLIANCE FOR MODEL ACID
AND ALKALINE FLOTATION PLANT
Plant Size: 180,000 Metric Tons Pe*~ Year of Product
Plant Age: 30 Years Plant Location: Southeastern U.S,
Level
(MTn)
Invested Capital Costs-
Total $134,000 $157,000
Annual Capital Recovery 21,800 25,600
Operating and Maintenane Costs:
Annual O&M (excluding
power and energy) 22,100 24,700
Annual Energy and Power 1,200 2,300
Total Annual Costs 45,100 52,600
Cost/Metric Ton Product $0.25 $0.29
Waste Load Parameters Raw
(kg/metric ton of Waste
product) Load
Suspended Solids 100 0.4
Le v gj__ Description:
~A~ - Neutralize, settle, discharge
B - Neutralize, settle, recycle
Source: Development Document and Arthur D. Little, Inc. estimates,
IV-45
-------
Table IV-24 COST OF COMPLIANCE FOR MODEL ACID
AND ALKALINE FLOTATION PLANT
Plant Size: 1,000,000 Metric Tons Per Year of Product
Plant Age: 30 Years Plant Location: Southeastern U.S.
Level
A B
(Min)
Invested Capital Costs:
Total $445,000 $521,000
Annual Capital Recovery 72,400 86,000
Operating and Maintenance Costs:
Annual O&M (excluding
power and energy 123,000 137,000
Annual Energy and Power 6,700 13,000
Total Annual Costs 202,100 236,000
Cost/Metric Ton of Product $0.20 $0.24
Waste Load Parameters Raw
(kg/metric ton of Waste
product) Load
Suspended Solids 100 0.4
Level Description:
A - Neutralize, settle, discharge
B - Neutralize, settle, recycle
Source: Development Document and Arthur D. Little, Inc. estimates,
IV-46
-------
Toble !V-?5 COST OF COMPLIANCE FOR MODEL HYDROFLUORIC
ACID FLOTATION PLANT
Plant Size:
Plant Location;
-,:.' '1"sr of Product
Level
Invested Capital Cos;.,.,
Total
Annual Capita" A^e-v^r.
Operating and Mai Pierian • -- .''"::-^.H :
Annual 03^1 (exr-l^oi;!;;
power and aner^y
Annual Energy a,id Po.-.v: "
Total Annual Costs
Cost/Metric Ton Produc";
??3700
$233,000
37,900
2^,900
?,300
^19,900
:-.?:fc
24,900
2$300
65,100
$0.36
Waste Load Parameters 'Jsw
(kg/metric tor of '••;.?.;te
product^ ; rac
Suspended Sc'hds (T51-;; "!3c
Fluoride 0-45
Level Description:
30 day max.0.023
! day max.0.046
30 day max,0.003
1 dc,y max.0.006
A - 90% of wastewstar removed in thickener and recycled to process,
Underflow from thickener fed to settling pond for removal of
tailings and pH adjustment prior to discharge.
B - Segregate HF wa.s^ewater,, pond and evaporate; recycle other
water after ponding.
Source: Development Documenj: and Arthur D. Little, Inc. estimates.
IV-4?
-------
Control Level C was Included 1n the Development Document for three wet
processing facilities which have such limited land available that proper-
j
j
j
size settling ponds could not be Installed.
4. Total Control Cost
j
Table IV- 26 summarizes the total fixed capital, and the annual costs
associated with the additional required control for the three processes J
1n the Industrial sand Industry.
j
j
j
j
j
j
j
J
j
IV-48 j
j
-------
Table IV-26 INCREMENTAL CONTROL COSTS TO MEET EFFLUENT GUIDELINES
FOR INDUSTRIAL SAND FACILITIES
Treatment Process
none
partial
none
partial
none
< partial
10
partial
INDUSTRY
Dry
Dry
Wet
Wet
Flotation A/A
Flotation A/A
Flotation HF
TOTAL
Current
Current Effluent Control
Control Status Level*
100% recycle
settle & discharge
100% recycle
settle & discharge
100% recycle
neutralize, settle,
discharge
90% recycle,
neutralize
B
A
B
A
B
A
A
Future
Control
Level
B
B
B
B
B
B
B
Number
of
Plants
16
4
98
32
13
4
1
Production Additional Control
Thousand Costs Required
Metric Tons for Compliance
Capital
2,049 0
512 68,000
14,340 0
4,609 390,400
2,817 0
1,024 92,000
256 93,200
25,608
Operating
($/103 ton)
0.00
0.03
0.00
0.02
0.0
0.04
0.08
*Refer to Tables IV-16 through IV-25.
Source: Development Document; Arthur D. Little estimates.
-------
F. ANALYSIS OF ECONOMIC IMPACT
The primary economic effect of the Implementation of the effluent
guidelines on the Industrial sands Industry will be to Increase the cost
of operation. The Impact on the Industry and the general economy will
depend on the resulting changes 1n prices and production 1n the Industry,
and any secondary Impact the primary changes might generate. Table IV-27
shows the normal costs of operation for model Industry plants, and the
costs of required levels of discharge control for each of the described
industry segments. Compliance costs range from $0.02 to $0.08 per metric
ton, compared with baseline operating costs of $3.80 to $5.50 per metric
ton.
1. Price Effects
The nature of the uses of the various specific industrial sands means
that their demand 1s very price Inelastic. The cost of industrial sands
represents a very minor portion of total product cost for the end products
of which they are a part. A very large percentage Increase in the price
of Industrial sand would result in a negligible increase 1n total cost
for glass, foundry products, or products which use sands as either an
abrasive or filtration medium in their production process. Either the
cost of substitutes for sand is several times the costs of sands, or there
are no substitutes available at present or in the foreseeable future.
Thus, a significant general increase in industrial sand prices would
probably be passed on to consumers, and demand would not decline in the
face of higher prices. The costs of incremental control from Level A to
Level B for the flotation process would increase costs by $0.042 per
ton, which translates to an increase of only 0.8% of the price of low-cost
sands (Segment IA)*, and a smaller increase for higher-cost sands.
Sae Table IV-9 for type definition.
IV-50
-------
TABLE IV-27. COST COMPONENTS FOR INDUSTRIAL SAND INDUSTRY
Dry Process Plants
Wet Process Plants
Flotation Process Plants
(st)
(rat)
Plant Size
Annual Capacity
Price per
Revenues
Normal Operating Costs
Variable Costs
Labor
Materials
Repair & Maintenance
Mining
Fixed Costs
SG&A
Depreciation
Interest
State & Local Taxes &
Insurance
Net Revenues
Net Revenue per Metric Ton
Total Cost
Fixed Cost
Variable Cost
Cost Per Metric Ton
Capital Investment
Total Cost
Fixed Cost
Variable Cost
Cost Per Metric Ton
Capital Investment
Type IA
180,000
5.09
916,200 1
855,000 1
585.000
97,000
256,000
14,000
218,000
270,000
140,000
72,000
17.000
1 1 ,000
79^000
.439
ImlL
180,000
7.40
,330,000
,250,000
842 .000
168,000
290,000
22,000
362,000
408,000
219,000
112,000
34,000
17,000
106,000
.589
Type IA
180,000
5.09
916,200
355.000
585.000
97,000
256,000
14,000
218,000
270,000
140,000
72,000
17,000
11,000
19^000
.439
Type II
180,000
7.40
1,330,000
1,250,000
842.000
168,000
290,000
22,000
362,000
408,000
219,000
112,000
34,000
17,000
106.000
.589
COMPLIANCE COSTS BY LEVEL INCREMENTAL STEP FROM
(Partial Recycle to Complete Recycle)
4,600
2,800
1,800
0.030
170,000
4,600
2,800
1,800
0.030
170,000
INCREMENTAL
4.700
3,200
1,500
0.026
12,200
4,700
3,200
1,500
0.026
12,000
Type IB
1,000,000
5.11
5,110,000
4,708,000
3,346,000
687,000
1,820,000
99,000
740,000
1,362,000
585,000
500,000
100,000
75,000
5.040.000
.504
A-B
136,000
203,000
33,900
0.034
570,000
Type IA
180,000
5.09
916,200
355,000
585^000
97,000
256,000
14,000
218,000
270,000
140,000
72,000
17,000
1 1 ,000
790,000
.439
7,500
3,800
3,700
0.042
15,000
Type IJ
180,000
7.40
1,330,000
1,250,000
842,000
168,000
290,000
22,000
362,000
408,000
219,000
112,000
34,000
17,000
106,000
.589
7,500
3,800
3,700
0.042
15,000
STEP FROM A-C
43,400
20,100
23,300
.241
43,400
20,100
23,300
.241
100,600
100,600
Source: Arthur D. Little, Inc. estimates
IV-51
-------
J
About 25% of the nation's Industrial sand plants, representing about J
25% of annual production, have been Identified as requiring additional costs
to meet effluent guidelines. The Increased costs borne by such Incremental j
control plants are expected to be passed on.
j
However, some plants may have to make the more costly control procedure •
of shifting from Level A to Level C. The estimated per ton control cost
then 1s $0.241. There 1s no specific data available on the actual number J
of plants that would require this level of discharge control. However, it
1s believed that the bulk of plants which would require the use of thick- J
eners are already on full recycle. It is assumed that 10% of the plants
requiring Incremental control would have to move from Level A to Level C f
«
(four plants). An upper limit on the number of these plants 1s expected
to be 25% of the total number of plants requiring incremental control
(10 plants). (See Table IV-28.) These plants are not believed to be in «•
a market position that will allow them to pass on their much higher cost
I
to consumers. The consumers of sands from such plants would probably not J
accept a price Increase greater than the industry average, but would go
to other suppliers of industrial sands. It is anticipated that such j
plants would only be able to get the $0.04 per ton industry-wide increase.
Should any of the plants possess certain characteristics—such as dominance |
•
in a local, isolated market, a very-low-operating-cost site, or a very
special type of mineral deposit—then they could probably pass on their ;
cost Increases. ™
2. Financial Effects J
The rates of return and cash flow position for the bulk of impacted £
plants would be unaffected, because they would be able to pass on the
cost increase. The essentially zero price elasticity of demand would mean &
that such firms would not suffer a decline of sales in the face of a
small price increase. Net revenues would be maintained in the face of a &
J
cost increase. *™
IV-52 ™
j
-------
f r f ( r i r , r , ! r t \ r r
Table IV-28 SUMMARY OF EFFLUENT GUIDELINE IMPACT ON THE INDUSTRIAL SAND INDUSTRY
Impact Category
Effect
Unaffected
Unaffected
Affected
Unaffected
Affected
Characterization
Case I- Increased
Costs
Case I-Potential
Closure-lower
limit
Case II-Increased
Costs
Case II-Potential
# of
Plants
127
39
4
31
10
% Production
75.6 19,400
23.2 5,480
2.4 720
18.4 4,400
6.0 1,800
% Employment
75.8 3,335
21.4 942
2.8 123
17.2 756
7.0 309
%
75.8
21.4
2.8
17.2
7.0
Closure
TOTAL 168 100.0 25,600 100.0 4,400 100.0
Source: Arthur D. Little, Inc. estimates
-------
j
i
J
However, the small number of plants—requiring the significantly f
higher-cost compliance process—would face a substantial deterioration in "*
net revenues and cash flow position. Out of the total $0.241 per ton '
compliance cost, only $0.04 per ton could probably be passed on to con- "•
sumers. The net revenues estimated for the model plant 1n this segment
1s about $0.45 per ton. Thus, the absorption of a $0.24 per ton compliance J
cost (of which only $0.04 could be passed on by a price Increase) would
reduce the net revenue per ton by almost 50%. However, should any of J
these plants meet any of the special conditions listed above, their ability
to pass on costs would protect their financial position. I
Because additional Investment 1s required in the plants that must add *
effluent controls, not only must net revenues after increased control costs **
be sufficient, but capital must be made available to fund the required
investment. The capital requirements for the control change from Level A J
to Level B for the model firms appears relatively modest. One measure of
current capital employed in such plants is the normal depreciation charge. *J
The total required Investment for pollution control is 25% or less of
annual depredation. This relatively small addition to capital stock for «
the model plants should result in little funding difficulty. The required
Investment could be funded from retained earnings or as part of normal |
borrowings.
I
The plants requiring the more expensive control change from Level A m
to Level C require almost eight times the control Investment of the other
!
plants. This substantially larger capital requirement would be a signif- J|
leant financial barrier for such plants. They are not expected to be able
to raise the capital from internal funds, and borrowing is also unlikely \
am
because their net revenues, return on sales, and return on capital would
be much lower under effluent control.
\
J
IV- 54
j
-------
3. Production Effects
a. Potential Plant Closures
The plants which require the control change from Level A to Level C
will probably not continue to be viable economic units. It is estimated
that there are only 4 to 10 plants in the country that fall into this
category, and they are the only plants that are expected to close. For
this reason, the regulation specifies that the guidelines are solely based
on Level B technology. The regulations specify the manner in which plants
in extraordinary situations may seek relief. Therefore, no actual closures
are predicted.
The ability of other plants to pass on increased costs and raise the
necessary capital will leave their operations unimpaired. The virtually
zero price elasticity of demand for industrial sands means that production
levels will not be affected by any measurable change in demand because of
any small price increase.
b. Effects on Industry Growth
There is no anticipated impact on industry growth because of the
effluent guidelines. Total capital requirements are not significantly
altered for new or expanding operations in the industry, and anticipated
price increases are not expected to alter demand growth.
Control capital requirements are not expected to alter the ease of
entry to the industry or any patterns of competition.
4. Employment Effects
No jobs would be lost through plant closures.
IV-55
-------
5. Community Impacts
There would be no anticipated adverse Impact on any community.
6. Other Impacts
No other Impacts are expected to result from the Implementation of the
effluent control guidelines.
IV-56
-------
G. LIMITS OF THE ANALYSIS
The industrial sand industry raises some additional limitations for
the economic analysis, in addition to the general limits imposed by the
overall method used. The economic impact depends on the number of plants
falling into a specific industry segment: those plants required to imple-
ment control Level C. Yet there is no hard information on the actual
number of plants falling into this segment. The analysis also used a
narrow definition of economic viability. Individual operations may be
willing to accept lower rates of return because of property values of
the site, future potential land values, etc. The industrial sand plant
may be a means of just meeting the holding costs for an appreciating asset;
thus, as long as the operation can meet its costs of operation, it will be
kept going. This again leads to an overstatement of the economic impact
of the guidelines.
Special cases of economic hardship are expected to be dealt with on
an individual basis with specific plants that request variances.
While there are limits to the analysis, an attempt has been made to
make assumptions that would overstate the adverse economic impact. The
expected impact for industrial sand is of such magnitude that even if it
increased severalfold it would remain negligible. These plants are also
not expected to be a major employer in their community.
IV-57
-------
V. PHOSPHATE ROCK (SIC-1475)
A. PRODUCTS MARKETS AND SHIPMENTS
1. Product Definition
"Phosphate rock" is a commercial term for a rock that contains one
or more phosphate minerals—usually calcium phosphate—of sufficient grade
and suitable composition to permit its use, either directly or after con-
centration, in manufacturing commercial products. The term "phosphate rock"
includes phosphatized limestones, sandstones, shales, and igneous rocks.
Phosphate rock does not have a definite chemical composition. The
major phosphorus minerals of most phosphate rock are in the apatite group
and can be represented by the formula Ca5(PO.)3(F,CL,OH). The (F,C1,OH)
radical may be all fluorine, chlorine, or hydroxyl ions, or any combination
of them.
Marketable phosphate rock is graded according to its equivalent
content of tricalcium phosphate, Ca-JPO.K, also known as bone phosphate
of lime (BPL). The normal percentage ranges of BPL are: below 60%,
60-66%, 66-68%, 68-70%, 70-72%, 72-74%, 74-75%, and 76-77%.
Phosphate rock occurs as nodular phosphates, residual weathered
phosphatic limestones, vein phosphates, and consolidated and unconsolidated
phosphatic sediments. Major domestic production is by open pit mining of
the nodular phosphates found in Florida.
2. Shipments
a. Reserves
Deposits of phosphate rock are widespread throughout the world, but
those of the greatest economic importance are in the United States, North
V-l
-------
Africa, and the U.S.S.R. South America's most Important deposit 1s 1n
the Sechura Desert of Peru, and 1t 1s currently 1n the process of being
commercially developed. Large deposits have been discovered 1n Australia
and production 1n Queensland 1s expected to commence 1n late 1976. Little
Information 1s available to analyze the phosphorus potential of Asia, but
the only known workable deposit 1n Southeast Asia 1s located 1n North
Vietnam.
A recent U.S. Bureau of Mines estimate of world reserves, taking Into
account the effect of selling price on the volume of economically recover-
able reserves is presented in Table V-l. (U.S. reserves are about 34% of
the total.) Estimated world reserves at the $20 per ton level equal 384
times world consumption in 1974.
In the United States, phosphate deposits have been reported in 23
states, but Important reserves are known and are being exploited 1n only
a few. The estimated quantities of marketable product recoverable 1n
these states are shown in Table V-2. Because of the higher costs associated
with their exploitation, reserves in other states will not be tapped until
higher price levels are reached for phosphate rock.
The commercial deposits in Tennessee are expected to be depleted
within 10 to 20 years, depending on production expansion. However, low-
grade deposits not currently considered as a reserve are also available
in the area. To respond to increasing demand, production capacity in
Florida was greatly increased in 1971. This accelerated depletion of the
state's reserves will likely cause production of Florida phosphate rock to
peak in the late 1980's and then decline. This action may shift U.S.
production toward the remaining western reserves in the later 1980's and
1990's unless technology is developed for recovering the phosphate content
of slime tailings. The known reserves reported for the North Carolina
deposits are nearly as large as those in Florida, but are being exploited
at a much slower rate.
V-2
-------
Table V-l ESTIMATE OF WORLD MARKETABLE PHOSPHATE ROCK RESERVES
U.S. PRICE PER RECOVERABLE TON
(TO6 Short Tons)
Continent
N. America
S. America
Europe
Africa
Asia
Oceania
$8 Per
Short Ton
1,836
53
829
1,770
335
120
$12 Per
Short Ton
5,350
290
2,050
8,430
1,186
750
$20 Per
Short Ton
16,340
930
4,100
20,500
4,600
1,300
TOTAL
4,943
18,036
47,770
Source: U.S. Bureau of Mines—"Economic Significance of the
Florida Phosphate Industry," Information Circular
8653, 1974.
V-3
-------
Table V-2 U.S. KNOWN MARKETABLE PHOSPHATE ROCK RESERVES
AT TWO PRICE LEVELS
I
-p.
106 Short Tons
Marketable Phosphate P
State Rock Reserves content
(1973 Price Level)
Florida
North Carolina..
Idaho
Montana
Utah
Wyoming
Total
1,200
380
30
200
3
200
1
2,014
168
53
4
28
(1)
28
(1)
106 Metric Tons
Phosphate Rock
Resources (2.5
Times 1973 Level)
2,500
2,400
600
6,000
1,200
2,300
440
15,450
P
content
349
335
84
838
168
321
61
Source: U.S. Bureau of Mines--"Economic Significance of the Florida Phosphate
Industry," Information Circular 8653, 1974.
-------
Present western phosphate mining operations are open pit. However,
most of the western reserve is deep, requiring selective underground min-
ing, which will become economically viable only if future phosphate rock
prices are high.
The phosphatic slimes from the washing plants in the Florida land-
pebble and Tennessee brown-rock fields (containing 5.5 to 7.5 percent
phosphorous) are discharged into waste ponds. If an economic process
was to be developed to recover the P content., the phosphorus reserves in
Florida and Tennessee would be increased by up to 33%, depending on
recovery efficiency. Even without such technological advances, both
domestic and worldwide reserves will be adequate through 1990, although
production patterns will change.
b. Trends in Domestic Supply
Domestic phosphate rock production capacity has increased sharply in
recent years in response to a tight demand situation and rising prices in
both domestic and foreign markets. U.S. production capacity will continue
to grow in the near future as several projects, already undertaken to
increase productive mining capacity, are completed. This is shown in Table
V-3, where capacity increases represented by firm expansion projects have
been included. As indicated, total domestic capacity should rise from
48.6 million metric tons in 1974 to 74.8 million metric tons in 1980, an
average annual increase of about 7.5%.
As shown in Table V-4, the United States has historically been a net
exporter of phosphate rock. Only small quantities of rock are imported,
chiefly low-fluorine rock for animal feed supplement. In the future, the
average grade of rock produced domestically will decline as poorer grades
become economically recoverable and high grade reserves are depleted. This
trend in rock quality will tend to reduce rock exports and increase exports
of phosphorus in higher-valued form (i.e., as concentrated phosphatic
fertilizers).
V-5
-------
Table V-3 TOTAL U.S. PRODUCTION CAPACITY, 1974-1980
(103 of Metric Tons)
Area 1974 1975 1976 1977 1978 1979 1980
Florida 36,000 39,200 42,600 49,400 51,700 52,400 52,400
Tennessee 2,950 2,950 2,950 2,950 2,950 2,950 2,950
North Carolina 2,700 2,700 3,650 3,650 7,250 7,250 7,250
Western 6,950 6,950 6,950 10,800 12,200 12,200 12,200
TOTAL U.S. 48,600 51,800 56,150 66,800 74,100 74,800 74,800
Source: Tennessee Valley Authority
V-6
-------
Table V-4 PHOSPHATE ROCK EXPORT/IMPORT BALANCE
FOR THE UNITED STATES, 1968-1974
Marketable
Production
Year
1968
1969
1970
1971
1972
1973
1974
10^ Metric
Tons
37,422
34,244
35,143
35,277
37,041
38,226
41 ,446
Average
Value
$ 6.70
6.10
5.79
5.78
5.61
6.24
12.10
Imports for
Consumption
10-* Metric
Tons
105
127
123
76
50
59
165
Average
Value
$25.45
28.02
30.72
32.52
28.38
21.85
54.51
Exports
10-* Metric
Tons
10,976
10,284
10,649
11,419
12,950
12,587
12,607
Average
Value
$ 6.89
6.05
5.63
5.68
5.82
6.59
15.39
Source: Arthur D. Little, Inc.
-------
3. End Uses
The various end uses of phosphate rock are outlined in Figure V-l.
In 1974, about 79% of domestic consumption was ultimately used for production
of fertilizers, 7.5% was incorporated in detergents, 5.1% in animal feed
supplements, 4.2% in food products, and 4.2% in miscellaneous applications.
4. Possibilities of Substitution
Alternative sources of phosphorus are rather limited, consisting
primarily of basic slag from Bessemer or basic open-hearth steel manufac-
turing, from guano, and from bone meal. Nor is there a substitute for
phosphorus in the major end use of phosphate rock--fertilizers. However,
phosphorus compounds used in products other than fertilizers—such as
synthetic detergents, foods, and fire extinguisher compounds—can be
replaced by other materials at increased cost or with a sacrifice of
quality. For example, alums may be substituted for monocalctum phosphate
monohydrate as a leavening agent in baking powder. Similarly, soda ash,
borax, soaps, and other cleaning compounds can be used in place of synthetic
phosphate detergents.
5. Future Growth
Over the last few years, the rate of growth in worldwide consumption
of phosphate rock has been about 7.5% per year. This growth is shown in
Table V-5, along with worldwide production for recent years. The recent
record of domestic production and consumption 1s outlined in Table V-6.
In 1972-73, phosphate rock was in short supply on the world market, partly
because U.S. phosphoric acid production capacity had been rapidly increased,
creating additional demand for phosphate rock.
Following Moroccan price initiatives, the price of phosphate rock
rapidly escalated to such high levels that the quantity demanded was
V-8
-------
r f r r r
INDUSTRIAL
ROCK
(MINED, WASHED, GROUND)
AGRICULTURAL
SILICA, SAND, AND COKE
+HZSO,
PHOSPHORUS
CHLORIDE
PHOSPHORUS
SULFIDE
RED
PHOSPHORUS
MATCHES
LUBRICANTS
MATCHES
ORGANIC
SYNTHESIS
INSECTICIDES
PLASTICIZERS
PHOSPHORUS
OXIDE
DEHYDRATING
AGENTS
TRACER
BULLETS
MILITARY PHOSP
USES COPPER.
i
££« INC£N£
WEAK PHOSPHORIC
ACID (HjKty
NORMAL AND
ENRICHED
SUPERPHOSPHATE
1
EXPORTS
TKIPLE
SUPERPHOSPHATE
EXPORTS
CONCENTRATED
PHOSPHORIC ACID
+NH-,
AMMONIUM
PHOSPHATES
FIGURE IV-1 AGRICULTURAL AND INDUSTRIAL END-USERS OF PHOSPHATE-ROCK
-------
Table V-5 HISTORY OF WORLD PHOSPHATE ROCK
PRODUCTION AND CONSUMPTION
(TO6 Metric Tons)
Production Consumption
1969
1970
1971
1972
1973
77.1
81.1
83.9
89.0
97.7
73.7
77.9
85.2
91.6
100.5
1974 110.3 112.6
Sources: British Sulfur Corporation
ISMA
V-10
-------
Table V-6 HISTORY OF U.S. PHOSPHATE ROCK
PRODUCTION AND CONSUMPTION
Year
1968
1969
1970
1971
1972
1973
1974
(103
Production
33,855
33,321
35,167
36,551
39,694
40,862
43,939
Tons)
Consumption
22,984
23,164
24,642
25,209
26,794
28,334
31,497
Source: U.S. Bureau of Mines
"Production" here is phosphate rock sold or used
by producers.
"Consumption" is apparent consumption as calculated by
USBM for the U.S.
V-ll
-------
reduced, relieving the tight market situation. Although prices have
declined recently, 1t appears they will remain well above the levels that
prevailed until 1973; thus, worldwide consumption 1s expected to grow at
a considerably lower rate than 1n recent years, probably about 5% annual-
ly, but certainly no more than 7.5% per year.
V-12
-------
B. INDUSTRY STRUCTURE
1. Types of Firms
The Tennessee Valley Authority reports that phosphate rock was
produced at 26 locations in the United States in 1974. A list of the 20
firms active at that time is given in Table V-7, which also notes their
estimated production capacity, location, and forward integration into
fertilizer or other phosphorus products. The producing firms include
large diversified corporations; companies involved in many different in-
dustries (e.g., U.S. Steel, Borden Chemical); companies involved predomi-
nantly in agricultural phosphorus products (Beker Industries); multi- • .
mineral companies (International Minerals and Chemicals); small phosphate
rock producers (George Relyea); and a government agency (Tennessee Valley
Authority). Some 15 of the 20 firms produce some other phosphorus product.
All but two have phosphate rock operations in only one production area.
Production capacity for individual firms spans more than three orders of
magnitude, from 0.09 to 10.5 million metric tons per year.
Each firm seems unique and dissimilar from the others, an individuality
which makes impossible a single-model financial analysis at the corporate
level or other generalizations of corporate health, structure, or style.
2. Types of Plants
Phosphate ore is mined by open-pit methods in all four producing
areas: Florida, North Carolina, Tennessee, and the Western states. In
the Florida land-pebble deposits, the overburden is stripped and the ore
mined by large electric dragline excavators equipped with buckets, with
capacities up to 37.5 cubic meters. Ore is slurried and pumped to the
washing facility, in some instances several miles from the mine. In the
Tennessee field, and the open-pit mines in the western field, ore is
mined by smaller dragline excavators, scrapers, or shovels and trucked to
V-13
-------
Table V-7 U.S. PHOSPHATE ROCK INDUSTRY, 1974
Company
Agrico
Beker Industries
Borden Chemical Co.
Brewster Phosphates
Cominco-American
Gardinier
W.R. Grace
Hooker Chemical Co.
International Minerals
& Chemicals
Mobil Chemical Co.
Monsanto
Occidental Ag. Chem.
Presnell Phosphate
George Relyea
J.R. Simplot
Stauffer Chemical
Swift Chemical Co.
Tennessee Valley Authority
Texasgulf
USS Agrichemicals
TOTAL U.S.A.
Total Phosphate
Rock Capacity
(1Q3 Tons/Yr)
5,500
2,100
900
3,200
200
1,800
2,100
700
10,400
4,100
1
Location of Mines
1,
2,
500
700
600
100
1,800
2,600
2,700
200
2,700
2,500
48,600
Florida
X
X
X
X
X
X
X
X
X
NC Tenn.
X
X
X
X
X
West*
X
X
X
X
X
X
Production Integration
(also produces)
Phosphoric Phosphatic
Phosphorus Add Fertilizer
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
1
Source: Tennessee Valley Authority, 1975
'includes Idaho, Montana, Wyoming, and Utah
-------
^ facilities. In North Carolina, a 55-cub1c-meter dragline is used for
stripping, and the ore is then hydraulically transported to the washer.
\
All of the North Carolina (and nearly all Florida and Tennessee)
' phosphate ore must be treated before it can be used. Washing ts accom-
*"" plished by sizing screens, log washers, various types of classifiers, and
mills to disintegrate large clay balls. In the Florida land-pebble field,
^~ the plus-14-mesh material is dried and marketed as high-grade rock or
sometimes blended with the fine granular material (minus-14, plus-150 mesh)
^. - that has been treated in flotation cells, spirals, cones, or tables.
Losses of phosphate in washing and flotation operations (up to 40% in
some Tennessee areas), occur in the form of slimes containing 4 to 6%
solids. The slimes are discharged into holding ponds, where initial
• settling occurs, and substantial quantities of relatively clear water are
^" returned to the mining and washing operations.
*j
*- Some of the Western field phosphate rock production is of suitable
grade for furnace acid production as it comes from the mine. Siliceous
w phosphate ore and mixtures of phosphate rock and clay minerals are amenable
to beneficiation, and three companies in the Western field are beneficiat-
ing part of their production. Two flotation facilities and several wash-
taw
ing facilities are in operation.
Most of the producers of phosphate rock sell a beneficiated product
of varying grades for processing into elemental phosphorus, phosphoric acid,
*- phosphatic fertilizers, or animal feed. A few mines sell unbeneficiated
rock to other producers or processors. In addition, some ore is sold for
w direct application to the soil.
w 3. Distribution of Plants and Employees, by Size and Location
The latest statistics available from the U.S. Bureau of Mines indicate
the distribution of mine sizes shown in Figure V-2. A rough analysis
*- V-15
-------
26
20
10
Lew Than
1000 Tons Tons
Source: USBM, 1974.
Tons
106-106 10fl-107
Tons Tons
More Than
107 Tons
Mine Production Size (Crude Ore)
FIGURE V-2 DISTRIBUTION OF PHOSPHATE ROCK MINES
VERSUS MINE PRODUCTION SIZE, 1973
(Total of 42 Mines)
V-16
-------
of this data indicates that over 85% of domestic crude ore production is
accounted for by mines over one million tons per year in size; that is,
by the upper 50% of the U.S. phosphate rock mines.
On a slightly different basis, the TVA reported phosphate rock
production capacity in 1974 at 26 locations in the United States. Capacity
varied from 90,000 metric tons annually to more than 11 million metric
tons. The distribution of capacity is given in Table V-8 for the different
producing regions.
Non-administrative employment in the phosphate rock industry in 1974
was about 4,500 nationally, according to the Bureau of Mines. The U.S.
Census provides additional historical data on employment trends, as shown
in Figure V-3. If non-administrative employment is distributed among the
different regions on the basis of production, then about 3,690 are employed
in Florida and North Carolina, 585 in the West, and 225 in Tennessee.
4. Relationship to Total Industry
The quantities produced in the three production regions, from 1968 to
1974, are roughly indicated in Table V-9. Florida and North Carolina
dominate domestic production of phosphate rock, accounting for 82% of
the national total in 1974. Most of this production comes from the few
counties indicated in Figure V-4 as Florida land-pebble districts. (The
last Florida hard-rock phosphate mine was shut down in 1965.)* Polk
County accounts for 75% of the Florida phosphate industry activity.
*
U.S. Bureau of Mines--"Economic Significance of the Florida Phosphate
Industry," Information Circular 8653, 1974.
V-17
-------
Table V-8 DISTRIBUTION OF PRODUCTION CAPACITY
AT ONE LOCATION, BY REGION, 1974
Production
..Capacity
10J Metric Tons
Annually
<100
100-500
500-1,000
1,000-5,000
5,000-10,000
>10,000
Number of Production
Locations in Region
Florida and
North Carolina Western Tennessee
1
8
1
1
3 1
5 4
1 - -
Source: Tennessee Valley Authority
V-18
-------
L.
.2
a
at
4-
o
f
I A
3 4
o
All Employees
Production,
Development,
& Exploration
Workers
1954 1958 1963 1967 1972
Source: U.S. Bureau of the Census, 1972 Census of the Mineral Industries
FIGURE V-3 PHOSPHATE ROCK INDUSTRY EMPLOYMENT TRENDS
V-19
-------
Table V-9 MARKETABLE PRODUCTION OF PHOSPHATE ROCK
IN THE UNITED STATES, 1968-1974
Quantity Average Value
Year State (IP3 tons) ($/ton)
1968 Florida and North Carolina 29,966 6.45
Tennessee 2,857 8.27
Western States 4.599 7.34
U.S. Total 37,422 6.70
1969 Florida and North Carolina 27,152 5.92
Tennessee 2,970 6.36
Western States 4,101 7.08
U.S. Total 34,223 6.10
1970 Florida and North Carolina 28,375 5.60
Tennessee 2,869 5.39
Western States 3.898 7.39
U.S. Total 35,142 5.79
1971 Florida and North Carolina 29,167 5.75
Tennessee 2,332 5.21
Western States 3,778 6.34
U.S. Total 35,277 5.78
1972 Florida and North Carolina 30,954 5.62
Tennessee 1,954 5.49
Western States 4.132 5.63
U.S. Total 37,040 5.61
1973 Florida and North Carolina 31,232 6.14
Tennessee 2,282 5.62
Western States 4.716 7.25
U.S. Total 38,230 6.24
1974 Florida and North Carolina 33,548 12.19
Tennessee 2,187 8.44
Western States 5.711 12.95
U.S. Total 41,446 12.10
Source: U.S. Bureau of Mines, 1975
V-20
-------
W ^-*-^W
J
J
J
J
J
J
J
J
J
J
-------
5. Industry Segmentation
As indicated in the preceding sections, phosphate rock production in
the United States can be divided into two distinct geographic regions:
• A Western district, including the states of Idaho, Wyoming,
Montana, and Utah; and
• An Eastern district, including the major production area in
central Florida, and the less significant production areas
in North Carolina and Tennessee.
The Western region accounts for only 13% of domestic phosphate rock
production. The associated manpower is estimated to bear a similar relation-
ship to total domestic phosphate rock employment. Due to local mineral
characteristics and corresponding process practices, and because of the
favorable rainfall/evaporation balance existing for the Western facilities,
all six producers in this region will soon be operating with no discharge.
Therefore, they will experience no incremental costs upon implementation
of the proposed effluent guidelines.
Producers in the Eastern district must already comply with effluent
guidelines close to those proposed. As stated previously, only four
facilities are known to be exceeding the proposed limits, and all four are
in Central Florida. As far as is known, the facilities in North Carolina
and Tennessee (each state accounting for only about 5% of national
production) will not be affected.
There is little competition in phosphate rock between the Western
and Eastern districts, because of the large geographical separation, and
the large unit freight cost which would be added to a comparatively low
unit selling price.
V-22
-------
With this background, the U.S. phosphate Industry has been segmented
w-
into two classes for analysis of economic impact. The Western producers
form one segment—which need not be closely studied, because of the absence
^ of incremental control costs and the insignificance of market competition
between the Eastern and Western segments.
u.
The Eastern segment can be subdivided into those who will and those
L. who will not experience incremental control costs. The production costs
for each group are thought to be similar. Competition in this segment,
| and the financial and structural characteristics that affect it, will be
discussed.
V-23
-------
C. FINANCIAL PROFILES
1. Industry Performance
Because of the wide variation 1n the nature of phosphate rock mining
operations, 1t 1s quite difficult to generalize regarding production costs
for Individual producers. Such factors as depth of overburden, phosphate
rock matrix thickness and rock quality, age of processing facility, and
the location of the facility, can have a material impact on operating
costs and investment requirements. The operating costs shown in Table
V-10 probably are representative of Western operations and the Eastern
facilities in Florida and North Carolina.
The typical Western operation has been defined as producing 1.27
million metric tons per year of acid-grade rock. The typical Eastern
operation produces 2.38 million metric tons per year of dry beneficiated
phosphate rock, a plant size representative of operations in Florida and
North Carolina. For the purposes of cost estimation, each facility was
assumed to be producing at full capacity—a reasonable approximation of
the 1974 situation. The costs were developed initially on a mid-1975
basis, and have been appliced without modification -in this report because
the variability of costs between producers certainly exceeds the cost
changes for each one between mid-1974 and mid-1975. As will be seen, the
precise estimation of production costs is not a critical point in the
economic impact analysis for phosphate rock.
%The costs for Tennessee operations are in the range of $5.83-7.44 per
metric ton of dry product. This is very close to the estimated cost for a
typical Eastern operation, and thus, within the range of error required
for the analysis, production costs can be assumed homogeneous within the
Eastern segment.
V-24
-------
Table V-10 PRODUCTION COST FOR REPRESENTATIVE EASTERN
AND WESTERN PHOSPHATE ROCK FACILITIES
Eastern Western
Production Size (106 MT/yr) 2.38 1.27
Capital Investment ($106)
Mining (incl. royalty & transfer to plant) 10.09 9.02
Beneficiation 14.96 23.45
TOTAL 25.05 32.47
Annual Operating Costs ($10 /yr)
Mining (incl. transfer to plant) 4.43 10.70
Beneficiation 11.03 7.43
TOTAL 15.46 18.13
Operating Costs ($/Metric Ton of 6.50 14.28
Marketable Rock)
Source: Arthur D. Little, Inc. estimates
V-25
-------
2. Model Plants
Table V-ll outlines representative financial aspects of a typical
Florida phosphate rock mining and beneficiation operation in the Eastern
segment. This table has been prepared on the basis of the average domestic
1974 price of $12.10 per metric ton ($11 per short ton). The 1974 price
has been used as a long-term ceiling price which is comparable to the dis-
charge control costs generated from the Development Document.
Most phosphate rock and other mineral leases are written so that the
producer pays a royalty to the landowner, but retains the right to the
depletion allowance. Thus, although a royalty was included in the $6.49
production cost, the financial analysis indicates a depletion allowance of
14% of the sales value.
As stated previously, it is impossible to present "typical" financial
data for the corporate health of phosphate rock producers. They form too
diverse a group to be represented by one model. A detailed analysis of
such factors as ability to raise capital and expected life of the operation
must be done on a plant-by-plant basis.
V-26
-------
Table V-ll FINANCIAL PROFILE FOR MODEL FLORIDA PHOSPHATE
ROCK MINING AND BENEFICIATION OPERATION
(per metric ton)
Basis: 2,381,000 tons per year
Price $12.10
Cost
Mining 1,86
Beneficiation 4.63
Total 6.49
Gross Margin 5.61
GS&A 1.10
Income Before Taxes 4.51
Depletion Allowance @ 14% 1.69
Taxable Income 2.81
Taxes @ 48% 1.34
After-Tax Profit 1.47
Depreciation .62
After-Tax Cash Flow 2.09
Source: Arthur D. Little, Inc. estimates
V-27
-------
D. PRICES AND PRICE SETTING
1. Present
Until late 1973, the price of phosphate rock from U.S. producers, as
well as from such major overseas producers as Morocco, were relatively
stable. Sellers were generally not disposed to change prices, because
they perceived demand for their own product to be price-elastic in the
upward direction and price-inelastic downward.
However, in 1973, the Moroccans, emulating the oil producers, posted
a sharp increase in the price of the various grades of rock and followed
this with further increases in 1974. Because of the relatively tight
supply situation, U.S. producers were able to follow the Moroccans with
similar price increases. These are set forth, together with prices for
prior years, in Table V-12.
Similar price increases were also taking place during the same period
with other fertilizer materials, and the effect of this was to produce a
sharp drop in the quantity demanded in 1975. This, coupled with significant
expansions in productive capacity in phosphate rock, as well as other
fertilizer products, has led to significant overcapacity and continued lag
in demand. Hence, prices have dropped markedly from the peak experienced
in 1975, and further substantial declines are expected.
Phosphate rock exported from several U.S. producers is handled by
a single organization, PHOSROCK (Phosphate Rock Export Association), which
publishes a price list for rock exports. This organization has existed
since 1973, with exports in prior years having been made by individual
producers. Phosphate rock used to manufacture fertilizers in the United
States is generally processed by the same companies that produce the
rock. No realistic price is available for this material, which moves
V-28
-------
Table V-12 EXPORT PRICES OF MOROCCAN AND FLORIDA
PHOSPHATE ROCKS
1957
1962
1967
1972
1973
1974 (January)
1974 (July)
1975 (January)
1976 (January)
Morocco
74% BPL
($f.a.s./
Metric Tons)
14.00
11.25
11.75
11.75
14.17
42.00
63.00
68.00
50. OO1
Florida
74-75% BPL
Uf-o.b./
Metric Tons)
8.90
9.25
10.18
11.18
10.20
27.50
42.00
55.00
47.00
(U.S.)
72-70% BPL
($f.o.b./
Metric Tons)
7.85
8.20
9.40
10.02
11.50
24.00
36.00
48.00
41.00
1
Approximate
Source: Arthur D. Little, Inc.
V-29
-------
between the mine and the processing plant at an arbitrary Internal trans-
fer price. That portion of the rock which is sold to other U.S. producers
is covered by list prices issued by the various rock producers. For the
smaller purchaser, the list probably represents realistic prices paid.
However, a significant portion of rock sold to other companies—In partic-
ular the larger purchasers—is under individual negotiation contracts, often
on a long-term basis, and no price information is generally available. It
is known that at least certain of these contracts are written at levels
very much below list prices, having been written prior to the sharp in-
creases of 1973 and 1974, but containing excalation provisions governed
only by actual increases in mining and benefielating costs, including such
items as power, labor rates, and undoubtedly added costs due to environ-
mental considerations.
2. Projected
The recent shortage was alleviated principally by a drop in the
quantities of phosphate fertilizers demanded. The present overcapacity
is expected to increase dramatically, as several projects to increase
productive mining capacity are underway in various phosphate rock-producing
sections of the world. The discussion of domestic supply trends at the
beginning of this section predicted that total U.S. capacity would rise
from 48.6 million metric tons in 1974 to 74.8 million metric tons in 1980.
This represents an average annual increase in excess of 7.5%, which is
very much higher than the rate of increase in demand for phosphate ferti-
lizers that can be expected in the United States.
Similar increases in the productive capacity on a global basis are
expected, as shown in Table V-13. These figures represent a worldwide
rate of increase in rock mining capacity of approximately 9% per year;
again, substantially in excess of projected demand growth.
V-30
-------
Table V-13 WORLD SUPPLY-DEMAND BALANCE
WORLD DEMAND AT VARIOUS GROWTH RATES, 1974-1980
(Basis: 1974 Demand of 112.6 million metric tons)
1975 1976 1977 1978 1979 1980
Production Potential 123.9 142.7 155.6 176.0 181.5 191.7
5% Growth 118.1 124.0 130.2 136.7 143.6 150.8
Balance 5.8 18.7 25.4 39.3 37.9 40.9
7.5% Growth 120.9 130.0 139.7 150.2 161.5 173.6
Balance 3,0 12.7 15.9 25.8 20.0 18.1
Source: Arthur D. Little, Inc.
V-31
-------
In the same table is shown the demand through 1980 that would develop
at two different annual growth rates. It appears likely that the growth
will be 1n the neighborhood of 5% per year, and certainly no higher than
the 7.5% per year shown. On both of these bases, significant excess
capacity should continue through 1980.
As pointed out elsewhere in this report, the cost of mining phosphate
rock is generally well under $10 per ton, even taking into account such
increases in cost as have taken place in recent years. Therefore, under
the normal actions of competitive marketing, we would expect that the
substantial and growing overcapacity in rock that is developing will exert
strong downward pressures on prices. It is possible that the rock-producing
countries could act together in the manner of OPEC, in maintaining current
price levels, but the existence of such a large proportion of the export
capacity in the United States, where such collusive action is illegal,
suggests that competition will continue and prices will decline, although
probably not to levels existing prior to 1973.
V-32
-------
E. POLLUTION CONTROL REQUIREMENTS AND COSTS
1. Effluent Control Levels
i
Table V-14 presents the EPA regulations for point-source discharge of
_ water effluents from the phosphate rock industry. Similar guidelines
apply for BPT, BAT, and NSPS. These regulations require effluent dis-
j_ charge to have a total suspended solids (TSS) concentration not exceeding
30 mg/1 for a 30-day average, or 60 mg/1 maximum average for any one day.
2. Effluent Control Costs
""" The effluent control costs to process water from the phosphate indus-
try are associated totally with the treatment and storage of suspended
i- solids. There is no specific treatment applied for the removal of fluorides
or phosphates, although it is reported that the existing control procedures
L do affect a reduction in the level of these two pollutants.
! Table 18, page 220 of the EPA Development Document, presents the
fixed capital and operating costs for three different compliance levels
; for Eastern phosphate rock producers. The model plant size used to
'"" represent both segments of the Florida phosphate rock producers is 2.4
million metric tons per year, and the costs are based on mid-1974 values.
— These modified control costs are shown in Table V-15.
;_ The change in base year from mid-1972 to mid-1974 was made by using
a GNP inflator of 16.5%. The adjustment of fixed capital investment
and operating costs was accomplished by appropriately modifying the cost
bases for Table 18 of the Development Document. Specifically, the pond
area required for the larger model-plant size was assumed to be equal to
"" the original 1,000-acre pond, multiplied by the ratio of new to old plant
sizes. Pump and piping costs were adjusted by applying the Development
"- Document recommended exponential factor of 0.9 to the ratio of plant
V-33
-------
Table V-14 RECOMMENDED LIMITS AND STANDARDS FOR BPCTA, BATEA, AND
NSPS-PHOSPHATE ROCK MINING AND BENEFICIATION*
CONCENTRATION IN EFFLUENT
Parameters 30-Day Average 24-Hour Maximum
TSS 30 mg/liter 60 mg/liter
*
Flotation unit process and mine drainage other unit
processes will have no discharge.
Source: Development Document
V-34
-------
Table V-15 COST OF COMPLIANCE FOR MODEL EASTERN PHOSPHATE ROCK
MINING AND BENEFICIATING FACILITY
Plant Size: 2,400,000 Metric Tons Per Year of Product
Plant Age: 15 Years
Base Year: Mid-1974
Plant Location: Florida-North-Carolina-
Tennessee
Invested Capital Costs:
Total
Annual Capital Recovery
Operating and Maintenance
Costs:
Annual O&M (excluding
power and energy)
Annual Energy and Power
Total Annual Costs
Cost/Metric Ton Product
Waste Load Parameters
(mg/liter)
Suspended Solids
Dissolved Fluoride
Phosphorus (total)
Level A
(Min)
$11,180,000
1,410,000
503,000
Level B
$12,090,000
1,549,000
544,000
RAW
WASTE
LOAD
3-560
2*
4*
<30
2*
4*
Incremental Cost
Level B-A
$910,000
139,000
41,000
336,000 420,000
2,249,000 2,513,000
$ 0.94 $ 1.05
84,000
264,000
$ 0.11
Estimated average values
Level Description:
A - Pond treatment of slimes and sand tailings
B-A plus improved process water segregation
Source: Development Document and Arthur D. Little, Inc. estimates
V-35
-------
capacities. The annual capital recovery was developed by using an annual
Interest charge of 10%, plus straight-line depreciatlonof 20 years for
ponds, 10 years for process equipment, and 5 years for materials-handling
equipment.
3. Current Levels of Control
As previously stated, the U.S. phosphate Industry can be divided into
Western and Eastern segments. Figure V-5 shows the segmentation of this
industry as it applies to the following economic impact analysis.
Phosphate rock producers must already comply with limits of 30 mg/1
TSS (monthly average) and 60 mg/1 TSS (maximum one-day average). Accord-
ing to the Development Document, five out of the six Western producers are
already operating with no discharge. The other Western producer has
evidently agreed to a compliance deadline for achieving zero discharge.
Most facilities in the East (Florida, Tennessee, and North Carolina) are
reportedly already in compliance. The EPA knows of only four producers who
are not already complying with the new effluent levels recommended, and
all four are in Florida. No firms in Tennessee or North Carolina ar?e
known to be operating in excess of the proposed standard. Thus, the only
facilities which will be affected by the new effluent guidelines are
assumed to be in Florida, and it is on such facilities that this economic
impact study will focus.
It should be noted that the phosphate rock industry is facing a number
of other environmental challenges. A long-recognized problem has been the
proper treatment of the large volumes of slimes generated during phosphate
rock processing in Florida. These slurries of very fine clay and phosphate
minerals require years to dewater, and occupy a volume larger than that of
the original phosphate rock matrix. Therefore, the slimes are Impounded
in many large ponds, formed by erecting dikes around mined-out areas.
Maintenance of these ponds is a major concern, one closely regulated by
V-36
-------
I
Effluent
TSS < 30 mg/1
11*
Effluent
TSS>30rn§/1
4*
'Number of Facilities.
Source. Development Document.
FIGURE V-5 DISTRIBUTION OF PHOSPHATE ROCK FACILITIES BY GEOGRAPHIC AND
CURRENT CONTROL LEVEL CATEGORIES, 1974
-------
state agencies, because dike failures could have enormous environmental
impact. Because the Florida land-pebble district is located close to
developed and expanding urban areas, the large land areas which must be
dedicated for many years to slime-holding ponds pose a significant land-use
conflict. Progress is being made in the reclamation of ponds and other
m1ned-out areas for recreational, agricultural, and other uses.
4. Total Control Costs
Table V-16 presents the total fixed capital, and the annual costs
associated with the additional control required for the phosphate industry.
V-38
-------
r r r r
r ' r
r r
r. r
Table V-1S INCREMENTAL EFFLUENT CONTROL COSTS FCS ?O£L fhOSPHATE UOCK MIM&
BENEFICIAflNG FACILITY, AND THE TOTAL PHOSPHATE INDUSTRY
(BPCTCA, BATEA)
Category
Model Facility
Annual Production
Phosphate Rock
(1Q6 Metric Tons)
2.4
Total Costs
($103)
Investment Annual
910
264
$/Ton Phosphate Rock
Investment Annual
0.38
0.11
Affected Segment
9.6
3,640 1,056
0.38
0.11
CO
vo
TOTAL INDUSTRY
48.6
3,640 1,056
0.7
0.02
Source: Arthur D. Little, Inc. estimates
-------
F. ANALYSIS OF ECONOMIC IMPACT
The basic result on the phosphate rock industry of implementing the
effluent guidelines will be to increase the costs of operation. The impact
on the industry and the general economy will depend on the resulting changes
in prices and production in the industry and any secondary impact those
primary changes might generate. Table V-17 shows the normal operating costs
for the model industry plant and the costs of required level of discharge
control. (These costs have been developed in Sections C and E respective-
ly.)
1. Price Effects
The nature of the uses of phosphate rock means that their demand is
very price-inelastic. One of the principal uses of phosphate rock is as
fertilizer (79%). As an input for food products the price elasticity of
demand is very low. Food products themselves have low price elasticities,
so as a small proportion of the total cost of food products, demand for
phosphate rock is doubly insensitive to price changes. Phosphates are an
essential soil nutrient and there are no economic substitues for phos-
phate rock as a source of phosphorus. A significant general increase in
phosphate rock prices could be passed on to consumers and demand would not
decline substantially in the face of higher prices. Much of phosphate
rock is produced under long-term contracts which provide for increases in
price due to increased costs, so that even under long-term contracts the
cost increase due to guideline implementation could be passed on.
Four of the nation's 26 phosphate rock plants, representing about 20%
of annual prediction, have been identified as requiring additional costs
to meet the effluent guidelines. The increased costs borne by these
incremental control-cost plants is expected to be passed on. The added
cost of $0.11 per ton is only a 0.9% increase in the 1974 price.
V-40
-------
Table V-17 REVENUES, NORMAL COSTS, AND CONTROL COSTS
PHOSPHATE ROCK INDUSTRY
Production 2,400,000 tons
Price $ . 12.10
Revenues 29,040,000
Normal Operating
Costs 23,770,000
Mining 4,646,000
Beneficiation 11,112,000
GS&A 2,640,000
Depreciation 1,488,000
Depletion 4,066,000 -
Net Revenues (pre-tax) 5,270,000
Net Revenue (per ton) 2,196
Discharge Control Costs
Incremental Discharge
Control A to B 264.000
Fixed Costs 139,000
Variable Costs 125,000
Cost per Ton 0.11
Capital Requirement $ 910,000
Source: Arthur D. Little, Inc. estimates
V-41
-------
In the last two years, phosphate rock prices on the International
market have Increased about 100%. Demand has fallen, Indicating that
there 1s some price elasticity, but demand has fallen remarkably Uttle
1n face of the large price increases. The present (1976) situation in
phosphate production, capacity utilization, and prices would Indicate that
no cost Increase could be passed on. However, the analysis is based on
the 1974 price and present prices have already risen many times above the
price Increase which would have resulted from the passing on of discharge
control costs resulting from implementation of the guidelines.
2. Financial Effects
The rates of return and cash flow position for impacted plants would
be unaffected, because they could pass on the cost increase. The very
low price elasticity of demand would mean that such firms would not suffer
decline of sales in the face of the anticipated less-than-1% price in-
crease. Net revenues would be maintained in the face of the cost increase.
Because additional investment 1s required in the plants that must
add effluent controls, not only must net revenues after the Increased
controls be sufficient, but capital must be made available to fund the
required investment. The capital requirements for the required control
process for the model firms appears relatively modest. One measure of
current capital employed in these plants is the normal depreciation
charge. A $910,000 investment is required for the model plant in the
industry. This represents a small proportion of the estimate $25 million
original cost Investment in the plant. This relatively small addition to
capital stock for the model plants should result in little funding dif-
ficulty, because the plants are part of large corporations where required
Investment could be funded from retained earnings.
V-42 -i
-------
3. Production Effects
u.
No plant closures are anticipated because of implementation of the
^~" guidelines, so there would be no alteration of production.
— The required investment in discharge control will increase the capital
requirements for new or expanded operations. The relative amount of
u_ capital required for effluent control is a very small addition to total
capital required for the total operation. The effluent control guide-
lines are not expected to affect future expansion of production by the
industry.
*"" The additional capital requirement would also not affect the pattern
of competition in the industry. It is already an industry dominated by
*- a few producers and such factors as control of the natural resource are
the determining factors in entry to the industry.
v_
4. Employment Effects
Because no plant closures or reduction in production is expected to
result from implementation of the guidelines, no adverse impact is expected
*~" on employment.
— 5. Community Effects
L_ Community effects would not be adverse, because no plant closures or
employment loss is anticipated.
L_
6. Balance of Trade Effects
Phosphate is a significant material in international trade and the
United States is a net exporter. The additional cost due to effluent con-
trols is so slight that it should have no impact on U.S. export volumes.
V-43
-------
G. LIMITS OF THE ANALYSIS
In addition to the general limits imposed by the overall method used
for the economic analysis, the phosphate rock industry raises some addi-
tional limitations.
Recent developments in international markets for phosphates have shown
that prices are unstable. This analysis has not considered a dramatic
price drop on the international market. The likelihood of international
prices falling below 1974 levels is considered to be very remote. How-
ever, such a price break could change the economic impact. Domestic
producers would then have to absorb the cost increase due to effluent
controls. But that is such a small portion of total selling price even
at pre-1974 levels that any major impact on the industry because of inter-
national price fluctuations should not be ascribed to cost of discharge
control. The estimated control costs are so small that even large errors
in these estimates would not significantly affect the expected impact.
V-44
-------
APPENDIX
ANALYSIS OF SURVEY DATA FROM CRUSHED STONE AND
CONSTRUCTION SAND AND GRAVEL INDUSTRIES
A. SURVEY COVERAGE
Arthur D. Little (ADL) analyzed the results of an industry trade
association survey of 199 companies located throughout the United States.
The companies were either directly involved in the production of crushed
stone (SIC-1422, 1423 and 1429) or in the production of construction sand
and gravel (SIC-1442), and were not necessarily solely dependent on the
production of non-metallic minerals for their revenues. In fact, many
of the actual survey respondents were also in the business of producing
other manufactured products, which may or may not be derived from either
crushed stone or sand and gravel. Most companies surveyed were members
of at least one of the following associations: National Lime Association
(NLA), National Lime Institute (NLI), National Crushed Stone Association
(NCSA), Portland Cement Association (PCA), and the National Sand and
Gravel Association (NSGA).
Table A-l compares the actual number of companies contacted and
associated responses. The survey represents a cross section of companies
in the crushed stone industry and the construction and sand and gravel
industry for 1974.
The annual production of crushed stone covered by the NLA, NLI/NCSA
and PCA sample survey for 1974 was approximately 47.6 million short tons,
or about 4.6% of the crushed stone industry. Revenues derived from the
sale of this crushed stone also represented about 4.6% of the industry.
Tables A-2 and A-3 list the actual tally of information by association and
by process used to produce the crushed stone. Of the number of sample
respondents who provided information for both production and revenues, PCA
members represented almost 50% of the coverage for crushed stone. PCA
membership represents about 14 to 15% of the crushed stone industry's
A-l
-------
Table A-l SURVEY COVERAGE BY ASSOCIATION
NLA
NLI/NCSA
PCA
NSGA
TOTAL
Number of
Companies
Contacted
12
78
49
60
199
Number of
Company
Responses
3
17
28
II
60
Number of
Quarry or Pit
Sites Covered
10
31
122
20
183
A-2
-------
Table A-2 ANNUAL PRODUCTION AND SALES COVERED
BY SURVEY RESPONSES
of Sites Production Revenue Sales
i_
PCA
dry processing
wet processing
NLA
dry processing
NLI/NCSA
dry processing
wet processing
NSGA
wet processing
dredging on land
processing
23
4
22
6
6
8
(10J tons)
17,729.6
7,027.1
4,833.1
13,075.3
4,947.0
3,308.7
4,046.8
36,183.6
15,857.6
9,288.2
25,620.9
8,758.4
7,246.8
6,621.8
A-3
-------
Table A-3 SAMPLE SURVEY COVERAGE OF CRUSHED STONE INDUSTRY AND
SAND AND GRAVEL INDUSTRY, 1974
Crushed Stone
Total
Industry*
Production Sales
(TO6 tons)
1,041
Facilities in
Survey
Survey as
a % of
Industry
2,085
Production Sales Production Sales
4.6 4.6
tons)
47,612.1 95,708.8
Sand and Gravel
949.7 1,312.3 7,355.5 13,868.6
.08 1.1
Source: U.S. Department of Interior, Bureau of Mines; Minerals Yearbook, Volume I
-------
production. PCA companies generally engage 1n the business of crushed
limestone quarrying for the purposes of producing cement. As a result,
much of the crushed stone reported by PCA respondents Is produced for
internal transfer purposes to produce cement. This is unlike the NLA
and NLI/NCSA respondents, who sell much of what they produce to the out-
side world.
The sample coverage of PCA respondents represents about 66% of total
crushed stone production that is produced by cement plants. It also
turns out that roughly 66% of the quarries owned by cement plants are
covered by the survey. This obviously has a strong influence on the
sample results.
The sample coverage through the NSGA for the construction sand and
gravel industry accounts for about 0.08% of the industry's annual production
and 1.1% of the industry's sales. The actual sample coverage of annual
production and revenue sales information for construction sand and gravel
are presented in Tables A-2 and A-3. The sample only covers two process-
ing techniques for sand and gravel: dredg1ng/on-land processing and
wet processing. Responses for dry processing and dredging/fln-board
processing were insufficient to allow any valid analyses.
In 1974, the Bureau of Mines reported that the construction sand and
gravel industry produced 27.4% of its sand and gravel by wet processing
on land and approximately 10% by dredging. About 62% of production was
by dry processing.
A-5
-------
B. SURVEY TABULATIONS
1. Employment, Payroll Characteristics by Site
In tabulating survey site-specific information pertaining to payroll,
employment, and production per employee characteristics, Table A-4, PCA
responses far outweighed responsed from NLA and NLI/NCSA for the crushed
stone industry. There are too few site-specific responses from NSGA.
Employment coverage in Table A-4 includes both direct and supervisory
employment involved in crushed stone or sand and gravel extraction. The
corresponding payroll covers wages and salaries paid to direct and super-
visory extraction personnel including the payroll burden. Average wages
and tonnageproduction per employee are presented in Table A-4 by association
by process. In 1974, average wages for the crushed stone industry as
represented by the site-specific responses from PCA, NLA, and NLI/NCSA
were approximately $15,924 and for sand and gravel (NSGA) $12,189. The
1974 average production per employee, as represented by the responses,
was 32,831 short tons for crushed stone and 28,912 short tons for sand and
gravel. For both crushed stone and sand and gravel the survey figures on
productivity appear to be higher than the industry figures (estimated from
1972 Bureau of Mines data). Census reports show that 1972 employment in
sand and gravel wet processing was 24.2% of total employment and 2.2% of
dredging on land.
The Census reports show that in 1972 employment in the crushed stone
industry dry processing was 70% of total employment and 30% in wet process-
ing.
2. Cost Structure Characteristics by Site
In analyzing the crushed stone and sand and gravel company data, an
attempt was made to ascertain the cost structure of extraction sites by
size of operation as measured by production. Total costs of extraction
A-6
-------
r r
Table A-4 AVERAGE WAGES AND PRODUCTION PER EMPLOYEE BY ASSOCIATION
NLA
dry processing
Nil/NCSA
dry processing
wet processing
PCA
dry processing
wet processing
TOTAL (crushed stone)
NSGA
wet processing
dredging on-land
# of
Sites
6
26
9
90
5
7
9
Payroll
($103)
Total
3,071
6,933
4,545
33,165
3,051
50,765
1,318
2,380
Average
512
267
505
369
610
188
264
Employment
Average
Wages
Total Average
316
619
266
1,725
262
3,188
91.4
212
53
24
30
19
52
13.1
24
9,718
11,200
17,086
19,226
11,645
15,924
14,420
11,226
Production
(103 tons)
Total
4,969
18,976
7,658
64,699
8,362
104,664
2,601
6,171
Average
828
730
851
719
1,672
372
686
Tons per
Employee
15,725
30,656
28,789
37,507
31,916
32,831
28,457
29,108
processing
TOTAL (sand and
gravel)
3,698
303.4
12,189
8,722
28,912
-------
by site were subdivided Into fixed, semi-variable, and variable costs.
Energy costs, as a subcomponent of variable costs< were also discreetly
defined as a piece of extraction cost data. This cost Information was
attained by site for each company that responded. Extraction cost data
was defined as follows:
t Fixed Costs (FC) - For each site, the total annual costs
that do not change when extraction levels change. Examples
of fixed costs are: depreciation of capitalized items,
Interest on long-term loans that may have been taken out to
cover the equipment and installations, land rents, real estate
taxes, and insurance premiums on equipment and installations.
Include stone extracted for external sale.
0 Semi-Variable Costs (SVC) - For each site, the total annual
costs that do not change when extraction levels change, but
which can drastically be reduced or eliminated if operations
at the site cease. Examples of semi-variable costs are:
leases paid for equipment and installations, licenses paid, and
expensed exploration and development work. Include stone
extracted for external sale.
t Variable Costs (VC) - For each site, the total annual costs
that vary with the level of output. Examples of variable costs
are: the direct labor payroll; payroll for supervisors and
other indirect labor; payroll burden; consumption of fuels,
electricity, water, and other such utilities; operating
materials and supplies; charges made for the depletion of
reserves; net interest payments on loans to finance applicable
working capital; and payments of royalties and taxes that
vary with extraction levels. Include stone extracted for
external sale.
A-8
-------
• Total Costs (TC) - Summation of fixed, semi-variable, and variable
costs.
The cost information presented in Table A-5 applies to the portion of
a company that extracts minerals from a quarry or pit site and produces
either crushed stone or sand and gravel at the point of transfer. Point
of transfer is that point at which the resource qualifies for inclusion in
percentage depletion.
Table A-5 presents average production costs and employment by site
production size segments for each of the associations process used. For
example, all sites surveyed under each association which produce 400,000
short tons or less have an average employment and an average total cost,
variable cost and fixed cost as presented in Table A-5. Table A-6 presents
an average implied cost per ton of production based on the information
tabulated in Table A-5. Figures A-l through A-3 chart total, variable,
and fixed costs by production size for PCA, NLI/NCSA, and NSGA, respect-
ively. It must be noted here that in deriving Tables A-5, A-6 and Figures
A-l through A-3, disclosure problems were prevalent; therefore, only the
information derived from three or more responses are presented.
Energy costs by site as reported by the respondents reveal that
energy costs per ton of production of crushed stone averages around $0.14
per ton, and around $0.17 per ton for sand and gravel. Refer to Table A-7
for specific site responses on energy costs.
3. Pricing Characteristics by Site
Actual pricing information was difficult to ascertain. Very few
responses listed prices per ton. From these, Arthur D. Little was able to
attain an average FOB price per ton by site. However, this price does not
necessarily correspond to the actual price that a ton of either crushed
stone or sand and gravel was sold for in the marketplace. For companies
A-9
-------
Table A-5 AVERAGE PRODUCTION, COSTS, AND EMPLOYMENT WITHIN
PRODUCTION SEGMENTS BY ASSOCIATION
(short tons)
400,000 -
<400,000 1.0 million >1.0 million
PCA
# of respondents 14 56 12
dry
avg. production 216 671 1,458
avg. TC 556 1,186 2,432
avg. VC 422 930 1,753
avg. FC 134 256 679
avg. employees 9 19 2b
wet
# of respondents 3
avg. production 2,455
avg. TC 4,209
avg. VC 2,941
avg. FC 1,268
avg. employees 46
NLA
dry
# of respondents 3
avg. production 238
avg. TC 764
avg. VC 534
avg. FC 230
avg. employees 23
NLI/NCSA
dry
# of respondents 9 12 5
avg. production 226 655 1,928
avg. TC 451 1,046 2,805
avg. VC 351 819 2,287
avg. FC 100 227 518
avg. employees 9 26 51
wet
# of respondents 5 3
avg. production 554 1,434
avg. TC 767 2,166
avg. VC 630 1,817
avg. FC 138 349
avg. employees 17 51
A-10
-------
u.
Table A-5 (cont) AVERAGE PRODUCTION, COSTS, AND EMPLOYMENT WITHIN
PRODUCTION SEGMENTS BY ASSOCIATION*
Production (short tons)
<400.000 >400.000 <700)000
NSGA
dredging
# of respondents 4 4
avg. production 251 761
avg. TC 328 1,061
avg. VC 276 854
avg. FC 52 207
avg. employees 9.8 26.3
wet
# of respondents 5
avg. production 327
avg. TC 562
avg. VC 404
avg. FC 158
avg. employees 13
Semi-variable costs from the survey responses were allocated
to fixed costs and variable costs: 80% and 20% respectively.
A-ll
-------
Table A-6 AVERAGE COST PER TON BY SIZE OF PLANT
Size Plant
400,000 -
<400.000 1.0 million >1.0 million
Association
Nil/NCSA
dry processing 1.99 1.60 1.45
wet processing 1.37 1.51
PCA
dry processing 2.57 1.77 1.67
wet processing 1.71
Size of Plant
NSGA
wet processing
NSGA
dredging
on land
processing
iZOO
1.72
<400,000 >400,000
1.31 1.39
A-12
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3.0
2.8
2.6
2.4
2.2
2.0
I1"8
I
e
(3
1.6
1.2
1.0
0.8
0.6
0.4
0.2 L-
0
Dry Processing
Total Costs/Ton
Fixed Costs/Ton
J_
0.2
0.4 0.6 0.8 1.0
Level of Production (Min S.T.)
1.2
1.4
FIGURE A-1 CRUSHED STONE INTEGRATED WITH PORTLAND CEMENT MANUFACTURE
COSTS PER TON BY LEVEL OF PLANT PRODUCTION
A-13
-------
2.0
1.8
1.6
1.4
i 1.2
§
1.0
0.8
0.6
0.4
0.2
NLI/NCSA
Dry Proctssing
Wet Processing
Total Costs/Ton
Variable Costs/Ton
Fixed Costs/Ton
I I I 1 t I 1. I 111 I I I
0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.0
Level of Plant Production (mm S.T.)
2.2 2.4
FIGURE A-2 COMPARATIVE UNIT PRODUCTION COSTS FOR CRUSHED STONE,
BY LEVEL OF PLANT PRODUCTION
A-14
-------
L_
1.6
1.4
1.2
§ 1.0
w
o
0.8
0.6
0.4
0.2
Dredging
on Land
Processing
, Total Costs
Variable Costs
Fixed Costs
0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0
Level of Production (mm ST.)
FIGURE A-3 CONSTRUCTION SAND AND GRAVEL COSTS PER TON
BY LEVEL OF PLANT PRODUCTION
A-15
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Table A-7 ENERGY COSTS PER TON OF PRODUCTION
# of Sites Energy Cost
Associations Responses Production Energy Cost Per Ton
tons)
NLA
dry processing 6 4,969.3 1,172.7 .24
Nil/NCSA
dry processing
wet processing
PCA.
dry processing
wet processing
NSGA
wet processing
dredging on land
processing
29
9
87
4
4
8
20,521.3
7,778.9
59,886,5
8,262.6
2,392.7
3,046.8
2,460.6
1,019.0
9,197.0
717.2
380.3
529.3
.12
.13
.15
.U9
.16
.17
A-16
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that own quarries and transfer their product internally to other sections
of the company, it was necessary to be able to place a transfer price or
value of the crushed stone or sand and gravel which is being internally
transferred. Table A-8 shows average FOB price per ton and internal trans-
fer o^ica per ton. Responses were few and there was a considerable range
T- answers from individual sites.
The crushed stone industry in 1974 valued its crushed stone shipped
et approximately $2.00 per ton.* The sand and gravel industry in 1974
valued Hs sand and gravel shipped at approximately $1.38 per ton.* The
sampla appears to represent the crushed atone industry better than the
construct.!on sand and grave"! industry.
A< ^otrmtJal vs. Actual Operating Capacity by Site
By aggregating site responses on capacity/hour and annual hours
operated, it is possible to derive an implied potential operating capacity
given that tha sites do not increase or decrease numbers of hours operated
during the year. This is accomplished by multiplying the total capacity/
hour by the number of total hours operated per year. Comparing this
potential level of production with actual annual production, it is possible
to ascertain an actual operating capacity rate. Refer to Table A-9 for an
implied actual operating capacity rate for each of the associations. Of
course if the sites increased the number of hours operated during the year,
the actual operating capacity rate could be lower given the same level
of annual production. We estimate that the crushed stone industry operates
at about 75-80% edacity and the sand anu gravel Industry operates at
slightly less than 70-75%. This assumes that the number of annual
operation hours and production are not changed.
Source: Arthur D. Little, Inc. estimates derived from Bureau of Mines
information.
A-17
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Table A-8 AVERAGE FOB PRICE/TON AND INTERNAL
TRANSFER PRICE/TON BY ASSOCIATION
Associations
NLA
dry processing
NLI/NCSA
dry processing
wet processing
PCA
dry & wet process-
ing
NSGA
wet processing
dredging on-land
processing
# of
Sites
29
10
9
6
FOB
Price/Ton
$1.92
1.99
1.88
1.49
1.96
1.79
Internal
I of Transfer
Companies Price/Ton
12
$1.53
1.64
2.31
A-18
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r
r r
r
r
r" r
Table A-9 ACTUAL VS. POTENTIAL OPERATING CAPACITY BY ASSOCIATION
NLA
NLI/NCSA
PCA
NSGA
# of
Sites
8
40
99
15
Production
(103 tons)
7,934.4
29,380.2
73,758.0
7,197.7
Capaci ty/
Hour
2,860
16,410
49,978
5,984.3
Hours Operated
Per Year
21,363
90,129
218,565
26,143.5
Potential
Operating
Capacity
(103 tons)
9,136.2
32,768.0
114,227.8
7,632.7
Actual
Operating
Capaci ty
(I)
86.9
89.7
64.6
94.3
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5. Expected Life Cycles of Production by Site
Based on the responses from our survey, about 80% of the crushed stone
sites covered have an expected life of over 10 years, as shown 1n Table
A-10. Sand and gravel responses show that only 20% of the sites have an
expected Hfe of greater than 10 years. As can be seen from Table A-10,
the sand and gravel data contained too few responses for much confidence
to be associated with this site life-expectancy figure.
One would expect that the pit sites for construction sand and gravel
industry would probably not register an expected life cycle as long as
the crushed stone industry due possibly to the difference in the nature of
the capital equipment requirements and mineral extraction process.
6. Gross Capital Outlays
In comparing annual revenue sales of company respondents with their
annual gross capital outlays, it appears that the crushed stone respondents
(excluding the PCA respondents) provide approximately 10% of each dollar
worth of sales for capital outlays: PCA provides approximately 17%.
(See Table A-ll.) Based on the sand and gravel responses, it appears that
approximately 11% of each dollar's worth of sales goes toward capital out-
lays. This was based on company financial statements and not site-specific
financial statements. As a result, this is by no means a clean number to
be directly associated with either the crushed stone or sand and gravel
operations. However, it does give some indication of capital outlays
associated with companies who are in the business of producing crushed
stone and sand and gravel. The cleaner number of capital outlays per
dollar sales, of course, would be for crushed stone, excluding cement com-
panies and for sand and gravel. The Bureau of Mines reported that in 1972
the sand and gravel industry's capital outlays were 14% of their shipments.
A-20
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fill
I I
f !
! f
i r r r r" r - r - r
Table A-1Q ANNUAL PRODUCTION SEGMENTED INTO EXPECTED SITE LIFE BY ASSOCIATION
<5 Years
5-10 Years
>10 Years
NLA
Dry Processing
Dry Processing
Wet Processing
PCA
Dry Processing
Wet Processing
NSGA
# of # of
Sites Production Sites Production
0
4 1 ,441
3 3,449
4 3,256 12 6,033
0 - 0
# of
Sites
5
19
6
63
5
Production
4,525
14,953
4,210
42,444
89362
Dredging On-Land
Processing and
Wet Processing
819
3,971
2,344
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TABLE A-11. ANNUAL NET CASH FLOW PER CAPITAL OUTLAY DOLLAR AND CAPITAL OUTLAYS PER DOLLAR SALES
ro
ro
NLA
NLI/NSCA
PCA
NSGA
# of Company
Responses
19
26
6
Annual
Sales
($106
1143.
3396.
22.
)
6
9
1
Annual Gross
Capital Outlays
($106)
116.
586.
2.
5
2
5
Annual Before
Tax Profits
($io6)
97.9
273.4
1.7
Annual
Depreciation
60.8
129.7
2.8
Net Cash
Flow Per
$ Capital
Outlay*
.9426
.4773
1.5267
Capital Outlay
Per $ Sales
.1018
.1720
.1118
Net Cash Flow = (Before tax profits * tax rate) + depreciation: tax rate is assumed to be .50
t
-------
In comparing net cash flow per dollar of gross annual capital out-
lays, crushed stone (excluding PCA respondents) produce $0.94 of net
cash flow for every dollar spent on capital, and the sand and gravel in-
dustry produces $1.52 in net cash flow for every dollar spent on capital.
(S«a Table A-ll.) Net cash flow should include depletion allowances;
however, it was not possible to quantify this information, so net cash
flow is assumed to be equal to before tax profits multiplied by a tax
rate of 0.50 plus depreciation.
7. Company Financial Statements
Table A-12 presents a summation of 1974 company financial statements
by association grouping. Only the companies that responded to all the
balance sheet information presented in Table A-12 were included in this
summation. These financial statement profiles for each association are
composed of all business dealings that the respondent companies are en-
gaging. For example: a PCA company that receives sales revenues from
limestone quarrying and cement manufacturing will have reported revenues
?.s a sum of both business involvements. The same concept would apply to
the remaining financial statement entries tabulated and present in
Table A-12; however, respondents from NLA, NLI/NCSA, and NS6A appear to be
more in the business of crushed stone and sand and gravel.
Table A-13 attempts to gain some indication of how profits, assets,
liabilities, and net worth relate to revenue sales as they were reported
by the same companies presented in Table A-12. For instance, pre-tax
profits for companies grouped into NLA and NLI/NCSA, as represented by
the sample, are slightly less than 13% of revenues. If one assumes a tax
rate of 0.5, and applies this rate to before-tax profits, after-tax profits
for NLA, NLI/NCSA are approximately 6% of sales revenues. The crushed
stone industry profits average around 7% of sales. Repeating this analy-
sis with PCA and NSGA data groupings, PCA respondents show that after-tax
A-23
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TABLE A-12. AGGREGATE COMPANY FINANCIAL STATEMENTS BY ASSOCIATION
Association
NLA & NLI/NCSA PCA NSGA
# of Company responses 19 25 8
Revenues (millions $) 697.4 3308.3 26.1
Pre-tax Profits (millions $) 89.2 266.6 1.8
After tax Profits (millions $)* 44.3 133.3 .9
Current Assets (millions $) 474.7 1168.9 12.9
Fixed Assets (millions $) 370.0 2100.5 20.5
Current Liabilities (millions $) 92.0 508.2 6.5
Long Term Liabilities (millions $) 130.4 806.7 4.1
Net Worth (millions $) 1067.7 2142.0 19.8
Production (million tons) 103.1 82.9 5.7
*
Assumes tax rate of 0.5
A-24
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TABLE A-13. AGGREGATE COMPANY FINANCIAL STATEMENTS BY ASSOCIATION
(Revenues Index = 100)
Association
# of Companies
Revenues
Pre-Tax Profits
Current Assets
Fixed Assets
Current Liabilities
Long Term Liabilities
Net Worth
After Tax Profits*
NLA & NLI/NCSA PCA
19 25
100.0 100.0
12.9 8.0
68.1 35.3
53.1 63.4
13.2 15.3
18.7 24.3
153.1 67.7
6.4 4.0
NSGA
8
100.0
1.8
12.5
20.5
6.5
4.1
19.8
3.5
Assumes tax rate of 0.5
A-25
-------
profits are about 4% of sales and NSGA respondents are slightly lower at
3.5% of sales.
In comparing sand and gravel company responses (NSGA) to crushed
stone respondents (NLA, NLI/NCSA, PCA), the current value of fixed assets
relative to current revenues for sand and gravel is substantially lower
than for crushed stone. Given that most sand and gravel company respondents
deal mainly in the sand and gravel business, this suggests that the value
of equipment (i.e.., front-end loaders, etc.) for sand and gravel is much
less than for the equipment required in rock quarry pits to produce crushed
stone.
The crushed stone respondents (NLA, NLI/NCSA) show that the ratio of
total assets to sales is approximately 1.21. The crushed stone industry
shows that for a 200,000-ton plant this ratio is approximately 1.25.
Sand and gravel respondents (NSGA) show that the ratio of total
assets to sales is approximately 1.28. The sand and gravel industry
shows that for a small and medium size plant the ratio is approximately
1.3.
A-26
U.S. Environmental Protection Agency
Region V, Library ^^
230 South Dearborn Street ^
Chicago, Illinois 60604
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