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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I  '
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             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
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                  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:
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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.
                                    1-6

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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.

                                     1-10

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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.
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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%
                                    1-13

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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.
                                    1-14

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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.

                                    1-15

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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.
                                     1-16

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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

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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

-------
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

-------
(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.
                                    II-3

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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

-------
                                                          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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-------
                                            TABLE 11-3 (oont.)
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                                                       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

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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

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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

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     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

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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

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              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

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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

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       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

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      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

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      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

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               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

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     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

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_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

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                  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

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                   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

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     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

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                  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

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                                          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

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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

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                        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

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     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

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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

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     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

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     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

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     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

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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

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     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

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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

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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

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                    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

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 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

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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

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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

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             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

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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

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     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

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     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

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                     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

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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

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           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

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                                        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

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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

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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

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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

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$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

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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

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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

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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

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                      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

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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

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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

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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

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                       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

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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

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          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

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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

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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

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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

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              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

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                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

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                                                                                 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

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                                                                                    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

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                        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

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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

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                          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

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              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.

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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

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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

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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

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      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

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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

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        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

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                                     W       ^-*-^W
J
     J
          J
               J
                         J
                              J
                                   J
                                        J
                                                            J
                                                                           J

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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

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                   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


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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

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     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

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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

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 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

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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

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      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

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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

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                  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

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     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

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              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

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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

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        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


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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

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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

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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

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                                         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

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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

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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

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     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

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             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

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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

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                                  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

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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

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                             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

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            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

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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

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                                                                                           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

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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

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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

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      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

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    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

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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

-------
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

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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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