EPA-230/l-76-OE5c
APRIL 1976
This document has not been
submitted to NTIS, therefore it
should be retained.
ECONOMIC ANALYSIS OF
INTERIM FINAL EFFLUENT GUIDELINES
FOR THE
CARBON BLACK INDUSTRY - - GROUP II
QUANTITY
U.S. ENVIRONMENTAL PROTECTION AGENCY
Office of Water Planning and Standards
Washington, D.C. 20460
ul
CD
-------
This document is available in limited quantities through the
U. S. Environmental Protection Agency, Economic Analysis
Section (WH-553), 401 M Street, S.W., Washington, B.C. 20460.
This document will subsequently be available through the
National Technical Information Service, Springfield, VA 22151.
-------
EPA 230/1-76-065C
ECONOMIC ANALYSIS OF INTERIM FINAL EFFLUENT GUIDELINES
FOR THE CARBON BLACK INDUSTRY - GROUP II
Contract No. 68-01-1541
Task Order No. 39
OFFICE OF WATER PLANNING AND STANDARDS
ENVIRONMENTAL PROTECTION AGENCY
Washington, D.C. 20460
April 1976
n
Arthur D Little Inc.
-------
This report has been reviewed by the Office of Water
Planning and Standards, EPA, and approved for publica-
tion. Approval does not signify that the contents neces-
sarily reflect the views and policies of the Environmental
Protection Agency, nor does mention of trade names or
commercial products constitute endorsement or recom-
mendation for use.
Arthur D Little, Inc
-------
PREFACE
The attached document is a contractor's study prepared for the Office of Water
Planning and Standards of the Environmental Protection Agency (EPA). The purpose of the
study is to analyze the economic impact which could result from the application of
alternative effluent limitation guidelines and standards of performance to be established
under sections 304(b) and 306 of the Federal Water Pollution Control Act, as amended.
The study supplements the technical study (EPA Development Document) supporting
the issuance of proposed regulations under sections 304(b) and 306. The Development
Document surveys existing and potential waste treatment control methods and technology
within particular industrial source categories and supports proposal of certain effluent
limitation guidelines and standards of performance based upon an analysis of the feasibility
of these guidelines and standards in accordance with the requirements of sections 304(b)
and 306 of the Act. Presented in the Development Document are the investment and
operating costs associated with various alternative control and treatment technologies. The
attached document supplements this analysis by estimating the broader economic effects
which might result from the required application of various control methods and tech-
nologies. This study investigates the effect of alternative approaches in terms of product
price increases, effects upon employment and the continued viability of affected plants,
effects upon foreign trade and other competitive effects.
The study has been prepared with the supervision and review of the Office of Water
Planning and Standards of the EPA. This report was submitted in fulfillment of Contract
No. 68-01-1541, Task Order No. 39 by Arthur D. Little, Inc. Work was completed as of
April 1976.
This report is being released and circulated at approximately the same time as
publication in the Federal Register of a notice of interim final rulemaking under sec-
tions 304(b) and 306 of the Act for the subject point source category. The study is not an
official EPA publication. It will be considered along with the information contained in the
Development Document and any comments received by EPA on either document before or
during proposed rulemaking proceedings necessary to establish final regulations. Prior to
final promulgation of regulations, the accompanying study shall have standing in any EPA
proceeding or court proceeding only to the extent that it represents the views of the
contractor who studied the subject industry. It cannot be cited, referenced, or represented
in any respect in any such proceeding as a statement of EPA's views regarding the subject
industry.
Arthur D Little, Inc
-------
TABLE OF CONTENTS
Page
List of Tables and Figure vii
1.0 EXECUTIVE SUMMARY 1
1.1 INTRODUCTION 1
1.2 PURPOSE AND SCOPE 2
1.3 ECONOMIC ANALYSIS METHODOLOGY 2
1.4 CHARACTERIZATION OF THE U.S. CARBON BLACK INDUSTRY 4
1.5 TREATMENT TECHNOLOGY AND ASSOCIATED COSTS 5
1.6 ECONOMIC IMPACT ON THE U.S. CARBON BLACK INDUSTRY 6
2.0 INDUSTRY CHARACTERIZATION 9
2.1 THE PRODUCT AND ITS MANUFACTURING PROCESSES 9
2.2 MANUFACTURERS, PRODUCTION, AND MARKETS 10
3.0 WATER POLLUTION CONTROL PROBLEMS, TECHNOLOGY,
AND COSTS 15
4.0 ECONOMIC IMPACT ANALYSIS OF EFFLUENT GUIDELINES 21
4.1 PRESCREENING METHODOLOGY 21
4.2 RESULTS OF THE PRESCREEN ANALYSIS 22
4.3 ECONOMIC AND TECHNOLOGICAL FACTORS 23
5.0 ECONOMIC IMPACT ON THE U.S. CARBON BLACK INDUSTRY 25
Arthur D Little, Inc
-------
LIST OF TABLES AND FIGURE
Table No. Page
1.5A Wastewater Treatment Costs for Subcategories A and B 5
1.6A Cost of Wastewater Treatment for the Carbon Black Industry 8
2.2A Production Capacity of Carbon Black Manufacturers 11
2.2B Total Annual Production of Carbon Black 12
2.2C Average Yearly Prices of Carbon Black 12
3.0A Subcategory A — Furnace Black Manufacture Wastewater Treatment
Costs for BPCTCA, BADCT, and BATEA Effluent Limitations 16
3.0B Subcategory B — Thermal Black Manufacture Wastewater Treatment
Costs for BPCTCA, BADCT, And BATEA Effluent Limations 17
3.0C Cost of Wastewater Treatment for the Carbon Black Industry 18
4.3 Information Table — Carbon Black Industry 24
Figure No.
2.2 Comparison of Carbon Black and Synthetic Rubber Production 14
vn
Arthur D Little, Inc
-------
1.0 EXECUTIVE SUMMARY
1.1 INTRODUCTION
This report is one of a series of reports being prepared by Arthur D. Little, Inc.
(ADL) for the Environmental Protection Agency (EPA) under Contract No. 68-01-1541,
Task No. 39. The overall objective of this task is the determination of the economic impact
that EPA interim final effluent limitations will have on eight point-source categories. The
EPA plans to name the following industries as point-source categories:
• Pharmaceuticals (SIC 2831, 2833, and 2834);
• Gum and Wood Chemicals (SIC 2861);
• Pesticides and Agricultural Chemicals (SIC 2879 and those establishments
engaged in manufacturing agricultural pest-control chemicals covered under
SIC 281 and 286);
• Adhesives (SIC 2891);
• Explosives (SIC 2892);
• Carbon Black (SIC 2895);
• Photographic Processing (SIC 7221, 7333, 7395, 7819); and
• Hospitals (SIC 8062, 8063, and 8069).
This report on the carbon black industry is based upon the recommended wastewater
treatment technology and treatment cost estimates presented in the "Draft Development
Document for Interim Final Effluent Limitation Guidelines and Proposed New Source
Performance Standards for the Carbon Black Point Source Category," March 1976 (super-
seding the original February 1975 version).
For the purpose of analyzing the wastewater characteristics and necessary wastewater
treatment technology, and for developing cost estimates for the implementation of such
technology, the Development Document has divided the carbon black industry into four
separate subcategories, based on the type of manufacturing process employed. The subcate-
gories are as follows:
Subcategory A - Carbon Black Manufacture by the Furnace Process;
Subcategory B — Carbon Black Manufacture by the Thermal Process;
Subcategory C — Carbon Black Manufacture by the Channel Process; and
Subcategory D — Carbon Black Manufacture by the Lamp Black Process.
Arthur D Little, Inc.
-------
1.2 PURPOSE AND SCOPE
The purpose of this report is to assess the economic impact on the U.S. carbon black
industry (SIC 2895) from the cost of meeting interim final EPA effluent limitation
guidelines applicable to the direct discharge of wastewater effluents from point sources.
Compliance with the effluent limitation guidelines may require the carbon black
industry to install complete end-of-pipe wastewater treatment facilities, upgrade existing
facilities, and/or modify its manufacturing process operations. The proposed effluent
limitations guidelines are divided into three compliance levels:
• Level I — by 1977, for existing industry installations, the "Best Practicable
Control Technology Currently Available" (BPCTCA) as promulgated, is to
be applied;
• Level II - by 1983, for existing industry installations, the "Best Available
Technology Economically Achievable" (BATEA), as promulgated, is to be
applied; and
• Level III - for manufacturing installations constructed after the promulga-
tion of applicable guidelines, the "New Source Performance Standards"
(NSPS), are to be applied.
This report presents the results of the prescreening process and technical and economic
analyses applied to the carbon black industry to determine the economic impact of the
effluent limitations.
1.3 ECONOMIC ANALYSIS METHODOLOGY
1.3.1 Prescreening
A prescreening methodology was developed to aid in selecting those industry subcate-
gories that probably would not be significantly impacted by the interim final effluent
guidelines.
ADL initiated the project by studying the Development Document and compiling
industry information. To provide a preliminary assessment of the economic impact of water
pollution control on the industry (both in general and as defined by the interim final
effluent guidelines), we considered a number of technical and economic factors. We next
summarized these factors in short statements which we presented, in tabular form, to the
various members of the ADL team who were knowledgeable on the industry and its
pollution control problems. In considering the various factors and their effect on economic
impact, we used only information readily retrievable. We invoked this limitation to prevent
an excessive use of available resources in conducting the prescreen exercise. The completed
information tables and the accompanying ADL expert comments are contained in the body
of this report. 0
Arthur D Little Inc
-------
To determine which industry subcategories we would recommend for elimination from
further economic impact study, we finally evaluated the information of the ADL experts
against four criteria. If an industry subcategory met any one (or a combination) of these
criteria, we considered its elimination. The criteria were:
1. The industry subcategory was generating no wastewater;
2. The ratio of BPCTCA* plus BATEA** treatment cost to selling price was
less than 2% and/or the ratio of BPCTCA plus BATEA to profits was about
15% or less;
3. Practically all of the plants in the subcategory were currently discharging
into municipal sewage systems and would continue to do so with little or no
pretreatment costs incurred; and
4. The treatment facilities recommended in the Development Document had
already been installed in practically all of the plants of the subcategory.
1.3.2 Economic Analysis
In assessing the economic impact of the interim final effluent guidelines on the carbon
black industry, we considered the following economic and technical factors:
• The end-uses of carbon black and the nature of the relationship between the
suppliers and major users of carbon black;
• The degree to which carbon black is a non-substitutable ingredient in its
major end-product — rubber tires;
• The stability of the markets for carbon black and the sensitivity of end-
product (rubber tire) price to carbon black price;
• The growth in demand for carbon black as related to the demand for
automobile rubber tires;
• The reserve capacity of the carbon black industry;
• Trends in carbon black manufacturing technology; and
• Technological factors affecting the industry's ability to achieve zero dis-
charge.
*Best Practicable Control Technology Currently Available
'Best Available Technology Economically Achievable
Arthur D Little, Inc.
-------
1.4 CHARACTERIZATION OF THE U.S. CARBON BLACK INDUSTRY
The carbon black industry in the United States can be characterized by the following
statements:
• Carbon black is currently manufactured by eight U.S. firms in a reported
total of 36 active manufacturing facilities.
• Total carbon black production in 1973 was 1,587,600 metric tons, which
represents about 83% of an estimated annual production capacity of
1,892,000 metric tons. More than three-fourths of the carbon black pro-
duction capacity is located in Louisiana and Texas.
• The value of U.S. carbon black production in 1973 was approximately $284
million, representing an average 1973 price of $179/metric ton ($0.0812/lb).
Since the cost of raw materials, viz., petroleum and natural gas, represents a
very large component of the total manufacturing cost, recent increases in
both gas and oil prices have resulted in increased carbon black prices. Carbon
black prices in the fourth quarter of 1975 were characteristically $243/
metric ton ($0.11/lb), a 35% increase over the 1973 level.
• Typically, more than 93% of total carbon black consumption is in rubber
applications, and the rubber tire industry is by far the principal consumer.
(Upwards of 90% of all carbon black produced is destined for tire manufac-
turing.) Printing ink represents the second largest use of carbon black.
• The United States is an exporter of carbon black (typically 5% of total
production). Recently installed overseas production capacity has resulted in
a trend toward shrinking U.S. exports, however.
• More than 91% of all carbon black currently produced is manufactured by
the furnace process (Subcategory A). Most of the remainder are manufac-
tured by the thermal process (Subcategory B). The amount of carbon black
manufactured by the channel and lamp black processes (Subcategories C and
D) is essentially insignificant (less than 0.1% of total production).
• Manufacturing plants employing the furnace process (Subcategory A) do not
produce any inherent process wastewater streams, although about one-third
of the plants do discharge small wastewater streams consisting of plant
washdown water and stormwater runoff.
• The thermal process (Subcategory B) produces a small wastewater stream
consisting of recirculating cooling water purge that is carbon black-
contaminated.
Arthur D Little Ir
-------
• Plants employing the channel and lamp black processes do not discharge
process wastewater streams.
1.5 TREATMENT TECHNOLOGY AND ASSOCIATED COSTS
According to the Development Document, Subcategory C — carbon black manufacture
by the channel process — and Subcategory D — carbon black manufacture by the lamp black
process — do not discharge wastewater and therefore will not incur wastewater treatment
costs.
Subcategory A — carbon black manufacture by the furnace process — and Subcate-
gory B - carbon black manufacture by the thermal process - do include plants that
discharge wastewater. Therefore, these subcategories will incur wastewater treatment costs.
For achieving the BPCTCA, BATEA, and BADCT* effluent limitations, all of which stipulate
zero discharge of wastewater, the Development Document recommends sedimentation,
followed by filtration, prior to recycling the treated wastewater back into the process as
quench water.
The wastewater treatment costs presented in the Development Document were based
on a "model plant" approach, i.e., the wastewater treatment cost estimation was developed
for a representative plant in the industry. The treatment costs for the model plant are
presented in Table 1.5A.
TABLE 1.5A
WASTEWATER TREATMENT COSTS FOR SUBCATEGORIES A AND B
(EN R 1944 - 1974 Costs)
Subcategory A — Subcategory B —
Furnace Process Thermal Process
Model Plant Production Rate 214 metric ton/day 68 metric ton/day
Model Plant Wastewater Flow Rate 28,800 gpd 13,000 gpd
Capital Investment for
Wastewater Treatment Facility $279,900 $181,800
Total Annual Cost $56,700/yr $40,900/yr
Unit Treatment Cost $0.75/metric ton $1.71/metric ton
*Best Available Demonstrated Control Technology.
Arthur D Little, Inc.
-------
The methodology of the cost estimates presented in the Development Document
appears reasonable; however, we believe that there are a number of strictly technical areas
which make the model plant upon which the Development Document cost estimates were
based unrepresentative of some plants within the carbon black industry. Some of the areas
of major differences between the model and actual plants, as found in the carbon black
industry survey, are:
• Net rainfall/evaporation balances;
• Ability to implement storm water segregation;
• Ground water infiltration;
• Present use of wet scrubbers at some plants;
• Effect of water quality on the product; and
• Plant wash practices.
We concluded that the differences between the model and actual plants in these
technical areas probably would not preclude most of the plants in the carbon black industry
from achieving zero discharge, although it is quite possible that certain plants in certain
situations might find such a practice technically and economically unfeasible. In such
specific cases, particularly where extensive in-plant equipment and piping modifications will
be required, the costs presented in the Development Document might be far exceeded.
1.6 ECONOMIC IMPACT ON THE U.S. CARBON BLACK INDUSTRY
Based on our prescreen analysis, we concluded that if the wastewater treatment cost
estimates presented in the Development Document are incurred by the carbon black
industry as a direct result of implementation of the interim final effluent guidelines, there
would be no significant economic impact on the carbon black industry. Thus, we eliminated
the carbon black industry from further intensive economic impact analysis for the reasons
described in Section 1.3.1. The results of our analysis are given below:
1.6.1 Subcategory A — Furnace Black
Of the 29 plants in this subcategory, only 10 plants (representing approximately 35%
of the total furnace black production) discharge wastewater; therefore, it is unlikely that the
other 19 will incur wastewater treatment costs. Of these 10 plants, the estimated total
investment is $1,870,000, and the total annual treatment cost is $380,000. The unit
treatment cost is only 0.34% of selling price. This percentage of treatment cost to selling
price is so low that it is not possible to quantify its potential effect on production,
employment, new investment, or plant closures.
1.6.2 Subcategory B - Thermal Black
Of the four plants in this subcategory, only two plants appear to have point-source
wastewater discharge. The total estimated investment to achieve zero discharge is $510,000,
Arthur DLittleJn
-------
and the total annual treatment cost is $120,000. The unit treatment cost is only 0.78% of
the selling price. Again, this percentage is so low that it is not possible to quantify its
potential effect on production, employment, new investment, or plant closures.
The total industry-wide treatment cost is $500,000, or 0.17% of the value of carbon
black production for 1973.
The cost of wastewater treatment for the carbon black industry is summarized in
Table 1.6A.
Arthur D Little, Inc
-------
TABLE1.6A
COST OF WASTEWATER TREATMENT FOR THE CARBON BLACK INDUSTRY
Subcategories
A. Furnace Black
1. Total plants
00 2. Plants discharging
wastewater
B. Thermal Black
1. Total plants
2. Plants discharging
wastewater
^
D
cr
Notes:
1.
2.
3.
4.
Estimated
Number of
Plants
29
10
Estimated
Production
(metric ton/yr)
1,452,650
500,900
134,950
67,475
Treatment Cost
as a Percent
of 1974 Selling
Price
BPCTCA+BATEA
Total Industry-Wide
Annual Cost
Total Industry-Wide
Investment
(millions of dollars)
BPCTCA+BATEA BPCTCA+BATEA
0.34
0.38
1.87
0.78
0.12
0.51
All treatment costs adjusted to the 1974 level (ENR Construction Cost Index — 1994).
Selling price for both furnace black and thermal black taken as $0.10/lb.
Treatment costs derived from EPA Development Document cost model.
Same wastewater generation rates used for both furnace and thermal black.
(This procedure results in the furnace black costs being an absolutely worst-case estimate.!
Source: Arthur D. Little, Inc., estimates and EPA Development Document.
-------
2.0 INDUSTRY CHARACTERIZATION
2.1 THE PRODUCT AND ITS MANUFACTURING PROCESSES
Carbon black is a black, fluffy, finely divided powder consisting of 90% to 99% ele-
mental carbon. Carbon black is uniquely different from other bulk carbons, such as char-
coals and cokes, both in terms of properties and applications. Although there are many
different grades of carbon black, it is generally treated as a single product.
In essence, carbon black is manufactured by producing carbon from either liquid or
gaseous hydrocarbon materials. Depending upon the process, the production is achieved
either by thermal degradation or incomplete combustion. In the United States, there are
currently four different manufacturing processes employed. Each process is briefly described
below.
2.1.1 The Furnace Black Process
In terms of total installed capacity, the furnace black process is by far the most pre-
dominant in the U.S. carbon black industry. In the furnace black process, carbon black is
produced by the partial combustion of natural gas or petroleum distillates. In the gas
furnace process, natural gas is partially combusted in refractory-lined furnaces. The carbon
particles are removed from the gas stream by means of bag filters. Yields (in terms of the
percent of carbon in the feedstock actually converted to carbon black) for plants employ-
ing the gas furnace range from 10% to 30%.
In the oil furnace variation, low-sulfur oil, similar to residual oil, is generally atomized
into a natural gas-fired combustion zone. The carbon black particles are collected by bag
filters in the same manner as the gas furnace variation. Yields for the oil furnaces range from
35% to 65%. Higher yields, coupled with an increasing shortage of natural gas, have been
responsible for a trend toward oil furnace installations.
2.1.2 The Thermal Black Process
The thermal black process is based on the cracking of hydrocarbons rather than on
partial combustion, as in the case of furnace black. Thermal black furnaces are operated in
alternating heating and production cycles. During the heating cycle, the furnace is heated by
burning hydrogen gas previously liberated from a production or cracking cycle. When heated
to the proper temperature, the feedstock (generally natural gas) is introduced into the
furnace, and the production cycle begins. Carbon is collected from quenched effluent gases
also by means of bag filters. Yields generally range from 40% to 50%. Although the thermal
process is the second most predominant production process, the increasing price of natural
gas does not favor its growth.
Arthur D Little, Inc
-------
2.1.3 The Channel Black Process
The channel black process is an almost obsolete process in which carbon black is made
by partially burning natural gas in special chambers where the flames are made to impinge
upon cooled surfaces. Carbon black deposited on the surfaces is continuously removed by
mechanical scrapers. The yields are very low, varying from 1% to 5%. Low yields, coupled
with the rising price of natural gas, have virtually eliminated this process. In fact, there is
only one channel black plant currently in operation.
2.1.4 The Lampblack Process
The lampblack process is the oldest method of manufacturing carbon black (its origin
dates back to ancient times). Lampblack, as carbon black manufactured by this process is
called, is manufactured by burning selected oils in a restricted supply of air. In terms of its
contribution to total industry-wide production, lampblack manufacture is relatively insig-
nificant. Since there are certain special applications for lampblack, it is still manufactured in
the United States at two different plants.
2.2 MANUFACTURERS, PRODUCTION, AND MARKETS
Carbon black is currently manufactured by eight U.S. firms in a reported total of 36
active manufacturing facilities. A listing of the eight manufacturers, along with their esti-
mated production capacities, is presented in Table 2.2A. As of 1974, the carbon black
industry had a production capacity of approximately 1,892,000 metric tons per year. The
total production capacity is distributed according to manufacturing process as follows:
Metric Tons/Yr
Furnace black 1,731,000
Thermal black 159,300
Channel black 1,800
Total 1,892,100
In terms of available production capacity, the Cabot Corporation is the largest sup-
plier. The four largest producers - Cabot, Cities Service, Ashland Chemical, and Phillips
Petroleum - account for well over 70% of the available production capacity.
Over three-fourths of the carbon black production capacity is located in Louisiana and
Texas. The concentration of carbon black plants in the Gulf Coast area was originally the
result of a need to be near natural gas feedstock suppliers.
For its rather large size, the carbon black industry is not very labor-intensive. During
1971 approximately 3200 people were employed by the entire industry.
10
Arthur D Little, In<
-------
TABLE 2.2A
PRODUCTION CAPACITY OF CARBON BLACK MANUFACTURERS
(as of 1974)
Producer Capacity
(metric tons/yr)
1. Cabot
• Furnace black 414,600
• Thermal black 45,400
• Channel black 1,800
2. Cities Service
• Furnace black 360,200
• Thermal black 25,000
3. Ashland Chemical
• Furnace 294,800
4. Phillips Petroleum
• Furnace black 214,600
5. J. M. Huber
• Furnace black 170,100
• Thermal black 20,900
6. Continental Carbon
• Furnace black 181,400
7. Sid Richardson Carbon Co.
• Furnace black 95,300
8. Commercial Solvents Corp.
• Thermal black 68,000
Total industry capacity 1,892,100
Source: "Chemical Profiles," Schnell Publishing Company, July 1, 1974
A 10-year history of total carbon black production is presented in Table 2.2B. During
the 1963-1973 period, total carbon black production increased from 934,000 metric tons
per year to 1,588,000 metric tons per year, an increase of 70%. The carbon black industry
typically operates reasonably close to its production capacity. During 1973, the total
production was 1,588,000 metric tons, or 83% of estimated total capacity.
11
Arthur D Little, Inc.
-------
TABLE 2.2B
TOTAL ANNUAL PRODUCTION OF CARBON BLACK
Year Total Production
(1000 metric ton)
1973 1,588
1972 1,452
1971 1,369
1970 1,330
1969 1,344
1968 1,276
1967 1,127
1966 1,167
1965 1,068
1964 1,008
1963 934
Source: "Minerals Yearbook," 1963-1973
Until major oil and gas price increases began during the latter part of 1973, the price
of carbon black was very stable. During the 1963-1973 period, the average price of carbon
black rose only 14%. The average price of carbon black in 1973 was $179 per metric ton
($0.0812/lb), thus resulting in a total 1973 carbon black production level valued at
$284,000,000. Average yearly carbon black prices are presented in Table 2.2C.
TABLE 2.2C
AVERAGE YEARLY PRICES OF CARBON BLACK
Average Price
Year (S/metric ton)
1973 179 0.0812
1972 171 0.0776
1971 169.5 0.0769
1970 167 0.0758
1969 160 0.0726
1968 161.4 0.0732
1967 158 0.0717
1966 158 0.0717
1965 155.6 0.0706
1964 154.5 0.0701
1963 157 0.0713
Source: "Minerals Yearbook," 1963-1973
12
Arthur D Little, Inc
-------
The cost of the hydrocarbon feedstocks is a major component of the overall manu-
facturing cost. During 1973, the carbon black industry consumed 49,682 million cubic
feet of natural gas and 623,236 thousand gallons of liquid hydrocarbons, having an esti-
mated total value of approximately $68,000,000, or 24% of the total value of the final
product.1 Increases in feedstock prices have greatly increased the price of carbon black in
recent years. In 1975 fourth-quarter carbon black prices were characteristically $243 per
metric ton ($0.11/lb), a 35% increase over the 1973 average price of $179 per metric ton.
Thus, within the two-year period from 1973 through 1975 the price of carbon black has
undergone an increase which was almost three times greater than the increase over the
period from 1963 to 1973.
In terms of markets, the carbon black industry has a very clearly defined group of
major end-users. The major end users of carbon black are found in the manufacture of
rubber, printing ink, paint, paper, and plastics.
By far, the most important consumer of carbon black is the rubber industry. Typically,
more than 93% of all carbon black manufactured is destined for the rubber industry, the
vast majority of it being used for tire manufacture. We estimate that upwards of 90% of all
carbon black produced is used in tire manufacture. Carbon black serves as a reinforcing
agent, increasing both abrasion resistance and dimensional stability. In this capacity, it is
currently an indispensable ingredient. Typically, a passenger car tire contains 6-7 Ib. of
carbon black, and there are no substitutes for carbon black in tire manufacturing. To illus-
trate the degree to which carbon black production is closely tied to rubber production, a
parallel plot of carbon black production and total synthetic rubber production is shown
in Figure 2.2.
Since tire production is obviously dependent on automobile sales, a large component
of carbon black production can be expected to follow automobile sales. Of course, this
effect is damped out by the more constant market for replacement tires. There are a num-
ber of automotive trends which suggest a decreased rate of growth within the carbon black
industry. Consumer trends toward smaller cars with smaller tires, as well as the increased
production of longer wearing radial tires, coupled with reduction in driving mileage, will all
have a negative effect on the volume of carbon black production.
The second largest volume of carbon black is consumed in the manufacture of printing
ink. This market is expected to remain rather stable. Manufacturing applications for carbon
black in plastics are expected to increase.
The United States is an exporter of carbon black. In 1973, approximately 5% of the
total U.S. production was exported. Historically, the percent of carbon black exported has
been declining steadily as more and more foreign manufacturing capacity comes on-stream.
Recent dislocations in worldwide hydrocarbon feedstock supplies have resulted in somewhat
increased exports. Foreign countries may possibly elect to import carbon black rather than
use their available feedstocks.
1. "Minerals Yearbook," 1973, p. 247.
Arthur D Little, Inc
-------
2700
2600 -
2500
2400
2300
-~ 2200
o
^ 2100
o
.y 2000
O 1900
o
o
~ 1800
Z
O
JZ 1700
U
O 1600
cr
a.
J 1500
1400
1300
1200
1100
1000
900
SYNTHETIC RUBBER PRODUCTION
(SOURCE'"SURVEY OF CURRENT BUSINESS")
1963 THROUGH 1973
CARBON BLACK PRODUCTION
(SOURCE-- "MINERALS YEARBOOK'
1963 THROUGH 1973
1963 64 65 66 67 68 69 70 71 72 73 74 75
PRODUCTION YEAR
FIGURE 2.2 COMPARISON OF CARBON BLACK AND
SYNTHETIC RUBBER PRODUCTION.
14
Arthur D Little, In
-------
3.0 WATER POLLUTION CONTROL PROBLEMS, TECHNOLOGY, AND COSTS
According to the Development Document, neither the channel black process nor the
lampblack process produces a contaminated process wastewater stream.
The thermal black process produces an inherent process wastewater stream. It consists
of a recirculating cooling water purge contaminated with carbon black. In the thermal black
process, furnace gas is quenched with water to reduce its temperature before it is passed
through bag filters where the product carbon is removed. The hydrogen-containing exit gas
thus contains an appreciable amount of humidity, which must be removed before recycling
the hydrogen back into the process as a fuel. The humidity in the gas stream is removed by
cooling the gas stream with water sprays, thus lowering the gas temperature below the
boiling point of water and thereby condensing out most of the humidity. The spent spray
water undergoes a temperature rise caused by the liberated heat of condensation and must,
therefore, be cooled prior to reuse. Typically, the spray water is part of a cooling water
circuit in which fresh makeup water is added to replenish inevitable losses within the
system. As with most cooling circuits, it is necessary to purge or "blow down" a certain
fraction of the total circulation to prevent the buildup of undesirable contaminants. In the
thermal black process, this blowdown stream is contaminated with small amounts of carbon
black lost from the process.
According to the Development Document, certain thermal black plants eliminate this
blowdown stream by using it to quench the hot gases leaving the furnaces. Otherwise, the
purge stream forms a point-source discharge.
Carbon black manufacturing plants employing the furnace black process do not
produce an inherent process wastewater stream. Certain furnace black plants, however, do
have small plant washdown streams and stormwater runoff streams. The local rainfall/
evaporation relationship plays a large role in determining whether there is, or is not, a
point-source discharge from the plant. According to the Development Document, 19 out of
a total of 29 furnace black plants do not have point-source discharges. Some plants have no
discharge preliminary because of favorable climate conditions, while others are able to use
excess water as quench water.
Based on the Development Document, at least two (possibly three) out of a total of
four thermal black plants presently do not discharge.
For both Subcategory A - Furnace Black - and Subcategory B - Thermal Black - the
Development Document recommends that the BPCTCA and BATEA treatment levels be in-
corporated under a single "no discharge" requirement. The Development Document
further recommends that no discharge be achieved by subjecting process wastewater to
sedimentation and filtration (if necessary) and then recycling that water back into the
process as quench water.
15
Arthur D Little, Inc.
-------
The wastewater treatment cost model presented in the Development Document con-
siders a "typical" 214 metric ton per day furnace black plant and a "typical" 68 metric ton
per day thermal black plant, which generate 28,800 and 13,000 gpd of wastewater,
respectively.
The cost model is based on two wastewater treatment steps: Step 1 consists of
sedimentation and Step 2 consists of filtration. It is anticipated that certain plants will
require only Step 1, while other plants will require both Step 1 and Step 2. In any case, the
cost model provides for the treated effluent to be totally recycled back to the process. The
Development Document cost models for the furnace black subcategory and the thermal
black subcategory are presented in Tables 3.0A and 3.OB.
TABLE 3.0A
SUBCATEGORY A - FURNACE BLACK MANUFACTURE
WASTEWATER TREATMENT COSTS FOR BPCTCA, BADCT,
AND BATEA EFFLUENT LIMITATIONS
(ENR 1994-1974 costs)
Average Production - 214 metric ton/day
Production Days - 350
Wastewater Flow — kl/day
(gpd)
kl/metric ton product
(gal/1000 Ib)
Raw
Waste Load
109
28,800
0.5
61
Technology Level
Step No. 1 Step No. 2
Total Capital Costs
Annual Costs
Capital recovery plus return at 10% at 10 years
Operating plus maintenance
Energy plus power
Total Annual Cost
Unit Cost $/1000 kg product
($710001b product)
Notes:
$210,400 $ 69,500
34,300
5,600
NIL
39,900
0.53
0.24
11,200
5,600
NIL
16,800
0.22
0.10
1. Since a zero-discharge requirement is specified for each of the treatment levels, BPCTCA,
BADCT, and BATEA treatment costs will be identical.
2. It is anticipated that the Step 1 technology level will be required by all plants; certain plants
may require Step No. 2 in addition to Step No. 1
Source: EPA Development Document.
16
Arthur D Little, Inc
-------
TABLE 3.0B
SUBCATEGORY B - THERMAL BLACK MANUFACTURE
WASTEWATER TREATMENT COSTS FOR BPCTCA, BADCT,
AND BATEA EFFLUENT LIMITATIONS
(ENR 1994-1974 costs)
Raw
Waste Load
Average Production — 68 metric ton/day
Production Days
Wastewater Flow
-350
- kl/day 49
(gpd) 13,000
kl/metric ton product 0.7
(gal/1000 Ib) 86
Technology Level
Step No. 1 Step No. 2
Total Capital Costs
Annual Costs
Capital recovery plus return at 10% at 10 years
Operating plus maintenance
Energy plus power
Total Annual Cost
Unit Cost $/1000 kg product
($/1000 Ib product)
$138,700 $ 43,100
22,600
5,600
NIL
28,200
1.18
0.54
7,100
5,600
NIL
12.700
0.53
0.24
Notes:
1. Since a zero-discharge requirement is specified for each of the treatment levels, BPCTCA,
BADCT, and BATEA treatment costs will be identical.
2. It is anticipated that the Step 1 technology level will be required by all plants; certain plants
may require Step No. 2 in addition to Step No. 1.
Source: EPA Development Document.
From supplementary data made available by the Development Document contractor, it
appears that these costs can reasonably be applied across the industry for the purpose
of providing an industry-wide estimate of treatment costs — fully recognizing the fact that
specific plants may incur costs which are higher or lower than the cost model. Table 3.0C
presents the total industry-wide costs that would result if the treatment costs presented in
the Development Document cost model were fully incurred. Under this premise, the total
industry-wide capital investment would be $2,380,000 and the total industry-wide annual
cost would be $491,000. The estimated total annual cost is approximately 0.17% of the
total 1973 production value of $284,000,000.
It should be noted that in terms of industry-wide estimates, this is a "worst case"
assessment. It assumes that all plants currently have no treatment in place and will incur the
17
Arthur D Little, Inc.
-------
TABLE 3.0C
COST OF WASTEWATER TREATMENT FOR THE CARBON BLACK INDUSTRY
•^
D
c:
Subcategories
A. Furnace Black
1. Total plants
oo 2. Plants discharging
wastewater
B. Thermal Black
1. Total plants
2. Plants discharging
wastewater
Estimated
Number of
Plants
Estimated
Production
(metric ton/yr)
Treatment Cost
as a Percent
of 1974 Selling
Price
BPCTCA+BATEA
Total Industry- Total Industry-
wide Wide
Annual Cost Investment
(in millions of dollars)
BPCTCA+BATEA
BPCTCA+BATEA
29
10
4
2
1,452,650
500,900
134,950
67,475
0.34
0.38
0.87
0.78
0.12
0.51
Notes:
1. All treatment costs adjusted to the 1974 level (ENR Construction Cost Index - 1994).
2. Selling price for both furnace black and thermal black taken as $0.10/lb.
3. Treatment costs derived from EPA Development Document cost model.
4. Same wastewater generation rates used for both furnace and thermal black. (This procedure results in the furnace black costs being an absolutely
worst-case estimate.)
Sources: Arthur D. Little, Inc., estimates and EPA Development Document.
-------
total cost presented in the cost model. Also, many plants actually have much lower flow
rates than that used in the cost model.
We wish to note that while the cost model presented in the Development Document
appears to be reasonable (when compared against normally encountered wastewater treat-
ment costs), we foresee a potential problem area in connection with the "no discharge"
requirement included in the BPCTCA and BATEA guidelines. While total recycle is feasible
for many plants, it is conceivable that the treatment measures required by certain plants
could possibly result in costs far above those presented in the Development Document cost
model. For example, extensive revisions to plant layout, plant equipment, and storm sewer
piping may be required for some plants in heavy rainfall areas. We believe that it would be
prudent to further review the technological and economic feasibility of the no discharge
requirement for those plants requiring extensive revisions.
Our contacts with industry representatives have indicated that the following factors
could affect the achievement of zero discharge:
• inability to segregate storm water,
• location in a net rainfall region,
• lagoons affected by ground water infiltration,
• poor quality intake water,
• the use of wet scrubbers to control air pollution,
• detergent being used for washing bag filters and general cleaning.
19
Arthur D Little, Inc
-------
4.0 ECONOMIC IMPACT ANALYSIS OF EFFLUENT GUIDELINES
4.1 PRESCREENING METHODOLOGY
The objective of the prescreen was to provide sufficient information to permit
choosing which industry subcategories could be eliminated from further study. Of course,
eliminating some of the subcategories would permit a more cost-effective utilization of the
available resources for studying the economic impact of the proposed effluent guidelines.
For any prescreen process to be effective, it must:
• Exclude only those subcategories for which there is strong evidence readily
available that the economic impact would be insignificant; and
• Not consume a large amount of the available resources.
Initiating the study, ADL developed information which characterized the industry, its
markets, its pollution control practices, and any consideration that EPA should know about
respective industry subcategories. To obtain the kind of information that was necessary, we
developed an outline of the information needed in tabular form.
The ADL experts prepared their comments utilizing only personal knowledge or
information that was immediately available. In many instances, there were areas in the
information table on which no comment was possible, either because the requisite informa-
tion was not immediately available, or because the answer was too complex for answering at
the prescreen level.
The information contained in the comments and on the information table not only
provided the basis for our recommendations concerning the categories we felt the EPA
should consider eliminating, but also generalized the condition of the industry with respect
to the proposed regulations.
In developing our recommendations, we wanted to have a high degree of certainty that
any category we recommended for elimination could not, on further study, be shown to be
seriously impacted. Thus, we developed four criteria, any one of which, if met by an
industry subcategory, would be enough to give a tentative classification as a subcategory for
elimination. These criteria were:
(1) The industry subcategory is generating no wastewater.
(2) The ratio of BPCTCA plus BATEA unit costs to selling price is less than 2%,
and/or the ratio of BPCTCA plus BATEA costs to profits is about 15% or
less.
21
Arthur D Little, Inc.
-------
(3) Most of the plants in the subcategory are currently discharging into munic-
ipal sewage systems and may continue to do so with little or no pretreatment
cost incurred.
(4) Most of the recommended treatment facilities have already been installed in
most of the plants in the subcategory.
Criterion (1) obviously represents the strongest reason for eliminating an industry from
further study. If the industry does not discharge wastewater, water pollution regulations will
have nc impact upon the industry.
Criterion (2) is based on discussions with ADL economic experts. We decided that, if
this criterion were met, the proposed standards would likely not result in a significant
economic impact. Often, our experts had no profit margin information available. In those
instances, when the ratio of treatment cost to selling price was less than 2%, we still
recommended that EPA consider removing the subcategory from further study. However,
this recommendation is not so strong as the recommendations made using profit informa-
tion.
In considering treatment cost/selling price and treatment cost/profit margin ratios, it is
important to realize that the treatment costs presented in the Development Document are
for a total treatment system and represent the costs incurred by a plant having no
wastewater treatment already in place. Most facilities within the carbon black industry have
some form of wastewater treatment already installed.
Criterion (3) also represents a very strong reason for eliminating a subcategory from
further study. If the wastewater treatment practice within a subcategory consists mainly of
discharging to municipal sewage systems, the cost of that treatment is already being incurred
via sewer charges. If the subcategory can continue this practice, be consistent with the
pretreatment standards set forth in the Development Document, and yet incur little or no
pretreatment cost, then the incremental economic impact to that subcategory will be nil.
Since the Development Document does not provide pretreatment costs, criterion (3) was
used to eliminate a category only when it was very clear that pretreatment would be either
unnecessary or minimal.
Criterion (4) represents a reason for eliminating an industry from further study on the
basis that, should the industry meet criterion (4), it would not have to expend as much
money as the Development Document indicates to meet the proposed standards.
4.2 RESULTS OF THE PRESCREEN ANALYSIS
We recommend no further study of the economic impact of the guidelines on the lamp
black and channel black producers, because they produce no effluents and therefore meet
the requirements of prescreening criterion (1).
22
Arthur D Little, Inc
-------
We recommend no further study of furnace black and thermal black because unit
treatment costs as a percent of selling price are below 2%, thereby meeting the requirements
of prescreening criterion (2).
Based on a representative selling price of $220 per metric ton, the unit treatment cost
as a percent of selling price is only 0.34% for furnace black and 0.78% for thermal black (see
Table 3.0C).
4.3 ECONOMIC AND TECHNOLOGICAL FACTORS
The precise impact of the guidelines, although judged to be insignificant on the bases
of the prescreening criteria, will depend on the complex interaction of a number of
technological and economic factors facing the industry (see Table 4.3). These include the
following:
• The end-uses of carbon black and the nature of the relationship between the
suppliers and major users of carbon black;
• The degree to which carbon black is a non-substitutable ingredient in its
major end-product — rubber tires; the stability of the markets for carbon
black and the sensitivity of end-product (rubber tire) price to carbon black
price;
• The growth in demand for carbon black as related to the demand for rubber
tires for automobiles;
• The reserve capacity of the industry;
• Trends in carbon black manufacturing technology; and
• Technological factors affecting the industry's ability to achieve zero dis-
charge.
Although we did not subject these subcategories to further analysis, because their unit
treatment costs were so low in relation to the pre-screening criteria, certain conclusions can
be drawn from the economic factors cited above which indicate that the guidelines will have
little impact on the industry. The non-substitutability of carbon black in its major applica-
tion - rubber tires — and the small value of carbon black compared to the final value of the
product ($0.60 worth of carbon black in a tire selling for $50.00) suggest that the demand
for carbon black is highly price inelastic. Thus, the demand for carbon black would not be
significantly affected by price increases of the magnitude discussed in this report, and there
would be no significant impact on the output and employment in the industry.
23
Arthur D Little, Inc.
-------
TABLE 4.3
INFORMATION TABLE - CARBON BLACK INDUSTRY
Subcategories
Industry Data
1. Annual Production (metric tons)
2. Production Value ($ millions)
3. Representative Range of Unit Selling
Price* ($/metric ton)
4. Estimated Profit Margin (% of selling price)
5. BPCTCA (1977) Treatment Cost**
($/metric ton)
6. BATE A (1983) Treatment Cost**
($/metric ton)
Technical and Economic Factors Pertinent to
Economic Impact Analysis
Technical Factors
7. Possibility of drastically reducing or
totally eliminating wastewater flow rate
8. Possibility of substantially reducing cost
of end-of-pipe treatment via in-plant
changes and/or process modifications
9. Fraction of plants with substantial waste-
water treatment facilities in place.
10. Fraction of plants presently discharging
into municipal wastewater treatment
facilities.
11. Frequency or likelihood of plants sharing
waste treatment facilities with other
manufacturing operations.
12. Degree to which proposed treatment de-
parts from currently employed treatment.
13. Seriousness of other pending environmental
control problems (including OSHA).
Economic Factors
14. BPCTCA plus BATE A unit treatment cost
as percentage of unit selling price.
15. BPCTCA plus BATEA unit treatment cost
as percentage of unit profit margin.
16. Would the demand for the industry's
product be significantly affected by a 10%
increase in price?
A. Furnace Black
1,452,650
319.6
220
Not Available
0.75
0.75
High
High
Moderate
None
Low
Varies
Moderate
0.34
Not Available
Not Greatly
B. Thermal Black
134,950
29.7
220
Not Available
1.71
1.71
High
High
Moderate
None
Low
Varies
Moderate
0.78
Not Available
Not Greatly
'Selling price is based on approximate 1974 level ($0.10/lb).
**BPCTCA and BATEA treatment costs have been adjusted from 1972 to the 1974 level using
the Engineering News Record Construction Cost Index (1972 = 1780, 1974 = 1994).
24
Arthur D Little, Inc.
-------
5.0 ECONOMIC IMPACT ON THE U.S. CARBON BLACK INDUSTRY
Based on our prescreen analysis, we concluded that, if the wastewater treatment cost
estimates presented in the Development Document are incurred by the carbon black
industry as a direct result of implementation of the interim final effluent guidelines, there
would be no significant economic impact on the carbon black industry. Thus, the carbon
black industry was eliminated from further intensive economic impact analyses. The results
of our analysis are given below:
Subcategory A - Furnace Black - Of the 29 plants in this subcategory, only 10
plants (representing approximately 35% of the total furnace black production)
have wastewater discharges, and will therefore be likely to incur wastewater
treatment costs. Of these 10 plants, the estimated total investment is $1,870,000,
and the total annual treatment cost is $380,000; thus the unit treatment cost is
only 0.34% of the selling price. This percentage of treatment cost to selling price
is so low that it is not possible to quantify its potential effect on production,
employment, new investment, or plant closures.
Subcategory B — Thermal Black — Of a total of four plants, no more than two
plants appear to have point-source wastewater discharges. The total estimated
investment to achieve zero discharge is $510,000, and the total annual treatment
cost is $120,000. Thus, the unit treatment cost is only 0.78% of the selling price.
Again, this percentage is so low that it is not possible to quantify its potential
effect on production, employment, new investment, or plant closures.
Wastewater treatment costs for subcategories A and B are $500,000, or 0.17% of the
value of the 1973 carbon black production. We believe that this percentage is so small that
there will be no significant rise in carbon black prices and no significant change in carbon
black demand.
There is, however, at least one plant that must both segregate its stormwater and
replace its wet scrubbers to meet the zero-discharge requirement. This plant will surely
incur water pollution control costs significantly above those presented by the Development
Document cost model. The economic impact on this specific plant could be significant.
25
Arthur D Little, Inc
------- |