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

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  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.

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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.

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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

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                                     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

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                       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

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                         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

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                           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.

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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

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     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.

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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

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        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.

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     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

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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

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                                                                          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.

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                       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

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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<

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                                      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.

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                                     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

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     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

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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

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    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.

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     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

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                                      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.

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                                                                           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.

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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

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          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.

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     (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

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     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.

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                                    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.

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         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

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