-74-044
SEPTEMBER 1974
            ECONOMIC ANALYSIS
                     OF
      PROPOSED EFFLUENT GUIDELINES

 THE  PLASTICS  AND  SYNTHETICS  INDUSTRY
                  PHASE II
                   QUANTITY
      U.S. ENVIRONMENTAL PROTECTION AGENCY
           Office of Planning and Evaluation
              Washington, D.C. 20460
UK
                        a
                   \

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  This document is available in limited quantities through the
U. S. Environmental Protection Agency, Information  Center,
Room  W-327 Waterside Mall, Washington, D. C. 20460.

  The  document -A ill subsequently be available through the
National Technical Information Service, Springfield, Virginia
22151.

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          ECONOMIC ANALYSIS
                 OF
    PROPOSED EFFLUENT GUIDELINES
 THE PLASTICS AND SYNTHETICS INDUSTRY
              (PHASE II)
U.S. ENVIRONMENTAL PROTECTION AGENCY
       Office of Planning and Evaluation
          Washington, D.C. 20460
            EPA 230/1-74-044
             September 1974

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                                     PREFACE

     The attached document is a contractor's study prepared for the Office of Planning and
Evaluation of the Environmental Protection Agency ("EPA"). The purpose of the study is
to analyze the economic impact which could 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") support-
ing  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 Planning
and  Evaluation  of  EPA.  This  report  was  submitted in fulfillment  of Contract No.
68-01-1541,  Task Order No.  13  by  Arthur D. Little,  Inc. Work was  completed  as of
September 1974.

     This report  is being released  and circulated at  approximately the same time as
publication in the Federal Register of  a notice of proposed rule making  under sections
304(b) and 306 of the Act for the subject point source category. The study 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 rule making 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 industy. It cannot be cited, referenced, or represented in
any respect in any such  proceeding as a statement of  EPA's views regarding the  subject
industy.
                                        in

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                       TABLE OF CONTENTS




                                                           Page




 I.   INTRODUCTION                                            1




 II.   EXECUTIVE SUMMARY                                      3




III.   METHODOLOGY                                            9




IV.   INDIVIDUAL PRODUCT SEGMENTS                             11




         CELLULOSE NITRATE                                   11




         NITRILE BARRIER RESINS                               15




         FLUOROCARBON                                      19




         ETHYLENE VINYL ACETATE                              23




         UNSATURATED POLYESTER RESINS                        27




         SATURATED POLYESTER RESINS                          35





         POLYPROPYLENE FIBERS                                39




         METHYLMETHACRYLATE RESINS                          43




         ALKYD MOLDING RESINS                                47




         POLYVINYLBUTYRAL                                  51




         POLYVINYL ETHERS                                    55




         POLYVINYLIDENE CHLORIDE                             59




         SILICONE  RESINS                                      63




         POLYAMIDES                                         67




         SPANDEX  FIBERS                                      69




         ETHYL CELLULOSE                                     73




         OTHER RESINS                                        75

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                                I. INTRODUCTION

     The  purpose of this  study  is to determine  the  economic  impact of the costs of
pollution  abatement requirements under the Federal Water Pollution Control Act Amend-
ments of 1972 for each of four levels of treatment:

     1)    Best  practicable  control  technology currently  available - to be met by
          industrial discharges by  1977.

     2)    Best available technology  economically achievable - to be met by industrial
          dischargers by 1983.

     3)    New  source  effluent standards   to be applied to all  new facilities (that
          discharge directly to navigable waters) constructed after the promulgation of
          these guidelines.

     4)    New source pretreatment  standards - to be applied to all facilities (that use
          municipal systems) constructed after promulgation of these guidelines.

     The specific impacts to be considered are:

     1)    Price effects  - including effects upon an industry's suppliers and consumers.

     2)    Profitability, growth, and capital availability effects.

     3)    Number, size, and location of plants that can be expected to close or curtail
          production.

     4)    Changes in employment.

     5)    Community impacts.

     6)    Balance of payments consequences.

     7)    Any other impacts.

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                             II.  EXECUTIVE SUMMARY

     This Phase II study of the economic  impact of water pollution control costs on the
synthetics polymer industry is focused on the small volume specialty plastic materials which
are generally made by  two  or more companies.  With  the exception of the unsaturated
polyester resins, these materials are produced by major chemical companies which have both
the technology and  the capital available to install and operate water pollution control
equipment. Again, with  the exception of the unsaturated polyesters, the producers of these
resins all produce  other plastic materials, many  of which are large volume, lower priced
commodity  type resins. Because  of the specialized  uses  for these resins,  they  generally
command higher prices  and generate higher profits than do the larger volume commodity
resins. With  the  exception again of the  unsaturated  polyester resins, the number of
producers is limited  to at  most six. This prevents the  very intense price competition
characteristic of the large volume  resins which are made by as many as 20 companies, and
this in turn keeps profits at a higher level. With a few exceptions, there is little integration to
end use products such as film or bottles.  The exception  is  the unsaturated polyesters. Most
of the resin  producers, however, are integrated back to their raw materials. These resins are
generally  produced in  plants which  produce other  resins.  The location  of the plants
generally depends  on the locations selected for the larger volume resins made at the same
site, and there is a tendency for these plants  to be  located in the Southwest.

     The production of  these resins involves fairly sophisticated technology,  again, with the
exception of the unsaturated  polyesters.  These plants are generally quite well automated,
and therefore are not labor intensive.

     In  general, prices  in this industry are determined  by the performance value of the
material in competition  with  other plastics and non-plastic materials.  A second factor in the
price  structure  is the price sensitivity and  in general, these products will not show con-
spicuously lower demand if the price were increased within reason. Three of the products,
cellulose nitrate, ethyl cellulose and spandex fibers, have reached the peak of their demand
and are declining in importance.

     The characteristics  of the unsaturated  polyester resin  industry segment  are  quite differ-
ent. This industry consists of a large number of producers. The U.S. Tariff Commission lists
some  70 producers, and  this is not believed to be complete. These producers fall into two
different categories; large resin and chemical companies,  and small specialty  resin and paint
companies. Twenty-six of the companies  are believed to represent 90% of the production,
the remainder being  spread over a number of small operations. The large companies have
production capacities over a hundred million pounds, while some of the smaller  individual
operators produce less than a million pounds a year. The larger companies are integrated to
some  end products,  and to  some of the  raw materials.  The smaller companies are  not
integrated. The larger companies have a  number of plants at various locations,  primarily
chosen close  to the markets. The small companies generally have only one location. This
segment of the industry is  also characterized by  the demand for a variety of grades  and

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types of resins, specifically formulated for a given end use.  Large producers market a wide
line of products whereas the smaller companies usually produce only one grade. The larger
companies in the industry generally have modern up-to-date well-automated plants whereas
the small companies have old relatively obsolete operations. It is estimated that 90% of the
plants in this segment discharge to municipal sewers. The profits of the large producers are
generally average for the plastics industry while profits for the smaller companies are below
average.

     Prices of these resins  are generally determined  by  the performance of the polyester
resin versus that of competing  plastics and metals.  In  the case of some of the  smaller
companies, the price is determined largely by the level necessary to obtain the contract.

     The assessment  of the economic impact of the cost of meeting effluent guidelines is
based primarily on  whether the cost can  be  passed through as price  increases to the
consumer. If it  can be  passed on, there  will be little or no  effect on profitability, plant
closures, employment effects, community effects, growth  or balance  of trade.  In general,
the price  would rise slightly. A second  consideration  is  whether the increase  in  price
required to  cover the  cost of meeting the guidelines would affect  the demand  for the
material. This is analyzed on the basis of the price/performance ratio of the plastic material
versus that of substitute products such as glass, paper, metal and other plastics, recognizing
that all  of these may also face some increase in price in  order to cover the cost of meeting
their guidelines.

Impact

     A review shown in Table 1, of the costs associated with pollution abatement control to
be achieved  by 1977, best practical control technology currently available (BPCTCA), and
the cost associated with best available technology economically achievable (BATEA), to be
achieved by  1983, shows a range of 0.1% of the current selling price to 10.79?.

     Costs of this magnitude are insignificant compared to  the increases in costs which are
now and will result from increased raw material prices. We  believe in all but two cases that
the cost of meeting these controls can be added to the sales price so that there will be  no
effect on the profitability,  growth, employment, production, the community or balance of
trade. In general the  producers have the capital and technology to achieve the standards set.

     In  two  segments,  saturated and unsaturated polyester resins, the costs  of the initial
investment to install treatment facilities to meet BPCTCA, BATEA and  BADT guidelines
will  have some  effect and  may cause some companies to shut down. This added expense
may also prevent some potential producers from entering these two industry segments. The
cost of  adding the necessary water pollution control  equipment is only one factor in these
situations. Added to this are the costs associated with gathering the necessary technical data
and employing experts to assess the information and determine what treatment technology

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                                                      Table  1
                                    Cost  Impact  on  Synthetic  Polymers Production
               Capital Cost Per Plant  ($1000)       Annualized  Cost  (c/lb)*
                                   Annualized Cost as % of Sales Prices*
                      BPT    BAT    BADT
BPT
BAT
BADT
                                                                                        BPT
                                                   BAT
BADT
Cellulose
Nitrate
Nitrile
Barrier
Fluorocarbon
Ethylene Vinyl
Acetate
Unsaturated
Polyester
Saturated
Polyester
Polypropylene
Fiber
Methyl
Methacrylate
Alkyd Molding
Polyvinyl
Butyral
Polyvinyl
Ether
1113
82
44-145
26-47
198
49
146
155 -
1020
198
1010
29
2260
161
44-145
53-101
198
77
579
179-
1176
198
2759
58
1113
82
44-145
26-47
198
49
146
155-
1020
198
1010
29
0.4 - 0.85
0.06 - 0.36
0.32 - 1.95
0.03 - 0.30
0.08 - 0.38
0.07 - 2.03
0.24 - 0.49
0.07 - 0.28
0.08 - 0.38
0.28 - 1.47
0.20 - 0.70
0.5 - 1.8
0.06 - 0.78
0.32 - 1.95
0.06 - 0.93
0.08 - 0.76
0.21 - 4.48
0.24 - 0.49
0.07 - 0.28
0.08 - 0.76
0.28 - 7.50
0.20 - 1-80
0.45
0.18
0.32
0.03
0.16
0.14
0.24
0.07
0.16
0.56
0.30
0.8 - 1.7
0.1 - 0.6
0.1 - 0.6
0.2 - 2.0
0.4 - 1.9
0.1 - 2.9
0.7 - 1.4
0.1 - 0.4
0.4 - 1.9
0.4 - 2.1
0.2 - 0.7
1.0 - 3.6
0.1 - 1.3
0.1 - 0.6
0.4 - 6.2
0.4 - 3.8
0.3 - 6.4
0.7 - 1.4
0.1 - 0.4
0.4 - 3.8
0.4 - 10.7
0.2 - 1.8
0.9
0.3
0.1
0.2
0.8
0.2
0.7
0.1
0.8
0.8
0.3
*Includinc Capital Charges

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                                                 Table 1  (continued)
                                     Cost Impact on Synthetic Polymers Production
                     Capital  Cost  Per Plant
                       BPT     BAT    BADT
   Annualized Cost (c/lb>
BPT
BAT
BADT
Annualized Cost as % of Sales Prices *
     BPT        BAT        BADT
Polyvinylidene
Chloride
Silicones
Polyamides
Spandex
Ethyl
Cellulose
6-32
1696-
2480
60
24
360-
530
19-87
4176-
5965
172
48
750-
1386
6-32
1696-
2480
60
24
360-
530
0.05 - 0.11
0.60 - 1.20
0.13 - 1.17
0.10 - 0.30
0.55 - 1.0
0.05 - 0.38
1.70 - 3.50
0.26 - 3.25
0.10 - 0.50
1.65 - 2.84
0.05
0.70
0.26
0.20
0.60
0.1 - 0.2
0.6 - 1.2
0.1 - 0.9
0.1 - 0.3
1.1 - 2.0
0.1 - 0.7
1.7 - 3.5
0.2 - 2.5
0.1 - 0.5
3.3 - 5.7
0.1
0.7
0.2
0.2
1.2
*Including Capital Charges

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is needed.  These costs will be a deterrent  to some small producers. The effect will be
heightened by the necessity to meet other federal standards such as air pollution, solid waste
disposal, safety and noise control regulations. None of these factors would affect major resin
producers. They may, however, affect the small - i.e., less than 50 employee - company.

     The producers which will face the greatest difficulty will be the small manufacturer of
unsaturated polyester resins (approximately two to three direct dischargers and seven
plants in municipal systems.) These companies, faced with  raw material shortages, costs to
meet other federal standards, and increasing  water pollution control costs might elect to
shut down - certainly they will not expand. This situation represents only a very minor
portion  of the industry segment, and any dislocations would have only a minor impact on
the  entire industry but would be serious to the companies involved.

     Production  capacity and industry growth would  not  be seriously affected since  the
plants represent  less than 1% of the industry capacity. Possibly 30  employees  might be
affected  but  this would  not have any significant community  effect. There would be no
balance of trade effect since these producers do not export.

     The other industry segment which might have a problem is the saturated thermoplastic
polyesters. This new product is just getting started and the  plants are small (25-50 MM Ibs).
As demand develops and larger plants are built the price will decline.

     The extent  of this price decline will determine the demand for the resin which will be
based on its price/performance versus that of competitive  materials, both plastic and
non-plastic.

     Table 1  shows that costs to meet BPCTCA are 0.1% - 2.9% of current sales price; the
costs to meet BATEA are 0.3% - 6.4% and to meet BADT are 0.2%. As the price declines
these percentages will increase and at the high end of the range of costs to meet BATEA
these costs may  become  burdensome.  Thus,  one  plant may  be  shut down in favor of
building a new larger plant which would have lower pollution abatement costs per ton of
product. There would be no effect on capacity, growth, employment or balance of trade.

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                                III. METHODOLOGY

     The economic analysis of proposed effluent limitations on the plastics industry is based
on a consideration as to whether the cost of achieving these guidelines can be passed on to
the consumer, and whether this increase in price would affect demand. If the added cost of
meeting these guidelines cannot be  passed on in  the  final  selling price, then profitability
would be lessened and if this is severe, plants would possibly shut down.

     Another factor  which we consider is whether the additional cost of meeting guidelines
for water pollution control would increase the price so that the plastic material would no
longer be competitive  in  the marketplace with  substitute materials. Plastic  materials  com-
pete in the marketplace on a price/performance basis with non-plastic materials, i.e., metal,
glass and paper as  well as other plastic materials. If the cost of meeting controls is high and
is passed on to the consumer, this might reduce industry growth or perhaps  cause a decline
in  demand, the latter of which could force plants to close. If such costs were not passed on
in  the final price,  then profitability would be lessened to  the  point where no additional
capacity would be installed and perhaps some plants would be shut down.

     Where the costs of meeting guidelines can be passed on without affecting the growth of
the industry, since other competing substitute materials  are  also  going to have to pay
increased coslsfor water pollution control, we conclude that there will be no plant closings
and therefore no effect on the community, employment, production^ balance of trade.

     Since these specialty plastics are not heavy polluters, we are assuming that the cost to
meet  the guidelines are  certainly no  greater than that of competing materials such as paper,
glass, steel, aluminum and the large volume commodity plastics.

     A second consideration is whether the companies producing the materials which  must
invest  additional capital  to  install  equipment  for water  pollution  control  have capital
available  for these expenditures. If this capital is not available, then some plants might
choose to shut down.

     With regard to balance of trade, the United States is generally the leader in specialty
plastic materials so that there  is little competition from foreign sources. Generally, prices
abroad for these materials are higher than in the United States. We therefore conclude that
generally there will be no effect on balance of trade unless the cost of meeting the guidelines
should exceed the differential between the U.S. price and foreign prices. Generally speaking,
exports of these materials is not a significant factor in total sales.

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                      IV. INDIVIDUAL PRODUCT SEGMENTS

                               CELLULOSE NITRATE

A.  INDUSTRY SEGMENTS

     Cellulose Nitrate is made by only two companies,  the Hercules Company with a plant
at Parlin,  New Jersey and the DuPont Company with  a plant at Deepwater, New Jersey.
Both companies  manufacture their own chemical cellulose which is the major raw material.
Cellulose nitrate  is not used to any extent today as a plastic; it is still used in the production
of lacquers. The  product in the past has been made into sheet and rods; major applications
were optical  frames, shoe heels, piano and accordion keys, Ping-Pong balls, playing cards,
market  price tags, business machine cards and gambling dice. At  one  time there were a
number of other producers including Monsanto and Cellanese. In all of the above applica-
tions other materials have replaced cellulose nitrate with the possible exception of dice. As a
result almost  all cellulose nitrate is now  sold to paint companies for  the  production of
lacquers.

     Production  of  cellulose  nitrate plastics other  than coatings declined from 12 million
pounds  in 1940  to 1 million pounds in 1962 when statistics were discontinued. There is no
future  growth in cellulose nitrate plastic. Consumption of cellulosic  resins  for  surface
coatings was estimated to be 45 million pounds in the last reported year 1967.

     Estimated end use is as follows:

          Wood Furniture Finishes                   27 million gallons
          Cellophane Coatings                        10 million gallons
          Wood Finishes - Non-Furniture              6 million gallons
          Paper Coatings                              5 million gallons
          Miscellaneous Finishes                       5 million gallons
          Modifiers                                   5 million gallons

     All these cellulose nitrate finishes are lacquers and  hence are based on solvent systems.
Because of flammability hazards and air pollution considerations, solvent systems are being
phased out in favor of aqueous or powdered coatings.

     The cellulose nitrate plant of Hercules is at Parlin, New Jersey and it produces  one
other product. The DuPont plant at Deepwater produces resin primarily for lacquers. There
is no water treatment plant at that facility; they pipe waste  water  to another plant where
the wastes are treated along with the wastes from other organic chemical production. The
total number of  employees in these two plants is less than 100.  We do not see any further
growth for cellulose nitrate.
                                        11

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B.  FINANCIAL PROFILES

     The estimated annual  profit before taxes for production of cellulose nitrate is shown
below:
                                         c/lb
         Income
                                          51
         Cost
              Fixed Costs
              Variable Costs
              Sales G&A
                 Total

         Net Return before tax1
         % of Sales $
10
25
_5_
40

11
21.6%
     The market salvage value of plant assets would only be the extent to which the specific
pieces of equipment could be used for other purposes; i.e., pumps, kettles, filter presses, etc.
The plants themselves are too old to be sold for further production of cellulose nitrate. The
major constraint on financing additional capital assets is the lack of growth of the market
rather than anything else.

C. METHODOLOGY

     No change from general methodology.

D. POLLUTION CONTROL COSTS
         Total Capital Cost Per Plant,$1000
         Total Annual Cost^/lb
         Annual Cost as % of
         Sales Price
                                                      BPT
                              BAT
         1113
         0.4 - 0.85

         0.8- 1.7
2260
0.5 - 1.8

1.0-3.6
E. IMPACT ANALYSIS

1. Price Effects

     The additional cost to achieve BAT and BPT water pollution guidelines would not have
any significant effect on the cellulose nitrate industry. Cellulose nitrate is only used where
its properties dictate the application rather than by price. The small additional cost could be
passed on to the consumer  so that the price would  be raised to accommodate  these costs.
Such a minor increase would not affect the market.
1.  Excludes freight, local and state taxes.
                                         12

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2. Profitability

     40% of the waste from these plants is handled through plant waste treatment facilities
and  the  other 60% is discharged to sewers Since we believe that the costs for meeting the
guidelines can be passed on to the consumer, there would be no effect on the profitability
of the industry.

3. Plant Closures and Production Effects

     Since there would be  no effect on profitability with the extra cost being passed on to
the consumer, we see no plant closings or production effects.

4. Employment Effects

     There would be no employment effects since there are no plant closings.

5. Community Effects

     There would be no community effects.

6. Impact on Industry Growth

     The increased  costs would  not affect the industry growth. The industry is declining
because of the appearance  of better and lower cost plastic  materials. All previous molding
uses are  believed to have  been discontinued  and the only remaining segment, coatings, is
declining.

7. Balance of Trade Effects

     There would be no balance of trade effects.

F. LIMITS TO THE ANALYSIS

     Assuming  that the cost figures  are  accurate, we do  not  see that there  are  any
questionable aspects to the impact analysis and no assumptions were made that were critical
or would affect the accuracy of our judgment.
                                         13

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                               NITRILE BARRIER RESINS

 INTRODUCTION

     Nitrile Barrier resins are included in this study not because of their present significance
 (they are not yet made in  commercial quantities and are not yet available for sale) but
 because  of their potential significance in the future. These are the  resins which  have been
 test marketed as Coca Cola bottles, Pepsi Cola bottles and Seven-Up bottles. Obviously, if
 they should  be  accepted for soft drink bottles their consumption  would quickly become
 significant. Since they are not yet being made commercially and in some cases even the raw
 materials have not yet been established, economic data on costs, profits, and type of plant
 are not available. The processes are proprietary.

     The three  materials classified as nitrile barrier resins are Barex made by Standard Oil
 of  Ohio, Lopac made by Monsanto and NR-16 (an experimental designation) by DuPont.
 The NR-16 resin was developed jointly with American Can  Company and is trade named
 Vicobar. These  resins are  lightweight, transparent,  impact  resistant and  have  a high
 acrylonitrile content.  They can be formed into bottles which are clear, have excellent barrier
 properties, and can contain carbonated beverages. It is stated that they can be disposed of in
 normal   waste  channels without adversely  affecting incinerator  operations.  They are
 generally approved for packaging foods and  beverages. These materials will  be competing
 with glass  and  other  clear  transparent plastics suitable  for  bottles such  as  PVC, methyl
 methacrylates and possibly aromatic polyesters.  The reason for their potential significance is
 the market for  soft  drink bottles which could  consume up  to 4.4  billion pounds of this
 resin. These  resins, of course, must compete with plastic coated glass bottles  and other
 plastic bottles.

 A.  INDUSTRY  SEGMENTS

     At  present  these nitrile resins are only being made in  developmental quantities for
 evaluation. There are several operating units.  One  is the  DuPont Company,  which is
 operating at  a level of about 10 million pounds per  year at Montague,  Michigan and is
 presently increasing capacity to  30 million pounds per year. It is  rumored  that they are
 considering a 100 million pound  a year plant. They state, however, that they do not have an
 operating plant,  do not have a design  basis, have made no decision on the process and have
 no plant data on the raw wastes or treatability of such wastes.

     Vistron  Company, a division of Standard Oil of Ohio, makes a product called Barex. It
is  presently being made in  a  pilot plant with  a capacity of 12  million pounds per year
operated by Ethyl Corporation at Baton Rouge, Louisiana. It is understood that  Vistron is
currently constructing a plant with a capacity of 20 million pounds a year at a cost  of 59
million to be completed by 1975  in Ohio.
                                         15

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     The  third producer is  Monsanto  which produces Lopac resin.  They  are currently
constructing a plant at Springfield, Massachusetts. Data on its capacity and process are not
known. Monsanto  is  also constructing a plant to make  nitrile  barrier  bottles in South
Windsor, Connecticut and is considering two more bottle plants.

     Probably no more than  50 people  are currently employed in production. To  date the
composition of these specific resins is not known nor is it known whether the formulas are
definitely  established. One thing is common to all  processes;  they  have at least a 60%
acrylonitrile  content.  The  other  monomers  which may  be  copolymerized with  the
acrylonitrile include methyl acrylate, methyl  styrene, styrene,  methyl acrylonitrile and
butadiene.

     Other companies who have been mentioned in the  press as considering production of
similar nitrile barrier resins  include Borg-Warner,  Dow, Rohm and Haas, Union  Carbide,
American Cyanamid and B.F. Goodrich.

     Without knowing the specific raw materials or processes, it is not possible to discern
whether there will  be any difference in the effluent control costs by the different producers
but we consider it unlikely.

B. FINANCIAL PROFILES

     Since  we do not know the process, size of the plant, raw materials or selling price, it is
not possible to establish financial profiles. We estimate current profitability to be  negative;
but future profitability will be positive and approaching the industry average.

C. METHODOLOGY
     Same as general methodology.

D.  POLLUTION CONTROL COSTS
         Capital Cost Per Plant, $1000
         Annual Cost^/lb
         Annual Cost as % of Sales Price
   BPT
     82
0.06 - 0.36
0.1 -0.6
   BAT
    161
0.06 - 0.78
0.1 - 1.3
E. IMPACT ANALYSIS

1. Price Effects

     The impact of present costs to reach both BPT, BAT, and BADT are not significant
enough to affect the production or profitability of nitrile barrier resins. The price would be
raised  to take into account the cost of meeting the guidelines due to the anticipated demand
                                         16

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 inelasticity  of the  product. These increases in price would be insignificant compared to
 anticipated  increases caused  by rising raw material  prices. They  will also  be small in
 comparison to anticipated cost savings as larger plants are built.

 2. Profitability

     Under present  circumstances with resin selling at 60^ a pound, the added cost for water
 pollution can be passed  on to the consumer and therefore there would be  little effect on
 profitability. If, however, the nitrile barrier resins become suitable as bottles  for carbonated
 beverages, the price will have to drop so that they will  be competitive with  glass and other
 resins. At these lower prices,  the cost of meeting EPA guidelines might not be able to be
 fully  passed on, which would reduce the  profitability. Economies of scale  of large plants
 which would  then be built might offset this. Again, profitability would probably be more
 affected by the raw  material costs than water abatement costs.

 3. Plant Closures and Production

      We do not expect any plant closures  due to the cost of meeting  BPT,
 BAT,  and BADT guidelines.

 4. Employment Effects

    We do  not anticipate  any unemployment  effects since no plant closures
are expected.

 5. Community Effects

     Since there would be no employment effects there should be no community effects.

 6. Impact on Growth

    The  major factor  affecting the  industry growth  is going  to be the performance
 qualifications  of these  resins  versus  glass  bottles,  polypropylene  bottles and  poly-
 vinylchloride bottles. Since the cost of establishing new plants, BADT, represents only .03
 of a percent of present selling price,  there would not  seem to be any restrictions on the
 construction of additional capacity. Our analysis shows that most of the barrier resin plants
 being  built will have their own treatment facility or will have primary treatment, and 70%
 will be direct dischargers with the remaining 30% discharging to municipal sewers.

 7. Balance of Trade

    No effect 
                                         17

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F. LIMITS OF ANALYSIS

    The major limit to the accuracy of our estimates is the fact that we do not know what
the final nitrile barrier resins will be made of. Also we do  not know what the future price
will be.  And finally, we do not know whether the properties of the resin will  allow it to
capture  the large market from substitute materials. We are  assuming that the resin will have
moderate success which  will allow  construction of plants  of 100 million  pounds per year
capacity by 1983. Further,  we are assuming that the costs of pollution  control will be
comparable to those for competing materials.
                                        18

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                                FLUOROCARBON
INTRODUCTION

     The six fluorocarbon resins listed below are considered together since they have several
common properties. First, they all have similar effluent problems in dealing with fluorine.
Secondly, they have  a  basically similar chemical nature. Thirdly, they are all high priced,
small volume specialty resins produced by, at the most, three producers.
Company
                      FLUOROCARBON RESIN PRODUCTION
Resins
Trade Name
Capacity
MM Ib/yr
DuPont       Tetrafluoroethylene
              Fluoronated ethylene propylene
              Perfuoroalkoxy
              Ethylene Tetrafluoroethylene

Allied         Chlorotrifluoroethylene
              Ethylene Chlorotrifluoroethylene
              Tetrafluoroethylene

ICI           Tetrafluoroethylene

Pennwalt      Vinylidene fluoride

3M Corp.      Chlorotrifluoroethylene
                         Teflon
                         Teflon FeP
                         Teflon PFA
                         Tefzel

                         Plaskon CTFE
                         Halon TFE
                         Halon TFE

                         Fluon

                         Kynar

                         KelF
                           Total
                       14

                        2
                        3.5

                        2.2

                        2.2

                        2.3
                       26.2
     Of the total produced, tetrafluoroethylene is believed to account for 75% of capacity
and production. The fluorocarbon resins are  noted for their lubricity, temperature resis-
tance, chemical inertness, and weatherability.  As  a result,  these products have found use in
military vehicles, aerospace applications, automotive lubricants, non-stick pots and pans,
electrical applications,  and exterior coatings for buildings and  equipment exposed  to
corrosive environments. They are available as granules, either filled  or unfilled, powders,
dispersions, elastomers, and as rods, tubes, and sheets.

A. INDUSTRY SEGMENTS

     There  are only five companies producing fluorocarbon resins as shown in the table
above.  All are major corporations having broad product lines,  a high degree  of diversifica-
tion, excellent technology and strong financial backing. All but Pennwalt produce a variety
                                        19

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of other plastic materials. Allied and DuPont are integrated to the manufacture of ethylene
and fluorine. All of these plants are modern, efficient, and have a high degree of technology.
All of them are believed to be operating at an economic size level which is small because of
the limited market for these products.

     There are only five plants involved and the total number of employees in the industry
is estimated to be less than 200.

     All of these  plants  will be impacted  about equally and  we have contacted all the
producers.

     Prices of fluorocarbon resins range from  $3.25 to  $10.00 per pound depending on
type. Tetrafluoroethylene, the largest volume produced, is $3.25  per pound. Considering the
limited number of producers, the price of the fluorocarbons is determined not so much by
competition between producers as  competition with  other  materials, both plastic and
rubber. For example, vinylidene  fluoride, when used as a corrosion resistant coating for
buildings,  processing equipment, etc., competes with PVC, vinylidene chloride and silicate
coatings.  Tetrafluoroethylene competes with other plastics such as nylon  and chlorinated
tetrafluoroethylene. To some extent the producers also tend to follow the pricing lead of the
major producer.

     While there is continued  slow growth  for  these materials we do not  foresee that
demand will  reach  a level where larger plants can be constructed which would allow a
significant  cost reduction. Therefore, major  price changes in this segment of the industry
will tend upward due to the increased costs of raw materials.

B. FINANCIAL PROFILE

     Published data on profitability and cost structure for these materials is not available.
Our best estimate of the industry averages is shown below:

     Fluorocarbon Costs:

          Income                                        325

          Cost
              Fixed                                     85
              Variable                                   135
              Sales, G&A                                25
                      Total                             245

          Return Before Tax1                             80
          % of $ Sales                                    24.6
1. Excludes freight, state and.local taxes

                                        20

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     We do not know  of  any significant deviation or variation between the producers
 regarding production cost or profitability. 3M may have somewhat higher raw material costs
 since it is not integrated  to raw materials.

     The market value of plant assets is probably about  10% of the original plant value since
 the only salvageable assets are  the individual pieces of equipment. One tetrafluoroethylene
 plant was shut down last year because of market competition and was dismantled in this
 fashion.

 C. METHODOLOGY

     Same as general methodology.

 D. POLLUTION CONTROL COSTS
                                                     BPT
                    BAT
         Capital Cost Per Plant,$1000
         Annual Cost^/lb
         Annual Cost as % of Sales Price
   44 - 145
0.32  - 1.95
  0.1 -0.6
  44- 145
0.32- 1.95
  0.1 -0.6
E. IMPACT ANALYSIS
1.  Price Effects
     Based on the average selling price of fluorocarbons, the cost to meet both BPT and
BAT range from . 1 percent to .6 percent of the selling price. The cost of pollution control
for new plants is .10 of a percent. Since this would not affect demand, these prices will be
passed along to the consumer and result in a consequent price rise.

2.  Profitability

     Due to the highly specialized and sophisticated uses for these expensive resins, there is
no concern but  that a cost of this order of magnitude can be passed along to the consumer
and will have no  effect on the  profitability of the industry. In addition,  all  of the plants
have some in-plant treatment, and all  discharge  to  municipal  sewers.  This  industry has
already spent $180,000 on in-plant treatment, so that the effects of additional costs for the
industry will only  be another $180,000.
                                       21

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 3-7 Plant Closures, Production, Employment, Community,Industry Growth
     and Balance of Trade Effects
     Since the impact of the  cost of meeting the guidelines has no important  effect  on
prices,    these costs are insignificant in view of rapidly rising raw material costs, and any
required  increases can be  passed on  to  the  consumer,  there will be no effect on plant
closures,  production,  employment,  communities,  industry  growth, or the
balance of trade.

F. LIMITS OF ANALYSIS

     We know of no critical assumptions which would affect our conclusions, and believe
that our judgments are correct.
                                        22

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                           ETHYLENE VINYL ACETATE

INTRODUCTION

     Ethylene vinyl acetate  resins are  essentially low-density polyethylene resins which
have been copolymerized with  15% to 30% of vinyl acetate monomer in order to modify
the properties. They  should  be considered  as modified  low-density polyethylenes. The
major reasons for the modification is to change  the  crystallinity in  order to improve the
toughness of the polyethylene. These copolymers have found major application in films
used to produce industrial sacks, i.e. 80 pound sacks used for the packaging of fertilizer,
grain, chemicals, etc.

     Technically, any  of the  12 producers of low-density polyethylene  can produce
ethylene vinyl acetate copolymers and  can utilize the same  equipment.  Therefore, refer-
ence should  be made to the  U.S.  Environmental  Protection  Agency  report on poly-
ethylene entitled "Economic  Analysis of Proposed Effluent Guidelines:  The
Plastics and Synthetics  Industry (Phase  I)".

A.  INDUSTRY SEGMENTS

     The producers of ethylene vinyl  acetate resins are  all essentially of the same size,
nature  and degree of  integration. While almost any producer of low-density polyethylene
could produce these resins, the major suppliers are believed to be:

                Chemplex                   Union Carbide
                Dow                        US1
                DuPont

     Of these, DuPont has announced that it is withdrawing production of these resins in
1974. USI is probably the most vigorous in promoting the development of these products
and  indeed  is integrated to manufacturing  films as  well as marketing  resin. All  of the
companies are major sized corporations with sales over $100 million. All  are integrated to
the production of the basic raw material  ethylene and all are major corporations highly
diversified into other plastics.

     It is our understanding that total  production of ethylene vinyl acetate copoJymer is
about 3% of all low-density polyethylene resin or approximately  150 million pounds per
year; this percentage  is increasing. The total  amount of vinyl acetate in the copolymer
can vary between 15%  and 30%. We  believe  that it averages about 17%  and that  this
average  content  is also increasing. The  difference in  water pollution between low-density
polyethylene and  ethylene  vinyl acetate resin is  the  recovery  and purification  of the
unreacted vinyl acetate monomer.

     The size, age, location, level of technology, level  of integration and efficiency of
these plants  is similar  to  that for  low-density  polyethylene  production. Only  one

                                        23

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company, USI, has a separate line that produces just ethylene vinyl acetate copolymers.
The  others use equipment interchangeably with low-density polyethylene production. All
others are of economic size which is now roughly 200-500 million pounds. Most plants
were  built  within  the  last  10 years and operate  at a high level  of technology and effi-
ciency. All of the  producers are integrated to  ethylene except USI and all are integrated
to end products particularly  film. It  is not possible to  identify the  number of people
employed in ethylene vinyl acetates production since there is no data on the percentage
of each plant  capacity  used  to  produce the copolymer. We  do not see  any significant
difference between the  various producers of EVA.

B. FINANCIAL PROFILE

     The financial  performance of producing  EVA versus low-density  polyethylene de-
pends mainly  on  the  difference  in  the selling price  between  the copolymer  and the
homopolymer  minus the additional cost of vinyl acetate monomer. Since there is no real
data  to determine  the actual  percentage of vinyl acetate in the product mix we can only
base  our figures on an  estimate that  on the average 17% vinyl  acetate is added. These
economics are  shown below:
                                                    Profitability Analysis
           Income
           Cost
                Fixed
                Variable
                Sales, G&A
                   Total
                 16


                  3.5
                  8.1
                 _L4
                 13.0
           Return Before Tax1
           % on Sales $

C. METHODOLOGY

     Same as general methodology.

D. POLLUTION CONTROL COSTS
     Capital Cost per Plant.SlOOO
     Annual Costx^/lb
     Annual Cost as a % of Sales Price
    BPT
   26-47
0.03-0.30
0.2- 2.0
                 3.0
                 18.7
    BAT
   53-101
0.06  -0.93
0.4-6.2
1. Excludes freight, state and local taxes.
                                       24

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E.  IMPACT ANALYSIS

1. Price  Effects

     The costs of meeting BPT, BAT, and BADT are small in  relationship to the selling
price and insignificant in view of rising raw  material costs. Prices will rise to accommo-
date the  cost of meeting  water pollution guidelines.

2. Profitability

     All  producers of ethylene  vinyl acetate resins  are understood to do primary treat-
ment and 50% of them  also do biological  treatment. Thus,any impact  on the industry's
profitability will  be less  than that indicated by the costs required to meet standards. The
industry  is expected  to  spend $120,000  a year  to  meet 1977  standards, and $370,000
annually  to meet  1983 standards.  New plants will have to spend approximately $100,000
per year  to meet  1977 requirements. Capital expenditures to date approximate  $50,000
worth of installed equipment.  As a  result  of the  low percentage of total sales price
required  to meet standards and the substantial amount of already installed equipment, we
do  not see that  the  cost  of meeting BPT and BAT will  affect the profitability  of the
industry. These costs  can be passed on to the consumer so that there should be no effect
at all on profitability. The cost of water pollution control will be minimal compared to
the overriding factor  of  the increased costs of  ethylene due to  the rising price of oil. In
addition, data indicates that the costs of meeting water pollution guidelines for EVA is
less than for both polyvinyl chloride and low-density polyethylene, its major competitors.
We therefore see  no  effect on  the  profitability  of  producing  EVA because of meeting
EPA guidelines.

3-7 Plant Closures, Production, Employment, Community, Industry Growth
    and Balance of Trade Effects
     Since the impact  of the cost of meeting the guidelines had no important effect on
prices, these costs are  insignificant in view of rapidly rising raw material costs, and any
required  increases can be passed  on to the  consumer, there  will be no effect  on plant
closings,employment, communities,  industry  growth, or  the balance of trade.

F.  LIMITS OF ANALYSIS

     We believe  that these analyses are  correct based on our judgment  of the growth of
the industry. There  are  no critical  assumptions  which  would affect the validity  of our
conclusions.
                                       25

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                      UNSATURATED POLYESTER RESINS

INTRODUCTION

     Unsaturated polyester resins refers to the resins which are almost always reinforced
with glass fiber and  used in  the  production of sail boats, translucent  corrugated archi-
tectural panels, automotive parts,  motor boats, etc. This industry segment is the largest
and most important of this study.

A. INDUSTRY SEGMENTS

     The major producers are listed below:

                  Company                            No. Plants

                  Owens Corning                           2
                  Reichhold                                7
                  Ashland                                  4
                  Glidden                                  5
                  W.R. Grace                               5
                  Freeman                                  2
                  PPG                                      4
                  Koppers                                  2
                  Cook  Paint and Varnish                    5
                  Rohm & Haas                             2
                  Atlas-ICI                                 J_
                                                          39

     Producers who report their production range in size from companies producing less
than 1 million  pounds per year to major firms  such  as  Reichhold Chemical and  W.R.
Grace which produce  in  excess of  100 million pounds per year. Some companies such as
Ford Motor  Company, Pioneer, and boat manufacturers produce primarily for captive use
in cars, decorative  laminates, and  boats,  respectively. Other firms such  as Reichhold are
primarily merchant producers selling a broad line of products. Since the equipment used
to make polyester  resin is the same as that used  to make  alkyd paint resins and most of
the producers make both  products, it is difficult to establish the exact capacity for either
material.  Present consumption by end use is shown below.  Growth is expected to be 15%
per year through 1978 with  the most rapid growth in  the transportation, appliances and
construction segments.
                                      27

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                                                          1973
                        End Uses                         MM Ibs.

                   Aircraft & aerospace                       28
                   Appliance & Equipment                   82
                   Construction                             220
                   Consumer goods                         115
                   Corrosion resistant products              120
                   Electrical parts                           108
                   Marine                                  385
                   Car and train                            307
                   Other                                    85
                                                          1450

     Only one  producer in the industry  is using  a continuous  process. All others use a
batch process and the minimum size economic plant is in the order of 25 million pounds
per year  requiring probably  two to  three  kettles. Most of the major producers have
multiple  small  plants  located  relatively  near  the markets with capacities of about  50
million pounds a year. As  a result of  this fragmentation  it is unlikely  that there will be
further reductions in  costs resulting from  economies of scale in expanding to large plants.

     The  larger  producers  manufacture and  market a variety of grades of resin, i.e.  12
base resins and 30 formulations tailored to their customer needs which vary in viscosity,
molecular weight,  etc. Some producers also provide specialty resins such as flame resistant
grades which sell for  a premium price. Most of the major pro^'eers are integrated  to the
manufacture of at least  some  of their raw materials namely, styrene monomer, glycols,
and maleic or phthalic anhydride. However,  raw  materials are generally  available in small
quantities to all producers so that integration is not a necessity. A number of producers
are also  integrated to the manufacture of end products  such  as building panels, pipe,
down  spouts  and gutters. Some  producers of end products such as boats manufacture
their  own resin. Most of the major producers of polyester resins also produce a variety of
other plastic materials particularly alkyds and other thermosetting resins.

     In  general, the  resin  producing plants are located  near the marketplace since these
resins do not  require large-size  plants. Reichhold Chemical, one of the largest  manu-
facturers has, for example, located plants near the customers in such locations as Azusa,
California; Detroit,  Michigan;  Elizabeth,  New  Jersey;  Grand  Junction,  Tennessee;
Houston,  Texas; Jacksonville, Florida;  San Francisco, California  and Tacoma, Washington.
We estimate the following geographical breakdown of production:

                   Midwest                              50%
                   Northeast and Middle  Atlantic           15%
                   South                                25%
                  West                                  10%
                                        28

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     Since the resins are relatively simple to make, a number of end users such  as boat
producers, corrugated panel producers, automobile companies,  and  furniture companies
make their own resins. In addition, some of the  producers of  fiber glass reinforcement
make their own resins.

     The average age of the plants in the industry is impossible to estimate. There have
been  a  number of recent expansions by the major producers  in new plants. However,
there are also some old alkyd resin kettles that have been in existence for 25  years which
are now producing polyester resins. Since this is essentially a batch  process the capacity
depends on  the  number of kettles in a given plant and  this varies from one to ten or
more. All producers use the same  technology which has not changed materially in the
past 20 years. The one  exception is the  development of a continuous process by Reich-
hold Chemical Company which is believed to be used in  one plant.

     We estimate that there  are approximately 80 plants producing these resins and 40 of
them produce 90% of the resin. The major resin producers which have  captive operations
are

                              Owens Corning
                              Reichhold

     The total number of employees in the industry is estimated  to be  1200.

     It  is expected that the  industry will grow from the 1973 level of  1.4 billion pounds
per year to 2.8 billion pounds  by  1978. Growth in  1974 will be limited by raw material
shortages.

B. FINANCIAL PROFILE

     It  is  extremely difficult to arrive  at a meaningful, average financial profile for
companies in this  industry  since they vary all the way from small companies operating
obsolete alkyd resin kettles  to large multi-national firms fully integrated to materials and
end  products.  Furthermore,  since  the  equipment  is  used interchangeably  for other
products, it  is difficult to determine the operating profits for any given product  at any
given time. We are showing  below, however, our best estimate of the financial profile for
this industry including 1) a major merchant supplier and 2) a small custom producer.
                                        29

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                           PROFITABILITY ANALYSIS

     Production Capacity               10 MM Lbs.             100 MM Lbs.

     Income^/lb                          19                     21

     Cost^/lb
         Fixed                           11                     10.0
         Variable                          4                      3.0
         Sales. G&A                      _2__                    3.5_
            Total                         17                     16.5

     Return Be fore Tax1                    2.0                    4.5
     7< on Sales $                          10%                  21.4%

     There  is a very  wide range of profitability from perhaps 10% to 25% return on sales
before tax  depending on the size  of the company, the degree of integration, the product
mix and the overhead cost.

     The salvage value  of  the  assets is small,  perhaps  10%  of the original  value of the
equipment. Generally the equipment can be used to produce other resins.

C. METHODOLOGY

     The best  way to assess the economic impact of water pollution control costs is to
relate the value of polyester resins to the value  of competing materials and determine
whether these  costs can be  passed through to the consumer. If they can there will be no
impact.

D. POLLUTION CONTROL COSTS

                                               BPT                 BAT
     Capital Cost per Plant,$ 1000                 198                   198
     Annual Cost^/lb                       0.08 - 0.38          0.08 - 0.76
     Annual Cost as a % of Sales Price         0.4 - 1.9             0.4 - 3.8
1.  Excludes freight, state and local taxes.
                                       30

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 E.  IMPACT ANALYSIS

 1.  Price Effects

     Prices in this industry are determined primarily by strong price competition amongst
 producers. Since there are a wide variety  of formulations it is readily  possible for  one
 producer to  reduce  his  costs  and therefore use price to  obtain  a specific  customer
 contract. Another  factor influencing  the price structure  of the  industry is competition
 from other substitute materials  particularly  in automotive parts where  reinforced poly-
 esters must compete  with steel,  other plastics and aluminum which are  equally suitable.
 As it is  true with many other industries, the major price effect of the future is going to
 be  due  to the rapidly increasing cost of raw  materials particularly  styrene, which, for
 example, has  doubled in price in  the last nine months. This price increase far obscures
 the  .4 cent per  pound cost  to  meet 1977  pollution controls. For example, due to the
 shortage of styrene, prices  of the resins have increased by 50% in  the last  three months
 to approximately 30<^ a pound.

     This industry  sends  90% of its waste to municipal sewers so that only 10% of the
 waste load is regulated by effluent limitations. The BPT and BAT costs can readily be
 passed on to  the consumer by the larger producers.  We therefore expect that there may
 be  minor increases  in  prices due to meeting  effluent guidelines with major price increases
 due to the increased price of raw materials.

 2. Profitability

     The major financial  effect will be on the profitability of smaller companies  if they
 have to  invest substantial capital to install  pollution control equipment. They will  also
 need technical assistance  in installing and providing  for water  pollution control. These
 companies will have to compete on a price  basis  with the  companies which already  have
 these capabilities and  much of  the installed equipment. This will be  compounded by a
 probable necessity for their meeting other federal standards such as air  pollution, safety
 and  noise. The cumulative effect of  these  regulations  may severely  reduce their profit-
 ability  and strain their capital  resources. Today  many of these  companies discharge to
 municipal sewers. The larger companies  should  be able  to  pass on the costs of pollution
 control.

3. Production Effects

     Production of these  resins  is  now  controlled by the availability of raw materials.
 Many companies have  recently  cut  back on production  because of the  lack  of  raw
materials. While it  is possible that some small companies not discharging  to  municipal
sewers  will shut  down operations rather than pay for water pollution control,  this  pro-
ductive  capacity would be more than offset by expansions of the major producers  if  they
could get sufficient styrene monomer  and other raw materials. If there are plant closings
                                        31

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the major reason will be the lack of available raw materials rather than the costs of water
pollution abatement.  The major effect of water pollution  control costs would be  that
some small companies might close down rather than install the necessary treatment equip-
ment. Annual operating costs  to meet 1977 and 1983  standards will be 0.4% of the sales
price for a small plant;  hence  only a few, perhaps 10 plants, might close. These would be
those  plants  too small  to  afford the  investment.  Since only 10% of the waste load is
discharged directly it is  estimated that  two to three  plant closures would occur as a result
of effluent limitations and approximately seven  plants could potentially close if pretreat-
ment standards require capital  and annual  expenditures similar to BPT.

4.  Employment Effects

    We estimate that perhaps  10 small plants; i.e. 5 mm Ibs/year capacity, might choose
to  cease operations. The employment  effect from such plant closings would approximate
100 people. However, only about twenty to thirty employees would be affected by direct
discharge effluent limitations.

5.  Community Effects

    Plant closings would generally be in medium  sized cities in New England and  the
Midwest. The overall  effect on the  community would  be  negligible due to the  small size
of the  companies closing down. Dislocated employees would undoubtedly be absorbed in
the local work force. There would be no secondary effects.

6.  Impact on  Industry Growth

    A new polyester resin plant coming  on stream and meeting BADT levels will have a
cost of .154  per pound. This  might prevent small producers from entering this  industry;
however, it would not affect industry growth since large present producers would expand
and build  new plants. We believe that the costs for meeting new  plant standards will be
able  to be passed  on  to  the consumer and, therefore,  industry growth  will not be
affected. Industry growth will  be affected  over the next several years due to a shortage of
raw materials, however.

7.  Balance of Trade Effects

    We do  not see that the  small  additional costs for water pollution control of the
unsaturated polyesters would have any effect on  the balance of trade.
                                       32

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F. LIMITS OF ANALYSIS

     We know of no  critical  assumptions  which have  been  made that would affect the
accuracy of this  analysis. Estimates as to the number of plants which might close could
vary by   20%. The only assumption which has been made is that 90% of the waste is
discharged  to municipal  sewers. If this were  incorrect, there might be additional prob-
lems since some  additional small plants not on municipal sewers might have difficulty in
meeting the standards.
                                       33

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                         SATURATED POLYESTER RESINS

A.  INDUSTRY SEGMENTS

     Saturated polyester resins as distinct from unsaturated polyester resins are a series of
relatively new engineering thermoplastic molding resins,  which are sold in limited quanti-
ties (15  million pounds per year) for injection molding  of parts requiring high  tempera-
ture resistance, excellent  dimensional  stability and  excellent electrical properties. They
have unsurpassed chemical resistance and are very easily fabricated. These resins compete
with materials such as nylon, phenolics, and polyacetals. They sell in the  price range of
65^ to 95^ per pound.

     There  are  only  three   producers,  General  Electric  which  manufactures  Valox,
Celanese which  manufactures  Celenex, and Eastman  Chemical Products  which makes
Tennite.

     All  of the plants are new,  i.e. built in  1971. The Tennessee Eastman plant  is at
Kingsport, Tennessee.  The General Electric plant is at Pittsfield, Massachusetts and the
Celanese plant is  at Belvidere, New Jersey. Total employees are estimated to number 25.

     There are two basic types of resins: PET (polyethylene terephthalate) and PTMT
(tetramethylene  phthalate). A variety  of grades  are offered including flame  resistant
grades  in both natural and colors. The  product is similar to polyester fibers and can  be
made in  the  same equipment.  Both  Celanese and Tennessee Eastman make polyester
fibers.

     A 20% per year  growth is expected with predictions of  100 million pounds per year
by 1980.

B. FINANCIAL PROFILE

     It is very difficult to establish the  financial profile for these resins since  they are
only being made in limited quantity and/or are being made in facilities used for polyester
textile  fibers. The economics  of a commercially sized plant which will be built as demand
grows,  will be significantly different. Our estimate of future profitability is  shown below:
                                       35

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                Income                               68

                Cost
                     Fixed                             9
                     Variable                         35
                     Sales, G&A                       10.5
                       Total                         54.5

                Return before tax1                     13.5
                '/'/ on sales $                          20

C. METHODOLOGY

     The only  method of assessing the economic impact of water pollution  abatement
costs  is the extent to which these  costs can be passed on to the final consumer. Since
these  materials  are relatively  high priced engineering materials whose price will be declin-
ing, the assessment will have to  be  based on estimated future prices and estimates of the
materials which these  engineering plastics will replace.

D. POLLUTION CONTROL COSTS

                                               BPT                 BAT
     Capital Cost per Plant^ 1000                  49                  77
     Annual Cost^/lb                        0.07 - 2.03          0.21 - 4.48
     Annual Cost as a % of Sales Price         0.1 - 2.9            0.3 - 6.4

E. IMPACT ANALYSIS

1. Price Effects

     The price  of polyesters today,  68^/lb.  is an introductory price  and  probably does
not cover the full cost of production and development. As larger scale plants are built
and sales increase in  volume,  it is expected that the price would come  down. The level to
which  this  price  will  drop  depends on  the performance value of the polyester versus
competing  materials,  including metal, polypropylene  and other engineering plastics. The
price will  be maintained at whatever level is required to market  the products in sufficient
volume  to operate the plants close to capacity. We believe that the polyesters will com-
pete  primarily  with  other engineering  resins such as polyacetal and nylon and that the
cost  of meeting water pollution standards will be passed on to the consumer since the
1. Excludes freight, state and local taxes.
                                       36

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increase is small in relationship to the value of the product; therefore, prices will rise to
reflect these  costs.  It will, however, be only a small percentage 0.1% to 3.0%.  A rise of
this  nature will be  obscured by considerably higher price increases due to the increased
cost  of raw materials.  The cost for water pollution control in new plants is only .02 of a
% of selling price, and  this would be added to the sales price.

2.  Profitability

     The  financial effects of water pollution control on  the profitability would be  negli-
gible for companies who  are able to meet BPT and BAT and who are operating on low
volume water supplies, since  these  costs could be  readily passed on to the consumer.
There  is believed  to be one present plant operating on a high volume water flow. If  it has
to meet  1977 and  1983 standards it  would be  at a disadvantage  and  its profitability
would be reduced  since  it could only pass on as  much of the cost as the lower cost
producers. The effect on profitability of new entrants and new plants, which is indeed the
future of this industry, would also be negligible since the  costs are quite low. The present
and  potential producers, General  Electric,  Tennessee Eastman, Goodyear and Celanese all
have ample capital reserves.

3.  Plant Closures and Production Effects

     There would  be  no  effect  on present  production  because of the  cost of  water
pollution. There is  the possibility that the costs of water pollution  in the one high-cost
plant might cause this plant to be shut down  in favor of building  a new plant since the
cost  of new  plant construction is only .02 of a percent of sales price for water pollution
controls, whereas modifying the one existing plant to meet BAT by 1983 would be  6.4%.
We foresee that the old plant will not shut down until the new plant is substituted; thus,
on a overall  basis, total  production would  not be  affected. We  expect  that production
will  expand  as the  market expands and  as the price/performance ratio of the materials
improves  versus competitive materials. Since we believe  this product will expand in use
and  that  there is capital  available, and since the cost of water pollution  control in new
plants is low, these costs can be passed on.  There will be expansions and growth in the
industry to 100 million pounds.

4.  Employment Effects

     We believe that this  industry is going to expand, that more and more people will be
employed, and if an obsolete plant is shut down, the employees  will be readily absorbed
into  the new plant  which  will have considerably larger capacity.

5.  Community Effects

     Since this industry  is expanding and employing  more people, and the dislocated
employees will  be  reemployed  in  another  plant within the industry there will be  no
community effects.

                                       37

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6. Impact on Industry Growth

     This industry is expected to grow depending on the price/performance ratio of this
material versus competitive products.  We do  not  see that the cost of meeting  guideline
standards would  affect this growth. Growth  will  depend  on the relative value of these
materials which will be  more dependent on raw  material costs than on costs for water
pollution controls.

7. Balance  of Trade Effects

     There  will be no balance  of  trade effects since exports are expected to  increase
regardless of price rises affected by effluent abatement costs.

F. LIMITS OF  ANALYSIS

     We believe that  the accuracy  of our estimates are    15%.  There  were no critical
assumptions which would be sufficiently sensitive to overrule our basic conclusions and
there are no questions  remaining to  be  answered.
                                        38

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                            POLYPROPYLENE FIBERS

A. INDUSTRY SEGMENTS

     Polypropylene  fibers  are defined as multi-filament and staple  fibers  used in textile
applications  and  exclude  slit  film, fibrelated film  and  mono  filaments. Capacity for
multi-filament  and  staple  is  estimated  at 205 million pounds  per year. The  principal
market for multi-filament  is in the manufacture of indoor/outdoor carpets. Shown below
is our estimate of the demand for polypropylene fiber.
           Multi-filament                 MM Lbs.         MM Lbs.
                Carpets                      55              65
                Upholstery                  30              35
                Other                                        5

           Staple
                Nonwoven Carpets            40              45
                Carpet Backing               13              20
                Other                      _2             _1_0_
                   Total                    140             180
     All three of the major producers of polypropylene fibers are large  well financed
diversified corporations. The table below shows their estimated capacity.


                                                                   Capacity
     Company                                                     MM Ibs/yr.

     Hercules Co.                Covington, Kentucky                   115
                                Oxford, Georgia
     Phillips Fiber               Spartanburg, South Carolina              45
     Standard Oil of California    Dayton, Tennessee                      45
                                                                      205
                                       39

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     Of the  three companies,  Hercules  and Phillips are  both integrated to the manu-
facture of polypropylene resins. Standard Oil of California  purchases resin. Hercules is the
major producer  of polypropylene and Phillips is a  major producer of other polyolefin
resins.  Phillips is also integrated  to  the  manufacture of  other fabricated forms such as
film  and  bottles.  Standard Oil  of California  is only concerned  with the production of
polypropylene multi-filaments. All of the plants are  under 10 years of age. All producers
use essentially the same technology  and we do  not know any difference in efficiency
between these operations.  The only difference between the producers is the  fact that
Standard Oil  of  California does not make its own resin. The number of employees in this
industry is estimated to  be  1,000.

B. FINANCIAL  PROFILES

     Shown below is our estimate of  the profit of polypropylene fiber production:

                                                     Profitability Analysis
                                                             l/lb	
           Income                                            35

           Cost
                Fixed                                          12
                Variable                                       11
                Sales, G&A                                    _4_
                   Total                                      27

           Return Before Tax1                                   8
           % Return on Sales  $                               23

     This is an estimated average of the three producers. There could be a different profit
for Hercules  and Phillips depending  on  the price which  they pay themselves for their
captive  polypropylene resin. Since Standard Oil of California has propane  available  it
need not  worry  about the availability of propylene  which is  made  from propane raw
material sources. We  do not see that there are  any financial  constraints on additional
expansions in this industry  since all of the producers  have ample capital available.

C. METHODOLOGY

     This  is the same as the general methodology.  The impact depends on  whether the
industry can  pass costs  through as price increases to  consumers  which in turn depends on
the price/performance of the material versus that of competitive materials.
1. Excludes  freight,  state, and  local  taxes.
                                        40

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 D.  POLLUTION CONTROL COSTS
                                                BPT                 BAT
     Capital Cost per Plant,$ 1000                 146                 5 79
     Annual Cost^/lb                        0.24 - 0.49          0.24 - 0.49
     Annual Cost as a % of Sales Price          0.7 - 1.4             0.7-1.4
 E.  IMPACT ANALYSIS

 1.  Price Effects

     Since there  are only  three producers of polypropylene fiber, prices are not deter-
 mined  by competition between  producers, but by competition and end  uses  between
 polypropylene  fiber and  other substitute fibers such  as polyesters  and nylon. We do
 expect  that there will  be  an increase  in the price of polypropylene fiber over  the next
 several  years due to sharply increasing prices of the raw material propylene which comes
 from natural gas and  which is now and is expected to continue to be in short supply.
 The cost to control water pollution for  polypropylene fibers through  1977 and  1983
 amounts to only  0.7% to  1.4% of present selling price, while the cost for a new plant is
 only 0.07 percent of the selling price. These factors are insignificant in comparison to the
 cost increases of raw  materials and can undoubtedly be passed along to the consumer,
 thus raising the price slightly. Further, all present producers of polypropylene discharge
 to municipal sewers and, therefore, do not come under  the effluent standards. We, there-
 fore, project only a minor increase in  prices due to the costs of water pollution control.
 Such a  minor increase would not affect the competitive position of polypropylene fibers
 versus that of competitive materials since these  materials face similar price increases due
 to water pollution controls.

 2. Profitability

     The profitability  of producing  polypropylene  fibers should  not  be affected in any
 way since any minor increase in costs  can be passed on to  the consumer. There will be
no  effect on capital availability since  all  of the producers of polypropylene fibers have
 almost unlimited capital available.

 3.-7. Plant Closures, Production, Employment, Community,  Industry
     Growth, and Balance of Trade Effects
     Since  the impact of the cost of meeting the guidelines has no important effect  on
prices, these costs are insignificant in view of rapidly rising raw material costs, and any
                                       41

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required  increases can  be passed  on to the consumer, there will be no effect on plant
closings, employment, communities, industry growth or the balance of trade.

F. LIMITS TO THE  ANALYSIS

    We believe the accuracy of our judgment is high. We do not believe  that there are
any critical assumptions which  would affect the overall validity of our conclusions, and
there are no questions remaining to be answered.
                                        42

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                        METHYLMETHACRYLATE RESINS

A.  INDUSTRY SEGMENTS

     Methylmethacrylate  resins were  originally  produced in sheet form  during World
War II and trade named Plexiglass  and  Lucite. These clear, transparent sheets were used as
canopies on military  aircraft.  These resins are now  familiar in  their use  as illuminated
signs  at gas stations and other outdoor displays,  ornamental decorative objects such as
cigarette lighters and the ubiquitous automobile  tail light lenses. The product is made in
two forms: (l)a clear transparent sheet and  (2) a  molding  powder. Major new growth is
anticipated for these  materials due to the laws requiring unbreakable glazing  in storm
doors, etc.; thus, methacrylate sheeting is replacing glass in these applications. Another
new application for methacrylate  resins which could  increase demand by 50% over the
next seven years is the development of methacrylate bath tubs and wash basins. These are
already used extensively in mobile homes and  are finding increased use in residential
homes.

     Shown below  is  the  estimated production  capacity  of the  methacrylates including
integrated production  of the monomer:
Company                                     	Capacity MM Ibs.	
                                              Monomer   Cast Sheet     Molding Resin
Rohm and Hass         Bristol, Pa.
                       Deer Park, Texas          520          130            45
DuPont                Parkersburg, W.Va.        120            0            35
American Cyanamid     Wallingford, Ct.
                       Sanbom, Maine           100           25             13
Swedlow               Florence, Ky.
                       Garden Grove, Cal.          0           70              0
Others                                          	0_         _1_5_             1_
   Total                                         740          240            100
     It can be noted that three of the producers, Rohm and Haas, DuPont and Cyanamid
are  major chemical firms  producing a variety of other chemicals and plastics. Swedlow
which  has  two  plants,  one on  the west coast and  one in  Kentucky, produces only
methacrylate  resins. All producers, with the exception of DuPont, are integrated  to the
production of the  cast sheet. DuPont has recently licensed a process from Japan to make
cast  sheet and will build a production unit at Memphis to do this. The technology in the
manufacture of molding resins has not changed substantially over the past 10 years and is
not expected to. There has been, however, a major change in the manufacture of cast
sheet since Swedlow developed a continuous  casting  process.  Rohm and Haas has also
                                       43

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developed a  continuous  casting process and DuPont has licensed one from Japan. Con-
tinuous casting is less expensive than cell casting. These continuous  casting plants are 0-5
years of age.  The cell casting units are considerably older, being perhaps 25  years old.

     The  only  segment of  the  industry which would  be affected  differently  by water
abatement  costs are the  approximately 3 small companies included in the "other" cate-
gory which account for a total of 22 million pounds.

B. FINANCIAL PROFILE

     Shown below  is the estimated profitability of producing methylmethacrylate sheet
and compound.
                                                      Profitability Analysis
            Income                                             70

            Cost
                 Fixed                                          10
                 Variable                                       43
                 Sales, G&A                                    _7_
                   Total                                       60

            Return Before Tax1                                  10
            % Return on Sales                                   14.3

     Costs  will be similar for all producers with the exception that American Cyanamid,
which only has  a cell casting line,  will have somewhat higher costs for sheet  and  DuPont
will  have  to pay a royalty  to  Mitsubishi for its license.  Swedlow's costs may be higher
since they  must  purchase monomer.

     Prices of the methacrylate  molding compounds are determined  by the price sensi-
tivity effect  and the  prices  of competing materials.  The price  sensitivity effect is small;
namely, lowered prices are  not  going to  materially  increase demand. Competition from
other resins, i.e., polycarbonates in tail light lenses is a big factor. In general, these prices
will  remain stable except for any increase in raw  material cost. In the cast sheet segment
the price of methacrylate sheet will be determined by its performance value versus safety
glass, polycarbonates, and other  plastic glazing  materials. Its use in  sanitary ware such as
wash basins  and bath tubs  will also be  based  on  its performance against that of com-
peting materials such  as  melamine  resins  and enameled  iron. The price in general will be
held at  the highest level which  will allow it to improve its market share  in each of these
applications. The price of cell  cast sheet will  be determined  by competition with  the
continuous cast sheet and  will  be held at a slight  premium due to its somewhat better
properties.  The  continuous  cast sheet  will maintain a price/performance  value relative to
extruded sheet  since  the continuous cast sheet has better properties than the extruded
sheet. Prices  are expected to increase as basic feedstocks rise  in cost.
1.  Excludes freight, state and local  taxes.

                                          44

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C. METHODOLOGY

     The economic impact of the  co*ts of pollution controls will be based on the extent
to which these costs can be passed along to the consumer without losing a share of the
market to competitive materials.

D. POLLUTION CONTROL COSTS

                                               BPT                 BAT
     Capital Cost per Plant,$1000              155-1020         179-1176
     Annual Cost^/lb                       0.07-0.28       0.07-0.28
     Annual Cost as a % of Sales Prices        0.1-0.4            0.1-0.4
E. IMPACT ANALYSIS

1. Price Effects

     There is  a problem  in dealing  with methylmethacrylate resins since 240  million
pounds are sold as a cast sheet in a finished fabricated form, whereas another  100 million
pounds are sold as resin at a significantly lower price. This resin then is injection molded
into  automobile tail lights, etc. The cost of the  finished sheet  is 70^/lb and  the  resin is
45^/lb. As a result the cost of water pollution  control as a percent of  the sales price
varies considerably. In any event the  cost, as shown above, is small. These required price
increases are all relatively insignificant.

     Due to the increasing price/performance value of these materials we believe that the
costs to meet  BPT, BAT and BADT water pollution abatement will be passed on to the
consumer and  the  prices will rise accordingly. We see no secondary effects as a result of
these price increases.

2. Profitability

     The profitability of this industry should not be affected by  this minor increase in
cost  since we  believe  it can be  passed on to  the  consumer. There would be  no problem
with  capital  availability  since the  producers,   Rohm  and Haas,  DuPont, American
Cyanamid,  and Swedlow^have ample capital reserves.

3.-7. Plant Closures, Production, Employment, Community, Industry
     Growth,  and  Balance of Trade Effects
     Since  the impact of the cost of meeting the guidelines has no important effect on
prices, these costs are insignificant in view of rapidly rising raw material costs, and  any

                                       45

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required  increases can  be passed  on to the consumer, there will be no effect on plant
closings, employment, communities,  industry growth, or the balance of trade.

F. LIMITS TO THE ANALYSIS

     We believe the accuracy of our judgment is high. We do not believe that there  are
any  critical assumptions which  would affect the overall validity of our conclusions, and
there are no questions remaining to be answered.
                                       46

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                             ALKYD MOLDING RESINS

 A.  INDUSTRY SEGMENTS

     Alkyd molding resins are chemically similar to unsaturated polyester resins and the
 alkyd resins used for paint. They are generally available in the form of dry powder, paste,
 and rope and usually contain fillers including glass and clay. The alkyd resin itself can be
 made by any company which makes polyester resin or alkyd paint resin and thus capacity
 figures are not  meaningful. Much of the alkyd resin is sold to compounders who add fillers,
 colors, catalysts and reinforcement and then sell their proprietary compound  to the end
 users such as aircraft companies, automotive companies, electrical appliance companies, etc.
 Major  uses for these resins  are in automotive  parts  because of  their high temperature
 resistance, excellent electrical  properties and excellent dimensional stability. Other applica-
 tions include appliances,  television sets, etc.  The compounder who adds fillers, such as glass
 fiber and clay, to prepare a proprietary compound does not generate any liquid waste. These
 resins  have been  in use since  1950 but  consumption  is believed  to  be less  than
 75 MM pounds. Growth is expected to be modest, 5-7% per year.

     It is difficult to prepare a  list of alkyd molding resin producers since some listings
 include  people that are  primarily paint  resin  producers  and others who  are primarily
 compounders. Shown below is our estimate of the major producers.

          Allied Chemical, Morristown, N.J.
          Durez, Tonawanda, N.Y.
          Plastics Engineering Company, Sheboygan. Wis.
          Koppers, Pittsburgh, Pa.
          Celanese, Louisville, Ky.
          Freeman Chemical,  Port Washington, Wis.
          Resyn Corporation. Enden, N.J.
          Arco  Chemical, Philadelphia, Pa.

     There is no significant difference in the firms that produce  these resins.  Some of the
firms are integrated to the manufacture of raw materials, such as Allied and Koppers, and
most of them  formulate molding compounds. There are a large  number of different
formulations as indicated by the fact that the price varies from 35^ to 55^ depending upon
the specific formulation.

     The technology to make these resins has not  changed much over the  past  10 years
except  in  formulations for specific end uses. The plants are relatively old compared to the
plastics industry since they are using older alkyd and polyester equipment.

     No producer makes  these resins in more than one plant. There are a number of smaller
plants that could make these resins and no new producers are anticipated.
                                        47

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     We have taken into account all the major producers of these resins and do not see that
any one producer would be affected differently than any other.

B. FINANCIAL PROFILE

     It is  very difficult to determine the financial profiles for these resins including profit
before tax and cash flow since production costs are similar to those for polyesters whereas
the price  is dependent on the specific nature of the proprietary compound manufactured.
Thus, the profitability may  even  vary  for each batch of resin made by any  one of the
producers. Because of the technical service required and the costs associated with developing
proprietary compounds there is a considerable increase over  the actual production cost of
the resin at the mill. Those companies which have highly proprietary compounds may sell
them for  55^ per pound. Other companies which are producing fairly standard resins may
only receive 35^. Margins are estimated to range from 25% to 10% on sales before tax. The
salvage value of the assets is the same for all producers and is only that of the value of the
resin kettle. These  can generally be sold as used equipment for perhaps 10% to 20% of the
original dollar investment depending on their condition.  The estimated cost structure is
shown below:
              Income                                    39
              Cost
                Fixed                                   17.0
                Variable                                 9.0
                Sales, G&A                               4.5
                   Total                                 30.5

              Return before tax1                          8.5

              % Return on Sales                          22%

     Prices in this  industry are dependent  upon the performance of the alkyd molding
compound versus that  of competitive plastics  materials such as phenolics, polyesters, and
the new engineering thermoplastics. Price is not affected by supply versus demand because
supply can be  readily  increased at any time that the  demand should  grow.  The market
volume is not sufficiently large to encourage intense competition. This is a specialty product
whose price is determined by its specific performance value in a given application. We do
not see that there will be any major price change  in the near future since the technology is
fairly well understood and the raw materials are standard. Prices may go  up some as a result
of the increased cost of raw materials such as styrene monomer.
1.  Excludes freight,  state and local taxes.
                                         48

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C.  METHODOLOGY

     Same as the  general methodology; the impact depends on the ability to pass costs
through as increased prices to consumer, which in turn depends on the price/performance of
the product versus  that of competitive materials.

D.  POLLUTION CONTROL COSTS

                                             BPT                  BAT
     Capital Cost per Plant,,$ 1000              198                  198
     Annual Cost^/lb                      0.08 - 0.38          0.08 - 0.76
     Annual Cost as a % of Sales Prices       0.4-1.9            0.4-3.8

E.  IMPACT ANALYSIS

1. Price Effects

     The  cost for  water pollution control for  alkyd molding  resins  is the same as for
unsaturated polyesters. However, since the alkyd molding resins sell for a higher price per
pound the percent  increase in selling price is less.

     The alkyd resins are used only where their particular performance is required. The cost
of water pollution control as a percent of sales is not significant for BPCTCA, BATEA or
BADT. We do not  believe that there are going to be  any new plants. Since this is a relatively
low percent increase, we  believe that these costs can be passed on to the consumer with a
resultant price increase, and there would be no secondary effects of these price increases.

2. Profitability

     Since  price increases can be passed on  to the end user, there would be no effect on
profitability.  In addition,there would be no problem with capital availability since the major
chemical companies have ample financial resources.

3-7.  Plant Closures, Production, Employment, Community,
     Industry Growth, and Balance of Trade Effects

     Since  the impact of the cost  of  meeting the  guidelines has no important  effect on
prices, these  costs  are insignificant in view of rapidly rising raw material costs, and any
required  increases  can be passed on  to the consumer, there will be  no effect on  plant
closings, employment, communities, industry growth or the balance of trade.

F. LIMITS TO THE ANALYSIS

     We believe our analysis is accurate by  15%. We do not believe there are any critical
assumptions which  would affect the validity of our  conclusions and there are no  questions
remaining to be answered.
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                              POLYVINYL BUTYRAL

A.  INDUSTRY SEGMENTS

     Eighty percent  of the market  for polyvinyl  butyral is for the safety inner layer in
automobile  glass; the remainder is for coatings and export.  This product  was developed
about 40 years ago and at one time was used in all windows of automobiles. In the 1950's
the automotive manufacturers shifted to tempered glass for side windows and rear windows
for most cars. In all  cars, however, polyvinyl butyral is used as the safety ply in  the front
windshield. In 1966 the PVB ply was increased in thickness to 0.76 millimeter.

     There are at present only two producers of polyvinyl butyral sheet,  Monsanto and
DuPont. Up until December of 1973 it was also made by Union Carbide.

     Polyvinyl butyral is made from polyvinyl alcohol and both producers are integrated to
this intermediate raw material, polyvinyl alcohol. Further, both producers are integrated to
the manufacture of the sheet which is then sold to the major manufacturers of automobile
windshield glass, namely Pittsburgh Plate Glass and Libbey-Owens-Ford. There  are three
plants: Monsanto has a plant at Indian Orchard, Massachusetts which is 30  years old and a
newer plant at Trenton, Michigan which is 16 years old. The DuPont plant is  at Fayetteville,
North  Carolina and  is about  20  years  old. The  Trenton, Michigan plant of Monsanto
produces only polyvinyl butyral; the Indian Orchard plant produces a complex of thermo-
setting and thermoplastic resins.

     The capacity of  these plants is not readily discernible since they can be easily expanded
as the demand by the automotive industry increases. It is a batch process and the basic raw
material is polyvinyl alcohol  and its precursor  polyvinyl acetate. The technology differs
somewhat between the two plants since it is possible to produce by-product materials such
as ethyl acetate or to recycle the polyvinyl alcohol. It is doubtful that this technology is
going to change. It is also very doubtful that any new producers will enter the market. Both
producers would probably be equally impacted by the cost of water pollution control.

B. FINANCIAL PROFILES

     No  figures have ever been released on  the  cost of  production or profitability  of
producing polyvinyl  butyral since they are interwoven with the cost of production of the
polyvinyl  acetate,  polyvinyl alcohol, polyvinyl formal and other derivatives that can be
made in the same plant. Our best estimate is shown below:
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                                                        l/lb
              Income                                   72

              Cost
                 Fixed                                  10
                 Variable                                40
                 Sales G&A                              J7.5_
                   Total                                57.5

              Return before tax1                         14.5

              % Return on Sales                         20.0

     We  believe that the production costs to both producers, although using  somewhat
different processes, are quite similar.

     Prices in this industry are determined by competitive materials. The only competitor is
tempered glass  which is lower priced but not  as effective. It  has been approved for use in
side  and rear windows but not for  front windows. Improvements  in the performance of
tempered or coated glass could force a reduction in the price of polyvinyl butyral. At the
higher end of the  scale polycarbonate sheet, which is about four times as expensive as
tempered glass, grew 38% last year in use in safety glass. It is being used in security areas
such as armored cars, bulletproof cars, and areas where theft or other security problems are
high.  A third product has now been made available. This is a polyester windshield produced
by the Sieracin Corporation which  is optional on certain high priced  models. It can  be
electrically  heated,  is  shatterproof,  and  was  used  in  aircraft   in  competition  with
methacrylates many years ago.

     We  do not  foresee that there will be any  significant changes in the prices of polyvinyl
butyral as  a result of water  pollution abatement costs.  However, the basic  intermediate,
vinyl  acetate, is  based on ethylene which is expected to increase sharply in cost  due to the
"energy crisis."

C. METHODOLOGY

     The economic  impact of water  pollution  costs will be assessed  on the basis of whether
these costs can be passed on to the ultimate consumer.
1.  Excludes freight, state and local taxes.
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D.  POLLUTION CONTROL COSTS

                                             BPT                 BAT
     Capital Cost per Plant,$1000              1010                2759
     Annual Cost,
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                               POLYVINYL ETHERS

A.  INDUSTRY SEGMENTS

     The vinyl ethers presently made include: vinyl  ethyl ether made by Union Carbide,
vinyl methyl  ether made by GAP  Corporation and  a vinyl  methylmaleic anhydride
copolymer also made by GAP. Other ethers have been made in experimental quantities but
these are the only ones of commercial significance. They are offered in both solution and
powdered form so that in total there are about six different grades.

     These are not true  plastic materials in that their applications are in the manufacture of
hair spray,  can  coatings, warp sizing  of textiles and  pressure sensitive adhesives. GAP
operates two plants, both at Calvert City. The Union Carbide  plant is at South Charleston,
West Virginia. All three are parts of larger chemical producing operations.

     There is no published information on the capacity to produce these particular resins
and the information is held confidential. We beh'eve, however, that the total market is about
3-5 million  pounds and we estimate that the dollar sales in total is in the order of $3.75
million. Plants are not operating at capacity and because of limited growth we do not  expect
new producers or new plants. Both producers are integrated to the manufacture of some of
their raw materials. There is no integration to end products.

     The plants  are approximately  15 years old.  We do not foresee any  changes in
technology which would change the nature of the production process. We would estimate
that less than 1 00 employees are employed in total. We see no reason to distinguish between
the two producers with regard to the impact of water abatement costs.

B. FINANCIAL PROFILES

     No information is available on the profitability or cash flow of these three resins. Our
estimate is that the total profit before  tax on all three of them  is in the order of $1.0
million. Our estimate of costs are shown below. We have no reason to believe that the
profitability of one producer differs materially from that of  the  others. The major con-
straint on additional plant construction is the size of the market. There are no financial
constraints.
              Income                                    1 00
              Cost
                  Fixed                                 25
                  Variable                              50
                     Total                              75
              Return before tax1                          25
              % Return on Sales                          25
1. Excludes freight, state and local taxes.
                                         55

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     Prices in this industry are determined by the value of the product in its end use. These
resins are only used  in highly specialized  applications where there is  little competition.
Under  these circumstances prices can probably be  maintained at a profitable level. We do
not think prices will change unless some new technology is developed and that is considered
quite unlikely. New competing plastics with lower prices might force a reduction in prices.

C. METHODOLOGY

     The economic  impact of the cost of water abatement controls will be determined by
whether  the cost can be  passed along to the consumer, which we  think is likely. These
products are based on  raw materials which are likely to increase in cost.

D. POLLUTION CONTROL COSTS

                                             BPT                 BAT
     Capital Cost  per  Plant,$ 1000               29                   58
     Annual Cost,tf/lb                      0.20 - 0.70           0.20 -  1.80
     Annual Cost as % of Sales Price        0.2 - 0.70           0.20 -  1.80

     At present, polyvinyl ether wastes  are treated as follows: 70% is handled in  primary
industrial treatment and 30% is discharged to municipal sewers. The total annual cost to the
industry  to meet 1977 standards has been estimated at $30,000; to meet  1983 standards, it
will be $70,000 per year.

E. IMPACT ANALYSIS

1. Price Effects

     We believe that since the costs to meet water  pollution guidelines are a minor percent
of the selling price,these costs will be passed  on to the consumer. Thus, the price of the resin
will rise to include the costs for water abatement control in 1977 and 1983. These increases
will also  cover  the  costs to  new plants. We do not see that  there will  be any  secondary
effects as a result of these price increases.

2. Profitability

     Since we believe  that the  costs for water pollution abatement can be passed on to the
consumer, there will be no effect on  profitability.  Further, since the cost to provide such
water abatement is low, we do not see that there will be any effect on capital availability.

3-7.  Plant Closures, Production, Employment, Community,
     Industry Growth, and Balance of Trade Effects
                                         56

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     Since the impact of the cost  of meeting the guidelines has no important effect on
prices, these costs are insignificant in view of rapidly rising raw material costs, and any
required  increases  can  be passed on to the consumer, there will be no effect on plant
closings, employment, communities, industry growth or the balance of trade.

F. LIMITS TO THE ANALYSIS

     We believe that our analysis is correct by  15%. We have made no assumptions that
would be critical to our conclusions, and there are no questions remaining to be answered.
                                        57

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                          POLYVINYLIDENE CHLORIDE

A.  INDUSTRY SEGMENTS

     Polyvinylidene chloride resin, trade  named Saran by  Dow, is manufactured in two
forms, as a latex which is used for coatings on paper and other plastic films and as a solid
material which is extruded into film commonly used for wrapping turkey, cheese, etc.

     Dow and Vulcan are the sole producers of the monomer and Dow is the sole producer
of the solid  polyvinylidene  chloride. Dewey and  Almy produces latex from purchased
monomer at  Owensboro, Kentucky.  DuPont is  believed to make latex for captive use.
Latices are offered in different solids concentration and molecular weights for different
uses.

     The Dow plant at Midland, Michigan is estimated to be at least 20 years of age,  whereas
the latex plant of Dewey and Almy is about 12 years of age. We estimate that production is
in the order of 50 million pounds per year. The total number of employees involved would
be less than 100. We do not see that the producers would be  affected  differently by the
impact of water abatement control costs. Growth is estimated to  be 10% per year  over the
next five years.

B. FINANCIAL PROFILES

     No data  has ever been released on the profitability of producing vinylidene  chloride
latex. We  estimate a profit  of 30% of the sales as shown below. The salvage value of the
assets would be that of the  equipment  such as kettles and reactors which are used. This
equipment can be used in the manufacture of other types of resins. Dow would probably
have higher profits then  Dewey and Almy since it markets both the solid and latex and is
integrated back to the monomer. There are no financial constraints on additional plant
expansions; the major restriction being the limited growth of the market which is estimated
to be about 12% per year.
              Income                                   54
              Cost
                  Fixed                                 8
                  Variable                              30
                     Total                              38

             Return before tax1                         16

             % Return on Sales                          30
 1.  Excludes freight, state and local taxes.

                                       59

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     Prices in this industry are determined by the competitive value of the product, i.e., the
price/performance  ratio of vinylidene chloride versus other packaging materials and other
plastic coatings. Vinylidene chloride latices are high priced and, hence, are used only where
they are required for their excellent barrier  properties. They  are not price sensitive and,
thus, lower prices would probably not increase the size of the  market significantly. We do
not see that there will be significant price changes other than those caused by increases in
feedstock raw materials, i.e., ethylene due to increased crude oil prices.

C. METHODOLOGY

     The impact of increased costs for water abatement control will be assessed on the basis
of whether these increased costs can  be passed  on to the final consumer without loss of
market share.

D. POLLUTION CONTROL COSTS

                                              BPT                 BAT
     Capital Cost per Plant, $1000           6-32               17-87
     Annual Cost/tf/lb                      0.05 - 0.11           0.05  - 0.38
     Annual Cost as a % of Sales Price        0.1-0.2             0.1-0.7

     There are only three independent producers and one captive producer, all of which are
major corporations. All  producers have primary treatment, and  50% of these have biological
treatment.  There is no  discharge  to municipal sewers.  The  annual  cost  to meet  1977
guidelines is only $10,000;for the industry to meet 1983 guidelines, the industry will spend
$40,000/year, and no new plants are expected.

E. IMPACT ANALYSIS

1. Price Effects

     Any additional costs for water pollution abatement will be passed on to the consumer
since  no other materials are available at similar prices. Therefore, there will be a minor
increase in price to offset the additional expenses needed.

2-7.  Profitability, Plant Closures, Production,  Employment,
     Community, Industry Growth, and Balance of Trade Effects
     Since the impact of the cost of meeting the guidelines has no important effect on
 prices,  these costs are insignificant in view of rapidly rising raw material costs, and any
 required increases can be passed on to the consumer, there will be no effect on profitability,
 plant closings, employment, communities, industry growth or the balance of trade.
                                        60

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F. LIMITS TO THE ANALYSIS

    The estimated accuracy of our analysis is  15%. We have made no critical assumptions
which could affect our conclusions and there are no questions remaining to be answered.
                                      61

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                                 SILICONS RESINS

A.  INDUSTRY SEGMENTS

     Silicone materials fall into four categories: resins, fluids, specialties, and elastomers.
This study is concerned only with the resins and fluids. The elastomers are used for seals
and gaskets, cosmetic surgery, and medical applications. The fluids include greases, water
resistant coatings,  emulsifying agents, defoaming agents,  and automobile  and furniture
polishes. The  specialties  include hand lotions, release agents, anticoagulants and  water
repellents.  There  are also  five new silicone glycols used  as  powder  surface modifiers,
emulsifiers and wetting agents.

     There are five plants producing these products as listed below:

         Stauffer: Adrian, Michigan
         General  Electric: Waterford, New York
         Union Carbide:  Sistersville, West Virginia
         Dow Corning: Carrollton, Kentucky and Midland, Michigan

All of the  producers of silicones are diversified into other plastic and chemical products.

     The  total capacity  of  the  industry is estimated  at  150 million pounds and it is
broken down as follows:

                   Elastomers             45 million  pounds
                   Resins                 20 million  pounds
                   Fluids                 60 million  pounds
                   Specialties              15 million  pounds
                   Other                  10 million  pounds

     The  industry is believed  to be running at about  85% of capacity. The plants range
from 20 years old  to 10 years old.

     All producers utilize nearly  the same technology and all  are integrated to the inter-
mediate raw  material chlorosilane. All of the companies  produce  end product  such as
greases, rubbers, resins and  fluids. We estimate that  the number of employees involved in
the manufacture of these  resins is less than 100.

B. FINANCIAL PROFILES

     It  is not possible to  estimate the profitability  of silicone resin production since  the
producers make both elastomers, resins, fluids,  and  specialties and prices range from $9
to $l/lb.  Any average profit  figure  would have to  cover products ranging from  medical
                                        63

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inplants to rubber  gaskets used in  automobiles. There is no way to  separate the profit-
ability of the  resin  segment from the overall operations. Our best estimate is that return
on sales before tax  is in the order  of 20%. Fixed costs  are high, perhaps as  high as 30%
of total  costs, due to  the extensive technical  service  and product  development effort
required.

     There are no financial constraints on  further expansion.  Expansion will  be dictated
by demand. We do not see that there is any significant difference  between the profit-
ability of the  various producers although  their product mix does vary  on a  year-to-year
basis.

     The major factor that determines the price  of the silicone resins is its  price sensi-
tivity and this effect is small. In  most  applications, silicones are  used where no other
products are  available  and, therefore, a  price  reduction would not materially  increase
demand.  This  tends to  keep prices  stable and at a high level. The constraints on higher
prices are the  availability  of competitive materials once  the price reaches a high enough
level. We do not foresee any likely price changes other than  those caused by inflation.

C. METHODOLOGY

     The economic  impact of water pollution  control  costs  will be determined by the
extent to which these costs can be passed on to  the consumer through price increases.

D. POLLUTION CONTROL COSTS

                                               BPT                  BAT
     Capital Cost per Plant, $1000           1696-2480         4176-5965
     Annual Cost.^/lb                      0.60 - 1.20          1.70 - 3.50
     Annual Cost as a % of Sales Price      0.6-1.2             1.7-3.5

     It should  be recognized that all of the present producers have their own treatment
plants rather  than  depending upon municipal sewage treatment. All producers provide
primary treatment and  20% of the producers provide biological treatment of their wastes
within their own plant complex.  The data we have been provided states that the  total
annual costs to handle  silicone wastes in 1977 will be $1,560,000 and the annual cost to
meet 1983 guidelines will be $5.21 million dollars. Offsetting  this, however, is  the fact
that  the industry already spends $390,000/year for present pollution control systems.
                                        64

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E. IMPACT ANALYSIS

1. Price Effects

     We believe  that in light of the unique  price/performance position of silicone resins
the costs of meeting BPCTCA, BATEA and BADT  guidelines can be passed along to the
consumers. We, therefore, expect that  prices will rise proportionate to the costs of water
pollution abatement. We suggest that  costs for raw materials and inflation will  grossly
exceed these costs. We  see no secondary effects  because of the price increases.

2-7.  Profitability, Plant Closures, Production, Employment,
     Community, Industry Growth, and Balance of Trade Effects
     Since the impact of the  cost of meeting the guidelines  has no important  effect on
prices, these costs are insignificant  in view of rapidly  rising raw material costs, and any
required increases can be passed on to the  consumer, there will be no effect on profit-
ability, plant closings,  employment,  communities, industry  growth  or the balance of
trade.

F.  LIMITS TO THE ANALYSIS

     The  accuracy of our analysis is   15%. We do not know of any critical assumptions
that have been  made  which would  alter our  overall conclusions, and  there  are  no
questions remaining to be answered.
                                        65

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                                    POLYAMIDES

  A.  INDUSTRY SEGMENTS

      The polyamides considered in this report are those other than nylon 6 and 66. This
  includes nylon 6-10, nylon 1 1 and nylon 12. A listing of producers is shown below:

                                                                    Sales/Price
      Nylon 6-10  - DuPont, Richmond, Virginia                         $1.20
                    Monsanto, Pensacola, Florida
      Nylon 11    - Rilsan Corporation, Glen Rock, N.J.                  $1.54
      Nylon 12    - Rilsan Corporation, Glen Rock, N.J.                  $1.60

      Monsanto  reports  that their specialty nylons are produced at irregular intervals  on
  one or two  of  their  20 autoclaves. They  operate for about one day at  a  time  and the
  waste  is insignificant compared with the water waste generated from production of nylon
  6 and  66  at the  same plant. Rilsan  Corporation,  a  French Company, has a plant at
Glen Rock, New  Jersey which produces  nylon 11  and 12.  They state that manufacturing
  data is classified  as confidential and cannot be made available. Our best  estimate is that
  their total  production  is in the order of 5 million  pounds a year. These resins are used
  for powder coating, a  technique common in  Europe but only just getting started in this
  country. They  obtain  their monomers  from  their  plant in Europe. An  examination of
  their facility indicates  that the plant  has  zero  discharge. The  total  number of people
  employed in  this industry segment is less than 100.

  B.  FINANCIAL PROFILE

      There  is no  way to isolate the  costs and profits of producing nylon 6-12 from the
  other nylons  produced in the  same plants at Richmond and  Pensacola. There is no data
  on raw material costs or production costs at Rdlsan's plant at Glen  Rock, New Jersey and
  the plant is  not  operating on  a  commercial  scale.  There  are so many factors, i.e., con-
  sumer  acceptance, price/performance, affecting the  future profitability  of  these experi-
  mental resins that the cost of water abatement is not significant.

  C.  METHODOLOGY

      The methodology is the same as for the other resins, i.e., the impact depends upon
  whether the costs can  be passed to the consumer through price  increases and, thus,  the
  firm's profitability is not affected.
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D  POLLUTION CONTROL COSTS

                                             BPT                 BAT
     ' ..pita! Cost per Plant;$ 1000                60                   172
     Annual Cost^/lb                     0.13-1.17          0.26 - 3.25
     Annual Cost as a % of Sales Price       0.1 - 0.9            0.2 - 2.5

     We have been  informed that at present 100% of the producers  treat their own waste
jnd do  not discharge to municipal sewers. All producers provide primary  treatment, and
60 r  provide  biological  treatment.  The  annual  cost to meet  1977 guidelines will be
580,000 for the industry and  to  meet 1983 levels,  $220 000.     The industry already
:-ne;ui-; 540,000/year.

h  'MPACT ANALYSIS

1  Pr.ct Effects

     Our analysis of industry  pricing  practice shows that the  insignificant cost for water
i  : ,. ;,  u control  could be readily added  to the price, and  priceswill rise accordingly. We
  .  ,  secondary effects as a result of these price increases.

     ?;, :ci  (.:   demand for these products is based  on  their performance in various end
     >;! ; ,, - not sensitive to minor  increments in  price. There will, however,  be major
 H (.      ^ r,.L-.ce n\>i to  raw material shortages.  Since the corporations involved  in manu-
: .f,i,  ..     ,' products  have ample  financial  reserves, we see no problem  with capital
                      Closures, Production, Employment,
            ,s!ry, industry Growth, and Balance of Trade Effects
     :>'".,'  ,1  ici.oact of the  cost of meeting the guidelines has no important effect on
p'i^-.-  '!   :  --.jits are insignificant in view of rapidly rising raw material costs, and any
required  irire^ses can be passed on to the consumer, there will be no effect  on profit-
; :i'-::!\,  ;/;nu closings,  employment, communities,  industry growth or  the  balance  of
 <-.  I.IM- "-  *0 fHE ANALYSIS

     Vve be.'if-n; GUI judgments  are  accurate.  We  have made no assumptions  which are
 crilica!  to the sensitivity of our conclusions, and  there are  no questions remaining to be
 v;is \vered.
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                                SPANDEX FIBERS

A.  INDUSTRY SEGMENTS

     Spandex  is a polyurethane synthetic  fiber manufactured in the United States by
three companies, DuPont at Williamsburg, Virginia, Globe Manufacturing Company at Fall
River, Massachusetts and Gastonia, North Carolina and Ameliotex Incorporated, at Rocky
Hill, New Jersey. No production figures are available. We believe that DuPont  which is
integrated to raw materials  manufactures 75%  to  80%  of the total  produced,  which is
between  15-20 million  pounds per year. This  product  is an elasticized  synthetic yarn
which replaced rubber thread. At one point there were four or five additional producers,
all of which have discontinued  production  because of the  limited market. The market is
now saturated and shows little signs of growth. The raw materials are  similar to those for
other polyurethane  plastics.  There  is  only one grade  although  it is made  available  in
different deniers.  DuPont, of course, is a major producer of other synthetic fibers. Globe
Manufacturing and Ameliotex only produce Spandex fibers  for their own use.

     The process of manufacturing these fibers is proprietary and we  are not  certain that
Globe and Ameliotex  use the same  process as DuPont. There would, however, appear to
be little difference in water pollution between the different producers.

     The product was developed  for use in bathing  suits,  foundation garments, support
hose, etc. It  was originally estimated that these fibers  would be used for suits  and dresses;
however, these markets  have  been taken  over by knitted fabrics. The only possibility of
significant growth in this industry would be due to a change in women's fashions.  How-
ever,  since  there  is excess  capacity today,  we do not visualize additional
plants  being constructed even with increased demand.

     We believe these plants are approximately  10 years of age.  We  do not  believe that
there has  been any change  in  technology  in recent  years  nor do we expect  any  future
change.  We estimate that there  are less than 100 people employed in the total industry.
We do  think  there might be differences in the significance  of pollution control costs
between DuPont which  is by far the major producer  and the two smaller  producers, who
probably have higher production costs.

B. FINANCIAL PROFILES

     There  is  no available data on the profitability of producing  Spandex fiber. Our
estimate of the profitability is shown below:
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         Income                                       100
         Cost
              Fixed                                    25
              Variable                                  6Q_
                 Total                                  85

         Return before tax1                               15
         % Return on Sales                               15

We expect  that DuPont makes a considerably better profit than the two  small indepen-
dent producers. There is little or no  salvage  value for the assets because the equipment is
highly specialized and cannot be used for the production of other fibers.

     The major factor  affecting the  price of Spandex  fiber is the relationship between
supply and  demand. Supply  has generally  exceeded  demand which tends to keep  the
price  down. Serious competition from  other products, the only one of which is rubber
thread, is unlikely since Spandex is a superior material. We do not expect  any significant
price changes other than necessary to  cover raw material and pollution abatement costs.

C. METHODOLOGY

     The economic  impact of water pollution controls will depend  on  the extent to
which these costs can be passed through to the customer.

D. POLLUTION CONTROL COSTS

                                            BPT                BAT
     Capital Cost per Plant.$1000               24                   48
     Annual Cost^/lb                      0.10 - 0.30          0.10- 0.50
     Annual Cost as a % of Sales Price        0.1-0.3             0.1 - 0.5

     There  are only  three producers of Spandex fibers and 90% of the waste is controlled
by in-plant water treatment;  10%  of the waste is  handled by municipal sewerage.  All
wastes have primary treatment. Sixty percent  have industrial biological treatment. The
estimated annual cost to the industry to meet  1977 standards is only  $40,000,
and   $80,000after      1983.  It  is estimated  that  the industry already  spends
$20,000/year.
1.  Excludes freight, state and local taxes.
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E. IMPACT ANALYSIS

1. Price Effects

     We believe that the costs to meet effluent guidelines will be added  to  the price of
the fiber.  These price increases  will have minimal effect considering that Spandex
fibers are  used where they are definitely  required. There  is no competing material and,
therefore,  the price increase will have no effect on demand.

2-7.  Profitability, Plant  Closures, Production, Employment,
     Community,  Industry Growth, and Balance of Trade Effects
     Since  the impact of the cost of meeting  the guidelines has no important effect on
prices, and any  required increases can be  passed on  to  the consumer,  there will be no
effect on profitability,  plant closings, employment,  communities,  industry growth or the
balance of trade.

F. LIMITS TO THE ANALYSIS

     We know of no critical assumptions which would affect our overall  conclusions, and
there are no questions remaining to be answered.
                                       71

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                               ETHYL CELLULOSE

A.  INDUSTRY SEGMENTS

     Ethyl  cellulose., the only  cellulosic except cellulose  nitrate  used  as  a plastiCj was
originally produced during World  War II and  was used because of its toughness at low
temperatures. The major applications  were  flashlight cases  and chess pieces. The material
is now available as pellets for molding and extrusion and as a transparent sheet. This resin
has good  electrical properties  and excellent  toughness. At present there  are  two  pro-
ducers,  Dow at  Midland,  Michigan,  and Hercules at Hopewell,  Virginia,  where other
cellulose derivatives are also produced. The water  wastes are combined  with those  from
other cellulose-based products  and the costs will be difficult  to  allocate between  these
products.

     No figures have ever been released on the size of plants or production capacity. Our
estimate is that  less than  5  million pounds per year are  produced and that the plants
employ less than  25  people. We  do  not believe that water pollution costs will have a
material effect on the future  of  this limited industry. We  foresee no  growth  for the
product and cannot visualize that  there would be  any new producers. Discontinuance of
production at either Dow  or  Hercules  would have no significant effect on either  com-
pany.

B. FINANCIAL PROFILES

     No data is available on costs.  Our best estimate is that producers earn  a 25% pre-tax
return on sales excluding costs for  freight and local taxes.

C. METHODOLOGY

     The impact  will  be based on the  ability to pass pollution control  costs on to the
consumer through price increases and, thus, the effect on the plant's profitability.

D. POLLUTION CONTROL COSTS

                                             BPT                 BAT
     Capital Cost per Plant,$1000            360-530           750--  1386
     Annual Cost  tf/lb                       0.55-1.0            1.65-2.84
     Annual Cost  as a % of Sales Price        1.1-2.0             3.3-5.7

     The costs for water pollution  abatement  for ethyl cellulose has been combined with
the manufacture of other cellulose derivatives since they cannot be separated. All plants
have primary treatment and all plants treat their own wastes; thus they  do not discharge
to municipal sewers.  It is estimated  that  the  industry  already  spends approximately
$540,000/year for pollution control.
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E. IMPACT ANALYSIS

1. Price Effects

     The costs to meet  1977 and 1983  pollution controls will be added to  the price of
the ethyl  cellulose  resin  with  a resultant minor price  increase. This price increase is
achievable due to the inelasticity of demand^

2-7.  Profitability, Plant  Closures, Production,  Employment,
     Community, Industry Growth, and Balance of Trade  Effects
     Since  the  impact  of the cost of meeting the guidelines has no important effect  on
prices, these  costs are  insignificant in view of rapidly rising raw material costs, and any
required  increases can  be  passed  on  to  the consumer, there will be no  effect on profit-
ability,  plant  closings, employment,  communities,  industry  growth or the  balance  of
trade.

F. LIMITS TO THE ANALYSIS

     These estimates are  believed to be  accurate.  We  know of no assumptions which
would affect  the  validity of our conclusions  and there are no questions remaining to be
answered.
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                                  OTHER RESINS

     Although not a part of this contract and not the subject of current study by Arthur D.
Little, Inc., we  have been asked to comment  on the economic impact of the costs of
meeting  the guidelines  for epoxy resins,  urea and melamine  resins,  and
phenolic resins,  since  these  guidelines are  currently being reproposed.
Our comments are included below.
UREA AND MELAMINE RESINS

     The new costs of meeting guidelines for melamine and urea resins, are higher  than
previously estimated for  BPT standards, and somewhat lower for BAT standards. Further,
they are still a relatively small percentage  of the selling price, i.e., 0.3 - 0.4% to meet BPT
and 0.7 - 0.8% to meet BAT standards.

     The cost of pollution control for 1977 standards is small. The costs to meet  1983 levels
are not significant for the larger plants using standard amounts of water. Small plants using
high amounts of water would have some problem, especially those plants making urea resins
whose profit margins are  minimal. There are a number  of captive urea resin plants used to
make resin for particle board and adhesive which might also find it difficult to install new
capacity  considering the  investment required and  the  overall cost.  Under these circum-
stances it  might  be cheaper for those producers to buy resin rather than manufacture their
own.

EPOXY RESINS

     The cost to meet the revised guideline standards for epoxy resins are higher than the
previously proposed  BPT standards  and about the  same for the BAT standards. In both
cases, these costs are a relatively small percentage of the selling price, i.e.,  0.2 - 0.8% to
meet BPT and 0.7 - 2.3% to meet BAT standards. We,therefore,do not see that there will be
any significant impact on the industry as a result of these annual costs.

     The investments necessary in a high water usage plant to meet BAT standards ($1.4
million) might cause  some problems. Older plants might shut down in favor of construction
of newer plants depending upon the degree of obsolescence of the older units. There are
plants  whose age and high  water use might cause a problem. There are about 20 com-
pounders and a large number of captive producers and most discharge to sewers.

PHENOLICS

     The costs to meet water effluent guideline standards for phenolics are  high. They do
present a problem and the impact on the industry may well be significant, since the cost is
very high  for an  industry which has relatively modest profit margins (6 to 10 percent of
selling price). It is our understanding that  the costs  to meet these  guidelines are still under
review at  the  time  of printing of this document. Until final cost  figures are available,
estimates of the  potential impact cannot be made. An  addendum analysis of this segment
will be conducted in the near future to assess these potential impacts.

                                         75

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   II ( IINK Al HI I'OK I
      DAI A  I'A(,I
I   Report No
EPA 230/1-74-044
3.  Recipient's Accession No.
  4   I ill  .ind Subhtle

      Economic Analysis of Proposed Effluent Guidelines - The Plastics and
      Synthetics Industry Phase II
                                                        5. Report Date
                                                           September 1974
                                                        6.
                                                                                        8. Performing Organization Rept. No.
                                                                                           C-75913
i  l'  l'i i Inniiiiif: Orgimi/.ihon Name anil Address
!      Arthur D. Little, Inc.
      Acorn Park
      Cambridge, Mass. 02140
                                                        10. Projcct/Task/Work Unit No.
                                                           Task Order No. 13
                                                        11. Contract/Grant No.

                                                           68-01-1541
  I 2  Sponsoring Orj;am/alion Name and Address
      Office of Planning and Evaluation
      Environmental Protection Agency
      Washington, D.C.  20460
                                                        13. Type of Report & Period Covered
                                                        14
      Siip|>lemcnl.ir> Notes
  Id  Abstracts
      We expect little economic impact from the imposition of proposed effluent guidelines on the manufacture of the specialty
      resins with the exception of unsaturated polyester resins and thermoplastic polyester resins. The small producers of un-
      saturated polyester resins will face some difficulty and might close. This would affect less than 1% of the industry capacity.
      Costs of meeting guideline standards might slow the growth of saturated polyester resins. Phenolic resins will likely be
      affected depending on final costs yet to be developed.
  I 7  Ke\ Words and Document Analysis.
      Cellulose Nitrate
      Nitrile Barrier Resins
      Fluorocarbons
      Ethylene Vinyl Acetate
      Unsaturated Polyester Resins
      Saturated Polyester Resins
      Polypropylene Fibers
      Methylmethacrylate

  17b. Identifiers/Open-linded Terms
      17a.  Descriptors
                           Alkyd Molding Resins
                           Polyvinyl Butyral
                           Polyvinyl Ethers
                           Polyvinylidene Chloride
                           Silicone Resins
                           Polyamides
                           Spandex Fibers
                           Ethyl Cellulose
                           Other Resins
  I7i  COSAII I icId/C.roup
  IK  Availability Statement
     Limited availability through U.S. Environmental Protection
     Agency Information Center, Waterside Mall,
     Washington, D.C.   20460
                                       19. Security ("lass (Iliis
                                          Report)
                                           UNC1 ASSI1 11 [)
                                      2(}. Secuntx ( lass ( This
                                          Pace)
                                           IMM( 1.ASSI1 II I)
          21.  No. ot IVe
                      80
          22.  Price
 I OKM N1IS-1S 
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