United States
Environmental Protection
Agency
Office of
Water Planning and Standards
Washington, DC 20460
EPA 440/2-79-017
r/EPA
Water
Economic Impact Analysis
of Alternative Pollution
Control Technologies
Wet Process Hard board
and Insulation Board
Subcategories of the
Timber Products Industry
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This document is available in limited quantities
through the U.S. Environmental Protection
Agency, Economic Analysis Staff WH-586, 401 M
Street, S.W., Washington, D.C. 20460, 202-755-
2484.
This document will subsequently be available
through the National Technical Information
Service, Springfield, Virginia, 22151.
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EPA-440/2-79-017
Economic Impact Analysis of
Alternative Pollution Control Technologies
Wet Process Hardboard and Insulation Board Subcategori<
of the Timber Products Industry
U.S. Environmental Protection Agency
Office of Water Planning and Standards
September 1979
« S Environmental Protection
K, 12* Floor
CtMo, IL 60604-35^0
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TABLE OF CONTENTS
List of Tables v
List of Figures vii
I. EXECUTIVE SUMMARY 1
A. SCOPE OF WORK 1
B. INDUSTRY CHARACTERIZATION 1
C. CURRENT EFFLUENT STATUS AND COST OF COMPLIANCE 3
D. ECONOMIC IMPACT OF COMPLIANCE WITH REGULATIONS 3
II. INDUSTRY CHARACTERIZATION - INSULATION BOARD 7
A. INDUSTRY DEFINITION 1
B. TYPES OF FIRM 7
C. PRODUCT DESCRIPTION 8
D. PLANT CHARACTERISTICS OF THE EXISTING INDUSTRY 12
E. CHARACTERISTICS OF NEW PLANTS 15
F. COMPETITIVE STRUCTURE 16
G. FINANCIAL PROFILE 20
III. INDUSTRY CHARACTERIZATION -WET PROCESS HARDBOARD 23
A. INDUSTRY DEFINITION 23
B. TYPES OF FIRMS 23
C. PRODUCT DESCRIPTION 26
D. PLANT CHARACTERISTICS OF THE EXISTING INDUSTRY 29
E. CHARACTERISTICS OF NEW CAPACITY 33
F. COMPETITIVE STRUCTURE 34
G. FINANCIAL PROFILE 37
IV. COST OF COMPLIANCE WITH REVISED WATER EFFLUENT
REGULATIONS 39
A. INTRODUCTION 39
B. CU R R E NT E F F LUE NT STATUS 39
C. POLLUTION CONTROL OPTIONS FOR EXISTING PLANTS 39
D. POLLUTION CONTROL OPTIONS FOR NEW SOURCES 41
in
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TABLE OF CONTENTS (Continued)
Page
V. ECONOMIC IMPACT OF COMPLIANCE WITH REVISED WATER
EFFLUENT REGULATIONS 45
A. INTRODUCTION 45
B. PRICE INCREASES 45
C. FINANCIAL CONSIDERATIONS 48
D. PLANT CLOSURE 48
E. CAPACITY EXPANSION 51
F. MARKET STRUCTURE 51
G. EMPLOYMENT AND COMMUNITY IMPACTS 51
VI. LIMITATIONS OF ANALYSIS 53
A. EPA's REGULATIONS AFFECTING WASTE DISPOSAL 53
B. FUTURE GROWTH IN DEMAND 54
C. UNKNOWN FACTORS 54
REFERENCES 55
BIBLIOGRAPHY 57
APPENDIX A - SUPPLEMENTARY DATA 59
APPENDIX B - EPA FINANCIAL 308 SURVEY 65
IV
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LIST OF TABLES
Table No. Page
1-1 Cost of Compliance for Plants Impacted by Revised
Effluent Regulations 4
1-2 Revenue Required to Recover the Cost of Complying with
Revised Regulations for Hardboard Plants 5
11-1 Sales by Insulation Board Manufacturers, 1977 7
11-2 Production of Insulation Board, 1965-1976 9
II-3 Insulation Board Plants in the United States, 1977 14
II-4 Age Distribution of Insulation Board Plants 15
II-5 Employment Level of Insulation Board Plants 16
II-6 Concentration in the Insulation Board Industry 16
II-7 Prices of Selected Insulation Board Products, 1965-1978 17
II-8 Price Indexes for Selected Insulation Board Products, 1965-1978 19
II-9 Pro-Forma Income Statement Insulation Board Plants 21
111-1 Hardboard Production Capacity, 1977 24
III-2 1977 Hardboard Sales 25
III-3 Shipments, Imports, and Apparent Consumption, 1964-1978 27
III-4 Capacity Utilization by Hardboard Industry, 1967-1978 28
111-5 Distribution of Hardboard Plants by Plant Age 32
111-6 Employment in Wet Process Hardboard Plants 33
UI-7 Process Economics of New Wet Process Hardboard Capacity 34
111-8 Hardboard Industry Capacity 35
111-9 Tempered Hardboard Price Trends, 1963-1978 36
111-10 Hardboard Demand and Price Forecast 38
111-11 Pro-Forma Income Statement Wet Process Hardboard Plants 38
IV-1 Insulation Board and Wet Process Hardboard Current
Method of Water Effluent Disposal 39
IV-2 Model Plant Treatment Options 40
IV-3 Cost of Compliance for Plants Impacted by Revised
Effluent Regulations 41
IV-4 Model Plants for New Source Performance Standards
Insulation Board and Wet Process Hardboard 42
IV-5 Cost of Compliance New Insulation Board and Wet
Process Hardboard Mills 43
V-1 Revenue Required to Recover the Cost of Complying with
Revised Regulations for Hardboard Plants 46
V-2 Distribution of Hardboard Capacity Impacted Vs.
Non-impacted Plants Option 3 47
V-3 Cost of New Hardboard Capacity New Mill Versus
Incremental Expansion 52
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LIST OF FIGURES
Figure No. Page
11-1 Insulation Board Production, 1969-1976 11
II-2 Insulation Board Demand, 1976-1982 13
111-1 Hardboard Consumption and Construction Expenditures,
1964-1978 30
III-2 Total Hardboard Demand, 1976-1984 31
V-1 Post-Compliance Profitability with No Price Increase
(1976 Cost Structure) 49
V-2 Investment Required for Compliance with Revised Effluent
Regulations Compared with Plant Cash Flow 50
vu
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I. EXECUTIVE SUMMARY
A. SCOPE OF WORK
The U.S. Environmental Protection Agency (EPA) is required by Section 301 (d) of the
Clean Water Act to review and revise, if necessary, effluent limitations promulgated pursuant to
Sections 301, 304, and 306 within five years of promulgation of these regulations. This study
presents an economic impact analysis of alternative pollution control technologies for the in-
sulation board and wet process hardboard subcategories of the timber products industry. It
characterizes each industry subsegment; summarizes alternative technologies and their related
costs of compliance,* and analyzes and discusses the anticipated economic impact on those
plants that would require investments to be in compliance with alternative regulation options.
The EPA assisted in the analysis by surveying the board products industry through a Financial
308 Letter.
The study does not address the costs and economic impacts that might or might not be
incurred as a result of other environmental or other federal regulations, such as EPA solid waste
regulations, EPA air pollution regulations, EPA pesticide regulations or Occupational Safety and
Health Administration regulations.
B. INDUSTRY CHARACTERIZATION
1. Insulation Board
The insulation board industry comprises establishments engaged in the production of
structural and decorative fiberboard products constructed from inter-felted ligno-cellulosic fibers
and having a density of less than 31 pounds per cubic foot.
Twelve companies, one of which is privately held, operate the 17 insulation board plants in
the United States. Eleven of these companies are large, diversified corporations: five have major
interests in forest products, and six have major interests in other building products. Two of the
companies have more than one insulation board plant.
The basic operating technology of the industry is very similar to the fourdrinier paper
process and has not changed substantially since its inception. Ten of the seventeen plants are
located in the South, with the remainder in Maine, Michigan, Minnesota, Pennsylvania and
Oregon. Plant capacities range from 54 million to 400 million square feet, Vz" basis, but stated
capacities can vary according to the product mix. Plant locations are evenly distributed among
rural, suburban, and urban areas. Seven of the seventeen plants can also manufacture hardboard.
Insulation board products are primarily used in the construction industry as building board,
insulating roof deck, roof insulation, ceiling tile, lay-in-panels, sheathing and sound deadening
board. Between 1965 and 1976, U.S. production has fluctuated between 3 billion square feet, Vz"
basis, and 3.9 billion square feet. The value of shipments in 1976, was estimated at $275
million.
'Derived from Revised Technical Review of Best Available Technology, Best Demonstrated Technology and Best
Demonstrated Technology and Pretreatment Technology for the Timber Products Point Source Category, as prepared
for the Environmental Protection Agency by Environmental Science & Engineering, Inc.
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However, insulation board is threatened by substitute products and/or technologies in
many of its applications. Thus, in contrast to an average annual growth rate of 1.6%
from 1965 to 1976, Arthur D. Little, Inc., forecasts a decline at an average annual rate of
5% into the 1980's.
Since 1960, the industry has become more concentrated: currently four companies
(Celotex, Armstrong Cork, Weyerhaeuser, and United States Gypsum) operate 56% of U.S.
capacity. As insulation board is capital intensive compared to other solid wood prod-
ucts and requires a secure wood source, there are significant barriers to the entry of new
firms.
Since 1965, price changes in insulation board have been moderate compared to price
changes of other wood products with which it competes. The median value of after-tax
profitability is about 3% of sales, with a range from zero to 7%.
2. Wet Process Hard board
The wet process hardboard industry comprises establishments producing hardboard in
densities generally ranging from 31 to 65 pounds per cubic foot from inter-felted wood fiber, using
a wet forming and either a wet or dry pressing process.
There are 15 producers operating 28 wet and dry process plants in the United States. The
industry is composed of 3 private firms and several large corporations. Of the 15 hardboard
producers, 7 operate more than one hardboard plant. Wet process plants represent 16 of the 28
facilities and are operated by 11 producers; 4 of these producers operate more than one wet
process plant.
As with the insulation board industry, hardboard mills frequently are integrated back to
raw materials sources as owners of woodlands and the larger publicly owned companies also
operate captive distribution systems that handle a portion of their output. The remaining
producers sell their products through independent wholesalers or through the captive distribution
systems of other companies.
Hardboard products serve four general markets; interior paneling, exterior siding, indus-
trial, and do-it-yourself. Most of the mills have associated fabricating facilities to produce a wide
variety of finished products.
Imports have ranged from 4.6% to 15.6% of domestic consumption during the 1970's.
Volumes vary, depending on the level of U.S. demand, and tend to fill a market need at the lower-
value end. In 1978, shipments from domestic plants totaled 7.7 billion square feet, reflecting an
average annual growth rate of 7.9% since 1964. During the same period, domestic consumption
has grown at 7.5% per year, totaling an estimated 8.7 billion square feet, 1/8" basis, in 1978.
While wet process hardboard plants generally compete in the market against the output of
dry process mills, the latter use minimal amounts of process water and are closed systems. Wet
process mills are those operations that use a pulping process that requires large amounts of water
and a wet mat forming system similar to the paper process.
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A typical wet process plant produces about 230 million square feet, 1/8" basis, with
individual plant capacities ranging from 52 to 1850 MMSF. Of the 16 wet process plants in the
United States, 8 were constructed before 1958 and 2 since 1968. No new wet hardboard plants
have come on stream since 1971; however, several locations have added substantial capacity.
While Arthur D. Little, Inc., forecasts future growth in demand at about 3% per year, it is highly
likely that capacity additions to meet this increased demand will come in the form of incremental
expansion at existing facilities or perhaps through the conversion of under-utilized insulation
board capacity.
The five largest firms (Masonite, Abitibi, Weyerhaeuser, Boise-Cascade, and Superwood)
operate more than 70% of total hardboard and wet process hardboard capacity. As with insulation
board, there are significant barriers to the entry of new firms, including its capital intensity,
market structure, need for a fiber source, and the required sales effort.
In 1976, the median, after-tax profit for a 200-million-square-foot wet process hardboard
plant was about 7%; the industry range was from 1% to 13%.
C. CURRENT EFFLUENT STATUS AND COST OF COMPLIANCE
Two of the plants producing only insulation board discharge into navigable waters, whereas
five discharge into municipal sewers and five have no process water discharge. Of the eleven wet
process hardboard plants, nine discharge into navigable waters, one discharges into municipal
sewers and one has no discharge. Of the five plants producing both insulation board and
hardboard three discharge into navigable water, one into a municipal system, and one has no
discharge. Thus many plants have pollution control equipment in place and, for several plants,
current treatment will be sufficient to meet revised effluent guidelines. However, seven plants
producing wet process hardboard may be required to install new equipment to meet the revised
regulations. An eighth plant is in the process of installing a pretreatment system.
Investment costs under the two control options defined by the Environmental Protection
Agency for wet process hardboard range from $183,000 to $7.4 million, depending on the size of
the facility and the control option defined (Table 1-1). Annual operating costs range from $51,000
to $2.3 million.
A candidate new source performance standard for insulation board and wet process hard-
board plants calls for zero discharge. The total investment required also varies by plant size and
process type, and ranges from $2.9 million to $5.5 million for insulation board, and from $2.0
million to $5.1 million for wet process hardboard. Land requirements for an S2S wet process
hardboard are up to 720 acres.
D. ECONOMIC IMPACT OF COMPLIANCE WITH REGULATIONS
An analysis of economic impact of the revised water effluent regulation options was per-
formed for each of the seven affected plants. The price increase required to recover the cost of
compliance varies widely among the wet process hardboard plants but, in general, Option 1 will
produce a lower impact upon costs than would Option 2. (Table 1-2).
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TABLE 1-1
COST OF COMPLIANCE FOR PLANTS
IMPACTED BY REVISED EFFLUENT REGULATIONS
($000)
Investment
Option 1
Plant 2002
Plant 2003
Plant 2004
Total Option 1
Option 2
Plant 2001
Plant 2002
Plant 2003
Plant 2004
Plant 2007
Plant 2012
Plant 2099
Total Option 2
Type of
Product
S1S
S2S
S1S
SIS
S1S
S2S
S1S
S1S
S1S
S1S
Total
285
7,266
1.320
8,871
6,856
1,105
7,436
2,938
183
599
1,228
20,345
Land
5
40
105
150
188
46
40
300
0
0
30
604
Other
Investment
280
7,226
1,215
8,721
6,668
1,059
7,396
2,638
183
599
1,198
19,741
Operating
Costs
51
2,219
179
2,449
796
107
2,300
274
101
173
107
3,858
Source: Environmental Science and Engineering, Inc.
Hardboard, on average, is expected to be in tight supply over the next five to ten years with
demand expected to grow annually at approximately 2% per year. To satisfy this demand, new
capacity will be necessary. The minimum price necessary to support new capacity is over $100 per
thousand square feet. This price is over 30% higher than the 1977 price and is higher than any
price increase computed in Table 1-2 for the affected plants as being necessary to recover cost
increases and maintain profitability.
Profitability of wet process hardboard plants impacted by revised regulations will be
reduced in the absence of price increases and all but one plant will cover cash costs and
depreciation, assuming that the 1976 operating results are representative of cost conditions likely
to prevail in 1984. To the extent that price increases to support new capacity outstrip cost
increases for the affected plants, the reduction in profitability occasioned by the regulation will
be mitigated.
The EPA is proposing Option 2 as the Best Conventional Pollutant Control Technology for
wet process hardboard. Under Option 2, two plants have capital requirements of less than 100% of
cash flow, two plants have investment requirements of 100% to 200% of annual cash flow and
three plants have investment requirements of 200% to 350% of cash flow.
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TABLE 1-2
REVENUE REQUIRED TO RECOVER THE COST OF
COMPLYING WITH REVISED REGULATIONS FOR HARDBOARD PLANTS
Plant Type/Code
(1)
1976
Revenue ($000)
Recovery of Compliance Cost
Required
A Revenue $/MSF
% A 1977
Price
Option 1
Plant 2002
Rant 2003
Plant 2004
Plant 2013*
Option 2
Plant 2001
Plant 2002
Plant 2003
Plant 2004
Plant 2007
Plant 2012^
Plant 2013*
Plant 2099
20,000
>30,000
8,400
20,400
>30,000
20,000
>30,000
8,400
9,600
>30,000
20,400
5,500
78
78
78
78
78
78
78
78
78
78
78
78
0.80
9.93
6.60
6.10
3.96
2.60
10.23
13.40
1.75
0.30
6.10
8.30
1
13
9
8
5
4
13
17
2
0
8
11
*This plant is in the process of installing a pollution control system, and those specific
costs were used in the analysis.
**The average price for wet process hardboard for 1976.
Source: Arthur D. Little, Inc., estimates.
Had Option 1 been selected, four fewer plants would have been affected and the required
price increase to recover cost would have been slightly lower.
The number and size of insulation board plants will be unaffected by the proposed regu-
lations. However, one hardboard plant, 2003, may close as a result of Option 1 or 2 because of the
large capital requirements and the reduction in plant profitability. If this plant closes
approximately 300 jobs will be affected with attendant impacts on community employment.
New hardboard capacity probably will be built at existing plants rather than at greenfield
sites and will not be influenced significantly by revised new source regulations.
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II. INDUSTRY CHARACTERIZATION —
INSULATION BOARD
A. INDUSTRY DEFINITION
The insulation board industry ( a subset of the building board industry, SIC 2261) comprises
establishments engaged in the production of structural and decorative fiberboard products
constructed from inter-felted ligno-cellulosic fibers and having a density of less than 31 pounds
per cubic foot.
B. TYPES OF FIRM
1. Size of Firms
Twelve companies, one of which is privately held, operate the 17 insulation board plants in
the United States (Table II-l). Eleven of these companies are large diversified corporations, five
have major interests in forest products and six have major interests in other building products.
There are only two multi-plant companies; Celotex, the largest producer, operates four plants
and U.S. Gypsum operates three.
TABLE 11-1
SALES BY INSULATION BOARD MANUFACTURERS, 1977
($ million)
Total Insulation
Company Corporate Board1
Abitibi Paper Co., Ltd. 880 12
Armstrong Cork 981 31
Boise Cascade 2316 16
Celotex/Jim Walter2 525/1422 59
Flintkote 587 16
Georgia Pacific 3675 16
Huebert Fiberboard 2 2
Kaiser Gypsum 212 12
National Gypsum 748 15
Temple/Time Inc. 340/1038 17
U.S. Gypsum 1177 21
Weyerhaeuser 3283 23
1. At 80% of capacity and $97/MSF, 1/2".
2. Fiscal year ended August 31.
Source: Dun and Bradstreet Directory, 1978, Directory of Corporate
Affiliates, 1978.
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The percentage of sales revenues contributed to each company by insulation board products
varies considerably from company to company (Table II-l). Although they may hold sizeable
insulation board capacity, most of the companies are involved in many other businesses and do
not have significant capital committed to the industry relative to their total business. Annual
sales of the 12 companies, including sales from other operations such as lumber, plywood, and
non-wood products, range from $2 million to more than $3.6 billion (Table II-l).
2. Integration/Diversification
The major forest products firms are normally fully integrated backward to timber ownership
or control and forward to distribution systems. Insulation board is usually manufactured to take
advantage of the volumes of locally available waste from other wood products mills and to
broaden the company's product line.
Four of the forest products firms (Abitibi, Boise Cascade, Georgia Pacific, and Weyerhaeu-
ser) have major capital interests in various segments of the paper industry as well as a full
spectrum of building products. Temple Industries, a subsidiary of Time, Inc., produces a wide
range of solid wood products.
Five of the building products firms involved in the insulation board industry (U.S. Gypsum,
National, Kaiser Gypsum, Flintkote and Celotex, a division of Jim Walter Corporation) are
highly diversified into both residential and nonresidential building materials. Armstrong Cork
has major interests in both residential and commercial interior finishing materials, including
floor coverings, wall coverings, and furniture. The general building products firms produce
insulation board to complement their product lines. While these firms are characterized by well-
developed captive distribution systems, they generally are not integrated backward to timber
control. The remaining company, Huebert Fiberboard, is privately held and insulation board
apparently constitutes its major business.
C. PRODUCT DESCRIPTION
1. Types of Products
Insulation board is known in the marketplace under many different names, i.e., fiberboard,
sheathing board, backer board, or asphalt board. Insulation board products can be divided into
seven major categories, as follows:
• Building Board — a general-purpose product for interior construction.
• Insulating Roof Deck — a three-in-one component which provides roof deck,
insulation, and a finished interior ceiling surface. Insulation board sheets are
laminated together with waterproof adhesives.
• Roof Insulation — insulation board designed for use on flat roof decks.
• Ceiling Tile — insulation board embossed and decorated for interior use. It is also
valued for acoustical qualities.
• Lay-in-Panel — a finished tile board used in suspended ceilings.
• Sheathing — a board used in exterior construction because of its insulative and
noise control qualities, its bracing strength, and its low price.
• Sound Deadening Insulation Board — a special product designed to control noise
levels in buildings.
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The American Society for Testing and Materials, American National Standards Institute,
U.S. National Bureau of Standards, and other agencies set standard specifications for these and
other product categories.
2. Market Size and Future Growth
Since 1965, total U.S. production, as reported by the Bureau of the Census, has fluctuated
between a low of 1.16 million tons (3.0 billion square feet, Vfc" basis) in 1970 to a high of 1.55
million tons (3.9 billion square feet) in 1973 (Table II-2). In 1971 and 1972, the insulation board
industry seemed to be slowly losing its market and steadily becoming more unprofitable as plants
continued to close. Six plants had closed since 1960 and operations at two more plants were
severely cut back in 1977. Since 1975, per capita consumption of insulation board has fluctuated
between 11.3 and 13.5 pounds per person although total U.S. production in 1976 was still below
the 1973 peak (Table II-2). While the future trend for insulation board demand is a declining one,
the current (1978) high levels of housing construction and the demand for insulation have
stabilized production levels.
TABLE 11-2
PRODUCTION OF INSULATION BOARD, 1965-1976
Year
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
Total1
(000 tons)
1258
1155
1176
1133
1352
1219
1446
1529
1547
1295
1240
1450
Production
Per Capita
(pounds)
12.9
11.7
11.8
11.3
13.3
11.9
14.0
14.6
14.7
12.2
11.7
13.5
Per $ Billion of
New Construction2
(000 tons)
15.9
14.5
15.1
13.8
16.4
15.5
16.9
16.6
16.6
16.2
17.9
19.8
1. Annual growth rate 1.6%.
2. Constant 1967 do liars.
Note: Government import/export data are unreliable. The volumes are generally
offsetting and less than 2.5% of sales; therefore, the data are not shown.
Source: "The Demand and Price Situation-for Forest Products, 1976-1977"
USDA, Forest Service Miscellaneous Publication 1357.
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Trade directories indicate that 64% of the world's insulation board capacity is in the United
States. Government data on insulation board imports and exports are unreliable; the volumes are
small and offsetting; therefore, the data are not shown. However, according to U.S. Forest Service
data, imports have generally been less than 2.5% of domestic production.
Interior products account for 309p of the total production (on a '/2-inch basis) and are mainly
prefinished building board and ceiling tile (Figure II-l).* Exterior products, principally sheathing
board and roof insulation board, represent 58% of production. The remaining 12% includes
insulation board used in industrial applications, principally trailer (mobile home) board.
The largest interior products market has traditionally been nonacoustical ceiling tile and
lay-in panels. This market has dropped from 530 million square feet in 1972 to 321 million square
feet in 1976, largely as a result of the inclusion of stricter flame spread requirements in building
codes. The product, which had been widely used in nonresidential construction, is now limited to
the residential repair and remodeling market. Improvements in some fire resistance qualities
have helped the acoustical tile market grow from 172 million square feet to 201 million square feet
over the 1972-1976 period and have kept regular tile products from losing even more of their
market. Over the same period, sound-deadening board has suffered heavy market losses, with
volume slipping from 114 million square feet to 46 million square feet. The future of the interior
products markets is highly dependent on the ability of the manufacturers to develop a better fire
resistant board. Arthur D. Little forecasts that the interior products market will decline 5-6%
annually through 1982.
The largest of the exterior products markets is sheathing. In this application, insulation
board is frequently used as a backup to brick veneer. Over the period from 1972 to 1976 sheathing
volume decreased from 1,608 million square feet to 1,368 million square feet; however, 1972
insulation board sheathing production was the highest in the past nine years. The availability of
price-competitive products and the fact that many building codes permit exterior wood sidings to
provide rack**resistance, previously provided by plywood sheathing or brick, are forcing a
cutback in the insulation board sheathing market. Also, insulation board sheathing products
have an R-value of approximately 2.64 (°F ft2. Btu/inch), which is considerably lower than that of
most true insulation products like fiberglass and foams. Furthermore, the sheathing panels are
usually '-> inch thick, with a resulting R-value of only 1.32, which is less than what is being
required in energy conserving construction.
Gypsum sheathing is insulation board's chief competitor in the sheathing market. The 1977-
1978 housing boom, however, has caused a shortage of gypsum, thus resulting in more insulation
board being used than would otherwise have been the case. Gypsum is a good example of a
preferred cost-competitive product. New products such as foil-backed structural foams are also
competing in the sheathing market. On the other hand, roof insulation board has made a
recovery, with production going from a nine-year low of 261 million square feet in 1972 to 549
million square feet in 1976. As a result, over the 1972-1976 period, the total exterior products
market volume has increased 1.69c. The exterior product demand will weaken as housing con-
struction slows and as capacity comes on-stream from competing products (approximately 10
* For a more detailed breakdown, see Appendix A.
** Racking strength — the ability of the structural unit to withstand shear and bending stresses resulting from various
building loads.
10
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2L
c o
T3
O -D
£ §
•E i
co a
o
'&
^0
tf>
c
1800
1600
1400
1200
1000
800
600
400
200
Housing Starts
v\
Total Production
if
ill
Exterior
Products
Interior
Products
_L
tf^;^
^^^^^>^^>:^.v
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plywood mills and at least two foam panel plants are under construction). In view of these
downward pressures on demand, Arthur D. Little forecasts the exterior products market to drop
by 2.5-3.0 percent annually through 1982.
The industrial market for insulation board has declined from a nine-year high of 718 million
square feet in 1972 to 418 million square feet in 1976. Most of this loss is attributable to a decline
of 243 million square feet over the 1972-1976 period in the trailer board market, which was largely
a result of flame spread requirements in mobile homes. The use of insulation board for expansion
joint strips has also declined dramatically. Arthur D. Little estimates that the industrial market
will decrease 7-8% annually through 1982.
The insulation board industry is indirectly affected by the level of hardboard imports;
should the hardboard demand growth require more domestic capacity, some insulation board
capacity can be converted to produce hardboard. A conversion from hardboard to insulation
board capacity, although it is not likely, may also occur during periods of weak demand for
hardboard.
Most insulation board is used in remodeling or new construction; therefore, the demand for
it is cyclical. To minimize the influence of cyclicality, various historic growth rates were calcu-
lated, based on data in Table A-l, using a least squares time trend line. Over the 1969-1976
period, the market for exterior insulation board products grew at 0.74% per year, while interior
and industrial products grew at an annual rate of 0.55% and -1.6%, respectively, and the average
annual growth rate for total production was 0.35%. At the same time, the economy in general has
experienced real growth of about 3.0% per year, thus confirming our discussion about insulation
board losing market share to competitive products for a long time. The factors which have
contributed to the current favorable supply/demand balance for insulation board in 1977-78 are
temporary; the strong housing market combined with the shortage of gypisum sheathing will not
persist. Further competition from competing products will become more intense. In view of these
considerations, the aggregated market for insulation board is projected to decline at an average
rate of 5% annually through 1982 (Figure II-2). However, because of the cyclicality of construc-
tion, this market will reflect the same short periods of growth and construction typical of most
building materials.
D. PLANT CHARACTERISTICS OF THE EXISTING INDUSTRY
1. Process Technology
The basic operating technology of the industry is very similar to the fourdrinier paper
process and has not changed substantially since its inception. A cylinder screen type of mat
forming system is also used. Some technical improvements have been made in the fiber refining
stage of the production process.
Technical changes in the product also have had a significant impact on the industry and
have been market-driven. These have resulted in production process modifications.
2. Size of Plants
Existing plant capacities, on a '/2 inch-thick basis, range from 54 million to 400 million
square feet (Table II-3). The mix of structural and tile products at a given mill can have a
substantial impact on the stated mill capacity figures. For example, because of trim losses and
12
-------
3800
3600
3400
C 3200
I 3000
LL
0)
2800
c
I 2600
2400
2200
2000
I
I
1976 1977 1978
Source: Arthur D. Little, Inc., estimates.
1979
1980
1981
1982
FIGURE 11-2 INSULATION BOARD DEMAND, 1976-1982
13
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TABLE 11-3
INSULATION BOARD PLANTS IN THE UNITED STATES, 1977
Company
Abitibi
Armstrong Cork
Boise Cascade
Celotex
Celotex
Celotex
Celotex
Flintkote
Georgia Pacific
Huebert Fiberboard
Kaiser Gypsum
National Gypsum
Temple Industries
U.S. Gypsum
U.S. Gypsum
U.S. Gypsum
Weyerhaeuser
Total
Location
Blountstown, FL3
Macon, GA
International Falls, MN
Dubuque, IA
Marrero, LA4
L'Anse, Ml 3
Sunbury, PA3
Meridian, MS
Jarratt, VA*
Boonville, MO
St. Helens, OR
Mobile, AL
Diboll,TX
Lisbon Falls, ME
Pilot Rock, OR3
Greenville, MS
Broken Bow (Craig), OK
Annual1
Capacity
(MMSF-1/2")
150
4002
210
737
200
210
50
150
192
220
271
300
Other
Products
Manufactured
Hardboard
Hardboard
(1978)
Hardboard
Hardboard
(all facilities)
Hardboard
3090
1. These are approximate capacities as they depend upon product mix. Figures quoted are for mills
operating 24 hours/day, 6-2/3 days/week, 50 weeks/year.
2. Understated due to heavy tile production. If operated as a sheathing mill, capacity would increase 20%.
3. No effluent.
4. Not considered in this analysis.
Sources: 1976 Directory of the Forest Products Industry, American Board Products Association,
and Arthur D. Little, Inc., estimates.
14
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product configuration, a mill that produces interlocking ceiling tile will produce 20% less board
than an identical mill producing sheathing. Plants producing prefinished building board and lay-
in ceiling tile will also have trim losses considerably in excess of identical sheathing mills.
3. Age Distribution
Age is a factor in overall plant efficiency. Twelve of the plants are more than 20 years old
and all but one are more than 10 years old (Table II-4).*
TABLE 11-4
AGE DISTRIBUTION OF
INSULATION BOARD PLANTS
Age (Years) Number of Plants
0-19 5
20-29 5
30+ J_
Total 17
Source: EPA Financial 308 Letter.
4. Location
Ten of the 17 plants are located in the South and the remainder are in Maine, Michigan,
Minnesota, Pennsylvania, and Oregon. This distribution developed because of the availability of
wood fiber close to the market and insignificant competition for wood resources in the South at
the time the plants were constructed. The sites are evenly distributed between rural, suburban,
and urban areas.
Wood resources that are owned or controlled under long-term contracts typically supply 30-
50f;< of the plants' raw fiber needs. The remainder of each plant's fiber requirement is made up by
open market purchases. Four of the mills are part of multi-plant forest products production
complexes and derive a substantial portion of their fiber requirements from the waste of other
operations.
5. Employment
The 1972 Census of Manufactures indicates that the industry supported 6,100 employees on
a payroll of $59 million. Most of the plants operate with over 200 employees (Table II-5); however,
compared to the more basic wood products, such as lumber and plywood production, it is one of
the less labor-intensive segments of the industry.
E. CHARACTERISTICS OF NEW PLANTS
In the past nine years, only one new insulation board plant has opened. Since 1960, six
plants have shut down. In 1976 and 1977, two large plants announced major cutbacks in their
*The Celotex plant in Marrero is excluded from this analysis because it does not use wood fiber as a raw material but is
included in the discussion in order to present a complete picture of the industry.
15
-------
TABLE 11-5
EMPLOYMENT LEVEL OF
INSULATION BOARD PLANTS
Number of Employees Number of Plants
0-199 5
200-299 5
300-399 3
400+ _4_
Total 17
Source: EPA Financial 308 Letter.
operations. In 1978, Georgia Pacific was expected to add hardboard siding capacity in Jarratt,
Virginia, to its insulation board and will operate both production lines. No companies have
announced any intentions, plans, or desires to build additional insulation board capacity.
F. COMPETITIVE STRUCTURE
1. Market Structure
Since 1960, when 23 insulation board plants were operated by 17 firms, the industry has
become more concentrated. Currently, the top three firms control 47% of industry capacity and
the top five firms control 63fp (Table II-6). As product demand declines and plants close or
convert to other products, the industry is expected to become even more1 concentrated.
TABLE 11-6
CONCENTRATION IN THE
INSULATION BOARD INDUSTRY
Firm % Capacity
Celotex 24
Armstrong Cork 13
Weyerhaeuser 10
U.S. Gypsum 9
Temple 7
All Others (7) J37^
Total 100
Sources: American Board Products Association,
and Arthur D. Little, Inc., estimates.
16
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2. Pricing Mechanism
The economic justification for construction of insulation board plants was based on the use
of waste from other forest products mills as the basic raw material supply. Initially, this raw
material was very inexpensive; but, since 1972, increased competition for wood chips and rising
energy, labor and pollution control costs have increased insulation board costs (Table II-7).
TABLE 11-7
PRICES OF SELECTED INSULATION BOARD PRODUCTS1,1965-1978
(dollars per thousand square feet)
Roof
1/2-Inch2 Insulation3
Year Sheathing Board Ceiling Tile4
1965 37.09 63.78 83.05
1966 36.45 65.15 83.75
1967 36.01 65.02 87.24
1968 38.17 64.17 91.78
1969 40.73 65.15 97.88
1970 36.91 67.16 103.38
1971 37.78 66.06 109.14
1972 42.06 66.19 112.28
1973 44.98 67.56 113.32
1974 49.23 84.59 117.16
1975 50.20 100.13 121.87
1976 58.31 107.80 130.42
1977 66.05 N/A N/A
1978 (March) 74.87 N/A N/A
1. f.o.b. mill, with freight allowed to destination.
2. Standard density, 1/2" x 2' x 8' to 4' x 9', with asphalt impregnation or
water-resistant coating, manufacturer to wholesaler.
3. 1" x 2' x 4', asphalt treated, manufacturer to roofing contractor.
4. 1/2" x 1' x V, 1 x 2', or 1 x 3', factory-painted plain surface, beveled edges,
manufacturer to wholesaler or retailer.
Source: U.S. Bureau of Labor Statistics.
Insulation board prices are usually quoted on a dollar per thousand square feet basis, f.o.b.
shipping point, with full freight allowed to the destination. Between 1965 and 1976, insulation
board sheathing prices increased 57%, including a 30% increase since 1973. Since 1965, the price
of ceiling tile has also increased 57%, but the increase since 1973 has been only 15%. Ceiling tile
prices reflect the higher value-added manufacturing steps and are more than double the price of
sheathing; therefore, while the percentage increases for the 1965-1976 period are equal, the
absolute dollar price increases for ceiling tile are more than double the price increases for
sheathing.
17
-------
The major pricing constraint for insulation board is created by price levels of substitute
products rather than intra-industry competition. The price comparisons must be made on the
basis of performance value, not unit costs. The triple role of insulation board as a structural,
decorative, and insulation product makes price comparisons particularly difficult. To illustrate,
the March 1977 price of '/2-inch insulation board sheathing was $58.71 per thousand square feet,
while the price of 'A-inch plywood sheathing was $190. On this basis, the insulation board
appears to be a better value. However, in use, a siding material must be applied over the
sheathing. An alternative wall construction is to use fiber glass insulation and a plywood or
hard board siding product that provides the strength of the sheathing, a finished outside wall, and
a better R-value for the complete wall. The construction costs of the fiber glass/siding wall are less
than a sheathing/siding wall and the higher-quality insulation will result in lower long-term
heating costs. Ultimately, what appeared to be a major price advantage for insulation board
becomes insignificant. Gypsum sheathing has been very competitive with insulation board on a
price/utility basis for years and has established itself as the preferred sheathing material in many
areas. Structural foams are also beginning to appear on the market and will also compete strongly
with insulation board on the basis of performance value.
In the past, commercial structures have used large quantities of insulation board for ceiling
tile, lay-in panels, and roof deck insulation. But fire code restrictions have severely cut back the
use of the material in these applications. The insulation board roof decking has also met with
strong competition from perlite and rigid fiber glass boards. Until a fire-retardant insulation
board ceiling tile is on the market and widely accepted in building codes, the price of insulation
will not stimulate demand, and plastic or mineral board substitutes will dominate the non-
residential market.
3. Price Elasticity of Demand
Changes in the price of insulation board from 1965 to 1976 have been moderate compared to
those of lumber, plywood, and other wood products with which it competes (Table II-8). While
the 1976 wholesale price index (WPI) for insulation board products was 160.8 (1967=100), the
WPI for all construction products had risen to 187.7. But the general inflation index was at 159.0;
thus, insulation board prices have kept pace with general inflation and thus have experienced no
real price increases. There are several factors that contribute to this situation.
First, the recent cost-price relationship based on improved plant efficiency and resulting
lower costs may have allowed the industry to maintain its accepted level of profitability without
increasing prices. However, given the recent history of wood costs, competition for fiber, and costs
of finishing materials, this relationship is not likely to continue to be a major factor.
Second, the industry may have absorbed the impact of lower margins per unit by increasing
production volumes with added shifts and small incremental investments to increase existing
plant capacities. The closure of six plants since 1960 while production continued to increase
slightly is an indication that this has happened in the remaining plants. This course of action at a
facility could, depending on volume-price relationships, result in level rates of return as a
consequence of lower per unit margins on greater volumes.
Finally, there is a market-price relationship. Insulation board may have to keep down its
prices to meet competition from substitute products such as gypsum and maintain its market
shares. While there is probably some cross-elasticity of demand between insulation board and
competing products, price is not the principal reason for utilizing insulation board.
18
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4. Barriers to Entry of New Firms
Insulation board is capital intensive compared with the production of other solid wood
products such as plywood and lumber. Other than capital requirements, the significant barriers
are securing a wood source and, depending on the product line, the scale of the required
marketing effort. Tile products would require a larger sales effort than sheathing because of the
proprietary nature of the product.
5. Other Regulatory Factors
A result of government timber policy restricting the harvest of federal timber on the West
Coast would be to lower supplies and push up prices of lumber and plywood. This would probably
result in increasing demand for fiberboard and would allow substantial price increases. An easing
of government timber policy that would allow a higher level of removals from West Coast forests,
which is equally likely at this time, would have the opposite effect.
G. FINANCIAL PROFILE
Plant sales vary directly with production (Table II-9). However, plant book values differ for
plants of similar size because of plant age and other factors.
While the distribution of manufacturing cost differs by size of plant, there appear to be
significant differences in relative costs due to other factors. A number of insulation board plants
appear to be operating at a loss, and operating margins overall are small compared with those of
hardboard plants. The outlook for insulation board demand indicates that the financial condition
of some insulation board plants will worsen as capacity utilization rates fall. Insulation board
plants are also likely to shut down or convert to other products in the face of falling demand.
20
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TABLE 11-9
FINANCIAL PROFILES
PRO-FORMA INCOME STATEMENT INSULATION BOARD PLANTS
Sales (1976) $8,500,000 (range $3-30 Million)
Capacity 125 Million Square Feet
Capacity Base 1/2"
Pro-Forma Cost of Manufacture
Sales
Cost of Goods Sold
Labor
Materials
Depreciation
Other Expenses
Total Cost of Goods Sold
Gross Margin
Selling General & Administrative
Interest
Profit Before Tax
Profit After Tax
Plant Book Value
Median Value
100
25
35
4
20
84
16
10
6
3
$7,000,000
Range of Values
100
15-31
30-50
2-8
2-44
8-24
7-18
<0-13
<0-7
$500,000-$25,000,000
Source: EPA Financial 308 Letter. Excludes plants producing both insulation board and
hardboard.
21
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III. INDUSTRY CHARACTERIZATION —
WET PROCESS HARDBOARD
A. INDUSTRY DEFINITION
Wet process mills are only one segment of the hardboard production capacity. The in-
dustry* is composed of three segments: wet, wet-dry and dry processes, that serve the same
markets with similar products and are largely operated by the same companies. Inherent differen-
ces in physical product characteristics developed by each process, however, make some products
better suited to some application.
The wet process hardboard industry comprises establishments producing hardboard in
densities generally between 31 and 65 pounds per cubic foot from inter-felted wood fiber using a
wet forming and either a wet or dry pressing process (known respectively as wet-wet and wet-dry).
The dry process segment of the industry uses a dry forming and dry pressing process to manufac-
ture hardboard.
B. TYPES OF FIRMS
1. Size of Firm
There are 15 producers operating 28 wet and dry process plants (Table III-l). The industry is
composed of three private firms and several large corporations. Seven of the 15 hardboard
producers operate more than one hardboard plant. Wet process plants represent 16 of the 28
facilities and are operated by 11 producers, four of which operate more than one wet process
plant.
The larger corporations in the wet process board industry are Masonite, Abitibi, Champion
International, Weyerhaeuser, and U.S. Gypsum. The largest private company, Superwood, is the
fourth-ranked producer in the industry whereas the two remaining private firms are among the
smallest producers.
Total annual sales for companies in the wet process segment of the hardboard industry,
including sales from operations such as lumber, plywood, paper, chemicals, and others, range
from $25 million to more than $3.6 billion (Table III-2). The importance of a particular plant to
each firm varies with each case.
2. Ownership/Integration/Product Diversification
Of the 12 wet process hardboard mills, 8 are owned by publicly held corporations; the 4
remaining mills are owned by 3 private companies.
Frequently, as owners of woodlands the public corporations are integrated back to raw
material sources, which typically supply 35-45% of their raw material needs. The private com-
panies are also likely to own some woodlands but, unlike the public companies, they do not
typically derive as large a percentage of their wood requirements from these sources.
Standard Industrial Classification 2499, "Wood Products Not Elsewhere Classified," includes, among other in-
dustries, medium-density fiberboard, wet process hardboard, and dry process hardboard. SIC data do not dis-
tinguish among these three industries.
23
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TABLE 111-1
HARDBOARD PRODUCTION CAPACITY, 1977
(million square feet — 1/8" basis)
Company
Abitibi2
Abitibi
Evans Products
Forest Fiber
Mason ite
Mason ite
Superior Fiber
Superwood
Superwood
Champion International
Abitibi2
Boise Cascade
Temple
Weyerhaeuser
U.S. Gypsum
U.S. Gypsum
U.S. Gypsum
WET-WET PLANTS1
Location
Alpena, Ml
Roaring River, NC
Corvallis, OR
Forest Grove, OR
Laurel, MS
Ukiah, CA
Superior, Wl
Duluth, MN
N. Little Rock, AK
Dee, OR
WET-DRY PLANTS2
Alpena, Ml
International Falls, MN
Diboll, TX
Craig, OK
Danville, VA
Pilot Rock, OR
Greenville, MS
Total - Wet Process
Subtotal
Annual Capacity
200
315
110
114
1850
560
158
380
130
76
3893
329
700
244
175
230
86
155
Subtotal
1919
5812
Boise Cascade
Celotex
Champion International
Champion International
Georgia Pacific
Georgia Pacific
Louisiana Pacific
Ma son ite
Publishers Forest Prods.
Superwood
Weyerhaeuser
Weyerhaeuser
DRY PLANTS3
Phillips, Wl
Paris, TIM
Catawba, SC
Lebanon, OR
Conway, NC
Coos Bay, OR
Oroville, CA
Towanda, PA
Anacortes, WA
Bemidji, MN
Doswell, VA
Klamath Falls, OR
Total Dry Process Capacity
Total Hardboard Capaticy
80
195
225
107
265
201
150
490
52
90
315
290
2460
8272
1. The Masonite mills and the Abitibi mill in Alpena, Ml, use combinations of the wet-wet and
wet-dry processes.
2. There are wet-wet and wet-dry operations at this location.
3. Does not include medium-density fiberboard (MDF) plants because it is a different product
used in different applications.
Sources: 1976 Directory of the Forest Products Industry, American Board Products Association,
and Arthur D. Little, Inc., estimates.
24
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TABLE 111-2
1977 HARDBOARD SALES
(all producers, $MM)
Company
Abitibi Paper Co. Ltd.
Boise Cascade
Celotex/Jim Walter1
Champion International
Evans Products
Forest Fiber
Georgia Pacific
Louisiana Pacific
Masonite1
Publishers/Times Mirror Co.
Superior Fiber/Carlson Companies
Superwood
Temple/Time Inc.
U.S. Gypsum
Weyerhaeuser
Total
Corporate
Sales*
800
2316
525/1422
3127
941
N/A
3675
794
445
NA/976
NA/650
N/A
340/1038
1177
3283
Total**
Hardboard
Sales
72
66
17
34
9
9
40
13
247
5
13
21
40
66
Wet Process**
Hardboard
Sales
72
60
7
9
9
206
13
44
21
40
15
1. Fiscal year ends August 31.
Sources: *Dun and Bradstreet Directory, 1978, Directory of Corporate Affiliations, 1978.
**Arthur D. Little, Inc., estimates, based upon an operating rate of 100% and the prices for 1977
shown in Table III-9.
Six of the parent companies operate captive distribution systems that handle a portion of
their output. The remaining producers sell their products through independent wholesalers or
through the captive distribution systems of other companies.
In addition to hardboard products, all of the parent companies are involved in the produc-
tion and distribution of a wide range of other wood products — both competing and non-
competing — and various building materials. Many hardboard operations are parts of forest
products complexes that may produce various combinations of lumber, plywood, particleboard,
fiberboard, pulp, and/or paper. The parent companies generally have a strong orientation to-
wards forest products (five are involved in the paper industry) and may produce other building
materials such as gypsum board. Three of the firms are significantly diversified beyond building
materials businesses.
25
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C. PRODUCT DESCRIPTION
1. Types of Hard board Products
Hardboard products can be divided into four classes on the basis of water resistance,
modulus of rupture, and tensile strength. The four classes, listed in order of decreasing strength
properties, are as follows:
(1) tempered
(2) standard
(3) service-tempered
(4) service
Hardboard products serve four general markets: interior paneling, exterior siding, industrial
and do-it-yourself. Most of the mills have associated fabricating facilities for prefinished pan-
eling, panel stock, siding, perforated board, embossed, and/or cut-to-size products.
Hardboard serves a very wide range of end uses involving about 800 different sets of
specifications. Marketing efforts have usually been aimed at displacing traditional products such
as gypsum, plaster, stucco, and plywood in specific applications. Hardboard is challenging and
being challenged by these products and others in various markets and applications.
Interior paneling may be manufactured from any of the four classes of hardboard in
thicknesses of '/s to Vi inch. Panels up to 5 feet wide or 12 feet long are available. Hardboard was
used as the substrate in about 20% to 40% of the interior paneling sold in 1973, with its major
competition being inexpensive lauan plywood, domestic hardwood plywood, and thin par-
ticleboard. It is used for both wood-grain prints and tileboard panels. The surface of the panel
may be embossed to provide a surface texture or pattern before a finish is applied. The hardboard
manufacturer may produce and sell prefinished paneling, unfinished paneling stock, or both.
Siding is manufactured specifically for exterior use. Lap siding is manufactured in thick-
nesses of :1/s inch and greater, widths from 4 to 12 inches, and lengths up to 16 feet in two-foot
increments. Panel siding is fabricated in sheets 4 feet wide, 4 to 12 feet long and usually Vi inch
thick or thicker. Hardboard was introduced to the siding market in the late 1940's and now
competes against PVC, aluminum, brick, stucco, plywood, and other wood siding mate-
rials.Textures simulating most other siding materials, as well as improved finishes, have in-
creased hardboard's market share in residential siding and will probably continue to do so.
Hardboard siding is now also gaining market share in mobile home applications and Arthur D.
Little expects this trend to continue.
The industrial market for hardboard encompasses a very wide range of end-user and OEM
(original equipment manufacturer) applications, including: displays, furniture, transportation,
electronics, interior construction, factory equipment, and toys. The list of actual and possible
uses is extremely diversified. Most industrial markets require the hardboard manufacturer to
meet a unique set of specifications pertaining to board characteristics and/or fabrication require-
ments. The industrial market is so diversified that competition from substitute products in any
one segment has only minimal impact on the overall hardboard industry. However, companies
that concentrate on only a few markets can be impacted.
26
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2. Market Size and Future Growth
Recent economic trends have been generally favorable to the industry (Table III-3). Per
capita consumption has increased about 4.0% annually since 1964. Shipments from domestic
plants totalled 7.7 billion square feet in 1978, reflecting an average annual growth rate of 7.9%
since 1964. The industry slowdown in 1974 and 1975 was followed by a strong recovery in 1976 that
continued into 1979.
TABLE 111-3
SHIPMENTS, IMPORTS, AND APPARENT CONSUMPTION, 1964-1978
(million square feet - 1/8" basis)
Apparent Imports as a
U.S. Shipments Imports Consumption % of Consumption
1964 2689 471 3160 14.9
1965 2921 572 3493 16.4
1966 3083 443 3526 12.6
1967 3038 426 3464 12.3
1968 3710 648 4358 14.9
1969 4247 708 4955 14.3
1970 4384 457 4841 9.4
1971 5225 634 5859 10.8
1972 5798 1070 6868 15.6
1973 6050 1039 7089 14.7
1974 5654 750 6404 11.7
1975 5681 277 5958 4.6
1976 6485 494 6979 7.1
1977 7714 627 8341 7.5
1978 7843 920 8763 10.5
Source: American Board Products Association.
Reliable data on exports are unavailable but exports are believed to be less than 2% of
domestic production. In contrast, imports of hardboard have been up to 16.4% of domestic
consumption. Although producers in developing countries generally enjoy lower costs and no
entry duties, imports are very sensitive to economic conditions in the United States. Imports
suffered a severe market share setback in 1975-1976 and are only beginning to recover; in 1975,
imports were only 4.6% of consumption (Table III-3). The quality of imports appears to be
generally adequate to satisfy the lower end of the hardboard market; it is believed that U.S.
domestic producers are frequently the purchasers of foreign hardboard in order to satisfy domes-
tic demand during periods of rapid demand growth. At those times, domestic suppliers generally
prefer to upgrade the quality of product they supply in order to improve average margins.
27
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Brazil is by far the largest source of hardboard imported by the United States; the U.S.S.R.,
Sweden, and Canada are also significant, with Poland, Romania, Korea and other countries
selling hardboard in U.S. markets in varying quantities. Brazil, Argentina, Romania and Korea
are among the developing countries that now face no U.S. tariffs. Most other countries, except the
U.S.S.R. (30%), pay a 7.5% ad valorem duty for imports into the United States. The United
States will remain a net importer of hardboard, despite the declining trend in imports, due to the
relatively low cost of hardboard purchased from foreign sources.
Capacity utilization declined significantly in 1972 because of a 30% increase in capacity in
that year, and again in 1974/1975 as a result of market conditions and a conversion of insulation
board capacity to hardboard production (Table III-4). Demand strengthened in 1976 and the
industry has operated at 83-94% of capacity since. Precise data on 1977/1978 are unavailable but
the industry is believed to have operated at rates of 85% to 95%.
TABLE 111-4
CAPACITY UTILIZATION BY HARDBOARD INDUSTRY, 1967-1978
(million square feet - 1/8" basis)
Capacity
Annual U.S. Utilization
Capacity Shipments (%)
1967 4555 3038 67
1968 4648 3710 80
1969 5019 4247 85
1970 5335 4384 82
1971 6000 5225 87
1972 7753 5798 75
1973 7916 6050 76
1974 8723 5654 65
1975 8348 5681 68
1976 7771 6485 83
1977 8272 7714 93
1978 8284 7843 95
Source: American Board Product Association.
Historically, losses in one market have been offset to a greater or lesser extent by gains in
another. For example, hardboard continues to lose automotive markets; the technological trend
toward light automobiles has resulted in the use of lightweight plastics in applications where
hardboard was formerly dominant. On the other hand, the minimal quantities of petrochemical
adhesives and relatively low energy intensity required in hardboard manufacture protect the
28
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industry from what could be a severely negative impact of increased resin costs increases in the
cost of plastics, and other siding products such as brick and have helped to stimulate demand for
hardboard siding.
Roughly 60% of hardboard is used directly in construction or is affected by construction
demand, while most of the remainder is used in industrial applications. Shipments of hardboard
follow the construction industry trends but the volatility of hardboard shipments is dampened
somewhat by its industrial market (Figure III-l). Analysis of 1964-1978 shipments and con-
sumption using a least squares linear-time trend results in annual growth rates of 7.9% and 7.4%
respectively. Growth rates in the 1972-1978 period for shipments and consumption were 5.2% and
4.2%, respectively, because of an industry slowdown in 1974 and 1975. The slower growth rates for
consumption are a result of fluctuations in the level of imports.
The consumption growth rates indicate that hardboard's share of the construction materials
market has increased. The economy in general experienced a growth rate of about 3.0% per year
for the period, and construction since 1973 has remained below 1973 constant dollar levels. This
market share growth trend can be expected to continue, and long-term growth in consumption
will average up to 2.0% annually through 1984, with short-term trends following the construction
cycle (Figure ni-2).
D. PLANT CHARACTERISTICS OF THE EXISTING INDUSTRY
1. Process Technology
Wet process operations use a pulping process that requires large amounts of water and a wet
mat forming system similar in some respects to the fourdrinier paper forming process. In wet-wet
mills, the wet mat is pressed between a flat hot platen and a rigid screen that will allow steam to
escape from the board. The board produced in this manner is called an SIS or screen back board.
In wet-dry mills, the mat is dried before pressing so it can be pressed between two flat hot platens,
producing a board with a smooth surface on both sides (S2S). In dry process mills, the mat is
formed from dry fibers in an air inter-felting process. The dry mat is pressed between two flat hot
platens, thus producing an S2S board. One mill uses a dry-wet process in which the mat is dry
formed, as described above, then water is added and it is pressed between a flat hot platen and a
screen, producing an SIS board. Insulation board capacity may, in certain cases, be converted to
produce selected grades of wet process hardboard (and vice versa).
Process developments in wet process hardboard have been limited and slow, although the
industry has had major product developments such as exterior siding and deep embossing. As a
result of design changes in caul plates used in wet pressing operations, wet-wet mills can produce
an S2S hardboard with minimal sanding, allowing them to compete in S2S markets against wet-
dry and dry-dry mills.
Developments that hold potential for lower costs are important to this industry because of
the product substitution possible in most markets; likewise, adverse cost developments are of
equal significance. The full impact of energy costs, for example, on pulping processes (e.g., the
explosion process) may affect hardboard's cost effectiveness relative to substitute products in the
future.
There are no foreseeable technical process developments that will have a major impact on
the hardboard industry. The technology of the wet process hardboard industry generally has
29
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30
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remained static since the development of dry process mills eliminated many of the water
pollution problems facing the industry. Dry process technology is competitive with the wet
process mills to the extent that it makes possible the manufacturing of hardboard which usually
competes with the products of the wet process mills without incurring water pollution abatement
costs. This advantage is partially offset by air pollution control expenditures that will be required
for dry process mills. It is, of course, theoretically possible to convert a wet process mill to a dry
process mill; however, the capital costs involved would make the operation both uneconomic and
uncompetitive; thus, conversion to dry processes is an unlikely response to revised effluent
regulations.
2. Size/Age/Location
A typical wet process plant produces 230 million square feet (MMSF-'/a inch) annually,
while individual plant capacities range from 52 to 1850 MMSF (Table HI-1). Although the largest
plant is also the oldest (Masonite started operations in Laurel, Mississippi, in 1926), the older
plants tend to be smaller.
Prior to 1948, only three hardboard plants were in operation in the United States and they
all used a wet process (Table III-5). Of the ten plants built in the 1948-1957 period, five were wet
process mills. The next decade brought six wet and four dry process mills. Since 1968, two wet
process mills have been built (both in 1971) while three dry process mills have started production.
Prior to 1978 there were sixteen wet process mills (including seven wet-wet, six wet-dry, and three
operations using both processes) and twelve dry process mills in the United States. A thirteenth
mill was due to start up late in 1978. Additions to existing mills did not necessarily use the same
process; three mills are actually a combination of wet forming and both dry and wet press lines.
This gives these mills additional flexibility to meet market demands by producing either SIS or
S2S hardboard. Most of the older plants have been continually expanded and modernized so age
is not a valid indication of efficiency,
TABLE 111-5
DISTRIBUTION OF
HARDBOARD PLANTS BY PLANT AGE
Number of Plants
Year of Start-Up Wet* Dry**
Prior to 1948 3 0
1948-1957 5 5
1968 to 1977 6 4
1968 to present 2 3
Total 16 12
Sources: *EPA Financial 308 Letter. Does not include Jarratt, Va.
* "Industry data.
32
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The first two plants were constructed in Mississippi and used roundwood as their fiber
source. Later expansion of the industry in the North Central states depended on inexpensive
hardwoods, while mills in the Pacific states used wastes from softwood lumber and plywood
operations as fiber sources. The fact that hardboard mills are evenly spread throughout these
regions is indicative of the wide range of wood species being used in hardboard and the signifi-
cance of low-cost fiber to the producer. Most of the plants are located on rural sites but several are
in urban and suburban areas.
3. Employment
Most plants employ between 100 and 300 workers and staff (Table III-6). Employment
figures for each mill depend upon the size and product mix of the facility.
TABLE 111-6
EMPLOYMENT IN
WET PROCESS HARDBOARD PLANTS
Number of Employees Number of Plants
0-199 8
200-399 5
400+ _3
Total 16
E. CHARACTERISTICS OF NEW CAPACITY
1. Recent Capacity Additions
No new wet hardboard plants have come on-stream since 1971; however, several locations
have added substantial capacity. In addition to large capacity expansions in 1972, Masonite
completed a 175-MMSF expansion of its wet process plant in Ukiah, California, in 1977. Abitibi
also completed small expansions of the Alpena and Roaring River facilities. The 100-MMSF
addition to the Weyerhaeuser plant in Doswell, Virginia, was the only dry process expansion.
Boise Cascade diverted some of the insulation board capacity at International Falls, Minnesota,
to add 100 MMSF to its hardboard capacity. At least five plants added incremental volumes to
their siding production capacity.
Announced plans for capacity additions in 1979 include construction of a 66-MMSF, 7/16-
inch, wet process hardboard siding mill at Georgia Pacific's insulation board plant in Jarratt,
Virginia. Temple Industries has also announced a $21 million addition to its wet process facility
to produce hardboard siding. No further information has been made public about these projects
or any others.
2. Process Economics of New Capacity
It is extremely unlikely that anyone would build a wet process S2S mill. Capacity addition
would most likely take the form of incremental expansion of existing facilities or perhaps the
conversion of insulation board capacity. However, process economic models were constructed for
Greenfield expansion, conversion of an insulation board plant and incremental expansion (Table
III-7).
33
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TABLE 111-7
PROCESS ECONOMICS OF NEW WET PROCESS HARDBOARD CAPACITY
S1S Con version of
Greenfield Mill Insulation Board Mill Incremental Expansion
Design Production (MMSF, 1/8") 293 234 117
Capital Investment ($ million) 50 25-28 15-20
Operating Cost ($ million)
Labor 10.2 9.0 3.7
Wood 4.2 3.4 1.7
Other Materials 4.2 3.4 1.7
Energy 3.6 3.2 1.3
Other Costs 2.0 1.6 0.8
24.2 20.6 9.2
Operating Cost/MSF, 1/8" ($) 82.59 88.03 78.63
Investment/MSF, 1/8" ($) 170.65 113.70 149.57
Source: Arthur 0. Little, Inc., estimates. See Appendix A, Table A-2 for assumptions underlying costs.
The parameters of any expansion or conversion are extremely variable and unique to every
case. Thus the capital investment and the operating cost for each of the wet process hardboard
expansion methods shown in Table III-7 are not applicable to any specific situation. Incremental
operating costs per thousand square feet, 1/8" basis, are lowest for capacity added through
incremental expansion, followed by that for a Greenfield mill and insulation board plant con-
version. Investment costs per thousand square feet are highest for a Greenfield plant and lowest
for an insulation board plant conversion.
F. COMPETITIVE STRUCTURE
1. Market Structure
The five largest firms control 70.5% of the total hardboard production capacity. Masonite
Corporation, by far the largest firm in the industry, controls 35.1% of the total hardboard
capacity and 41.5% of the wet process hardboard capacity (Table I1I-8). Wet process mills
represent 70.3% of the total U.S. hardboard capacity.
2. Pricing Mechanism
The ability of the industry to pass increases in production costs for tempered hardboard on
to the marketplace is of major importance in considering the question of whether or not hard-
board producers will be able to continue operations with the burden of additional pollution
control costs.
Prices are quoted on a dollars per thousand square feet basis and are usually based on
standard units and sizes. Prices are generally f.o.b. mill with full rail freight allowed to the
destination. Due to the wide range of end uses, prices, and customer categories, hardboard prices
are set at a number of levels, depending on the class of trade of the purchaser. Frequently specific
hardboard prices involve a complicated schedule of discounts and extras dependent upon the size
of the load, packaging, style of the product, degree of fabrication, quality, etc.
34
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Firm
Masonite
Abitibi
Weyerhaeuser
Boise Cascade
Superwood
U.S. Gypsum
Champion
Temple
Superior Fiber
Evans
Forest Fiber
Total
TABLE 111-8
HARDBOARD INDUSTRY CAPACITY
Percent of
Total Capacity
35.1
10.2
9.4
8.5
7.3
5.7
4.9
2.9
1.9
1.3
1.4
88.61
Wet Process
Percent of
Capacity
41.5
14.5
3.0
12.0
8.8
8.1
1.3
4.2
2.7
1.9
2.0
Percent of Firm's
Hardboard Capacity
83.1
100.0
22.4
89.7
85.0
100.0
18.6
100.0
100.0
100.0
100.0
100.0
81.72
1. Four other firms are operating only dry process mills.
2. Average
Source: American Board Products Association.
The largest producer does exert some control over product design trends, frequency of price
changes, and price leadership. As explained earlier, the industry serves as a very wide range of
end uses requiring an estimated 800 different sets of specifications; this makes direct competition
between manufacturers selling to the industrial market not only uncommon but unlikely to occur
in the future. Hardboard marketing efforts have traditionally been aimed at displacing such
entrenched products as lumber and plywood in specific applications using pricing as an incentive;
now, hardboard is challenging and being challenged by plastics and metals for various appli-
cations. Consequently, a major pricing factor is the possibility of substitution of competitive
materials by and for hardboard. Price competition can be a factor in sales to retail yards handling
large volumes of hardboard.
3. Price Elasticity of Demand
Price changes in hardboard from 1967 to 1976 (Table III-9) have been far less frequent and
quite moderate compared with price changes of lumber, plywood, and other products with which
it competes. While the wholesale price index for construction materials in 1976 was 187.7, the
wholesale price index for tempered hardboard was only 131.4. Furthermore, the GNP deflator for
1976 was 1.59 of the 1967 level, which shows that hardboard prices have failed to keep pace with
general economic conditions. There are several factors that contribute to this situation.
First, costs of production have not increased as rapidly as general inflation, which may have
allowed the industry to maintain its accepted level of profitability without increasing prices. This
situation will probably not continue given the likely real increases in wood costs and increased
competition for fiber. However, the costs of producing substitute materials are likely to increase
even faster than hardboard production costs.
35
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TABLE 111-9
TEMPERED HARDBOARD PRICE TRENDS, 1963-1978
Percent Increase Price2
Year Price1 Over Previous Year Index
1963 61.956 - 103.8
1964 61.001 1.6 102.2
1965 60.941 0.1 102.1
1966 60.822 (.2) 101.9
1967 59.688 (1.9) 100.0
1968 58.633 (1.8) 98.3
1969 59.969 2.3 99.8
1970 61.001 1.7 102.2
1971 60.345 (1.1) 101.1
1972 61.001 1.1 102.2
1973 62.792 2.9 105.2
1974 70.432 12.5 118.0
1975 70.253 0.3 117.0
1976 78.430 11.6 131.4
1977 85.175 8.6 142.7
1978i 93.95 10.3 157.4
All
Construction
Materials
Price Index
93.6
94.7
95.8
98.8
100.0
105.6
111.9
112.5
119.5
126.6
138.5
160.9
174.0
187.7
204.9
228.2
1. Manufacturers' price to jobber or wholesaler delivered to destination or
f.o.b. mill with freight allowed, $/MSF, 1/8" basis.
2. 1967 = 100
Source: U.S. Department of Labor, Bureau of Labor Statistics, Wholesale
Price Indices.
Second, the incremental additions in 1976, 1977 and 1978 suggest that the industry may
have absorbed the anticipated impact of lower margins per unit by adding shifts. This course of
action would result in stabilized rates of return as a consequence of lower per unit margins on
greater volumes produced at any individual facility.
Finally, there is a market-price relationship. Hardboard producers may have to keep their
prices down to meet competition from substitute products and maintain market shares. Price
apparently varies somewhat independently of consumption and in different magnitudes, as
shown in the random pattern of price-consumption correlations. Obviously, demand is not totally
price inelastic, but for real price increases of 1-2% there is no adverse impact on overall demand.
The ability of hardboard manufacturers to pass on the additional costs of pollution abate-
ment depends on the amounts involved. Any increase in costs will result in higher levels of
competition from substitute products and a more cautious approach to the commitment of
capital for capacity expansions. Decreases in market share, if they occur, would be slow in
industrial applications, because products would have to be redesigned, and quickly for construc-
tion applications.
36
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A price scenario for wet process hardboard was developed to gauge the ability of hardboard
producers to recover higher costs through higher prices. The demand forecast through 1984 was
combined with announced capacity expansion commitments and an Arthur D. Little forecast of
additional capacity that might be added in 1982 through 1984 (Table 111-10). Potential real price
increases were estimated based upon the estimated operating rate of U.S. plants and the volume
of imports necessary to satisfy U.S. demand. Current price levels and the high rate of overall
inflation indicate that producers will suffer a real price decline in 1979 of 6% and that they will
not fully recover until 1981. By 1984, real price increases on the order of 20% are likely, most of
that occurring in 1984.
4. Barriers to Entry of New Firms
Compared to other solid wood products mills, hardboard is a capital intensive industry. The
most significant barriers to the entry of new firms, however, are the concentration of the market,
the magnitude of the sales effort required, and the development of a secure fiber source. A new
company would have to develop new markets or "buy" market share from competitiors; given the
recognition of the existing producers in the marketplace, it could be a costly and difficult task at
best. A new producer has the alternative of selling through the existing producers' distribution
systems, as is done in the case of other wood products, but this would be undesirable for both
production and marketing reasons.
5. Other Regulatory Factors
A result of government policy restricting the cut of federal timber on the West Coast will be
to push prices of lumber and plywood upward, thereby relieving some pressure against hardboard
price increases. An easing of government timber policy that would allow a higher level of removals
from West Coast forests, which is equally likely, would have the opposite effect.
G. FINANCIAL PROFILE
While wet process hardboard sales (Table ffl-ll) vary directly with production, plant book
values will differ for plants of similar size, primarily because of age of plant.
There was no observable difference in the distribution of the pro-forma costs of production
for wet process hardboard (Table III-ll) between plants that may be required to undertake
expenditures for water pollution regulations and plants that will be in compliance. Differences in
the distribution of costs arise in part from plant size differences and plant location (local cost)
factors.
37
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TABLE 111-10
HARDBOARD DEMAND AND PRICE FORECAST
MMF2 1/8" % Change In
U.S. U.S. Operating Apparent Real Price
Capacity Shipments Rate Imports Consumption MSF, 1/8"
1978 8284 7843 95 920 8763 2
1979
1980
1981
1982
1983
1984
8340
8760
8935
8935
8955
8975
7692
8322
8666
8455
8686
8705
92
95
97
95
97
97
627
478
533
445
694
1094
8319
8800
9200
8900
9380
9800
-6
2
6
2
6
10
Source: Arthur D. Little, Inc., estimates.
TABLE 111-11
PRO-FORMA INCOME STATEMENT
WET PROCESS HARDBOARD PLANTS
1976Sales $16,000,000 (range $6,000,000->$120,000,000)
1976 Capacity 200 Million square feet
Capacity Base 1 /8"
Pro-Forma Cost of Manufacture Median Value Range
Sales 100% 100%
Cost of Goods Sold
Labor 20 15-50
Materials 30 19-50
Depreciation 5 2-5
Other Expenses 20 5-28
Total Cost of Goods Sold 75_
Gross Margin 25 15-36
Selling, General & Administrative 1_1_ 7-25
Interest 0-4
Profit Before Tax 14 8-24
Prof it After Tax 7 1-13
Plant Book Value 10,000,000 900,000 >$40,000,000
Source: Derived from the EPA Financial 308 Letter.
38
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IV. COST OF COMPLIANCE WITH
REVISED WATER EFFLUENT REGULATIONS
A. INTRODUCTION
The purpose of this chapter is to describe the current water effluent method of disposal used
by insulation board and wet process hardboard plants, and to summarize the cost of compliance
developed by the technical contractor. These data were used to estimate the economic impact of
the revised water effluent regulations described in Chapter V. Also described are the control
options for new sources and their associated costs of compliance.
B. CURRENT EFFLUENT STATUS
Plants producing both insulation board and wet process hardboard are classified according
to the predominant product volume and are referred to throughout as "combination" plants.
Of the eleven wet process hardboard plants, most (nine) discharge into navigable water, one
discharges into municipal sewers and one recycles its process wastewater (Table IV-1). The
insulation board plants are distributed across all categories: two discharge into navigable water,
five discharge into municipal sewers, two dispose of their effluent on site (e.g., spray irrigation)
and two recycle their process wastewater. Of the five combination plants, three discharge into
navigable water, one into a municipal sewer and one has no discharge.
TABLE IV-1
INSULATION BOARD AND WET PROCESS HARDBOARD
CURRENT METHOD OF WATER EFFLUENT DISPOSAL
Current Water
Effluent Disposal
Navigable Water
Municipal Sewer
No-Discharge
Total
Insulation Board
Number of
Plants %
2
5
4
11
Only
Total
18
45
37
100
Wet Process
Hardboard Only1
Number of
Plants
Combination
9
1
jL
11
% Total
66
17
17
Number of
Plants
3
1
1
% Total
60
20
20
100
100
'Counting Abitibi's Alpena, Michigan operation as one plant.
Source: U.S. Environmental Protection Agency
C. POLLUTION CONTROL OPTIONS FOR EXISTING PLANTS
1. Cost Models
Many plants have pollution control equipment in place and their current treatment will be
sufficient for several of them to meet revised effluent guidelines. However, seven plants producing
wet process hardboard alone may be required to install new equipment to meet revised water
effluent regulations and an eighth is currently in the process of installing a new pretreatment
system.
39
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Since so few plants in the wet process hardboard sector need to undertake compliance
activities, the technical contractor generated costs of compliance for each impacted plant. The
cost estimation method was to use one or more of the plants that have higher levels of water
effluent treatment in place as models. The cost of installing the model treatment process was
then estimated for impacted plants. Table IV-2 depicts the relationship between the pollution
control options and model treatment plant. The plant indicated as a "special case" has a
pollution control system in the process of construction, which may or may not be similar to the
model treatment plants.
TABLE IV-2
MODEL PLANT TREATMENT OPTIONS
Impacted Plant
Wet Process Hardboard
Option 1 -S1S/S2S
Option 2 -S1S
Option 2 - S2S
Plant 2001
Plant 2002
Plant 2003
Plant 2004
Plant 2007
Plant 2012
Plant 2013
Plant 2099
Model Treatment
Plant
2099
2006
2010
Current
Discharge
Method
Proposed
Discharge
Method
Special Case
Direct
Direct
Direct
Direct
Direct
Direct
Indirect
Direct
Direct
Direct
Direct
Direct
Di rect
Direct
Pretreatment
Di rect
Source: Environmental Science and Engineering, Inc.
The wet process hardboard control options represent different degrees of stringency. Option
1, modelled on plant 2099, calls for a screen, first settling basin, an aerated lagoon, and second
settling basin. Option 2, for SIS modelled on plant 2006, consists of two consecutive aerated
lagoons followed by a settling basin. Option 2, for S2S modelled on plant 2010, consists of a
screen, an equalization basin, a primary clarifier, activated sludge removal, a secondary clarifier,
an aerated lagoon and a faculative lagoon; in addition, prior to disposal the sludge is processed
through an aerobic digestor, a sludge thickener and a vacuum filter.
2. Costs of Compliance
The differences among the control option costs for wet process hardboard plants are
significant, apparently because of differences in the size of facilities (Table IV-3). Plant 2013 is in
the process of installing a pollution control system. Under the less stringent EPA option, three
plants (2002, 2003 and 2004) would be impacted. Under Option 2, four plants would be added to
the list of impacted plants whereas plant 2006 would be added to the list under Option 3.
40
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TABLE IV-3
COST OF COMPLIANCE FOR PLANTS
IMPACTED BY REVISED EFFLUENT REGULATIONS
($000)
Investment
Option 1
Plant 2002
Plant 2003
Plant 2004
Total Option 1
Option 2
Plant 2001
Plant 2002
Plant 2003
Plant 2004
Plant 2007
Plant 201 2
Plant 2099
Type of
Product
S1S
S2S
S1S
S1S
S1S
S2S
S1S
S1S
S1S
S1S
Total
285
7,266
1,320
8,871
6,856
1,105
7,436
2,938
183
599
1,228
Land
5
40
105
150
188
46
40
300
—
-
30
Other
Investment
280
7,226
1,215
8,721
6,668
1,059
7,356
2,638
183
599
1,198
Operating
Costs
51
2,219
179
2,449
796
107
2,300
274
101
173
107
Acres of Land
.5
4.0
10.5
18.8
4.6
4.0
30.0
0
0
3.0
Total Option 2
20,345 604
19,741
3,858
Source: Environmental Science and Engineering, Inc.
D. POLLUTION CONTROL OPTIONS FOR NEW SOURCES
1. Cost Models
A candidate new source performance standard for insulation board and wet process hard-
board plants calls for zero discharge. The control technology, is the same for mechanical refining
insulation board and thermo-mechanical insulation board (that for SIS wet process hardboard
and S2S wet process hardboard is similar), and consists of the following steps:
Screening;
Neutralization;
Nutrient Addition;
Aerated lagoon (two aerated lagoons for hardboard);
Faculative lagoon; and
Spray irrigation.
The characteristics of the model insulation board and hardboard plants are shown in Table
IV-4.
2. Costs of Compliance
The costs of compliance for new insulation board and wet process hardboards plants are
summarized in Table IV-5.
41
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TABLE IV-4
MODEL PLANTS FOR NEW SOURCE PERFORMANCE STANDARDS
INSULATION BOARD AND WET PROCESS HARDBOARD
Plant Type
Wastewater Raw BOD Raw TSS
_ Flow Wasteload Wasteload
(tons/day) (MMSF/yr., 1/8") (000 gal./day) (Ibs/day) (Ibs/day)
Design Production
Mechanical Refining
Insulation Board
Plant 1 250
Plant 2 600
Thermo-mechanical Refining
Insulation Board
Plant 1 200
Plant 2 400
264
635
212
425
0.5
1.2
0.5
1.0
7,510
18,000
22,400
44,800
9,170
22,000
6,410
12,800
S1S
Wet Process Hardboard
Plant 1
Plant 2
100
300
106
318
0.3
0.8
7,710
23,100
3,040
9,110
S2S
Wet Process Hardboard
Rant 1
250
264
1.5
32,500
7,510
Source: Environmental Science and Engineering, Inc.
42
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TABLE IV-5
COST OF COMPLIANCE
NEW INSULATION BOARD AND
WET PROCESS HARDBOARD MILLS
Plant Type
Mechanical Refining
Insulation Board
Plant 1
Plant 2
Thermo-mechanical Refining
Insulation Board
Plant 1
Plant 2
S1S
Wet Process Hardboard
Plant 1
Plant 2
S2S
Wet Process Hardboard
Plant 1
Total Operating
Investment Cost
2,336
4,044
2,862
5,491
1,953
2,915
5,075
543
964
951
1,985
516
684
1,393
Acres of Land
Required
270
630
270
631
159
437
792
Source: Environmental Science and Engineering, Inc.
43
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V. ECONOMIC IMPACT OF COMPLIANCE
WITH REVISED WATER EFFLUENT REGULATIONS
A. INTRODUCTION
The cost of compliance estimates generated by the technical contractor (Chapter IV) were
combined with plant financial profiles and economic characteristics of the industry (Chapter III)
to produce an estimate of the economic impact of revised water effluent regulations on the
insulation board and wet process hardboard sectors of the timber industry.
Because there are so few plants in the insulation board and wet process hardboard sectors,
and only seven wet process hardboard plants must incur costs to comply with revised water
effluent regulations, an analysis of economic impact was performed for each affected plant.
The potential economic impacts discussed in this chapter include:
price increases, and demand shifts;
financial considerations;
plant closure;
capacity expansion;
market structure;
employment and community impacts.
B. PRICE INCREASES
1. Level
The price increase required to recover the cost of compliance varies widely among wet
process hardboard plants (Table V-l). For the wet process hardboard plants, Option 1 will
produce a lower impact upon price than Option 2. Because plant 2013 is currently in the process
of installing a pollution control system, its required revenue is the same under all options.
Plants 2002, 2003 and 2004 are required to make expenditures for pollution control under
both options. For plant 2002 the required price increases to recover the cost of Option 1 is about
one percent of the 1977 aggregate average price of hardboard, while its required price increase to
recover costs for Option 2 is equivalent to 4%. For plant 2004 the required price increase to recover
costs for Option 2 technology is twice as high as Option 1. For plant 2003, the required price
increase is about the same under both options.
The differences in required price increase from plant to plant for a given model treatment
can be explained by a combination of in-place treatment, production scale and/or special
circumstances.
The relative difference between Option 1 and Option 2 also differs from plant to plant. This
reflects the differences in control equipment in place from plant to plant.
45
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TABLE V-1
REVENUE REQUIRED TO RECOVER
THE COST OF COMPLYING WITH REVISED REGULATIONS
FOR HARDBOARD PLANTS
Plant Type/Code
Option 1
Plant 2002
Plant 2003
Plant 2004
Plant 2013*
Option 2
Plant 2001
Plant 2002
Plant 2003
Plant 2004
PI ant 2007
Plant 2012
Plant 2099
(1)
1976
Revenue ($000)
20,000
>30,000
8,400
20,400
>30,000
20,000
>30,000
8,400
9,600
>30,000
5,500
1976
Price**
$/MSF
78
78
78
78
78
78
78
78
78
78
78
Recovery of Compliance Cost
Required
A Revenue $/MSF
0.80
9.93
6.60
6.10
4.02
2.60
10.23
13.40
1.75
0.30
8.30
% A 1977
Price
1
14
9
8
5
4
14
18
2
0
11
*This plant is in the process of installing a pollution control system, and those specific
costs were used in the analysis.
**The average price for wet process hardboard for 1976.
Source: Arthur D. Little, Inc., estimates.
2. Obtainability
In evaluating economic impact, in addition to the long-term price increases that are
necessary to recover the cost of compliance with revised water effluent regulations, it is important
to determine if and when price increases can be obtained.
The first step in evaluating whether price increases can be obtained was to compare the
productive capacity in plants that are required to make expenditures for revised regulations with
those that are not. Comparing the capacity of plants impacted by Option 2 with that of plants
currently in compliance, one finds that wet process hardboard plants impacted by revised
regulations represent 55% of the 1976 total hardboard (wet and dry) capacity and 56% of the total
1976 production (Table V-2). The total hardboard segments had an operating rate of 83% in 1976
46
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TABLE V-2
DISTRIBUTION OF HARDBOARD CAPACITY
IMPACTED VS. NON-IMPACTED PLANTS
OPTION 2
Wet Process
Impacted Plants (8)
Plants in Compliance (8)1
Total Wet Process (16)
Dry Process (12)
Total Hardboard
1976
Capacity
(1/8"-MMSF)
4,307
1,004
5,311
2,460
7,771
%of
Total
55
11
68
100
1976 Production
1/8" - MMSF % Total
3,643
701
4,344
2,141
6,485
56
11
67
33_
100
1976
Capacity
Utilization
85
70
82
8_7_
83
1. Includes two combination plants.
Source: Derived from Financial 308 Letter and Table III-4.
while the impacted plants operated at 85% of capacity. However, wet process and other hard-
board plants have enjoyed higher operating rates from 1976 to 1978 than in the past.
Under Option 1 only four plants are impacted and the impacted plants represent 16% of
hardboard capacity.
While current operating rates are important, future growth in demand and capacity expan-
sion will indicate the probable supply/demand balance at the time the plants are required to
make the pollution control investments. As previously discussed (Chapter HI) hardboard demand
will continue to grow at an average rate of 2% a year, while fluctuating with the business cycle for
the construction industry. Insulation board, on the other hand, is a product in long-term decline.
By 1984, demand for insulation board will be 65% of the 1976 level and, if all plants were in
operation, the industry operating rate would be at about 60%. The demand for hardboard will be
about 40% higher in 1984 than in 1976 and an 1100-1200 MMSF of additional capacity will be
required to meet the demand.
It is not contemplated that any Greenfield plants will be constructed to add to hardboard
capacity. The probable method of expansion is incremental increases in capacity at existing
plants and conversion of insulation board capacity to hardboard capacity. (Coincidentally, the
increased hardboard capacity required by 1984 is about the same in MMSF as the excess
insulation board capacity that will exist by then (1,200 MMSF), although only a small proportion
of this capacity can practically be converted to hardboard.) The total cost of production and
derived selling prices based upon long-run total cost indicate that the price of hardboard must
rise to a level substantially higher than the levels indicated in Table V-l to support new capacity
(Section V-F).
47
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Since hardboard is expected to be in tight supply on average over the next five to ten years,
and the cost of new capacity cannot be supported by current market prices, then eventually prices
can be expected to cover the increased costs of existing hardboard producers.
The increases in hardboard price (measured in 1976 dollars) under Options 1 and 2 will not
generally be sufficient to negate its competitive advantage over other products. However, even
when demand is price inelastic, some reductions in demand can occur. Under Option 2, while the
cost of hardboard will still be lower than that of some substitutes, the required price increases will
be large enough so that there could be some decline in product demand. However, these price
increases will not reduce demand sufficiently to prevent the addition of new capacity.
C. FINANCIAL CONSIDERATIONS
When an industry can recover cost increases through price increases without impacting
demand, the economic impact is less severe than it would otherwise be. However, plants may
suffer adverse economic impact if price increases lag cost increases and if companies are unable to
finance the compliance investment.
The profitability of wet process hardboard plants impacted by revised regulations was
analyzed as if price increases did not occur (Figure V-l). In general, plant profitability will be
reduced, but a plant will still cover its cash costs and depreciation, assuming that the 1976
operating results are representative of cost conditions likely to prevail in 1984. However, one plant
would incur a loss under these assumptions.
Most of the insulation board and wet process hardboard plants are parts of larger corpora-
tions which generate cash flow in excess of the required pollution control investment and which
also have some ability to generate external funds. However, a parent company might be reluctant
to divert funds from other operations to hardboard plants. For this reason and the fact that a few
plants are part of smaller corporations, it is advisable to examine the relationship between plant
cash flow and the required compliance investment.
For the impacted plants not now installing a pollution control system, the investment re-
quired for revised effluent regulations was divided by cash flow (Figure V-2). For wet process
hardboard plants, the investment associated with Option 1 ranges up to 300% of 1976 cash flow,
while the investment associated with Option 2 could reach 330% of cash flow.
The impacted wet process hardboard plants will eventually recover the costs of compliance
through higher prices which will probably also provide a sufficient rate of return on investment.
However, the installation of pollution control equipment will cause a cash drain from other
operations.
D. PLANT CLOSURE
The evaluation of whether a plant will close down as a result of pollution control regulation
(or any other event) is at best an imprecise estimate based upon an external view of plant's
situation. Of necessity, the evaluation is based upon financial criteria without knowledge and
consideration of a corporation's policies and goals. To illustrate, a corporation may decide to close
or sell an apparently profitable plant if the plant's business does not meet its long-term objec-
tives. On the other hand, to retain control over the source of supply, a corporation may elect to
invest in and operate a marginal plant which provides a source of equipment or materials for its
other operations.
48
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22.0
20.0
18.0
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
T
Current
Profitability
Before Tax
Post-Compliance
Profitability
Before Tax
Option 1
Option 2
Wet Process Hardboard
Source: Arthur D. Little, Inc., estimates.
FIGURE V-1 POST-COMPLIANCE PROFITABILITY WITH NO PRICE INCREASE
(1976 COST STRUCTURE)
49
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400 i-
300
o
3
to
c
200
100
Option 1
Option 2
Wet Process Hardboard
Source: Arthur D. Little, Inc., estimates.
FIGURE V-2 INVESTMENT REQUIRED FOR COMPLIANCE WITH REVISED EFFLUENT
REGULATIONS COMPARED WITH PLANT CASH FLOW
50
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Under Options 1 and 2 one plant may close rather than invest in the pollution control
equipment. This may occur because profitability in the absence of price increases will be severly
reduced and the investment is over 300% of 1976 cash flow. However, these data do not reflect the
anticipated real price increases that will occur by 1984 for hardboard which will allow the plant to
maintain profitable operations.
E. CAPACITY EXPANSION
The discussion of the hardboard and insulation board industry segments (Chapters II and
III) indicated that no Greenfield mills are likely to be built for either of the two product types.
Insulation board demand is facing a long-term decline and significant excess capacity by the
1980's; therefore, no new capacity will be built.
Capacity expansion for hardboard will most likely occur through incremental expansion of
existing hardboard mills and secondarily from conversion of insulation board capacity. This is
primarily attributable to the high cost of new capacity compared with current market prices.
While this relationship would be exacerbated by pollution control costs, they are of secondary
importance.
Under a total recycle option, the required increment to cover pollution control costs for a
new source does not differ from that of a conversion and expansion (Table V-3). However, for a
new facility the baseline plant cost translates into a higher, long-term required price-per-ton.
All the expansion methods shown in Table V-3 require a higher product price than the
current average market prices, suggesting that capacity increases will lag demand growth enough
so that market price will rise to cover the costs of new capacity. The average 1978 market price
was $93.95 per MSF; real prices must rise by 25% to support an incremental expansion by the
lowest-cost method. This increase is greater than that required by impacted hardboard plants to
recover costs of pollution control costs under all of the options studied.
F. MARKET STRUCTURE
The number and size of future insulation board plants will be unaffected by revised
regulations because the new source performance standards do not affect economies of scale. The
one plant that may close has about 6% of industry capacity and its closure will not affect the
number of participants in the industry. Any new capacity probably will be built at existing plants
and will not be influenced significantly by revised regulations.
G. EMPLOYMENT AND COMMUNITY IMPACTS
As noted above, one plant may close rather than invest in additional controls. If so
approximately 300 jobs would be directly affected. In addition, since this plant is not located near
major employment centers, secondary community impacts could occur with decreases in the
economic activity in the surrounding area.
51
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TABLE V-3
COST OF NEW HARDBOARD CAPACITY
NEW MILL VERSUS INCREMENTAL EXPANSION
$1978
1. New Plant
Baseline Plant
Water Effluent Control
Capacity
MMSF
293
Incremental
Investment
($000)
57,000
2,915
Annual
Operating
Costs
($000)
24,200
684
2. Conversion of
Insulation Board Plant
Baseline Conversion Cost 234
Water Effluent Central
(Option 2)1 -
3. Incremental Expansion
Baseline Expansion 117
Water Effluent Control
(Option 2)1
1. Based on range for similar size plants.
Source: Arthur D. Little, Inc., estimates.
27,000
20,440
17,500
8,370
Long-Run
Price
($/MSF)
136
5
141
117
2-14
119-131
106
2-14
108-120
52
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VI. LIMITATIONS OF ANALYSIS
The economic impact of revised water effluent guidelines upon the wet process hardboard
industry may differ fron the analysis in this economic impact assessment, depending upon:
1. EPA regulations which affect waste disposal,
2. Future growth in demand, and
3. Unknown factors related to impacted plants.
Item (1) was beyond the scope of the Technical Contractor's and the Economic Contractor's
work. Items (2) and (3) are limitations in every analysis of this type but their influence on the
results of a study varies from case to case and thus requires discussion.
A. ERA'S REGULATIONS AFFECTING WASTE DISPOSAL
Subtitle C of the Solid Waste Disposal Act, as amended by the Resource Conservation and
Recovery Act of 1976 (RCRA), creates a regulatory framework to control hazardous wastes.
Section 3004 addresses standards for owners and operators of hazardous waste treatment, storage
and disposal facilities. The regulation impacts the analysis of alternative control options because
it specifies the technical and monitoring requirements for each disposal method, as well as
restrictions on disposal of waste by method. These, in turn, may limit the application of some of
the control options studied, or result in higher costs for an alternative than have been indicated
by the technical contractor in this report. Further, insulation board and wet process hardboard
preserving plants which dispose of water effluent on-site may be impacted, in that the current
method of disposal may no longer be environmentally adequate.
The application of the pollution control options studies in this report will be affected by
RCRA regulations. The lagoons associated with enhanced biological treatment will be considered
as methods of hazardous waste disposal or storage, and thus plants will be required to monitor
groundwater and surface water as well as to install leachate collection and monitoring systems.
A leachate collection and monitoring system is not included in the cost of compliance.
Assuming that an aerated lagoon is similar in size to small land-fills (5,OOOM3/year), then the
incremental compliance cost per plant could be as follows:
Initial Investment: $129,000
Annual Operating Costs: $ 42,200
Other monitoring equipment is required for groundwater and surface water testing. The cost
of analysis for groundwater and surface water samples would be on the order of $60,000 per year.
Another source of additional cost is related to sludge disposal. Consideration of whether or
not the sludge and effluent of wet process hardboard plants were hazardous wastes was beyond
the scope of the technical contractor's report,1 although it was discussed. The costs of sludge
disposal are expected to double or triple as a result of Section 3004.2 Therefore, that component of
the technical contractor's operating cost (amounting to about 3% of operating costs) will be two to
three times as high, but it will not change the results of the economic impact assessment.
53
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B. FUTURE GROWTH IN DEMAND
If the construction and housing market growth inherent in the forecast of wet process
hardboard growth does not materialize, then the impacted plants will have difficulty in recov-
ering costs of compliance. However, the Arthur D. Little forecast is generally regarded as
conservative relative to other forecasts and thus this should not present a problem.
C. UNKNOWN FACTORS
The analysis of economic impact was based upon 1976 production and sales data and
individual plants may not track industry trends. This could affect the ability of individual plants
to increase price.
54
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REFERENCES
1. Revised Technical Review of Best Available Technology, Best Demonstrated Technology and
Pretreatment Technology for the Timber Products Point Source Category, report to the U.S.
Environmental Protection Agency by Environmental Science and Engineering, Project No.
78-052, September 1,1978.
2. Integrated Economic Impact Assessment of Hazardous Waste Management Regulations
(Regulatory Analysis Supplement), Preliminary Draft Report prepared for the Office of Solid
Waste Programs, U.S. Environmental Protection Agency, October, 1978.
55
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BIBLIOGRAPHY
Current Industrial Reports, M26A, U.S. Department of Commerce.
"The Demand and Price Situation for Forest Products, 1976-1977," Forest Service Miscellaneous
Publication 1356, U.S. Department of Agriculture.
Directory of Corporate Affiliates, Dun & Bradstreet, New York, 1978.
Directory of the Forest Products Industry, American Board Products Association, 1976.
Revised Technical Review of Best Available Technology, Best Demonstrated Technology and
Pretreatment Technology for the Timber Products Point Source Category, report to the U.S.
Environmental Protection Agency, by Environmental Science and Engineering, Project No. 78-
052, September 1, 1978.
Survey of Current Business, Bureau of the Census, U.S. Department of Commerce.
Wholesale Price Indexes, Bureau of Labor Statistics, U.S. Department of Labor.
57
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APPENDIX A
SUPPLEMENTARY DATA
59
-------
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62
-------
TABLE A-2
DERIVATION OF UNIT COST
WET PROCESS HARDBOARD NEW CAPACITY
LABOR HOURS
1. Greenfield Mill
Manhours/Ton
Logging 2.72
Manufacture 14.72
Transportation 2.08
19.52
2. Conversion of Insulation Board to Hard board
Increase manhours by 10%: 21.42 manhours/incremental ton
3. Incremental Expansion
Decrease manhours by 10%: 17.57 manhours/incremental ton
ENERGY REQUIREMENTS
1. Greenfield Mill
Million Btu's
Gross Manufacturing Requirements 21.551
Energy Generated from Residue .797
20.754
2. Conversion of Insulation Board to Hardboard
Increase Btu's by 10%: 22.829 million Btu's
3. Incremental Expansion
Decrease Btu's by 10%: 18.679 million Btu's
WOOD REQUIREMENTS
300 tons of chips/day = 107 MBF/day
0.84 MSF/day
63
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APPENDIX B
EPA FINANCIAL 308 SURVEY
65
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TABLE B-1
RESPONSES TO EPA FINANCIAL 308 SURVEY
Questionnaires Mailed to 18 Companies:
19 Wet Process Hardboard Mills
16 Insulation Board Mills
Response Rate: 100%
Applicable Responses Were Received For:
11 Wet Process Hardboard Only Mills*
11 Insulation Board Only Mills
5 Combination Mills
* Counting Abitibi's Alpena, Michigan operation as one mill.
67
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INSTRUCTIONS AND DEFINITIONS RELATING TO
INSULATION BOARD
I. This survey must be completed by each manufacturing facility that manufactures
insulation board.
2. A questionnaire for each insulation board plant has been sent to the corporate address.
This may or may not be a plant site. All questions on a survey form refer to one parti-
cular insulation board plant site only and a separate questionnaire must be completed
for each. Questionnaires were mailed to corporate offices because much of the infor-
mation resides there and typically corporate involvement is required for response to
materials of this kind.
3. Please submit one completed questionnaire for each plant in the enclosed, pre-addressed
envelope by November 30, 1977.
4. All questions contained in this survey are intended to obtain information about your
manufacturing operations and activities as they pertain to insulation hoard manufacture
only. Other plant operations should not be considered in determining your responses
unless a question specifically instructs you to do so.
5. A list of definitions of terms used in the survey has been provided to assist you in
understanding the questions asked and to insure your interpretation of terms is the
same as that of the persons who developed the survey. Please read these definitions
prior to completing any questions and refer to them as often as necessary to assure
accuracy in the completion of your response. Defined terms appear in italics in the
questionnaire.
6. All questions should be answered by checking the appropriate box or boxes. Those
questions requiring a written response should be answered by printing or typing in the
appropriate space.
7. Attempt to answer all questions. Where appropriate, answers should be provided for
the most recent fiscal year. If you cannot provide a full response 1o a question, answer
as much of it as you can. If a question is not relevant to your plant operation or the
information requested is not obtainable, please provide an explanation. If clarification
or supplementation of any response is necessary, please attach a separate sheet. If you
do not know the answer to a question, write "don't know" or "DK". If a value is
zero, write in zero (0).
8. If you have difficulty understanding or answering any question, please call Stephen
Mermelstein, 202-755-6906.
9. Please retain a copy of your completed survey, since it may be necessary to contact
you in the future to verify your responses.
10. Definitions appear on the reverse of this page.
68
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DEFINITIONS
Accumulated Depreciation—Total depreciation to date
or the difference between original book value and
current book value.
Annual Cost of Pollution Control and Other Environ-
mental Regulations—Depreciation charges for pollution
control equipment or for plant and equipment modi-
fications required by regulations. Operating costs
include the cost of maintenance and operating labor,
supplies, fuel, and electricity required to operate the
equipment related to the regulation.
Depreciation—Annual book depreciation of assets at this
plant. Do not include any Timberland Depletion in
this figure.
Direct Wages, Salaries and Related-Payroll costs (salaries,
wages, unemployment insurance, PICA and other
related costs) of direct labor (production employees)
engaged in the manufacture of insulation board.
Fixed Assets-Capital assets, plant site land, and equip-
ment are all categories of fixed assets. The book values
or value net to depreciation or depletion should be
shown. Do not include any Timberland in this figure.
Gross Fixed Assets-Original book value of Fixed Assets.
Insulation Board-A generic term for a homogeneous
panel made from lignocellulosic fibers (usually wood
or cane) characterized by an integral bond produced
by inter-felting of the fibers, to which other materials
may have been added during manufacture to improve
certain properties, but which has not been consoli-
dated under heat and pressure as a separate stage in
manufacture, said board having a density of less than
31 lb/ft3 (specific gravity 0.50) but having a density
of more than 10 lb/ft3 (specific gravity 0.16).
Materials Cost-Logs, wood, chips, chemicals and other
supplies used in the production of insulation board.
Navigable Waters-Waters of the United States, including
ocean, rivers, streams, etc. (surface water).
NPDES (National Pollutant Discharge Elimination System)
Permit-A permit issued by EPA or an approved state
program to point sources which discharge to public
waters allowing the discharge of wastewater under
certain stated conditions.
Operating Margin-Earnings before interest, taxes, general
and administrative expense.
OSHA-The Occupational Safety and Health Admin-
istration.
Other Income (Expense)-Income (expense) not directly
or indirectly associated with wet process hardboard
manufacture.
Payback Period—The number of years it takes for an
investment to repay itself.
Process Wastewater-Any used water which results from
or has had contact with the manufacturing process,
including any water for which there is a reasonable
possibility of contamination from the insulation
board manufacturing process or from raw material-
intermediate product-final product, storage, trans-
portation, handling, processing or cleaning. For
purposes of this survey, cooling water, sanitary waste-
water, store water and boiler blowdown are not
considered process wastewater if they have no contact
with the process.
Production Workers-Direct and indirect labor associated
with and attributable to wood treating at this plant.
Profit After Tax—If this is a single-plant company, the
net profit remaining after Federal Income taxes. If a
multi-plant company, calculate an approximate profit
after tax by using the aggregate corporate tax rate.
Profit Before Tax-Sales less all costs, except Federal
Income taxes.
Return on Investment-The average annual increased
revenue (or decreased cost) on an original investment,
usually calculated by a discounted cash flow method,
expressed as a percentage of original investment.
Sales-Sales, f.o.b. plant, net of discounts, and returns. If
the plant is a cost center, estimate the approximate
market value (f.o.b. plant) of the products produced in
the most recent fiscal year.
Selling, General and Administrative Cost—Salaries, wages
and related labor costs not directly associated with
production activity; state and local taxes; insurance
and expenses allocated from parent.
Total Assets-Fixed Assets, inventories, receivables, cash
securities, et cetera.
Total Liabilities-Long-term debt, accounts and notes
payable, deferred taxes, et cetera.
Unusual Production Costs—Any plant characteristic
that causes unusual costs should be described as well
as the impact upon operations. For example, if the
plant is in a remote location, freight costs to the
nearest market may be higher than those of other
plants competing in the market.
69
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308 QUESTIONNAIRE
INSULATION BOARD
i. Name of Plant
ii. Address of Plant
Street
City State Zip
iii. Name of Respondent* Title
iv. Address of Respondent
Street City State Zip
v. Telephone No. of Respondent
Area Code Number
vi. Parent Company
vii. Is this plant engaged in the manufacture of insulation board?
Yes D Continue with Questionnaire
No D Do not fill out the questionnaire but return after completing this
page, through Question vii.
viii. To assert your claim of confidentiality, please check off the box corresponding to the
questions that in the company's opinion require confidential treatment.
1 D 5
2 D 6
3D 7
4 D 8
NOTE: Upon receip
the questionnaire so
D 9 D
D 10 D
D 11 D
D 12 D
13 D
14 D
15 D
18 D
19 D
20 D
21 D
22 D
t by EPA, this page will be separated from the remainder of
that data processing and use is conducted on a coded basis.
For Use by EPA
Tndft Number
'Person to be contacted in case of questions.
70
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308 QUESTIONNAIRE
INSULATION BOARD
Company Code
(For EPA Use)
A. GENERAL INFORMATION
1. Is this insulation board (IB) plant a stand-alone operation or part of a multi-plant complex?
Stand-Alone D Multi-plant Complex D
If part of a multi-plant complex, approximately what percentage of total complex sales revenue was
represented by insulation board in the fiscal year ending 1976? %
2. Is this plant at an urban, suburban or rural location?
Urban O Suburban D Rural D
3. What year did the plant begin operation?
B. SALES AND PRODUCT MIX
4. What were total sales for this insulation board (IB) plant during 1976?
Under
$8 Million $8-12 Million $13-20 Million $21-28 Million Over $28 Million
D D D D D
5. Which of the following product types were produced at this IB plant during 1976?
Insulation Board
a.
b.
c.
Structural
Decorative
Other
Produced
At Plant
D
D
D
Approximate Percent of Sales
<10
D
D
D
10-30
D
D
a
31-50
D
D
D
51-70
D
a
a
71-90
a
n
a
>90
a
a
a
6. Are any changes (other than normal business fluctuations) planned over the next five years in IB
production process or product mix?
Yes D No D (If no, go to Part C)
If yes, please describe:
71
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C. PLANT CAPACITY AND PRODUCTION
7. Annual Capacity: The amount of thousands of square feet of insulation board which could have been
produced in this plant during 1976 if the IB plant was operated fully 6-2/3 days/week, 24 hours/day,
(350 days or 8400 hours/yr.)-
Thousands of Square Feet
Insulation
Board
(1/2" Basis)
< 100,000
D
300,001-
350,000
100,000-
150,000
n
350,001-
400,000
150,001-
200,000
D
400,001-
450,000
200,001-
250,000
D
450,001-
500,000
250,001-
300,000
D
> 500,000
n n n n n
8. Actual Production in 1976: The amount of thousands of square feet of insulation board which were
produced in this IB plant during 1976:
Insulation Board (1/2" basis)
. thousands of square feet
9.
10.
11.
Did this IB plant have any unusual downtime during 1976, e.g., labor strikes, accidents, et cetera?
Number of Weeks of Unusual Downtime
No D (Go to 10)
Yes D
<1
D
Average number of employees during
Production Workers
Other Employees
a . Typical number o f p
<25
n
n
1-2
D
1976:
26-50
D
D
3-4
D
51-75
D
D
5-6
D
76-100
D
D
7-8
D
101-150
n
n
>8
D
>150
D
D
iroduction days per week:
1-4 D 5 D 6 D 7 D
b. Please state number of weeks at each shift level (the total should add to 52 weeks)
No. of Weeks
(1) at 0 shifts (shut down or no insulation board production)
(2) at 1 shift
(3) at 2 shifts
(4) at 3 shifts
(5) at 4 shifts
52 weeks Total [(1) + (2) + (3) + (4) + (5)]
72
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D. REVENUES AND EXPENSES
12. Income Statement
Please check the box which most closely approximates your costs as a percentage of sales. (Use an
approximate allocation of data are available at the plant level.)
Approximate Percent of Sales
a. Direct Wages, Salaries
and Related
b. Materials (logs, wood,
other materials,
inventory charges)
c. Depreciation
d. Other Plant Expenses
(Including rent, fuel
and energy)
e. Operating Margin
f. Selling, General and
Administration
(Including allocation
from Parent)
g. Interest Expense
h. Other Income (Expense)
i. Profit Before Tax
j. Taxes
k. Profit After Tax
< 16
D
<40.0
D
< 1
D
< 1
D
< 10
D
< 8
D
0
D
D
< 3
D
<1
D
<2
D
16-20
D
41-45
D
1-2
D
1-2
D
10.0-20.0
D
8-10
D
1-2
D
D
3-9
D
2-3
D
2-4
D
21-25
D
46-50
D
3-4
D
3-4
D
26-30
D
51-55
D
4-5
D
4-5
D
21.0-25.0
D
11-13
D
34
D
D
10^12
D
4-5
D
5-10
D
5-6
D
D
13-15
D
6-7
D
11-15
D
31-35
D
56-60
D
6-7
D
6-7
D
25.1-30.0
D
>14
D
7-8
D
D
16-17
D
8-9
D
>15
D
>35
D
>60
D
> 7
D
> 7
D
>30
D
>8
n
D
>17
D
>9
D
73
-------
13. How representative is 1976 profit before tax compared to the 1971-1975 period:
Much Better than Average D
Better than Average D
About the Same D
Worse than Average D
Much Worse than Average D
14. What Depreciation Method is used?
Equipment Buildings
a. Book Basis: Straight-Line D D
Double-declining Balance D D
Sum of Year's Digits D D
Other: D D
(Please Specify)
b. Tax Basis: Straight Line D D
Double-declining Balance D D
Sum of Year's Digits D D
Other: D D
(Please Specify)
c. Pollution Control Expenditures:
Accelerated Over 5 Years D D
Same as Other Equipment D D
15. Annual Cost of Pollution Control and other Regulations Affecting Insulation Board Production Process
and Costs at this IB Plant:
Don't Fiscal Year Ending
Know None ~ 1976 1977*
a. Direct Costs
(1) Water Pollution Regulations:
(a) Annual Operating Costs** D D
(b) Annual Depreciation Charges** D D
(c) Obligations to Municipalities D D
(2) Air Pollution Regulations:
(a) Annual Operating Costs D O
(b) Annual Depreciation Charges D D
•Please estimate the 1977 value if unknown at this time.
* "Include the cost associated with shared facilities, including Industrial Waste Recovery Systems.
74
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(3) Solid Waste Disposal (Total,
including waste water sludge
and wood waste):
(a) Annual Operating Costs
(b) Annual Depreciation Charges
(4) Other Regulations Affecting Pro-
duction Processes and Produc-
tion Costs (Please Specify):
Don't
Know
D
D
D
Fiscal Year Ending
None
D
D
D
1976
1977*
(a) Annual Operating Costs D
(b) Annual Depreciation Charges D
b. Indirect Costs (e.g., environ-
mental research, consultants,
litigation) D
16. How does this plant discharge of process waste water"!
a. Discharge into navigable water
b. Discharge into municipal sewer
c. Disposed on plant site
d. Disposed off plant site
e. Process waste is recycled (no discharge)
f. Other D Please specify
D
D
D
D
D
D
D
17a. If you do not discharge process waste water into a municipal sewer, do you have the option to
connect?
Yes D No D Don't Know D
b. If you do have the option to connect to a municipal sewer, what is the initial capital invest-
ment cost?
$
Don't Know D
c. If you discharge any wood treating process waste water into a sewer system, on what basis
are your sewer charges made?
Flat annual fee D
Gallon of effluent D
Other D Please specify
•Please estimate the 1977 value if unknown at this time.
75
-------
d. If you discharge into a municipal sewer, what were your total sewer charges in 1976?
$
e. If you discharge process waste water into navigable waters, do you have an NPDES permit"!
Yes D No D Don't Know D
f. Do you own or have available for purchase about one acre of land at or adjacent to this facility
that could be used for an effluent treatment system?
Yes D No D
If yes, what is the current market value per acre? $
18. Unusual Production Costs
Are there any circumstances peculiar to this plant which result in unusual production costs (other
than unusual downtime described in Q. 9)?
Yes D No D
If Yes, please describe:
19. Distribution of Corporate Assets and Liabilities
a. What was the value of the company's total assets at the end
of the 1976 fiscal year? $
b. What was the value of the company's total liabilities and net
worth at the end of the 1976 fiscal year (accounts payable,
debt due within the year, etc.)? $
c. What was the value of debt maturing in one year? $
d. What was the corporation's debt/equity ratio? : 1
20 Value of Assets for this Insulation Board Plant
a. Gross Fixed Assets: Original Cost (Book Value) of plant
and equipment dedicated to insulation board $
b. Accumulated depreciation
c. Net Fixed Assets (Gross Fixed Assets less cumulative
depreciation = Current Book Value)
d. Total Assets: Net Fixed Assets, Cash Receivables,
inventory, other costs)
76
-------
21. Capital Investment Criteria for IB Plant
a. What basis is used to evaluate the IB plant's profitability (return on investment)"!
D Total Assets (As above, 20.d) less current liabilities
D Book Value of Net Fixed Assets (As above, 20.c)
D Replacement Cost
D Salvage Value
D Other (Specify)
b. What is the target internal pre-tax rate of return on capital required for investment in this plant?
% At what ROI would you consider closing the plant? %
c. If rate of return criteria are not used, what is the required payback period for investment?
Years or D Useful life. At what payback period would you consider clos-
ing the plant? Years
22. Capital Investment for IB Plant (including capitalized maintenance)
(1)
Total
Investment
Planned 1977
Total Actual 1972-76
(2)
Plant Capitalized
Maintenance of
Major Expansion
(3)
Water
Pollution
Control
(4)
Other Environmental
Regulation Impacting
Production Processes
77
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INSTRUCTIONS AND DEFINITIONS RELATING TO
WET PROCESS HARDBOARD
1. This survey must be completed by each manufacturing facility that manufactures
hardboard by the wet process.
2. A questionnaire for each hardboard plant has been sent to the corporate address.
This may or may not be a plant site. All questions on a survey form refer to one parti-
cular hardboard plant site only and a separate questionnaire must be completed for
each. Questionnaires were mailed to corporate offices because much of the information
resides there and typically corporate involvement is required for response to materials
of this kind.
3. Please submit one completed questionnaire for each plant in the enclosed, pre-addressed
enveloped by November 30, 1977.
4. All questions contained in this survey are intended to obtain information about your
manufacturing operations and activities as they pertain to wet process hardboard
manufacture only. Other plant operations should not be considered in determining
your responses unless a question specifically instructs you to do so.
5. A list of definitions of terms used in the survey has been provided to assist you in
understanding the questions asked and to insure your interpretation of terms is the
same as that of the persons who developed the survey. Please read these definitions
prior to completing any questions and refer to them as often as necessary to assure
accuracy in the completion of your response. Defined terms appear in italics in the
questionnaire.
6. All questions should be answered by checking the appropriate box or boxes. Those
questions requiring a written response should be answered by printing or typing in the
appropriate space.
7. Attempt to answer all questions. Where appropriate, answers should be provided for
the most recent fiscal year. If you cannot provide a full response to a question, answer
as much of it as you can. If a question is not relevant to your plant operation or the
information requested is not obtainable, please provide an explanation. If clarification
or supplementation of any response is necessary, please attach a separate sheet. If you
do not know the answer to a question, write "don't know" or "DK". If a value is
zero, write in zero (0).
8. If you have difficulty understanding or answering any question, please call Stephen
Mermelstein, 202-755-6906.
9. Please retain a copy of your completed survey, since it may be necessary to contact
you in the future to verify your responses.
10. Definitions appear on the reverse of this page.
78
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DEFINITIONS
Accumulated Depreciation-Total depreciation to date
or the difference between original book value and
current book value.
Annual Cost of Pollution Control and Other Environ-
mental Regulations-Depreciation charges for pollution
control equipment or for plant and equipment modi-
fications required by regulations. Operating costs
include the cost of maintenance and operating labor,
supplies, fuel, and electricity required to operate the
equipment related to the regulation.
Depreciation-Annual book depreciation of assets at this
plant. Do not include any Timberland Depletion in
this figure.
Direct Wages, Salaries and Related-Payroll costs (salaries,
wages, unemployment insurance, PICA and other
related costs) of direct labor (production employees)
engaged in the manufacture of wet process hardboard.
Fixed Assets-Capital assets, plant site land, and equip-
ment are all categories of fixed assets. The book values
or value net to depreciation or depletion should be
shown. Do not include any Timberland in this figure.
Gross Fixed Assets-Original book value of Fixed Assets.
Hardboard-A generic term for a panel manufactured
primarily from inter-felted lignoceUulodc fibers
(usually wood), consolidated under heat and pressure
in a hot-press to a density of 31 lb/ft3 (specific
gravity 0.50) or greater, and to which other materials
may have been added during manufacture to improve
certain properties.
Materials Cost-Logs, wood, chips, chemicals and other
supplies used in the production of wet process hard-
board.
NPDES (National Pollutant Discharge Elimination System)
Permh-A permit issued by EPA or an approved state
program to point sources which discharge to public
waters allowing the discharge of wastewater under
certain stated conditions.
Navigable Waters-Waters of the United States including
ocean, rivers, streams, etc. (surface water).
Operating Margin-Earnings before interest, taxes, general
and administrative expense.
OSHA-The Occupational Safety and Health Admin-
istration.
Other Income (Expense)-Income (expense) not directly
or indirectly associated with wet process hardboard
manufacture.
Payback Period-The number of years it takes for an
investment to repay itself.
Process Wastewater-Any used water which results from
or has had contact with the manufacturing process,
including any water for which there is a reasonable
possibility of contamination from the wet process
hardboard manufacturing process or from raw material-
intermediate product-final product, storage, transpor-
tation, handling, processing or cleaning. For purposes
of this survey, cooling water, sanitary wastewater,
store water and boiler blowdown are not considered
process wastewater if they have no contact with
the process.
Production Workers-Direct and indirect labor engaged
in and attributable to the production of wet process
hardboard at this plant.
Profit After Tax-If this is a single-plant company, the
net profit remaining after Federal Income taxes. If a
multi-plant company, calculate an approximate profit
after tax by using the aggregate corporate tax rate.
Profit Before Tax-Sales less all costs, except Federal
Income taxes.
Return on Investment-The average annual revenue (or
decreased cost) on an original investment, usually
calculated by a discounted cash flow method.
Sales-Sales, f.o.b. plant, net of discounts, and returns. If
the plant is a cost center, estimate the approximate
market value (f.o.b. plant) of the products produced in
the most recent fiscal year expressed as a percent of
the original investment.
Selling, General and Administrative Cost-Salaries, wages
and related labor costs not directly associated with
production activity; state and local taxes; insurance
and expenses allocated from parent.
Total Assets-Fixed Assets, inventories, receivables, cash
securities, et cetera.
Total Liabilities-Long-term debt, accounts and notes
payable, deferred taxes, et cetera.
Unusual Production Costs-Any plant characteristic
that causes unusual costs should be described as well
as the impact upon operations. For example, if the
plant is in a remote location, freight costs to the
nearest market may be higher than those of other
plants competing in the market.
79
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308 QUESTIONNAIRE
WET PROCESS HARDBOARD
i. Name of Plant
ii. Address of Plant.
Street
City
iii. Name of Respondent*.
State
Zip
Title.
iv. Address of Respondent
Street
v. Telephone No. of Respondent
vi. Parent Company
City
State
Zip
Area Code
Number
vii. Is this plant engaged in the manufacture of insulation board?
Yes D Continue with Questionnaire
No D Do not fill out the questionnaire but return after completing this
page through Question vii.
viii. To assert your claim of confidentiality, please check off the box corresponding to the
questions that in the company's opinion require confidential treatment.
i a
2 a
3 a
4 a
5
6
7
8
D
D
D
a
9
10
11
12
a
a
a
a
13
14
15
18
a
a
a
a
19
20
21
22
a
a
a
D
NOTE: Upon receipt by EPA, this page will be separated from the remainder of
the questionnaire so that data processing and use is conducted on a coded basis.
For Use by EPA
Code Number
"Person to be contacted in case of questions.
81
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308 QUESTIONNAIRE
WET PROCESS HARDBOARD
Company Code
(For EPA Use)
A. GENERAL INFORMATION
1. Is this wet process hardboard (WPH) plant a stand-alone operation or part of a multi-plant complex?
Stand-Alone D Multi-plant Complex D
If part of a complex, approximately what percentage of total sales at this complex was from wet
process hardboard in the 1976 fiscal year? %
2. Is this plant at an urban, suburban or rural location?
Urban D Suburban D Rural D
3. What year did the plant begin operat
B. SALES AND PRODUCT MIX
4. What were total sales (net f.o.b.) for
Under $5 Million $5-10 Million
ion?
this wet process hardboard (WPH) plant during 1976?
More than
$1 1-20 Million $21-30 Million $30 Million
D D D D
5. Which of the following product types were produced at this WPH plant during
S1S Products
a. Siding
b. Panelling
c. Industrial Board
d. Other SIS
S2S Products
e. Siding
d. Panelling
g. Industrial Board
h. Other S2S
Produced
At Plant
D
D
D
D
D
D
D
D
1976?
a
Approximate Percent of Sales
<10
a
a
a
D
a
n
n
a
10-30
a
a
a
a
D
a
n
a
31-50
n
a
D
D
a
a
D
a
51-70
a
D
a
n
D
a
a
n
70-90
n
a
a
n
a
a
n
a
>90
a
a
n
n
a
a
n
n
6. Are any changes (other than normal business fluctuations) planned over the next five years in pro-
duction process or product mix at this WPH plant?
Yes D No D (If no, go to Part C)
If yes, please describe
82
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C. PLANT CAPACITY AND PRODUCTION
7. Annual Capacity: The amount of thousands of square feet of the product which could have been
produced in this plant during 1976 if the plant was operated fully 6-2/3 days/week, 24 hours/day
(350 days or 8400 hours/yr.).
Thousands of Square Feet
Wet Process
Hardboard
(1/8" Basis)
< 100,000
D
300,001-
350,000
100,000-
150,000
D
350,001-
400,000
150,001-
200,000
D
400,001-
450,000
200,001-
250,000
D
450,001-
500,000
250,001-
300,000
D
> 500,000
D D D D D
8. Actual Production in 1976: The amount of thousands of square feet of the product which were
produced in this plant during 1976:
Wet Process Hardboard (1/8" basis)
No D
(Go to 10)
Yes D
Average number of e
Production Workers
Other Employees
5 any unusual downtime during 1976, e.g., labor strikes, accidents, etc
Number of Weeks of Unusual Downtime
<1
n
^ees during
<25
D
D
1-2
D
1976:
26-50
D
D
3-4
D
51-75
D
D
5-6
D
76-100
D
D
7-8
D
101-150
D
D
>8
D
>150
D
D
11. a. Typical number of production days per week:
1-4 D 5D 6D 7 D
b. Please state number of weeks at each shift level (the total should add to 52 weeks):
No. of Weeks
(1)
(2)
(3)
at 0 shifts (shut down or no wet process hardboard production)
at 1 shift
at 2 shifts
(4)
(5)
at 3 shifts
at 4 shifts
52 Weeks Total [(1) + (2) + (3) + (4) + (5)]
83
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D. REVENUES AND EXPENSES
12. Income Statement
Please check the box which most closely approximates your costs as a percentage of sales. (Use an
approximate allocation if data are unavailable at the plant level.)
This WPH Plant's Cost as an Approximate Percent of Sales
a. Direct Wages, Salaries
and Related
b. Materials (logs, wood,
other materials plus
inventory charges)
c. Depreciation
d. Other Plant Expenses
(Including rent, fuel
and energy)
e. Operating Margin
f. Setting General and
Admin. (Including
Allocation from
Parent)
g. Interest Expense
h. Other Income (expense)
i. Profit Before Tax
j. Taxes
k. Profit After Tax
<16
D
<20
D
<1
D
<1
D
<30
n
<5
D
0
D
D
<10
n
<4
D
<4
D
17-19
n
21-27
n
1-2
D
1-2
D
31-35
n
6-7
n
1-2
D
n
11-14
D
5-6
n
5-6
n
20-23
D
28-33
D
3-4
D
3-4
D
36-40
D
8-10
D
3-4
D
D
15-19
D
7-9
D
7-9
n
24-26
n
34-40
n
4-5
D
4-5
n
41-45
D
11-12
D
5-6
n
D
19-24
n
10-12
D
10-12
D
27-29
n
41-47
D
6-7
n
5-6
D
46-50
D
13-15
D
>6
n
n
25-30
D
13-15
D
13-15
D
>29
D
>47
n
>7
D
>7
D
>50
D
>15
D
84
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13. How representative is 1976 profit before tax compared to the 1971-1975 period:
Much Better than Average D
Better than Average D
About the Same D
Worse than Average D
Much Worse than Average D
14. What depreciation method is used?
Equipment Buildings
a. Book Basis: Straight-Line D D
Double-declining Balance D D
Sum of Year's Digits D D
Other: D D
(Please Specify)
b. Tax Basis: Straight Line D D
Double-declining Balance D D
Sum of Year's Digits D D
Other: D D
(Please Specify)
c. Pollution Control Expenditures:
Accelerated Over 5 Years D D
Same as Other Equipment/Bldgs. D D
15. Annual Cost of Pollution Control and other Regulations Affecting WPH Production Process and
Production at this Plant:
Don't Fiscal Year Ending
Know None 1976 1977"
a. Direct Costs
(1) Water Pollution Regulations:
(a) Annual Operating Costs** D D
(b) Annual Depreciation Charges** D D
(c) Obligations to municipalities D D
(2) Air Pollution Regulations:
(a) Annual Operating Costs D D
(b) Annual Depreciation Charges D D
•Please estimate 1977 expenditures if they are not known.
"Include the cost associated with shared facilities, including Industrial Waste Recovery Systems.
85
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Don't
Know
Fiscal Year Ending
None
1976
1977*
(3) Solid Waste Disposal (Total,
including waste water sludge
and wood waste):
(a) Annual Operating Costs
(b) Annual Depreciation Charges
(4) Other Regulations Affecting Pro-
duction Processes and Produc-
tion Costs (Please Specify):
D
D
D
D
D
D
(a) Annual Operating Costs
(b) Annual Depreciation Charges
b. Indirect/Overhead Costs (Environ-
mental research, consulting fees,
litigation, etc.)
D
D
D
16. How does this plant dispose of process waste water!
a. Discharge into navigable water
b. Discharge into municipal sewer
c. Disposed on plant site
d. Disposed off plant site
e. Process waste water is recycled (no discharge)
f. Other D Please specify
n
D
D
D
D
D
D
D
17.a If you do not discharge process waste water into a municipal sewer, do you have the option to
connect?
Yes D
No D
Don't Know D
b. If you do have the option to connect to a municipal sewer, what is the initial capital invest-
ment cost?
$ Don't Know D
c. If you discharge any process waste water into a sewer system, on what basis are your sewer
charges made?
Flat annual fee D
Gallon of effluent D
Other D Please specify
*Please estimate the 1977 value if unknown at this time.
86
-------
d. If you discharge into a municipal sewer, what were your total sewer charges in 1976?
$
e. If you discharge process waste water into navigable waters, do you have an NPDES Permit1*.
Yes D No D Don't Know D
f. Do you own or have available for purchase about one acre of land at or adjacent to this facility
that could be used for an effluent treatment system?
Yes D No D
If yes, what is the current market value per acre? $
18. Unusual Production Costs
Are there any circumstances peculiar to this plant which result in unusual production costs (other
than unusual downtime described in Q. 9)?
Yes D No D
If Yes, please describe:
19. Distribution of Corporate Assets and Liabilities
a. What is the value of the corporation's total accounts receivable? $
b. What is the value of the corporation's total current liabilities
(accounts payable, debt due within the year, etc.)? $
c. What is the value of debt maturing in the current fiscal year? $
d. What is the corporate debt/equity ratio? : 1
20. Value of Assets (Wet Process Hardboard Plant):
a. Gross Fixed Assets: Original Cost (Book Value) of plant
equipment dedicated to wet process hardboard $
b. Accumulated depreciation
c. Net Fixed Assets (Gross Fixed Assets less cumulative
depreciation-Current Book Value) $
d. Total Assets: Net Fixed Assets, Cash Receivables,
inventory, other costs) $
87
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21. Capital Investment Criteria for WPH Plant
a. What basis is used to evaluate the plant's profitability (return on investment)?
D Net Assets (Total Assets, as above in 20.d, less Current Liabilities)
D Book Value of Net Fixed Assets (as above in 20.c)
D Replacement Cost
D Salvage Value
D Other (Specify)
b. What is the target internal pre-tax rate of return on capital required for investment in this plant?
% At what ROI would you consider closing the plant? %
c. If rate of return criteria are not used, what is the required payback period for investment?
Years or D Useful life
22. Capital Investment for WPH Plant (including capitalized maintenance)
(1) (2) (3) (4)
Plant Capitalized Water Other Environmental
Total Maintenance of Pollution Regulation Impacting
Investment Major Expansion Control Production Processes
Planned 1977
Total Actual 1972-76
88
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