i I
c/EPA
United States
' | Environmental Protection
i I Agency
Office of
Water Planning and Standards
Washington, DC 20460
EPA-440/2-79-018
Water
Economic Impact Analysis
of Alternative Pollution
Control Technologies
Wood Preserving
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-440/2-79-018
Economic Impact Analysis of
Alternative Pollution Control Technologies
Wood Preserving Subcategories
of the Timber Products Industry
U.S. Environmental Protection Agency
Office of Water Planning and Standards
September 1979
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This report has been reviewed by the Office of
Water Planning and Standards, EPA, and approved
for publication. Approval does not signify that the
contents necessarily reflect the views and policies of
the Environmental Protection Agency, nor does
mention of trade names or commercial products
constitute endorsement or recommendation for use.
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PREFACE
This document is a contractor's study prepared for the Office of Water Planning and
Standards of the Environmental Protection Agency (EPA). The purpose of the study is to analyze
the economic impact which could result from the application of effluent standards and limita-
tions issued under Sections 301, 304, 306 and 307 of the Clean Water Act to the timber products
industry.
The study supplements the technical study (EPA Development Document) supporting the
issuance of these regulations. The Development Document surveys existing and potential waste
treatment control methods and technology within particular industrial source categories and
supports certain standards and limitations based upon an analysis of the feasibility of these
standards in accordance with the requirements of the Clean Water Act. Presented in the
Development Document are the investment and operating costs associated with various control
and treatment technologies. The attached document supplements this analysis by estimating the
broader economic effects which might result from the application of various control methods and
technologies. This study investigates the effect in terms of product price increases, effects upon
employment and the continued viability of affected plants, effects upon foreign trade and other
competitive effects.
The study has been prepared with the supervision and review of the Office of Water
Planning and Standards of EPA. This report was submitted in fulfillment of Contract Nos. 68-01-
4194 and 68-01-4398 by Arthur D. Little, Inc.
This report is being released and circulated at approximately the same time as publication
in the Federal Register of a notice of proposed rule making. The study is not an official EPA
publication. It will be considered along with the information contained in the Development
Document and any comments received by EPA on either document before or during final rule
making proceedings necessary to establish final regulations. Prior to final promulgation of
regulations, the accompanying study shall have standing in any EPA proceeding or court
proceeding only to the extent that it represents the views of the contractor who studied the
subject industry. It cannot be cited, referenced, or represented in any respect in any such
proceeding as a statement of EPA's views regarding the timber products industry.
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TABLE OF CONTENTS
Page
List of Tables vii
List of Figures ix
I. EXECUTIVE SUMMARY 1
A. SCOPE OF WORK 1
B. INDUSTRY CHARACTERIZATION 1
C. COSTS OF COMPLIANCE 2
D. ECONOMIC IMPACT 3
II. INDUSTRY CHARACTERIZATION 7
A. INDUSTRY DEFINITION 7
B. TYPES OF FIRMS 7
C. PRODUCT DESCRIPTION 10
D. CHARACTERISTICS OF THE EXISTING INDUSTRY PLANTS 15
E. CHARACTERISTICS OF NEW PLANTS 17
F. COMPETITIVE STRUCTURE OF THE INDUSTRY 21
G. PRICE AND COST HISTORY 25
H. FINANCIAL PROFILES 29
III. COST OF COMPLIANCE 35
A. INTRODUCTION 35
B. CURRENT EFFLUENT STATUS 35
C. CONTROL OPTIONS 35
D. COSTS OF COMPLIANCE FOR EXISTING INDUSTRY 36
E. COST OF COMPLIANCE FOR NEW SOURCES 36
IV. ECONOMIC IMPACT ASSESSMENT 45
A. ECONOMIC CHARACTERISTICS OF IMPACTED PLANTS 45
B. ECONOMIC IMPACT ON EXISTING INDUSTRY 45
C. ECONOMIC IMPACT UPON NEW SOURCES AND
CAPACITY EXPANSIONS 54
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TABLE OF CONTENTS (Continued)
Page
V. LIMITATIONS OF ANALYSIS 57
A. EPA REGULATIONS AFFECTING WASTE DISPOSAL 57
B. RETURN ON INVESTMENT CRITERIA 58
C. COST VARIATIONS FROM PLANT TO PLANT 58
D. FUTURE GROWTH IN DEMAND 59
E. LOCAL CONDITIONS OF IMPACTED PLANTS 59
REFERENCES 61
BIBLIOGRAPHY 63
APPENDIX A- INDUSTRY CHARACTERIZATION 65
APPENDIX B- PRO-FORMA NEW SOURCE MODELS 69
APPENDIX C- EPA FINANCIAL 308 SURVEY 79
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LIST OF TABLES
Table No. Page
1-1 Total Cost of Compliance Wood Preserving Industry 4
1-2 Summary of Economic Impact Steaming Indirect Dischargers 5
1-3 Summary of Economic Impact Boulton Indirect Dischargers 6
11-1 Pressure Cylinder Capacity of the Ten Largest Wood Preserving Firms, 1976 8
11-2 Wood Preserving Plants Form of Business Organization, 1976 9
11-3 Preserved Wood Products and Their Potential Substitutes 11
II-4 Wood Treated With Preservatives, 1955-1976 12
11-5 Value of Shipments for the Wood Preserving Industry, 1958-1976 13
II-6 Distribution by Annual Sales Value 17
II-7 Number of Production Employees Per Plant, 1976 19
M-8 Distribution of Wood Preserving Plants by Year of Initial Operation 19
H-9 Profitability of New Plants versus Older Plants, 1976 20
11-10 Estimated Fixed Capital Requirements for the Manufacture of Preserved
Wood (organic treatment) 22
11-11 Estimated Annual Operating Costs for the Manufacturing of Preserved Wood 23
11-12 Concentration Ratios in the Wood Preserving Industry, 1963-1976 24
11-13 Selected Operating Ratios for the Wood Preserving Industry: 1964 to 1976 27
11-14 Pro-For ma Income Statements of Wood Preserving Plants by Sales
Category 30
11-15 Wood Preserving Plants Asset Turnover by Sales: Service Category, 1976 31
11-16 Wood Preserving Plants Distribution of Assets by Sales and Service Company
1976 32
11-17 Capital Expenditures and Productivity in Wood Preserving Industry, 1967-
1976 33
11-18 Target Rate of Return for Investments Made by Wood Preserving Industry 34
111-1 Wood Preserving Steaming Indirect Dischargers Cost of Compliance Under
Alternative Technologies 37
III-2 Wood Preserving Boulton Indirect Dischargers Cost of Compliance Under
Alternative Technologies 38
III-3 Total Cost of Compliance Wood Preserving Industry Installing Least-Cost
Technology 39
HI-4 Wood Preserving Industry Production Size Cutoffs Indirect Dischargers 40
III-5 Total Cost of Compliance Wood Preserving Industry Installing Least-Cost
Technology (With Size Cutoff) 41
111-6 Model Plants for New Source Performance Standards 42
111-7 Cost of Compliance New Wood Preserving Plants 43
IV-1 Land Availability for Plants 46
IV-2 Indirect Discharger Wood Preserving Plants Percentage Decline in Profitability
After Compliance Without Price Increases 49
IV-3 Form of Business Organization by Discharge Status 52
vu
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LIST OF TABLES (Cont)
Table No. Page
IV-4 Wood Preserving Industry Potential Plant Closures Under BAT
Alternatives 53
IV-5 Wood Preserving Industry Employment Losses from Plant
Closures 54
IV-6 Impact of BAT Requirements Upon Long-Run Revenue Required
to Support New Sources 56
V-1 Changs in Revenue Required by Discount Rate 58
vm
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LIST OF FIGURES
Figure No. Page
11-1 Sales Trends for Preserved Wood Products 1960-1988 14
11-2 Wood Preserving Plants in the United States, 1974 18
II-3 Wood Preserving Industry - Price Indices of Raw
Materials, 1970-1978 26
II-4 List Prices of Selected Preserved Wood Products, 1969-1978 28
IV-1 Price Increases Required to Recover Costs of Compliance 48
IV-2 Investment Required for BAT Alternatives as a Percentage
of Cash Flow 51
V-1 Revenue Requirement as a Percentage of Sales by ROR
for Sample Plants 59
IX
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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 wood
preserving subcategories of the timber products industry. It characterizes each wood preserving
subsegment; summarizes alternative technologies and their related costs of compliance* and
analyzes and discusses the anticipated economic impact on those plants that would have to make
investments to be in compliance with alternative regulation options. The EPA assisted in the
analysis by surveying the wood preserving 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
The wood preserving industry comprises establishments primarily engaged in treating
wood, sawed or planed in other establishments, with creosote or other preservatives to prevent
decay and to protect against fire and insects. This industry also includes the cutting, treating,
and selling of crossties, poles, posts, and pilings.
The wood treating process can employ either pressure or non-pressure systems. Non-
pressure processors use open tanks containing the preservatives in which the wood is immersed.
Pressure processors can be either "full-cell," commonly used with aqueous solutions, or "empty-
cell," used with oil preservatives.
The industry is composed of a large number of small, privately owned plants and a few
larger establishments, totaling 302 companies that operated about 415 wood preserving plants in
the United States in 1976. Of these companies, 87% are single-plant firms. The largest, Koppers
Company, operates 25 plants, whereas the other multi-plant firms operate 10 or fewer. The 10
largest represent approximately 51% of total industry pressure-tank capacity.
Wood preserving companies vary with respect to the degree of vertical integration and
ownership. Most of the companies are not integrated back to the ownership of timberland but
purchase wood or treat customer-owned wood on a service basis only. Ownership is about 22%
through publicly held corporations, 69% privately held and 9% proprietorships.
In general, firms located in the South are treating mostly Southern Pine while those in the
West treat mostly Douglas Fir. The industry uses either oil-borne (organic) preservatives for
products such as poles, pilings or railroad ties, or waterborne (inorganic) preservatives for
plywood and lumber. The majority (80%) of firms treat with organic preservatives.
'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.
1
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Wood preserving plants are distributed throughout the United States, but 45% are located
in the Southeast. Of plants responding to the EPA Financial 308 Survey, 30% described their
plant site as urban, whereas 25% were reported to be suburban and 45%, rural. The industry
exhibits a fairly even distribution by annual sales value, with 45% of the facilities having sales
between $300,000 and $2.4 million.
The value of shipments by the wood preserving industry rose from $344 million in 1967 to
$761 million in 1974, before easing in the succeeding two years. The volume of wood preserved
peaked at 286 million cubic feet in 1967; in 1976, the most recent year for which data are
available, the total volume was 257 million cubic feet. Future growth will vary by product but is
forecast by Arthur D. Little, Inc., to average three percent per year to 1988.
Preserved wood is largely a commodity market modified by transportation costs which give
regional advantages to some producers. Sometimes, the availability of a particular wood specie
can also be a factor. Demand elasticity in the industry varies somewhat among products but the
major factors governing demand are the competition within the industry, the economic climate of
user industries and the cost-effectiveness of substitute products.
The industry has experienced significant cost increases for some of the principal raw
materials used, especially chemicals and wood. However, producers have been largely able to pass
on increased costs in the form of higher selling prices, although margins have eased during the
1970's.
Pro-forma income statements developed for seven sales and service categories of wood
preserving plants indicate a range in after-tax profit of 0.5% to 6%. (Plant models were developed
for five plants treating owned-wood products and ranging in sales from $200,000 to $7.5 million,
and two plants offering a treating service only and having sales of $250,000 and $1 million,
respectively.) The return on total capital in 1976 for 314 of the 337 respondents to the EPA
Financial 308 Letter ranges from 1.9% to 32%. The ratio of sales to total assets ranges from
2.5 to 5.
C. COSTS OF COMPLIANCE
Costs of compliance were developed for three levels of treatment for each indirect discharge
plant:
Biological treatment;
Metals removal; and
Zero discharge.
Six options were examined for indirect dischargers:
Option 1: Existing interim final standards; i.e., no further regulation;
Option 2: Biological treatment only for plants using pentachlorophenol;
Option 3: Metals removal for plants with fugitive metals;
Option 4: Zero discharge only for plants using pentachlorophenol or plants with
fugitive metals;
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Option 5: Zero discharge for plants using pentachlorophenol; and
Option 6: Zero discharge for all indirect dischargers.
The total investment required for all indirect dischargers is highest under Option 6, at $6.1
million, and lowest for Option 3, at $1.6 million (Table 1-1).
. The cost of compliance was also calculated using a set size-cutoff criterion. The effect of
using the size cutoff is to cut in half the number of impacted plants and the total industry cost of
compliance.
There is only one direct discharging plant; and for that plant, two levels of treatment
technology were developed:
Additional biological treatment with activated carbon adsorption; and
No discharge, through spray evaporation.
D. ECONOMIC IMPACT
A small portion (10%) of the wood preserving subcategory will be affected by the
alternatives that were considered.
The EPA is proposing Option 5 without a size cutoff as the Pretreatment Standard for
Existing Sources for both Boulton and steaming indirect dischargers. A total of 21 steaming
plants and 6 Boulton plants will be impacted by Option 5. Revenue required to recover cost
ranges from 2% to 33% (Table 1-2) for impacted steaming plants and 2% to 49% (Table 1-3) for
Boulton plants. Under Options 2 and 3, required price increases would have been lower while
under Options 4 and 6 the required price increase to recover cost would have been about the same.
There will be no general price increase as a consequence of the alternatives studied.
Individual plants may be able to recover their cost if local market conditions permit. Therefore,
the profitability of impacted plants will decline.
The investment required under each option studied is generally larger than average annual
cash flow for indirect dischargers (Table 1-2). An estimated 25% of annual cash flow could be
made available for pollution control investment; thus most plants will require external financing.
Under Option 5, there could be from two to seven plant closures in the steaming category
and one to three in the Boulton category. The employment losses associated with plant closures
are expected to range from 103 to 383 in the steaming category and from 15 to 56 in the Boulton
category. Under Options 2 and 3, in the steaming category, plant closures and employment
would have been lower while under Options 4 and 6 both would be higher. In the Boulton
category, the plant closures and employment losses are the same under Options 3, 4 and 6 as for
Option 5.
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II. INDUSTRY CHARACTERIZATION
A. INDUSTRY DEFINITION
As defined in Standard Industrial Classification (SIC) 2491, the wood preserving industry
"comprises establishments primarily engaged in treating wood, sawed or planed in other estab-
lishments, with creosote or other preservatives to prevent decay and to protect against fire and
insec.ts. This industry also includes the cutting, treating, and selling of crossties, poles, posts, and
piling."
B TYPES OF FIRMS
The wood preserving industry is composed of a large number of small, privately owned
plants and a few larger establishments. Larger establishments are generally either:
Owned by companies whose major source of income is not wood preserving: e.g.,
Koppers, Kerr-McGee Chemical Corp., Southern Wood Piedmont Co., and Inter-
national Paper Company; or
Owned by companies which are primarily wood preservers; e.g., J. H. Baxter &
Co., Wyckoff Co.
Each of these firms operates at numerous locations. There were approximately 302 com-
panies and 415 wood preserving plants in the country in 1976. The Environmental Protection
Agency Financial 308 Letter* was answered by 337 plants.
1. Size of Firm
The wood preserving companies vary considerably in both sales and number of wood
preserving operations. Of 302 wood preserving companies, 263 (87%) are single-plant firms, 39
(13%) are multi-plant firms. Koppers Company operates 25 plants; the other multi-plant firms
operate 10 or fewer plants.
Available information shows that total annual sales of these companies, including sales
from other operations, range from less than $200,000 to over $1 billion.
The wood preserving industry has a large number of small firms. However, on the basis of
pressure tank capacity, the 10 largest firms represent approximately 51% of the total industry.
While actual production may not be directly correlated with pressure tank capacity because
capacity utilization may vary and different products and different species of wood require varying
treating times, pressure tank capacity is an indicator of production capacity. In 1976, Koppers
Co., Inc., represented 20% of total industry capacity, while the four largest firms represented 37%
of total capacity (Table II-l).
2. Integration
Wood preserving companies also vary with respect to vertical integration. Some plants are
part of lumber operations or associated with a company sawmill. In such cases, the wood treating
operation may be an additional service for lumber customers. In other cases, such as Koppers
Survey conducted by EPA under Section 308 of the Federal Water Pollution Control Act, as amended, referred to
throughout as the "EPA Financial 308 Letter." A response summary and the tabulated data are contained in Appendix
D. The number of responses to individual questions often are fewer than 337.
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TABLE 11-1
PRESSURE CYLINDER CAPACITY OF THE TEN LARGEST
WOOD PRESERVING FIRMS, 1976
Total Pressure
Tank Capacity Percent of Total
Company (thousand cubic feet) Industry Capacity
Koppers Co., Inc. 415 20
Kerr-McGee Chemical Co. 127 6
Southern Wood Piedmont Co. 123 6
J.H.Baxter 108 5
Wyckoff Co. 73 3
Atlantic Creosoting Co., Inc. 57 3
International Paper Company 51 2
McCormick & Baxter Creosoting Co. 50 2
Crown Zellerbach Treated Wood Products 45 2
Cascade Pole Co. 34 2
All others 1,OM 49
Total Industry 2,106 100
Source: Arthur D. Little, Inc., estimates based upon Ernst and Ernst Wood Preservation Statistics
1976.
Company, Weyerhaeuser, and International Paper, where the company is involved in wood
products and/or chemicals, the treatment of wood for customers is a natural expansion of its
existing resources. In a few cases, railroads and utility companies own wood treatment facilities,
which serve as captive suppliers of poles, ties, crossarms, etc., and seldom sell to others. The
Atchison, Topeka & Sante Fe Railway Company, Burlington Northern, Southern California
Edison Company, Texas Electric Cooperatives, Inc., and Utah Power & Light are some of these.
Most of the companies, however, are not integrated back to wood; i.e., they do not own their
own timberland, and they purchase wood. A number of plants treat wood for customers on a
service basis only, while other plants treat wood for customers on a service basis and also treat
purchased wood.
3. Ownership Characteristics
Both privately and publicly held companies are represented in this industry segment. In
general, the smaller, single-plant companies are privately held and the largest companies are
publicly held.
There are basically two different patterns of ownership and management in the industry. In
the first category are plants owned by publicly held corporations which may or may not do wood
preserving as the primary activity. These plants are managed by individuals with little or no
equity in the corporation. Plants following the second pattern are owner-managed and may be
proprietorships or privately held corporations. They may even have been owned by the same
family for several generations.
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The ownership and management patterns in an industry are important for an assessment of
how the industry will be impacted by pollution control costs. Profitability requirements are very
different between an owner-manager and a corporation which more critically views the return on
investment from one of many plants. The former may accept an increase in abatement costs as a
neccessity for staying in business, while the latter may decide that the increased cost is not
justified by the expected returns. On the other hand, a closely held company may have difficulty
obtaining capital investment funds and thus be unable to continue to operate.
Among these plants primarily treating with organic preservatives, 25% are owned by
publicly held corporations. Among the plants primarily treating with inorganic preservatives,
only 10% of the plants are owned by publicly held corporations (Table II-2). Publicly held
corporations owned only 22% of the total number of plants responding to the EPA financial 308
survey; but according to the 1972 Bureau of Census statistics, publicly held corporations ac-
counted for 73% of the total value added of the wood preserving industry.
TABLE 11-2
WOOD PRESERVING PLANTS
FORM OF BUSINESS ORGANIZATION, 1976
Primary
Organic Preservatives # %
Proprietorship 23 10
Co-op 1 0
Privately Held Corporation 158 65
Publicly Held Corporation 59 _25
241 100
Primary
Inorganic Preservatives
Proprietorship 5 8
Co-op
Privately Held Corporation 54 82
Publicly Held Corporation 7 10
66 100
Total
Proprietorship 31 9
Co-op 1 0
Privately Held Corporation 230 69
Publicly Held Corporation 72 22
Number of Respondents to Question 334 100
Source: Derived from EPA 308 Financial Letter
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C. PRODUCT DESCRIPTION
1. Type of Products
The development of the wood preserving industry in the United States has been based on
the need for prolonging life in wooden structural products. Historically, railroads ties, utility
poles, and pilings treated with creosote have been the major products of the industry. In recent
years, lumber and plywood treated for fire retardancy, insect resistance, arid rot resistance have
experienced rapid growth.
The industry's products as listed in SIC 2491"" include:
Bridges and trestles of wood, treated
Creosoting of wood
Crossties, treated
Flooring, wood block, treated
Mine props, treated
Millwork, treated
Piles, foundation and marine construction, treated
Piling of wood, treated
Poles, cutting and preserving
Poles and pole crossarms, treated
Structural lumber and timber, treated
Vehicle lumber, treated
Wood products, creosoted
The industry can be categorized according to size, product, technology, or location. Gener-
ally speaking, the firms that are located in the South are treating mostly Southern Pine, and
those in the West are treating mostly Douglas Fir. The industry uses oil-borne (organic) or
waterborne (inorganic) preservatives. The products treated with oil, such as poles, piling, and
railroad ties, have a distinct odor and "oiliness," which makes them unsuitable for use where odor
is objectionable. The waterborne preservatives are used for preserving plywood and lumber,
especially when treating for fire retardancy.
Competition in the wood preserving industry is normally very keen and usually based on
price. Many suppliers only exist to serve regional markets, and some regions are served by only
one or two suppliers. There is some limited competition from other materials, such as steel,
concrete, and aluminum (Table II-3). In addition to price differentials, there! are advantages and
disadvantages to each type of material. Generally the type of use dictates the type of material
required. For example, treated wood piles must be used in acidic soil (such as in a sanitary
landfill) because acidic conditions corrode steel and concrete. Of particular interest is the
possibility of more vigorous competition from concrete railroad ties; concrete ties are being used
in several parts of the United States and this use is growing.
2. Market Size
From 1955 to 1976, the volume of wood treated with preservatives fluctuated from a low of
213.9 million cubic feet in 1962 to a peak production of 286.4 million cubic feet in 1967 (Table II-
4). Production was 257.2 million cubic feet in 1976, the most recent year for which data are
available. The industry's historical peak production level, 356.6 million cubic feet, was in 1947,
indicating that the long-term trend is down.
10
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TABLE 11-3
PRESERVED WOOD PRODUCTS AND THEIR POTENTIAL SUBSTITUTES
Preserved Wood Product
Piling
Marine piling
2 x 4's, etc.
Plywood
Fire-retardant lumber, plywood, etc.
Poles
Railroad ties
Potential Subttitute1
In-place concrete
Driven concrete
Steel piling
Hollow I beams
In-place concrete
Driven concrete
Interlocking iron sheets
Metal studs
I-Beams
Prestressed walls
Concrete
Cinder block
Sheetrock
Particleboard
Asbestos
Gypsum
Metal sheets
Metal poles
Prestressed concrete
Concrete ties
1. Not all substitutes have been proven to be reliable. The potential for
substitution is limited because material selection is often dictated by
specific uses.
Source: Arthur D. Little, Inc., estimates.
11
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The value of shipments rose from $344.2 million in 1967 to $761 million in 1974, the peak
year (Table II-5). Both 1975 ($647.7 million) and 1976 ($704 million) were below this peak level.
Typically, about 85% of the value of shipments is from owned wood, with the remainder contract
work.
TABLE 11-5
VALUE OF SHIPMENTS FOR THE WOOD PRESERVING INDUSTRY, 1958-1976
($ million)
Value of Capital
Year Shipments Expenditures
1958 203.0 3.7
1959 218.1 (D)
1960 225.1 3.7
1961 220.1 4.1
1962 230.0 4.9
1963 247.3 5.5
1964 270.9 5.8
1965 279.6 11.4
1966 326.0 10.4
1967 344.2 10.7
1968 375.1 9.3
1969 386.1 13.2
1970 387.8 8.4
1971 416.9 10.4
1972 475.8 14.8
1973 557.4 11.6
1974 761.2 28.1
1975 647.7 27.5
1976 704.3 22.3
Source: U.S. Department of Commerce, Bureau of the
Census, Annual Survey of Manufacturers
3. Future Demand Growth
During the early sixties, the demand for preserved wood products increased dramatically
compared with levels existing in the fifties (Table II-l). Since then there have been wide swings in
total annual production but discernible trends for individual product categories.
The annual production volumes of ties, poles and timbers also exhibit wide swings but there
are definite trends in each of the major categories shown in Figure II-l. In addition, Arthur D.
Little, Inc. and others have concluded that these trends are likely to continue over the next 10
years.
The forecast values from 1978 through 1988 were derived by analyzing the production trend
from 1963 to 1976 for each product category as well as the annual fluctuations. The growth rate (or
decline) underlying the trend was compared to with the forecast growth rates of other studies to
13
-------
300
290
280
270
260
250
240
230
220
210
200
Total
110
100
90
80
70
60
50
40
30
20
10
Cross Ties
I I I I I
I I I I I I I l I
60 62 64 66 68 70 72 74 76 78 80 82 84 86 88
Year
60 62 64 66 68 70 72 74 76 78 80 82 84 86 88
Year
110
100
90
80
70
60
50
40
30
20
10
Poles
I I I I I I I I I I I I I I l
60 62 64 66 68 7072 74 76 78 80 82 84 86 88
Year
10 -
60 62 64 66 68 70 T.l 74 76 78 80 82 84 86 88
Year
Source: Historic Data Ernst & Ernst data cited in The Analysis of Existing Wood Preserving Techniques and Possible
Substitutes, June 1977.
Forecast Arthur D. Little, Inc., estimates.
FIGURE 11-1 SALES TRENDS FOR PRESERVED WOOD PRODUCTS 1960-1988
(Thousand Cubic Feet)
14
-------
check for reasonableness and to establish a range. As a group, all the other preserved wood
products exhibited no upward or downward trend and were assumed to remain stable at about
42,000 cubic feet per year. The forecast for total preserved wood products is the sum of the
individual product forecasts.
This analysis was performed to identify product areas when the demand might be declining
and thus provide a basis for assessing the willingness and unwillingness of impacted plants to
make an investment in pollution control expenditures. Product growth areas were also examined
to gauge the extent to which they would take up the slack in the production of declining products
and also to evaluate the potential for any price increase.
On balance, the future outlook for preserved wood products appears good, with the decline
in pole demand being offset by the increase in demand for ties and timbers. The pole demand will
decline because of slowdowns in growth of utilities and because the size of new transmission lines
will require steel. Also, the demand for poles in new urban areas is being affected by the
requirement to place utility distribution lines underground. The demand for railroad ties is a
result of the rebuilding of roadbeds, which will produce an upward trend over the next 10 years,
which will level off as the railroad industry shifts from rebuilding to maintenance. The growth in
demand for timbers and lumber is in part a consequence of FHA requirements for preserved wood
in home construction. While the average annual growth in timbers from 1963 to 1974 was 5.4%, a
future real growth rate of 3% is forecasted to reflect the expected construction of single-family
units in the 1978 to 1988 period.
D. CHARACTERISTICS OF THE EXISTING INDUSTRY PLANTS
1. Process Technology
Wood preserving is a two-stage process; first, the wood is preconditioned to reduce its
moisture content; and, second, the wood is treated with preservatives.
Any one of several methods can be used to precondition, including: seasoning in large, open
yards; kiln drying; pressure steaming in a retort, followed by vacuum drying; heating in a
preservative bath under reduced pressures (Boulton Process); or vapor drying. Pressure treat-
ment is the most common form of processing. As widely recognized, this form of treatment
provides a superior product to that resulting from the brush or dip application of preservative.
Wood treating can be either a pressure or non-pressure process. In the non-pressure pro-
cesses, the wood is immersed in open tanks containing the preservatives. The pressure processes
can be either "full-cell" or "empty cell." In the "full-cell" process, a vacuum is created in the
retort and the preservative is added and forced into the wood under pressure. The "full-cell"
process is commonly used with aqueous solutions. In the "empty-cell" process, preservative is
added to the retort and forced into the wood under pressure; then the retort is evacuated.
The typical pressure treatment facility includes three major processing areas:
A treating cylinder, or pressure vessel, with the necessary pumps, tanks, and
control equipment;
A boiler plant to heat the solution and to pressurize the cylinder;
15
-------
A seasoning and storage yard, including the cylinder loading track and ancillary
transportation facilities;
Support equipment, such as hoists and lifts for handling timber; finishing equip-
ment, for incising, boring, blocking, framing and shaving materials; and kilns, or
other processing facilities, for artificial seasoning of selected products.
The treating cylinders are the most important component of a wood treatment plant. These
steel cylinders (retorts), typically used in pressure treatment, are from 4 to 10 feet in diameter
and up to 175 feet in length. As an indication of the "charge" size held by a treating cylinder, the
average charge for a 6-foot by 36-foot cylinder, typical for a facility in the Northeast, can be 6,000
board feet (500 cubic feet) of lumber.
Wood preserving plants can also be categorized on the basis of the types of preservatives
used, as follows:
plants treating with organic materials, such as pentachlorophenol, oil, and creosote
solutions;
plants treating with waterborne inorganic salts, principally zinc, copper, arsenic,
and chromium; and
plants treating with both organic and inorganic preservatives.
Of the plants identified by the 1976 AWPA Wood Preservation Statistics, 49% treat with
organics, 21% treat with inorganics, and 24% treat with both types of preservatives.
2. Product Diversification Within Plants
Although the industry treats a wide range of wood products, individual plants usually
concentrate on a limited range of products. Plants using inorganic (waterborne) preservatives
treat mostly dimension lumber, posts, and poles for insect and rot resistance and fire retardancy;
(oil-borne) plants using organic preservatives treat primarily poles, posts, pilings, and railroad
ties, and a few other products such as cross arms and bridge timber. Poles and ties are the major
production items of organic plants; inorganic plants have a greater variety of treated wood
products, but their volume may be smaller.
3. Size of Plants
There are no published data on individual plant capacities or production, because capacity
varies with the type of wood treated, the type of treatment and the type of conditioning. For
example, Douglas Fir requires a considerably larger residence time than species found in other
parts of the country. Although the numbers of cylinders and types of processes are known, there is
not necessarily a correlation between these and either plant capacity or production. Some
industry members reported that a typical 80-ft. cylinder, operating with an organic process, has
an output of 30,000 to 45,000 board feet per day (based on 15,000 board feet per charge, 2 or 3
charges per day). Daily inorganic production may be somewhat higher because of shorter treat-
ment times. Reported annual operating rates (time used for treating as a percent of total time
available for treatment, not including loading and unloading time) for the industry range from
40% to 70%.
16
-------
Taking 1976 annual sales value as an indicator of size, the plants are very uniformly
distributed among the value of sales size categories shown in Table II-6. The median plant size
lies in the $0.7 to $1.2 million annual sales range. Six of the 319 plants responding to the EPA
Financial 308 Letter had sales of over $11.5 million, whereas 25 plants had sales of less than $70
thousand.
TABLE 11-6
DISTRIBUTION BY ANNUAL SALES VALUE
1976 Sales
Plants Built Plants Built
Since 1970 1970 or Earlier Total
($000) # % # % # %
0-70 8 16 17 6 25 8
71-155 48 21 8 25 8
156-300 10 20 19 7 29 9
301-700 8 16 40 15 48 15
701-1200 5 10 45 17 50 16
1201-2400 5 10 37 14 42 14
2401-3200 5 10 21 8 26 8
Over 3200 _5 10 69 25 _74 23
Total Responding 50 100 269 100 319 100
Source: Derived by Arthur D. Little, Inc., from EPA Financial 308 Letter.
4. Location
Although there are no statistics available on the geographical distribution of consumption,
both production and consumption follow the distribution pattern of facilities (Figure II-2). Most
of the plants (45%) are in the Southeast region. Of the plants responding to the EPA Financial
308 survey, 30% described their plant site as urban, whereas 25% were suburban and 45% rural.
5. Employment
The median sized plant employs 10 to 19 production workers (Table II-7). Two plants
employ more than 125 workers, while 22% of all plants employ fewer than 3 workers. The Bureau
of the Census estimated the total employment of the wood preserving industry to be 9,700 in 1976.
Because of the increased use of materials handling equipment, employment has decreased from
the peak of 12,800 in 1968.
E. CHARACTERISTICS OF NEW PLANTS
1. Plants Constructed Since 1971
Of the 332 plants responding to the question in the EPA 308 Letter, 56 plants began
operation in the 1971-1977 period (Table II-8). Table II-6 showed the size distribution of 50 of
these new plants based on the value of their 1976 sales. The average new plant is smaller than the
older plants, possibly suggesting that facilities typically expand over their production life.
Comparing the plant size distribution of the new plants to the size distribution of all plants
17
-------
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o>
CO
ui
0
ui
z
3
ui
I
t-
2
0.
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-------
TABLE 11-7
NUMBER OF PRODUCTION EMPLOYEES PER PLANT, 1976
Number of Production
Employees per Plant Number of Plants Percentage of Plants
1-3 73 22
4-6 39 12
7-9 26 8
10-19 56 17
20-34 55 17
35 - 48 27 8
49-75 36 11
76-99 8 2
100-125 6 2
Over 125 2 1
Subtotal 328 100
No Response 9_
Total 337
Source: Derived by Arthur D. Little, Inc., from Environmental Protection
Agency Financial 308 Letter.
TABLE 11-8
DISTRIBUTION OF WOOD PRESERVING PLANTS
BY YEAR OF INITIAL OPERATION
Year of Initial Operation Number of Plants Percentage of Plants
Before 1930 58 17
1931 -1940 13 4
1941-1950 46 14
1951-1960 83 25
1961 -1970 76 3
1971-1977 56 17
Subtotal 332^ 100
No Response 5
Total 337
Source: Derived by Arthur D. Little, Inc., from Environmental Protection Agency
Financial 308 Letter.
19
-------
(Table II-6), one can see that the median new plants are smaller than all the older plants. The
median annual sales of the new plants is $0.3 to $0.7 million, whereas the median annual sales of
older plants is $0.7 to $1.2 million.
The median age of the 332 plants responding to the EPA Financial 308 survey is approx-
imately 20 years; 55 plants were built before 1930 and 56 plants began operation between 1971
and 1977, i.e., an average of 7 per year (Table II-8). Most of the responding plants were built in
the 1950's and 1960's.
The profitability of the two groups is roughly comparable (Table 11-9). The older plants and
the new plants have a median profitability after tax of 2% of sales value.
TABLE 11-9
PROFITABILITY OF NEW PLANTS VERSUS OLDER PLANTS, 1976
1976 Prof it
*fterTax . New Plants1 Older Plants1
as Percentage of
Sales Value Number Percentage Number Percentage
Under 1 16 37 56 25
1-2 6 14 58 25
3-4 7 16 47 21
5-7 7 16 38 17
Over 7 _7_ J6 26 11
Subtotal 43 100 227 100
No Response 7 60
Total 50 287
1. New plants are those beginning operation between 1971 and 1977, while older plants
began operation before 1971.
Source: Derived by Arthur D. Little, Inc., from Environmental Protection Agency Financial
308 Letter.
When industry capacity utilization is low, or demand growth is slow, a competitor has
difficulty entering the industry. As the industry has become more automated and hence more
capital intensive in recent years, the capital cost for entry, in real terms is significantly higher
now than it was five or ten years ago.
2. Capital and Operating Costs for New Plants
Capital and operating costs were developed for model new source plants proposed by the
technical contractor. Two plants sizes were selected, with each assumed to be producing one of
four preserved wood products. The plant sizes are as follows:
1. Two cylinders, each seven-foot diameter by 130 feet long.
2. Five cylinders, each seven-foot diameter by 130 feet long.
20
-------
The product, location and process relationships are as follows:
Case Product Location Process
A Railroad Ties South Central Boultonizing
B Southern Pine poles South Central Steaming
C Douglas Fir poles West Coast Boultonizing
D Southern Pine lumber South Central Inorganic
The total installed cost for the 5-cylinder facility is about $6.5 million, compared to $3.3
million for the two-cylinder plant (Table 11-10), added to Table 11-11. Of the respondents to the
308 Financial Survey, only 7 (2%) indicated that they had net fixed assets over $2 million.
The two-cylinder plant has 25 operating, 7 maintenance and 13 supervisory and office
employees, at an average annual cost of $15,000 per employee (Table 11-11). The five-cylinder
plant is assumed to have 50 operating, 14 maintenance and 20 supervisory and office personnel,
reflecting scale economies over the two-cylinder plant. Taxes and insurance are estimated at 4%
of the capital cost. While maintenance and other consumable supplies, such as packaging, vary
with the operating volume of each plant, these variations are too small to affect overall operating
costs and have been assumed to be a constant percentage of sales.
The following additional assumptions were made:
One-product operation was assumed, although most facilities have variable and
constantly changing product mixes, depending on specific and local market
conditions.
Capital requirements for the West Coast facility are estimated to be 10% greater
than for the Southern plants.
Land requirements are 50 acres and 75 acres, respectively, for the two plants.
Raw wood and preservative costs are as specified in accepted, published industry
references.
40% of the cylinder volume is used for each charge, plants operating three shifts a
day and 300 days per year.
While cycle time depends on wood specie, moisture content, type of process
employed and degree of preservation required, the following, perhaps conservative,
cycle times were used:
Railroad ties (Boultonized) 30 hours
Southern Pine poles (steamed) 16 hours
Douglas Fir poles, green (Boultonized) 40 hours
Southern Pine lumber(CCA) 16 hours
F. COMPETITIVE STRUCTURE OF THE INDUSTRY
1. Market Structure
Although the industry is composed of many small firms, the four largest firms had 37% of
the total market in 1976, and the eight largest firms had 47% of the total market (Table 11-12).
The size of the firms vary considerably. The top company has about 20% of the market, the next
21
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TABLE 11-10
ESTIMATED FIXED CAPITAL REQUIREMENTS FOR THE MANUFACTURE OF
PRESERVED WOOD (ORGANIC TREATMENT)
($000)
Location: South, new facility or replacement value1
Cylinder Size: 7-foot diameter, 130 feet long, 5000 cubic feet in volume
Site Preparation3
Yard Equipment4
Pressure Cylinder
Storage Tanks and Pumps
Utilities:
Boiler and Compressor5
Dry Kilns
Primary Oil-Water Separation6
Subtotal
Engineering, Construction and
Contingency at 25%
Total Fixed Capital7
Bare Cost
of Equipment
Per Cylinder
400
250
100
125
100
NA
Installed2
Cost of a
Two Cylinder
Plant
200
800
700
250
400
250
40
Installed2
Cost of a
Five Cylinder
Plant
300
1,600
1,700
400
750
400
57
975
2,640
660
3.300
5,207
1,302
6,509
1. Add 10% for West Coast construction cost differential.
2. Installation includes piping, instrumentation, electrical, structures, foundations, erec-
tion labor, and allocated portion of shops and offices.
3. Site preparation costs estimated at $4,000 per acre.
4. Yard Equipment includes track and trams for cylinder loading, trimming and framing
equipment, and mobile equipment. Processing is based on receipt of rough sawn wood,
and specifically excludes debarking and rough sawing.
5. A wastewood-fired boiler is assumed.
6. For the primary oil-water separation system, 50% of the cost is included in the cost of
the plant, as indicated on pages 8-60 through 8:63 of the August 29, 1978, ES&E report.
7. Does not include cost of land acquisition, because land costs vary considerably from
site to site.
Source: Arthur D. Little, Inc., estimates based on industry interviews.
22
-------
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-------
4
Largest
Companies
34
35
34
35
37
8
Largest
Companies
44
44
NA
44
47
20
Largest
Companies
64
63
NA
60
NA
50
Largest
Companies
84
84
NA
78
NA
TABLE 11-12
CONCENTRATION RATIOS IN THE WOOD PRESERVING INDUSTRY, 1963-1976
Percent of Value of Shipments Accounted for by
Year
1963
1967
1970
1972
1976
Source: 1963-1972: U.S. Bureau of Census, Annual Survey of Manufacturers,
1976: Arthur D. Little, Inc. estimates.
three companies have 5% to 6% each, and the next four about 2% each. The remainder of the top
20 have market shares of 1% each and the next 30 have shares averaging a.bout 0.6%. The level of
concentration has not changed significantly since 1963, indicating a stable market structure.
Preserved wood is largely a commodity market modified by transportation costs which give
regional advantages to some producers. While there is some interregional competition in the
industry, the cost of inbound and outbound transportation results in predominantly regional
markets. For some applications, a particular wood specie is preferred and wood may be shipped
over longer distances in these cases; more often, a suitable wood specie may be found locally.
2. Pricing Mechanism
Pricing mechanisms appear to be quite varied. For some products (mostly lumber), whole-
salers and commission firms conduct continuous pricing and bidding between the preserving
plants and the final customers via the telephone. Some of the preserved lumber is sold from price
lists. On the other hand, most poles, piling, and railroad ties are sold directly to the customer
through formal bids for specific projects. Purchase decisions are made on the basis of price,
availability, and delivery of future production, since most preservers only keep small inventories
and make the products only on order.
3. Price Elasticity of Demand
Demand elasticity varies somewhat according to the product. The major factors governing
demand are competition within the industry and the economic climate of user industries.
Demand for those products with high demand growth potential (such as dimensionalized lumber)
wil probably not be affected by an increase in prices. Those products which are threatened by
lower demand growth potential (such as utility poles) have higher price elasticity and will be less
likely to pass along cost increases as increases in price.
For the immediate future, the demand for railroad ties is expected to continue to grow
strongly because of tightened federal railroad safety regulations and the Northeast Railroad
Reorganization Act. However, concrete ties are now being used for some of the replacements.
24
-------
Inorganically treated products (using inorganic salts), although a small portion of all treated
products, have recently had rapid growth, even up to 20% per annum, and are expected to
continue at a growth rate higher than GNP as the construction market improves and demand for
dimension lumber and plywood increases. The market for utility poles is not expected to grow
strongly, as previously discussed. Currently, it is mostly a replacement market, and threatens to
be diminished in the future by the requirement for underground wiring. Although there are
economic and technical difficulties with underground wiring, if these are worked out they may
replace wooden poles for some applications. Other products, such as construction and marine
pilings, face some pressure from substitute products. In summary, it appears that although some
products will have high growth rates, production for the whole industry will continue to have little
long-term growth. This situation will make it difficult for producers to increase prices.
G. PRICE AND COST HISTORY
In the 1970-1978 period, the costs of wood preservative chemicals have shown the greatest
increase, followed by those of wood (lumber, piles, and ties), and finally labor (Figure II-3A). All
of these costs have increased at a rate greater than that of general inflation (Figure II-3B).
The cost of labor in the wood preserving industry has been increasing steadily; the average
payroll per worker was more than 60% higher in 1978 than in 1970, an annual increase of 6.2%.
However, since 1970, labor as a percent of value added and per dollar of shipments has declined
(Table 11-13). In fact, employment in the industry as a whole has declined, from 12,000 in 1970 to
9,700 in 1976, and the percentage of the workforce classified as production workers has also
declined, from 849o to 79% for the same period, mainly because of the greater use of materials
handling equipment to reduce labor costs.
Naturally, the most significant raw material cost is that for wood, which represents from
40% to 75% of the selling price of the preserved wood product. The selling prices of untreated ties
and piles (Figure II-3A) and lumber (Figure II-4) have increased, respectively, 12.4%, 8,8%, and
13.7% annually in the 1970-1978 period, or faster than the rate of overall inflation. The higher rate
of increase for ties versus piles is attributable in part to favorable demand levels for railroad ties.
The proportion of wood cost to total sales dollars has remained roughly constant over the 1970-
1978 period and, except for the 1974-1975 recession, the combined cost of all raw materials has
been a stable proportion of the sales dollar (Table H-13).
Thus, producers have been able to pass on increased costs of wood in the form of increased
selling prices, as indicated by selling prices having closely tracked wood costs (Figure II-4).
After years of relatively constant prices, the prices of major chemical preservatives, pen-
tachlorophenol and, particularly, creosote oil have increased dramatically since 1973. The price
increases for these chemical preservatives over the 1970-78 period, averaging 11.1% and 12.6% per
year, respectively, are greater than those of the final products. This indicates their increased
importance as an input cost, although they still make up a smaller portion of the total than either
wood or labor.
The previous discussion of potential industry growth suggests that future demand will be
weaker, and the industry will have a more difficult time in passing along increased costs in the
form of price increases. However, the pollution abatement cost is predominantly fixed rather than
variable. A change in fixed cost represents a change in long-run average total cost; therefore,
assuming the historic supply/demand balance, it is likely that the cost per unit of production for a
25
-------
250.0
200.0
150.0
100.0
50.0
A. Average Annual Increase:
Current $(1972 =100)
Creosote 12.6%
Pentachlorophenol
/ Lumber 13.7% 11'1%
Labor 6.2%
II I I I I
J I I I
1968 1970 1972 1974 1976 1978 1980
1972 Values: creosote, 27d/gallon; pentachlorophenol 18^/pound; labor $3.31/hour
200.0
150.0
100.0
75.0
50.0
B. Average Annual Increase:
Constant $(1972 =100)
Creosote 7.
Pentachlorophenol 3.7%
Lumber 6.7%
Labor 0.9%
I I
I I I I I
J I
I I I
1968
1970
1972
1974
1976
1978
1980
Sources:
(chemicals) Chemical Marketing Reporter
(wages) Employment and Earnings, US Department of Labor, Bureau of Labor Statistics
(lumber) Wholesale Prices and Price Indexes, US Department of Labor, Bureau of Labor Statistics
(GNP deflator) Economic Indicators, Council of Economic Advisors.
FIGURE 11-3 WOOD PRESERVING INDUSTRY
PRICE INDICES OF RAW MATERIALS, 1970-1978
26
-------
Year
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
TABLE 11-13
SELECTED OPERATING RATIOS FOR
THE WOOD PRESERVING INDUSTRY: 1964 to 1976
Cost of
Materials
Per
Dollars of
Shipments
(dollars)
Cost of
Materials &
Payrolls
Per Dollar
Shipments
(dollars)
Value Added
Per Employee
(dollars)
Payrolls as
Percent of
Value Added
0.63
0.64
0.63
0.62
0.61
0.64
0.63
0.64
0.64
0.67
0.63
0.64
0.68
0.81
0.81
0.80
0.80
0.79
0.81
0.81
0.82
0.80
0.80
0.75
0.78
0.81
8,788
9,050
10,479
11,103
11,540
11,818
12,017
13,800
15,557
18,446
30,783
24,548
23,608
49
48
45
46
45
47
51
48
42
40
29
38
41
Source: U.S. Department of Commerce, Bureau of the Census, Census of Manufactures,
1973, 1974, 1975, 1976; and Arthur D. Little, Inc., estimates.
27
-------
12
11
10
9
8
7
= 6
Q_
Treated
Untreated
Y / /\ Value Added in Wood
Preserving
Average Annual
Increase
19 oo/
I ^.O/O
12.4%
9.4%
s.8%
1968
1970
1976
1978
1980
1972 1974
Year
List prices are given because they provide a comparable basis for analysis over an extended period
of time. The majority of contracts specify prices which provide substantial discounts from list
prices.
o
Piles: Points: 12" - 3 ft. from butt 7 in.; Length: 40 to 50 ft., truck lots,New York
3Ties: 6" x 8" x 8'6", Chicago, Red Oak, Carload lots
Source: Engineering News Record.
FIGURE 11-4 LIST PRICES OF SELECTED PRESERVED WOOD PRODUCTS,1
1969-1978
28
-------
larger, more efficient plant will set the maximum amount of price increase. Since the effluent
abatement cost per unit of production will be greater for smaller plants, smaller plants may not
recover the entire cost increase through higher prices. Market factors will determine whether this
cost increase may be passed along through price increases or will be absorbed by reducing profits.
H. FINANCIAL PROFILES
1. Income and Asset Analysis
In assessing the economic impact of an EPA regulation upon a specific industry, the
impacted industry is examined on a stand-alone basis with out regard to the other businesses
associated with it or to resources available to the parent companies of industry plants. For this
reason, it is important to have an accurate picture of the revenues
-------
TABLE 11-14
PRO-FORMA INCOME STATEMENTS
OF WOOD PRESERVING PLANTS
BY SALES CATEGORY ($000)
Sales
Cost Goods Sold
Wood
Payroll
Other Expenses
Depreciation
Total Cost Goods Sold
Gross Margin
Selling General
& Administration
Interest Expense
Profit Before Tax
Profit After Tax
Number of 308 Letter
Respondents
Percent of Total
Respondents1
Plants
200
100
44
19
18
4
85
15
11
3
1
0.5
Treating
700
100
44
17
17
2
80
20
12
2
6
3
Owned-Wood Products
1,800
100
55
13
15
2
85
15
11
1
3
2
3,500
100
50
12
20
2_
84
16
9
1
6
3
(TOWP)
7,500
100
55
19
12
2_
__88_
12
5
1
6
3
Treating Service
Only (TSO)
250
100
8
20
39
5
72
28
14
2
12
6
1,000
100
24
19
34
2_
21
21
15
1
6
4
50
81
15% 25%
40
12%
50
15%
50
15%
2%
37
11%
1.13 plants (4%) had sales evenly split between TSO and TOWP.
Source: Derived by Arthur D. Little, Inc., from EPA Financial 308 Letter.
30
-------
TABLE 11-15
WOOD PRESERVING PLANTS
ASSET TURNOVER BY SALES/SERVICE CATEGORY, 1976
Turnover Ratio
Sales/Service
Category ($000)
TOWP
200
700
1,800
3,500
7,500
TSO
250
1,000
Total
Plants1
50
81
40
50
50
6
37
Sales/
Total Assets
2.5
3.0
3.0
2.5
2.5
3.0
5.0
Sales/
Net Assets2
3.8
4.7
4.3
3.1
3.1
4.0
8.0
Sales
Fixed Assets
5.0
8.0
10.0
10.0
8.0
5.0
10.0
1976
Return on
Total
Capital (%)3
1.9
11.1
8.6
9.3
9.3
24.0
32.0
1. Based on 327 responses; 13 plants were equally split between TSO and TOWP.
2. Total assets less current liabilities.
3. Profit After-Tax (Table 11-14) = Margin
Sales/Net Assets = Turnover; Net Assets = Total Assets Current Liability
Rate-of-Return on Total Capital = Margin x Turnover
Source: Derived by Arthur D. Little, Inc., from Environmental Protection Agency Financial 308 Letter.
distribution of assets varies with size of plant (Table 11-16). For plants engaged in treating owned-
wood products, fixed assets as a percentage of total assets generally decline as sales level
increases. While the reverse is true for TSO plants (Table 11-16), the variability and small total
number of plants are such that the two plant sizes are not statistically different in the percentage
of assets in plant and equipment.
The "other current asset" category includes inventory items. As expected, plants treating
owned-wood products, except the smallest plants, have a higher percentage of assets in this item
than plants engaged in treating service only. For both plant categories, accounts receivable
decrease as a percent of total assets as sales increase.
In recent years, more than 85% of the industry's capital expenditures have been on new
machinery and equipment to reduce labor costs (column 3 of Table 11-17). This investment has
reduced total employment and raised the level of industry productivity (shown as a real increase
in value added per employee in 1967 dollars in column 7) by about 25% in the 1967-76 period.
However, a number of firms have not made the expenditures to reduce labor costs; their
comparatively less favorable cost structure will make the financing of major capital expenditures
for pollution control especially difficult.
31
-------
TABLE 11-16
WOOD PRESERVING PLANTS
DISTRIBUTION OF ASSETS
BY SALES AND SERVICE COMPANY, 1976
Sales Category ($000)
Accounts Receivable
Other Current Assets
Total Current Assets
Fixed Assets
Total Assets
Average Value of
Total Assets ($000)
Number of Plants in
Sample1
Plants Treating Owned-Wood
200
35.0%
20.0
55.0
45.0
700
35.0%
30.0
65.0
35.0
1,800
30.0%
40.0
70.0
30.0
Products (TOWP)
3,500
20.0%
55.0
75.0
25.0
7.500
20.0%
50.0
70.0
30.0
Treating Service
Only (TSO)
250
35.0%
25.0
60.0
40.0
1,000
26.0%
24.0
50.0
50.0
100.0% 100.0% 100.0% 100.0% 100.0%
270
320
617
1,805
3,710
100.0% 100.0%
1.3
751
50 81 40 50 50 6 37
1. Based on 327 responses; 13 plants were equally split between TSO and TOWP.
Source: Derived by Arthur D. Little, Inc., from Environmental Protection Agency Financial 308 Letter.
32
-------
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33
-------
2. Investment Criteria
As part of the Environmental Protection Agency Financial 308 Letter, wood preserving
plants were asked to provide their criteria for investment in wood preserving plant and equip-
ment. This information is used in the economic impact assessment to estimate the price increase
required to recover the cost of pollution control investment. A total of 119 (35%) of the plants
indicated an investment criterion; 22% provided target internal rate-of-return values, and 6%
provided payback criteria.
Plants providing rates-of-return criteria represented a cross section of the wood preserving
plants responding. There were too few responses to the question to subcategorize the rate-of-
return by plant characteristics. However, the distribution of respondents to the question were
similar to that of the total sample with respect to sales level, current discharge status and type of
preserved wood product. The distribution of target rates of return was taken as representative of
the total industry.
The average and median pre-tax rates of return are in the 20-24% category (Table 11-18).
Using midpoints of the categories, the weighted average after tax rate-of-return is about 12%,
assuming a 48% tax rate. The impact was assessed (Chapter IV) using the weighted average value
and the sensitivity was analyzed (Chapter V) to determine the impact of different rates-of-return
on the results.
TABLE 11-18
TARGET RATE OF RETURN FOR
INVESTMENTS MADE BY WOOD PRESERVING INDUSTRY
Pro-Tax
Rate of % of
Return (%) # Respondents
0-4 0 0
5-9 2 4
10-14 7 13
15-19 11 21
20-24 8 15
25-29 12 25
30-40 8 15
40 or more 4 7
52 100
# %of
Distribution of Sample Respondents Total
Plants Using Rate-of-Return Criteria 75 22
Plants Using Payback Criteria 21 6
Plants Using Other Methods 23 7
Not Answering Question 218 65
337 100
Source: Environmental Protection Agency Financial 308 Letter.
34
-------
I. COST OF COMPLIANCE
A. INTRODUCTION
The costs of compliance for a number of alternative BAT regulations have been developed
by the EPA Technical Contractor, Environmental Science and Engineering, Inc.6 The purpose of
this Chapter is to summarize the costs of compliance associated with each option, review the
current status of the industry, and describe the investment and operating costs that will be
incurred under each alternative.
B. CURRENT EFFLUENT STATUS
One wood preserving plant discharges into navigable waters, i.e., it is a direct continuous
discharger, while 42 discharge into municipal systems, i.e., indirect discharge. Inorganic plants
are required to be at no discharge; all remaining organic plants do not discharge. The plants that
will be required to make expenditures represent a minority of the industry. In total, the 43
potentially impacted plants represent about 10% of the 415 plants in the industry.
The one direct discharge plant is a steaming plant. An additional 31 plants in the organic
category and 11 Boulton plants discharge into municipal systems.
The costs of compliance developed by the EPA technical contractor were based upon a
separate EPA Technical 308 Letter as well as on plant visits and sampling data. The technical
contractor developed cost of compliance data for each plant separately, including two plants that
did not provide economic data. Current effluent status was verified by the technical contractor
through follow-up phone calls.
C. CONTROL OPTIONS
Six options were examined for indirect dischargers:
Option 1: Existing interim final pretreatment standards; i.e., no further
regulation;
Option 2: Biological treatment only for plants using pentachlorophenol;
Option 3: Metals removal for plants with fugitive metals;
Option 4: Zero discharge only for plants using pentachlorophenol or fugitive
metals;
Option 5: Zero discharge for plants using pentachlorophenol; and
Option 6: Zero discharge for all indirect dischargers.
Treatment technology as developed by the technical contractor differed by wood preserving
process; and for indirect dischargers, two treatment subcategories were used:
Boulton Process; and
Steaming Process.
35
-------
Two levels of treatment technology are applicable to the one direct discharge steaming
plant:
Additional biological treatment with activated carbon adsorption; and
No discharge through spray evaporation.
The costs of effluent monitoring were generated by the EPA and not the technical con-
tractor. These costs will add $5,000 to $10,000 per year to operating costs.
D. COSTS OF COMPLIANCE FOR EXISTING INDUSTRY
Tables III-l and III-2 contain the investment and operating costs associated with additional
cost of the options, or levels of control, respectively, for the Boulton and steaming plants. The
land investment has been broken out separately because it permits comparison of the relative
amount of land required for each of these control options. On the basis of the Technical
Contractor's work and the results of the Financial 308 Survey, a cost of $5000 per acre was taken
for land; thus the number of acres required for each can readily be determined. Land investment
was separated from other investment in the economic impact assessment because land is not a
depreciable asset and, therefore, must be treated separately. As the tables show, the compliance
costs vary considerably from plant to plant, depending upon the volume of water effluent.
For indirect discharge steaming plants the cost of compliance, in terms of both investment
and monitoring, increases with the stringency of the pollution control requirement. In contrast,
for most Boulton plants, the cost of no discharge can be lower than the cost of metals removal or
biological treatment. (The obvious exceptions to this are the two Boulton plants which would
incur zero cost except under a no-discharge option.)
Table III-3 shows the total costs of compliance that will be incurred by the direct and
indirect dischargers in the wood preserving industry. Since "no discharge" is generally less
expensive for Boulton plants than heavy metals removal, the six Boulton plants would presum-
ably install the cooling tower evaporation control equipment under Option 3. Table III-3 illus-
trates the total cost of compliance assuming that plants will install no discharge control
equipment where biological treatment or metals removal are more expensive.
The lowest cost alternative for indirect discharges is Option 3, where total investment is $1.7
million and the fewest number of plants (11) are affected. Under Option 6, which represents no
discharge for all indirect dischargers, the cost of compliance is $6.1 million.
The EPA also considered the use of production cut-off levels (Table III-4) to trigger
compliance for indirect dischargers. Applying the cutoffs under each alternative produces sub-
stantially lower compliance costs and fewer impacted plants (Table HI-5). Under each alterna-
tive the investment cost, operating costs and number of impacted plants are about half the levels
with no size-cutoff criterion.
E. COST OF COMPLIANCE FOR NEW SOURCES
Costs of compliance for new sources were generated by the technical contractor for organic
plants using the Boulton process and organic steaming methods. Under BPT guidelines, new
wood preserving plants using inorganic processes are required to have zero discharge; therefore,
they were not analyzed.
36
-------
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38
-------
TABLE 111-3
TOTAL COST OF COMPLIANCE WOOD PRESERVING INDUSTRY
INSTALLING LEAST-COST TECHNOLOGY
($000's)
Indirect Dischargers
Option 1
Steaming
Boulton
Option 2
Steaming
Boulton
Option 3
Steaming
Boulton
Option 4
Steaming
Boulton
Option 5
Steaming
Boulton
Option 6
Steaming
Boulton
Direct Dischargers
Biological Treatment
with Carbon Adsorption
Discharge/Spray
Evaporation
No. of
Plants
Investment
Total
Land
Other
Investments
69.0
177.0
69.0
177.0
Annual
Operating
Cost
19
6
25
8
6
14
25
7
32
21
6
27
31
11
42
1,828.0
773.5
2,601.5
957.2
575.6
1,532.8
4,006.2
810.2
4,816.4
3,231.9
626.1
3,858.0
5,006.5
1,274.2
6,280.7
26.0
5.0
31.0
1.0
1.3
2.3
76.2
3.2
79.4
55.8
2.0
57.8
101.2
3.2
104.4
1 ,802.0
768.5
2,570.5
955.4
574.3
1,529.7
3,930.0
807.0
4,737.0
3,176.1
624.1
3,800.2
4,930.3
1,271.0
6,201.3
441.7
196.8
638.5
179.3
196.8
376.1
451.0
207.3
658.3
365.7
164.2
529.9
546.4
405.8
952.2
Source: Data supplied by EPA and Environmental Science and Engineering, Inc., revised by
Arthur D. Little, Inc., to reflect land cost of $5000 an acre.
23.0
15.0
39
-------
TABLE 111-4
WOOD PRESERVING INDUSTRY PRODUCTION SIZE CUTOFFS
INDIRECT DISCHARGERS
STEAMING
Alternative
Option 1
Option 2
Option 3
Option 4
Option 5
Option 6
Plants Impacted
Without Cutoff
0
19
8
25
21
31
Cutoff
(000 Cu. Ft.)
Not Applicable
900
1,200
1,200
1,200
1,200
Plants Impacted
With Cutoff
0
13
2
12
12
15
BOULTON
Option 1
Option 2
Option 3
Option 4
Option 5
Option 6
0
6
6
7
6
11
Not Applicable
700
700
1,100
1,100
1,100
0
5
5
3
2
6
40
-------
TABLE 111-5
TOTAL COST OF COMPLIANCE WOOD PRESERVING INDUSTRY
INSTALLING LEAST-COST TECHNOLOGY
(WITH SIZE CUTOFF)
($000-5)
Investment
Indirect Dischargers
Option 1
Steaming
Boulton
Option 2
Steaming
Boulton
Option 3
Steaming
Boulton
Option 4
Steaming
Boulton
Option 5
Steaming
Boulton
Option 6
Steaming
Boulton
Direct Dischargers
Biological Treatment
with Carbon Adsorption
No Discharge/Spray
Evaporation
No. of
Plants
Total
Land
Other
Investments
Annual
Operating
Cost
13
5
18
2
5
7
12
3
15
12
2
14
15
6
21
1,324.1
636.5
1,960.6
214.9
636.5
851.4
1,836.3
484.6
2,320.9
1,836.3
300.5
2,136.8
2,268.1
879.8
3,147.9
19.3
3.8
23.1
1.1
3.8
4.9
26.7
2.5
29.2
26.7
1.2
27.9
35.7
2.5
38.2
1,304.8
632.7
1,937.5
213.8
632.7
846.5
1,809.6
482.2
2,291.8
1,809.6
299.3
2.108.9
2,232.4
877.3
3,109.7
318.9
164.4
483.3
45.7
164.4
210.1
205.3
104.4
309.7
205.3
61.3
266.6
260.8
274.8
535.6
1 69.0
1 177.0
69.0
177.0
23.0
15.0
Source: Data supplied by Environmental Science and Engineering, Inc., revised by Arthur D. Little,
Inc., to reflect land cost of $5000 an acre.
41
-------
The treatment technology for new Boulton plants consists of:(8)
Primary gravity oil-water separation;
Flocculation followed by rapid sand filtration; and
Evaporation in cooling tower, with provisions for additional heat input through a
heat exchanger.
The treatment technology for a new steaming plant consists of:
Primary gravity oil-water separation;
Flocculation followed by rapid sand filtration; and
Containment and spray evaporation.
Cost-of-compliance estimates were based upon the plant types and sizes shown in Table
III-6. Two sizes of Boulton plant are shown (one with two 130' x 7' cylinders, and one with five
cylinders), each treating Douglas fir poles, which require a long residence time in a retort. Costs
were also developed for two sizes of organic steaming plants treating southern pine poles. Boulton
plants treating southern oak railroad ties would have production rate and wastewater flows
similar to those for the organic steaming plants, but the treatment technology shown for the
Boulton plant.
TABLE 111-6
MODEL PLANTS FOR NEW SOURCE PERFORMANCE STANDARDS
Design Production ...
Wastewater
Cubic Feet/ Product Flow
Plant Type Day Type (Gal./Day)
Boulton Process
Plant A 3,200 Douglas Fir 4,000
Poles
PlantB 8,000 " 10,000
Organic Steaming Plants
Plant C 6,000 Southern Pine 2,500
Poles
Plant D 15,000 " 7,000
Source: Environmental Science and Engineering, Inc.
The cost of compliance with the new source treatment technology is shown in Table III-7 for
each model plant. The compliance investment and operating costs reflect only one half of the cost
of primary oil-water separation; the remainder has been included in the new plant baseline data
described in Chapter II and included in Chapter IV. The total cost of primary oil-water separation
is also shown in Table ID-?; these costs differ by size of plant but not by treatment method.
42
-------
TABLE 111-7
COST OF COMPLIANCE
NEW WOOD PRESERVING PLANTS
Model Plant Type
Boulton Plant A1
Boulton Plant B1
Organic Plant C1
Organic Plant D1
Total
Investment
$161,030
223.310
267,640
427,500
Operating
Cost
$66,260
99,260
73,640
105,300
Acres of Land
Required
0.50
0.75
0.90
1.95
Total Requirement
Primary Oil-Water
Separation
2-CyUnder Plant
5-CyMnder Plant
80,000
113,500
8,000
9,500
1. Half the investment and operating cost of primary oil/water separation has been excluded.
Source: Environmental Science and Engineering, Inc., letter dated August 11,1978, adjusted
to reflect land cost of $5000 an acre.
43
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IV. ECONOMIC IMPACT ASSESSMENT
This chapter discusses the results of the economic impact assessment of the costs of
complying with the BAT options studied. It also contains a description of plants that will be
required to install or modify equipment (thus incurring higher costs of operation) to comply with
the studied control options, and compares these plants with those that currently have self-
contained or no discharge.
A. ECONOMIC CHARACTERISTICS OF IMPACTED PLANTS
As described in Chapter III, only 10% of the plants in the wood preserving industry will be
impacted by the BAT alternatives studied because the remaining 90% of the industry is currently
not discharging a liquid waste into navigable water or into a municipal system. The impacted
plants were compared with the balance of the industry in several areas important to determining
the impact of the alternatives on the industry:
Sales
Process
Profitability
Product Mix
Location
With the exception of plant sales, size, and location, impacted plants are not significantly
different from non-impacted plants. In general, plants impacted by BAT requirements are larger
than non-impacted plants.
Most of the impacted plants (75%) are in urban areas while most of the no discharge plants
(77%) are in suburban or rural areas (Table IV-1). The impacted plants located in urban areas
cited a lack of available adjacent land for an effluent treatment system (17 of 40 impacted
respondents). Hence, land availability does not appear to be a problem in suburban or rural
locations.
B. ECONOMIC IMPACT ON EXISTING INDUSTRY
The economic impacts of the compliance costs for each studied alternative were analyzed
with respect to:
Price
Demand reduction/shifts
Financial effects
Plant closures and market structure
The sensitivity of these economic impacts to the assumptions that were made is discussed in
Chapter V, Limitations of Analysis.
1. Price Impacts
The potential long-run price impacts resulting from the control alternatives that were
studied were addressed by estimating the "long-run price increases" i.e., those necessary to
45
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recover all costs associated with a control option, including a normal rate-of-return on in-
vestment, associated with the costs for each control alternative. The rate-of-return on investment
that was used was the average value for the plants responding to the rate-of-return criteria
question posed in the EPA Financial 308 Letter. (See Chapter II.)
An estimate was made of the revenue required for plants to recover the total cost of
compliance (Figure IV-1). Since the costs of compliance were developed by plant, the required
revenue for each option is shown as a percentage of sales by sales level. The relative increase in
revenue required to recover compliance costs varies with size of plant.
The revenue required to recover compliance costs can be viewed as the average price
increase across all products required by a plant in a given sales category. Obviously, small plants
have a higher revenue requirement because compliance costs for a given option are dis-
proportionately higher for small plants than for large plants.
Because only 10% of the plants in the industry will be impacted by the regulation, the price
increases expected from the regulation are likely to range from 0% to the same percentage as that
for the larger plants. The wood preserving industry is competitive and while the industry demand
curve for most preserved wood products is relatively inelastic, the demand curve facing individual
firms is quite elastic. However, the following factors and circumstances may enable these plants
to obtain price increases to recover cost:
The impacted plants are generally larger than the industry average;
They may be in isolated geographic markets;
The general price level inflation in the U.S. (6-8% per year) may facilitate at least
partial cost recovery.
During the 1970's, the prices of preserved wood products have outpaced general price
inflation. Given "customary," inflation-related price increases of 6-8%, impacted wood preservers
may be able to recover an additional 1-2% of increased cost associated with pollution control.
Also, larger plants are often associated with multi-plant companies which have some market
power and may be able to obtain a price increase to recover a portion of the cost of compliance.*
Finally, plants in locations where there are few or no competing firms may be able to raise prices,
limited primarily by the cost of transporting products from the nearest plant that is not
impacted.
Note that the analysis of plant closures viewed each plant as a stand-alone operation,
unable to recover the cost of compliance through price increases.
2. Production Shifts
Growth rates in the demand for preserved wood products will affect the ability of impacted
plants to obtain price increases. Plants predominantly producing poles will be unlikely to obtain
higher prices for this product in the face of a declining industry demand. Shifting from poles to
other products may enable a plant to produce a product with higher added value to maintain
current production levels. However, tight capacity is not forseen for any preserved wood product
and thus the ability of impacted plants to increase real prices will be inhibited.
Although there are occasions when multi-plant companies do not have market power at a specific location,
economic theory and actual experience indicate that such market power generally exists.
47
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While the selection of preserved wood versus steel or concrete materials is predominantly
based upon structural requirements, for railroad ties this situation could change. If concrete ties
prove to be technically feasible and economically producible a portion of the market
expansion forecast for ties could be captured by concrete substitutes, especially if the life-cycle
costs become more competitive. While this may not be a factor until the mid-1980's, that would
coincide with the deadline for BAT compliance and would further prevent the impacted plants
from recovering costs of compliance through price increases.
3. Financial Impact
It is unlikely that the impacted plants as a group will be able to recover the costs of
complying with BAT regulations through higher prices. If they elect to install the pollution
control equipment, profitability is likely to decline. Table IV-2 shows the impact of increased
operating costs and investment upon profitability in the absence of price increases. The analysis
considered the impact on operating costs due to out-of-pocket expenditures; i.e., while potential
interest payments on debt are included as a cost, the total cost of capital is not included in the
figures. Also, the lowest-cost means of achieving compliance was used i.e., if Option 4 is less
expensive than Option 3 for a plant, it is assumed the plant will install Option 4.
TABLE IV-2
INDIRECT DISCHARGER WOOD PRESERVING PLANTS
PERCENTAGE DECLINE IN PROFITABILITY* AFTER COMPLIANCE WITHOUT
PRICE INCREASES
Plant Sales ($000): 200
700 1800 3500
Percent Decline in Profitability*
Option 2
Steaming
Boulton
Option 3
Steaming
Boulton
Option 4
Steaming
Boulton
Option 5
Steaming
Boulton
Option 6
Steaming
Boulton
260
260
260
260
20-86 8-155
347
79 6
400
21-100 8-174
400
21-87
400
21-87
400
8-174
8-174
89
6-46
16-42
36-113
16-45
6-208
16-45
3-208
16-45
3-208
16-45
7500
2-45
13-68
4
13-68
3-50
13-68
3-50
13-68
3-50
13-68
*Change in Profit/Precompliance Profit: the absolute value of the changes in profit divided by
precompliance profit. A value greater than 100% means plant is operating at a loss.
Source: Arthur D. Little, Inc., estimates.
Because the costs of compliance for small plants are relatively higher, small firms will suffer
the greatest decline in profitability as a result of compliance. The small plants with lowest sales
volume would be in a negative profit situation under all of the control options studied. Plants in
the other sales categories would suffer a decline in profitability and most impacted plants would
still be profitable under each alternative.
49
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Any price increases the impacted plants are able to obtain would mitigate the reduction in
profitability for small and medium-sized plants. However, as discussed above, price increases
that do occur (barring a tight market) will reflect the cost structure of the larger plants. Even with
price increases, many plants with less than $1.8 million in sales are likely to become unprofitable
if they make the compliance expenditures.
Reduction in profitability is not the only financial impact of the regulation. If one were to
assume that all impacted plants could recover the pollution control expenditures through price
increases, it is still likely that a number of impacted plants would be unable to finance the
required investment.
For small plants with sales under $1 million, the investment required for all options studied
exceeds annual plant cash flow for all but one plant (Figure IV-2). Even for larger plants, the
studied alternatives often require investment exceeding a single year's cash flow. Considering the
fact that a portion of the plant's cash flow must be used for expenditures other than those
associated with BAT regulations, impacted plants will not generate sufficient cash flow to self-
finance compliance with these regulations. The impacted plants generate an annual cash flow
equivalent to approximately 4% of sales.* About 3% of sales is reinvested to maintain industry
assets leaving about 1% of sales for dividends, retained earnings, and other purposes. To have
available the equivalent of one year's cash to invest in pollution control, wood preservers would be
required to accumulate four years' cash flow in excess of maintenance investment requirements.
Therefore, if BAT regulations are required in 1984, any plant with a pollution control investment
requirement in excess of one year's cash flow will probably have to obtain external financing
between 1979 and 1983 to fund pollution control expenditures.
Assuming that a plant is viable i.e., prices will eventually increase to cover the BAT
investment expenditures a plant will have to seek financing from a parent company or the
financial community. However, the wood preserving industry is dominated by privately held
corporations, and only 22% of all plants are publicly held (Table IV-3). Inasmuch as many of the
privately held corporations and proprietorships are one-plant corporations, effectively the plant
and corporate cash flows are one and the same. Also, the ownership pattern of the plants that will
be impacted by BAT regulations is only slightly more favorable than that of the industry overall,
with 22 (55%) of the discharging plants organized as proprietorships or privately held
corporations.
More likely, the privately held corporations will require external financing to a greater
extent than the publicly held corporations. In either case, the financial community or parent
corporations is less likely to be willing to make investments in financially nonviable plants. On
the basis of the financial criteria, only the larger impacted plants would be able to make the
investment required to satisfy BAT requirements.
4. Plant Closures
The impacted wood preserving plants (especially the small ones) will be unable fully to
recover costs through price increases. Further, a number of plants will have cash flow shortfalls
relative to pollution control investment requirements. Thus plant shutdowns in the wood pre-
serving industry are likely to occur.
* Based upon responses to the EPA Financial 308 Letter. See Chapter II.
50
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TABLE IV-3
FORM OF BUSINESS ORGANIZATION BY DISCHARGE STATUS
Discharging Plants Zero Discharge* Total Plants
Form of Business Organization Number Percent Number Percent Number Percent
\ 1 2 1 31 11 } 32 9
Co-op ' J '
Privately Held Corporation 21 53 209 71 230 69
Publicly Held Corporation 1£ 45 54 18 72 22
Total** 40 100 294 100 334 100
*Plants currently at, or currently required to be at, zero discharge.
**Total respondents to question.
The evaluation of whether a plant would shut down rather than .make the investment
required to comply with pollution control regulations is imprecise. First, the evaluation is
external to the corporate environment and based on no knowledge or consideration of corporate
goals and objectives. Second, the evaluation is based on financial criteria and, while they are in
turn based upon industry data and a distribution of wood preserving plant rate-of-return criteria,
they may not reflect the actual parameters that would be used in the individual decision-making
process, especially since few plants provided information on financial decision criteria.
With those caveats in mind, the analysis indicates a number of closure candidates (Table
IV-4), based on by the following characteristics:
Low Sales,
Low Profitability, and/or
Negative Cash Flow.
The profitability and cash flow of each discharging plant was derived from the EPA
Financial 308 Letter. The change in operating cost and relationship of investment required to
cash flow was examined under each control option. The plants were assumed to install the least
costly treatment technology that would achieve compliance; for example, Option 6 (no discharge)
costs were used if less costly than Options 2 or 3.
If a plant could finance the pollution control investment from cash flow and maintain a
positive profit margin in the absence of price increases, then the plant was judged likely to remain
open. A plant was designated as a high probability of closure where required investment was on
the order of 200% of annual cash flow and/or post-compliance profit margins would be negative.
Plants judged to have a moderate probability of closure were those for which investment would be
100% to 200% of annual cash flow but which would still have a positive profit after tax.
Since compliance costs are disproportionately high for smaller plants, plants with low sales
volumes are more highly impacted. Under the control options studied, up to 8 plants with sales
52
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TABLE IV-4
WOOD PRESERVING INDUSTRY POTENTIAL PLANT CLOSURES
UNDER BAT ALTERNATIVES
Without Size Cutoff
With Size Cutoff
Alternative
Option 2
Steaming-lndirect
Boulton-lndirect
Total
Option 3
Steaming-lndirect
Boulton-lndirect
Total
Option 4
Steaming-lndirect
Boulton-lndirect
Total
Option 5
Steaming-lndirect
Boulton-lndirect
Total
Option 6
Steaming-lndirect
Boulton-lndirect
Total
High Moderate
Probability Probability Total
High
Probability
Moderate
Probability
Total
3
^
5
2
J_
3
6
J_
7
2
J_
3
8
J_
9
5
7
5
7
6
_2
8
3
_2_
5
4
_3
7
11
_3
14
7
3
10
14
_3^
17
2
~2
2
2
2
~2
2
2
3
3
Source: Arthur D. Little, Inc., estimates.
under $3.5 million would be unlikely to make the investment in control equipment for financial
reasons i.e., the plant is likely to incur operating losses as a result of compliance costs or be
unable to finance the investment. Under Option 2, three steaming plants and two Boulton plants
could close (Table IV-4). The number of potential closures increases with the stringency and
scope of the regulatory alternative and under Option 6 up to 14 steaming plants and 3 Boulton
plants face closure. If the EPA were to apply a size cutoff, the number of potential closures falls
off radically, with plant closures foreseen only under Options 4, 5, and 6.
5. Employment Effects
The potential employment losses attributable to plants with a high probability of closure
increases under each of the options and reaches a maximum of 3.5% of the industry production
workers under Option 6 (Table IV-5). The employment losses associated with moderate probabil-
ity plant closure are about the same under Options 4 and 5 at about 4% of the workforce.
53
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Alternative
Option 2
Steaming-lndirect
Boulton-lndirect
Total
% Employees*
Option 3
Steaming-lndirect
Boulton-lndirect
Total
% Employees*
Option 4
Steaming-lndirect
Boulton-lndirect
Total
% Employees*
Option 5
Steaming Indirect
Boulton-lndirect
Total
% Employees*
Option 6
Steaming-lndirect
Boulton-lndirect
Total
% Employees*
TABLE IV-5
WOOD PRESERVING INDUSTRY
EMPLOYMENT LOSSES FROM PLANT CLOSURES
Without Size Cutoff
With Size Cutoff
High
Probability
Moderate
Probability
130
41
171
2.2%
Total
130
Jl
171
2.2%
High
Probability
Moderate
Probability
Total
77
15
92
1.2%
54
41
95
1.2%
131
56
187
2.4%
199
15
214
2.£
280
41
321
4.2%
470
56
535
5.7%
103
15
118
1.5%
280
41
321
4.2%
383
56
439
5.7%
199
?99~
2.6%
199
199
199
2.6%
199
253
15
268
3.5%
295
41
336
4.4%
548
56
604
7.8%
27
27
0.3%
199
2.6%
199
199
2.6%
199
2.6%
226
226
2.9%
* Based upon 7,700 production workers in 1976, Department of Commerce, Bureau of Census, Annual Survey
of Manufacturers: General Statistics. Plant production employment data from EPA Financial 308 Letter.
Source: Arthur D. Little, Inc., estimates.
C. ECONOMIC IMPACT UPON NEW SOURCES AND
CAPACITY EXPANSIONS
1. Potential for New Plants
The wood treating industry is not capital intensive compared with the average manufac-
turing industry; the sales turnover ratios for plants in 1976 was found to range from 3.0 to 10.0 or
more,* whereas the ratio of sales to assets for most process industries is on the order of 1.0 to 2.5.**
There is considerable excess capacity among existing plants, based upon maximum operating
capacities, but transportation and other factors make it likely that new capacity will be built in
growing regions (e.g., the South) before excess capacity is fully utilized in others.
* Financial 308 Letter.
** Based on data from FTC-SEC, Quarterly Financial Reports.
54
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Although most new capacity may take the form of incremental expansion (e.g., the addition
of a new retort at an existing site), some 17% (or 56 of 337) of the respondents to the Financial 308
Letter indicated that their wood treating plants have begun operation since 1970.
2. Impact Upon New Plants
A number of new wood preserving plant models were developed to evaluate the impact of
new source performance standards. (See Chapter II.) Process economic models were developed for
four different plant types:
Boulton plants treating Douglas fir poles in the Northwest;
Organic steaming plants treating Southern Pine poles;
Boulton plants treating oak railroad ties in the South; and
Inorganic plants treating Southern Pine lumber.
Two plant sizes were created for each type: one with two cylinders and one with five (See
Chapter II). As mentioned in Chapter III, existing standards for new inorganic plants will have no
incremental costs of compliance from BAT revisions. Further, costs of compliance for Boulton
plants treating oak railroad ties were not generated by the technical contractor.
Table IV-6 depicts the baseline revenues on each model plant as well as the incremental
revenue required to recover costs of compliance (where available). The model plants are larger
than the average existing plant, with production and revenue levels at the upper end of the
spectrum. The revenue required to recover costs for compliance in the long run is similar to that
for existing plants for Option 6, the no discharge option, in the higher sales categories shown in
Figure IV-1. The cost of pollution control equipment per se would not appear to hinder the
addition of new capacity.
If the existing industry BAT requirements are defined as additional biological treatment or
current pre-treatment standards, then incremental expansion may be favored as a means of
capacity expansion, especially given the incremental land requirements of a no-discharge new
source standard.
55
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TABLE IV-6
IMPACT OF BAT REQUIREMENTS UPON LONG-RUN REVENUE
REQUIRED TO SUPPORT NEW SOURCES
Case Plant Type/Product
A Boulton/Douglas Fir Poles
B Boulton/Douglas Fir Poles
C Steaming/Southern Pine Poles
D Steaming/Southern Pine Poles
E Boulton/Oak R.R.Ties
F Boulton/Oak R.R.Ties
G Inorganic/Southern Pine Lumber
H Inorganic/Southern Pine Lumber
Annual
Production
(000 Cubic ft.!
720
1,800
1,800
4,500
960
2,400
1,800
4,500
Baseline
Revenues
($000)
7,860
19,300
11,300
28,100
6,500
16,000
13,500
33,300
Revenue Required for
BAT Compliance Costs
($000) % Baseline
154
226
198
298
2
1
2
1
Not Available
Not Available
Not Available
Not Available
Source: Arthur D. Little, Inc., estimates.
56
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V. LIMITATIONS OF ANALYSIS
The economic impact of BAT regulations may differ from the analysis in this economic
impact assessment depending upon the following:
(1) EPA regulations which affect waste disposal;
(2) Return-on-investment criteria;
(3) Cost variation from plant to plant;
(4) Future growth in demand; and/or
(5) Local conditions of impacted plants.
Item (1) was beyond the scope of the technical contractor's or the economic contractor's
work. Items (2) through (5) 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. EPA 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 indicated by the
technical contractor in this report. Further, wood preserving plants which dispose on-site (28%)
may be impacted, in that the current method of disposal may no longer be environmentally
adequate.
The application of both no-discharge and discharge options studied in this report will be
affected by RCRA regulations. The lagoons associated with enhanced biological treatment and
the impoundment associated with spray evaporation will both 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 the two aerated lagoon cells combined, or an impoundment, are analogous in size to
small landfills (5,OOOM3/year), then the incremental compliance cost per plant could be as
follows:
Initial Investment: $129,000
Annual Operating Costs: $ 42,200
Another source of additional cost is monitoring requirements. The cost of analysis for soil
and water samples could be on the order of $60,000 per year.
Consideration of whether or not the sludge and effluent of wood preserving plants were
hazardous wastes was beyond the scope of the technical contractor's report, although it was
discussed in the draft report. For off-site disposers, the costs of disposal are expected to double or
57
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triple as a result of Section 3004. 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.
B. RETURN ON INVESTMENT CRITERIA
The use of a higher or lower target rate of return than the median value (12%) produces
noticeably higher or lower required revenue to cover cost of compliance (Table V-l). Comparing
the revenue increase requirement for the low and high ROR scenarios for the sampled plants, the
table shows that the change in revenue requirement for a discount rate change from 12% to 5%
ranges from 22% to 40% for the sample plants. There is a greater change in the revenue
requirements from a change in the discount rate of 12% to 20%, and it ranges from 33% to 51%.
TABLE V-1
CHANGE IN REVENUE REQUIRED BY DISCOUNT RATE
Discount Rate
12% 5% 20%
Revenue
Required
$000 $000 % Change $000 % Change
5 3-40 7 40
39 30 -23 52 33
75 52 -31 113 51
89 59 -22 121 36
108 78 -28 156 44
173 118 -32 258 49
178 130 -27 255 43
434 300 -31 643 48
There is relatively little variation in the revenue requirement as a percent of sales due to
ROR target (Figure V-l). The requirement seems to be higher for both the smallest plants and the
very large plants, but even these plants require additional revenue of less than 10% of sales. The
bulk of the increases in revenue to maintain target ROR are within the 1-5% range; on the
average, the ROR scenarios differ by 1 percentage point. Therefore, the economic impact assess-
ment is basically insensitive to the return on investment criteria employed.
C. COST VARIATIONS FROM PLANT TO PLANT
Because of plant-specific conditions, the technical contractor indicated that the cost esti-
mates for an individual plant could vary between 75% and 150% of the costs for the control
options presented in Chapter III. The cost differences could arise as a result of such factors as
usable treatment in place, land availability, and/or cost of controls. The cost of compliance is
based upon land cost per acre, which will vary considerably depending upon the plant location.
Those plants with lower costs will be less severely impacted by the alternatives studied. In
addition to the understatement of compliance cost caused by EPA regulations on hazardous
waste, there could be plant-specific conditions (e.g., terrain) which contribute to higher costs.
Plants with higher costs will be more severely impacted by the regulation.
58
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10
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D D ROR = 20%
0 ROR = 12%
0 AROR= 5% D
A
DO
Q 0
D DA
A 0 °8 A
A ^
I 1 1 1 I I 1 1
1000 2000 3000 4000 5000 6000
Sales Volume ($ 000)
7000
8000
FIGURE V-1 REVENUE REQUIREMENT AS A PERCENTAGE
OF SALES BY ROR FOR SAMPLE PLANTS
D. FUTURE GROWTH IN DEMAND
If the forecast growth for railroad ties and timbers does not materialize or if the rate of
decline in poles is greater than forecast, the number of potential closure candidates will increase.
If, on the other hand, demand growth is greater by virtue of a strong housing market growth and
accelerated repair of railroads, then the number of plant closures will be fewer than indicated
because the supply/demand balance is such that high-cost plants (including plants impacted by
the regulation) determine price and therefore can recover costs of pollution control investment.
E. LOCAL CONDITIONS OF IMPACTED PLANTS
The analysis of plant closures is subject to the limitations of any plant closure analysis
(Chapter IV). In addition, local market conditions of some impacted plants will determine to a
significant extent whether a plant will shut down rather than comply with a regulation. For
example, if an impacted plant were in a market area where there were virtually no competing
firms, it might be able to increase its price and recover the cost of installing control equipment,
limited by the cost of transportation of the closest competing firm. This would also be the case if
all the plants in an area were required to make equivalent expenditures to comply with pollution
control requirements. Local conditions could produce a worse impact than described in Chapter
IV if, for example, most of the firms in the area are not impacted, in which case the impacted
plant would have very little chance of recovering the costs of pollution control.
59
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REFERENCES
1. Annual Survey of Manufactures, U.S. Department of Commerce, various years.
2. Trend Impact Analysis Study of the Wood Preserving Market, Dow Marketing Research
Reports, February 1976.
3. Ibid, p. 21-22.
4. Ibid, p. 36.
5. Personal communications with members of the AWPA.
6. Revised Technical Review of Best Available Technology, Best Demonstrated Technology and
Pretreatment Technology for the Timber Products Point Source Category, report to the Envi-
ronmental Protection Agency by Environmental Science & Engineering, Project No. 78-052,
September 1, 1978.
7. Integrated Economic Impact Assessment of Hazardous Waste Management Regulation (Regu-
latory Analysis Supplement), Preliminary Draft Report prepared for the Office of Solid Waste
Programs, U.S. Environmental Protection Agency, October 1978.
8. Census of Manufactures, U.S. Department of Commerce, 1972.
61
-------
BIBLIOGRAPHY
The Analysis of Existing Wood Preserving Techniques and Possible Substitutes, Contract No. 68-
01-4310, by The MITRE Corporation, for the U.S. Environmental Protection Agency, June 1977.
Annual Survey of Manufactures, Bureau of the Census, U.S. Department of Commerce, various
years.
Cen.su.s- of Manufactures, Bureau of the Census, U.S. Department of Commerce, 1967 and 1972.
Chemical Marketing Reporter, Schnell Publishing Co., Inc., New York, various issues.
Economic Indicators, Council of Economic Advisors,
Engineering News Record, McGraw Hill, Inc., New York, various issues.
Employment and Earnings, Bureau of Labor Statistics, U.S. Department ui Labor, various
issues.
Integrated Economic Impact Assessment of Hazardous Waste Management Regulations, Prelim-
inary Draft Report for the Office of Solid Waste, U.S. Environmental Protection Agency, October
1978.
Quarterly Financial Reports, Federal Trade Commission, Securities and Exchange Commission,
various issues.
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 & Engineering, Project No. 78-052,
September 1, 1978.
Trend Impact Analysis Study of the Wood Preserving Market, J. L. Natonski, February 1976.
Wholesale Prices and Price Indexes, Bureau of Labor Statistics, various issues.
Wood Preserving Statistics, Ernst & Ernst, 1976.
63
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APPENDIX A
INDUSTRY CHARACTERIZATION
65
-------
APPENDIX A
INDUSTRY CHARACTERIZATION
1. PRODUCT DIVERSIFICATION
It is primarily the largest companies in the industry which produce a wide range of products.
Most firms in the industry operate only one plant. In these cases, the plant produces organically
treated products or inorganically treated products, although some single plant firms produce
both. Furthermore, smaller firms tend to specialize on particular preserved wood products. For
example, a firm may produce only preserved railroad ties or posts or pilings or dimensional
lumber. For many of the smaller firms, wood preserving is a service offered by a company in the
lumber and wood products business.
2. IMPORTS AND EXPORTS
Import and export statistics do not distinguish preserved wood products from other wood
products. However, piling, utility poles, and railway crossties are likely to be preserved when
imported or exported. In recent years, imports, primarily from Canada, have been in the range of
$10 million to $15 million per year (Table A-l). Exports, primarily to wood-poor regions such as
the Middle East and Japan, have totaled $20 million to $35 million in recent years (Table A-2).
About lO'.V to 15' r of the U.S. production of utility poles is exported. With this exception, imports
and exports do not constitute a sizeable portion of any other preserved wood markets.
TABLE A-1
U.S. IMPORTS OF PRESERVED WOOD PRODUCTS1,1970-1977
Timber, Poles, Piling, Posts, and
Other Wood in the Rough
Value2
Year ($000)
1970 7,733
1971 8,633
1972 9,369
1973 8,654
1974 15,069
1975 9,868
1976 10,615
1977 10,011
Railroad
Quantity
(MBF)
8,418
3,363
7,924
11,308
13,916
12,475
8,164
7,367
Ties
Value2
($000)
717
385
757
1,505
2,566
2,625
2,314
1,370
Total
Value2
($000)
8,450
9,018
10,126
10,159
17,635
12,493
12,929
11,381
1. U.S. import statistics do not distinguish preserved wood products from other wood products,
but the products shown are predominantly preserved wood products.
2. Values shown are f.a.s. (free alongside ship) values.
Source: U.S. Department of Commerce, Bureau of the Census, U.S. Imports Schedule A,
Commodity by Country, FT 135.
67
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68
-------
APPENDIX B
PRO-FORMA NEW SOURCE MODELS
69
-------
TABLE B-1
PLANT A-1
ESTIMATED OPERATING COSTS FOR THE MANUFACTURE OF PRESERVED WOOD
ORGANIC TREATMENT
Cylinder Size: 2 cylinders, each 7' diameter x 130' long, 5000 cubic feet
Capital Cost: $3,300,000 (1978)
Location: South Central
Production: 2000 cubic feet per charge; 30 hours per charge (Boultonizing)
3 shifts per day, 300 days per year
Product: 960,000 cubic feet per year of Railroad Ties
Item
Raw Materials:
Wood
Creosote
Units
Cubic feet
Gallons
Unit Cost
($)
2.15
0.70
Units Per
Cubic Foot
1.0
1.0
Dollars Per
Cubic Foot
2.15
0.70
Thousand
Dollars
Per Year
2,064
672
Total Raw Materials
Processing:
Labor, Operating
Labor, Maintenance
Maintenance Supplies
Consumable Supplies
Fuel and Power
Plant Overhead
Taxes and Insurance
Total Processing
Total Cost, F.O.B. Plant
Man hours
Man hours
50% of Labor
4% of Capital
6.00
6.50
2.85
2,736
0.324
0.090
0.090
0.046
0.135
0.207
0.137
1.329
311
86
86
46
132
199
132
992
4.179
3,728
Source: Arthur D. Little, Inc., estimates based on industry interviews.
71
-------
TABLE B-2
PLANT A-2
ESTIMATED OPERATING COSTS FOR THE MANUFACTURE OF PRESERVED WOOD
ORGANIC TREATMENT
Cylinder Size: 5 cylinders, each 7' diameter x 130' long, 5000 cubic feet
Capital Cost: $6,509,000 (1978)
Location: South Central
Production: 2000 cubic feet per charge; 30 hours per charge (Boultonizing)
3 shifts per day, 300 days per year
Product: 2,400,000 cubic feet per year of Railroad Ties
Item
Raw Materials:
Wood
Creosote
Total Raw Materials
Processing:
Labor, Operating
Labor, Maintenance
Maintenance Supplies
Consumable Supplies
Fuel and Power
Plant Overhead
Taxes and Insurance
Total Processing
Total Cost, F.O.B. Plant
Units
Cubic feet
Gallons
Man hours
Man hours
50% of Labor
4% of Capital
Unit Cost Units Per
($) Cubic Foot
2.15 1.0
0.70 1.0
6.00 0.012
6.50 0.003
Dollars Per
Cubic Foot
2.15
0.70
2.85
0.250
0.076
0.090
0.046
0.135
0.163
0.108
0.869
3.719
Thousand
Dollars
Per Year
5,160
1,680
6,840
600
182
216
110
326
391
260
2,085
8,925
Source: Arthur D. Little, Inc., estimates based on industry interviews.
72
-------
TABLE B-3
PLANT B-1
ESTIMATED OPERATING COSTS FOR THE MANUFACTURE OF PRESERVED WOOD
ORGANIC TREATMENT
Cylinder Size: 2 cylinders, each 7' diameter x 130' long, BOX cubic feet
Capital Cost: $3,300,000 (1978)
Location: South Central
Production: 2000 cubic feet per charge; 16 hours per charge (Steaming)
3 shifts per day, 300 days per year
Product: 1,800,000 cubic feet per year of Southern pine poles
Item
Raw Materials:
Wood
Pentach loropheno I
Total Raw Materials
Processing:
Labor, Operating
Labor, Maintenance
Maintenance Supplies
Consumable Supplies
Fuel and Power
Plant Overhead
Taxes and Insurance
Total Processing
Total Cost, F.O.B. Plant
Units
Cubic feet
Pounds
Man hours
Man hours
50% of Labor
4% of Capital
Unit Cost Units Per
($) Cubic Foot
3.00 1.0
0.42 0.5
6.00
6.50
Dollars Per
Cubic Foot
3.00
0.21
3.21
0.173
0.048
0.048
0.024
0.072
0.111
0.073
0.549
3.759
Thousand
Dollars
Per Year
5,400
378
5,778
311
86
86
46
132
199
132
992
6,770
Source: Arthur D. Little, Inc., estimates based on industry interviews.
73
-------
TABLE B-4
PLANT B-2
ESTIMATED OPERATING COSTS FOR THE MANUFACTURE OF PRESERVED WOOD
ORGANIC TREATMENT
Cylinder Size: 5 cylinders, each 7' diameter x 130' long, 5000 cubic feet
Capital Cost: $6,509,000 (1978)
Location: South Central
Production: 2000 cubic feet per charge; 16 hours per charge (Steaming)
3 shifts per day, 300 days per year
Product: 4,500,000 cubic feet per year of Southern pine poles
Item
Raw Materials:
Wood
Pentachlorophenol
Total Raw Materials
Processing:
Labor, Operating
Labor, Maintenance
Maintenance Supplies
Consumable Supplies
Fuel and Power
Plant Overhead
Taxes and Insurance
Total Processing
Total Cost, F.O.B. Plant
Units
Cubic feet
Pounds
Man hours
Man hours
Unit Cost
<$)
3.00
0.42
50% of Labor
4% of Capital
Units Per
Cubic Foot
1.0
0.5
6.00
6.50
Dollars Per
Cubic Foot
3.00
0.21
3.21
0.133
0.040
0.048
0.024
0.072
0.087
0.058
0.463
3.673
Thousand
Dollars
Per Year
14,445
600
182
216
110
326
391
260
2,085
16,530
Source: Arthur D. Little, Inc., estimates based on industry interviews.
74
-------
TABLE B-5
PLANT C-1
ESTIMATED OPERATING COSTS FOR THE MANUFACTURE OF PRESERVED WOOD
ORGANIC TREATMENT
Cylinder Size: 2 cylinders, each 7' diameter x 130' long, 5000 cubic feet
Capital Cost: $3,630,000 (1978)
Location: West Coast
Production: 2000 cubic feet per charge; 40 hours per charge (Boultonized)
3 shifts per day, 300 days per year
Product: 720,000 cubic feet per year of Douglas fir poles
Item
Raw Materials:
Wood
Pentachlorophenol
Total Raw Materials
Processing:
Labor, Operating
Labor, Maintenance
Maintenance Supplies
Consumable Supplies
Fuel and Power
Plant Overhead
Taxes and Insurance
Total Processing
Total Cost, F.O.B. Plant
Units
Cubic feet
Pounds
Man hours
Man hours
50% of Labor
4% of Capital
Unit Cost Units Per
($) Cubic Foot
3.40 1.0
0.42 0.75
6.00
6.50
Dollars Per
Cubic Foot
3.40
0.32
3.72
0.432
0.119
0.119
0.064
0.183
0.276
0.201
1.396
5.116
Thousand
Dollars
Per Year
2,448
230
2,678
311
86
86
46
132
199
145
1,005
3,683
Source: Arthur D. Little, Inc., estimates based on industry interviews.
75
-------
TABLE B-6
PLANT C-2
ESTIMATED OPERATING COSTS FOR THE MANUFACTURE OF PRESERVED WOOD
ORGANIC TREATMENT
Cylinder Size: 5 cylinders, each 7' diameter x 130' long, 5000 cubic feet
Capital Cost: $7,160,000(1978)
Location: West Coast
Production: 2000 cubic feet per charge; 40 hours per charge (Boultonized)
3 shifts per day, 300 days per year
Product: 1,800,000 cubic feet per year of Douglas fir poles
Item
Raw Materials:
Wood
Pentachlorophenol
Total Raw Materials
Processing:
Labor, Operating
Labor, Maintenance
Maintenance Supplies
Consumable Supplies
Fuel and Power
Plant Overhead
Taxes and Insurance
Total Processing
Total Cost, F.O.B. Plant
Units
Cubic feet
Pounds
Man hours
Man hours
50% of Labor
4% of Capital
Unit Cost
($)
3.40
0.42
Units Per
Cubic Foot
1.0
0.75
6.00
6.50
Dollars Per
Cubic Foot
3.40
0.32
3.72
0.333
0.101
0.120
0.061
0.181
0.217
0.159
1.163
4.883
Thousand
Dollars
Per Year
6,120
576
6,696
600
182
216
110
326
391
286
2,093
8,789
Source: Arthur D. Little, Inc., estimates based on industry interviews.
76
-------
TABLE B-7
PLANT D-1
ESTIMATED OPERATING COSTS FOR THE MANUFACTURE OF PRESERVED WOOD
ORGANIC TREATMENT
Cylinder Size: 2 cylinders, each 7' diameter x 130' long, 5000 cubic feet
Capital Cost: $3,300,000 (1978)
Location: South Central
Production: 2000 cubic feet per charge; 16 hours per charge (Steaming)
3 shifts per day, 300 days per year
Product: 1,800,000 cubic feet per year of Southern pine lumber
Item
Raw Materials:
Wood
CCA
Total Raw Materials
Processing:
Labor, Operating
Labor, Maintenance
Maintenance Supplies
Consumable Supplies
Fuel and Power
Plant Overhead
Taxes and Insurance
Total Processing
Total Cost, F.O.B. Plant
Units
Cubic feet
Pounds
Man hours
Man hours
50% of Labor
4% of Capital
Unit Cost Units Per
($) Cubic Foot
3.60 1.0
1.00 0.33
6.00
6.50
Dollars Per
Cubic Foot
3.60
0.33
3.93
0.173
0.048
0.048
0.024
0.072
0.111
0.073
0.549
4.479
Thousand
Dollars
Per Year
6,480
594
7,074
311
86
86
46
132
199
132
992
8,066
Source: Arthur D. Little, Inc., estimates based on industry interviews.
77
-------
TABLE B-8
PLANT D-2
ESTIMATED OPERATING COSTS FOR THE MANUFACTURE OF PRESERVED WOOD
ORGANIC TREATMENT
Cylinder Sin: 5 cylinders, each 7' diameter x 130' long, 5000 cubic feet
Capital Cost: $6,509,000 < 1978)
Location: South Central
Production: 2000 cubic feet per charge; 16 hours per charge (Steaming)
3 shifts per day, 300 days per year
Product: 4,500,000 cubic feet per year of Southern pine lumber
Item
Raw Materials:
Wood
CCA
Total Raw Materials
Processing:
Labor, Operating
Labor, Maintenance
Maintenance Supplies
Consumable Supplies
Fuel and Power
Plant Overhead
Taxes and Insurance
Total Processing
Total Cost, F.O.B. Plant
Units
Cubic feet
Pounds
Man hours
Man hours
50% of Labor
4% of Capital
Unit Cost
($)
3.60
1.00
6.00
6.50
Units Per
Cubic Foot
1.0
0.33
Dollars Per
Cubic Foot
3.60
0.33
3.93
0.133
0.040
0.048
0.024
0.072
0.087
0.058
0.463
4.393
Thousand
Dollars
Per Year
16,200
1.485
17,685
600
182
216
110
326
391
260
Source: Arthur D. Little, Inc., estimates based on industry interviews.
78
-------
APPENDIX C
EPA FINANCIAL 308 SURVEY
79
-------
TABLE C-1
RESPONSES TO EPA FINANCIAL 308 SURVEY
# %*
Total Mailed 601
Less Duplicates 27
Net Responses 424 87.1
Total Applicable Responses 337 69.2
Total Non-Applicable Responses** 87
No Answer 150 30.8
*Based on sum of "Total Applicable" and "No Answers" (487).
**Plants which indicated that they do not treat wood.
Source: Arthur D. Little, Inc., estimates.
81
-------
INSTRUCTIONS AND DEFINITIONS RELATING TO
WOOD PRESERVING
1. This survey must be completed by each manufacturing facility that treats wood either
as a treating service only (TSO) or treats wood products owned by it for subsequent
sale to others.
2. A questionnaire for each wood preserving plant has been sent to the corporate address.
This may or may not be a plant site. All questions on the survey form refer to one
particular plant site only and a separate questionnaire must be completed for each
location. Questionnaires were mailed to corporate offices because much of the infor-
mation resides there and typically corporate involvement is required for response to
material of this kind.
3. Please submit one completed questionnaire for each plant in the enclosed, pre-
addressed envelope by October 21, 1977.
4. All questions contained in this survey are intended to obtain information about your
manufacturing operations and activities as they pertain to wood preserving 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 the answer
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 sheet.
82
-------
DEFINITIONS
Annual Cost of Pollution Control and Other Environmen-
tal Regulations - Depreciation charges for pollution con-
trol equipment or for plant and equipment modifica-
tions 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.
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.
General and Administrative Cost - Salaries, wages, and
related labor costs not directly associated with produc-
tion activity; state and local taxes; selling expense
insurance and other overhead costs.
Gross Margin Earnings before interest, taxes, general
and administrative expense.
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.
OSHA - The Occupational Safety and Health Admin-
istration.
Other Materials Cost - Chemicals and other supplies
used in the production of wood treated products.
Payback Period - The number of years it takes for an
investment to repay itself.
Payroll Costs Wages, unemployment insurance, FICA
and other related costs of direct labor (and indirect)
employed in treating wood products.
Peak Design Capacity = Design Void x 0.6 x Charge
Factor
Design Void = 3.142 x (Cylinder Radius)* x'Cylinder
Length
Charge Factor = Average number of possible charges
per 24 hour period
Peak Capacity as Modified = Modified Void x 0.6 x Charge
Factor
Modified Void = 3.142 x (Current Cylinder Radius)1 x
Current Cylinder Length
Process Waste - Any used water or liquid waste product
which results from or has had contact with the manu-
facturing process, including any water for which there
is a reasonable possibility of contamination from the
wood preserving process or from raw material-inter-
mediate product-final product, storage, transportation,
handling, processing or cleaning. For purposes of this
survey, cooling water, sanitary wastewater, storm
water and boiler blowdown are not considered process
waste 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 actual corporate tax rate.
Profit Before Tax - Sales less all costs, except Federal
Income taxes.
Return on Investment - The average annual revenue (or
decreased cost) realized on an investment, expressed
as a percentage of the original investment cost.
Sales - Sales, fob plant, net of discounts, and returns. If
the plant is a cost center, estimate the approximate
market value (fob plant) of the products produced in
the most recent fiscal year.
Total Assets - Fixed assets, inventories, receivables, cash
securities, et cetera.
Total Liabilities - Long-term debt, accounts and notes
payable, deferred taxes, et cetera.
Treated Wood Products - Wood treated with organics
(oils) or with inorganic salt solutions or dual oil and
salt treatment.
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.
Wood Cost - If this plant is treating service only (TSO),
wood cost should be zero. If treating owned wood
products, show the cost of the wood products before
treatment. (Use approximate cost as a percentage of
sales if actual cost is unknown.)
83
-------
308 QUESTIONNAIRE
WOOD PRESERVING
Company Code #
(for EPA use)
NOTE: Upon receipt by EPA, this page will be separated from the remainder of the questionnaire so
that data processing and use of the data is conducted on a coded basis by its contractor.
i. Name of Plant
ii. Plant Site Address
Street
City State Zip
iii. Name of Respondent*
iv. Address of Respondent
Street City Stale Zip
v. Telephone of Respondent
vi. Parent Company
vii. Total number of wood treating wood plants owned by parent
vui. Is this plant engaged in treating wood products?
Yes D Continue with Questionnaire
No D Do not fill out the questionnaire but return after completing this page, through Question
viii with a cover letter describing the nature of your business.
ix. To assert your claim of confidentiality, please check off the box corresponding to the questions,
which, in the company's opinion, require confidential treatment.
22 D 26 D
23 D
24 D
25 D
1
2
3
4
D
D
a
a
5
7
8
9
a
a
D
a
10
11
12
13
a
a
a
a
14
15
16
17
a
D
a
a
18
19
20
21
D
D
a
a
'Person to be contacted in case of questions.
84
-------
308 QUESTIONNAIRE
WOOD PRESERVING
Company Code
(for EPA use)
A. GENERAL INFORMATION
1. What is the form of business organization of this plant?
Proprietorship or Partnership D
Co-op D
Privately-held Corporation D
Publically-held Corporation D
2. Is this wood treating plant a stand-alone operation or part of a multi-plant complex at this
location?
Stand-alone D
Multi-plant complex D
3. Approximately what percent of total sales at this complex or plant was from wood treating
in FY 1976? %
4. Is this plant at an urban, suburban, or rural location?
Urban D
Suburban D
Rural D
5. What year did the wood treating plant begin operation?
85
-------
B. EFFLUENT INFORMATION
6. How does this plant dispose of liquid process waste?
a. Discharge into navigable water D
b. Discharge into municipal sewer D
c. Disposed on plant site D
d. Disposed off plant site d
e. Process waste is recycled (no discharge) D
f. This plant does not generate liquid process waste D
g. Other D Please specify
IF THE ANSWER TO QUESTION 6 IS (c), (d), (e), OR (0, YOU MAY OMIT ANSWERS TO THE
FOLLOWING QUESTIONS:
7,10,20,21b,22,25
7.a If you do not discharge liquid process waste 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 investment
cost?
$ Don't Know D
c. If you discharge any wood treating process waste into a sewer system, on what basis are your
sewer charges made?
Flat annual fee D
Gallon of effluent D
Other D Please Specify
d. If you discharge into a municipal sewer, what were your total sewer charges in 1976? $
e. If you discharge liquid process waste 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? $
C. SALES AND PRODUCT MIX
8. Fiscal year 1976 wood treating plant sales (thousands of dollars).
Under 70 D 301-700 D 1,801-2,400 D 4,801-7,200 D
71-155 D 701-1,200 D 2,401-3,200 D 7,201-11,500 D
156-300 D 1,201-1,800 D 3,2014,800 D More than 11,500 D
86
-------
9. Which of the following product types are treated at this plant:
Treated As a percent of Plant Sales
Treated Wood Products at Plant Under 10 11-30 31-50 51-70 71-90 Over 90
a. Organic (Oil or Dual Oil
and Salt Treatment)
(1) Railroad Ties D D D D D D D
(2) Pilings, Poles D D D P D D D
(3) Timber, Lumber,
and Other D D D D D D D
b. Inorganic (Salt Based)
(1) Pilings, Poles D D D D D D D
(2) Timber, Lumber,
and Other D D D D D D D
lO.a. Are any changes (other than normal business fluctuations) planned in production process or product
mix?
Yes D No D (If No, Go to Part D)
b. Process change towards:
More Organic D More Inorganic D
Less Organic D Less Inorganic D
c. Product Mix Change
More Ties D More Poles D More Other D
Less Ties D Less Poles D Less Other D
d. Other, please specify nature of change
D. PLANT CAPACITY AND PRODUCTION
11. What is your peak design capacity (or peak capacity as modified)? cu. ft.
Cubic Feet/24 hour period*
12.a. What region of the country is the origin of most of the wood treated at this facility?
Northeast D Southeast D Midwest D
Northwest D Southwest D Other D
b. Is the wood mostly:
Hardwood D or Softwood D
If unable to calculate peak (design) capacity by the formula shown in "DEFINITIONS" attach a separate sheet describing
the radius and length of each cylinder.
87
-------
13. Typical number of production days per week?
14 D 5D 6D 7D
14. Number of weeks at each shift level (total should add to 52 weeks):
No. of Weeks
a. at 0 shifts (shut down or no wood preserving)
b. at 1 shift
c. at 2 shifts
d. at 3 shifts
e. at 4 shifts
52 Week* TOTAL OF (a) + (b) + (c) + (d) + (e)
15. 1976 Production (Thousands of cubic feet)
16. Typical number of production workers in 1976:
1-3 D 7-9 D 20-34 D 49-75 D 100-125 D
4-6 D 10-19 D 35-48 D 76-99 D Over 125 D
17. This facility is primarily engaged in (a) treating service only (TSO), and or (b) treating owned wood
products for sale to others:
Approximate Percent of Sales
Under 10 10-25 26-50 51-75 Over 75
a. Treating Service Only D D D D D
b. Treating Owned Wood Products D D D D D
18. What proportion of owned wood is from company-owned timberland?
Approximate Percent of Owned Wood Supply
None 1-24 25-49 50-74 75-100
D D D D D
88
-------
E. FINANCIAL STATEMENT
19. Revenue and Expenses
Check the box for each item which most closely approximates your 1976 fiscal year expenses as a
percent of sales.
Cost as a Percent of Plant Sales
a. Wood Cost
b. Other Materials Cost
c. Payroll Cost
d. Depreciation
Under
10
D
D
D
Under 1
D
10- 16-
15 21
D D
D D
D D
1-2
D
Under 10 11-15
e. Gross Margin
f. General and Administrative Cost
g. Interest Expense
h. Profit Before Tax
i. Profit After Tax
20. How representative was this plant's
About the same
Better than Average
Worse than Average
D
Under 1
D
Under 1
D
Under 1
D
Under 1
D
1976 profit
D
D
D
D
1-5
D
1-4
D
1-4
D
1-2
D
22- 29-
28 38
D D
D D
D D
3-5
D
16-25
D
6-10
D
5-8
D
5-8
D
3-4
D
39- 49-
48 60
D D
D D
D D
6-8
D
26-30
D
11-15
D
9-12
D
9-12
D
5-7
D
before tax experience versus the average for
Over
60
D
D
D
OverS
D
Over 30
D
Over 15
D
Over 12
D
Over 12
D
Over?
D
1971-1975?
89
-------
21. Factors related to Revenues and Expenses
a. Fixed Costs: If the plant faces lease, rental or mortgage commitments beyond 1976, (for build-
ings or equipment), indicate the average annual charges and the year the commitments expire.
Leases/ Wood Debt
Rental D Contracts D Payment D Other* D
(1) Average Annual Charge: $ $ $ $
(2) Commitment Expires: 19 19 19 19
(*if other commitments attach separate sheet)
b. What Depreciation Method is Used: Equipment Building)
(1) Book Basis:
Straight-Line
Double-Declir
Sum of Year's Digits
Other:
(Please Specify)
(2) Tax Basis:
Straight Line
Double-Declinin
Sum of Year's Digits
Other:
(Please Specify)
g Balance
igits
g Balance
ligits
jl Equipment Amortization:
T 5 Years
i other equipment
D
D
D
D
D
D
n
D
D
n
D
D
D
D
D
n
n
n
22. Unusual Production Costs
Are there any circumstances peculiar to this plant which result in unusual production costs?
Yes D No D
If Yes, please describe:
90
-------
23. Historical/Annual Cost of Pollution Control and Other Environmental Regulations:
Don't
Know
None
Fiscal Year Ending
1975
1976
(1) Water Pollution Regulations:
(a) Annual Operating Costs
(b) Annual Depreciation Charges
(2) Solid Waste Disposal (including waste
water sludge and wood waste, con-
tract hauling):
D
D
D
D
(a) Annual Operating Costs
(b) Annual Depreciation Charges
(3) Other Environmental Regulations
Affecting Production Processes
and Production Costs
(Please Specify V
(a) Annual Operating Costs
(b) Annual Depreciation Charges
D
D
D
D
D
D
Air
D
D
D
s
s
OSHA
D
$
$
$
S
$
$
(4) Other Administrative Costs:
Environmental department,
research, litigation, consultants,
additional administrative costs.
D
D
24. Value of wood treating plant Assets and Liabilities (as of the end of the most recent fiscal year).
a. Net Fixed Assets (Gross Fixed Assets
less cumulative depreciation)
b. Total Assets: (Net Fixed Assets, Cash
receivables, inventory, other assets)
c. What was the value of this wood treating
plant's accounts receivable?
d. What was the value of this wood treating
plant's accounts payable?
e. Current Plant Debt (i.e., debt maturing in
current year or payable on demand).
f. Long-Term Plant Debt (debt maturing
beyond the current year [1977])
g. Total Plant Liabilities (long-term debt,
accounts payable, deferred taxes, other
debt, etc.)
Don't Know D
Don't Know D
91
-------
25. Capital Investment Criteria for the Plant
a. What investment criteria do you use?
Return on Investment (RO1) D
Payback D
Discounted Cash Flow D
Other D
b. If you use return on investment criteria:
(1) What is the target internal pre-tax rate of return on capital required for investment in
this plant? .
(2) At what ROI would you consider plant shutdown? .
c. If you use payback period criteria, what is the required payback period for investment?
years
d. What is the current long term interest rate you must pay for new capital?
percent per year
26. Capital Investment for the Plant (not including capitalized operating or maintenance expenses).
(1)
Total Capital
Investment
(Actual) 1971-76
(Planned) 1977
(2)
Water Pollution
Control
(3)
Other Environmental
Regulation (State or Federal)
Impacting Production Processes
92
-------
STRAIGHT TABULATION OF WOOD PRESERVING INDUSTRY RESPONSES
A. GENERAL INFORMATION
1. What is the form of business organization of this plant?
Number Percent
Proprietorship or Partnership 31 9.28
Co-op 1 .30
Privately-held Corporation 230 68.86
Publically-held Corporation 72 21.56
Total 334 100.00
2. Is this wood treating plant a stand-alone operation or part of
a multi-plant complex at this location?
Number; Percent
S t and-alone 268 80.00
Multi-plant complex 67 20.00
Total 335 100.00
93
-------
3. Approximately what percent of total sales at this complex or plant
was from wood treating in FY1976?
r .
I
I
0
I_
11
0.2971
._.______ T -
1
0.297
l -9;; :
I_ _,
211
6.2311
21
6.231
L0-19£
___ __ __ T _
101
2.9671
- __ _ T _ .
10
2.967
20-29* '
(
51
1.4841
5
1.484
?0-3c'>o <
61
1.7831
""""
6
1.780
VO-499C
5
1.4b4
5
1.464
80-R9* 90-99%
1
I
I
1
I
171
5.J45I
17
5.045
i
21
0.5931
?
0.593
1
151
4.4511
_ __ T ____
15
4.451
1
221
6.I;2BI
22
6.52*
1
581
17.2111
53
17.211
number
percentage
number
percentage
NO ROW
ANSWER 'SUMS
I j 1
I 1551 201 337
I 45.9941 5.9351 100.000
I j j
155 20 337
45.994 5.935 100.000
94
-------
4. Is this plant at an urban, suburban, or rural location?
Urban
Suburban
Rural
Total
5. What year did the wood treating plant
PEFORc
1930 1931-1940 1941-
I 5S I 131
I 17.4561 3.6461 1
T T _ 1 _____
59 H
17.45& 3.8t6 I
1961-1970 1971-1977 OTHER
761 561
22.4851 16.56BI
76 56
22.485 16.56B
Number Percent
98 29.38
85 25.22
153 45.40
336 100.00
begin operation?
1950 1951-1960
1
461 831
3.0091 24.5561
46 83
3.609 24.556
NO
ANSWER
I 51
I 1.4791
1.479
number
percentage
RPal
SUMS
337 number
100.000 percentage
337 number
1 00 . 000 percentage
95
-------
B. EFFLUENT INFORMATION
6. How does this plant dispose of liquid process waste?
Number Percent
Direct discharge 10 2.9
Indirect-steaming 30 7.8
Indirect-Boulton 10 2.7
Disposed on plant site 98 26.2
Disposed off plant site 18 4.8
No discharge (recycled) 126 33.8
No liquid waste 60 16.1
Inorganic 5 1.3
Other 7 1.9
No entry 9 2.4
Total 337 100.0
IF THE ANSWER TO QUESTION 6 is (c), (d), (e) OR (f), YOU MAY OMIT
ANSWERS TO THE FOLLOWING QUESTIONS:
7, 10, 20, 21b, 22, 25
7.(a) If you do not discharge liquid process waste into a municipal
sewer, do you have the option to connect?
Number Percent
Yes
No
Don't Know
Total
2
19
9
30
6.67
63.33
30.00
100.00
96
-------
7 (b) If you do have the option to connect to a municipal sewer, what is the
initial capital investment cost?
0-5,000
T
I
I
T
I
I
T
5,000- 10,000-
10,000 13,000
11
0.2*61
1
0.296
15,000-
20,000
I
I
20,000-
?5,000
I
I
-I
I
T
- I
number
percentage
25,000-
30,000
-
1
I
30,000-
35,000
I
I
-T-
35,000-
40,000
1
1
- T-
40,
45
000-
,JOO
45,
50
I
I
-T
000-
,000
50,000
_T _
I
I
- T
i
i
-T
number
percentage
DONT KNOW
NO
ANSWER
1
I
I
i
111
3.2541
11
3.254
1
3251
96.4501
_____ ___ r
325
96.450
ROU
337
100.000
number
percentage
337 number
100.000 percentage
7.(c) If you discharge any wood treating process waste into a sewer
system, on what basis are your sewer charges made?
Flat annual fee
Gallon of effluent
Other
Total
Number
7
21
13
41
Percent
17.07
51.22
31.71
100.00
97
-------
7. (d.) If you discharge into a municipal sewer, what were your total
sewer charges in 1976? $ .
7.(e) If you discharge liquid process waste into navigable waters,
do you have an NPDES permit?
Number Percent
Yes
No
Don"t Know
Total
10
4
2
16
62.50
25.00
12.50
100.00
98
-------
7. (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?
I
I
0-500
0.
0.
21
5921
2
592
500-
1,000
0.
0.
1
296
1
296
I
I
1 ,000-
1,500
21
0.5921
2
U.b92
1,500-
2,000
21
0.5921
2
0.592
2,000-
2,500
J.5<
0.5<
1
L.
1
5,000
0.
0.
2
592
2
592
I
I
5,000
3.
3.
12
-------
C. SALES AND PRODUCT MIX
8. Fiscal year 1976 wood treating plant sales (thousands of dollars)
Under 70
71 - 155
156 - 300
301 - 700
701 - 1,200
1,200 - 1,800
1,801 - 2,400
2,401 - 3,200
3,201 - 4,800
4,801 - 7,200
7,201 - 11,500
More than 11,500
Total
9. Which of the following product
a. Organic (Oil or Dual Oil and
(1) Railroad Ties
Under 10
11 - 30
31 - 50
51 - 70
71 - 90
Over 90
Total
Number
25
25
29
48
50
21
21
26
24
30
13
6
318
types are
Percent
7. .86
7, .86
9 ,. 12
15.09
15 ,.7 2
6,60
6 . 60
8,18
7.55
9 . 43
4.09
1.89
100.00
treated at this plant:
Salt Treatment)
Number
35
19
7
10
10
20
101
Percent
34.65
18.81
6.93
9.90
9.90
19.80
100 . 00
100
-------
(2) Pilings, Poles
Under 10
11 - 30
31 - 50
51 - 70
71 - 90
Over 90
Total
(3) Timber, Lumber, and Other
Under 10
11 - 30
31 - 50
51 - 70
71 - 90
Over 90
Total
9b. Inorganic (Salt Based)
(1) Pilings, Poles
Under 10
11 - 30
31 - 50
51 - 70
71 - 90
Over 90
Total
(2) Timber, Lumber, and Other
Under 10
11 - 30
31 - 50
51 - 70
71 - 90
Over 90
Total
101
Number
23
30
21
15
25
35
149
Number
64
48
33
14
19
30
208
Number
33
11
0
0
1
2
47
Number
13
26
13
6
14
59
131
Percent
15.43
20.13
14.10
10.07
16.78
23.49
100.00
Percent
30.77
23.07
15.86
6.73
9.13
14.42
100.00
Percent
70.21
23.40
.00
.00
2.13
4.25
100.00
Percent
9.92
19.85
9.92
4.58
10.68
15.04
100.00
-------
9c. Other
in production process or product mix?
Yes
No
Total
lOb. Process changes towards:
More Organic
Less Organic
More Inorganic
Less Inorganic
Total
lOc. Product Mix Change
More Ties
Less Ties
More Poles
Less Poles
More Other
Less Other
Total
Number
1
Percent
100
.00
mal business flucti
:t mix?
Number
11
123
134
Number
1
6
3
0
10
Number
2
0
0
0
4
0
6
Percent
8
91
100
.21
.79
.00
Percent
10
60
30
100
.00
.00
.00
.00
.00
Percent
33.
.
.
66.
9
100.
33
00
00
00
67
00
00
102
-------
D. PLANT CAPACITY AND PRODUCTION
12a. What region of the country is the origin of most of the wook
treated at this facility?
Northeast
Northwest
Southeast
Southwest
Midwest
Other
Total
12b. Is the wood mostly:
Hardwood
Softwood
Total
13. Typical number of production
1-4 days
5 days
6 days
7 days
Total
Number
15
65
146
39
40
24
329
Number
62
267
329
days per
Number
32
252
26
17
327
Percent
4.55
19.75
44.37
11.85
12.16
7.29
100.00
Percent
18.84
81.16
100.00
week?
Percent
9.79
77.06
7.95
5.20
100.00
103
-------
14. NfKnber of weeks at each shift level (total should add to 52 weeks):
at 0 shifts (shut down or no wood preserving)
0-9
10-19
20-29
30-39
1
I
I
1
2811
83.1361
281
83.136
-1-
121
3.5iOI
12
3.550
------- 1 --
101
2.9591
10
2.959
-----i
61
1.7751
6
1.775
number
percentage
number
percentage
-49 50-52
T 1.
II II
0.2961 0.2961
1 1-
1 1
0.296 0.296
POOR
DATA
1
271
7.9831
1
27
7.988
ROW
SUMS
338
100.000
338
100.000
number
percentage
number
percentage
104
-------
14. Number of weeks at each shift level (total should add to 52 weeks):
(cont) at 1 shift
0-9
10-19
20-29
I
I
I
1
9bl
30.3681
96
30.863
1
101
3.2151
10
3.215
171
5.4661
T
17
5.466
number
percentage
number
percentage
30-39
--------- 1
161
5.1451
16
5.145
40-49
1-
191
6.109T
1-
19
6.109
50-52
1
1531
49.1>6I
1
153
49.196
ROW
SUMS
311
100.000
311
100.000
number
percentage
number
percentage
105
-------
14. Number of weeks at each shift level (total should add to 52 weeks):
(cont) at 2 shifts
I
I
0-9
2611
83.9231
261
83.923
10-19
191
6.1091
19
6.109
20-29
8
2.572
a
2.572
I
81 number
I percentage
I
number
percentage
RQrt
30-39 40-I
-------
14. Number of weeks at each shift level (total should add to 52 weeks):
at 3 shifts
I__
I
I
0-9 ]
I__
2311
7^.2771
I___
231
74.277
LO-19 ;
41
1.2861
4
1.2a6
>0-29
51
1.6C6I
5
1.608
number
percentage
number
percentage
ROM
30-39 40-49 50-52 SUMS
--------- 1 ---------- T ---------- i
51 71 591 311 number
1.6081 2.2511 IP. 9711 100.000 percentage
5 7 59 311 number
1.608 2.251 18.971 loo.ooo percentage
107
-------
14. Number of weeks at each shift level (total should add to 52 weeks)
(cent) at 4 Sh1fts
I_-
I
I
I_.
0-9
I_
3071
98.7UI
_________ T _
307
98.714
10-19 20-29
21
0.6
-------
15. 1976 Production (Thousands of cubic feet).
I
I
0
T
1
250, OOC
1201
35.61 1
12C
35.61
500,000
56
16.617
56
16.617
250,000-
I
l number
1 percentage
I
number
percentage
500.
750
000-
,000
R
e
30
.902
30
.902
--
I
1
-
750,000-
1,000.000
*>
5.
17
044
17
044
I
I
>
1,000,000
5>
17.751
17.751
T
i
i
r
NO
ANSWER
16
16
55
.320
35
.320
I
I number
I percentage
I
number
percentage
ROW
SUMS
33?
100.000
number
percentage
337 number
100.000 percentage
109
-------
16. Typical number of production workers in 1976:
1-3
4-6
7-9
10 - 19
20 - 34
35 - 48
49 - 75
76 - 99
100 - 125
Over 125
Total
Number
73
39
26
56
55
27
35
8
6
2
327
17. This facility is primarily engaged in
only (TSO) , and/or (b) treating owned
to others:
a. Treating Service Only
Under 10
10 - 25
26 - 50
51 - 75
Over 75
Total
b. Treating Owned Wood
Products
Under 10
10 - 25
26 - 50
51 - 75
Over 75
Total
Number
134
49
30
14
28
256
Number
21
20
17
39
212
309
Percent
22.32
11.93
7.95
17 . 12
16.92
8.26
10.70
2.45
1.83
.61
100.00
(a) treating service
wood products for sale
Percent
52 . 55
19.22
11.76
5.49
10.98
100.00
Percent
6.80
6.47
5.50
12 . 12
68.61
100.00
110
-------
18. What proportion of owned wood is from company-owned timberland?
E. FINANCIAL STATEMENT
19. Revenue and Exp«n»*s
a. Wood Cost
Under 10
10 - 15
16 - 21
22 - 28
29 - 38
39 - 48
49 - 60
Over 60
Total
b- Oth«r Materials Coat
Under 10
10 - 15
16 - 21
22 - 28
29 - 38
39 - 48
49 - 60
Over 60
Total
Number
256
59
3
2
9
329
Number
17
10
10
15
49
59
69
70
299
Number
65
74
72
44
27
13
1
5
301
Percent
77.81
17.93
.91
.61
2,74
100.00
Percent
5.67
3.34
3.34
5.02
16.39
19.73
23.08
23.41
100.00
Percent
21.60
24.50
23.92
14.62
8.97
4.32
.33
1.66
100.00
111
-------
c. Payroll Cost
Under 10
10 - 15
16 - 21
22 - 28
29 - 38
39 - 48
49 - 60
Over 60
Total
d. Depreciation
Under 1
1-2
3-5
6-8
Over 8
Total
Gross Margin
Under 10
10 - 15
16 - 25
26 - 30
Over 30
Total
Number
103
102
45
36
13
4
1
2
306
Number
59
117
85
26
20
307
Number
102
53
87
27
37
306
Percent
33.66
33.23
14.71
11 ,,76
4.24
1.30
.,33
,,65
100 ,.00
Percent
19.22
38.11
27 . 69
8.47
6.51
100.00
Percent
33.33
17.32
28.43
8.82
12.09
100.00
112
-------
f. General and Administrative
Cost
Under 1
1-5
6-10
11 - 15
Over 15
Total
Number
Percent
g. Interest Expense
Under 1
1-4
5-8
9-12
Over 12
Total
h. Profit Before Taxes
Under I
1-4
5-8
9-12
Over 12
Total
18
88
93
48
48
295
Number
171
84
24
5
4
288
Number
68
83
61
46
31
289
6.10
29.83
31.52
16.27
16.27
100.00
Percent
59.37
29.01
8.33
1.73
1.38
100.00
Percent
23.53
28.72
21.11
15.92
10.73
100.00
113
-------
i. Profit After Tax Number Percent
Under 1
1-2
3-4
5-7
Over 7
Total
76
63
56
45
33
273
27.84
23 .,08
20, .51
16.42
12.04
100 . 00
20. How representative was this plant's 1976 profit before
tax experience versus the average for 1971-1975?
Number Percent
About the Same 70 40.69
Better than Average 36 20.93
Worse than Average 66 _3JL_2Z
Total 172 100,00
114
-------
21. Factors related to Revenues and Expenses
a. Fixed Costs: If the plant faces lease, rental or mortgage commit-
ments beyond 1976, (for buildings or equipment), Indicate the
average annual charges and the year the commitments expire.
Leases/Rental
(1) Average Annual Charge: $
< 25,OUO- 50,000- 75,OJO-
0 25,000 50,000 75,000 100,000
I I L J l y.
I 2471 681 101 41 II number
I 73.0771 20.11*1 2.9591 1.1331 o.29ol percentage
I i t r j T_
247 68 10 4 i number
73.077 20.118 2.959 1.183 0.290 percentage
100,000- 1?5,000- 150,000- 175,000- 200,000- 225,000-
125,000 150,000 175,000 200,000 225,000 250,000
1 1 1 T _ 1 T
31 21 31 I I I number
o.SoPi 0.5921 0.8881 I I i percentage
I T ! 1 r j
3^3 number
C.888 0.592 0.888 percentage
> ROW
250,000 SUMS
I 1
I I 338 number
I I 100.000 percentage
I 1
338 number
100.000 percentage
115
-------
21. Factors related to Revenues and Expenses
(cont) a> p^xe(j cost;S: if the plant faces lease, rental or mortgage commit-
ments beyond 1976, (for buildings or equipment), Indicate the
average annual charges and the year the commitments expire.
Wood Contracts
(1) Average Annual Charge; $
3251
9&.154I
325
96.154
< 25,000- 50,000- 75,,000-
25,000 50,000 75,000 100,000
j j j
51 U I
ll^!1. °-^q6l I O.CJ88I percentage
i - i i j
5
1.479
i
0.296
J
31
number
3
0.888
number
percentage
100,000-
125,000
-
I
I
1?5»000-
150,000
11
0.2961
1
0.296
150,000-
175,000
31
H.88PI
3
0.888
175,000- 200,000-
200,000 225,000
I
I
. T
2?5,000-
250,000
I
I
.T
I
I
-T
number
percentage
number
percentage
250,000
I 1
I I
I I
I 1
ROW
SUMS
338
100.000
338
100.000
number
percentage
number
percentage
116
-------
21. Factors related to Revenues and Expenses
(cont) a pjxed costs: if the plant faces lease, rental or mortage commit-
ments beyond 1976, (for buildings or equipment), indicate the
average annual charges and the year the commitments expire.
Debt Payment
(1) Average Annual Charge: $
25*000
25,000-
50,000
50,000-
75,000
75,000-
100,000
1
I
I
1
2571
76.0361
257
76.036
311
9.1721
31
9.172
i
241
7.1011
24
7. mi
1
111
3.2541
11
3.254
2
J.^2
^
i.
0.592
I
21 number
21 percentage
I
number
percentage
100
125
,000-
,000
5
1.479
5
1.479
I
I
125,000-
150,000
1
0.29o
1
0.2<»6
I
I
150,000-
175,000
3
0.888
3
0.888
I
I
175,000-
200,000
I
I
200,000-
225,000
1
0.296
1
0.296
225,000-
250,000
I
I
I
I
number
percentage
number
percentage
250,000
. _ ^ _« .** * T
31
O.d381
1
3
0.388
ROW
SUMS
338 number
100.000 percentage
338 number
100.000 percentage
117
-------
21. Factors related to Revenues and Expenses
(cont)
a. Fixed Costs: If the plant faces lease, rental or mortgage commit-
ments beyond 1976, (for buildings or equipment), Indicate the
average annual charges and the year the commitments expire.
Other
(1) Average Annual Charge: $
I
I
0
3331
98.5211
333
9d.52l
< 25,000-
25fOOO 50tOOO
21
o . r. y 2 1
2
0.5)2
I
I
50,000- 75,OUO-
75,000 lOOtOOO
II
0.2961
I
0.296
T
1
I number
I percentage
T
L
number
percentage
100,000-
125,000
125,000-
15U,GOO
150,000-
175,000
175,000-
200,000
200,000-
225,000
225,000-
250*000
number
percentage
250,000
1 1
I 21
I 0.5921
I 1
0.592
ROW
SUMS
338 number
loo.ooo percentage
338 number
100.000 percentage
118
-------
,21* .Factors related to Revenues and Expenses
(cont)
a. Fixed Costs: If the plant faces lease* rental or mortgage commit-
ments beyond 1976, (for buildings or equipment), Indicate the
average annual charges and the year the commitments expire.
Leases/Rental
(2) Commitment Expires: 19
BEFORE AFTER NO
1985 1935-1995 1995 ANSWER SUMS
I ---------- 1 ---------- 1 ---------- 1 ---------- 1
I 551 IM 41 26"* I 338 number
I 16.2721 4.1421 1.1831 78.4021 lou.ooo percentage
55 14 4 265 338 number
16.272 4.142 1.183 78.402 100.000 percentage
119
-------
21. Factors related to Revenues and Expenses
(cont) a> Fixed Costs: If the plant faces lease, rental or mortgage commit-
ments beyond 1976, (for buildings or equipment), Indicate the
average annual charges and the year the commitments expire.
Wood Contracts
(2) Commitment Expires: 19
BEFORc AFTER NO
1985 1985-1995 1995 ANSWtR SU^S
I 1 ! 1 1
I III I I 3271 338 number
I 3.2541 I I 96.7461 iOJ.ooo percentage
i 1 z 1 : 1
11 327 338 number
3.254 96.746 lOO.ooo percentage
120
-------
21. Factors related to Revenues and Expenses
(cont) a> Ffxee| costs: If the plant faces lease, rental or mortgage commit-
ments beyond 1976, (for buildings or equipment), Indicate the
average annual charges and the year the commitments expire.
Debt Payment
(2) Commitment Expires: 19
PfcFURc AFTER NO
1985 1985-1995 1^5 ANSWER SUMS
j 1 1 1 1
I 541 201 31 2611 338 number
I 15.9761 5.9171 0.8881 77.2191 iou.ooo percentage
I 1 1 1 1
54 20 J 261 3^8 number
15.976 5.917 o.88e 77.219 100.000 percentage
121
-------
21. Factors related to Revenues and Expenses
(cont)
a. Fixed Costs: If the plant faces lease, rental or mortgage commit-
ments beyond 1976, (for buildings or equipment), Indicate the
average annual charges and the year the commitments expire.
Other
(2) Commitment Expires: 19
BEFORE AFTER MO ROw
1985 1985-1V95 19?5 ANSWER SU*S
1 1 1 1
6i ii I 3311 33b number
L.775I 0.2961 I 97.9291 loo.oco percentage
1 1 1 1
& i 331 33 s number
L.775 0.296 97.929 100.000 percentage
122
-------
b.
What Depreciation Method is Used:
Equipment
(1) Book Basis
Straight-Line
Double-Declining
Balance
Sum of Year's Digits
Other
Total
Number
109
35
2
2
148
Percent
73.65
23.65
1.34
1.35
100.00
Equipment
(2) Tax Basis
Straight-Line
Double-Declining
Balance
Sum of Year's Digits
Other
Total
Number
81
68
4
2
155
Percent
52.26
43.87
2.58
1.29
Buildings
Number Percent
121
13
2
2_
137
87.60
9.48
1.46
1.46
100.00
Buildings
Number Percent
99 72.26
31 22.63
4
3
138
2.92
2.19
100.00
(3) Pollution Control Equipment Amortization
Number Percent
Accelerated Over
5 Years
Same method as
Other Equipment
Total
13
96
109
11.92
88.08
100.00
22. Unusual Production CostsAre there any circumstances peculiar
to this plant which result in unusual production costs?
Yes
No
Total
Number Percent
9.77
90123
100.00
123
-------
23. Historical/Annual Cost of Pollution Control and Other Environmental
Regulations
(1) Water Pollution Regulations
a. Annual Operating Costs Number Percent
Don't Know 145 63.60
None 83_ 36.40
Total 228 100.00
b. Annual Depreciation Number Percent
Charges
Don't Know 125 57.07
None 94 42.93
Total 219 100.00
(2) Solid Waste Disposal (including waste water sludge and wood
waste, contract hauling)
a. Annual Operating Costs Number Percent
Don't Know 134 56.07
None 105 43.93
Total 239 100.00
b. Annual Depreciation Number Percent
Charges
Don't Know 126 51.63
None 118 48.37
Total 242 100.00
(3) Other Environmental Regulations Affecting Production Processes
and Production Costs
Number Percent
Air 49 40.83
OSHA 33 27.50
Both 38 31.67
Total 120 100.00
124
-------
a. Annual Operating Costs Number Percent
Don't Know 129 64.82
None 70 35.18
Total 199 100.00
b. Annual Depreciation Number Percent
Charges
Don't Know 122 58.94
None 85 41.06
Total 207 100.00
(4) Other Administrative Costs: Environmental department, research
litigation, consultants, additional administrative costs.
Number Percent
Don't Know 126 59.43
None 86 40.57
Total 212 100.00
125
-------
24. Value of wood treating plant Assets and Liabilities (as of the end of the
most recent fiscal year).
a. Net FIXED ASSETS (Gross FIXED ASSETS
less cumulative depreciation). $
0 1 ?
r _ _______ T ____ T__ T
I 861 421 321
I 25.4441 12.4261 9.4671
I____ __ _ T __________ T __________ T___
86 t2 32
25.444 12.426 9.467
5678
III 41 71
3.2541 1.1831 2.0711 1.
_ i _ ____A __ _
1147
3.254 1.183 2.071 1.
> NO
2tOOOtOOO ANSWER
I_____ ____T__ __ ___T
I 71 901
I 2.0711 26.6271
7 90
2.071 26.627
3
_______ i
151
4.4381
15
4.438
41
1P3I
4
183
kOH
SUMS
337
100.000
337
100.000
4
______ ___T
171
5.03JT
17
5.030
1 tOOO.OOO-
9 2fOOO,000
_--T - T
31 191
1.1BM 5.6211
T T
3 19
1.183 5.621
126
-------
(cont)
Value of wood treating plant Assets and Liabilities (as of the end of the
most recent fiscal year).
b. Total Assets: (Net FIXED ASSETS, Cash
receivables, Inventory, other assets)
o
L
I
I
i
321
9.4671
32
9.467
1
261
7.6921
26
7.692
191
5.0211
19
5.621
--------i-
ill
3.2541
11
3.254
221
6.5091
22
6.509
567
71 til
2.0711 2.3671 2
7 6
2.071 2.367 2
2»000»000
I 401
I 12.1301
4Q
12.130
8
71
.0711 2.
7
.071 2.
HO
ANSWER
1191
35.2071
119
35.207
9
81
3671 0.
8
367 0.
ROrt
SUMS
33X
100.000
337
100.000
1 t 000 t 000-
2»OOOtOOO
31 351
88RI 10.3551
3 35
883 10.355
127
-------
24. Value of wood treating plant Assets and Liabilities (as of the end of the
con most recent fiscal year).
c. What was the value of this wood treating
plant's accounts receivable? $
< 25,000- 50,000- 75,000-
I
I
25,000 50,000 75,000 100,000
471
13.9051
47
13.905
181
5.3251
18
5.325
231
6.8051
23
6.805
181
5.3251
18
5.325
100,000-
125,000
1-
4.1421
1
14
4.142
125,000-
150,000
1-
131
3.8461
1-
13
3.846
150,000
1-
981
?9.2<>OI
1-
98
29.290
NO
ANSWER
1
1061
31 .3611
1
106
31.361
ROwl
SUMS
337
100.000
337
100.000
128
-------
24. Value of wood treating plant Assets and Liabilities (as of the end of the
(cont) _. , .
most recent fiscal year).
d. What was the value of this wood treating
plant's accounts payable? $
T_
I
I
T _
<
25,000
681
ZO.libI
68
20. Ufa
25,000-
50,000
281
8.2641
28
8.2e NO
125,000 150,000 150,000 ANSWcR SUMS
I i 1 i
131 41 701 1271 337
3.64M 1.1331 ?0.414I 37.574I 100.000
y i T i
13 4 70 127 337
3.846 1.183 20.414 37.574 100.000
129
-------
. 24. value of wood treating plant Assets and Liabilities (as of the end of the
(cont)
most recent fiscal year).
e. Current Plant Debt (I.e., debt maturing
1n current year or payable on demand) $.
I
I
<
25,000
501
14.7931
50
14.793
25,COJ-
50,000
241
7.1011
24
7.101
50,000-
75,000
121
3.5501
12
3.5*0
75,000-
100,000
81
2.3671
8
2.367
100,000-
125,000
1
91
2.663T
1
9
2.663
125,000-
150,000
1-
1 I
0.?96I
1-
1
0.296
150,000
--------- 1-
471
U.905I
NO
ANSWER
47
13.905
1861
55.3251
1
186
55.325
SUMS
337
100.000
337
100.000
130
-------
24. Value of wood treating plant Assets and Liabilities (as of the end of the
(cont) iT)ost recent fiscal year).
f. Long-Term Plant Debt (debt maturing
beyond the current year [1977]) $
I
I
0
651
19.2311
65
19.231
1
251
7.3961
25
7.396
2
51
L.479I
5
1.479
3
I.
71
2.0711
7
2.071
4
T
91
2.66^1
9
2.663
5
1
1
5
.479
5
.479
6
T _ _
I
I
I
T
7
1
0.296
1
0.296
8
__-
I
I
9
. _T _______
I
I
1
2
I
I
,000,
,000,
0
0
000-
000
21
.5921
2
.592
2
I
I
>
,000,
0
0
000
1
.296
1
.296
NO
ANSWER
I
I
64.
64.
217
497
217
497
I
I
I
I
SUMS
337
100.JOO
337
100.000
131
-------
25. Capital Investment Criteria for the Plant
a. What investment criteria do you use?
Number Percent
Return on Investment (ROI) 75 63.02
Payback 21 17.64
Other 23 19.34
No Answer 218
Total 337 100.00
132
-------
24. Value of wood treating plant Assets and Liabilities (as of the end of the
(cont)most recent fiscal year).
g. Total Plant Liabilities (long-term
debt, accounts payable, deferred
taxes, other debt, etc.) $
I
I
0
18.
18.
631
6391
63
639
i
1
29
8.580
29
8.580
I
I
2
5.32
1
5.32
5
8
5
I
T_
3
___ T
141
4.1421
4.14?
4
91
2.of>3T
_T
9
2.663
5
PI
2.3671
fi
2.367
6
I__
51
1.4791
5
1.479
7
I__
41
1 .1831
4
1.183
8
________ T
31
0.8881
3
0.888
1
9 2
I_
21
0.^921
2
0.592
,000,000-
,000,000
131
3.8461
13
3.846
2
I
I
>
,000,000
t_
41
1.1831
I_
4
1.183
NO
ANSWER
1651
49. 1121
165
49.112
ROW
SUMS
337
100.000
337
100.000
133
-------
26. Capital Investment Criteria for the Plant
(cont)
b. If you use return on Investment criteria:
(1) What 1s the target Internal pre-tax rate of return on
capital required for Investment 1n this plant?
0-4%
- ----1
I I
I I
_______ I -.
5-9*
21
0.5921
-
2
0.59?
10-14%
71
2.0711
7
2.071
15-19%
_* _» . __. T _»
III
3.2541
11
3.254
20-245&
81
2.3671
8
2.367
50%
OR
25-29% 30-34* 35-39% 40-44* 45-49% GREATER
131
3.8461
1.
12
3.8t6
81
2.3671
8
2.367
I
I
31
0.8861
3
0.888
I
I
11
0.2961
1
0.296
I
I
NOT
APPLIC
2651
78.4021
265
78.402
NO
AMSWER
201
5.9171
20
5.917
RCM
SUMS
333
100.000
338
100.000
134
-------
26. Capital Investment Criteria for the Plant
(cont) bi jf you use return on investment criteria:
(2) At what ROI would you consider plant shutdown?
I
I
I
I
0-4%
51
I. 4791
5
1.479
5-9% 1
81
2.3671
8
2.367
.0-14% 1
T __
61
i.7751
6
1.775
.5-19% I
61
1.7751
_ r
6
1.775
'0-24%
1
71
2.367!
1
7
2.367
5CU
OR
25-29% 30-34% 35-39% 40-44% 45-49* GREATER
i
I
1
I
I
11
0.2961
1
0.296
I
I
I
I
11
0.2^61
T
1
0.296
I
I
NOT
APPLIC
2651
78.4021
265
78.402
NO
ANSWER
301
11.2431
38
11.243
ROW
SUMS
33?
100.000
337
100.000
135
-------
26. Capital Investment Criteria for the Plant
(cont) c If yOU use payback peri0(j criteria, what Is the required payback
period for Investment? years
I
I
2 YRS
11
0.2961
1
0.296
2
21
0.5921
2
0.592
3
21
2
0.592
21
C.592I
2
0.592
5
61
2.0711
,6
2.071
6
1
I
I
T
1-----
I
I
T_-___
I
1
__ _ r -_-.
- 1 -
I
I
1
-------- i-
31
0.8881
T
3
0.888
10 10 YRS
I
I
I
I
3 3
0.888 0.888
NOT
APPLIC
--------- 1-
3171
93.7871
317
93.787
NO
ANSWER
1
II
0.2961
1
I
0.296
SUMS
337
100.000
337
100.000
136
-------
26. Capital Investment Criteria for the Plant
(cont) d. ^at is the current long term interest rate you must pay for
new capital? percent per year
I
I
< 1%
31
0.3881
3
0.888
7
11
0.2961
1
0.296
3
I__
111
3.5501
11
3.550
9
201
5.9171
20
5.917
10
251
7.3961
25
7.396
11
1-
31
0.8681
1-
3
0.888
12
j.
51
1.4791
1-
5
1.479
NO ROW
ANSWER SUMS
1 1
171 2521 337
5.0301 74.5561 100.000
! 1
17 252 337
5.030 74.556 100.000
137
-------
26. Capital Investment for the Plant (not Including capitalized operating
(cont)
or maintenance expenses).
(1)
Total Capital Investment
(Actual) 1971-76 $
I
I
ZE80
ENTRY
I
I
1-250,000
1131
33.4321
113
33.432
250,000-
500,000
561
16.5681
56
16.568
500,000- 750,000- NO
750,000 1,000,000 - ANSWER
1 1 i 1
241 341 I 1101
7.1011 10.3551 i 32.5441
1 1 i i
24 34 110
7.101 10.355 32.544
ROW
SUMS
I
I 337
I 1JO.OOO
I
337
100.000
138
-------
26. Capital Investment for the Plant (not Including capitalized operating or
maintenance expenses).
(Planned) 1977
(1)
Total Capital Investment
$
I
I
1 _
^ERO
ENTRY
31
0.3881
3
0.888
3
__ _ _ _ T .
131
3.8461
_____ __ T _ .
13
3.846
0
931
27.^151
93
27.515
I
I
1
""-
321 -
9.4671
32
9.467
M3
ANSvVFR
________ T
1881
55.6211
__ _____ T
183
55.621
2
91
2.6631
9
2.663
ROW
SUMS
337
100.000
337
100.000
139
-------
26. Capital Investment for the Plant (not Including capitalized operating or
maintenance expenses).
(2)
Water Pollution Control
(Actual) 1971-76 $
ENTRY
1
I
I
I
0
1011
29.8821
101
29.882
1
161
16
t.734
2
11
0.2961
1
0.296
NJ ROW
ANSWER SUMS
51 I 2151 337
1.4791 I 63.6091 100.000
j ---------- j ---------- 1
b 215 337
63.609 100.000
140
-------
26. Capital Investment for the Plant (not Including capitalized operating or
(cont)
maintenance expenses).
(2)
Water Pollution Control
(Planned) 1977 $
I
I
ZERO
ENTRY
0.
0.
3
I
8881
3
888
Q
19.
19.
67
812
67
822
I
I
1
3
0.6Pd
3
0.888
2
I
I
I
I
NO ROW
ANSWER SUMS
! j I
II I 26
-------
26. Capital Investment for the Plant (not Including capitalized operating or
(cont) ma1ntenance expenses).
(3)
Other Environmental Regulation (State
or Federal) Impacting Production Processes
(Actual) 1971-76 $
I
I
ZERO
ENTRY
11
0.296!
I
0.296
3
11
0.29ol
I
0.296
0 I
431 31
12.7221 0.8881
-------
26. Capital Investment for the Plant (not Including capitalized operating or
(cont)
maintenance expenses).
(Planned) 1977
(3)
Other Environmental Regulation (State
or Federal) Impacting Production Processes
$
I
I
ZERO
ENTRY
51
1.479!
T
1
5
1.479
3
I__.
11
0.2961
I__.
1
0.296
0
261
7.6921
26
7.692
I_
I
I
________ i_
1
21
0.^92 I
2
0.592
NO
AiNiSWFR
3041
R9.941I
__ _____ T
304
89.941
2
I
I
ROW
SUMS
338
100.000
338
100.000
143
* U S GOVERNMENT PRINTING OFFICE 1979 311-132/152
------- |