V\J -
GROWTH POTENTIAL IN THE HAZARDOUS WASTE
MANAGEMENT SERVICE INDUSTRY
Presented at the
National Solid Waste Management Association
International Waste Equipment and Technology Exposition
Chicago, June 2, 1976
U.S. ENVIRONMENTAL PROTECTION AGENCY
1976
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GROWTH POTENTIAL IN THE HAZARDOUS WASTE
MANAGEMENT SERVICE INDUSTRY
by John P. Lehman*
EPA's Office of Solid Waste Management Programs is
concerned with the proper management of all residuals of
our society destined for land disposal. Recycling;
treatment by physical, chemical, biological or thermal
means; and landfill disposal are the primary waste manage-
ment options being considered. In this discussion we are
primarily concerned with industrial manufacturing and
pollution control residues, and, in particular, the
fraction of those residues which are potentially hazardous
to public health and the environment.
One of the major conclusions of EPA's 1973 Report
to Congress on Disposal of Hazardous Wastes was "a private
hazardous waste management service industry exists and is
capable of expanding under the stimulus of a regulatory
program."
Almost three years have passed since that report was
issued. We have much more information about hazardous
wastes and their service industry than we did then.
*Mr. Lehman is Director, Hazardous Waste Management
Division, Office of Solid Waste Management Programs, U.S.
Environmental Protection Agency.
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A Federal regulatory program for hazardous waste management
has not yet been enacted, but is under consideration in the
Congress now. Meanwhile, several States have enacted
hazardous waste management regulatory legislation and have
begun to implement regulatory programs.
It seemed to us that a fresh look at the status and
growth potential of the hazardous waste management service
industry under current conditions, and under a postulated
Federal/State regulatory program, was in order to check
our basic assumption made in 1973. Accordingly, Foster D.
Snell, Inc., conducted for EPA a survey and analysis of the
potential for capacity creation in the hazardous waste
management service industry. Although the final report is
not yet completed, I can comment on some of the findings
now.
First, I will present a short review of our current
data on industrial and hazardous waste generation, which is
needed for service capacity projections. Next, I will
discuss the service industry profile as it exists today.
Lastly, I will outline the growth potential of the service
industry with and without a hazardous waste regulatory
climate.
Most of the data about the hazardous waste manage-
ment service industry was obtained from interviews with
many different companies in that industry. I want to thank
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the many people who cooperated with our study. The vol-
untary contributions by these people, which was always
informative and often frank and open, makes us believe the
results are accurate and truly representative of the
current situation.
Industrial Waste Profile
At last year's NSWMA Exposition in Los Angeles, I
presented some preliminary results from 6 of a series of 13
Federal surveys of industrial waste in the United States.
Data from all 13 studies are now available, plus some up-
dated estimates for those industries not studied in detail.
Our latest estimates indicate that 344 million metric
tons of industrial waste on a wet weight basis (i.e., as
is, including water content) are produced each year by
U.S. industry. For perspective, municipal waste amounts
to 122 million metric tons per year and sewage sludge is
produced at a rate of 33 million metric tons per year
(Figure 1). Few people appreciate the fact that industry
produces almost three times as much waste each year as is
generated by residential and commercial sources. Further,
industry generates about ten times more waste than do the
sewage treatment plants.
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FIGURE 1
ESTIMATED INDUSTRIAL WASTE VERSUS OTHER RESIDUALS
WET WEIGHT IN MM METRIC TONS PER YEAR
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The total industrial manufacturing and pollution
control waste produced by the 13 industries studied in
detail amounts to 200 million metric tons per year, on a
wet basis, or 58 percent of all industrial waste. Of this
amount, 40 million metric tons per year, or 20 percent, is
considered potentially hazardous (Figure 2). Our 1973
estimate of ten million metric tons per year of hazardous
waste from all industrial sources was clearly on the low
side. The hazardous waste load from these industries is
projected to increase to 52 million metric tons per year
in the next decade, or a rate of increase of roughly three
percent per year.
Of particular interest to the hazardous waste manage-
ment service industry is the new information that on a
weighted average, only 18 percent of potentially hazardous
waste is managed off-site, that is, by contract to outside
service facilities. However, this weighted average is
skewed by the primary metals industry which only manages
two percent of its wastes off-site. Excluding this indus-
try, the weighted average is 35 percent of potentially
hazardous waste managed off-site. The electroplating
industry sends the largest absolute amount (3.5 million
metric tons per year) of potentially hazardous waste to
outside service contractors. The organic chemical industry
is also a major customer of the hazardous waste management
service industry.
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FIGURE 2
HAZARDOUS WASTE PROFILE
(MM METRIC TON, WET)
INDUSTRY
1974
WASTELOAD
1977
1983
PERCENT
MANAGED
OFF-SITE
PRIMARY METALS
ORGANIC CHEMICALS
ELECTROPLATING
INDUSTRIAL INORGANIC
CHEMICALS
TEXTILE MILL PRODUCTS
PETROLEUM REFINING
7 OTHERS
20
7
5
4
2
1
1
21
12
4
4
2
1
2
25
13
5
5
1
1
2
2
20
70
15
5
60
75
TOTAL
40
46
52
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Industry Profile
Structure. In 1975, the hazardous waste industry
was comprised of 95 firms with 110 sites in the United
States (Figure 3). Over 90 percent of the companies had
only one site engaged in hazardous waste management. The
three largest firms of the industry have three to six sites
per company handling hazardous wastes.
Of the 95 companies in the industry, 57 percent are
tightly held private corporations or partnerships. All of
these companies have only one site and typically have sales
revenues less than $500,000 annually. Forty-three percent
of the total site locations are controlled through common
stock corporations or by divisions or subsidiaries of
parent corporations. This segment of the industry is
responsible for approximately 65 to 70 percent of the total
industry revenues. The five largest firms account for 33
percent of total revenues. For the majority of these
corporations, hazardous waste management is not their primary
business.
Only about eight percent of the sites are municipally
owned; they are concentrated in California.
Geographic Distribution. The geographic distribution
of sites was concentrated in EPA Regions II, V, and IX.
These regions contain approximately 60 percent of the sites.
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FIGURE 3
1975
INDUSTRY STRUCTURE
'95 FIRMS; 110 FACILITIES
'57% FIRMS PRIVATE; 43% PUBLIC (STOCK)
°5 LARGEST FIRMS DO 33% OF BUSINESS
' EMPLOYMENT; 2,000
"CAPACITY 7.3 MM TONS; 5.3 MM TONS ADEQUATE
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Regions I, VII and X were sparsely populated with sites
comprising collectively only 11 percent of the total
facilities.
Employment. In 1975, there were an estimated 2,000
employees actively engaged in the hazardous waste indus-
try. Approximately 11 percent of the employees are classi-
fied as professionals. Of the professional employees,
75 percent are chemists or chemical engineers. Larger firms
with sales over two million dollars per year have the
highest percentage of professionals with a chemical back-
ground; some of the leading firms in the industry have 100
percent of professionals with chemical backgrounds
(including sales personnel). Of the other 25 percent of
professionals in the industry, the majority is composed of
employees with business backgrounds who are engaged in
sales, accounting and management.
Union involvement in the hazardous waste treatment
industry is small with only one in five firms having
labor organizations. The union activity is concentrated
in firms with larger revenues and corporations with hazard-
ous waste divisions. No one union dominates the activity
in the industry. The Teamsters, Chemical Workers and
Steelworkers unions have involvement in the industry.
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Capacity. In 1974, the hazardous waste management
service industry had sufficient capacity to recycle, treat,
or dispose of approximately 7.3 million tons of waste per
year. However, some of the capacity is keyed to disposal
processes of questionable environmental adequacy. For
example, some of the waste disposal capacity involves poorly
designed, located, or operated landfills which are not
suitable for hazardous wastes. Also, it is EPA policy to
oppose emplacement of materials by deep-well injection
without strict controls and a clear demonstration that such
emplacement will not interfere with present or potential use
of the subsurface environment, contaminate ground water
resources, or otherwise damage the environment. Some deep-
well injection capacity does not appear to meet these
criteria. Consequently, it is estimated that there was
environmentally adequate capacity for 5.3 million tons of
hazardous waste in 1974.
Utilization of existing capacity ranged from 30 to 80
percent depending on the type of process and region of the
country. The average utilization rate was 53 percent. The
highest utilization rates were in EPA Region IX, averaging
80 percent for all processes.
Markets. EPA has identified 13 industry groupings
which are major generators of hazardous wastes. The hazard-
ous waste management industry views the 13 EPA groupings in
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terms of the wastes produced and the general types of
treatment required to process the wastes. The hazardous
waste management industry generally uses the following five
categories to describe markets:
Metals/Metal Finishing
Paints/Solvents/Coatings
Organics
Petroleum
Inorganics
Figure 4 presents the match between the five categories and
the 13 industry groupings. The types of wastes and the
general types of processes used for treatment and disposal
are also included.
F i n a n c i a 1 St. a t u s . The industry's sales and profits
have remained healthy over the five-year period 1971 to 1975
(Figure 5). Sales jumped from $46 million in 1971 to $107
million in 1975, an increase of 133 percent. However, the
major growth in both number of companies and revenue occurred
between 1971 and 1973. Increase in revenue since 1973 has
been due primarily to price increases of services, not
increases in waste volume. At present, the median sales
revenue of the companies surveyed was approximately $1
million annually.
Similarly, net income has increased 83 percent since
1971. Pre-tax income has averaged 10 percent of sales
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FIGURE 4
1975 MARKET STRUCTURE OF Infi
HAZARDOUS WASTE MANAGEMENT SERVICE INDUSTRY
MARKET CATEGORY
EPA
INDUSTRY GROUP
Metals/Metal
Finishing
Batteries
Electroplating
Primary metals
smelting and
refining
Special
machinery
Paints/Solvents/ Paint and
Coatings allied products
Organics
Petroleum
Inorganics
Organic
chemicals
Pharmaceuticals
Rubber and
plastics
Textiles Dyeing
and finishing
Petroleum
refining
Inorganic
chemicals
Leather
tanning
TYPES OF
HAZARDOUS
WASTES
Acid
solutions
Metals
containing
sludges
Organics
Solvents
Pesticides
Biologicals
Rubber
Plastics
Oily wastes
Aqueous
solutions of
salts, metals,
etc.
CURRENT
TREATMENT OR
DISPOSAL METHODS
Neutralization
Chemical Treatment
Sanitary Landfill
Secure Landfill
Deep Well Injection
Ocean Disposal
Incineration
Chemical Treatment
Sanitary Landfill
Secure Landfill
Incineration
Biological Treatment
Chemical Treatment
Sanitary Landfill
Secure Landfill
Incineration
Deep Well Injection
Chemical Treatment
Ocean Dumping
Secure Landfill
Source; Foster D. Snell, Inc., analysis based on industry interviews.
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FIGURE 5
FIVE YEAR FINANCIAL HISTORY OF
HAZARDOUS WASTE MANAGEMENT INDUSTRY
(Millions of Dollars)
ITEM
Active Number of Companies
in Industry
Industry Total Revenues
Total Net Income
Total Industry Working
Capital
Industry Current Ratio
Total Tangible Assets
Total Tangible Equity
Total Fixed Assets
Total Land
Total Debt
Total Long-Term Debt
Total Short-Term Debt
1971
76
$46
4.1
5.2
1.48
41
19
26
4.7
23
14
3.2
1972
82
$65
3.7
9.0
1.72
69
30
43
7.9
39
20
5.2
1973
87
$88
5.6
13.0
1.55
77
32
48
8.7
51
25
5.8
1974
91
$103
6.6
5.0
1.57
91
34
50
8.4
59
32
5.8
1975
95
$107
7.
3.
1.
90
33
49
8.
54
26
7.
5
8
41
5
2
Source; Foster D. Snell, Inc., Estimates Based on Industry Interviews
and Corporate Financial Statements
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over this period. Net income as a percentage of revenues
has varied between 5.5 percent and 9.0 percent. However,
profits as a percent of total tangible equity (net worth)
has been between 18 and 22 percent over the period. This
demonstrates that the industry has been making adequate
profits on its invested capital.
All is not rosy in the financial picture, however. The
working capital (current assets minus current liabilities)
position has declined since 1973. This is also reflected in
the current ratio (current assets divided by current lia-
bilities) . The industry has kept a very low cash position
while its current liabilities have been growing. This poor
cash flow situation is detrimental when attempting to obtain
low interest rates for long-term debt.
From 1972 to 1975 the total tangible equity remained
relatively stable while the industry total tangible assets
have grown by 30 percent. This shows that the owners have
not been investing their capital for expansion. Industry
expansion has been financed through debt.
Long-term debt was available to the industry until
1973. Since 1973, long-term debt has remained stable.
Short-term debt financing has increased from $3.2 million in
1971 to $7.2 million in 1975. This high cost debt financing
additionally points out the current problems of the industry
to obtain a lower cost of capital.
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Firms that are active in the hazardous waste treatment
industry can be classified into two basic categories: firms
whose main objective is hazardous waste treatment, and
divisions or sites of larger companies that are engaged in
the industry. The firms with their main objective in
treatment or disposal of hazardous waste had the following
characteristics over the past five years:
Net income has ranged between five percent and ten
percent of revenues with 1971 as the most profit-
able year.
In 1975, 15 percent of the companies surveyed were
unprofitable.
Amount of working capital available in the indus-
try has decreased with time and the current ratio
has dropped from 1.77 to 1.28.
In 1975, approximately 40 percent of the companies
surveyed had working capital deficits.
Large corporations who have divisions or sites engaged
in hazardous waste management have maintained a relatively
more stable financial picture from 1971 to 1975.
Success Factors. A firm's ability to obtain capital at
a reaonable cost was a large factor in the determination of
the firm's success. Many of the firms were subsidiaries or
divisions of larger parent organizations which had accessi-
bility to long-term capital. The industry in general
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is young, and does not have an established reputation
with private sources of debt financing. Hence, a number
of the smaller firms have had to utilize short-term financing,
retained earnings, or maintain low cash positions in an
effort to obtain necessary capital for expansion. These
firms report this has seriously affected their ability to
expand.
The non-uniformity of the enforcement of regulations
has enabled some firms to operate at lower costs than others.
Examples of differing regulations include the allowable
discharge limits for an area, permits for the ultimate
disposal of hazardous chemicals to landfills that are less
than secure, and the amount of "pressure" asserted by local
enforcement agencies.
Obtaining a site permit in localities that are
accessibly close to industry sources is a current problem.
In some cases, localities will not permit any further
industrial expansion.
Almost all of the hazardous wastes handled are serviced
on a contract basis. In general, the larger industrial firms
which seek to maintain a good public image are disposing of
their waste in a process approved by the local authorities.
However, in most areas of the United States, the industrial
firms signing contracts with the "environmentally adequate"
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hazardous waste service industry does not fill capacity.
In the current mode of operations, the most successful firms
have contracts for handling wastes from large reliable
sources.
Firms that offered a full—service hazardous waste
treatment service were more profitable than specialized
operations. A facility apparently needs the capability of
handling more than one industry's wastes. In addition,
multiple service firms have an established reputation in most
geographic areas. However, several instances were reported
of firms which "over-built" and were not successful. The
capital cost required of a full service facility was high;
volume never approached capacity and many multi-source
facilities were unsuccessful.
Growth Potential
The growth potential of the hazardous waste management
service industry is dependent on the future demand for such
services, the availability of capital to finance expansion,
and the regulatory climate which may lead to closure of
environmentally inadequate capacity.
In 1974, the amount of hazardous wastes available for
contract exceeded the available environmentally adequate
capacity by approximately 2.3 million metric tons per year
(Figure 6). However, this overall figure for capacity
short-fall must be viewed with caution since there are
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FIGURE 6
HAZARDOUS WASTES CAPACITY STATUS
1974
(MM METRIC TONS, WET)
MARKET
CATEGORY
ENVIRONMENTALLY
AVAILABLE FOR ADEQUATE SURPLUS
CONTRACT CAPACITY OR DEFICIT
METALS/METAL FINISHING
4.3
1.4
(2.9)
ORGANICS
INORGANICS
1.7
0.7
0.4
1.1
(1.3)
0.4
PAINTS/SOLVENTS/COATINGS
0.1
0.7
0.6
PETROLEUM
0.8
1. 7
0.9
TOTAL
7.6
5.3
(2.3)
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substantial variations by region of the country and by
markets. For example, there were short-falls in available
capacity in the metals/metal finishing and organic chemicals
markets, but surplus capacity in the other markets.
As of 1975, the industry's designed capacity was being
under utilized. None of the companies interviewed reported
facilities operating at full capacity. Nevertheless, except
for the northeastern area, the industry plans to increase
waste volume throughput by 1977 by:
adding new processes at existing sites
opening new sites in other States
adding storage and mixing facilities
adding sales personnel to cover new markets, and
adding operating personnel to further utilize
existing equipment.
By 1977, we anticipate that the hazardous waste avail-
able for contract will increase slightly, but that environ-
mentally adequate capacity will increase at a faster rate
(Figure 7). Consequently, the deficit in capacity will
decrease to 1.7 million metric tons per year. Again, this
overall short-fall can be misleading because it is mainly
due to large short-falls in the metals/metal finishing and
organic chemicals markets. We predict continuing surplus
capacity in the other markets.
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FIGURE 7
HAZARDOUS WASTES CAPACITY STATUS
1977
(MM METRIC TONS, WET)
ENVIRONMENTALLY
MARKET AVAILABLE FOR
CATEGORY CONTRACT
METALS/METAL FINISHING 3.5
ORGANICS 2 . 7
ADEQUATE SURPLUS
CAPACITY OR DEFICIT
1.7 (1.
0.7 (2.
8)
0)
INORGANICS
0.8
1.1
0.3
PAINTS/SOLVENTS/COATINGS
PETROLEUM
0.1
0.8
0.8
1.9
0.7
1.1
TOTAL
7.9
6.2
(1.7)
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The above capacity projections for 1977 were made
based on fairly firm expansion plans discussed during
interviews with service industry management. Beyond 1977,
the crystal ball becomes much more clouded. Capacity pro-
jections in the 1980 "s are highly dependent on the hazardous
waste management regulatory climate.
If the current State hazardous waste management
regulatory status remains constant through 1983, we would
expect some of the financially weak companies to drop out,
leaving about 75 to 85 companies in the business. The number
of facilities would increase, however, to about 130 to 140
facilities, employing about 2,100 people. The waste
available for contract would be about 10 million metric
tons per year. The available environmentally adequate
capacity would be about 7 million tons, but only 5 million
tons of this capacity would be utilized. The capital needed
for the added capacity would amount to approximately $200
million.
Thus, in this scenario, we see a modest growth rate
in the industry of about five percent per year, but a
continuing short-fall in environmentally adequate capacity.
Of great concern is our projection that about one-half of
the hazardous waste available for contract, or about
5 million metric tons per year overall would presumably be
disposed of at environmentally inadequate facilities.
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This overall figure could be much higher due to regional
and market variations in capacity.
A considerably different projection for 1983 results
if it is assumed that Federal or State legislation requiring
environmentally adequate treatment and disposal of all
hazardous waste is enacted by about 1977 and subsequently
implemented on a phased time schedule to minimize capacity
growth lead time problems and reduce costs.
Under this scenario, there would be some new entrants
in the business such that by 1983 we would expect 90 to
100 companies to be operating. The number of facilities
would increase substantially to about 160 to 170 facilities,
employing about 4,500 people. The available environmentally
adequate capacity would be about 9 million metric tons per
year, but it would be utilized unevenly, due to regional
and market variations, particularly in the metals and
organic chemicals waste categories, such that deficits in
capacity up to 6 million metric tons per year are possible.
About $600 million in new capital would be needed to
finance this expansion. Some of this would be available
from capital markets, and the remainder is expected to be
generated from increased profits as facility utilization
is increased due to regulatory pressures.
Thus, even with a regulatory climate, a substantial
short-fall of needed capacity, in the right place and for
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the correct markets, is anticipated in 1983 in the hazardous
waste management service industry, even though the overall
capacity will closely approach the total hazardous waste
load available for contract. Consequently, our original
premise that the private sector will respond to provide
needed capacity in a regulatory climate appears to be nearly
correct on a macro-scale, but incorrect when regional and
market-specific variances are taken into account.
These conclusions are, of course, based on imperfect
data and projections which may or may not come to pass. For
example, we have assumed the percent of industrial wastes
managed off-site will remain constant through 1983. If
waste generators were to build a substantial amount of waste
treatment and disposal capacity on-site, the short-falls in
capacity in the hazardous waste management service industry
would be correspondingly reduced or even eliminated.
In short, the hazardous waste management marketplace is
dynamic and requires periodic assessment, particularly if
new regulation is imposed. We shall watch the capacity
creation situation closely and shall adjust governmental
response as appropriate.
Summary
To recap, in this recent work we have found that:
1. Industry produces three times more waste annually
than is generated by residential and commercial
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sources, and ten times more than sewage treatment
sludge.
2. There is about four times as much potentially
hazardous waste being generated annually than we
thought in 1973 (40 vs. 10 million metric tons per
year).
3. The annual growth rate of hazardous waste gener-
ation will be less than anticipated (3 vs. 5 to 10
percent per year).
4. On a weighted average, only 18 percent of all
hazardous waste is treated or disposed of by off-
site hazardous waste management service contractors,
Excluding the primary metals industry, this factor'
jumps to 35 percent.
5. There are more hazardous waste management service
companies with more capacity than we thought in
1973, but this capacity is'being used only at a 50
percent rate and some of the disposal practices
are environmentally inadequate. Even so, more
wastes are being better managed than we thought.
6. Overall, the hazardous waste management service
industry's sales and profits have remained healthy
in the last five years, but 15 percent of the
companies surveyed were unprofitable and 40 per-
cent had working capital deficits.
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7. In 1974, there was a short-fall of 2.3 million
metric tons of environmentally adequate waste
disposal capacity; this capacity deficit will
decrease to 1.7 million metric tons in 1977
due to planned expansion in the service industry.
8. Matching of waste loads to available capacity
varies substantially by region of the country
and by markets.
9. There is a large capacity short-fall in the metals
and organic chemicals markets, but surplus capa-
city in the other markets.
10. If the current State hazardous waste management
regulatory status remains constant through 1983,
we see a modest growth rate in the service
industry, but a continuing short-fall in environ-
mentally adequate capacity.
11. If it is assumed that Federal or State legislation
requiring environmentally adequate treatment and
disposal of all hazardous waste is enacted by
1977, then by 1983 we project that the overall
service capacity will increase to closely approach
the total wate load available for contract, but
there will remain a substantial short-fall of
capacity in the right place and for the correct
markets.
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12. These capacity deficits could be reduced or
eliminated if waste generators build more on-site
waste treatment and disposal facilities.
The hazardous waste management service industry plays
an important role in protecting public health and the
environment by properly treating and disposing of poten-
tially hazardous waste. It is a high-risk business in a
dynamic market place. EPA supports the concept of a private
sector response to governmental mandates for environmentally
adequate management of hazardous waste. I hope this dis-
cussion will assist the service industry by highlighting the
problems and opportunities we see in the future. I refer
you to the full report, which should be available within six
months, for further details.
Thank you very much.
SW-543
•ft U S. GOVERNMENT PRINUNG OFFICE: 1976- 241-037/4
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