-
United States Office of Water & SW 182c
Environmental Protection Waste Management December 1979
Agency Washington DC 20460
Solid Waste
vvEPA Economic Impact Analysis
ENVIRONMENTAL
of Hazardous Waste PRSN
_ _ , n | . . DAtlAS, TEXAS
Management Regula
, on Selected
Generating Industries
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Prepublication issue for EPA libraries
and State Solid Waste Management Agencies
ECONOMIC IMPACT ANALYSIS
OF HAZARDOUS WASTE MANAGEMENT REGULATIONS
ON SELECTED GENERATING INDUSTRIES
This report (SW- I82c ) describes work performed
for the Office of Solid Waste under contract no. 68-01-4819
and is reproduced as received from the contractor.
The findings should be attributed to the contractor
and not to the Office of Solid Waste.
Copies will be available from the
National Technical Information Service
U.S. Department of Commerce
Springfield, VA 22161
U.S. ENVIRONMENTAL PROTECTION AGENCY
1979
-------
This report was prepared by Energy Resources Co., Inc. Cambridge, Massachusetts,
under contract no. 68-01-4819.
Publication does not signify that the contents necessarily reflect the
views and policies of the U.S. Environmental Protection Agency, nor does
mention of commercial products constitute endorsement by the U.S. Government.
An environmental protection publication (SW-182c ) in the solid waste
management series.
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CONTENTS
CHAPTER ONE EXECUTIVE SUMMARY 1
1.1 Regulatory Background 1
1.2 Industry Coverage and Basic Methodology 4
1.2.1 Data Sources for Estimating Compliance 4
Costs
1.2.2 Limits of the Analysis 6
1.3 Summary of Hazardous Waste Generation 7
1.4 Summary of Compliance Costs 9
1.5 Summary of Industry Impacts 18
PART I; ELECTRIC UTILITIES
CHAPTER TWO CHARACTERIZATION OF THE ELECTRIC 25
SERVICES INDUSTRY
2.1 Size and Scope of the Industry 25
2.1.1 Industry Definition 25
2.1.2 Industry Sales 26
2.1.3 Industry Employment 26
2.1.4 Fuel Mix in the Electric Utility Industry 27
2.1.5 Size Distribution of Firms 30
2.2 Industry and Market Analysis for Electric 33
Utilities
2.2.1 Industry Structure 33
2.2.2 Industry Conduct - The Regulatory Environ- 35
ment for Utilities
2.2.3 Industry Performance 37
2.2.3.1 Cost Trends 39
2.2.3.2 Price Trends 41
2.3 Financial Trends 42
111
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CONTENTS (CONT.
Paqe
2.3.1 Earnings and Internal Cash Flows 44
2.3.2 External Financing 47
2.4 Model Plant Descriptors 49
Notes to Chapter Two 50
CHAPTER THREE SOLID WASTE GENERATION IN THE ELECTRIC 51
UTILITY INDUSTRY
3.1 Waste Characteristics 52
3.1.1 Coal Ash 52
3.1.1.1 Physical Properties of Ash 53
3.1.1.2 Chemical Constituents 54
3.1.1.3 Trace Element Contents 56
3.1.2 Sludge from Flue-Gas-Desulfurization 59
Systems
3.1.2.1 Physical Properties 60
3.1.2.2 Chemical Characteristics of FGD 61
Sludge
3.1.2.3 Phase Composition and Trace 62
Elements
3.2 Leachate and Solubility Analyses 65
3.2.1 Solubility Analyses 65
3.3 Hazardous Waste Generation from Oil-Burning 73
Power Plants
3.3.1 Chemical Makeup of Oil Fly Ash 73
3.4 Other Electric Utility Solid Waste Streams 75
3.4.1 Metal Cleaning Wastes 75
3.4.2 Coal Pile Runoff 76
3.5 Model Plant Waste Quantities 78
3.5.1 Average Oil Ash Quantities 82
3.6 Aggregate Waste Quantities 83
3.7 Number of Generators 85
IV
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CONTENTS (CONT.)
3.8 Current Disposal Practices 85
3.8.1 Ash and FGC Sludge Systems 86
3.8.2 Ash Disposal 87
3.8.3 Commercial Utilization 88
3.9 RCRA Required Treatments 88
3.9.1 RCRA Option A - Required Treatments 90
3.9.2 RCRA Option B - Required Treatments 91
3.10 Cost Estimates 91
3.10.1 Cost Estimation Methodology 94
3.10.2 Option A Cpsts 98
3.10.3 Worst-Case Costs 100
3.10.4 Option B Costs 104
3.10.5 Administrative Costs 107
Notes to Chapter Three 112
CHAPTER FOUR ECONOMIC IMPACTS ON THE ELECTRIC UTILITY 115
4.1
4.2
4.3
4.4
INDUSTRY
Model Plant Impacts
Aggregate Cost Impacts
Regional Price Impacts
Secondary Impacts
Notes to Chapter Four
115
116
119
121
123
PART II: PULP AND PAPER MILLS
CHAPTER FIVE CHARACTERIZATION OF THE PULP AND PAPER 127
INDUSTRY
5.1 Size and Scope of the Pulp and Paper Industry 130
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CONTENTS (CONT.)
Page
5.1.1 Pulp 130
5.1.2 Paper 132
5.1.3 Paperboard 139
5.1.4 Building Board 141
5.1.5 Industry Employment 143
5.2 Industry and Market Analysis for the Pulp and 143
Paper Industry
5.2.1 Industry Structure 145
5.2.2 Industry Conduct and Performance 147
5.3 Financial Characterization of the Pulp and Paper 150
Industry
5.4 Model Plant Descriptions 153
Notes to Chapter Five 158
CHAPTER SIX HAZARDOUS WASTE GENERATION IN THE 161
PULP AND PAPER INDUSTRY
6.1 Issues in the Definition of Hazardous Waste 161
Streams
6.2 Waste Characteristics 162
6.2.1 Wastewater Treatment Sludges 162
6.2.2 Chemical Pulping Wastes 174
6.2.2.1 Green Liquor Dregs 174
6.2.2.2 Lime Burning Wastes 175
6.2.3 Bark and Woo'd Wastes 176
6.2.4 Coal and Bark Ash 181
6.2.5 Wastepaper Reclamation Wastes 183
6.2.6 Specialty Product Wastes 184
6.2.7 Miscellaneous Waste Streams 185
6,2.7.1 Evaporator Residues 185
6.2.7.2 Tall Oil Residues 186
6.2.7.3 Parchmentizing 186
VI
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CONTENTS (CONT.)
Page
6.3 Solid and Hazardous Waste Quantities 187
6.3.1 Model Plant Waste Quantities 187
6.3.2 Waste Stream Quantities 192
6.3.2.1 Wastewater Treatment Sludge 192
Quantities
6.3.2.2 Chemical Pulping Waste Quantities 192
6.3.2.3 Coal Ash Quantities 196
6.3.2.4 Bark and Wood Waste Quantities 198
6.3.2.5 Secondary Fiber Reclamation 198
Wastes
6.4 Number of Generators 199
6.5 Current Disposal Practices 199
6.6 RCRA-Required Disposal Methods 201
6.7 Compliance Costs 202
6.7.1 Technical Costs 202
6.7.2 On/Offsite Allocation of Paper Mill 202
Disposal Operations
6.7.3 Administrative Costs 204
Notes to Chapter Six 208
CHAPTER SEVEN ECONOMIC IMPACTS ON THE PULP AND 211
PAPER INDUSTRY
7.1 Model Plant and Worst-Case Impacts 211
7.2 Aggregate Cost Impacts 214
7.3 Industry Impacts 215
Notes to Chapter Seven 218
vn
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CONTENTS (CONT.)
Paqe
PART III; GASOLINE SERVICE STATIONS AND
AUTOMOBILE REPAIR SHOPS
CHAPTER EIGHT CHARACTERIZATION OF GASOLINE SERVICE 221
STATIONS AND AUTO REPAIR SHOPS
8.1 Gasoline Service Stations 222
8.1.1 Size and Scope of the Industry 222
8.1.1.1 Industry Definition 222
8.1.1.2 Industry Sales 223
8.1.1.3 Employment 224
8.1.1.4 Number of Establishments 226
8.1.2 Industry and Market Analysis 227
8.1.2.1 Industry Structure 227
8.1.2.2 Industry Conduct 230
8.1.2.3 Industry Performance 231
8.1.3 Financial Characterization 235
8.1.3.1 Earnings Trends 235
8.1.3.2 Basic Financial Ratios 236
8.1.4 Model Firm Characterization 239
8.2 Automotive Repair Shops 241
8.2.1 Size and Scope of the Industry 241
8.2.1.1 Industry Definition 241
8.2.1.2 Industry Sales 242
8.2.1.3 Industry Employment 243
8.2.1.4 Size Distribution of 244
Establishments
8.2.2 Industry and Market Analysis 244
8.2.2.1 Industry Structure 244
8.2.2.2 Industry Conduct and Performance 246
Vlll
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CONTENTS (CONT.)
8.2.3 Financial Characterization 248
8.2.3.1 Earnings Trends 248
8.2.3.2 Financial Ratios 250
8.2.4 Model Firm Characterization 250
Notes to Chapter Eight 254
CHAPTER NINE WASTE CHARACTERIZATION 257
9.1 Waste Characteristics 257
9.1.1 Identification 257
9.1.2 Characteristics of Waste Oil 257
9.1.3 Other Waste Streams 261
9.1.3.1 Antifreeze 261
9.1.3.2 Solvents 263
9.1.3.3 Batteries 264
9.2 Model Plant Waste Oil Quantities 264
9.2.1 Gasoline Service Stations 265
9.2.2 Automotive Repair Shops 266
9.3 Aggregate Waste Quantities 267
9.3.1 Gasoline Service Station Wastes 267
9.3.1.1 Waste Crankcase Oil Generated 267
at Service Stations
9.3.1.2 Crankcase Oil Returned to 270
Service Stations
9.3.1.3 Waste Hydraulic Oil Quantities 270
from Gasoline Service Stations
9.3.1.4 Total Waste Oil Quantities from 271
Gasoline Service Stations
9.3.2 Auto Repair Shops Waste Oil 273
9.3.3 Total Automotive Waste Oil - 1978 273
9.4 Number of Generators 275
9.5 Current Disposal for Waste Oils 277
IX
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CONTENTS (CONT.)
9.5.1 Disposal Practices 277
9.5.2 Pricing of Waste Oil 280
9.6 RCRA Specified Disposal 281
9.7 RCRA Compliance Costs 283
9.7.1 Technical Costs - Prices for Waste Oil 283
9.7.2 Administrative Costs - Option A 284
9.7.3 Administrative Costs - Option B 286
Notes to Chapter Nine . 287
CHAPTER TEN ECONOMIC IMPACT ASSESSMENT FOR GASOLINE 289
SERVICE STATIONS AND AUTOMOTIVE REPAIR
SHOPS
10.1 Model Firm Impacts 289
10.1.1 Gasoline Service Stations 289
10.1.2 Automotive Repair Shops 291
10.2 Aggregate National Impacts 294
10.3 Industry Impacts 296
Notes to Chapter Ten 299
PART IV; DRUM RECONDITIONERS
CHAPTER ELEVEN CHARACTERIZATION OF THE DRUM 303
RECONDITIONING INDUSTRY
11.1 Size and Scope of the Industry 303
11.1.1 Industry Definition 303
11.1.2 Industry Sales 304
11.1.3 Industry Employment 305
11.1.4 Size Distribution of Firms 305
11.1.5 Regional Distribution of Firms 307
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CONTENTS (CONT.)
Page
11.2 Industry and Market Analysis 308
11.2.1 Industry Structure 310
11.2.2 Industry Conduct and Performance 314
11.3 Financial Characterization 316
11.4 Model Plant Description 316
Notes to Chapter Eleven 319
CHAPTER TWELVE HAZARDOUS WASTE GENERATION IN THE 321
DRUM RECONDITIONING INDUSTRY
12.1 Process Description 321
12.2 Waste Characteristics 325
12.3 Hazardous Waste Quantities 326
12.4 Number of Generators 330
12.5 Current Disposal Practices 330
12.6 RCRA Required Disposal Practices 333
12.7 Disposal Costs 333
Notes to Chapter Twelve 335
CHAPTER THIRTEEN ECONOMIC IMPACTS ON THE DRUM 337
RECONDITIONING INDUSTRY
13.1 Model Plant Impacts 337
13.2 Aggregate Impacts 339
13.3 Industry Impacts 340
PART V: CHEMICAL WHOLESALING
CHAPTER FOURTEEN CHARACTERIZATION OF THE CHEMICAL 345
WHOLESALING INDUSTRY
14.1 Introduction 345
XI
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CONTENTS (CONT.)
Paqe
14.2
14.3
14.4
14.5
CHAPTER
15.1
15.2
15.3
15.4
15.5
15.6
15.7
15.8
Size and Scope of the Chemical Wholesaling
Industry
14.2.1 Industry Definition
14.2.2 Chemical Wholesaling Sales
14.2.3 Employment and Regional Distribution
of Firms
Industry and Market Analysis for Chemical
Merchant Wholesalers
14.3.1 Market Structure
14.3.2 Market Conduct and Performance
Financial Profile
Model Firm Characterization
Notes to Chapter Fourteen
FIFTEEN HAZARDOUS WASTE GENERATION IN THE
CHEMICAL WHOLESALING INDUSTRY
Process Description
Waste Characteristics
15.2.1 Organic Solvents
15.2.2 Acids
15.2.3 Caustic Solutions
Model Plant Waste Quantities
Aggregate Waste Quantities
Number of Generators
Current Disposal Practices
RCRA Specified Disposal - Options A and B
Costs of RCRA Compliance
15.8.1 Technical Costs of Compliance
15.8.2 Administrative Costs of Compliance
Notes to Chapter Fifteen
346
346
347
350
352
352
354
355
357
360
361
361
363
364
364
364
365
368
369
370
371
372
372
374
376
Xll
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CONTENTS (CONT.)
Page
CHAPTER SIXTEEN ECONOMIC ANALYSIS FOR THE CHEMICAL 377
WHOLESALING INDUSTRY
16.1 Model Firm Impacts 377
16.2 Aggregate National Impacts 380
16.3 Industry Impacts 382
Notes to Chapter Sixteen 384
PART VI; AGRICULTURAL SERVICES
CHAPTER SEVENTEEN CHARACTERIZATION OF THE AGRICULTURAL 387
SERVICES INDUSTRY
17.1 The Scope of the Agricultural Services Industry 387
17.1.1 Industry Sales and Growth 390
17.1.2 Distribution of Agricultural Services 394
Among Crops and Among Farm Regions
17.1.3 Industry Employment 397
17.1.4 Size Distribution of Firms 398
17.2 Industry and Market Analysis 402
17.2.1 Industry Structure 402
17.2.2 Industry Conduct 404
17.2.3 Industry Performance 404
17.3 Financial Profile 405
17.4 Economics of the Model Firms 405
Notes to Chapter Seventeen 409
CHAPTER EIGHTEEN HAZARDOUS WASTE GENERATION IN THE 411
AGRICULTURAL SERVICES INDUSTRY
18.1 Waste Characteristics 411
18.2 Hazardous Waste Quantities 416
18.2.1 Model Firm Waste Quantities 417
Xlll
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CONTENTS (CONT.)
Paqe
18.2.2 Used Pesticide Containers 417
18.2.3 Waste Pesticides 419
18.2.4 Dilute Pesticide Solutions 420
18.3 Aggregate Waste Quantities 421
18.3.1 Used Container Quantities 421
18.3.2 Waste Pesticides and Dilute Pesticide 424
Solutions
18.4 Number of Generators 427
18.5 Current Regulatory Framework 427
18.6 Current Disposal Practices 429
18.6.1 Container Rinsing and Disposal 430
18.6.2 Pesticides and Pesticide Solutions 431
18.7 Disposal Practices Required Under RCRA 436
18.8 Disposal Costs 437
18.8.1 Container Disposal Costs 437
18.8.2 Waste Pesticide Disposal Costs 439
18.8.3 Rinse Water Disposal Costs 439
18.8.4 Administrative Costs 441
Notes to Chapter Eighteen 444
CHAPTER NINETEEN ECONOMIC IMPACT ANALYSIS FOR 447
AGRICULTURAL SERVICES
19.1 Model Firm Impacts 447
19.2 Aggregate Costs 450
19.3 Industry Impacts 450
Notes to Chapter Nineteen 454
xiv
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CONTENTS (CONT.)
Pac
PART VII; METAL AND MINERAL DISTRIBUTIONS
CHAPTER TWENTY HAZARDOUS WASTES IN THE METALS AND 457
MINERALS DISTRIBUTION INDUSTRY
20.1 Introduction 457
20.2 SIC 5051: Steel and Ferrous Metals Service 458
Centers
20.2.1 Steel Service Center Wastes 459
20.2.2 Waste Properties 461
20.3 Mercury Distributors 461
20.4 Other Primary Metals Wholesalers 462
20.4.1 Toxicity of Wastes 464
20.5 Coal Wholesalers 464
20.5.1 Waste Characterization 465
20.5.2 Regulatory Setting 466
20.6 Metals and Mineral Ores Wholesalers 467
20.7 Conclusions 468
Notes to Chapter Twenty 468
PART VIII; REGULATORY IMPACTS UNDER RCRA OPTION C
CHAPTER TWENTY-ONE RCRA IMPACTS UNDER OPTION C 473
21.1 Electric Utilities 480
21.2 Pulp and Paper Manufacturers 480
21.3 Gasoline Service Stations and Automotive 482
Repair Shops
xv
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CONTENTS (CONT.
21.4 Drum Reconditioners 486
21.5 Chemical Wholesalers 488
21.6 Agricultural Services 494
21.7 Metal and Mineral Distributors 494
PART IX; METHODOLOGY
CHAPTER TWENTY-TWO STUDY METHODOLOGY 497
22.1 Model Plant Analysis 497
22.2 Assessment of Industry Impacts 498
22.3 Cost Estimates 500
22.3.1 Technical Costs 500
22.3.2 Administrative Costs 500
22.4 Limits of the Analysis 501
APPENDIX
APPENDIX A COST ESTIMATION METHODOLOGY 505
A.I Cost of Disposal of Ash and Sludge - Option A 505
A.2 Retrofit Costs for Ash Disposal - Option B 507
A.3 Cost of Dispoal of Ash and Sludge - Option B 512
A.4 Retrofit Costs for Ash Disposal - Option B 512
A.5 Worst-Case Cost Estimates 512
A.6 Aggregate Disposal Costs 512
xvi
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CHAPTER ONE
EXECUTIVE SUMMARY
This report has been prepared in support of the U.S.
Environmental Protection Agency's development of an economic
impact assessment of anticipated hazardous waste management
regulations. The regulations, which will soon be proposed,
are authorized by the Resource Conservation and Recovery Act
of 1976 (RCRA, PL 94-580). This study involves the examination
of three sets of draft RCRA regulations on seven industries
which are generators of potentially hazardous wastes.
1.1 Regulatory Background
The Resource Conservation and Recovery Act of 1976
authorized EPA to promulgate such regulations for the
control of hazardous wastes as may be necessary to protect
human health and environment. EPA developed three sets of
draft regulations which provide for varying levels of
environmental control. These are described below:
RCRA Option A; Regulations for Enhanced Protection
of Public Health and Environment. This set of draft
regulations provides for the maximum level of control
in the handling and disposal of hazardous wastes.
RCRA Option B: Proposed Actions. This set of draft
regulations incorporates a number of modifications to
Option A requirements. Most importantly, RCRA Option B
provides a modified definition of what constitutes a
"hazardous waste." It also proposes separate disposal
requirements for certain large-volume "special wastes."
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RCRA Option C; Lesser Degree of Public Health and
Environmental Protection. This set of regulations
seeks to reduce the economic burden of RCRA by (1)
exempting several types of waste from consideration,
(2) exempting small generators, and (3) reducing the
stringency of both technical and administrative
procedures.
The EPA first developed Options A and B prior to
the development of this report. Option C was not developed
until the draft report had been submitted. Accordingly, the
first 20 chapters of this report focus only on the impacts
of the initial options on the selected industries. Chapter
21 then treats Option C exclusively in light of the analyses
performed in the preceding chapters.
An abbreviated comparison of major sections of RCRA
Options A and B is provided in Table 1-1. Only several
elements which are of particular importance in the assessment
of economic impacts are shown in the table. Section 3001,
which covers the definition of hazardous wastes, is signifi-
cantly different between RCRA options. In particular, the
test protocol for potentially toxic wastes (The Toxicant
Extraction Procedure [TEP]) was modified. Also, some of
the toxicity tests, including that for aquatic toxicity, are
not included in Option B. Section 3004, under only Option B,
provides for definition of separate disposal requirements
for "special wastes." These requirements have not been
defined to date.
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1.2 Industry Coverage and Basic Methodology
The six industries covered are shown in Table 1-2.
Quite obviously, the industries covered vary from large
(electric utilities, the paper industry) to small (chemical
warehouses, drum reconditioners). A brief analysis was also
made of waste generation among metal and mineral distributors
A summary of findings for that industry is included as
Chapter 20.
For each industry, model and worst-case plants (or
firms) were developed as an analytical tool. The model
plant was defined to be representative of industry firms.
Regulatory impacts on this firm are then an indication of
impacts on most industry firms. The worst-case plant was
defined to represent those plants which will face above-
average compliance problems. These impacts are useful in
estimating the likelihood of plant closures. The worst-case
impacts for most industries are likely to occur at small,
economically vulnerable operations, and the worst-case firms
have been designed accordingly.
1.2.1 Data Sources for Estimating Compliance Costs
The methodology for estimating compliance costs varies
by industry. Consistent use was made of the work of two
other EPA contractors, Arthur D. Little (Integrated Economic
Impact Assessment of Hazardous Waste Management Relations,
EPA, October 1978) and Battelle Columbus Laboratories (Cost
of Compliance with Hazardous Waste Management Regulations,
September 1978). The ADL study was used as the basis for
estimating administrative costs (administrative costs are
here interpreted to include monitoring and testing, reporting,
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training, contingency, and financial responsibility costs).
However, a number of judgments had to be made concerning
the applicability of various tasks and the costs which would
be incurred in the various industries. As a result, the
administrative costs should be considered ERGO estimates,
based on the definition of tasks as supplied by ADL.
1.2.2 Limits of the Analysis
The estimates made in this study were based on data
derived from a variety of sources. Each of the estimates
and the basic data sources involve some degree of error. No
estimation was made of the total probable error range for
the cost estimates.
The waste stream designations made are also approximate,
Available data in some cases were not sufficient to clearly
assign a waste into the "hazardous" or "nonhazardous"
category. Conclusions were drawn based upon the existing
knowledge. This study was not designed to make a final
identification of hazardous wastes in all of the study
industries.
The cost estimates provided in this report are based on
the "worst-case" assumption that all of the wastes examined
are designated as hazardous. Thus all of the cost estimates
are contingent upon technical findings about the wastes.
This caveat is particularly important to the wastes in the
electric utility and pulp and paper where the majority of
wastes will be nonhazardous.
This study involves static analysis of the costs of
compliance with regulations. It was assumed that access to
-6-
-------
all necessary treatment or disposal facilities would be
available as needed at the estimated price or cost. Thus,
for example, no estimation was made of the effect of
increased demand due to regulation on the cost of services
at hazardous waste facilities. Also no forecast was made of
the future availability of such facilities.
No estimate was made of costs to comply with state
regulations or federal regulations for nonhazardous waste
disposal. The federal regulations are particularly important
in that some increase in disposal costs will occur for those
wastes designated as nonhazardous. The cost estimates
presented here show the increment over current disposal
costs. Some fraction of the incremental costs will be
incurred even for wastes designated to be nonhazardous.
The estimate of this fraction was not made due to the vast
uncertainties in interpretation of nonhazardous waste
disposal regulations.
1.3 Summary of Hazardous Waste Generation
The total hazardous waste generation by the six in-
dustries is provided in Table 1-3. The electric utility
industry generates by far the largest amount of potentially
hazardous wastes.
The total volume of hazardous wastes under the three
RCRA options is the same for all industries except pulp
and paper. Several large volume wastes generated by pulp
and paper mills are likely to be designated hazardous wastes
only under RCRA Option A. The waste streams are wastewater
treatment sludge, bark, and wood wastes and secondary fiber
wastes.
-7-
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The contribution of each waste stream to total
industry wastes is shown in Table 1-4. Coal ash
dominates the waste generation picture for electric
utilities. Approximately 60 million metric tons (MT)
of ash were generated in 1977 compared to roughly
4 million MT of sludge. A small volume of oil ash,
which generally has a higher metals content (greater
toxicity) than coal ash, was also generated. Coal ash
is also generated in the paper industry in the amount
of almost 1 million metric tons.
The largest volume waste streams among the other
industries are waste oil (1.1 million MT) and dilute
pesticide solutions (0.5 million MT). The total
hazardous waste production for the drum reconditioning
industry and for chemical warehouses was 170,000 MT and
5,000 MT respectively.
1.4 Summary of Compliance Costs
Total industry compliance costs under the three
RCRA options are shown in Tables 1-5, 1-6, and 1-7.
Under Option A compliance costs total $1.1 billion, of
which over 75 percent are technical costs and 25 per-
cent are administrative costs. Administrative costs
are defined as the sum of monitoring, testing,
reporting, training, contingency, and financial
responsibility costs. The largest costs are incurred
by the electric utilities industry ($606.6 million)
and the pulp and paper industry ($354 million).
Approximately $110 million in compliance costs would
be incurred by gasoline service stations and auto-
motive repair shops combined. The major portion of
-9-
-------
TABLE 1-4
MAJOR HAZARDOUS WASTE STREAMS FOR SIX INDUSTRIES (1977)a
INDUSTRY
Electric utilities
Pulp and paper
WASTE STREAMS
Coal ash
FGD sludge
Oil ash
Wastewater treatment
sludgec
Chemical pulping wastes
Bark and wood wastes0
Coal ash
Secondary fiber
VOLUMEb
(000 MT)
60,300
3,700
20
2,580
523
2,700
978
1,694
Service stations
and repair shops^
Gas stations
Repair shops
New car and truck
dealers
Fleets
Drum reconditioners
Chemical warehouses
Agricultural services^
reclamation wastes0
Waste oil 619
Waste oil 183
Waste oil 242
Waste oil 79
Process wastes 170
Repackaging wastes 5
Pesticide containers 29
Dilute pesticide solutions 550
and waste pesticides
aERCO estimates.
^Ash, FGD sludge, and bark quantities are expressed in
dry weights.
°Wastes are hazardous only under the Option A version
of Section 3001.
^Estimated waste volumes for 1978.
-10-
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Option A compliance costs under these industries are
administrative costs. Total compliance costs equal
approximately 1 percent of 1977 production value in all
industries.
Compliance costs under RCRA Option B are
substantially lower, although this is partly due to
the interpretation given to the existing draft regu-
lations. In particular, technical compliance costs for
electric utilities have been set at zero, pending the
definition of facility standards for utility wastes.
Costs are also significantly lower for the pulp and
paper industry. The reduction is due to the likelihood
of a "nonhazardous" label for most of the industry's
wastes under RCRA Option B. Administrative costs for
gasoline service stations and auto repair shops are
also lower under Option B. Overall, RCRA Option B
compliance costs for these six industries are
$212 million.
RCRA Option C not only offers a dramatic reduction
in cost, but also exempts large numbers of plants from
the regulation. Total compliance cost for the selected
industries under Option C is $109.9 million - nearly
50 percent of the total costs for Option B and only
10 percent of the cost of Option A. Nearly 90 percent
of this cost is for technical disposal. The number of
generators covered under Option C is only 20,881, only
11 percent of the 192,591 plants covered under Options A
and B.
-17-
-------
1.5 Summary of Industry Impacts
The expected decline in net income (pretax) for
the model and worst-case plants in each industry are
shown in Table 1-8. These calculations were made under
the assumption that no price change occurs which allows
the firms to pass through compliance costs. Large
declines in net income were noted for the agricultural
services and drum reconditioning industries. Relatively
small changes were noted for the model and worst-case
plants in other industries. No numerical -estimate was
made of the decline in net income for the model
plant in the electric utility industry. The regulatory
process for electric utilities was not formally modelled,
but the effect of RCRA on net income would, in all like-
lihood, be small. A small decline in net income would
be expected due to the effect of normal regulatory lag
on the ability of utilities to recover costs.
The overall industry impacts on Options A and B
are presented in Table 1-9. In these estimates, the
likelihood of price increases and other factors were
considered. The following definitions were used in
defining the likelihood of plant closure: (1) "unlikely"
means there is estimated to be less than a 25 percent
chance that 10 percent of the industry plants will
close, (2) "possible" means there is a 25 to 50 percent
chance that 10 percent of the industry plants will
close, and (3) "probable" means there is a 50 to
75 percent chance that 10 percent of the industry
plants will close. Price increases, all of which were
estimated to be 3 percent or less, were defined as
small.
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Plant shutdowns appear most likely in the agri-
cultural services industry. This industry includes a
large number of small, economically vulnerable firms.
Plant shutdowns are also possible in the drum recondi-
tioning industry, as indicated by the estimated drop in
net income for the model and worst-case plants.
However, strong market conditions for this industry
make it less likely that many firms will cease opera-
tions. Impacts on other industries should be small.
Some plant closures could occur in the pulp and paper
industry under RCRA Option A. However, it is extremely
unlikely that 10 percent of the industry's mills would
close.
No production cutbacks were forecast. Plant
closures, where they occur, will be due to the combined
influences of competitive and regulatory pressures.
Regaining industry firms should, therefore, be able to
handle the market demand.
A slight import increase is seen from the
electric utility industry as a result of RCRA. The
increase should occur from those utilities which are
equipped to burn both coal and oil. In 1977, there
were 96 utilities which burned coal and at least
100,000 barrels of oil. Some firms may increase oil
purchases due to the added expense of coal ash
disposal.
Option C will exempt the agricultural services
industry, removing any chance of plant shutdowns in
this industry due to RCRA regulations. Also,
compliance costs for drum reconditioners will not
change materially under Option C, but cost reductions
-21-
-------
in the pulp and paper industry and the exemption of all
utilities should help preclude significant impact in
these industries.
-22-
-------
PART I
ELECTRIC UTILITIES
-------
CHAPTER TWO
CHARACTERIZATION OF THE
ELECTRIC SERVICES INDUSTRY
An overview of the electric utility industry is pro-
vided in this chapter. The topics covered include the size
and scope of the industry, the industry structure, and the
financial characterization.
2.1 Size and Scope of the Industry
2.1.1 Industry Definition
The electric services industry, as defined by SIC code
4911, includes establishments engaged in the generation,
transmission, and/or distribution of electric energy for
sale. For this study, only the electrical generation
segment of the industry will be examined because it is this
portion of the industry that generates the potentially
hazardous waste materials of interest here. Principal
attention will be focused on coal-burning utilities for the
obvious reason that these plants produce the overwhelming
bulk of the potentially hazardous waste materials affected
by RCRA regulations. Oil-burning utilities will, however,
be briefly examined to determine their contribution to the
problem. Nuclear power plants will not be examined in this
study.
-25-
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2.1.2 Industry Sales
The electric utility industry is one of the largest
U.S. industries and has been one of the fastest growing.
Over the past 12 years (1965 to 1977) electrical generation
has doubled. Total industry revenues in the same period
have quadrupled, reflecting i ncreai-er1 sales and costs. The
industry requires extremely large volumes of capital spend-
ing. In 1978, capital expenditures for generation, trans-
mission, and distribution are expected to total $33 billion.
Thus, the industry fortunes have c, ; ly.ii t j cant effect on the
economy and on national capital markets.
Recently, however, industry growth has been moderated
by deferrals and/or cancellations of large power-generating
facilities. Several factors have contributed to the reduced
growth including concerns about energy conservation, uncer-
tainties about federal energy and environmental policies,
and difficulties in the siting of nuclear power facilities.
The growth of generating capacity has slowed in recent years
as shown below in Table 2-1.
2.1.3 Industry Employment
The total employment in the electric utility industry
is 362,500. However, only a small percentage of these
employees actually work in generating plants. Generating
facilities are capital-intensive and utilize minimal labor.
Most people employed by the industry work either in adminis-
trative capacities or in the transmission and distribution
end of the business which will be relatively unaffected by
these regulations.
-26-
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TABLE 2-1
GROWTH OF GENERATING CAPACITY3
TOTAL INSTALLED % ANNUAL
GENERATING CAPACITY GROWTH OVER
YEAR (000 kW) PREVIOUS YEAR
1977
1976
1975
1974
1973
1972
1971
aEdison Electric
576,336
550,611
527,591
495,519
459,252
418,457
388,377
Institute, Statistical
4.7
4.4
6.5
7.9
9.7
7.7
—
Year Book of
the Electric Utility Industry for 1976.
2.1.4 Fuel Mix in the Electric Utility Industry
Coal is the most extensively used fuel source in the
electric utility industry, and it is expected to remain so
into the future. Electric generation by each of the principal
fuel types is shown in Table 2-2. For 1977, coal-burning
utilities generated slightly more than half of the country's
electricity. The remaining fuel use was divided among oil
(18.8 percent), gas (16.1 percent), and nuclear (13.2 percent).
As can be seen from the table, the percentage of the total
electrical energy attributable to coal use has fallen since
1965 when coal accounted for two-thirds of the nation's total.
In the same period, the use of oil and nuclear fuels increased
substantially. However, current projections indicate that
coal use will not decline further. One such projection, made
by Edison Electric Institute, shows the percentage of total
power generated from coal remaining very stable through 1986.1
-27-
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The importance of coal, and therefore the importance of
environmental regulations on coal burning, varies signifi-
cantly among regions. The breakdown of fuel use by region
is shown in Table 2-3. Dependence on coal is highest for
TABLE 2-3
GENERATION, BY FUEL
TYPE AND BY REGION, 1976a
TOTAL
THERMAL
% OF GENERATION
REGION
New England
Middle Atlantic
East North Central
West North Central
South Atlantic
East South Central
West South Central
Mountain
Pacific
Alaska and Hawaii
aFederal Power
GENERATION
(MM kWh)
70,626
219,398
370,736
127,578
352,446
164,235
242,245
89,223
104,524
7,903
Commission, S
COAL
3
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81
68
59
90
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57
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Book
NUCLEAR
36
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Electric Institute, p. 23.
utilities in the East North Central, East South Central,
West North Central, and Mountain states. These regions cover
the entire Midwest, the Far West states, except for the
Pacific coast states, and the southern states of Mississippi,
Alabama, Tennessee and Kentucky. Coal-burning utilities
account for two-thirds of the total generation in these
-29-
-------
states. Coal use is also hiqh in the Middle and South
Atlantic states (49 percent and 59 percent). Coal use is
very low for the remaining regions, where oil or gas are the
chief fuel sources. These areas include New England, the
Gulf states, the Pacific coast, Alaska and Hawaii.
A different view of the industry can be formulated when
electrical generation is classified according to the type of
generator used. Most of the country's electricity is
derived from steam-driven generators. In 1977, 78 percent
of the total electricity supply was provided by steam
plants. The remaining supply was divided among hydroelectric
generators (10 percent), nuclear-driven generators (12 per-
cent), and internal combustion engines (less than 1/2 of
1 percent) . 2
2.1.5 Size Distribution of Firms
The growth in demand for electric power has been met by
increases in the average size of power plants. Statistics
on the size distribution of steam electric power plants
(private only) are displayed in Table 2-4 for the years
1965, 1970, and 1975. From 1965 to 1975, the total number
of steam electric plants fell slightly while generating
capacity more than doubled. The shift toward larger plants
is shown most dramatically by the increase in the number of
plants with over 1,000 MW of capacity from 17 in 1965
to 90 in 1975. By 1975, 35 percent of the operating plants
exceeded 500 MW of capacity. In 1965, only 14 percent of
the plants had a capacity greater than 500 MW.
The increasing plant size is due to the increased number
of generating units per plant and the increasing size of
-30-
-------
TABLE 2-4
PLANTS, BY GENERATING CAPACITY FOR
YEAR
1975
1970
1965
PRIVATELY
TOTAL
NO. OF
PLANTS
631
661
653
aFederal Power
Electric Utilities
OWNED
LESS
THAN
100
154
219
255
Commi
in the
FOSSIL-FUELED
100
TO
500
255
287
309
ssion ,
United
MW
501
TO
1,00
132
108
72
STEAM PLANTS3
OVER
0 1,000
90
47
17
TOTAL
CAPACITY
366,504
220,536
159,141
Statistics of Privately Owned
States,
years ind
icated .
individual units. Utilities are able to save on the capital
and operating costs per kilowatt hour of power supplied in
each case due to economies of scale in construction and
operation.
The trend toward larger size is expected to continue.
In Table 2-5, the current schedule for new orders of fossil-
fired boilers through 1990 is displayed. Average capacity
for the new units rises significantly through 1990. In
addition to the cost savings from larger plants and units,
the movement has also been encouraged by the advance of
nuclear power. Nuclear units are most economical in large
generating sizes. Makers of fossil-fired boilers have
strived to increase the efficient size of their units in
order to stay competitive on a cost per kilowatt (of capacity)
basis. The growth of power pools, that is, arrangements
where several utilities agree to coordinate their power
supply activities, has also facilitated the move to larger
unit sizes. The power pools allow utilities greater
-31-
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flexibility in the use of their generating capacity. In
general, the large units can be used to supply base load
power demand and small units switched on and off to meet
peak load power demand. Such an arrangement provides
important operating cost savings to utilities.
2.2 Industry and Market Analysis for Electric Utilities
2.2.1 Industry Structure
The electric utility industry encompasses both private
and publicly owned utility firms. The industry, however, is
dominated by private or investor-owned utilities. The
breakdown of industry firms by ownership type is shown in
Table 2-6, along with aggregate statistics on electric power
generation for the industry. As can be calculated from the
table, the private utilities generated 79 percent of the
total industry production for 1977. Furthermore, the role
of private utilities has remained fairly constant over time.
In 1965, private utilities produced 75 percent of the total
U.S. electrical production.
The next largest utility group includes the federally
owned utilities accounting for 10.1 percent of production in
1977. This group includes the nation's largest system, the
Tennessee Valley Authority (TVA), and other federal systems
including the Bonneville Power Administration and the Bureau
of Reclamation (Department of Interior) system. The federal
systems sell most of their electric power to other publicly
owned systems, or to a few large industrial purchasers. The
other publicly owned systems are municipal systems, state
projects, and public power districts.
-33-
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The remaining utility group consists of electric
service cooperatives funded by the Rural Electrification
Administration. The cooperatives supply power in remote
areas where the population is so sparse as to cause high
distribution costs per customer. In these areas, the
necessary investments were not profitable for private
industry and federal financing(was necessary. The REA
cooperatives generated 2 percent of the nation's power in
1977.
2.2.2 Industry Conduct - The Regulatory Environment
for Utilities
Because of the inherent efficiency of a monopoly
structure for electric services, private and public utilities
are granted local monopoly power and then controlled by
regulatory agencies. The purpose of the controls is to
prevent utilities from obtaining monopoly profits while at
the same time yielding a fair rate of return on investments,
and also to avoid unduly discriminatory rates and ensure
adequate and reliable service. The state regulatory agencies
control the sale of electricity to ultimate consumers, and
the Federal Energy Regulatory Commission controls the rates
on wholesale electricity sold across state lines.
When an electric utility files for a rate increase, the
matter is typically settled by the state regulatory agency
within the format of an adjudicatory proceeding, that is, a
rate case. The rate case is divided into two parts. The
"revenue requirement," or what the utility is allowed to
earn, is established first; the rate schedules are then
approved to meet the revenue requirement.
-35-
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The revenue requirement is usually expressed in formula
form as follows:
RR = E+d+T+ (V-D)R, in which
RR = Revenue requirement
E = Operating expenses
d = Annual depreciation expense
T = Taxes, including income taxes
V = Gross valuation of the property
D = Accrued depreciation
R = Rate of return
(V-D) = Rate base (net valuation)
(V-D)R = Return amount of profit, expressed as
earnings allowed on the rate base.
In most instances, data used in the rate case are taken
from the past 12 months of operations. The recent problem
for utilities has been cost inflation beyond that anticipated.
Even the substantial rate increases of recent years have often
failed to cover the rapidly increasing revenue requirements.
The problem is aggravated by the time lag involved in the
rate case process itself. The hearing process requires
6 months to a year, but of late the process has been more
drawn out due to the large number of utilities seeking
increases. The increase in the backlog of rate cases as
counted at year end grew from 59 percent in 1970 to 185
percent in 1975.3
The combined effect of cost inflation and the regulatory
lags has caused a decline in the rate of return on equity
for the industry. The distribution of firms along the
spectrum of possible returns is shown in Table 2-7. The
decline in returns is not catastrophic but is significant.
-36-
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TABLE 2-7
DISTRIBUTION OF RETURN ON EQUITY FOR
INVESTOR-OWNED UTILITIES, 1970 AND
19753
RETURN ON EQUITY (%)
Less than 5
5 to 7.9
8 to 10.9
11 to 13.9
14 to 16.9
17 and above
aFederal Power Commission,
Owned Electric Utilities in the
1970
2.4
17.9
27.1
32.3
16.4
3.9
Statistics of
United States.
1975
5.7
14.8
31.0
37.1
9.5
1.9
Privately
The percentage of industry firms earning less than a 5 per-
cent rate of return more than doubled between 1970 and
1975. At the other end of the scale, the number of firms
earning more than 14 percent had fallen from 20.3 percent to
11.4 percent. These figures have led to a weakening of the
industry's balance sheets, and to problems in obtaining
needed financing. These problems are discussed below.
2.2.3 Industry Performance
Before presenting the recent cost and price trends for
the industry, it is useful to examine the basic cost struc-
ture for the industry. The basic cost components, presented
as a percentage of total operating revenue, are shown in
Table 2-8. The table includes data on private utilities,
federal power projects, and municipal wholesalers and
retailers. As expected, power production costs are the
-37-
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largest expense. They account for 46 percent of total
operating revenue for private firms, and as high as
56 percent for both municipal retailers and federal
projects. For municipal retailers, the power production
costs include the higher costs of purchased power. Trans-
mission and distribution costs are a small portion of
operating expenses. The highest distribution costs are
borne by municipal retailers due to the distribution-
oriented operations of these companies. A large -'fference
between the private and public utilities is evident in the
depreciation and taxes account. The FPC data indicate that
23 percent of private operating revenue was expensed in this
account compared to 10 to 12 percent for public utilities.
The different tax status combined with the smaller asset
value of public firms is the reason for the larger spread.
2.2.3.1 Cost Trends
Utilities have faced significant cost increases parti-
cularly in expenditures for construction, fuel, and labor.
The trend in construction costs, as indicated by the Handy-
Whitman Index for utility construction, is displayed in
Table 2-9. The index nearly doubled from 1970 to 1977,
representing an average annual rate of increase of approxi-
mately 10 percent.
Fuel wholesale price indices have risen even more
steeply than the construction cost index. The price indices
for coal, petroleum products, and gas are shown in Table 2-10,
The index for each fuel more than doubled between 1970 and
1975. The average annual rates of growth in the period
were 21 percent for coal, 21 percent for petroleum products,
and 16 percent for gas.
-39-
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TABLE 2-9
COST TRENDS OF ELECTRIC POWER AND LIGHT
CONSTRUCTION, HANDY-WHITMAN INDEX3 'D
YEARC
1977
1976
1975
1974
1973
1-972
1971
1970
1965
INDEX VALUEd
385
367
341
276
249
241
217
203
164
aEdison Electric Institute, Statistical Year Book of
the Electric Utility Industry
for 1976, p. 68.
b!949 = 100.
cMeasured on January 1 of the year.
^The figures presented are for North Atlantic geographic
area. All geographic regions have had similar rates of cost
increase.
-40-
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TABLE 2-10
FUEL WHOLESALE PRICE INDICES3'b
YEAR
1975
1974
1973
1972
1971
1970
1965
aU.S. Bureau of
Price Indexes, 1976.
WPI:
COAL
385.
332.
218.
193.
181.
150.
93.
8
4
1
8
8
3
4
Labor
WPI: PETROLEUM WPI:
PRODUCTS, REFINED GAS FUELS
257
223
128
108
106
101
93
Statistics ,
.5
.4
.7
.9
.8
.0
.8
Wholesale
216.
162.
126.
114.
108.
103.
92.
Price
7
2
7
1
0
6
8
and
b!967 = 100.
The 1970 to 1975 period produced an increase in total
salaries and wages for the industry of 50 percent. In the
same time period, total electricity generated increased only
25 percent and the number of employees increased 4.8 percent
The consumer price index in the same period rose 40 percent.
It is apparent that the increase in labor costs to utilities
was fueled by the general inflation, and that the increase
was more rapid than the rise in productivity.
2.2.3.2 Price Trends
The price trend's have followed the cost trends in a
steady, upward/path. Th/e increases have been slightly
-41-
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greater than those of the consumer price index for the 10-year
period 1967-77, as shown in Table 2-11. The electricity
price index grew 90 percent in that period, compared with
83 percent of the consumer price index. It is noteworthy
that more than half of the growth for the index took place
in the final 4 years of the period, 1973 through 1977.
Since 1973, electricity prices have grown at an average
annual rate of 10 percent per year.
The growth of electricity prices has varied widely among
regions depending largely upon the varying availability of
fuel within each region. The percentage increase in average
electricity bills for each customer class is shown in
Table 2-12. Residential consumers in the New England, Pacific,
South Atlantic, and East South Central states (the latter two
categories cover the eastern seaboard except for New York,
New Jersey, and the other southern states east of Louisiana
and Arkansas) received the largest increases. The smallest
increases occurred in the southwestern (West South Central),
Mountain, and Middle Atlantic States.
2.3 Financial Trends
The financial position of utilities has declined in recent
years due to the effect of the regulatory lag (discussed
above) on their ability to recover costs and thus to maintain
the industry rate of return. With this change in fortunes,
the industry has found increasing difficulty in raising
funds. Internal cash flows are inadequate for financing
investment, and fund raising in national capital markets has
become increasingly expensive for the industry. As a
result, the balance sheet position for the industry is
significantly weaker than it was a decade ago. In the
-42-
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TABLE 2-11
ELECTRICITY PRICE AND CONSUMER PRICE INDICES3
ELECTRICITY CONSUMER
YEAR PRICE INDICES PRICE INDICES
1977
1976
1975
1974
1973
1972
1971
1970
1969
1968
1967
190.7
182.4
171.4
157.5
129.0
120.2
116.0
109.9
104.2
101.0
100.5
186.1
174.3
166.3
155.4
138.5
127.3
123.1
119.1
112.9
106.4
101.6
aU.S. Bureau of Labor Statistics, Wholesale Price and
Price Indexes, 1976.
TABLE 2-12
PERCENT INCREASE IN AVERAGE ELECTRICITY BILLS, BY CENSUS
REGION AND CUSTOMER CLASS, 1965 to 1975^
REGION RESIDENTIAL COMMERCIAL INDUSTRIAL
New England
Middle Atlantic
East north central
West north central
South Atlantic
East south central
West south central
Mountain
Pacific
Noncontiguous
U.S. Average
88.2
14.5
52.9
41.9
78.7
78.0
30.1
39.0
78.3
63.2
72.3
56.1
38.9
36.2
33.6
58.7
40.0
21.5
41.3
65.5
51.8
63.8
95.7
55.1
57.1
47.8
06.6
89.1
42.9
58.2
90.9
70.0
89.6
aPederal Power Commission, Typical Electrical Bills,
1975.
-43-
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section below, the earnings record of the industry will be
examined. The succeeding section will examine external
financing problems for the industry.
2.3.1 Earnings and Internal Cash Flows
The electric utility has shown fair earnings growth in
the 1970's, but this earnings growth has provided only a
constant fraction of the funds needed for capital expenditures.
The recent earnings history for investor-owned utilities is
shown in Table 2-13 along with statistics of annual cash flows
and capital expenditures. The net income for the utilities
grew at a rate of 12.6 percent per annum for the period 1972 to
1976. Earnings growth was lowest in 1974, when a 6 percent
increase was achieved, but recovered in 1975 to a healthy
16.6 percent. During the same period, capital expenditures
for investor-owned utilities rose only 6 percent per year.
However, a number of factors prevented utilities from increas-
ing their ability to internally finance investments.
In order to examine cash flow, it is necessary to move
from net income to retained cash income, i.e., that amount
of earnings which is available for reinvestment. The
utility net income figures include an allowance for funds
used during construction (AFUDC). The AFUDC account does
not represent cash earnings. It is, rather, an accounting
technique which allows utilities to claim as earnings some
of the implicit value of plants being constructed. In other
words, it represents future earnings counted in the current
period. The AFUDC portion of income, and thus the non-cash
portion of income, has risen significantly. As can be
derived from the table, AFUDC accounted for 9 percent of
earnings in 1968, but 27 percent in 1976.
-44-
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-45-
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Dividend payouts have risen with earnings through the
1970's. The payout of cash income, of course, reduced the
amount of income left for reinvestment. When dividend
payouts and AFUDC are subtracted from earnings, it is clear
that little or no cash income is available for reinvestment.
In 1968, retained cash income accounted for a significant if
not large portion of annual capital expenditures, namely
8 percent.
The gap between retained cash income and capital expendi-
tures must be made up by other internal cash flows and, as
will be discussed later, external financing. The sources
of cash flows for utilities are depreciation and amortization
expenses and deferred income taxes. Both of these accounts
are charged as operating expenses, but because they do not
involve cash outlays, they represent retained funds.
Depreciation is the larger of these two accounts, measured
in 1976 at 4.5 billion for investor-owned utilities.
Deferred income taxes have grown more rapidly, increasing
from $163 million in 1968 to $2.4 billion in 1976. The
deferred taxes may be thought of as an interest-free loan
from the federal government. These two entries combined
supplied $7 billion of the $17 billion needed for capital
expenditures in 1976.
For rate-setting purposes, the productive life of
generating plants is set at 30 to 40 years. The allowable
depreciation in a given year is therefore 3 percent or less
of the cost of existing plants. However, the costs of new
plants are much greater than those of existing plants so the
depreciation fund is not sufficient for new construction.
The result is a need for increased financing in external
capital markets.
-46-
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To summarize, retained cash earnings have provided very
little of the funds needed for reinvestment. Depreciation
funds and deferred income taxes have been steadily growing,
but supply only about 30 to 40 percent of the funds needed.
The industry therefore looks to external capital markets for
the bulk of its funds.
2.3.2 External Financing
The increased movement to external financing coincided
with the decline in the rate of return for utilities. As a
result, utility stocks and bonds declined in attractiveness
to investors. The problem is accentuated because the
capital requirements for the industry are extremely large.
The relationship of utility financing to total new market
issues of stocks and bonds is shown in Table 2-14. In each
financing category (long-term debt, preferred and common
stock), the percent of utility financing relative to the
national average has increased greatly. The specific
problems of the industry in each financing category are
described below.
The volume of debt interest charges for the industry
rose from less than $1 billion in 1965 to $5.6 billion in
1976. The rise in interest costs was due to the volume of
debt financing, the rise in interest rates during the
period, and the effect of the lowered rate of return on
utility bond ratings. The investor's services companies,
such as Standard & Poor's and Moody's which rate bond issues,
normally look closely at a firm's interest coverage ratio,
that is, the ratio of net income (before taxes and income)
to annual interest charges. The ratio fell sharply for
utilities in this period causing a decline in the risk
-47-
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TABLE 2-14
ELECTRIC UTILITY INDUSTRY INCREMENTAL LONG-TERM FINANCING AS
PERCENT OF TOTAL FOR ALL U.S. INDUSTRIES, 1965 to 1976 (%)a
YEAR LONG-TERM DEBT PREFERRED STOCK COMMON STOCK
1965
1966
1967
1968
1969
1970
1971
1972
19.73
1974
1975
1976
aTeknekron , Inc
Standards for Coal-F
and
Financial Impact
10
15
12
18
20
20
17
15
23
27
18
16
. , Review of
ired Utility
s, p. A-20.
29
44
51
72
56
83
50
75
55
77
46
57
7
8
9
8
10
19
22
24
33
51
51
46
New Source Performance
Boilers ,
Volume II Economic
rating (toward more risk) for utility bonds. Since bonds
which have a greater chance of defaulting must pay higher
yields, debt financing costs increased.
Utility stock prices for the period performed poorly,
although dividends were generally increased. The price/earn-
ings ratio for utility stocks, which can be roughly inter-
preted as the premium placed by the market on a given stock,
fell steadily from 19.8 in 1965 to 11.5 in 1970 and to 6.4
in 1976.5 The decline in the ratio was caused largely by
a fall in stock prices, and not by the gradual increase in
earnings. The price fall meant an increase in the number of
new shares which needed to be sold in order to obtain a
given amount of capital.
-48-
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Preferred stocks are also rated by investor services in
terms of the firm's ability to meet scheduled dividend payout
The amount of preferred stock sold rose much more rapidly
than income, leading to a decrease in the dividend coverage
ratio. Preferred stock ratings fell, requiring an increase
in stock yields.
2.4 Model Plant Descriptors
For all of the other industries covered in this study,
model plants (or firms) were developed as a means of estimat-
ing the regulatory impacts on plant net income. For this
industry model plants will be developed only as a means of
estimating average waste quantities, and as a basis for cost
estimates. The model plants are described in the next
chapter. A complete analysis was not made of net income
effects, due to the regulated nature of the industry.
Eventual impacts are largely a function of the regulatory
commission's attitude toward the additional expenditures. A
qualitative discussion of RCRA impacts on utility net income
and finances is provided in Chapter Four.
-49-
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NOTES TO CHAPTER TWO
1. Edison Electric Institute, Annual Electric Power
Survey, April 1977, p. 16.
2. Edison Electric Institute, "Advance Release of Data
for the Statistical Year Book of the Electric Utility
Industry-Year 1977."
3. Teknekron, Inc., Review of New Source Performance
Standards for Coal-Fired Utility Boilers, Volume II - Economic
and Financial Impacts, p. 2-22.
4. Teknekron, Inc., p. 2-7.
5. Teknekron, Inc., p. A-22.
-50-
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CHAPTER THREE
SOLID WASTE GENERATION
IN THE ELECTRIC UTILITY INDUSTRY
The principal solid waste disposal issue for electric
utilities is the potential environmental problems associated
with the disposal of coal ash and FGD scrubber sludge. In
this chapter, the physical and chemical properties of these
wastes will be examined. Potential environmental problems,
especially the toxicity of fly ash (as defined in the RCRA
program), will be examined. The characteristics of oil ash
will also be covered.
The disposal requirements for electric utility wastes
are, of course, dependent on whether the wastes are to be
considered hazardous under the RCRA. The issue is a
complex one which cannot be readily decided based on
available data. Cost estimates for disposal as a hazardous
waste are provided below. Actual disposal costs will be
highly region specific. In developing the cost estimates it
was necessary to make a number of assumptions about a
representative disposal operation. Details of the cost
estimation are included in Section 3.10 and Appendix A.
Also the administrative costs of RCRA compliance are covered
at the end of this chapter.
-51-
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3.1. Waste Characteristics
3.1.1 Coal Ash
The residual ash which results from the combustion of
coal is primarily derived from the inorganic mineral matter
in the coal. The amount of the residual is directly related
to ash content of the coal, which can vary widely depending
upon the circumstances in which the coal deposit was formed.
The range of observed ash contents among the major types of
coal is given below in Table 3-1. In each case the possible
range is very large. On the average, eastern coals have a
higher ash content than western coals. However, most
eastern coal (bituminous coal) has a higher heat value than
the subbituminous coal and lignite found in the west.
TABLE 3-1
RANGE OF ASH CONTENT IN COAL
TYPE OF COAL ASH (%)
Anthracite 4-19
Bituminous 3-32
Subbituminous 3-16
Lignite 4-19
Therefore, the difference in ash generation rates is less
than the difference between ash contents.
The ash residual is divided into fly ash and bottom
ash or boiler slag. Fly ash is that part of the ash which
is entrained in the combustion gas leaving the boiler. It
is collected downstream with mechanical collectors and/or
-52-
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electrostatic precipitators or in flue gas desulfurization
systems. The bottom ash is created from fused particles
which are sufficiently heavy to drop out of the furnace gas
stream. These particles are collected in the bottom of the
furnace. Boilers are characterized in terms of their
ash-handling equipment as being either wet-bottom or dry-
bottom. The former require high temperatures in order to
cause ash to soften and form slag (thus, wet-bottom), while
the latter handle bottom ash as a solid material or as
cinders.
The division of the ash residual is significant in that
potentially hazardous ash constitutents may be found in
varying amounts in either component.
3.1.1.1 Physical Properties of Ash
The fly ash and bottom ash are removed separately from
the power plant although they are generally combined for
ultimate disposal. In this section, the characteristics of
the ash are discussed.
Fly ash consists largely of small glassy spheroids
which are largely siliceous. The spherical particulates
r^nge in diameter from 0.5 to 100 microns.1 The fly ash
spans a color range of light tan to gray and to black. The
darker colors are evident in ash with an increased carbon
content. The lighter, tan-colored ash indicates high iron
content. The pH of the fly ash is generally that of a mild
or strong base, that is, a pH of 8 to 12.2 p]_v ash j_s a
natural pozzolan, a pozzolan being a siliceous material that
has little or no cementitious value itself, but in finely
divided form and in the presence of moisture is able to
-53-
-------
chemically react with alkaline earth hydroxides to form a
cementitious compound.
A portion of the fly ash produced consists of cenopheres,
These are silicate glass spheres filled with nitrogen and
carbon dioxide which vary from 20 to 200 microns in diameter.
These particles may comprise as much as 5 percent by weight
or 20 percent by volume of the fly ash.3 These particles
float on ash pond surfaces.
Bottom ash is formed as either solid materials or
cinders (in dry-bottom boilers) or slag (in wet-bottom
boilers). In the first case, a gray or black material in
angular shaped particles is formed. The dry-bottom boiler
ash has porous, dull reflective surfaces. Boiler slag
consists of angular black particles with a smoother, glossy
appearance. Bottom ash particles are larger than fly ash
particles. Samples of bottom ash from a dry-bottom boiler
have been measured to be 0.7 mm to 40 mm in diameter.4
3.1.1.2 Chemical Constituents
The inorganic constituents of ash are the same as those
typically found in rocks and soil. The major compounds are
oxides of silicon, aluminum, iron, and calcium. These
compounds comprise over 90 percent of the composition of
ash. The exact proportions of each for six coal samples are
presented in Table 3-2. The proportions of these chemicals
appear fairly consistent for the six samples for which data
are provided. However, widely divergent chemical makeups
are possible for different coals. For example, the percent
of silicon oxide in bituminous coal can vary from 5 to
70 percent.5
-54-
-------
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-55-
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The distribution of these elements is evenly spread
between fly ash and bottom ash. For none of the six samples
are there order of magnitude differences in the amount of a
given chemical found in the fly ash and bottom ash portions.
3.1.1.3 Trace Element Contents
The trace elements found in coal ash and the average
amounts of each are displayed in Table 3-3. A number of
these and other substances are referenced in the U.S. .EPA
Safe Drinking Water Standards as being potentially toxic if
they migrate to water sources. As can be seen from the
table, the concentrations of elements vary widely among
elements and among coal types. Within coal types there
can be large variations due to the specific mineralogy and
genesis of a specific coal vein. In general, the concentra-
tions of the trace metals are high and exhibit a wide variance.
Leachate quality is dependent upon the solubility of the
metals in ponds; the solubility issue is discussed in a
later section.
The distribution of trace elements among types of ash
is an important consideration because there is the possibility
that the different ashes could be disposed of separately.
In general, the distribution of elements between fly ash and
bottom ash depends on a variety of factors, many of which
are highly variable. The type of coal used and characteris-
tics of the individual combustion process are most important.
A comparison of the trace element content for ashes at six
utility plants is shown in Table 3-4. The elements tested
for at the six plants are roughly but not exactly the same
as those for which information is shown in Table 3-3.
-56-
-------
TABLE 3-3
AVERAGE AMOUNTS OF TRACE ELEMENTS IN COAL ASHES (ppm)a
ELE-
MENT
Ag
B
Ba
Be
Co
Cr
Cu
Ga
Ge
La
Mn
Ni
Pb
Sc
Sn
Sr
V
Y
Yb
Zn
Zr
HIGH-
VOLATILE
ANTHRA- BITUMI-
CITES NOUS
lb
90
866
9
81
304
405
42
20b
142
270
220
81
61
962
177
248
106
8
350b
688
aO' Gorman, J.
and Trace Elements
3b
770
1,253
17
64
193
293
40
285b
111
170
154
183
32
171
1,987
249
102
10
310
411
V. and P
in U.S.
MEDIUM-
VOLATILE
BITUMI-
NOUS
1.4b
218
896
13
105
169
313
52b
20b
83
1,432
263
96
56
75
668
390
151
9
195
326
.L. Walker,
LOW-
VOLATILE
BITUMI-
NOUS
lb
123
740
16
172
221
379
41
20b
110
280
141
89
50
92
818
278
152
10
231
458
Jr. , Mineral
LIGNITES
AND SUB-
BITUMINOUS
50b
1,020
5,027
6
45
54
655
23
lOQb
62
688
129
60
18
156
4,660
125
51
4
320b
245
Matter
Coals, Department of Interior,
July 1972.
blnsufficient data to compute an average value; maximum
value is shown in table.
-57-
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Plants, Tennessee Valley Authority, January 1977, p. 46. Data were derived by TVA
from a number of studies.
-58-
-------
The partitioning of trace elements between fly ash and
bottom ash varies significantly depending on the trace
element examined. The distribution of some elements, such
as cadmium, beryllium, and cobalt, is similar between ashes.
Some of these elements tend to occur more frequently in fly
ash, but the difference is considerably less than an order
of magnitude. Several elements are mainly evident in fly
ash. Arsenic, chromium, copper, selenium, zinc, boron, and
fluorine all show higher concentrations in fly ash. The fly
ash concentrations among these elements range from 2 to
20 times the concentration in bottom ash.
Conclusions about the partitioning of specific elements
are limited by variability among plants. For example, the
manganese data show both a perfectly even distribution
(Plant 3) and a high concentration of the element only in
bottom ash (Plant 2). In general, the results are similar,
both in the rough level of elements and in the occasional
order-of-magnitude variation in levels among samples.
Overall, the fly ash component tends to show greater
trace element concentrations. However, because bottom ash
includes the same elements and because of the wide range of
possible trace element concentrations, the potential toxicity
of the bottom ash needs also to be considered.
3.1.2 Sludge from Flue-Gas-Desulfurization Systems
A number of electric utilities have been fitted with
flue-gas-desulfurization systems for the control of air
emissions. The inception of New Source Performance Standards
for coal-fired utility boilers will result in a rapid increase
in the percentage of utility boilers which are fitted with
-59-
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these systems. A major concern with these systems is the
disposal or reuse of the FGD system byproducts. In this
section, the characteristics of scrubber sludge wastes will
be examined. The analysis will focus on lime or limestone
scrubbing systems which are "throw-away" systems in which a
waste stream is produced. Regenerable FGD systems have not
been used in many cases and will not be discussed here.
The use of throw-away flue-gas-desulfurization systems
or scrubbers usually results in a waste stream of a thin
water slurry of' from 5 to 15 percent solids. Sulfur dioxide
gas in the air flow is contacted with the system reagent,
lime (CaO), or limestone (CaCC>3), and the resulting solid
mixture includes calcium hydroxide, calcium carbonate,
calcium sulfate, and calcium sulfite.^ Fly ash may also
be removed by the FGD system and removed simultaneously with
the scrubber bleed stream, although the properties of sludge
without fly ash will be considered here.
3.1.2.1 Physical Properties
Water is used as the medium in which the necessary chemi-
cal reactions take place and the water content of the sludge
waste stream largely determines the physical properties of
the sludge. An increase in water content is undesirable for
a number of reasons. It increases the volume and weight of
the material which must be disposed of. It also reduces the
extent to which the sludge can be compacted and, by lowering
the shear strength of the material, reduces the bearing
capacity of any given disposal area. Finally, it increases
the permeability and thus the quantity of leachate produced
by the sludge. The primary benefit of the water content is
that it facilitates transporting of sludge (by pumping) from
the FGD system to the disposal area.
-60-
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The amount of water held is directly affected by the
proportions of calcium sulfite and calcium sulfate in the
sludge. The ease and extent of possible dewatering is also
affected by the ratio of these constituents. In general,
limestone scrubbers produce sludges with a predominance of
sulfite. The larger sulfite concentration is attributed
to the lower pH at which these scrubbers operate. Lime
scrubber sludge is more variable but some sulfate is
generally present. Calcium sulfite may constitute anywhere
from 20 to 90 percent of the sulfur-containing solids. The
proportion of sulfite must fall below 20 percent (80 percent
sulfate) before the material may be readily dewatered.^
The proportion of sulfite and sulfate is determined by
a number of factors including the choice of reagent already
mentioned (lime or limestone). The other factors are
(1) the amount of excess air in the boiler and (2) the pH
maintained in the scrubber system. Much excess air allows
for oxidation of the sulfite to sulfate, thereby improving
the handling qualities of the sludge. Conversely, the
systems which maintain a lower pH value (which are also
typically limestone systems) have a higher volume of sulfite
The effect of oxidation on scrubber sludge properties
has been widely noted. Some scrubber manufacturers are
including forced oxidation with their system in order to
convert the calcium sulfite to calcium sulfate.^0
3.1.2.2 Chemical Characteristics of FGD Sludge
The chemical pollutants in FGD scrubber sludge will be
dominated by the characteristics of the coal burned if fly
ash is collected with the scrubbing operation. However, it
-61-
-------
is appropriate to consider FGD sludge separately since in
some cases the two waste streams are produced separately
and could be handled separately. As will be discussed, the
amount of trace elements originating from non-coal sources,
such as the scrubber reagent, are small compared to those
from the coal ash.
3.1.2.3 Phase Composition and Trace Elements
The primary constituents of FGD waste solids are
calcium sulfite (CaS03), calcium sulfate, calcium carbonate,
and magnesium sulfate. Samples of the wastes from a number
of plants are shown in Table 3-5. (The samples shown
generally included some fly ash.) In each case the source
of the sample and the reagent used is identified. The bulk
of the calcium sulfate is in dihydrate form (CaSO^j^E^O)
which is gypsum, but some is in the hemihydrate form
(CaSC>4 • 1/2H20). The calcium sulfite appears as a hemihydrate
(CaS03'l/2H20). The calcium carbonate (CaCO^) found in the
samples results from excess reagent in the scrubber system,
whether lime or limestone is used.
The reaction products described above cover the great
bulk of the material in scrubber solids. Remaining constitu-
ents are trace elements derived from any fly ash included,
from the plant makeup waters used in sluice and slurry
systems, and from the lime or limestone reagents. The trace
element concentrations in fly ash are significant, as
described previously. In contrast, the trace elements in
plant makeup water are extremely small.12 The elements in
the reagents have a moderate effect on the total trace
elements in the system. The concentration levels for the
latter, as measured at five plants, are shown in Table 3-6.
-62-
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-63-
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TABLE 3-6
TRACE ELEMENT ANALYSES OF LIME AND LIMESTONE SAMPLES (ppm)a'b
ELE-
MENTS
Sb
As
Ba
Be
B
Cd
Cr
F
Ge
Hg
Pb
Mn
Mo
Ni
Se
V
Zn
Cu
Trace
1
5.3
3.0
<30.0
3.0
6.45
0.28
1.2
105.0
<1.0
<0.01
1.3
29.8
150.0
4.3
0.08
<50.0
9.6
5.8
aHolland, W.F
Elements in
2
3.1
2.9
<30.0
0.14
45.1
0.24
3.5
134.0
<0.1
0.012
10.0
83.5
0.04
4.62
0.17
<24.0
14.0
. , et al.
the Pond
STATION NUMBER
3
<0.80
0.83
<30.0
<0.27
11.2
0.92
0.61
307.0
<0.1
<0.01
26.0
43.6
15.0
<12.0
0.086
<160.0
71.4
9.3
4
1.3
0.66
<30.0
0.37
10.8
0.90
0.57
103.0
<0.1
<0.01
14.0
20.3
8.9
<6.0
0.3
<24.0
28.0
15.6
, The Environmental Ef
Disposal of Ash
5
3.2
2.7
<30.0
0.17
17.4
0.65
<0.80
117.0
<0.11
0.02
13.0
290.0
12.0
6.2
0.22
160.0
48.0
2.4
fects of
and FGD Sludge,
EPRI RP 202, September 1975.
^All results are reported as the average of duplicate
analyses. Analyses are in ppm on a dry sample basis.
Original source does not report which samples are lime or
limestone.
-64-
-------
Lime or limestone elemental concentrations appear to be
fairly consistent across the samples examined and are quite
small. In exceptional cases, the lime or limestone reagent
could cause the presence of high metal concentrations.
A variety of tests have been run to determine the overall
chemical analysis of FGD scrubber sludge.13 The results of two
such tests to determine the solids makeup of sludges are provided
in Table 3-7. Total trace concentrations are considerable, as is
immediately evident. Barium and fluorine are particularly high
in the two samples. Concentrations for the other elements are
more moderate but not negligible. For neither of the plants
is fly ash included in the sludge. A portion of the element
concentration did result from the lime or limestone inputs.^
3.2 Leachate and Solubility Analyses
The important consideration for the quality of leachate
produced by utility disposal areas is the solubility of
trace metal components in the ash and sludge. Use will be
made of the results of leachate tests reported from various
sources. As will be shown, the tests examined show some
potential problem of toxicity for ash and sludge ponds. An
additional section is also provided to briefly discuss some
analyses of the mutagenicity of fly ash.
3.2.1 Solubility Analyses
Solubility of the trace metals appears to be fairly low
for both ash and sludge leachate. However, tests run on ash
and sludge leachate indicate that the toxicity standards of
RCRA (Options A and B) may be violated in a number of cases.
-65-
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TABLE 3-7
TRACE ELEMENT ANALYSES OF LIME/LIMESTONE SLUDGE SOLIDS (ppm)a
ELEMENT
Sb
As
Ba
Be
B
Cd
Cr
F
Ge
Hg
Pb
Mn
Mo
Ni
Se
V
Zn
Cu
aHolland, W.
Trace Elements in
STATION
1
4.3
4.0
500.0
1.5
68.7
0.4
1.6
1,017.0
<1.0
<0.01
1.6
56.0
81.0
13.0
4.13
<50.0
13.9
38.9
NUMBER
2
7.5
12.0
4,400.0
2.0
211.0
1.1
4.0
950.0
2.4
0.46
2.4
147.0
8.0
26.0
3.8
<100.0
169.0
104.0
F., et al . , The Environmental Effects of
the Pond Disposal
of Ash and FGD Sludge,
EPRI RP 202, September 1975.
-66-
-------
Table 3-8 presents the results of coal ash leachate
tests vis-a-vis the RCRA limitations on trace metal content.
The tests presented are derived from a study by Radian Corpora-
tion of the environmental effects of disposal at five power
plants.15 The concentration of those elements for which an
RCRA standard is explicit is generally acceptable. Elements
which show unacceptable levels in at least one case are barium
(Station 1), chromium (Station 4), and selenium (Station 4).
Another analysis of trace element solubility in ash
ponds was performed at a coal-fired plant in Fruitland, New
Mexico.16 AS shown in Table 3-9, solubility tests were
formed with a variety of solutions of varying acidity. In
general, trace element solubility is inversely related to
the pH of the extractant. The high molarity solutions
mobilized large amounts of metals. With weaker acid solu-
tions and with water, the trace element concentrations are
closer to the RCRA standards of 10 times the Safe Drinking
Water Standards. One element which nevertheless exceeded
the RCRA limits is selenium.
In actual practice, no fly ash samples have been found
to fail the Extraction Procedure defined for Option B, but
only a small sample of ash has been tested. In a study of
coal ash characteristics made by Energy Resources Co. (The
Toxicity and Radioactivity of Ashes from U.S. Coals) it was
estimated that 28 percent of coal ash was likely to have
hazardous characteristics due to trace metal leaching. The
estimate was based on an analysis of trace elements in
U.S. coals and the likely leachate tendencies in coal ash.
For the purposes of this study, all coal ash will be assumed
to be hazardous. This assumption is made to bound the
"worst-case" economic impacts.
-67-
-------
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-69-
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A solubility analysis of scrubber sludge was also
performed by Radian Corporation. The results of this study
are presented in Table 3-10 for three stations and for an
analysis of the lime input at one station. The trace
element concentrations are low. Potential problems appear
only for fluorine and a limitation for this element has not
been specified in RCRA.17 -jhe lime input at Station 1 is
shown to contribute a small portion of the trace amounts for
most elements listed.
Other analyses of scrubber sludge show the possibility
that scrubber sludge may exceed the RCRA limits in some
cases. The range of elemental composition for scrubber
sludge leachates, as drawn from several studies, is provided
in Table 3-11. The maximum values exceed the 10X Safe
Drinking Water Standards for boron, mercury, and selenium.
Additional analyses of scrubber sludge may be found in the
literature.18 in some cases the results are skewed by the
inclusion of fly ash with the scrubber sludge. The fly ash
trace element concentration is greater than that for scrubber
sludge and would increase the levels shown in a leachate
test. As a general conclusion, scrubber sludge without fly
ash will have a lower metals content in solution than fly
ash ponds.
As a general conclusion, scrubber sludge will probably
be classed as nonhazardous in most cases. It is also
possible that scrubber sludge could be combined with hazar-
dous fly ash to produce a nonhazardous mixture. However,
in order to bound the possible economic impacts it will be
assumed that scrubber sludge is a hazardous waste.
-70-
-------
TABLE 3-10
EQUILIBRIUM CONCENTRATIONS OF
TRACE
ELEMENTS IN FGD SLUDGE LEACHATEa
STATION NUMBER
pH
Element (ppm)
Antimony
Arsenic
Barium
Beryllium
Boron
Cadmium
Chromium
Fluorine
Germanium
Mercury
Lead
Manganese
Molybdenum
Nickel
Selenium
Vanadium
Zinc
Copper
aHolland,
8
0
<0
2
0
2
0
0
31
<0
0
0
<0
0
<0
0
<0
0
0
W.F
1
.5
.014
.002
.0
.002
.6
.0005
.001
.5
.01
.0005
.0056
.002
.063
.05
.045
.1
.005
.031
• , et
9
0
<0
<0
0
6
<0
0
8
<0
0
0
<0
0
<0
<0
<0
0
0
al . ,
4
.7
.013
.002
.3
.001
.3
.001
.011
.7
.01
.001
.0033
.002
.061
.05
.0096
.1
.052
.045
The
8
0
0
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0
0
0
<0
7
0
0
0
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0
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0
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<0
<0
5
.4
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.03
.3
.002
.96
.002
.001
.6
.02
.0008
.0061
.002
.075
.05
.016
.1
.005
.005
Environmental
STA-
TION 1
LIME
12.
0.
<0.
<0.
0.
0.
<0.
0.
1.
<0.
0.
0.
<0.
0.
<0.
0.
<0.
0.
0.
6
016
002
3
001
22
001
004
2
01
002
0027
002
Oil
05
0005
1
11
013
Effects
RCA
LIMI-
TATION
None
0.5
10.0
None
None
0.1
0.5
None
None
0.02
0.5
None
None
None
0.1
None
None
None
of
Trace Elements in the Pond Disposal of Ash and FGD Sludge,
EPRI RP 202, September 1975.
-71-
-------
TABLE 3-11
ELEMENTAL COMPOSITION OF SCRUBBER SLUDGE LEACHATEa'b
ELEMENT STANDARD
As
Ba
B
Cd
Cr
Cu
Pb
Hg
Ni
Se
V
Zn
aFred C.
(PL94-580) on
0.05
1.00
1.00
0.75/irr.
0.01
0.05
1.00
0.010
0.002
0. 50/irr.
0.01
-
5.00
Hart Associ
Utility Sol
MAXIMUM
(mg/1)
0.13
0.30
2.00
40.00
0.047
0.011
0.250
0.56
0.04
0.07
0.003
0.05
0.54
0.20
4.20
ates, Inc.
id Wastes,
MINIMUM
(mg/1)
0.001
0. 008
0.002
0.220
0.005
0.001
0.002
0.003
0.0004
0.015
0.0005
0.100
0.010
, The Impact
EPRI FP-878
STANDARD
EXCEEDED
10X SDWA
No
No
Yes
No
NO
NO
NO
Yes
No
Yes
-
No
of RCRA
, August 1978.
^These results do not reflect tests made using the
Extraction Procedure proposed by EPA.
-72-
-------
3.3 Hazardous Waste Generation from Oil-Burning Power Plants
When oil instead of coal is burned by electric utilities
small quantities of fly ash and bottom ash are produced.
The amount of ash is less than 1 percent of that produced by
equivalent coal-burning installations. However, the quanti-
ties produced will be sufficient to place many utilities
into the generator category as defined by RCRA (see Sec-
tion 3.5.1 below).
3.3.1 Chemical Makeup of Oil Fly Ash
Oil fly ash has higher metal concentrations than coal
ash. The makeup of a sample of oil ash residual is shown
in Table 3-12. High concentrations of various metals
represent the entire mass of the ash sample. The sample
includes nearly a 20 percent concentration of vanadium, a
metal which is sufficiently valuable to encourage recovery.
As a result, a number of utilities sell their oil ash.
In addition to the inorganic constituents shown in
Table 3-12, organic material may represent 50 percent of
the ash volume. 19 -j^e amount of uncombusted material can
be reduced by reinjecting the fly ash into the furnace. The
ash residual can then be removed as bottom ash with insig-
nificant amounts of organic material. Reinjection of ash
also has the advantage of raising the vanadium content of
the bottom ash and making it more attractive for recovery.
The higher metal content of oil ash raises the obvious
question of metal content in any leachate produced. Little
research has been published to date. In general it will be
assumed that leachate from untreated oil fly ash will have a
-73-
-------
TABLE 3-12
TYPICAL RESIDUAL OIL ASH ANALYSIS9
CONSTITUENT WEIGHT (%)
Iron
Aluminum
Vanadium
Silicon
Nickel
Magnesium
Chromium
Calcium
Sodium
Cobalt
Titanium
Molybdenum
Lead
Copper
Silver
Total
22.99
21.90
19.60
16.42
11.86
1.78
1.37
1.14
1.00
0.91
0.55
0.23
0.17
0.05
0.03
100.00
aDanielson, J., Air Pollution Engineering Manual,
U.S. Environmental Protection Agency,
Study of Electrostatic Precipitators
Boilers, Southern Research Institute
1978.
May 1973, as cited in
Installed in Oil-Fired
study for EPRI, June
-74-
-------
higher metal content than coal ash, and that it will fail
RCRA standards for toxicity. This conclusion is based on
the evidence of metal concentrations in oil fly ash.
3.4 Other Electric Utility Solid Waste Streams
Routine maintenance operations, in the form of the
cleaning of boilers and other equipment, produce occasional
waste flows. Additional waste is generated in the form of
coal pile run-off. Waste streams must generally be treated
prior to discharge and pollutants will therefore be captured
in the resulting wastewater treatment sludges. These waste
*
streams and their likely classification vis-a-vis RCRA will
be covered in this section.
3.4.1 Metal Cleaning Wastes
A variety of maintenance operations is required to
sustain efficient boiler operation. The wastewater streams
generated consist of the cleaning solution used and the
matter removed from boiler equipment. The latter is likely
to consist of oil and grease and suspended solids. Specific
sources of wastewater are (1) boiler cleaning, (2) boiler
fireside cleaning, (3) air preheater cleaning, (4) feedwater
heating cleaning, and a variety of other metal-cleaning
operations.
Resulting wastewater treatment sludge would pick up the
trace element concentrations of the effluent flows. Trace
element concentrations are highly variable, but would
generally exceed RCRA limitations based on information about
concentrations in the effluent stream.20
— 7 5—
-------
3.4.2 Coal Pile Runoff
Coal-burning utilities reserve significant land areas
for primary and reserve coal storage piles. One study puts
the posssible range of the required land area at 25 to
100 acres. Depending on the height of the pile, from 780 to
2,340 square yards per megawatt of capacity would be required,
Pile heights range from 25 to 40 feet.21
The environmental problems associated with coal-pile
runoff are simiar to those for acid drainage from coal
mines. The physical and chemical constituents of coal-pile
runoff are shown in Table 3-13. An extremely wide range of
variability exists for trace elements. This variability is
not dissimilar to that for coal and coal ash. The pH of
coal-pile runoff will also be low enough on occasion to fail
RCRA standards.
If the coal pile runoff if collected, an NPDES permit
is required for discharge. As a hazardous waste its collec-
tion would be required under RCRA. Thus, uncontrolled
runoff would not be allowed. It will be presumed for this
study that the collected runoff is disposed with other coal
wastes. A separate estimate of control costs for the runoff
(for leachate collection) was not made on the presumption
that the same leachate collection and treatment system as
for the disposal site could be used. If this assumption is
not made, only a small increase (less than 2 percent) in
total compliance costs would be incurred.
-76-
-------
TABLE 3-13
CONSTITUENTS OF COAL-PILE RUNOFF3
Conventional measures of pollution
pH
Total suspended solids
Total dissolved solids
Turbidity
Total hardness
Major chemical constituents
Ammonia
Nitrate
Phosphorus
Sulfate
Chloride
Aluminum
Iron
Manganese
Sodium
Trace element constituents
Arsenic
Beryllium
Cadmium
Chromium
Cobalt
Copper
Magnesium
Mercury
Nickel
Selenium
Zinc
aFred C. Hart Associates, Inc.
(PL94-580) on Utility Solid Wastes,
RANGE
2.100 -
22.000 -
720.000 -
2.770 -
130.000 -
0.000 -
0.300 -
0.200 -
130.000 -
3.600 -
66.000 -
0.060 -
90.000 -
160.000 -
0.005 -
<0.010 -
<0.001 -
0.000 -
0.025 -
0.010 -
0.000 -
<0.0002 -
0.240 -
<0.001 -
0.006 -
(mg/1)
6.600
610.000
28,970.000
505.000
1,851.000
1.770
1.900
1.200
20,000.000
481.000
1,200.000
4,700.000
180.000
1,260.000
0.600
0.070
0.003
16.000
-
3.900
174.000
0.007
0.750
0.030
12.500
, The Impact of RCRA
EPRI FP-878,
August 1978,
p. 54.
-77-
-------
3.5 Model Plant Waste Quantities
Several studies have been made to develop estimates of
the quantities of solid waste generated by electric utili-
ties. One such study, published by TVA and EPA, will be
used here as a source of waste quantitites for a 500-MW
model plant. The plant is assumed to have an initial load
factor (% of time in operation) of 80 percent. The load
factor is assumed to decline over time as is explained in
sections below. The TVA study will also be used below as a
source of disposal cost estimates. (For a full reference
see Table 3-14.)
The specifications for the model plant used as the
basis for estimating quantities are listed in Table 3-14.
All of the factors listed have some influence on solid waste
quantities. In the specifications it should be noted that
the ash content of the coal is a moderately high 16 percent,
and the sulfur content is a substantial 3.5 percent.
Quantity estimates when these assumptions are varied are
given below. Another influence on the waste quantities is
the load factor (operating time), here assumed to be
80 percent. Older plants which are used more sparingly
generally have lower load factors and this would have a
direct effect on waste quantities.
The solid waste generated by the 500-MW model plant
consists of 28.1 MT/hr of FGD sludge and 24.5 MT/hr of
fly ash (dry weights). In the TVA study only fly ash is
considered. However, the model plant characteristics
specify the split factor of fly ash to bottom ash to be
80 to 20. Accordingly, 6.1 MT/hr of bottom ash is also
generated. The total waste generation is 58.7 MT/hr by dry
weight or 117.4 MT/hr by wet weight, with an assumed
-78-
-------
TABLE 3-14
MODEL PLANT CHARACTERISTICS - TVA STUDY3
ASSUMPTIONS
DATA
Plants
Units
Load Factor
Location
Coal
Ash content
Fly ash/bottom ash
Sulfur content
FGD system (limestone scrubber)
Scrubber efficiency (S02 removal)
Scrubbing reagent
Stoichiometric ratio
(Ca/S removed)
Slurry to pond (% solids)
Settled slurry
500 MW - single unit
80%
Midwest
16%
80/20
3.5%
65%-85%
Limestone
1.5
15%
50%
aBarrier, J.W., et al., Economics of Disposal of Lime/
Limestone Scrubbing Wastes; Untreated and Chemically Treated
Wastes, EPA-600/7-78-023a, February 1978.
-79-
-------
50 percent water content. Annual waste generation amounts
to 410,900 MT dry metric tons of waste material assuming an
operating time of 7,000 hours. The contribution of each
component of the waste stream is 196,700 metric tons of FGD
sludge, 171,500 metric tons of fly ash, and 42,700 metric
tons of bottom ash.
Waste quantity estimates for variations in plant
characteristics are shown in Table 3-15. Several of the
variations provide interesting information on the sensitivity
of waste quantities to the type of coal burned. Most o'f the
relationships between a given coal characteristic and the
related solid waste quantity are estimated to be roughly
proportional. However, sludge volumes change more than
proportionately for a given change on sulfur content. For
example, if the sulfur content of input coal is only
2 percent, rather than the base case sulfur content of
3.5 percent (a reduction of 43 percent), then the hypo-
thetical plant would produce only 27,000 Ib/hr of scrubber
sludge, a reduction in sludge volume of 54 percent. The
total hourly waste volume (fly ash and sludge) falls from
116,000 to 81,000 Ib/hr. If the sulfur is 5 percent, the
scrubber sludge volume jumps to 97,000 Ib/hr, an increase of
56 percent over the base case.
Waste quantities are significantly lower for plants
using low ash western coals. Ash quantities could be
one-half or one-third those of the base plant. Also, the
use of lime rather than limestone reduces the volume of
scrubber sludge significantly. The lime scrubbing system
produces 47,000 Ib/hr as compared to 62,000 Ib/hr, a drop of
nearly 25 percent.
-80-
-------
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-81-
-------
3.5.1 Average Oil As-h Quantities
Although the ash generation from coal-fired boilers far
outweighs the ash generation from oil-fired burners, utili-
ties using oil-fired burners are expected to be generators.
Ash quantities are generally greater than 100 kg/month from
utility-sized oil-fired burners.
The ash proportion of most fuel oils is typically only
0.1 percent by weight.22 However, a 50-MW output boiler
operating at 70 percent capacity and burning fuel oil with
0.1 ash content will generate a total of 6,770 kg of ash per
month. To generate 100 kg/month of ash, only 1.5 percent of
the ash need be retained in the boiler or in a particulate
control device. For larger boilers, higher ash fuels, or
higher capactiy levels, proportionately smaller percentage
of the ash need be retained to qualify the utility as a
generator.
Those boilers that are equipped to burn both coal and
oil have particulate control devices. Thus, they qualify as
generators whether they are burning coal or -oil. Those
utilities who burn just oil or oil and natural gas will also
be generators.
Utilities may collect the ash in any of a number of ways.
Thirteen companies are reported to'collect the fly ash from
combustion and then sell the ash for vanadium recovery.23
One utility recovering vanadium reports that boiler washes
at their 600-MW oil-fired boiler generate 12.25 m3 of
sludge eight times per year.2** Assuming a specific
gravity of 1.5, this material weighs 18.375 metric tons, for
a total of 147 metric tons per year. In other cases, only
bottom ash is accumulated. These quantities are quite small
-82-
-------
relative to fly ash, but may exceed 100 kg/month. In
addition, ash is collected from residues deposited on boiler
surfaces as well as tubes, air preheaters, economizers,
etc., during periodic boiler washdown and cleaning. The
percent of ash that is retained in the boiler varies from
boiler to boiler. From discussions with utilities and
boiler manufacturers, a figure of 5 percent of the total ash
will be assumed to be retained in the boiler and periodically
collected.25 &t this rate, a 50-MW boiler will generate
an average of 340 kg of bottom ash per month.26
In addition, for aggregate waste generation estimates,
an estimated 15 percent of the total fly ash generated is
assumed to be collected by firms that employ a coal-oil
boiler equipped with particulate control for fly ash control.
Thus, 20 percent of the total ash in oil as combusted is
assumed to be generated by oil-burning utilities. Based
upon 0.1 percent ash by weight in oil, and a consumption of
5.65 x 10^ barrels of oil, approximately 20,000 metric
tons of oil ash is estimated to have been generated (i.e.,
collected) in 1977 by all oil-fired boilers.
3.6 Aggregate Waste Quantities
The aggregate quantity of coal ash generated in a year
by the electric utility industry is estimated annually in a
survey of all coal-fired utility plants by the National Ash
Association. In 1977, the survey reported the following
aggregate quantities of ash by type: fly ash - 44.0 million
metric tons (48.5 million tons); bottom ash - 12.8 million
metric tons (14.1 million tons); and boiler slag - 4.7 million
metric tons (5.2 million tons). The total ash generation in
/-) *^
the survey report is 61 million metric tons.^'
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The estimates of ash quantities appear to be reasonably
accurate in that an estimation procedure based upon ash
production at a model plant provides similar results. In
order to develop the estimate of ash quantities, the model
plant, with characteristics as shown in Table 3-14 above,
was used. As stated above, the plant would produce 214,200
metric tons of ash per year while providing 3.5 billion kWh
of electricity. Assuming this plant produces ash at the
average rate for coal-burning utilities then the national
production of coal ash can be derived. Coal-burning utili-
ties generated 985 billion kWh of electricity in 1977. The
aggregate quantity of coal ash produced in 1977 is therefore
estimated to be 60.3 million metric tons. This figure is
extremely close to the National Ash Association's figure
of 61.5 million metric tons, suggesting that the Association's
survey was exhaustive.
The aggregate quantity of flue-gas-desulfurization
scrubber sludge is a direct function of the number of FGD
systems operating in the country. To date, only a small
fraction of the total coal-fired generating capacity has
been fitted with scrubbers. However, the institution of New
Source Performance Standards for air quality by EPA will
change the situation dramatically. In 1975, 2.5 billion kWh
were generated by utilities with FGD systems. For 1985,
when many new plants with the required scrubbers will have
come on line, an estimated 500 billion kWh will come from
plants with FGD systems.28 Estimated national quantities
of ash and sludge are shown in Table 3-16. Assuming once
again that the model plant characteristics are averages for
the utility industry, the total national quantity for 1975
would have been 126,000 metric tons. The national figure
will expand rapidly to 28.1 million metric tons in 1985.
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TABLE 3-16
ESTIMATED AGGREGATE QUANTITIES OF ASH AND SLUDGED
MM METRIC TONS MM kWh
FROM
COAL-FIRED
COAL ASH FGD SLUDGE COMBINED PLANTSb
1977
1980
1985
60.3
75.3
97.6
3.7C
11. 2d
28.1
64.0
86.5
125.7
985,000
1,230,000
1,595,000
aERCO estimate.
^Edison Electric Institute, Annual Electric Power
Survey, April 1977.
clt was assumed that the quantity of sludge generated
in 1977 was three times the 1975 figure of 1.225 million
metric tons.
dSCS Engineers, Data Base for Standards/Regulations
Development for Land Disposal of Flue Gas Cleaning Sludges,
EPA, December 1977.
3.7 Number of Generators
Approximately 400 utilities are currently burning coal,
although the number varies somewhat as some utilites switch
between coal and oil. The number of firms burning only oil,
and which are generators due to oil ash residues, is 350.29
3.8 Current Disposal Practices
Current disposal practices have improved during the
1970's, largely under the impetus of state regulations. In
this section disposal practices for ash and sludge systems
and for ash systems are surveyed. An additional section
measures the extent of productive use.
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3.8.1 Ash and FGD Sludge Systems
As of June 1978 there were 41 FGD systems operating in
the United States.30 Disposal ponds for FGD sludge and
coal ash have been unlined for the most part. A summary of
disposal practices as reported for 36 of these systems is
shown below in Table 3-17. A disposal method was not
reported for the other systems.
Given the relatively large number of unlined ponds,
this disposal method will be used as the baseline technology
for the industry in the cost estimates. A number of states
have moved to regulate disposal techniques. Emphasis has
been placed on insuring the eventual reuse of the land.
Thus disposal techniques are improving in response to RCRA.
Part of this activity can be interpreted as RCRA-inspired,
and therefore part of the RCRA impacts. Therefore, no
reduction in RCRA impacts will be considered due to the
level of state activity.
TABLE 3-17
CURRENT DISPOSAL PRACTICES FOR FGD SLUDGE3
DISPOSAL METHOD NUMBER OF SYSTEMS
Unlined pond - no treatment 19
Lined pond 5
Fixation 6
Landfill - no treatment 5
Mine disposal 1
Total 36
aSCS Engineers, Data Base for Standards/Regulations
Development for Land Disposal of Flue Gas Cleaning Sludges,
EPA, December 1977.
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3.8.2 Ash Disposal
Ash disposal is done by either wet (ponding) or dry
(landfilling) methods. A survey by the National Ash Associ-
ation reported that 50 percent of the industry used each
method. The Association also reports that the current trend
appears to be toward dry disposal. Some utilities have
moved in this direction under the regulatory eye of state
agencies.31
For ponding disposal, a wet slurry is generally used to
convey ash to the disposal pond. The water may then be
recycled to the plant or discharged, in which case an NPDES
permit would be required. Slurry systems work most easily
if they can use gravitational forces. As a result, many
utilities have chosen low-lying areas for ash ponds.32
Ash settles to a high solids content of from 60 to
90 percent. In some cases a utility will build a pond with
a sloped basin. At the low end of the basin, facilities are
constructed for recycling water to the plant. Ash is then
dumped at the high end, and the water content migrates
downhill. This practice provides for more rapid dewatering
of the ash.
Landfill techniques vary among utilities. A number of
firms, particularly those operating in states with RCRA-type
legislation, have actively upgraded their landfill practices.
Some firms report they have been able to reduce leachate
production to a minimum. Other firms, however, appear to be
using simple landfilling or landplacing (no cover). At such
sites, the only compaction of the ash may be due to the
truck traffic over the land which is generated by the
dumping operation.33
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3.8.3 Commercial Utilization
A survey by the National Ash Association indicated that
approximately 20 percent of all coal ash was commercially
utilized. The highest rates of utilization were for bottom
ash and boiler slag at 33 and 60 percent respectively. The
breakdown of the various uses are shown in Table 3-18.
3.9 RCRA Required Treatments
Wastes from electric utilities are treated in entirely
different fashions under the two sets of RCRA draft regula-
tions. Under Option A, utility wastes would be treated in
the same fashion as other hazardous waste streams. The
general facility requirements of Section 3004 would then
apply (assuming that the waste is hazardous). Under
Option B, special facility requirements are to be defined.
To date, the new facility requirements have not been an-
nounced. In the following sections, possible disposal
requirements under each option will be specified.
Retrofitting will be defined as closure of the existing
disposal site (with a clay cap) and development of a new
site. No consideration has been given to the possibility of
excavating existing sites.
Chemical stabilization methods have been included as
disposal options under both Options A and B. Existing
methods on the market include the IUCS system and the Dravo
system. These stabilization or fixation methods convert
utility sludge and ash into either a soil-like material or a
hard, impermeable material. In either case, the leachate
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TABLE 3-18
ASH UTILIZATION
METHOD OF UTILIZATION
Commercial utilization
Cement uses
Lightweight aggregate
Fill material for roads,
BOTTOM
FLY ASH ASH
37 2
2 3
20 20
BOTTOM
SLAG
3
-
8
dikes, construction
Stabilizer for road bases,
parking areas, etc.
Filler in asphalt mix
Ice control
Blast grit and
roofing granules
Miscellaneous3
Other ash removed
from plant site
Ash utilized after
initial disposal
Total
Total ash utilized^
(MM metric tons)
Percent of total
ash collected
—
-
3
7
26
100
5.7
13
22
-
9
17
22
100
4.2
32.6
13
48
22
4
1
100
2.8
60
aUltimate use not specified.
^National Ash Association, Ash at Work, September
1978.
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produced will probably be acceptable according to the RCRA
toxicity test.34
Certain factors could not be considered in the cost
estimates. Location factors, such as the RCRA stipulation
that facilities should not be located in a 100-year flood-
plain,, were not considered. Other crucial assumptions, such as
the presence of clay on-site, are described in sections below.
3.9.1 RCRA Option A - Required Treatments
The facility requirements specified under Option A
for surface impoundments and landfills are described in
Table 3-19. The surface impoundments criteria will be used
to develop ponding costs for new facilities fitted with FGD
TABLE 3-19
GENERAL HWMF REQUIREMENTS
UNDER RCRA (OPTION A)a
REQUIREMENTS FOR SURFACE
IMPOUNDMENTS OR LANDFILLS
OPTION
NUMBER LINER CAPPING COVER
1 Clay Clay Soil
(10-ft thick) (6-in. thick) (18-in. thick)
2 Double linerb Clay Soil
clay (6-in. thick) (18-in. thick)
(5-ft thick)
3 Chemical
stabilization
aU.S. Environmental Protection Agency draft regula-
tions for Section 3004, March 1978.
bFor the double liner case, it will be assumed that
a clay liner and an artificial liner are used.
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systems. For retrofitting, it will be assumed that existing
sites are closed. Disposal is then carried out in a hazar-
dous waste landfill. Alternatively, it would have been
possible to assume disposal in a surface impoundment.
A third option, not explicitly mentioned in RCRA
regulations, is the use of chemical stabilization methods.
It was assumed that these methods would represent acceptable
treatments under RCRA, and cost estimates will be provided
below for one such system.
3.9.2 RCRA Option B - Required Treatments
Facility requirements have not been specified for the
disposal of wastes from electric utilities. In the sections
below, several treatments will be costed as possible under
Option B. However, aggregate technical costs for disposal
will be assumed to be zero. This approach appeared most
consistent with the current form of RCRA regulations.
3.10 Cost Estimates
There are numerous elements to the total compliance
costs which may be incurred by electric utilities. The
principal cost categories are capital investments, incremen-
tal operating and maintenance expenditures, and administra-
tive costs. Capital investment costs are presented in the
sections below; incremental operating and maintenance
expenses have not been discussed separately. They are
included, however, in the estimates of disposal costs per
metric ton of waste. Administrative costs are presented
separately in Section 3.10.5.
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The capital investment costs include the following:
1. Land costs and site preparation costs
2. Liner costs
3. Leachate collection and treatment facilities
4. Other RCRA disposal requirements (monitoring
wells, fencing).
The most important assumptions about these elements are
discussed below and in the following section on cost
estimation methodology.
Disposal cost estimates are provided for two general
disposal cases. First, the costs of RCRA-specified
disposal for new coal-fired power plants will be examined.
The new plant costs are for the disposal of ash and
sludge. Second, retrofit costs are provided for ash
disposal. The first set of estimates will be used as
representative of present and future disposal costs for
sludge or sludge and ash combined. The second set of
estimates will be used to represent ash disposal costs.
The cost estimates presented here are designed to
be representative of the costs which may be incurred by
utilities. A number of cost parameters were selected as
being indicative of the compliance requirements which firms
will face. It was not possible in this study to take
into account the variability in these cost parameters. A
summary of these parameters and some possible variations
are provided below. The scope of this project did not
allow the opportunity to model the influence of variability
in these factors.
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Waste Characteristics - It was assumed that coal
ash and scrubber sludge would be uniformly considered
hazardous. Wastes from some plants may not actually
be hazardous.
Waste Quantities - The quantities from the model
plant (Section 3.3) were used. Ash content is thus
set at 16 percent and sulfur content is 3.5 percent.
For the retrofit case (ash only), ash content is also
16 percent. For the worst-case plant, ash content was
increased -to 20 percent.
In-place Soils and Regional Variations in Costs -
It was assumed that impermeable clay soils are
available at the disposal site. Costs were estimated
for spreading and placing clay soils to the RCRA-
specified thicknesses (5 ft and 10 ft). No estimate
was made for disposal at sites where natural in-place
soils can be utilized without any additional excavation
or construction costs. This assumption was taken as a
rough average of necessary construction activities. In
the eastern United States, varying thicknesses of
in-place soils may be available. In many western
areas, no impermeable soils may be available in the
vincinity of the disposal site.
Land Costs - Suitable land for the disposal site
was assumed to be available at a cost of $3,500 per
acre. The distance to the disposal site was set at
1 mile for the new plant, 2 miles for the retrofit
plant, and 5 miles for the worst-case plant. No
additional consideration was made of the effect of
RCRA prohibitions concerning siting in wetlands
areas, floodplains, or near-surface waters.
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3.10.1 Cost Estimation Methodology
The costs of disposal by ponding presented here are
based on those provided in a study published jointly by TVA
and EPA entitled The Economics of Disposal of Lime/Limestone
Scrubbing Wastes; Untreated and Chemically Treated Wastes
(Authors J.W. Barrier, H.L. Fawcett, and L.J. Benson). The
TVA study estimated costs of disposal for the 500-MW plant
used here. The study also examined a number of variations
to the base case including changes in the disposal method
and the size of the facility. Landfill costs are based
(with a number of modifications) on the methodology used in
a report published by the Electric Power Research Institute
entitled State-of-the-Art of FGD Sludge Fixation (Authors:
Michael Baker, Jr. Associates).
Cost estimates are based on the expected disposal costs
for a new 500-MW coal-fired unit and for a 10-year-old 500-MW
plant. In each case the total expected life of the facility
is 30 years. The new plant is assumed to be fitted with an
FGD system which collects both ash and sludge. Descriptions
of the waste generation rate and characteristics of the
emission control system are provided above in Section 3.5.
The disposal pond is assumed to be 1 mile from the plant.
A 500-MW facility rather than a larger facility was
chosen in order not to underestimate costs due to economies
of scale in disposal operations. However, the cost estima-
tion techniques used here for estimating landfill costs are
relatively insensitive to economies of scale. Thus unit
cost estimates for a 1,000-MW or 1,500-MW facility would be
only slightly lower.
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The 10-year-old plant is assumed to be basically the
same facility as the new 500-MW unit with the exception
that no scrubber system is in place. Current disposal
practices consist of sluicing coal ash to an unlined pond.
Under RCRA (Option A) the ash pond is allowed to dry and
then capped. For most ash ponds, dewatering costs would be
incurred. Landfill operations are then started. The
landfill area is located 2 miles from the plant. It was
assumed that no equipment costs were incurred for the ash
handling equipment at the plant. Many plants have the
capability for wet or dry ash handling (see reference cited
in note 27).
An important assumption concerns the expected operating
profiles for the two facilities. The capacity factors for
the two plants are described below in Table 3-20. The
operating schedules are derived from the TVA report and are
based on TVA's experience with electrical generation.
TABLE 3-20
OPERATING PROFILES FOR MODEL PLANTS3
NEW PLANT
YRS OF CAPACITY
LIFE
1-10
11-15
16-20
21-30
Avg.
FACTOR
80
57
40
17
48.5
ANNUAL
OPERATING
HOURS
7,000
5,000
3,500
1,500
4,250
aBased on operator prof
of Lime/Limestone Scrubbing
10-YEAR-OLD
REMAINING CAPACITY
YRS
1-5
6-10
11-20
Avg.
iles in
Wastes:
FACTOR
57
40
17
32.8
Economics of D
Untreated and
PLANT
ANNUAL
OPERATING
HOURS
5,000
3,500
1,500
2,875
isposal
Chem-
ically Treated Wastes, EPA, February 1978.
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Other elements of the cost estimation procedure are
described below:
1. The shorter operating hours and the absence of an
FGD system mean that a considerably smaller volume
of waste will need to be handled in the retrofit
facility. The average dry weight of waste to be
handled annually is 88,000 MT for the older plant
and 224,000 MT for the new plant.
2. The annual revenue requirements include necessary
capital charges (including a rate of return) and
operating and maintenance costs. The contribution
of the latter varies depending on the system
component being considered. The O&M expenses of
the landfill operation (ash loading transport,
compacting) are included in the annual revenue
requirements for the landfill site (unimproved).
3. Capital charges are slightly higher for retro-
fitting investments due to the retirement of costs
in a shorter time period. The difference in
annual capital charges between the new and retrofit
disposal sites amount to 1 percent of total
investment.35
4. The clay used for lining is assumed to be available
on-site. The cost of excavation and placing of
the clay is assumed to be $2.50/yd3, as was used
in the published TVA estimates.36 jf clay is
brought from off-site then costs would be dependent
on the transport distance. The artificial liner
costs were set at $4.50/yd2, roughly equivalent
to the cost of a hypalon or chlorinated polyethylene
-96-
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liner with a thickness of 30 mils.37 Less
expensive liners could have been proposed for use.
The TVA study includes estimates for liners
costing from $1.50 to $4.50 per square yard.
However, none of the currently available liners
appear to have the durability for long-term use in
a landfill.^8 AS a result, the most expensive
liner was assumed to be necessary.
5. For disposal of ash and sludge in a new plant, a
baseline cost of $7.51 per metric ton was used.
This figure, as estimated by TVA, represents the
cost of disposal in an unlined pond. For land-
filling, a baseline cost of $3.00/MT was used.
The figure was chosen as representative for
landfill operations which began 10 years ago,
that is, for the model plant to be retrofitted.
The range of disposal costs at existing sites
ranges from $1.50 to $5 per metric ton.
6. The cost estimates labeled "chemical stabilization"
refer to costs derived from the TVA study for the
IUCS system. Another stabilization system, the
Dravo system, was estimated by TVA to have a
higher price. Only the IUCS system costs are
presented here on the assumption that, other
factors being equal, the model plant would choose
the lower cost system. The comparability of the
systems was not assessed.
7. No costs are included for dewatering of the
existing sites. For ash ponds, it was assumed
that they would dry to a solids content which
would allow capping. Retrofit costs for
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ash/sludge ponds were not included due to the
small number of plants to which they would apply.
However, if dewatering is undertaken at these
plants, it would involve a substantial additional
cost.
8. Closure costs are included in the financial
responsibility costs described below. If they
were provided here as a separate component, they
would not change the results greatly due to the
small present value of expenditures to be made 20
to 30 years hence.
An appendix explaining the cost estimation procedures
in greater detail is included at the end of this report.
3.10.2 Option A Costs
The costs of RCRA compliance under Option A are shown
for a new 500-MW plant in Table 3-21. The baseline cost
estimate is $7.51/MT. Addition of either of the first two
disposal options, a 10-foot clay liner or a 5-foot clay liner
combined with an artificial liner, increases the disposal
costs substantially. The least cost option is clearly chemical
stabilization, which is costed at approximately $14/MT. In
fact the chemical stabilization option is shown to require a
lower capital investment than the unlined pond. Operating
expenses, however, bring the cost up to the $14/MT level.
Disposal costs are presented in terms of the applicable
annual revenue requirements. Annual revenue requirements
include capital charges (including provision for a rate of
return on equity) and operating and maintenance expenses.
-98-
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annualized compliance costs.
The costs of retrofitting are outlined for the model
plant in Table 3-22. A baseline or current cost of disposal
of $3/MT has been assumed. Under RCRA the existing site is
closed with a 6-inch clay cap and a new landfill site is pre-
pared. The basic capital investment for the site has been calcu-
lated at approximately $0.5 million. The site improvements are,
again, a 10-foot clay liner, or a 5-foot liner combined with
an artificial liner. The necessary capital investments for
these improvements are modest compared to those of the new
plant costs. Here they are estimated at $3.7 to $3.8 million
for each disposal option. The cost per metric ton of waste
nevertheless increases from $3/MT to $11.48/MT.
3.10.3 Worst-Case Costs
A wide number of options were available to define
the worst-case costs. Variables which could be manipulated
include: (1) transportation costs, (2) liner costs (adding
costs for importing clay), (3) ash content, (4) sulfur
content (in the case of scrubber sludge), (5) plant load
factors, (6) plant size, and several others. For this
analysis, three variables were chosen to define worst-case
costs. These are listed below in Table 3-23. The estimates
are for retrofitting a 500-MW plant with a 20-year remaining
life. The retrofit case was judged to have the widest
applicability and was therefore used in the definition
of worst-case costs. In the worst-case, the transportation
distance for the waste was changed only from 2 to 5 miles.
However, a very liberal transportation cost per ton of
-100-
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-101-
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TABLE 3-23
WORST-CASE ASSUMPTIONS
ITEM
Distance in disposal site
Ash content
Average annual load factor
MODEL PLANT
2 miles
16%
32.8%
WORST-CASE
5 miles
20%
60%
75 cents per ton was used and thus possible increases in
transportation costs are more than adequately covered.
The increased transportation distance increases the
cost per ton of ash diposed. The increased ash content and
load factor increase the size of the necessary capital
investment. However, these changes tend to reduce the cost
per ton of ash disposed. As a result, the overall cost per
ton of disposal in the worst-case is only slightly higher
than that for the model plant.
The cost components for the disposal site are shown
below in Table 3-24. The basic landfill site costs are
substantially higher than those of the model plant. Also
the total capital investment for the system is approximately
75 percent higher than for the model plant. An increase of
approximately 25 percent is estimated for the cost per
kilowatt hour generated by the worst-case plant. Table 3-25
below provides a comparison of several of the major compo-
nents of the model and worst-case disposal.
-102-
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-103-
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TABLE 3-25
MAJOR RESULTS OF MODEL AND WORST-CASE DISPOSAL CASES3'b
WORST-CASE
COST ESTIMATE MODEL PLANT PLANT
Total capital investment ($) 3,740,000 6,581,000
Cost/MT of disposal ($) 11.48 11.88
Cost (mills/kWh) 0.73 0.91
aERCO estimate.
^Comparison is made assuming use of a 10-ft clay liner.
3.10.4 Option B Costs
Two disposal options are provided under Option B. The
options and related costs are shown in Table 3-26. The
first involves the addition of a 1-foot clay liner to the
baseline method (unlined pond). The second option involves
chemical stabilization. The clay liner adds a relatively
modest $1.40 to disposal costs. As in Option A, chemical
stabilization increases the total cost of disposal to
approximately $14/MT.
Possible retrofit costs are shown in Table 3-27. In
this case it has been assumed that landfilling of dry ash
would be acceptable. Disposal costs consist only of devel-
oping the landfill site and capping the old site.
If the assumption about liners is modified, costs, of
course, increase. Addition of a 1-foot clay liner would add
approximately $0.50 to the disposal cost per metric ton.
-104-
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-106-
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Use of an artificial liner, as shown for Option A, would add
$2.64/MT.
In the calculation of aggregate disposal costs, no
technical requirements will be included under Option B.
This approach is consistent with the absence of technical
requirements for utilities under Option B. It is hoped that
some of the estimates presented here can be of use in future
efforts to cost out other disposal options.
3.10.5 Administrative Costs
The varied nontechnical costs of RCRA compliance are
described here under the general title of administrative
costs. The individual tasks are described in the following
tables. The costs attached to each item were derived from a
study by another EPA contractor, Arthur D. Little (Integrated
Economic Impact Assessment of Hazardous Waste Management
Regulations, Preliminary Draft, October 1978). In a number
of cases, judgments had to be made as to the applicability
of a task or the appropriate size of the relevant costs.
Thus the cost estimates should be considered ERGO estimates.
Costs are presented in Tables 3-28 and 3-29 for the
administrative costs associated with on-site disposal of
wastes under RCRA Options A and B. The large difference in
costs is due to the presumed existence in the first case of
financial responsibility requirements. The financial
responsibility costs were set for Option A at $194,500.
This figure is consistent with the "low estimate" of finan-
cial responsibility charges for a 20,000 m3 hazardous waste
landfill in the ADL report. The "low estimate" was chosen
-107-
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TABLE 3-28
ADMINISTRATIVE COSTS FOR ON-SITE DISPOSAL,
ELECTRIC UTILITIES (OPTION A)a
COST ($)
FIRST
YEAR
RECURRING
Section 3001;
1. Waste analysis'3
2. Documentation of wastes
3. Supervision of testing
Section 3002;
1. Application for ID Code
Section 3004;
1. Surface water monitoring0
2. Groundwater monitoring
3. Notification of disposal
4. Reporting of quantities disposed
5. Report of monitoring data
6. Develop contingency plan
7. System design for proper
facility operation
8. Daily inspections
9. Updating of procedures
Section 3005;
Develop facility description
Design financial requirements plan
Assessment and redesign of facilit
Understanding of permit
Training program
Design of contingency plan costs
fnnt- i napnr-v stmprvi =; i nn
ty
o. ues-Lyu i_»j_ i,uu i_ j-uy cuuy ^>.
7. Contingency supervision
Financial responsibility
requirements
Total
Annualized costs
23,000
240
50
32
28,000
10,400
32
1,136
260
493
2,142
20,075
811
42,600
1,340
1,730
1,790
13,750
4,000
1,000
194,500
347,381
294,076
23,000
28,000
10,400
1,136
260
20,075
811
4,500
1,000
194,500
283,682
aERCO estimates.
bAssumes $2,300/test, 10
c$350/sample at 8 sites,
tests/year.
10 times/year.
-108-
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TABLE 3-29
ADMINISTRATIVE COSTS FOR ON-SITE DISPOSAL,
(OPTION B)a
COST ($)
FIRST
YEAR
RECURRING
Section 3001;
1. Waste analysis'3
2. Documentation of wastes
3. Supervision of documentation
Section 3002;
1. Notification of
generator
23,000
240
50
32
Section 3004:
aERCO estimates.
bAssumes $2,300/test,
10 tests/year.
cAssumes $350/sample at 6 sites, 10 times/year,
23,000
1.
2.
3.
4.
5.
6.
7.
8.
Sect
1.
2.
3.
4.
5.
Surface water monitoring0
Groundwater monitoring
Notification of disposal operations
Reporting on quantities disposed
Report of monitoring data
System design for proper
facility operations
Daily inspections
Updating of procedures
ion 3005:
Develop facility description
Assessment and redesign of faclity
Understanding of permit
Training program
Supervision of permitting
Total
Annualized costs
28,000
10,400
32
1,136
260
2,142
20,075
811
42,600
1,730
1,790
13,750
1,000
147,048
98,597
28,000
10,400
-
1,136
260
-
20,075
811
-
-
-
4,500
1,000
89,182
-109-
-------
due to the relatively small risk involved in utility waste
disposal compared to other hazardous waste disposal.
Under Option B, firms disposing of wastes at owned,
offsite facilities will be required to provide manifests
with each shipment of waste. The manifest handling require-
ments were assumed not to apply to the model firm, which is
assumed to be able to dispose of wastes onsite. However,
these costs would apply to (1) firms which, in retrofitting,
must ship wastes offsite and (2) firms whose current landfill
operations involve offsite disposal of wastes. The cost of
manifest handling was estimated by ADL at $3 per manifest
for generators. For a standardized loading and filling
operation, such as for ash disposal, this cost estimate
appears to be fairly liberal. The number of truckloads of
ash for a 500-MW coal-burning plant would range from 2,000
to 7,000 per year. Thus costs for manifest handling would
range from $6,000 to $21,000 annually.39
A separate set of administrative requirements is
provided for offsite disposal of oil ash. These costs,
shown in Table 3-30, will be assumed to apply to oil-fired
generating plants. Most of these firms are currently using
onsite disposal, but under RCRA it appears likely that they
would choose offsite disposal for the small quantities of
oil ash generated.
-110-
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TABLE 3-30
ADMINISTRATIVE COSTS FOR OFFSITE DISPOSAL OF OIL ASHa
TASK
Waste analysis
($2,300/test,
5/year)
Documentation of
wastes
Supervision of
documentation
Application for
ID code
Reporting of
generation
Storage of
manifests
Manifest
OPTION A
FIRST
YEAR RECURRING
($) ($)
11,500 11,500
240.50
50
31.50
586 586
20 20
36 36
OPTION B
FIRST
YEAR
($)
11,500
240.50
50
31.50
242
20
36
RECURRING
($)
11,500
-
-
-
242
20
36
handling
($3/manifest,
I/month)
System design
for handling
disposal
Supervision of
system design
Ongoing
supervision
Maintenance of
test and
upgrading of
procedures
Totals
Annualized costs
993
300
600
214
300
600
214
993
300
600
214
14,571
13,256
13,470
14,227
300
600
214
12,912
13,126
aERCO estimate.
-Ill-
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NOTES TO CHAPTER THREE
1. Hecht, N.L. and D.S. Duvale, Characterization
and Utilization of Municipal and Utility Sludges and Ashes,
Volume II - Utility and Coal Ash (University of Dayton,
Dayton, Ohio, 1975), p. 66.
2. Chu, T.Y.J., P.A. Krenkel, and R.J. Ruane, Reuse
of Ash Sluicing Water in Coal-Fired Power Plants (Tennessee
Valley Authority), p. 29.
3. Hecht, N.L. and D.S. Duvale, 1975.
4. Ray, S.S. and F.G. Parker, Characterization of Ash
from Coal-Fired Power Plants (Tennessee Valley Authority),
p. 31.
5. O'Gorman, J.V./and P.L. Walker, Jr., Mineral
Matter and Trace Elements in U.S. Coal (Office of Coal
Research), 1972.
6. Holland W.F., et al., Environmental Effects
of Trace Elements from Ponded Ash and Scrubber Sludge (EPRI
Report No. 202), September 1975.
7. Michael Baker Jr., Inc., State-of-the-Art of FGD
Sludge Fixation (Electric Power Research Institute),
January 1978.
8. Michael Baker Jr., Inc., 1978, Section 2.
9. Michael Baker Jr., Inc., 1978, pp. 2-14.
10. Michael Baker Jr., Inc., 1978, Section 2.
11. Michael Baker Jr., Inc., 1978, Section 2.
12. Michael Baker Jr., Inc., 1978, pp. 2-30.
13. Other references include J.W. Rossoff et al.,
Disposal of By-Products from Nonregenerable Flue-Gas-
Desulfurization Systems, Second Progress Report (EPA),
May 1977.
14. Comparison of analyses presented in the source work
for Table 3-7, Radian Corporation's study, Environmental
Effects of Trace Elements from Ponded Ash and Scrubber Sludge,
indicates thatsizable portions oftheelements originated
in the lime or limestone inputs to the FGD system.
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15. Holland, W.F., et al., 1975.
16. Dressen, D.R., "Comparison of Levels of Trace
Elements Extracted from Fly Ash and Levels Found in Effluent
Waters from a Coal-Fired Plant," Environmental Science and
Technology (October 1977).
17. Fluorine is covered in the RCRA Option A regulations
Section 3001, but does not appear in Option B regulations.
18. See, for example, Rossoff, J.W., et al., 1977.
19. Southern Research Institute, Study of Electrostatic
Precipitators Installed on Oil-fired Boilers (Electric Power
Research Institute, 1978), pp. 3-17.
20. Fred C. Hart Associates, The Impact of RCRA
(PL94-580) on Utility Solid Wastes (EPRI FP-878), August
1978.
21. Cox, D.B. and R.J. Ruane, "Characterization
of Coal Pile Drainage," U.S. EPA, Second Symposium on
Fugitive Emissions: Measurement and Control, May 1977.
22. Southern Research Institute, 1978, pp. 3-15.
23. Personal communication between John Eyraud of ERCO
and A.J. O'Neil of Long Island Lighting Co., October 1978.
24. Personal communication between Alisa Gravitz of
ERCO and Phil Rock of Boston Edison Co., March 1978.
25. Based on personal communication between Steve
Fischer of ERCO and several firms. The range of estimates
given was 0 to 20 percent for ash retention.
26. Assumes 0.1 percent ash content, 70 percent load
factor, and 5 percent as bottom ash.
27. National Ash Association, Ash at Work, 1978.
28. Exact forecasts of generation from plants with
scrubbers have not been developed, pending the final
promulgation of New Source Performance Standards. The
500 billion kWh was chosen as a conservative estimate, based
upon the incomplete forecasts available.
29. U.S. Department of Energy, Annual Summary,
Cost and Quality of Fuels for Electric Utility Plants (1978).
Approximately 350 firms had oil deliveries, not counting
those firms which also had coal deliveries.
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30. SCS Engineers, Data Base for Standards/
Regulations Development for Land Disposal of Flue Gas
Cleaning Sludges, December 1977.
31. National Ash Association, 1978.
32. Personal communication between John Eyraud of ERGO
and Charles Govin, Wisconsin Electric Power, August 1978.
33. Personal communication between John Eyraud of ERGO
and Howard Humphrey of American Electric Power, September
1978.
34. For published evidence of leachate characteristics,
see J.W. Rosoff, cited above in note 10.
35. Based on the difference in capital charges for
plants with 30-year and 20-year remaining life in the TVA
study.
36. Personal communication between John Eyraud of ERGO
and Robert Torstrick of TVA, Muscle Shoals, Alabama.
37. Based on the liner costs cited in J.W. Rossoff,
p. 155.
38. Personal communication between John Eyraud of ERGO
and Robert Landreth of EPA, Cincinnati, August 1978.
39. Based on an assumed truck capacity of 36 yd^ of
ash. A cubic yard of ash is estimated to weigh 1.215 tons.
-114-
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CHAPTER FOUR
ECONOMIC IMPACTS ON THE ELECTRIC UTILITY INDUSTRY
The assessment of economic impacts for this industry
will vary somewhat from those presented for the other
industries covered. As a regulated industry, plant shut-
downs and other major economic dislocations are not much of
an issue for utilities. The principal impacts are pollution
control expenditure and the related increase in electric
utility rates. For this reason, only a brief model plant
analysis is provided below. Following sections will then
present aggregate cost impacts, and regional impacts under
the assumption that all ash and sludge is found to be
hazardous.
4.1 Model Plant Impacts
A detailed examination of the effects of RCRA on the
model plant net income was not undertaken as part of this
study. As a regulated industry, net income effects are a
function of the regulatory treatment of the added expendi-
tures. Several general conclusions will be drawn about the
probable magnitude of effects drawing upon the assessment of
industry finances and the industry regulatory structure as
presented in Chapter Two.
Net profits will decline due to the regulatory lag in
recovering costs. The size of the decline depends on the
rate of cost inflation and the length of the lag period.
-115-
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One study of the industry by another EPA contractor simu-
lated the decline in net profits due to the implementation
of air emission controls (NSPS).1 The investment in that
case was substantially larger than those considered here.
Assuming a 1-year regulatory lag, a net profit decline of
3 to 5 percent was expected for the industry. A similar,
perhaps smaller decline can be expected due to RCRA (Option
A). By extension, the industry is also likely to experience
a small decline in the rate of return on equity.
The sizable capital expenditures required under RCRA
Option A would also impinge on the quality of earnings.
Current utility earnings include an Allowance for Funds Used
During Construction (AFUDC). This balance sheet item
represents non-cash income counted in the current period,
even though it will be realized in future periods. In-
creases in the level of construction activity, generally
speaking, tend to increase the AFUDC component of earnings.
This increase represents a problem for utilities only to the
extent that investors shy away from firms with a high
non-cash component in earnings. In any case, the effects on
AFUDC should be small. The study cited above also indicated
small increases in AFUDC due to pollution control in-
vestments. 2
4.2 Aggregate Cost Impacts
The total national costs of RCRA compliance are shown
below in Table 4-1. Costs are shown based on the estimated
waste quantities in 1977 and 1985. In the latter year, large
quantities of FGD sludge, in addition to coal ash, are
expected to be generated. The total compliance costs for
1977 and 1985 are estimated at $600 million and $1 billion
-116-
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TABLE 4-1
IMPACT OF RCRA REGULATIONS ON
AGGREGATE NATIONAL ELECTRIC
RATES a
OPTION A
1977 1985
Total compliance 606.6 1,003.3
cost (1977 $MM)
Cost/kWh sold 0.31 0.37
(mills)
Average revenue/kWh 32.09 32.31
sold (mills)
Increase/kWh to 0.95 1.15
cover RCRA costs (%)
OPTION B
1977 1985
44.2 49.2
0.023 0.018
32.09 32.31
0.072 0.057
aERCO estimates based on the assumption that all ash
and sludge is found to be hazardous. It is likely that
relatively small portions of these wastes would actually be
designated as hazardous.
under Option A. The RCRA cost increase is equivalent to
0.31 mills per kWh of total electrical generation or roughly
a 1 percent increase in costs per kWh.
Option B costs presented here included only the adminis-
trative cost elements of RCRA, pending the definition of
technical disposal requirements by EPA. The RCRA adminis-
trative costs amount to $44 million and $49 million for 1977
and 1985.
The incremental costs of RCRA compliance are shown by
type of utility plant in Table 4-2. Virtually all of the
-117-
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TABLE 4-2
NATIONAL IMPACT OF RCRA FOR THE
ELECTRIC UTILITIES INDUSTRY
(1977
OPTION A
OPTION B
Technical disposal
costs
Coal wastes
Oil wastes
Administrative costs
Coal plants
Oil plants
Total costs
Coal plants
Oil plants
Total RCRA costs
1977
484.0
0.3
117.6
4.7
601.6
5.0
606.6
1985
865.9
0.4
132.3
4.7
998.2
5.1
1,003.3
1977
0
0
39.6
4.6
39.6
4.6
44.2
1985
0
0
44.6
4.6
44.6
4.6
49.2
aERCO estimates based on the assumption that cell ash
and sludge is found to be hazardous. It is likely that
relatively small portions of these wastes would actually be
designated as hazardous.
compliance costs will be incurred by coal-fired plants under
Option A. Compliance costs for oil-fired plants are estima-
ted at $5 million under Option A.
Under Option B, once again', only administrative costs
are shown. The large drop in administrative costs between
RCRA options is largely due to the absence of financial
responsibility costs under Option B. Oil-fired plants
accounted for 10 percent of the administrative cost burden
under Option B.
-118-
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4.3 Regional Price Impacts
Differential regional impacts will be felt depending
upon the proportion of fuel types used in electrical gener-
ation. The RCRA compliance costs were allocated among
regions based on the amount of coal and oil-fired generation
in each. The estimated regional impacts for Option A and B
are shown below in Tables 4-3 and 4-4. The results are not
hard to predict. The largest cost increases under Option B
are noted in the South Atlantic and Mountain regions where
coal-fired generation dominates. Small increases are noted
for the Pacific and New England regions. Option B impacts
are allocated in roughly the same fashion.
In order to better interpret the information included
in Tables 4-3 and 4-4, the following regional definitions
are provided.
New England - Me., N.H., Vt., Mass., R.I., Conn.
Middle Atlantic - N.Y., N.J., Penn.
East North Central - Ohio, Ind., 111., Mich., Wise.
West North Central - Minn., Iowa, Mo., N.D., S.D.,
Neb., Ks.
South Atlantic - Del., Md., Va., W. Va., N.C., S.C.,
Ga., Fla.
East South Central - Ky., Tenn., Ala., Miss.
West South Central - Ark., La., Okla., Tx.
-119-
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TABLE 4-3
RCRA IMPACTS ON REGIONAL ELECTRIC RATES (OPTION A)
1977 CENTS/kWh SOLD
REGION
REVENUE13 RCRA COST
RCRA COST AS
% OF REVENUE
New England
Middle Atlantic
E. North Central
W. North Central
South Atlantic
E. South Central
W. South Central
Mountain
Pacific
Alaska and Hawaii
United States
4.44
4.45
3.20
3.26
3.37
2.33
2.76
2.73
2.68
4.39
3.21
0.0029
0.026
0.049
0.046
0.040
0.044
0.0054
0.055
0.0024
0.0036
0.031
0.065
0.584
1.531
0.014
1.186
1.888
0.196
2.015
0.089
0.082
0.95
aERCO estimates.
^Derived from Edison Electric Institute, Statistical
Yearbook 1977, pp. 34-35.
TABLE 4-4
RCRA IMPACTS ON REGIONAL ELECTRIC RATES (OPTION B)a
1977 CENTS/kWh SOLD
REVENUE^
RCRA COST
RCRA COST AS
% OF REVENUE
New England
Middle Atlantic
E. North Central
W. North Central
South Atlantic
E. South Central
W. South Central
Mountain
Pacific
Alaska and Hawaii
United States
4.44
4.45
3.20
3.26
3.37
2.33
2.76
2.73
2.68
4.39
3.21
0.00097
0.0022
0.0033
0.0032
0.0030
0.0031
0.00048
0.0038
0.00051
0.0012
0.00023
0.022
0.494
0.010
0.098
0.089
0.133
0.017
0.139
0.019
0.594
0.072
aERCO estimates.
^Derived from Edison Electric Institute, Statistical
Yearbook 1977, pp. 34-35.
-120-
-------
Mountain - Mont., Idaho, Wyo., Colo., N.M., Ariz., Utah,
Nev.
Pacific - Wash., Ore., Cal.
4.4 Secondary Impacts
Plant shutdowns and the attendant job losses or produc-
tion cutbacks are unlikely for this industry. A brief
summary of industry impacts is shown below in Table 4-5.
A slight increase in oil imports is listed as a RCRA
impact on the electic utility industry. There were 96
plants in 1977 which burned both some coal and at least
100,000 barrels of oil.3 At the margin, the increased
cost of coal waste disposal should encourage an increase in
oil use. The quantity of the import increase was not
modeled.
-121-
-------
TABLE 4-5
SUMMARY OF IMPACTS ON THE ELECTRIC UTILITY INDUSTRY3
OPTION A
OPTION B
Number of generators
(1978)
Plant shutdowns
Job losses
Production cutbacks
U.S. demand reduction
Price increase
Balance of payments
effects
750
Unlikely
Unlikely
Unlikely
Small
Small
Slight import
increase
750
Unlikely
Unlikely
Unlikely
Small
Small
Slight import
increase
aERCO estimate.
-122-
-------
NOTES TO CHAPTER FOUR
1. Teknekron, Inc., Review of New Source Performance
Standards for Coal Fired Utility Boilers, Volume II -
Economic and Financial Impacts, March 1978.
2. Teknekron, Inc., 1978.
3. Annual Summary of Cost and Quality of Electric
Utility Plant Fuels, 1977, Office of Electric Power Regulation,
Federal Energy Regulatory Commission, U.S. Department of
Energy, September 1978.
-123-
-------
PART II
PULP AND PAPER MILLS
-------
CHAPTER FIVE
CHARACTERIZATION OF THE PULP AND PAPER INDUSTRY
The multisegmented, multibillion-dollar paper industry
produces thousands of intermediate and final products. Its
1977 sales of $40.2 billion accounted for over 3 percent of
all manufacturing sales. It employs almost 1 percent of the
total work force (676,000 people in 1976). It is the third
largest industrial water user and the fourth largest indus-
trial purchaser of fuel and electricity, even though it
generates approximately 45 percent of its own heat and
electricity.
The companies in the industry are large, highly diversi-
fied establishments which produce pulp, paper, paperboard
and building board (such as roofing shingles and wood fiber
board) as well as maintain their own timberland, whole-
saling and paper product conversion operations. The extent
of the vertical integration in the paper industry renders
artificial most segmentation for purposes of financial
analysis since the companies report few statistics by
segment other than production values. Thus figures for
profitability, asset size and composition, employment
productivity, and other economic characteristics for each
individual segment (pulp, paper, paperboard, and building
board) are largely unavailable. Approximately 72 percent of
the pulp, paper, paperboard and building board production
occurs in companies which are integrated in three tiers: (1)
woodland control, (2) pulp manufacture, and (3) paper and
board production.! Many of these companies, as well as
-127-
-------
those that are not as widely integrated, also own converting
operations. These facilities reduce bulk paper to more
marketable sizes. This report focuses on the pulp
(SIC 2611), paper (SIC 2621), paperboard (SIC 2631), and
building board (SIC 2661) segments of the paper industry.
Independent converting (SIC 264 and 265) establishments,
which buy paper directly from the mills as an intermediate
good and turn it into final products, are not included in
this work. Figure 5-1 shows the relationship between the
pulp, paper, and board segments and the converted paper and
board segments of the industry. As the figure illustrates,
the percentage of .the value of industry product shipments
accounted for by the converted paper and board segments has
decreased since 1972.
This industry produces several large volume waste
streams which will be examined in the next chapter. The
waste streams are (1) wastewater treatment sludge from a
number of industry segments, (2) wastes from chemical
pulping operations, (3) bark wastes, (4) coal ash, and
;j) secondary fiber reclamation wastes.
In the analysis that follows, each of the major
industry segments is briefly described (Section 5.1, industry
structure and trends are examined (Section 5.2), and financial
data are reviewed (Section 5.3). Model plant data are
developed in Section 5.4. The model plant analysis is
organized along process lines and draws on the tables
presented in Section 5.2, which show the approximate rela-
tionships between process and product.
-128-
-------
40
35
CO
< 30
0 25
Q
0 20
CO
z
g 15
-J
*j
5 10
5
n
"
••
^
-
6.5%
-
6.9%
—
_
ii'liilh'lll I
iiilllylllil i
39.0%
HPIIIili!!
34.1%
SX.-.X.K.}
3.3%
1
II
II
e
111
tj!
il
ilillltl
illlilli
58.S
I 111
i 1 1 >i
|H
tut
%
III!
'I!
Vxi&'i-'x
. 33.0%i
jji
1
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!•!"
i i
(I !
0.0%
• !' ' !'
i ' H
in i|
ill! i
•:•:•:•:•:•::
X-XvX
1.7%;
•x'X'X-
X-XvX
1967
1972
1977
I"" ' Pulp *S!C 2611
GUI Paper and Board SIC 2621, 2631, 2661
Converted Paper and Boards SIC 264, 265
(Bureau of the Cansus and BOO
Figure 5—1. Value of pulp, paper, board, and
converted products shipments. {U.S. Industrial Out-
look 1977, U.S. Department of Commerce Domestic
and International Business Administration.')
-129-
-------
5.1 Size and Scope of the Pulp and Paper Industry
Each of the paper industry's major segments - pulp,
paper, paperboard, and building board - are characterized
below. Production sales, geographical distribution, product
description and composition, and import/export data, where
relevant, are included in the descriptions. A final section
then discusses employment. Because there are no data on
employment by industry segment, the data presented in this
section treat the industry as a whole.
5.1.1 Pulp
There are two broad categories of pulp: wastepaper
pulp and wood pulp. Wastepaper pulp and pulp made from
other fibers such as rags are manufactured almost exclusive-
ly at integrated mills. These pulps will not be discussed
at length in this report. The second broad category of
pulp, wood pulp, is also produced primarily at integrated
facilities. Currently, integrated mills produce approxi-
mately 90 percent of the annual wood pulp tonnage, while the
remaining 10 percent is produced at independent mills.2
These figures are consistent with statistics of the American
Paper Institute which show that only 60 of the 279 reported
wood pulp mills are operated by independent pulp companies.
Table 5-1 presents a summary of wood pulp produr'.ion for the
last 4 years. As the table illustrates, a large portion of
total wood pulp production is used captively by the producer,
This is explained by the fact that the integrated mills
which produce the majority of the tonnage keep 84 percent of
that production for their own use. The remaining 16 percent
-130-
-------
TABLE 5-1
WOOD PULP PRODUCTION
(MM short tons)a
YEAR
1975
1976
1977
1978b
au.
1978.
WOOD
PULP
CAPA-
CITY13
51.9
53.1
54.7
55.9
TOTAL
PULP
PRODUC-
TION3
43.1
48.8
50.3
52.6
S. Department of
TOTAL
PULP
SHIP-
MENTS
7.3
7.9
NA
9.0
Commerce,
SIC
2611
PRODUC-
TION0 EXPORTS IMPORTS
4.3
5.1
5.3
5.5
U.S. Industr
2.6
2.6
2.8
2.8
ial
3.1
3.7
3.9
4.0
Outlook ,
b!978 estimates.
CSIC 2611 production is also included in total pulp
shipments.
is sold to domestic or foreign firms and is sometimes
referred to as "market pulp."
The geographic distribution of pulp production is
weighted toward the South. Approximately 64 percent
of the nation's pulping capacity is located in southern
states. Another 18 percent of the capacity is located in
the western states while the remainder is split evenly
between the eastern and the north central states.
There are two broad categories of wood pulp processes
chemical and mechanical. In chemical pulping processes,
chemicals are used to separate the fibers from the lignin
bonding material in wood. In mechanical pulping processes,
-131-
-------
the wood or wood chips are actually beaten or ground to
break the wood into its component fibers.
Each type of pulp can be bleached or unbleached,
depending on the desired quality of the paper product for
which it is used. Bleached pulp produces a whiter, higher
quality paper. However, the bleaching process also adds
more chemicals to the pulping liquors.
Table 5-2 shows total pulping capacity broken down by
pulp -type, excluding wastepaper pulp, as well as the approx-
imate fraction of each pulp type which is bleached. The
table shows that total wood pulp capacity increased only
slightly between 1972 and 1975 and expanded more rapidly
between 1975 and 1977. Table 5-3 shows the approximate end
uses of each kind of pulp.^ Pulps in various combinations
are used to manufacture different paper products, as described
in Sections 5.2.2 through 5.2.4 below.
Neither exports nor imports of pulp amount to more than
1 percent of total pulp production. Overall, the industry
is a net importer.5 Exports total approximately 3 million
short tons a year whereas annual imports, mostly Canadian
pulp, come to about 4 million tons. Table 5-1 provides
recent pulp import-export figures.
5.1.2 Paper
Establishments which are primarily engaged in paper
manufacture are classified under SIC 2621. However, in the
paper segment, as was the case in the pulp section of the
industry, the segmentation is not precise; most companies
produce paperboard and pulp as well as paper. Thus the
-132-
-------
TABLE 5-2
PULP CAPACITY BY TYPE
(MM short tons)3
PULP 1972 1975 1977 % BLEACHEDb
Wood pulp
Chemical Pulp
Dissolving and 1.7 1.7 1.6 100
special alpha
Sulphite 2.4 2.4 2.3 81
Sulphate (Kraft) and 32.8 35.0 37.2 42^
soda
Semi-chemical 3.9 4.2 4.6 8
Mechanical Pulp
Stone ground wood and 4.6 4.6 4.6 25^
refined
Thermo mechanical - 0.1 0.5 NA
Defribated and exploded 3.1 3.7 3.8 0
(building paper pulp)
Total wood pulpe 50.7 51.7 54.6 35
aAmerican Paper Institute, Statistics of Paper and
Paperboard.
bAverage since 1972, including 1978-79 estimates.
GAn additional 4 percent of total sulphate is semi-
bleached .
^Average 1966-71. This category is no longer reported
as bleached or unbleached.
eMay not add to totals on Table 5-1 because of rounding,
-133-
-------
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figures which follow may not refer exclusively to SIC 2621
firms.
Shipments of each major paper product are shown in
Table 5-4. Shipments have been growing slowly throughout
the seventies, although they declined in the recession of
1975 along with the output of most other paper industry
segments. The contribution to the total U.S. paper market
of each major product is displayed in Table 5-5. Printing
and writing papers, which include book, magazine, office,
TABLE 5-4
PAPER SHIPMENTS BY MAJOR PRODUCT
(MM short tons
1970
Newsprint
Printing & writing
papers
Unbleached kraft
Bleached packaging
3.
11.
3.
1.
5
0
7
1
1971
3.
11.
3.
1.
5
2
7
2
1972
3.
12.
3.
1.
7
2
8
2
)d
1973
3.
13.
3.
1.
7
4
9
1
197
3.
13.
4.
1.
4
6
5
1
1
1975
3.7
11.0
3.3
0.9
1976
3.7
13.1
3.8
1.0
papers
Tissue paper- 3.7 3.8 4.0 4.0 4.1 4.0 4.2
including sanitary
stock
Special industrial 0.4 0.4 0.5 0.6 0.6 0.4 0.6
papers
Total 23.4 23.8 25.4 26.7 27.0 23.3 26.4
aAmerican Paper Institute, Statistics of Paper and
Paperboard, 1977.
-136-
-------
TABLE 5-5
U.S. PAPER PRODUCTION, PERCENTAGE
CONTRIBUTION OF MAJOR PAPER PRODUCTS3
PAPER PRODUCTION
BY PRODUCT
Printing & writing papers 48
Newsprint 14
Unbleached kraft 15
Bleached packaging papers 5
Tissue paper 16
Special industrial paper 2
Total 100
aAmerican Paper Institute, Statistics of Paper and
Paperboard, 1977.
bond, mimeograph, and envelope papers, and bleached bristols
(index, file folder, and postcard paper), account for
48 percent of the market. Tissue paper, which includes
waxing and wrapping tissue stock as well as sanitary products
like toilet and facial tissues, is the next single largest
paper product category accounting for 16 percent of the
total paper output. Newsprint and unbleached kraft, the
source of most wrapping, bag, and sack paper, each represent
approximately 15 percent of the country's paper production.
However, the United States imports nearly twice as much
newsprint as the domestic paper industry produces.
Nearly half the pulp used for paper production is
bleached or semi-bleached sulphate (kraft pulp). Groundwood,
used primarily for newsprint, and unbleached kraft are the
-137-
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next most widely used pulps, acccounting for 13 and 15 per-
cent of total paper production respectively. More than
75 percent of the total paper is produced from chemical
pulping processes, and 97 percent is manufactured from virgin
fibers.
There are approximately 350 to 360 paper mills in
the United States.^ There is some variance in the number
of mills reported by different sources due to differing
opinions on how to distinguish mills from mill complexes.
Each of the large companies owns several mills. The approxi-
mate number of firms producing each of the major paper
products is shown in Table 5-6. Since many companies
manufacture paper in several of the product categories, the
total number of firms cannot be totaled to derive an industry-
wide company count.
TABLE 5-6
APPROXIMATE NUMBER OF FIRMS PRODUCING
MAJOR PAPER PRODUCTS, 1975^
PAPER PRODUCT NO. OF FIRMS
Newsprint 14
Printing and writing paper 71
Uncoated groundwood 20
Unbleached kraft 28
Bleached boards and bristols 26
Bleached packaging paper 40
Specialty paper 51
Tissue 51
aArthur D. Little, Economic Impacts of Pulp and Paper
Industry Compliance with Environmental Regulations, EPA,
May 1977.
-138-
-------
As for pulp production, the bulk of the capacity is
found in the south. During the 1930's paper companies
migrated south and west from the north and east to take
advantage of cheaper fossil fuel and labor, lower initial
construction costs, and favorable timberland purchases from
lumber companies that failed during the depression. Because
of this movement, the older, smaller, often nonintegrated,
and usually less productive mills are generally found in the
northeast and north central United States while the newer
larger, widely integrated plants are located in the south
and Pacific northwest."''
5.1.3 Paperboard
Mills producing primarily paperboard are classified as
SIC 2621. In 1972, there were 95 establishments attributed
to this segment of the paper industry.^ Data on paperboard
shipments, by major product, are presented in Table 5-7. As
the table illustrates, paperboard shipments were 28.4 million
short tons in 1976, up from 24.8 million in 1975, but not
equaling the industry record of 29.6 million achieved in
1973, although it should be noted that these production
figures may include tonnage manufactured at mills not
classified in SIC 2621.9 Approximately 7 percent of this
total production is shipped out of the country, making the
sector a net exporter.
Unbleached sulphate (kraft) and wastepaper are the
pulps most widely used for paperboard manufacture. Bleached
kraft is the dominant component in packaging products
for which cleanliness, aesthetics, and high strength-to-weight
relationships are important. For example, all paperboard
used for milk and food service containers are bleached kraft.
-139-
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Federal regulations require that those cartons which come
into direct contact with wet food products be made of virgin
material. For packaging applications like cereal and
cracker boxes where an inner lining is used or where low
cost is important like soap and detergent packaging, recycled
paperboard dominates.10 Nearly 70 percent of all exports
are made from unbleached kraft, most of it linerboard.
5.1.4 Building Board
The building board segment, SIC 2661, is the smallest
in the paper industry. Throughout the seventies, building^
board production has averaged 9 percent of industry-wide
production. There are three major product categories in
this segment: construction paper, insulation board, and
pressed wood fiber board (hardboard). Gypsum wallboard is
not included in this industry segment; although used
primarily for building, gypsum wallboard is classified as a
paperboard. For effluent guideline development, the EPA has
included both insulation board and hardboard in the wood
products industry (SIC 24). But for the purpose of hazardous
waste regulations, they will be covered here in the building
board segments of the pulp and paper industry. Apparently
insulation board and boxboard share both effluent loading
and market characteristics with the other lumber products.H
For the purposes of this description, all three major
products will be considered.
Building board production is fairly evenly divided
between the three major products. During the seventies
construction paper and hardboard production accounted for
35 and 37 percent of the total, whereas insulation board
represented approximately 28 percent (Table 5-8).
-141-
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The demand fot building board is more closely asso-
ciated with the demand for construction material than the
demand for paper. As with all building materials, the
demand for building board divides into two components:
(1) new demand and (2) replacement demand. In the con-
struction paper segment, the demand is less cyclical than
the demand for all building materials because there is a
large replacement component. Roofing shingles are the
largest end use of construction paper and they require
frequent replacement.13
5.1.5 Industry Employment
The pulp and paper industry is dominated by large
firms. The typical firm owns several mills which produce
different types of pulp, paper, and board, often in dif-
ferent states. Table 5-9 shows the distribution of estab-
lishments in the industry by plant type and number of
employees. The table shows that overall, more than half of
all facilities in excess of 100 employees and less than
one-fith had less than 20 employees. Only in pulp production
do small mills comprise the largest segment, while medium
size plants with 20 to 99 employees dominate the building
board segment.
5.2 Industry and Market Analysis for the Pulp and
Paper Industry
Established in the United States during the 1880's, the
paper industry is a mature industry, dominated by large
firms which have significant market power in certain in-
dustry segments. These characteristics can be seen in the
-143-
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industry's structure (Section 5.2.1), conduct and perfor-
mance (Section 5.2.2).
5.2.1 Industry Structure
There are at least 775 pulp, paper, and board mills
owned by approximately 400 companies (counting contiguous
mills as one unit, there are 561 mill complexes).14 &s a
whole, the paper industry appears to have a low concentration
T
ratio; the 10 largest firms account for less than 36 percent
of total capacity. In other large manufacturing industries,
such as chemical, petroleum, and steel, 10 or fewer firms
typically represent more than 50 percent of capacity.
However, the 15 largest pulp and paper companies recorded
57 percent of total industry sales.15 Furthermore, the
capacity concentration ratios in each product category are
much higher than the overall industry figure. The product
categories listed in Table 5-10 represent over 85 percent of
1977 paper and board capacity. In 10 of these 14 categories,
the top eight firms own over 50 percent of total capacity.
Most notable are the dissolving pulp, uncoated groundwood,
tissue, and construction paper segments where the top
eight companies account for over 75 percent of total capacity,
In the dissolving pulp segment, one firm alone accounts for
44 percent of capacity.16
On the other hand, several segments have more compe-
titive qualities. The recycled paperboard and printing
sector as well as the writing paper sectors, for example,
both contain many firms and relatively low concentration
ratios at the eight company level. However, the pattern of
finding higher concentration ratios in smaller product
categories repeats in the printing and writing segment. For
-145-
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TABLE 5-10
PAPER INDUSTRY CONCENTRATION STATISTICS -
MAJOR PAPER AND BOARD PRODUCTS, 1975a
PERCENT OF
U.S. CAPACITY
PRODUCT
TOP 4
FIRMS
TOP 8
FIRMS
APPROXIMATE
NO. OF FIRMS
Market pulp
Bleached paper grade^ 30.9 50.5
Dissolving * 77.0 100.0
Paper
Newsprint 44.0 64.5
Printing & writing 26.1 42.1
Uncoated groundwood 65.2 84.8
Bleached packaging paper 36.4 49.9
Unbleached kraft NA 69.4
Special industrial paper 25.7 42.1
Tissue 55.8 77.6
Paperboard
Unbleached kraft linerboard 34.8 57.0
Corrugating material 27.8 46.2
Recycled paperboard 23.3 38.2
Bleached board & bristolsb 44.9 67.1
Building board
Construction paper 57.7 81.0
25
8
14
71
20
40
28
51
51
28
29
101
26
23
aArthur D. Little, Economic Impacts of Pulp and Paper
Industry Compliance with Environmental Regulations, Volume II,
for U.S. Environmental Protection Agency, May 1977.
bBleached board (a paperboard product) and bristols (a
paper product) are grouped together here because they are
produced in the same mills, in some cases by interchangeable
machines.
-146-
-------
example, the top eight firms which produce uncoated ground-
wood, one type of printing and writing paper, account for
nearly 85 percent of total capacity.
The degree of vertical integration in the industry is
also high. As discussed in Section 5.1, approximately
72 percent of the pulp, paper, and board production is
shipped by companies which are integrated to woodland
management, pulp manufacture, and paper and board production.
In addition, many firms own their own converting operations.
Tissue and building board companies are almost always
integrated to the converting level.
Because such a large degree of integration is required
to compete with the industry leaders and, as described
below, growth in demand is declining, there are high barriers
to entry in the paper industry. In fact, there have been no
new grassroot entrants in recent years. All new paper
industry participants entered through merger or acquisition.17
Thus, when individual product categories are examined,
the paper industry appears to be composed of widely integrated,
relatively highly concentrated segments in which oligopolistic
behavior is possible. However, supply and demand conditions
which exist in this mature industry determine how much
market power can be exercised, as discussed briefly below.
5.2.2 Industry Conduct and Performance
In this section, a number of industry and market
characteristics are described. Price trends and market
conditions for the industry as a whole and for the principal
-147-
-------
segments are discussed. Much of the information presented
here is derived from a previous study of the industry.18
During the 1960's and early 1970's, cycles of excess
capacity and increasing productivity kept paper price
increases slightly below average price rises among other
commodities (see Figure 5-2). The new capacity added during
this period led to oversupply and kept prices down as
producers tried to increase their market share. Starting in
1973, price pressures eased and the industry was able to
pass on their accumulated cost increases as product demand
strengthened. The overall paper price index increased by
34 percent compared to the 27 percent rise observed in the
wholesale price index.
Although there are few, if any, new markets for the
paper industry to develop, it faces relatively little
competition from other industries. For example, there are
few substitutes for most printing and writing, tissue, and
building board products. However, packaging papers and
paperboards are experiencing some competition from plastics.
Price elasticities, where available, reflect these observa-
tions. Paper demand as a whole is relatively insensitive
to price changes. All segments have price elasticities
in the relatively inelastic range between 0.20 and 1.0.
Printing and writing papers have the lowest industry price
elasticity (approximately 0.22), whereas unbleached kraft
packaging papers, which experience competition from plastics,
have the highest industry price elasticity (0.9, which is,
however, still in the inelastic range).
In general, those sectors facing the most serious
competitive threats and highest price elasticities have
experienced the slowest expansion in production during the
-148-
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1970's, while those facing no direct competition and enjoying
relatively low price elasticities have had the best growth
records. The packaging paper segments had average annual
growth rates of from -1 percent to 1 percent during 1970 to
1976 whereas the printing and writing paper segment, with an
annual growth rate of 3.5 percent for the same time period,
faced better market conditions. Table 5-11 contains a
summary of competition, elasticity, and growth trends in
each of the major product sectors.
Considering the competitive threat, price elasticity,
and growth rate experience of the different segments, a
rough evaluation of potential economic vulnerability can
be made. Bleached market pulp, special industrial paper,
unbleached kraft linerboard, and corrugating material,
probably have the lowest economic vulnerability. Both
market pulp and linerboard enjoy strong foreign as well as
domestic markets. The industrial paper market is small and
specialized enough to keep favorable market prospects.
Similarly, although linerboard and corrugating material
experience some competition from plastics, they are still
the lowest cost materials for shipping containers.
On the other hand, bleached packaging and recycled
paperboard are potentially the most economically vulnerable.
Both bleached packaging papers and recycled paperboard are
facing substantial competition from plastics and both
sectors have experienced persistent overcapacity.
5.3 Financial Characterization of the Pulp and Paper Industry
The purpose of this section is to describe the financial
structure of the paper industry. Financial characteristics
-150-
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-151-
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will vary from segment to segment as well as by the size of
the firm within each segment. As mentioned above, however,
it is difficult to analyze the financial characteristics of
individual industry segments because most paper industy
statistics are reported only in aggregate form. Therefore,
the financial characteristics of the industry as a whole
will be presented.
Industry profits were below average profits for other
manufacturing industries during the 1960's and 1970's.
Industry net profits as a percent of sales fell to below
3 percent. The paper industry experienced record profit
lows in 1970 to 1972 because of the overcapacity problems
and because it was impossible to pass on the rising costs of
raw materials, energy, and labor in the weak early markets
of the 1970's. However, as demand improved in 1973 to 1974,
capacity expansion slowed, price increases became possible,
and profits improved to a post-World War II high in 1974.
Although the recession in late 1974 and 1975 caused a
downturn in profits again, most prices held and profits are
expected to improve as the economy recovers.20
The paper industry is quite capital intensive. Its
sales to asset ratio is 1.14, which makes it the fifth most
capital intensive among all U.S. manufacturing industries.
A look at the industry's cost of operations reveals that its
labor bill is approximately 28 percent of total operating
costs; materials account for 61 percent and energy costs
another 10 percent.21
At the present time, the capital structure in the
industry shows a high proportion of debt. In 1976, debt was
31 percent of total capital, and the debt/equity ratio was
44 percent.22 During the 1960's, when the industry was in
-152-
-------
a period of capital expansion, the capital structure experi-
enced a rapid displacement of equity financing by long term
debt. By 1970 to 1971, the debt to total capital ratio had
reached 33 percent and low profitability exhausted the
borrowing power of many firms. Both the low profits and
high debt ratios contributed to the slower rate of capacity
expansion experienced in the 1970's, as noted earlier. The
high debt levels and the inflation of capital goods during
the 1970's prevented many companies from using debt to
finance major expansions even as profitability rose between
1972 and 1974.23
Since the 1960's, most capital project funds have come
from retained earnings, as shown in Table 5-12. Stock
issues were important only in 1961, 1969, and 1971. However,
these trends seem to be changing. Although retained earnings
are still the major source of funds, both new stock sales
and additions to long term debt increased in 1974-75.
Overall, at the present time, the paper industry has
both a reasonable cash flow situation and the ability to
raise funds for capacity expansion. However, to fully
assess the impact of required hazardous waste control
spending, we turn next to model plant analyses.
5.4 Model Plant Descriptions
The average and worse case model plants used here
are selected from the plants modeled in the 1977 Arthur
D. Little study. ADL developed a total of 34 model plants
manufacturing 13 major paper products from a variety of
fiber furnishers. The models represent plant sizes typical
for a given product which operate at design capacity.
-153-
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TABLE 5-12
CHANGES IN PAPER AND ALLIED PRODUCTS INDUSTRY CAPITAL
STRUCTURE, 1970-75 ($MM)a
NET CHANGE IN EQUITY
YEAR
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
Totals
% of total
RETAINED
EARN INGS b
275
255
288
286
378
461
539
405
493
569
289
94
564
1,025
1,668
1,158
8,747
capital
NET
STOCK
SALES
39
401
(134)
(171)
40
(93)
6
(104)
(201)
340
(196)
253
(275)
(104)
124
118
43
TOTAL
314
656
154
115
418
368
545
301
292
909
93
347
289
921
1,792
1,276
8,790
65%
NET CHANGE IN
LONG-TERM DEBT
110
97
234
9
3
472
657
632
463
68
555
417
(164)
100
411
736
4,800
35%
aArthur D. Little, Economic Impacts of Pulp and Paper
Industry Compliance with Environmental Regulations, EPA,
May 1977.
profit retained in business.
-154-
-------
Models refer to new mill installations typical of good
technical practice in 1974. The plants are based on the use
of a single paper machine. The same amount of product could
be made on two or more smaller machines at significantly
different cost. Hence, while the model plants embody one
set of typical conditions, different and equally valid
assumptions could be made to represent other conditions.
Two plants were selected for the analyses of RCRA
impacts. The model plant is an unbleached kraft linerboard
mill. Unbleached kraft linerboard is the industry's largest
single homogeneous product line, accounting for 10,318,000
MT in 1976, or 40 percent of all paperboard manufactured and
19 percent of all industry product ion.25
The "worst-case" plant is a 100 percent recycled fiber
folding boxboard mill. This plant was chosen as the worst
case for several reasons. Folding boxboard is one of the
industry's basic products, accounting for 4,276,000 MT in
1976, 17 percent of paperboard production and 8 percent of
industry output.26 Slightly over half of folding boxboard
is made from secondary fiber. The solid wastes generated
from mills using secondary fiber are typically much larger
than for virgin fiber operations since between 10 and
15 percent of the raw material must be rejected in the
course of manufacturing an acceptable final product.
A major factor contributing to their "worst-case"
status is their present relatively weak economic position.
During the last 20 years, major inroads into markets
formerly supplied by recycled boxboard have been made.
Solid (virgin) boxboard grades now account for half the
boxboard market. The inroads have been led by the appear-
ance of solid bleached board which, though more expensive,
-155-
-------
has made major penetrations into the markets for packaging
of foods, drugs, cosmetics, and toys, where appearance and
high strength are important.27 AS a result, demand for
recycled boxboard has yet to surpass the record tonnage
produced in 1966.
In summary, the choice of unbleached kraft linerboard
is the average process and product is based simply on its
salience as the industry's dominant product. The choice of
recycled folding boxboard is based on factors higher than
average solid waste loads, economic vulnerability of the
small mill sizes, and secular market erosion.
The model plants are summarized in Tables 5-13 and 5-14,
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TABLE 5-13
MODEL PLANT CHARACTERISTICS
Plant data:
Product: linerboard from virgin fiber
Process: unbleached kraft
Mill size: 910 metric tons per day
Operating days/yr: 346
Location: southeast
Income data ($000):
Sales: 70,900
Cost of operations: 52,700
Pretax net income: 18,200
aERCO estimate derived by updating model plants
descriptions developed by Arthur D. Little, Economic Impacts
of Pulp and Paper Industry Compliance with Environmental
Regulations, EPA, May 1977.
TABLE 5-14
MODEL PLANT CHARACTERISTICS
Plant data:
Product: folding boxboard (secondary fiber)
Process: secondary fiber repulping
Mill size: 360 metric tons per day
Operating days/yr: 330
Location: north central United States
Income data ($000):
Sales: 44,500
Cost of operations: 27,200
Pretax net income: 17,300
aERCO estimate derived by updating model plants
descriptions developed by Arthur D. Little, Economic Impacts
of Pulp and Paper Industry Compliance with Environmental
Regulations, EPA, May 1977.
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NOTES TO CHAPTER FIVE
1. Arthur D. Little (ADL), Economic Impacts of Pulp
and Paper Industry Compliance with Environmental Regulations,
Vol. 1, May 1977, p. 19.
2. United States Department of Commerce, U.S. Industrial
Outlook (USIO) 1978, January 1978, pp. 40-41.
3. American Paper Institute, Statistics of Paper and
Paperboard 1977, New York, New York, p. 24.
4. The distribution of pulps among end products is only
a rough approximation. Pulps are substituted as prices,
processes, and trends in final product usage changeover
time.
5. Department of Commerce, USIO 1978, p. 41.
6. ADL, Economic Impacts, Vol.1, p. 22.
7. ADL, Economic Impacts, Vol 1, p. 28-29.
8. ADL, Economic Impacts, Vol.1, p. 22.
9. API, Statistics, p. 15.
10. Arthur D. Little (ADL), Economic Impacts of Pulp and
Paper Industry Compliance with Environmental Regulations,
Vol. 2, May 1977, pp. 70-72.
11. ADL, Economic Impacts, Vol. 2, p. 42.
12. ADL, Economic Impacts, Vol. 2, p. 42.
13. ADL, Economic Impacts, Vol. 2, p. 42.
14. Department of Commerce, Bureau of the Census, 1972
Census of Manufacturers.
15. Meta Systems Inc., Qualitative Assessment of Pulp
and Paper Industry Subcategories (for EPA), March 1978, p. 3.
16. ADL, Economic Impacts, Vol. 1, p. 24.
17. ADL, Economic Impacts, Vol. 1, p. 27.
18. ADL, Economic Impacts.
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-------
19. ADL, Economic Impacts, Vol. 1, p. 42.
20. ADL, Economic Impacts, Vol. 1, p. 44.
21. ADL, Economic Impacts, Vol. 1, p. 19.
22. API, Statistics, p. 27.
23. ADL, Economic Impacts, Vol. 1, p. 45.
24. ADL, Economc Impacts, Vol. 1, p. 45.
25. Vance Publishing, Lockwood's Directory of the
Paper and Allied Trades, 102nd ed., 1978, p. 3.
26. Vance Publishing, Lockwood Directory of the
Paper and Allied Trades.
27. ADL, Economic Impacts, Vol. II, p. 36.
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CHAPTER SIX
HAZARDOUS WASTE GENERATION
IN THE PULP AND PAPER INDUSTRY
6.1 Issues in the Definition of Hazardous Waste Streams
The major solid waste streams of the pulp and
paper industry are: (1) wastewater treatment sludge,
(2) bark and hog fuel wastes, (3) coal and bark ash, and
(4) wastepaper reclamation wastes. Additional small volume
waste streams include certain wastes from kraft pulping
operations. Of these waste streams, several exhibit
leachate characteristics which are sufficiently variable
as to make their proper classification (i.e., as a hazardous
or nonhazardous waste) ambiguous. Coal ash, which was
considered in Part One, has a variable heavy metal content
depending on the source of the coal burned. Similarly the
composition of wastewater sludges in the paper industry are
partially dependent on the characteristics of incoming
materials. Firms which process wastepaper have particularly
variable sludges due to a lack of control over wastepaper
inputs.
The analysis will focus on assumptions about waste
streams which are based on the limited empirical data. In
some cases, assumptions about large, highly heterogeneous
waste quantities are made from one or two test observations.
Clearly the data base for proper classification of wastes is
inadequate for this industry. This study should not be
considered to be 'making a determination of which industry
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wastes may be hazardous. The development of an adequate
data base is likely to take several years.
6.2 Waste Characteristics
Each of the four major solid waste streams of the
industry are discussed below in a separate section. The
waste streams considered are wastewater sludge, bark and
wood wastes, coal and bark ash, and wastepaper reclamation
wastes. Additional subsections are included for two waste
streams from the kraft pulping process.
6.2.1 Wastewater Treatment Sludges
Wastewater treatment sludge is generated in the process
of clarifying liquid plant effluents for discharge. Primary
wastewater treatment is used to reduce the suspended solids
content of the effluent. Recovered materials consist of
fiber, fiber debris, bark, and those filler and coating
materials which escape internal recovery systems. The most
common method of primary treatment is sedimentation.1
These methods usually employ a gravity clarifier or a lagoon
with adequate retention time to settle out suspended solids.
Filtration or flotation methods can also be used.
Secondary treatment involves the removal of biological
oxygen demand (BOD) caused by dissolved organic constituents
in the effluent. BOD reduction is accomplished using
activated sludge or aerated lagoon methods. In the first
process the primary treatment effluent flows into an aeration
basin where it is contacted with the "activated sludge" and
oxygen. The activated sludge is biologically active material
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which feeds on organic matter, removing it from the
wastewater. The resulting biological mass from the
aeration basin is separated from the final effluent and
recycled as the "activated sludge." A portion of the
sludge is disposed of in order to prevent sludge build-up.
Aerated lagoons are used to reduce BOD by contacting
the effluent with a low concentration of biological
organisms. This process is more land- and time-intensive,
but produces a lesser volume of sludge.
As noted above, the major constituents of primary
wastewater sludge are lost fiber and filler or coating
materials. The relative proportions of organic and fiber
constituents and inorganic filler material depends on the
nature of mill operations. High ash concentrations (inor-
ganic material) are typical in mills, which use de-inking
processes, recycle wastepaper, or use large amounts of
coating materials. The ash content can vary from a few
percent to 50 percent or more. The water concentration of
the sludge depends on the extent of dewatering and on the
ash content. Sludges with high ash content have a higher
solids concentration.
The trace element concentration in raw sludge is
also widely variable, and dependent on either the specific
process or the input fibers. Data on the chemical
make-up of a sample of four primary and secondary sludges
are provided in Table 6-1.
Of the metals tested for in these samples, three are
included in the EPA Primary Safe Drinking Water Standards -
namely chromium, cadmium and lead. These standards are
incorporated into the RCRA Section 3001 (Options A and B)
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and are therefore basic to the classification of hazardous
wastes. Each of the three metals is present in some
concentration in the sludges tested. Much of the ensuing
discussion will revolve around the presence of these metals
in leachate analyses of wastewater treatment sludges.
Leachate analyses for a number of industry sludges were
performed by the National Council of the Paper and Pulp
Industry for Air and Stream Improvement (NCASI). Much of
this information has not been published and cannot be
presented here. However, information is available on some
of the test results and is described below. Another
principal source of information is a research study which
has been sponsored by the Canadian government. The Canadian
study will be reviewed after presentation of the National
Council's results.
Leachate analyses were performed on two industry
sludges using the Toxicant Extraction Procedure (RCRA Option
A version). The sludges tested were from a de-inking mill
and a boardmill. Both sludge types are as likely to be
hazardous as any in the industry. The results of the tests
are shown in Tables 6-2 and 6-3. Cadmium, chromium and lead
concentrations were tested. Only lead of the three metals
exceeds ten times the Primary Safe Drinking Water Standard.
Lead is unacceptably high when strong acetic acid is used on
boardmill sludge, and for both weak and strong acetic acid
in the de-inking mill case.
The other metals tested for include iron, copper and zinc,
These are included in the EPA Secondary Drinking Water Stan-
dards. Each of these is present in significant quantities in
the raw sludge, although only zinc tended to leach out in any
of the tests (iron was not tested). Copper appears to
have little mobility for leaching out of the sludge.2
-166-
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TABLE 6-2
SLUDGE COMPOSITION AND SLUDGE
LEACHATE TESTS FOR BOARDMILL3
EXTRACTANTb
pH of leachate
Chromium
Lead
Cadmium
Iron
Nickel
Copper
Zinc
RAW
SLUDGE
_
79
380
NA
2,400
11
62
350
DISTILLED
WATER
6.4
<0.04
<0.02
<0.01
-
<0.01
<0.02
<0.02
WEAK
ACETIC
ACID
4.6
<0.4
0.13
<0.01
-
<0.01
<0.02
2.4
STRONG
ACETIC
ACID
4.5
<0.04
0.60
<0.01
-
<0.01
<0.02
2.4
RCRA
LIMIT
_
0.50
0.50
0.10
-
-
-
-
aNational Council for Air and Stream Improvement,
Response of Selected Paper Industry Sludges to Alternate
Solid Waste Toxic Extraction Procedures, Technical Bulletin
No. 311, 1978.
^Results shown are for tests using a 1:4 ratio of
dilution. Tests with slightly modified procedures were also
conducted.
-167-
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TABLE 6-3
SLUDGE COMPOSITION AND SLUDGE
LEACHATE TESTS FOR DE-INKING MILL3
EXTRACTANTb
pH of leachate
Chromium
Lead
Cadmium
Iron
Nickel
Copper
Zinc
RAW
SLUDGE
—
180
1 ,300
NA
1 ,500
8
330
300
DISTILLED
WATER
7.7
0.22
0.04
<0.01
-
<0.01
<0.02
0.04
WEAK
ACETIC
ACID
4.6
<0.06
2.60
<0.01
-
<0.01
<0.02
2.4
STRONG
ACETIC
ACID
4.3
<0.04
0.60
<0.01
-
<0.01
<0.02
2.4
RCRA
LIMIT
_
0.50
0.50
0.10
-
-
-
-
aNational Council for Air and Stream Improvement,
Response of Selected Paper Industry Sludges to Alternate
Solid Waste Extraction Procedures, Technical Bulletin
No. 311, 1978.
^Results shown are for tests using a 1:4 ratio of
dilution. Tests with slightly modified procedures were also
conducted.
A summary of leachate tests performed by the National
Council is provided in Table 6-4. Altogether, 13 repre-
sentative paper industry sludges were tested. Eight samples
did not show unacceptable trace-metal concentrations using
the Option A TEP and these were not included here. Five
sludges exceeded the RCRA limitation of ten times the
Primary Safe Drinking Water Standards with Option A TEP.
Retesting of sludges from these mills using the less stringent
Option B TEP indicated no unacceptable amounts of trace
metals.
-168-
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In the EPA Priority Pollutants Program, pulp and paper
mills are being required to reduce discharges of a variety
of materials. The elemental discharges which have been of
greatest concern to the industry and EPA are chromium,
copper, nickel, lead, zinc and mercury. Reductions in the
amounts of these chemicals requires that they be captured in
the wastewater treatment sludges. In many cases, therefore,
these elements will be present in wastewater sludges. The
leachate tests discussed here indicate that only chromium
and lead have sufficient mobility to leach out in unaccept-
able amounts.3
Another set of leachate analyses were performed by a
Canadian firm, under the sponsorship of the Canadian Depart-
ment of Fisheries and Environment.^ For this study, large
lysimeters were constructed and samples of pulp and paper
mill wastes were added. The samples were then subjected to
the equivalent of 100-inch annual rainfall for a period of
24 months. A summary of the study results are presented in
Table 6-5 for four of the industry wastes. The waste
streams studied include materials which are as likely to be
hazardous as any in the industry. In particular, the
combined wastes from a bleached kraft mill contained green
liquor dregs (see Section 6.2.2). Also slaker grits or lime
kiln rejects were added to the wastewater sludge of a
groundwood mill.
The 24-month analysis represented a fairly stringent
test of leachates from industry wastes. Maximum recorded
values for trace metal concentrations are presented and, in
a number of cases, they exceed RCRA standards. Once again,
chromium and lead were offending substances. Silver also
exceeded RCRA standards in three of four cases. Iron and
manganese concentrations were extremely high in some
-170-
-------
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-171-
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instances. However, the maximum recorded value figures can
be misleading. It should be noted that for most metals,
there was little leaching for a number of months. The
leaching pattern of lead, for instance, is shown in
Figure 6-1. The leaching of lead in each of the two cases
was minimal until the halfway point in the study. Then a
large quantity appeared in the leachate. No further lead
concentrations were detected in either case.
It appears that the large rainfall simulation eventually
washed out all of the metal concentrations. The test
methods of the Canadian study may be more st'ringent than the
RCRA TEP, but basically the tests are noncomparable.
In order to make any statement from these various test
results, the results of the National Council tests will be
used. Because the National Council used RCRA-specified test
procedures, their results are the most reliable available.
It is thus assumed from these data that a number of industry
sludges could be considered hazardous under the Option A
TEP, but would be nonhazardous under the Option B TEP.
The Option A TEP includes the requirement that tested
wastes show less than a specified level of aquatic toxicity.
A Daphnia assay test is proposed with a waste being classified
as toxic if its presence interferes with the reproduction or
growth of the culture as defined in the test.
Results using the specified Daphnia assay test were not
available. An indication of aquatic toxicity could be
derived from the Canadian study, which used a rainbow
trout (Salmo gairdneri) assay. Three types of paper in-
dustry sludge were tested: (1) biological (secondary)
sludge, (2) sludge from a bleached kraft mill, and (3)
-172-
-------
_ 60
P
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30
(j u.
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Figure 6—1, Two year leachate analysis-trends in lead content of leachate. (Econotecn Services
Limited,Consequences of Leaching from Pulp and Paper Mill Landfill Operations, Sept. 1977).
-173-
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sludge from a groundwood mill. Leachates from all three
sludges registered high initial toxicities (as measured in
the LC50 test of the rainbow trout assay).5 Over time
the leachates from a given sample showed declining toxicity.
Interpreting these results in terms of RCRA is a
problem. Aquatic toxicity in the Canadian study appears to
involve a considerably more stringent test which utilizes
undiluted leachate. The change of aquatic toxicity for
these wastes under RCRA appears, in fact, to be low (based
on tests made by NCASI).
The general assumption will be used for the economic
impact analysis that wastewater treatment sludges will be
hazardous under Option A TEP. The assumption will be the
basis for the calculation of total eventual treatment costs,
This assumption should not be interpreted as a conclusion
based on the available test data.
6.2.2 Chemical Pulping Wastes
6.2.2.1 Green Liquor Dregs
A waste stream produced in kraft pulping operations are
dregs (solids) from the green liquor clarifier. Green
liquor is produced at the chemical recovery stage of the
kraft (chemical) pulping operation. The material consists
of inert materials such as iron compounds, carbon, grit,
refractory material and possibly sodium salts.6 In most
operations, green liquor dregs are added to the mill sewer
system. Chemicals from the dregs would then end up in the
wastewater treatment sludge. It will be presumed that green
liquor dregs are added to the general mill waste stream and
-174-
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thus do not represent a separate waste stream. In some
cases, the material will represent a separate stream, and
quantity estimates are provided below for the green liquor
dregs.
The characteristics for a wastewater treatment sludge
made up largely of green liquor dregs were presented above.
One of the sludge samples tested by the National Council
(see Table 6-4) included green liquor dregs. The sludge
mixture failed to pass the Option A TEP due to leaching
of chromium, but passed the Option B TEP.
6.2.2.2 Lime Burning Wastes
One key step in modern alkaline (kraft) pulping is the
reconstitution of the pulping liquor by recausticizing lime
mud. Pulping costs would be prohibitive if only fresh lime
were used. Chemical recovery in kraft pulping is the source
of two related waste streams: slaker rejects and unburned
lime rejects from lime-burning kilns.
Solid waste from slakers is in the form of lumps or
pebbles whose composition will depend on the efficiency of
the given slaking operation. The waste will consist of a
mixture of inert particles and impurities carried through
the chemical recovery system and some calcium carbonate.
Lime kiln rejects are also mostly composed of inert con-
taminants which have passed through the recovery system and
a small amount of unburned lime that will vary with indi-
vidual kiln operation.
In sulfite pulping, chemical recovery solid wastes
again involve the inevitable inert materials plus an oxide
-175-
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of the base cooking chemical (calcium, sodium, magnesium, or
ammonia). The exact point at which this waste stream
originates varies with mill design but is often at the ash
washer or the cooking liquor filter.'''
Lime burning wastes are possibly hazardous under the
corrosivity tests under both RCRA options. No evidence was
available concerning the performance of these wastes against
the RCRA test protocol. Indirect evidence, based on pH
readings, is inconclusive. The arbitrary assumption that
wastes 'are hazardous will be used in the calculation of
economic impacts.
6.2.3 Bark and Wood Wastes
Pulp mills generate large volumes of bark and wood
wastes. Firms with bark boilers generally attempt to burn
as much bark and wood as possible; however, many firms do
not have bark boilers. Thus much of this solid waste is
disposed of in landfills. Possible environmental hazards of
disposal will be defined in terms of RCRA Section 3001
regulations in Options A and B. The only consideration
for bark and wood waste disposal is possible toxicity. The
more current Option B version of Section 3001 will be
considered first, wherein the toxicity definition depends on
the trace metal content of the leachate. The additional
issue of aquatic toxicity will also be discussed. Aquatic
toxicity is included in RCRA Option A.
Indications of the trace metal content of bark leachate
are given in the 2-year Canadian study of pulp and paper
mill wastes. Two types of bark were used in separate tests.
These were Douglas fir bark and Western red cedar bark. The
-176-
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TABLE 6-6
2-YEAR LEACHATE ANALYSIS OF BARK,
MAXIMUM RECORDED VALUES (mg/l)a
DOUGLAS WESTERN RED
Primary SOW
Arsenic
Barium
Cadmium
Chromium
Lead
Mercury
S e 1 e n i urn
Silver
Secondary SOW
Iron
Manganese
Zinc
aEconotech
from Pulp and
FIR BARK
NDb
2.5
ND
0.6C
l.QC
NA
NA
0.05
12
3
0.5
Services Limited
Paper Mill Landfi
CEDAR BARK
ND
5
ND
1.8C
3.QC
NA
NA
0.2
40
8
ND
, Consequences
11 Operations,
RCRA
LIMITATION
(10X SOW)
0.50
10
0.10
0.50
0.50
0.02
0.10
0.50
-
-
—
of Leaching
September 1977
= not detected.
cValue exceeds RCRA limitation.
study authors assert that in general terms, characteristics
for other tree species will be similar.8
Maximum recorded values in the generated leachate are
shown in Table 6-6. For each bark type the trace metal
concentrations are low. However, chromium and lead exceeded
the RCRA standards at their peaks. Further examination of
the test results for these metals is shown in Figure 6-2.
The pattern of leaching for the chromium shows that after
approximately 8 months, chromium value exceeded the RCRA
-177-
-------
I
_a
LU
I
o
UJ
ac
a
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cc
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.5
CHROMIUM
RCRA Limitation
12
MONTHS
24
a
a.
UJ
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tu
cc
<
ca
a
LU
3 i—
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1
.5
ND
LEAD
\
RCRA Limitation
12
MONTHS
24
Figure 6—2. Patterns of leaching of chromium and lead from bark. (Econotech Services Limited,
Consequences of Leaching from Pulp and Paper Mill Landfill Operations, Sept. 1977).
-178-
-------
limitation. Lead values were high in the first leachate
sample (taken after 4 weeks) and then immediately declined
below the RCRA limitation. Whether or not lead values would
exceed specified limits in the RCRA TEP test is uncertain.
Chromium values do not appear to represent a problem
although, as noted above, these tests are not strictly
compared to the RCRA TEP.
Additional data in the Canadian study included field
site tests from a number of wood waste disposal sites.
Results of the tests are shown in Table 6-7. The proportion
of wood and hog fuel at each site varies. In all of the
field site tests shown, no metals exceeded RCRA limitations.
Additional field site tests were made which are not shown
here. Altogether 12 field sites were tested with similar
results.
As a general conclusion, leachate from bark wastes can
be expected to have very low metal concentrations. It
appears possible for some lead to appear in bark leachate.
It is doubtful, however, that this will be a major problem,
judging from the testing of landfill sites. Bark wastes are
therefore expected to pass the test for toxicity specified in
Section 3001 of Option B.
RCRA Option A included requirements concerning the
aquatic toxicity of a waste. A Daphnia assay test is
proposed with a waste being classified as toxic if its
presence interferes with reproduction or growth as defined
in the test. No test results of paper industry wastes using
this test were available. However, the Canadian study and
other sources give indications of the aquatic toxicity of
industry wastes.
-179-
-------
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-180-
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Bark and wood waste leachate contain a number of resin
acids. The resin acids are generally regarded as toxic to
aquatic organisms. Toxicity testing for the two barks used
in the Canadian study consisted of a rainbow trout (Salmo
gairdneri) assay. Results of the test are shown in
Figure 6-3. Leachates from the two barks were highly toxic
initially but rapidly declined to zero as measured by the
LC50 test. Other sources have noted the apparent toxicity
of bark and wood wastes.9 However, as noted previously,
the Canadian study appears to represent a more stringent
test of aquatic toxicity. Available information based on a
small amount of testing by NCASI (unpublished results)
indicates that these wastes would pass the requirements.
In light of this uncertainty, an assumption about
toxicity will be made. It will be assumed that these
wastes are hazardous under Option A and not hazardous under
Option B.
6.2.4 Coal and Bark Ash
The pulp and paper industry generates a significant
portion of its own electricity. In many cases the fuels
used include coal and bark. Bark and hog fuel (wood chips
unsuitable for pulping) can be burned if modifications
are made in the standard boiler or if a special bark-burning
furnace is purchased.
The characteristics of coal ash leachate were discussed
in the previous part and no additional discussion is included
here, except where combined coal and bark ash characteristics
are presented. It will be assumed that coal ash adds to the
quantity of hazardous waste for the industry.
-181-
-------
o
X
o
o
LU
LU
cc
CJ
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High
Low
DOUGLAS FIR BARK
12
MONTHS
24
High
x
O
U.
O
LU
LU
cr
cj
LU
Q
Low
WESTERN RED CEDAR BARK
12
MONTHS
24
Figure 6—3. Toxicity of bark samples, LC50 Test-Rainbow trout assay. (Econotech Sen/ices Limited,
Consequences of Leaching from Pulp and Paper Mill Operations, Sept. 1977).
-182-
-------
Bark typically contains approximately 3 percent ash.
The principal chemical constituents to bark ash are calcium
oxide and silicon dioxide. As noted in the previous
section, trace metal concentrations in bark leachate are
very low. Trace element concentrations in bark ash will be
similarly very low although no data could be uncovered which
addressed this point directly. It will be concluded, given
the low concentrations in bark, that bark ash leachate will
have acceptably low metal concentrations. However, for
Option A, the uncertainties of the broader test requirements
will be covered by an assumption of toxicity.
6.2.5 Wastepaper Reclamation Wastes
One major source of solid waste in industry segments
using secondary fiber is reclamation waste. Contaminants
present in wastepaper must be removed before a new product
of acceptable and uniform quality can be made. These
contaminants include wire, strapping, tramp metal, glass,
plastics, dirt, and other foreign materials as well as
coatings, inks, fillers, and additives which are part of
paper manufacturing processes. The degree of contamination
and the amount of extraneous additives will vary with each
batch of wastepaper and with the requirements of any
given secondary fiber operation.
Much of the foreign material can be removed using
simple sorting techniques and presents no hazardous waste
problem. However, depending on the wastepaper source it is
possible for nearly anything to enter the waste stream.1°
It is possible that potentially hazardous papermaking
additives may contaminate the otherwise innocuous solids
removed in repulping. Because of the heterogeneity of this
-183-
-------
waste stream, and the wide variability in waste loads among
individual mills and among individual batches of wastepaper,
it is difficult to state conclusively what wastes will be
hazardous. Under the more stringent criteria of the RCRA
Option A regulations, it is possible that some wastepaper
reclamation wastes, because of the possibility that they
might come in contact with toxic additives, pigments, or
inks, would be declared hazardous. Under Option B, such
a classification is not as likely. To reflect these
possibilities, Option A is assumed to define wastepaper
reclamation wastes as hazardous; Option B is assumed to
classify these wastes as nonhazardous.
6.2.6 Specialty Product Wastes
Little information is available on the characteristics
of solid waste streams generated at specialty paper mills.
The addition of noncellulosic materials to the manufacturing
process will presumably add unusual ingredients to the
eventual wastewater treatment sludge.
Examples of specialty products include solvent-coated
papers, zinc oxide-coated papers, high wet-strength papers
and other industrial specialty products.H The list of
additives currently being used includes aluminum and silicon
oxides, zinc oxides, calcium carbonate, titanium dioxide,
ureaformaldehydes, polystyrene, acrylic, polyvinyl acetates
and phenol-based materials.
The concentrations of these materials in mill sludges
can only be inferred on a mill-by-mill basis. These mills
currently have effluent limitations defined on a mill-by-
mill basis by EPA. A partial indication of leaching
-184-
-------
characteristics can be derived from the analyses given above
of sludges from de-inking or boardmill sludges. Zinc and
lead appear to be the metals which tend to leach from
wastepaper feedstocks, and are therefore probably evident in
some specialty mill sludges.
6.2.7 Miscellaneous Waste Streams
Waste streams described below constitute distinct
sources of paper industry wastes but are of minor importance
compared to the massive volumes of other solid wastes like
bark or coal ash. Therefore, no estimates of waste volumes
are made for these sources. Brief descriptions of their
origin and composition are included below for the sake of
completeness.
6.2.7.1 Evaporator Residues
Part of the chemical operations typical of current
chemical pulping include the evaporation of waste pulping
liquor to increase its value as a source of process heat and
to increase the concentrations of active chemicals. However,
any evaporation process inevitably encourages the precipi-
tation of small amounts of entrained solids. As a result,
precipitated solids accumulate in evaporators and must
occasionally be cleaned out. This constitutes a distinct
waste stream though the quantity of waste involved is almost
negligible. Evaporators are cleaned with heated solutions
of various solvents or simply boiling water to remove
scale. The cleaning occurs no more often than once a week
at most, and typically once every several weeks.12
Evaporation scale is varied in composition, but usually
-185-
-------
includes inert materials and undissolved metals, particularly
calcium. Depending on the toxicity of cleaning agents,
this waste stream may or may not be considered hazardous.
Acidic cleaning agents could be added to the general mill
effluent for neutralization.
6.2.7.2 Tall Oil Residues
One byproduct of the chemical reactions in sulfate
pulping is the release of fatty acids and resin acids
present in wood into the cooking liquor as sodium soaps.
These acids and associated black liquor impurities constitute
what is known as tall oil soaps. These have a great many
uses in adhesives, emulsions and wetting agents, disin-
fectants, lubricants, paints and varnishes, and soap.
In the process of achieving the desired solids concentration
for separating the soaps from the black liquor, the liquor
passes through a series of evaporators. The solids which
precipitate out constitute another solid waste stream very
similar to that discussed above.13
After the black liquor is free of tall oil soaps, it is
returned to the chemical recovery process. Any additional
wastes dissolved in the black liquor are generated as part
of chemical recovery rather than as part of tall oil recovery,
6.2.7.3 Parchmentizing
Some specialty mills perform an additional paper
treatment called parchmentizing. In this process, paper is
treated with successive washes of sulfuric acid in order to
reduce the moisture content in the paper. The resulting
-186-
-------
product is a dry, brittle "parchment like" paper. The acid
wash treatment involved does not appear to generate a sepa-
rate, hazardous waste source. This waste rinse is normally
neutralized by interaction with the plant wastewater stream.
6.3 Solid and Hazardous Waste Quantities
Estimates of solid waste quantities for the wastes
examined will be presented in this section. The portion of
industry wastes which are classified as hazardous will
depend on whether RCRA Option A or B is being considered.
A summary of the waste designation to be used in
estimating the volumes of hazardous waste are shown in
Table 6-8. Simple industry breakdowns have been used to
represent the major types of the industry waste streams. As
can be seen from the table, most wastes will be assumed
hazardous under Option A while few wastes are likely to be
hazardous using Option B.
The waste designations can only be considered to be
assumptions. Data is inadequate to define the range of
possible compositions for wastes within the broad categories
used. Areas of particular concern are the composition of
sludge from mills using secondary fibers, coating materials
and the sludge from kraft mills. However, the data base
covering all of these wastes is very limited.
6.3.1 Model Plant Waste Quantities
Model plants were described in the previous chapter.
Here, waste streams from these plants will be described.
-187-
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The average plant is a kraft pulping mill and the worst-case
plant is a recycled boardmill plant.
There are a total of four potentially hazardous waste
streams from the model and worst-case plants: coal ash,
wastewater treatment sludge, chemical pulping solid wastes,
and secondary fiber or repulping solid wastes. The wastes
and their status under Options A and B are summarized in
Table 6-9.
Since the "model" plant usually burns non-coal fossil
fuels, it has no coal ash for disposal.14 However,
since coal ash is considered hazardous under both Options,
the "worst case" plant is assumed to be using coal to
generate all process heat (the "average" kraft mill requires
6.3 MMBtu per metric ton of product while the recycled
boxboard mill requires 11 MMBtu per metric ton).15 jn the
model plant, bark is burned to generate process steam so
that there are no bark wastes, except for bark ash, which
is considered non-hazardous under both Options.
Wastewater treatment sludge includes primary and
secondary sludge on a dry weight basis. These quantities
are based on an 83 percent sample of the industry's mills in
a 1975 survey made by NCASI. The survey results are
described more completely in the next section.
Chemical pulping solid wastes include green liquor
dregs and lime slaker rejects based on 1971 data collected
by Gorham International. Repulping wastes include all
material rejected as waste or unsuitable for repulping from
incoming raw material.
-189-
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TABLE 6-9
MODEL PLANT: WASTE QUANTITIES3
ESTIMATED HAZARDOUS
WASTE QUANTITIES (MT/yr)
WASTE
STREAM
Coal ash
Wastewater
OPTION
MODEL
PLANT
NAb
10,900
A
"WORST
CASE"
14,900
2,100
OPTION B
MODEL "WORST
PLANT CASE"
NA 14,900
NA NA
treatment
plant sludge
Chemical pulping 5,500 NA 5,500
solid wastes
Repulping solid NA 11,000 NA
wastes
Total 16,400 28,000 5,500
NA
NA
14,900
aSee notes to Table 6-9 on following page.
t>NA = not applicable.
-190-
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NOTES TO TABLE 6-9
1. Model plant: 910 MTPD virgin unbleached kraft
linerboard mill, 345 operating days per year.
2. "Worst-case" plant: 360 MTPD secondary fiber
folding boxboard mill, 330 operating days per year.
3. The coal ash estimate assumes a process heat
requirement of 11 MMBtu/MT of product (Arthur D. Little,
Cost of Pulp and Paper Mill Compliance with Environmental
Regulations, EPA, May 1977, p. H-5), 40 percent efficiency
in generation of process steam, 12,000 Btu/lb of coal,
and a 12 percent content:
____ 11 MMBtu/MT ______ n i?
(12,000 Btu/lb x 2.2 Ib/kg x 0.40 efficiency)
= 125 kg ash/MT product.
The plant is assumed to be operating 330 days per year
making 360 MTPD, resulting in 14,900 MT/yr of ash.
4. Primary wastewater treatment sludge is based on
average rates per metric ton of product, provided by Dwayne
Marshall of the National Council of the Paper Industry for
Air and Stream Improvement in conversation November 21,
1978. These are 31 kg/MT of product for "kraft paperboard,
packaging papers, news, and tissues," applied to the kraft
linerboard model plant, and 16 kg/MT of product for "recycled
paperboard," applied to the recycled boxboard model plant.
Only total secondary treatment sludge for industry
product catogeries was provided by the NCASI rather than a
generation rate as was provided for primary sludge. There-
fore, a secondary sludge generation rate was estimated here
by simply (1) dividing the relevant category's total primary
sludge by the given primary sludge rate to estimate that
category's production (2) dividing that category's given
total secondary sludge by its production to estimate an
average rate. This resulted in 3.9 kg/MT and 1.7 kg/MT for
the average and worst-case plants respectively.
5. Chemical pulping solid wastes are based on a rate
of 17.5 kg/MT of product, the midpoint of a 15-20 kg/MT
rate cited in Gorham International, Solid Waste Management
Practices in the Pulp and Paper Industry, EPA Office of
Solid Waste Management Programs, Contract 68-03-0207,
February 1974, p. 72.
6. Repulping solid wastes are taken from pulping paper-
board making losses assumed at 93 kg/MT product (Arthur D.
Little, Cost of Pulp and Paper Mill Compliance with Environ-
mental Regulations/ EPA, May 1977, p. E-7).
-191-
-------
6.3.2 Waste Stream Quantities
6.3.2.1 Wastewater Treatment Sludge Quantities
The quantity of wastewater treatment sludge varies with
the industry subcategory and with mills within each sub-
category. Ranges of generation of primary sludge for the
industry groups are shown in Table 6-10. In some cases,
such as for kraft paperboard mills, a factor of 4 could
separate the sludge generation rates at different mills.
The ranges are taken from a NCASI survey of sludge genera-
tion and disposal in 1972. Average figures are taken from a
NCASI 1975 survey. The rate of sludge generation is
equivalent to from 1 to 4 percent of production.16
Aggregate quantities of sludge are shown in Table 6-11.
The aggregated figures were based on the average sludge
quantities estimated in the National Council Survey.
Quantities of both primary and secondary sludge are included.
The distribution of mills among subcategories was approximate
due to the lack of clear distinctions between some processes.
For the calculation of 1977 quantities, the estimates were
scaled upwards in accordance with the increase in paper
production.
6.3.2.2 Chemical Pulping Waste Quantities
The estimated quantities of chemical pulping wastes
are based on data presented in Table 6-12 below. Sulfate
pulping wastes amounted to an estimated average of 711,800
MT in 1975. This figure includes green liquor dregs. This
value was scaled up to 1977 production in accordance with
the 1975 to 1977 increase in pulp production. Sulfite
-192-
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TABLE 6-11
PRIMARY SLUDGE GENERATION
PER UNIT OF PRODUCTION3
GENERATION RATE
GENERATION AVERAGE AVERAGE
SUBCATEGORY RANGE (Ib/ton) (Ib/ton) (kg/MT)
1. Kraft paperboard 20-80 62 31
Packaging paper
integrated with
Kraft operations
2. Kraft coated and 60-160 136 68
uncoated papers
3. Sulfite tissue 60-140 92 46
and paper
4. Groundwood newsprint, 60-120 112 56
coated and uncoated
papers
5. NSSC 20-60 24 12
6. De-inked tissue, coated 80-300 312 156
and uncoated papers
7. Recycled paperboard 0-60 32 16
8. Nonintegrated papers 20-80 60 30
9. Nonintegrated tissue 108 54
10. Nonintegrated tissue 418 209
from wastepaper
aDwayne Marshall, Nature and Behavior of Manufacturing
Derived Solid Wastes of Pulp and Paper Origin, December 1978
-195-
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TABLE 6-12
CHEMICAL PULPING WASTES3
VOLUME
(MT/yr)b
Sulfate pumping
Green liquor dregs 263,900
Slaker rejects 447,900
Sulfite pumping 17,100
aBattelle Columbus Laboratories, "Draft Report on Cross
Media Impact of the Disposal of Hazardous Wastes from the
Wood Products and Related Industries," October 1977.
^Estimated quantities in 1971.
pulping wastes are estimated at 17,100 MT for 1971 and were
also scaled upward. Total wastes for 1977 were approximately
847,000 MT, of which 532,000 MT consisted of slaker rejects.
6.3.2.3 Coal Ash Quantities
The ash content of coal varies from 5 to 30 percent
depending on the source and type of coal. For the purposes
of estimation a 12 percent ash content will be assumed. The
amount of coal burned at a given mill is dependent, of
course, on a large number of factors including the amount of
other fuels being burned. Table 6-13 gives a sample of the
amount of coal burned at three separate pulping mills. The
amount of coal burned, the amount of product produced and
the annual ash quantities to be disposed of are all indi-
cated. The range for the plants shown for annual coal
consumption is roughly 100,000 to 300,000 metric tons per
year.
-196-
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-197-
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Annual coal consumption for the industry in 1977 was
8.1 million metric tons.17 Aggregate ash quantities are
estimated at 0.98 million metric tons.
6.3.2.4 Bark and Wood Waste Quantities
Bark quantities can be estimated based on the amount of
incoming roundwood. Small quantities of wood waste will
also be generated. However, wood waste at a pulp mill is
predominantly bark so the bark estimation procedure, although
rough, is useful. The quantity of bark per unit of incoming
roundwood can fluctuate widely. Estimates for averages of
bark generated vary from 40 kg (dry weight) to 56 kg (dry
weight) per incoming cubic meter (320 to 450 lb/cord).l8
The figure of 50 kg/n\3 will be used here. Total roundwood
consumption by the industry in 1977 amounted to 159.3 million
cubic meters (44 million cords).19 Bark wastes are thus
estimated at 8.0 million metric tons by dry weight (assuming
a 50 percent moisture content, 16.0 million MT wet). Of
this 5.3 million metric tons or 66 percent was burned for
fuel, leaving 2.7 million metric tons to be landfilled.20
6.3.2.5 Secondary Fiber Reclamation Wastes
The aggregate quantity of secondary fiber reclamation
waste was developed based on estimates of quantity per
unit of production for the de-inking, paperboard, and non-
integrated fine papers segments. The aggregate total was
derived from 1977 production values. The aggregate volume
for 1977 is estimated at 1.69 million metric tons.21
-198-
-------
6.4 Number of Generators
As discussed in Chapter Five, there are over 775 pulp
and paper mills in the United States. In some cases,
however, several contiguous mills are jointly owned. These
mill complexes will be counted as one generator. On this
basis, the total numbers of possible generators is 561, as
derived from the ADL study, Economic Impacts of Pulp and
Paper Industry Compliance with Environmental Regulations
(1977). The number of generators under each RCRA option is
discussed further in Section 6.7»2.
6.5 Current Disposal Practices
Most solid waste generated in the paper industry is
disposed of by land application. A survey of disposal
practices for wastewater sludges in 1975 is shown in
Table 6-14. As can be seen, land application is most common
but a variety of disposal methods are possible. Sludge with
a high fiber content can be incinerated or recycled back
into the process as an input. A few mills are able to sell
sludge because of its fertilizer and landplacing because the
latter does not imply covering. A number of mills, partic-
ularly those in rural areas, have traditionally piled wastes
at sites near the plant.
Coal ash is generally disposed of at the same site as
wastewater sludge and other wastes. Some mills have separate
landfill sites for boiler residues but this does not appear
to be common practice.
Similarly hog fuel wastes are commonly landfilled. The
field sites examined in the Canadian study (see Section 6.2)
-199-
-------
TABLE 6-14
DISPOSAL OF PAPERMILL SLUDGES IN 1975
DRY
NUMBER WEIGHT PERCENT
METHOD OF MILLS (ton/day) OF TOTAL
Incineration
Landfilled
Landplaced
Incinerator and landfilled
Incinerator and landplaced
Recycled
Sold
Lagoon
Municipal/Contractor
Municipal and landplaced
Municipal and landfilled
Other
Totals
aNational Council for Air
Sludge Dewatering and Disposal
19
40
53
4
4
5
3
13
3
7
3
9
163
321
1,040
1,233
82
68
31
5
221
6
25
11
96
3,159
10
33
39
3
2
1
-
7
-
1
-
4
100
and Stream Improvement,
Practices in the U.S.
Paper Industry, August 1978.
-200-
-------
typically involved simple landfilling of wastes with or
without cover provided. In a number of cases, marsh land
near the mill was used for disposal. In some cases, hog
fuel wastes are used as fill for marshland recovery.27
Most landfill sites are adjacent to the mill since any
transportation requirements increase disposal costs.
Most firms which do transport wastes from the mill do not
haul it more than a mile or two from the plant.23 Addi-
tional waste streams from pulping processes, such as slakers
rejects or green liquor dregs, may be added to the general
plant effluent or disposed of separately. No figures were
available on the number of firms using each disposal method.
However, it appeared, based on discussions with industry
personnel, that green liquor dregs were commonly disposed of
in the general mill effluents.
6.6 RCRA-Required Disposal Methods
Paper industry wastes will require disposal in secure
landfills under RCRA. Additional treatments, such as
neutralization, will not be necessary.
Alternative disposal may be acceptable for the rela-
tively small-volume chemical pulping wastes. Some firms
currently dump these wastes into the general mill effluents.
The resulting wastewater treatment sludge may nevertheless
not be considered hazardous. As noted above in Sec-
tion 6.2.1, existing tests have shown that the resulting
sludge is likely to be classified as hazardous only under
the TEP of Option A. However, landfilling of these wastes
has been assumed to be an adequate disposal method.
-201-
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6.7 Compliance Costs
6.7.1 Technical Costs
Original landfill estimates were not developed for
paper industry landfills. Instead, the landfill costs
developed by another EPA contractor (Battelle Columbus
Laboratories) will be used.24 por each RCRA option,
landfills sized according to the amount of hazardous waste
were being disposed of by the model firms. Model plant
disposal costs were linearly interpolated between costs
estimated for specific yearly waste volumes in the Battelle
study. For example, the estimated wastes from the un-
bleached kraft linerboard mill (16,400 MT of wastes under
Option A) fell between the yearly disposal volumes of
16,800 MT and 14,400 MT for which costs of $28/MT and $29/MT
were presented. Linear interpolation to estimate the
disposal cost of the model plant gave $28.2/MT. Yearly
wastes for the same plant under Option B are 5,500 MT. The
interpolated value for the model plant is $44.3/MT.
6.7.2 On/Offsite Allocation of Paper Mill Disposal
Operations
Because there is no direct count of the number of
mills using a given waste disposal method, rough estimates
were made of the on/offsite disposal split for RCRA
Options A and B. Under Option A, offsite disposal was
assumed for all mills using municipal wastewater treatment
plants and for all small mills not integrated to pulp. In
other words, mills with their own wastewater treatment
plants are assumed to have an onsite sludge disposal area
which could potentially be modified for hazardous waste
-202-
-------
disposal. (In effect, this assumes that mills presently
disposing of a sizeable waste stream will find it easiest
to construct hazardous waste landfills). Small non-
integrated mills are expected to use offsite disposal
because it is likely they face land constraints by virtue
of their location closer to urban areas.
A breakdown of U.S. pulp and paper mills by process
size and wastewater treatment status is provided in work by
another EPA contractor.25 That study puts the number of
mills using municipal treatment at 154. There are an
additional 82 small nonintegrated plants not on municipal
systems for an estimated total of 236 offsite waste disposers.
The estimate for Option B is slightly more involved.
First, an estimate had to be made of the number of gener-
ators based on an estimate of mills generating chemical
pulping wastes and coal ash. Of the 168 mills using chemi-
cal pulping processes, it was assumed that 10 percent, or
17, also burn coal, since 10 percent of the industry's
self-generated energy was from coal. The estimated total
number of coal-burning mills is 10 percent of 561 or 56, for
an additional 39 mills. The total number that either burn
coal or use chemical pulping or both is 207. The offsite
disposers are assumed to be the small chemical pulp mills
(those averaging 250 MT per day of production) of which
there are 30, and small nonintegrated mills burning coal,
estimated at 10 percent of 135, for a total of 44 mills
disposing of their wastes offsite.26
-203-
-------
6.7.3 Administrative Costs
The administrative costs for the paper industry
compliance are shown in Tables 6-15, 6-16, and 6-17. Costs
are displayed for both onsite and offsite disposal. The
costs are derived from those developed by another EPA
contractor, Arthur D. Little.27 A number of judgments
were made as to the applicability of specific tasks.
The major cost elements are waste analysis, monitoring,
daily inspections, development of a site description (for
permitting), and financial responsibility costs. Under
Option B some of these costs were reduced because smaller
landfill sites would be used.
-204-
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TABLE 6-15
RCRA ADMINISTRATIVE COSTS FOR QN-SITE DISPOSAL
(OPTION A)a
ADMINISTRATIVE TASK
Section 3001
Waste analysis
($2,300/test, 5 tests/yr
for 3-5 waste streams)
Documentation of
waste analysis
Supervision of testing,
documentation
Section 3002
Application for I.D. Code
Section 3004
Surface water monitoring*3
Groundwater monitoring
Notification of disposal
operations
Reporting of disposal data
Reporting of monitoring data
Develop contingency plan
System design for proper
facility operation
Daily inspections
Updating of procedures
Section 3005
Develop description of site
Design financial requirement plan
Assess and redesign facility
Understanding of permit (legal aid)
Training program
Contingency plan costs
Continuing supervision
Financial responsibility costs
Total
Annualized costs
aERCO estimate.
^Assumes $350/sample with testing
per year.
-205-
COST
FIRST YEAR
34,500
240
50
32
21,000
6,200
32
1,136
260
493
2,142
20,075
811
42,600
1,340
1,730
1,790
13,750
4,000
1,000
63,000
216,181
162,888
at 6 sites,
($)
RECURRING
YEAR
34,-500
50
-
21,000
6,200
-
1,136
260
-
—
20,075
811
-
-
-
-
4,500
-
1,000
63,000
152,532
10 times
-------
TABLE 6-16
RCRA ADMINISTRATIVE COSTS FOR ON-SITE DISPOSAL
(OPTION B)a
ADMINISTRATIVE TASK
Section 3001
Waste analysis
($2,300/test, 5 tests/yr
for 3-5 waste streams)
Documentation of
waste analysis
Supervision of testing,
documentation
Section 3002
Application for I.D. Code
Section 3004
Surface water monitoring^
Groundwater monitoring
Notification of disposal
operations
Reporting of disposal data
Reporting of monitoring data
Develop contingency plan
System design for proper
facility operation
Daily inspections
Updating of procedures
Section 3005
Develop description of site
Design financial requirement plan
Assess and redesign facility
Understanding of permit (legal aid)
Training program
Contingency plan costs
Continuing supervision
Financial responsibility costs
Total
Annualized costs
aERCO estimate.
bAssumes $350/sample with testing
per year.
-206-
COST
FIRST YEAR
34,500
240
50
32
21,000
6,200
32
1,136
260
493
2,142
10,040
811
11,000
1,340
1,730
1,790
2,000
4,000
1,000
21,000
120,796
100,869
at 6 sites,
($)
RECURRING
YEAR
34,500
50
-
21,000
6,200
-
1,136
260
-
—
10,040
811
-
-
-
-
1,000
-
1,000
21,000
96,997
10 times
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NOTES TO CHAPTER SIX
1. McKeown, J.J., "Sludge Dewatering and Disposal
Practices in the U.S. Paper Industry," paper presented at
the University of Maine at Orono, August 21, 1978.
2. National Council for Air and Stream Improvement,
Technical Bulletin 311, page 18.
3. Dwayne Marshall, speech given at Northeast Regional
Meeting held by the National Council for Air and Stream
Improvement, November 2, 1978.
4. Econotech Services Limited, Consequences of Leaching
from Pulp and Paper Mill Landfill Operations, CPAR Secre-
tariat, Department of Fisheries and Environment, Canada,
September 1977.
5. Ibid.
6. Gorham International, Inc. Study of Solid Waste
Management Practices in the Pulp and Paper Industry, EPA,
February 1974, page 26.
7. Ibid., page 26.
8. Econotech Services Limited, Consequences of
Leaching from Pulp and Paper Mill Landfill Operations, CAR
Secretariat, Department of Fisheries and nvironment,
Canada, September 1977, page 10.
9. Beak Consultants, Ltd., Technical, Economic and
Environmental Aspects of Wet and Dry Debarking, March 18,
page 74.
10. Gorham International, Inc., Study of Solid Waste
Management Practices in the Pulp and Paper Industry,
EPA, February 1974, pp. 25-26.
11. Ibid., page 27.
12. Personal communication between Rob Martin of ERCO
and Dick Curry, Technical Director, McMillan, Bloedel Inc.
13. Ibid.
14. American Paper Institute, "Estimated Fuel and
Energy Use," 1978.
-208-
-------
15. Arthur D. Little, Economic Impacts of Pulp and
: Indust
unpublished;
Pap_er_ Industry Compliance with Environmental Regulations,
11 ^'Process Economics," Appendix, pp. H-5 and E-7.
16. Excerpted from "Nature and Behavior of Manufacturing-
Derived Solid Wastes of Pulp and Paper Origin, Introduction,"
preliminary draft, Dwayne Marshall, NCASI.
17. American Paper Institute, "Estimated Fuel and
Energy Use."
18. Gorham International, Inc. and Beak Consultants
Ltd., op. cit.
19. Personal communication between John Eyraud of ERGO
and Mr. Martin of the American Pulpwood Association.
20. American Paper Institute, "Estimated Fuel and
Energy Use."
21. Gorham International, Inc., and Arthur D. Little,
op. cit.
22. Econotech Services Limited, Consequences of
Leaching from Pulp and Paper Mill Landfill Operations.
23. McKeown, J.J., "Sludge Dewatering and Disposal
Practices in the U.S. Paper Industry."
24. Battelle Columbus Laboratories, Cost of Compliance
with Hazardous Waste Management Regulations, EPA, May 1978.
25. Arthur D. Little, Inc., Cost of Pulp and Paper
Mill Compliance with Environment Regulations, EPA, May 1977,
Vol. Ill, p. E-38.
26. Arthur D. Little, Inc., Cost of Pulp and Paper
Mill Compliance with Environment Regulations, EPA, May 1977,
Vol. III.
27. Arthur D. Little, Preliminary Integrated Assessment
of Hazardous Waste Management Regulations, EPA, October 1978.
-209-
-------
CHAPTER SEVEN
ECONOMIC IMPACTS ON THE PULP AND PAPER INDUSTRY
This chapter estimates the costs for pulp and paper
industry compliance with each of the two regulatory options,
for the model and worst-case plants. Current plant revenues
are compared to estimated compliance costs for Options A
and B in Tables 7-1 and 7-2 respectively. The estimated
plant compliance costs are then applied to industry hazar-
dous waste quantities to derive aggregate industry costs
which appear in Table 7-3. Finally, Table 7-4 presents a
qualitative summary of likely industry impacts on plant
closures, job losses, price increases, demand reduction and
balance of payments effects.
7.1 Model Plant and Worst-Case Impacts
Model plant impacts appear in summary form in
Tables 7-1 and 7-2 for Options A and B, respectively. Under
Option A regulations, the average plant (unbleached kraft
linerboard) has two hazardous waste streams: wastewater
treatment plant sludge and its pulping solid wastes (prin-
cipally rejects from lime burning). There is no bark waste,
since the model firm consumes all bark in generating process
steam and power. The resulting ash is not considered
hazardous under7 either Option A or B. Fossil iuel consump-
tion is some mix of oil and natural gas, which are assumed
to produce negligible solid wastes. RCRA costs are $625,000
or 3.4 percent of the plant's yearly net income. In
-21 1-
-------
TABLE 7-1
IMPACTS ON PULP AND PAPER MODEL PLANTS
OPTION A ($000)a
MODEL PLANT WORST-CASE PLANT
Sales 70,900 44,500
Cost of operations 52,600 27,200
Incremental RCRA impacts
Technical disposal costs 462 627
Administrative costs 163 163
Pretax net income 17,675 16,510
Pretax net income 18,300 17,300
(before RCRA)
Percent decline in pretax 3.4% 4.6%
net income
aERCO estimates.
TABLE 7-2
IMPACTS ON PULP AND PAPER MODEL PLANTS
(OPTION B) ($000)a
MODEL PLANT WORST-CASE PLANT
Sales 70,900 44,500
Cost of operations 52,600 27,200
Incremental RCRA impacts
Technical disposal costs 245 431
Administrative costs 101 101
Pretax net income 17,954 16,768
Pretax net income 18,300 17,300
(before RCRA)
Percent decline in pretax 1.9% 3.1%
net income
aERCO estimates.
-212-
-------
actuality, this percentage will be sensitive to the plant's
operating rate (assumed here to be design capacity of
245 days per year), wastewater sludge characteristics, the
efficiency of lime burning, and actual construction costs
for an onsite landfill. (Site acquisition costs are
probably minor since the average medium-sized woodpulp
mill's proximity to wooded areas imposes relatively little
space constraint.)
The "worst-case" recycled folding boxboard mill has
three hazardous waste streams: wastewater treatment sludge,
coal ash, and wastepaper reclamation wastes. The fact that
the plant burns coal results in the mill's largest solid
waste stream, 14,900 MT per year in coal ash. The next
largest waste stream is wastepaper reclamation wastes, taken
here at 93 kg/MT of product, as indicated in ADL's material
balance. In total, then, despite the fact that the mill
makes only 118,800 MT product per year versus the average
plant's 313,950 MT, its annual solid wastes amount to
28,000 MT. The large waste volume results in total RCRA
costs of $790,000 per year. The fraction of net income
consumed by RCRA costs is 4.6 percent compared with the
3.4 percent of the model plant.
In Option B, both the average and "worst-case" mills
have only one hazardous waste source: chemical pulping
wastes and coal ash, respectively. The resulting total RCRA
costs decline to $345,000 from $640,000 for the average mill
and to $531,000 from $805,000 for the "worst case." These
costs amount of 1.9 percent and 3.1 percent of net income,
respectively.
-213-
-------
7.2 Aggregate Cost Impacts
Under Option A, every pulp and paper mill is a hazar-
dous waste generator. There are five Option A hazardous
wastes: wastewater treatment sludge, coal ash, chemical
pulping wastes, bark, and wastepaper reclamation wastes.
The estimated 1977 waste quantity is 8,751,000 MT.
Table 7-3 summarizes estimated RCRA costs. Technical
disposal costs assume approximately 58 percent of all plants
will be able to use onsite disposal. Mills now using
municipal treatment plants, and small nonintegrated or
recycling mills are assumed to be using contractor disposal.
This on/offsite breakdown simply assumes that those mills
which now have minor solid waste loads (by virtue of their
size, nonwood pulping, or use of municipal wastewater
treatement plants) will have the most difficulty obtaining
the necessary land for onsite disposal. Larger mills,
TABLE 7-3
AGGREGATE COST OF COMPLIANCE FOR
THE PULP AND PAPER INDUSTRY
($000)a
OPTION A
OPTION B
Technical
Administrative
Total
1977 production value
Costs as a percent of
production value
287,400
66,600
354,000
40,200,000
0.88%
68,600
17,900
86,500
40,200,000
0.22%
aERCO estimates.
-214-
-------
wood pulping mills, and mills treating their own wastewater
are assumed not to face land constraints. When technical
and administrative costs are added, industry costs are $354
million, 0.88 percent of production value.
Under Option B, there are only two hazardous waste
streams: coal ash and chemical pumping wastes, for an
estimated total of 1,512,000 MT in 1977. The estimated
costs are based on an estimated total number of mills which
either burn coal, use chemical pulps, or do both. The
on/offsite breakdown on which disposal costs are based
assumes that all small chemical pulping mills and small
nonintegrated mills burning coal will be offsite disposers.
(Small chemical pulping mills average only 250 MT per day of
product and small nonintegrated mills average only 40 MT per
day,) Further, small mills, particularly nonintegrated
mills, tend to be located near sources of secondary fiber in
metropolitan areas and are most likely to have significant
land constraints. Under Option B, total compliance costs
are $86,500.
7.3 Industry Impacts
The model and worst-case plant impacts indicate rela-
tively small declines in net income for industry firms. As
a result, major economic dislocations are not expected. A
summary of industry impacts is provided in Table 7-4.
Price increases will ameliorate the effects on income
of RCRA disposal costs. The size of the price increase
needed for the model and worst-case firms is 0.9 percent and
1.8 percent to cover RCRA Option A costs. The ability to
increase prices will vary among industry segments and among
-215-
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TABLE 7-4
SUMMARY OF IMPACTS ON THE PAPER INDUSTRY3
Number of generators
Plant closures
Job losses
Production cutbacks
Price increases
U.S. demand reduction
Balance of payments effects
OPTION A
561
Unlikely
Unlikely
Unlikely
Small
Small
None
OPTION B
207
Unlikely
Unlikely
Unlikely
Small
Small
None
aERCO estimates.
firms. However, most of the waste streams are common to
industry segments and thus at least a partial cost pass-
through can be expected.
Mill closures will depend, for the most part, on the
number of firms operating at low profit margins, and on
differences in their ability to pass through cost increases.
The number of plant shutdowns is here estimated to be small.
In Table 7-4 plant shutdowns are designated as "unlikely"
for both options. The term "unlikely" is defined as meaning
that there is a less than 25 percent chance that 10 percent
of the industry plants will close. It is noteworthy that,
in a study by another EPA contractor, much larger cost
increases were expected to cause few mill closings.1
Any reduction in U.S. demand is expected to be minor.
The elasticity of demand for most paper products is low (see
Section 5.2.2). In the event that all costs are passed
through, the net reduction should be small.
-216-
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Balance of payment effects are also expected to be
small. Exports represent a minor portion of industry
volume, and the small price increases should have minimal
balance of trade effects.
-217-
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NOTES TO CHAPTER SEVEN
1. Arthur D. Little, Economic Impacts of Pulp and
Paper Industry Compliance with Environmental Regulations,
EPA, May 1977. In this study an aggregate cost increase
equivalent to an 8 percent price rise was expected to result
in 27 mill closings, or roughly 5 percent of industry
firms.
-218-
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PART III
GASOLINE SERVICE STATIONS AND AUTOMOBILE REPAIR SHOPS
-------
CHAPTER EIGHT
CHARACTERIZATION OF GASOLINE SERVICE
STATIONS AND AUTO REPAIR SHOPS
Gasoline service stations and automotive repair shops
are viewed together for the purposes of this study for two
reasons. First, the waste streams that make them subject
to future RCRA regulations are the same—waste motor oil
from automobile and truck oil changes as well as waste brake
and transmission fluid (also low viscosity motor oils) from
transmission and brake fluid changes. Second, the activi-
ties that generate these wastes—auto repair and mainten-
ance—are the same for those facilities which actually gen-
erate the wastes. In fact, generators of hazardous wastes
in the two industries often have more in common with each
other than with nongenerators in their respective industries.
Though falling under the same SIC rubrics as gasoline
service stations and repair shops, such establishments as
mass merchandizers and convenience stores which sell gaso-
line are not of concern here. However, because data tend
to be collected by SIC category, descriptive information on
these two industries may include those nongenerating esta-
blishments.
The descriptions of the two industries are presented
separately below because available data were collected
separately. This will also facilitate the development of
separate model firms for each industry that will more fully
distinguish the different organization and profitability
of firms in the two industries. Section 8.1 will present a
-221-
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description of the gasoline service station industry while
the automotive repair shops will be discussed in Section 8.2
8.1 Gasoline Service Stations
8.1.1 Size and Scope of the Industry
8.1.1.1 Industry Definition
The definition of gasoline service stations, used
throughout Part Three, will include only those establish-
ments that belong to the SIC designation 5541. This cate-
gory includes those firms that primarily sell gasoline and
oil, although they may sell other merchandise and perform
repair work. If revenues from other operations exceed those
realized from the sale of gas and oil, the firm will not
generally be classified as an SIC 5541 establishment. As
far as possible, only SIC 5541 specific data have been uti-
lized. However, industry surveys and trade publications do
not always adhere so strictly to those confines, and have
at times been used to supplement data used for this report.
The goal of this part is to establish the economic
impacts of Resource Conservation and Recovery Act (RCRA)
legislation on gasoline service stations and automotive
repair shops. For the most part, those firms that will be
affected are those that change oil or do repair work that
generates waste automotive oils. Thus, gas stations that
are completely self-service and that do not generate waste
oil will be relatively unaffected by RCRA. Unfortunately,
most operating statistics for gasoline service stations do
not make a distinction between stations that generate waste
oil and those that do not. As a result, financial and
-222-
-------
operating data will apply to all service stations, with
distinctions between generators and nongenerators made
whenever possible. The analysis of waste oil quantities
and economic impacts will apply to those service stations
that do generate waste oil.
8.1.1.2 Industry Sales
Table 8-1 illustrates industry sales data according to
the National Petroleum News for the past 10 years. Total
TABLE 8-1
GASOLINE SERVICE STATION SALES3
GAS
OIL
YEAR
1977
1976
1975
1974
1973
1972
1971
1970
1969
1968
1967
TOTAL
TOTAL SALES SALES
{$ billion) (MM gal,'
52.4
48.0
43.8
41.0
34.4
33.7
29.2
27.9
25.9
24.5
22.7
a!978 National
75,428
73,417
77,178
73,818
72,207
72,908
68,821
65,297
6.2,047
58,127
54,760
Petroleum News
QUARTS
) (MM)
—
877
1,014
996
961
964
987
1,066
1,046
1,074
1,177
Factbook Issue.
AVERAGE
QUARTS
PER CAR
PER YEAR
_
8.0
9.5
9.5
9.5
10.0
10.7
12.0
12.1
12.9
14.7
-223-
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sales revenues have increased steadily during the period to
$52.4 billion in 1977. The total volume of gasoline sales
reached a peak of 77.2 billion gallons in 1975 and has not
exceeded that level as of 1977. Although the total number
of automobiles has increased steadily, the average miles
per gallon has increased as well, leading to a decrease in
the total gallons sold. Likewise, motor oil sales at ser-
vice stations have decreased 25 percent from a high of
1.2 billion quarts in 1967 to only 0.9 billion quarts in
1976. This situation is due to two causes. First, the
interval between recommended oil changes has been growing.
More importantly, a large number of people are choosing
to change their own oil, which has meant a shift in the
buying patterns for motor oil from service stations to
large retail chains and other outlets.
Government mandated increases in average fuel
economy for automobile manufacturers' fleets of cars will
lead to higher and higher average miles per gallon in the
United States. This could offset the expected increase
in the total number of automobiles on the road and keep
the total gallons of gasoline sold at fairly constant
levels through 1985. Motor oil sales at gas stations are
likely to continue to decrease, as oil change drain
intervals for newer model automobiles continue to increase
and retail chains increase their share of the total market
for motor oil.
8.1.1.3 Employment
The most exact estimates for employment in the
gasoline service station industry are those of the 1972
census. In that year, a total of 747,668 persons were
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employed at 226,459 service stations, an average of 3.30
per station. The average number of employees per station
has remained fairly constant since then. The Department
of Commerce estimates that per-station employment was
3.35 in 1976. Due to the declining number of stations,
total industry employment for 1976 is estimated to be
627,000, a decline of 16 percent from 1972.
Although the average employment per station has remained
relatively stable, the average sales have increased at
service stations over the period from 1972 to 1976. This
implies that the average sales per employee have increased
over that period, although much of the change may be attrib-
uted to inflation. Table 8-2 displays average product sales
per employee in 1972, 1975, and 1976.
As can be seen, employment at service stations has not
kept pace with the increases in station sales. The most
notable case is the sales of gasoline which have increased
approximately 25 percent.
TABLE 8-2
PRODUCT SALES PER EMPLOYEE AT SERVICE STATIONS3
Gasoline (liters)
Oil (liters)
Tires
Batteries
a!978 National
1976
460,230
1,344
42
24
Petroleum News
1975
474,410
1,512
38
21
Factbook Issue.
1972
369,300
1,223
38
18
-225-
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8.1.1.4 Number of Establishments
After reaching a peak of 226,459 establishments in
1972, the number of gasoline stations has been steadily
declining.1 Estimates by the U.S. Department of Commerce
published in Franchising in the Economy show the total
number of service stations decreased to an estimated 176,450
in 1977 and predict the decline will continue through the
end of 1978. Table 8-3 illustrates the approximate number
of service stations in the United States from 1967 to 1978.
Whether or not the decline will continue is uncertain.
Sources contacted at the offices of National Petroleum News
TABLE 8-3
NUMBER OF GASOLINE SERVICE STATIONS
YEAR
1978
1977
1976
1975
1974
1973
1972
1971
1970
1969
1968
1967
au.s.
1976-1978.
bu.s.
C1978
NUMBER OF SERVICE STATIONS
171,000a
176,450a
186,400a
189,480a
196,130a
215,880a
226,459b
220,000^
222,000C
222,200C
219,100C
216,059b
Department of Commerce, Franchising in the Economy
Bureau of the Census, Census of Retail Trade.
National Petroleum News Factbook Issue, p. 103.
-226-
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and at the U.S. Department of Commerce feel that the decline
will continue at least through 1978, while the Department of
Energy estimates that the service station population in 1977
was increasing.2 However, the Commerce Department's
estimates are substantiated by the American Petroleum
Institute's reports and are generally accepted as being the
most reliable.
8.1.2 Industry and Market Analysis
8.1.2.1 Industry Structure
Under the classification of structure, three aspects
will be examined that are seen to provide useful information
about the nature of the gas station industry. These are:
1. Concentration ratio among firms.
2. Degree of vertical integration.
3. Barriers to entry.
Concentration Ratio Among Firms
Concentration levels on a national scale are miniscule.
Since gas stations compete for business only on a local
basis, it is only appropriate to consider concentration
ratios on that scale. However, even at a local level, it is
obvious that concentration levels are quite low and indicate
that gas stations are operating in a competitive market.
Based on national averages for 1977, a city with 100,000
automobiles has approximately 155 gasoline service stations.3
-227-
-------
No group of four or eight stations will command a significant
share of the market, nor will they be able to exercise any
influential market control. Because of this, all service
stations are subject to similar competitive pressures within
a local area and have little if any control over the market
to enable them to force other firms from the market.
Vertical Integration
In economic terms, the retail market for gasoline can
be classified as monopolistic competition. In monopolistic
competition, certain basic conditions exist.
1. A large number of firms are selling a differentiated
product. (Service stations are differentiated by
their proximity to customers, credit terms (credit
cards), and brand identification.)
2. Each commodity within the product group is a
fairly close substitute for every other commodity.
3. Such a large number of sellers is in the market
that each expects his competitive maneuvering to
go unnoticed by his rivals.
4. Price is the only immediate recourse that each
marketer can use in an effort to increase profits.
These qualifications apply very well to gasoline
service stations. One gasoline is almost a perfect substi-
tute for another, but the location of each station and brand
names provide differentiation. Although it is naive to
-228-
-------
think that each station assumes that no other stations will
match a price decrease, this must be true in part or an
operator would see no reason to decrease his price. Finally,
a service station has few other short-run methods to improve
profits other than manipulating prices.
This situation of monopolistic competition is tempered
somewhat by differing degrees of vertical integration.
The most common arrangement for marketing gasoline is
when a dealer leases a gas station from a major oil company.
This is the situation that will be assumed to exist for the
model firm. In this case, the dealer buys his products from
and pays rent to the oil company. The dealer's income is re-
presented by the profit remaining after he has covered all
of his expenses.
In addition to lessee dealerships, station organization
takes other forms. The station can be owned by a major com-
pany, who pay all employees a salary and specify operations.
In contrast, a dealer can own and operate his own station
and obtain gasoline from independent suppliers. Another
arrangement is where any individual owns a number of stat-
ions and leases them to a number of dealers. Gasoline is
then supplied by independent refiners.
Barriers to Entry
Recent changes in the gasoline service station industry
indicate that larger stations have a competitive edge in the
industry. As noted in Section 8.1.1.4, the service station
population has declined from a high of 226,000 in 1972 to
176,450 in 1977. Much of this decline has occurred from
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-------
smaller stations being forced out of business by larger,
higher volume stations. As the number of gas stations has
gone down, the average volume pumped at stations has gone up.
Simultaneously, the margins on sales have gone down. Thus,
larger volume stations in general set lower prices, operate
on lower margins, and outperform small stations. New
stations are increasing in size, raising the capital
requirements for new entrants. However, since the number
of service stations is still large, the increasing entry
requirements will not have a large impact on competition
in developed markets. The largest stations require an
investment of $250,000. While not small, this investment
requirement is not so large as to seriously restrict the
abilities of firms to enter the market.
Another concern for market entry is the consideration of
supply of gasoline. If a major or semi-major oil company is
seeking to open a station, they will also supply the gasoline
and other products. An independent dealer must obtain a
contractual agreement from an independent refiner for his
gasoline. In general, this is not a problem, although the
prospects of interrupted or decreased supply may be greater
for an independent dealer than for a major branded station.
8.1.2.2 Industry Conduct
Pricing Policies
The retailing of gasoline is marked by substantial
price competition. Because the gasolines sold at various
stations are virtually perfect substitutes for each other,
price manipulation is virtually the only method to improve
one's market position. Individual dealers sometimes choose
230
-------
to use budget prices as a means of entering new territory.
Also, gas station economics have become increasingly depen-
dent on high sales volume as the means to increased profits.
Both of these practices create the possibility of downward
pressure in local gasoline prices and markets.
Before federal price and supply controls of mid-1973,
the major brand stations were generally the price leaders.
Their prices were undercut by jobbers with branded indepen-
dent suppliers and private brand marketers. This led to a
niche for each type of marketer and margins across the board
were high enough to make adequate profits. Since the advent
of price and supply controls, this pricing framework has
for the most part been changed. Many private branders and
branded independent jobbers are paying higher prices for
their gasoline than are major brand retailers. An effort to
maintain their historic place in the retail market has led
to increasing downward pressure on margins. In addition,
competitive measures designed to reduce per-gallon operating
costs (such as self-service, high volume, or split island
stations) have put further pressure on margins. What has
resulted is a highly competitive system of setting prices
imparting strong pressures to lower per-gallon operating
costs so as to cover total average costs. Larger stations,
more efficient control of costs, split islands, etc., are
all methods used to widen the margin between costs and re-
venues, and which enable stations to remain price competitive,
8.1.2.3 Industry Performance
The structure and conduct sections above have illus-
trated the basic organization and methods of doing business
in the gasoline service station industry. In the performance
231
-------
section, the discussion will attempt to show how well the
structure and conduct combine to realize the goals of
efficient service to consumers while maintaining adequate
levels of return for the industry.
Trends in Profits and Prices
As the various retailing strategies mentioned above
have been implemented, there has been a steady decline in
the margins between the price of gasoline.charged to the
retailer and the price charged to the consumer. Table 8-4
shows a 17-year history of dealer and consumer prices and
the difference as a percentage of the dealer's pretax price.
The year 1960 saw the margin at around 30 percent of dealer
cost. The margin steadily climbed to around 38 to 39 per-
cent in the period 1967 to 1973. Mid-1973 federal price
and supply controls quickly affected the market, as 1974
margins were only 32.4 percent. By 1977 the markup had
declined to 19.3 percent. During the same period average
prices for the dealer increased from $0.1608/gal to
$0.4251/gal, with $0.163/gal of this increase coming in
the 2-year period from 1973 to 1975 in the wake of the dra-
matic increase in world oil prices. Although the upward
price trend is continuing, it is not at the rate of increase
experienced during 1973 to 1975.
Much of the recent decline in gasoline margins is due
to the onset of self-service marketing. Legal in all states
except New Jersey and Oregon, self-service generally lowers
operating costs so that the margins necessary for adequate
profits are lowered. Figure 8-1 shows the growth of self-
service gasoline sales in the United States since 1975.
232
-------
TABLE 8-4
GASOLINE PRICES AND MARGINS3
YEAR
1977
1976
1975
1974
1973
1972
1971
1970
1969
1968
1967
1966
1965
1964
1963
1962
1961
1960
DEALER TANK
WAGON PRICE
(BEFORE TAX)
(cents)
42.51
38.99
35.78
30.53
19.48
17.72
18.11
17.68
17.11
16.51
16.31
15.83
15.38
14.82
15.22
15.45
15.80
16.08
SERVICE
STATION
PRICE
(BEFORE TAX)
(cents)
50.70
47.44
45.45
40.41
26.88
24.46
25.20
24.55
23.85
22.93
22.55
21.57
20.70
19.98
20.11
20.36
20.53
20.99
MARGIN
(cents)
8.19
7.45
9.67
9.88
7.40
6.74
7.09
6.87
6.74
6.42
6.24
5.74
5.32
5.16
4.89
4.91
4.73
4.91
MARGIN
(%)
19.3
19.1
27.0
32.4
38.0
38.0
39.1
38.9
39.4
38.9
38.3
36.3
34.6
34.8
32.1
31.8
29.9
29.7
aPlatt's Oilgram Service as reported in the 1978
National Petroleum News Factbook Issue.
As can be seen, the growth of self-service marketing
has been steady. Whereas early in 1975 only around 14 per-
cent of sales were from self-service pumps, by the end of
1977 the market share approached 40 percent. The price dif-
ference between full and self-service gasoline averaged about
4 cents (1978 figures).4 since both types of station pay
-233-
-------
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ra
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3
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—
03
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-234-
-------
the same for gasoline, the self-service marketers are operat-
ing on margins approximately 4 cents less than full-service
marketers. This puts substantial downward pressure on the
margins throughout the industry.
8,1.3 Financial Characterization
8.1.3.1 Earnings Trends
Additional data characterizing breakdown of sales
dollars are available from a survey of firms in the gasoline
service station industry over the period from July 1976
through March 1977. Table 8-5 displays the income data for
a 91-firm sample.5 The 91 firms in the sample registered
approximately 7.0 percent of the total sales of the industry
in 1976. The operating percentages, expressed with respect
to sales, are an average of all individual service stations
included in each firm. In this survey by Robert Morris
Associates, a firm may consist of one independently owned
station or multi-unit firms that own and operate or lease
a large number of service stations. Therefore, the data
are not reported according to establishment size.
Several points are evident from Table 8-5 that were
referred to in the structure and conduct sections of this
chapter. First, the cost of operations (87.8 percent of
sales) dominate the expense accounts. These costs reflect
for the most part the cost of the gasoline to the retailer
and the low margins realized on its subsequent sale. Other
operating costs are necessarily a small percentage of sales.
Rent on business property (included in the operating expen-
ses category) is only a small portion of the expenses (med-
ian value of 0.9). Also of note is the profit before tax
-235-
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: TABLE 8-5
INCOME DATA FOR GASOLINE SERVICE STATIONS BY PERCENT
Asset size
($000)
Number of
firms
Net sales
Cost of sales
Gross profit
Operating
expenses
Operating
profit
All other
expenses (net
Profit before
aRobert
(JUNE 30 TO
0-250
25
100
84.2
15.8
13.7
2.1
0.4
)
taxes 1.7
SEPTEMBER 30, 1976)a
250- 1,000- 10,000-
1,000 10,000 50,000b
27 32 7
100 100
84.9 83.7
15.1 16.3
13.9 14.4
1.2 1.9
0 0.4
1.2 1.5
Morris Associates, Annual Statement Stud
All
91
100
87.8
12.2
10.6
1.6
0.1
1.5
les,
1977.
^Income data were not presented for this category due
to the small size of the sample. The data for these sta-
tions are included in the overall figures in the last column,
as a percentage of sales. At 1.5 percent for all establish-
ments, this value is typical of retail businesses that have
high sales to assets ratios and high inventory turnover
rates. The return on sales is not great; the low rate of
return on sales must be made up for by pumping a high vol-
ume of gasoline.
8.1.3.2 Basic Financial Ratios
Table 8-6 displays selected financial ratios based on
the same asset sizes and firm sample as the income data
above. Each ratio has three values listed. The values
-236-
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TABLE 8-6
FINANCIAL RATIOS (1976-1977 DATA)a
ASSET SIZE ($000)
FINANCIAL
RATIOS
Current
Quick
Cost of sales/
inventory
Sales/working
capital
Sales/net fixed
assets
Sales/total assets
aRobert Morris
0-250
5.lb
1.4C
l.ld
2.0
0.7
0.5
64.2
19.6
8.8
14.4
22.8
276.5
155.1
39.9
11.3
12.4
6.1
4.2
250-1,000
2.6
1.3
0.8
1.0
0.6
0.3
44.7
27.0
15.4
16.6
54.0
-98.3
29.5
13.9
6.2
7.7
5.5
3.6
Associates, Annual
1,000-1
1.5
1.1
0.7
0.9-
0.5
0.3
49.9
31.2
17.2
31.8
158.5
-33.8
15.3
8.2
3.6
6.0
4.1
2.1
Statement
0,000 ALL
1.7
1.2
0.8-
1.0
0.6
0.4
51.9
30.1
15.4
16.9
70.0
-98.3
27.7
13.3
7.4
7.6
5.3
3.0
Studies ,
1977.
Cupper quartile.
cMedian.
^Lower quartile.
represent the upper quartile, the median, and the lower
quartile of the values reported.
As firm size increases, several interrelated trends
occur. There is a trend away from domination of the balance
-237-
-------
sheet by current assets and liabilities. In particular, the
proportion of assets held as current assets declines even
faster than current liabilities, leading to decreasing
current and quick ratios (see Table 8-6). This shift occurs
mainly due to an increasing percentage of fixed assets and a
decline in the percentage of cash and inventories held on
the balance sheet. Larger firms are able to hold less of
their assets as inventories because they turn over their
inventories more rapidly than do small firms. Note in
Table 8-6 that the median value for cost of sales/inventory
increases with firm size, implying a faster inventory
turnover rate.
Although there is marked variation in financial oper-
ating ratios as firm size changes, the data presented in
Tables 8-6 and 8-7 allow some generalizations to be made
about gasoline service stations. Since sales of gasoline
(inventory) are the major source of revenue, inventory
turnover is rapid.
The Robert Morris survey indicates approximately
75 percent of service stations have quick ratios of 1.0
or below and current ratios of 1.7 or below. These
ratios indicate that service stations have to rely upon
the selling of inventories to meet short-term obligations.
The dependence upon fast moving gasoline sales enables
service stations to realize high sales/fixed assets ratios
relative to other industries. Even though profits as a
percent of sales are generally small, the high sales to
fixed assets ratio enables firms to realize an adequate
return on their investment.
-238-
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8.1.4 Model Firm Characterization
Because the number of firms in the gasoline service
station industry is so large, it is almost impossible to
characterize the industry members sufficiently to accurately
assess the impacts on each firm. As an alternative to this
time-consuming enterprise, it is convenient to represent the
industry by developing model firms that approximate the
conditions of actual firms. The majority of these firms
will be represented by a single model firm, which will be
used to measure "average" impacts. A second "worst-case"
model will also be used to focus attention on the most
marginally profitable enterprises, i.e., those stations
most likely to close due to regulation.
Table 8-7 displays the characterization of the model
firm. The justification for the characteristics assigned
to the model firm is delineated below.
For the purpose of the analysis, it will be assumed
that the model firm operates only one station. In actuality,
97 percent of gasoline service station firms operate only
one station.^
Financial data in Table 8-7 have been estimated from
data supplied by Edwin K. Williams and Co. in the 1978
National Petroleum News Factbook. Williams and Co. provided
average regional sales, expenses, and profit data for
service stations subscribing to their information service.
Their service excludes grocery, towing service, and conve-
nience gas suppliers, making it more representative of
stations likely to generate waste oil. The firm believes
that they represent the better performers in the industry
that can afford to buy their service. Accordingly, the
-239-
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TABLE 8-7
MODEL FIRM CHARACTERIZATION FOR
GASOLINE SERVICE STATIONS3'b
1977 $
Sales0
Cost of operations
Net income before taxes
MODEL
FIRM
344,000
327,400
17,500
WORST-CASE
FIRM
246,700
243,200
3,500
including compensation
of owner
aERCO estimate.
^A one-station company has been assumed.
GTotal gasoline sales for model firm were 429,636 gal-
lons; the worst-case firm pumped 339,252 gal/yr.
regions chosen to represent the model plants were carefully
selected to offset this bias.
The mean performance of service stations in Colorado
Springs, Colorado was chosen as the representative model.
This model pumps 35,803 gal/month - approximately the 1977
national average of 35,600 gal/month. The average net pro-
fit for all activities as a function of gasoline sold is
$0.032/gal. From annual sales of $344,900, the representa-
tive firm nets $13,900 after taxes. This figure has been
raised to $17,500 to yield an estimate of pretax net income,
The worst-case firm is represented by the performance
of stations in the Valdosta, Georgia, region. This region
was a poor performer in the Williams and Co. data base.
Only 28,271 gal/month are pumped by this station with an
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average profit from all operations of $0.01/gal. The worst-
case firm's annual net income after taxes of $3,500 from
sales of $246,700 is only one quarter that of the average
performer. The pretax net income figure remains at $3,500
assuming that exemptions and deductions have already pre-
cluded income tax.
8.2 Automotive Repair Shops
8.2.1 Size and Scope of the Industry
8.2.1.1 Industry Definition
For the purposes of this study, the automotive repair
shops that will be considered are covered by SIC classifi-
cation number 753. Within this category there are five
four-digit categories. These are:
7531 - Top and Body Repair Shops - Establishments
primarily engaged in the repair of automotive tops,
bodies, and interiors.
7534 - Tire Retreading and Repair Shops - Establishments
primarily engaged in repairing and retreading automotive
tires.
7535 - Paint Shops - Establishments primarily engaged
in automotive painting and refinishing. Paint shops of
top and body repair establishments are classified in
industry 7531.
7538 - General Repair Shops - Establishments primarily
engaged in general automotive repair.
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7539 - Automotive Repair Shops, not elsewhere classified
Establishments primarily engaged in specialized automo-
tive repair, not elsewhere classified, such as fuel
service (carburetor repair), brake relining, front-end
and wheel alignment, exhaust system (muffler) repair,
radiator repair, and glass replacement and repair.
Included in this group are automotive transmission
repair shops.
As is the case with gasoline service stations, a firm
is classified as an automotive repair shop if it obtains
more than 50 percent of its revenue from the sale of its
repair services. Thus, most repair facilities in gasoline
service stations are not classified as repair shops within
the SIC coding system and therefore are not considered here.
Their waste problems are discussed as a part of gasoline
service stations (see Section 8.1). Similarly, auto repair
services offered by automotive dealers or mass merchandisers
are not considered in this section.
Although those repair shops in SIC codes 7531, 7534,
and 7535 do not primarily do repair work that involves
generation of waste oil, many of these shops do perform
such work in addition to their specialty. Thus, these firms
are considered to be possible generators.
8.2.1.2 Industry Sales
Automotive repair shops receipts have grown steadily
over the 11 years from 1967 to 1977. Receipts in this
period grew from 4 to nearly 14 billion dollars, for an
average annual growth of 12.9 percent. However, inflation
has had a strong effect on receipts, since the average annual
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real growth rate has been only 5.07 percent. The total
revenue figure is expected to climb by 13.45 percent to
$15.6 billion for the year 1978.7
In the next several years, the demand for auto
maintenance and repair is expected to increase. Imple-
mentation of federal legislation requiring warranties on
auto emission controls will likely increase automobile
repair business activity as state and local inspection
and maintenance programs get under way.8 According to
the U.S. Industrial Outlook, receipts are expected to
grow at an average 8.7 percent per year over 1977 levels
over the next 5 years. However, the growth trend may be
balanced somewhat by increasing numbers of do-it-yourself
repairs. Of 10,000 households surveyed by the Motor and
Equipment Manufacturers Association in 1977, only 43
percent reported that they had paid a mechanic to perform
simple uncomplicated work. Only 28 percent used mechanics
exclusively and about 19 percent never employ mechanics
for their maintenance work. As automobile and repair
costs rise, the number of do-it-yourselfers is expected
to rise as well.9
8.2.1.3 Industry Employment
Total paid employees in the automotive repair shop
industry approached 238,000 in 1972. In addition to
these employees, a total of 53,600 firms operate as
individual proprietorships or partnerships without any
other employees on the payroll.10 Thus, census figures
do not officially record any employment for these firms.
The Bureau of Labor Statistics has estimated the employment
in SIC Code 753 for the years 1973 through 1977. According
-243-
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to these estimates, the employment has risen from the
238,000 in 1972 to 302,100 in 1977 at automotive repair
shops.11
8.2.1.4 Size Distribution of Establishments
Figure 8-2 shows the size distribution of firms by the
number of paid employees. The firms included are those
114,208 firms that were in operation at the end of 1972.12
As can be seen, over half of the firms had no paid employees
and 83 percent of the firms had three paid employees or
less. Only 1,769 firms, or 1.5 percent of the total, had 15
or more paid employees.
Clearly, the great majority of automotive repair shops
are small businesses that do not operate in conjunction with
other firms or company chains. Ninety-eight percent of
firms in the 1972 census were single establishment firms
that recorded 91 percent of total industry receipts.13
The other multi-establishment firms include such large
firms as "Midas" and "AAMCO," with several hundred estab-
lishments each.
8.2.2 Industry and Market Analysis
8.2.2.1 Industry Structure
Firm concentration, barriers to entry and the degree of
vertical integration in the automotive repair industry are
all low. As mentioned in Section 8.2.1.4 above, 98 percent
of the auto repair shops are single establishment firms.
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£
3
-------
They are strictly local, low revenue businesses that rarely
employ more than two or three persons, and there are more
than 127,000 shops nationwide. All these factors indicate a
low level of concentration in the industry.
The many small, individually owned shops located in
nearly every community across the country are also evidence
that barriers to entry are low. Automobile repair experience
and a small amount of capital are all that are required to
establish a repair shop. As receipts and expertise grow,
shop owners can slowly add equipment and expand the services
they offer.
The large number of small shops owned and operated as
individual proprietorships or partnerships also helps
demonstrate that vertical integration is nonexistent. The
chains that exist usually specialize in a particular kind of
repair (e.g., AAMCO specializes in automotive transmission
service). These large chains are only slightly more vertically
integrated than the independents as they usually have their
own lines of parts. The small amount of vertical integration
which is associated with automobile repair is usually
observed at auto dealerships that sell and then service the
cars. However, these kinds of automobile dealers are not
included in SIC 753.
8.2.2.2 Industry Conduct and Performances
With no significant concentration, barriers to entry or
vertical integration, the automotive repair industry can be
classified as a competitive industry. However, automotive
repair service pricing may not follow a purely competitive
model. It may be possible for a given shop to earn some
-246-
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price-setting latitude as a result of a good reputation, a
prime location, or, since most shops do little or no adver-
tising, poor price information transfer among customers.
Price variations for similar service within a given vicinity
are sometimes observed.
During the 1967-76 period, the price of auto repair and
maintenance service rose an average of 9 percent per year.
Table 8-8 displays a comparison of the price index for
automobile repair with that for consumer goods between 1967
and 1976. Price increases in the late sixties and early
seventies were lower than those experienced in the mid-
seventies. The table also shows that the price index for
auto repair services rose nearly 10 percent above the
general consumer price index during the same timespan. Both
increased costs and demand for auto repair services have
contributed to this price trend. Other influencing factors
may have been the limited price setting ability of some
firms and inflated prices for work done for insurance policy
TABLE 8-8
AUTOMOBILE REPAIR PRICE INDEX VERSUS THE CONSUMER PRICE INDEX9
PRICE
INDEX 1967 1970 1971 1972 1973 1974 1975 1976b
Consumer 100 116.3 121.3 125.3 133.1 147.7 161.2 169.2a
goods
Automobile 100 120.6 129.2 135.1 142.2C 156.8C 176.6C 189.7C
repair
a!976 U.S. Bureau of Labor Statistics, Statistical
Abstract of the United States.
bMay 1976.
cEstimated by the Bureau of Domestic Commerce.
-247-
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holders. Prices are expected to continue to climb, fueled
by the rising costs experienced by all industries, the
anticipated increase in demand for auto repair services, and
the predicted drop in the number of full service gas stations
(see Section 8.1.2.3).
The analysis of industry data shows that the automotive
repair shop industry is characterized by a large number of
small, personally owned establishments that do well just to
turn a profit. Amid many consumer complaints about unnecessary
repair work and high charges, this may seem paradoxical.
Much of it can be explained, however, by remembering that a
great deal of automotive repair work is done by automobile
dealers, gasoline service stations and mass merchandisers.
These establishments are not classified as SIC 753 and thus
their statistics do not show up here. The repair work
performed by SIC 753 repair shops is more likely to be the
less desirable work and business will not be as regular as
that experienced by a gas station or automobile dealer.
Thus, the small independent auto repair shops are at a
disadvantage compared to other repair facilities that have
another line of work to support them.
8.2.3 Financial Characterization
8.2.3.1 Earnings Trends
Table 8-9 presents financial statistics for auto repair
shops as compiled by Robert Morris Associates. The data are
taken from a 93-firm sample of firms in the SIC 7538 (general
automotive repair shops) classification.^-^ The sample
firms registered approximately 6 percent of industry sales
in 1977. As is the case with the gasoline service station
-248-
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TABLE 8-9
INCOME DATA - AUTOMOTIVE REPAIR SHOPS
(JUNE 30, 1976 TO MARCH 31, 1977)a
ASSET SIZE
($000)
Number of firms
Net sales
Operating
expenses
Operating
profit
All other
expenses (net)
Pretax net
income
aRobert Morris
0-250
64
100.0
9.4.9
5.1
1.5
3.7
Associates
250-
1,000
23
100.0
97.4
2.6
0.2
2.8
, Annual
1,000-
10,000b
6
-
—
—
-
Statement
ALL
93
100.0
95.7
4.3
0.0
4.3
Studies, 1977.
^Income data were not presented for this category due
to the small size of the sample. The data for these
stations are included in the overall figures in the last
column.
characterization, a firm in the sample may consist of one
independently owned shop or may be part of a multi-unit
chain. The operating percentages, expressed with respect to
sales, are an average of all individual service stations
included in each firm.
Although not reported by the Robert Morris data,
the cost of sales for auto repair shops is only around
50 percent of sales, in contrast to the 88 percent figure
for gasoline service stations.15 This reflects the fact
that automobile repair shops have higher overhead costs
relative to receipts. Because of this, other expenses are
increased in their share of the total costs of doing business,
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Table 8-9 shows that the profit before taxes of
automobile repair firms in the sample averaged 4.3 percent
of sales. The 64 firms in the smallest asset size category
averaged only 3.7 percent of sales as net profit before
taxes. It appears that modest profit margins are the rule
in this industry.
8.2.3.2 Financial Ratios
Table 8-10 shows selected financial ratios for the
automobile repair shop sample used in Table 8-9. Each
ratio has three values listed. The values represent the
upper quartile, the median, and the low quartile of the
values reported.
The current and quick ratios for the firms in the
sample do not vary appreciably with the asset size of the
firm. The median current ratio is 1.4 and the median quick
ratio is 0.7. These ratios are somewhat lower for business
enterprises. However, in general terms, they indicate only
that repair shops must maintain sales volume in order to
meet their obligations.
8.2.4 Model Firm Characterization
The model firms for automotive repair shops are
characterized in Table 8-11. As with gasoline service
stations, almost all firms (98 percent) are single facility
establishments. Accordingly, the model firm operates only a
single shop.
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TABLE 8-10
FINANCIAL RATIOS FOR AUTO REPAIR SHOPS
(1976-77 DATA)a
FINANCIAL
RATIOS
Current6
Quickf
Sales/working
capital
Sales/net fixed
assets
Sales/total
assets
0-250
l'.4C
1.0d
1.2
0.7
0.4
10.1
23.5
339.0
30.2
14.6
4.8
4.9
3.2
2.0
aAnnual Statement Studies
ASSET SIZE ($000)
250-1,000
1.8
1.4
1.2
1.3
0.8
0.6
8.2
14.1
21.7
40.9
17.3
8.6
3.4
2.9
2.4
ALL
2.1
1.4
1.0
1.2
0.7
0.4
9.5
18.0
142.9
31.2
14.5
6.3
4.2
3.0
2.0
, Robert Morris Associates, 1977
bupper quartile.
GMedian.
^Lower quartile.
eThe ratio of current assets over current liabilities.
^The ratio of current assets net of inventories over
current liabilities.
-251-
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TABLE 8-11
MODEL FIRM CHARACTERIZATION AUTOMOTIVE REPAIR SHOPS9
Sales
Cost of operations
Compensation of proprietor
Net income before taxes
Net income and proprietor
compensation before taxes
MODEL
FIRM
80,000
69,000
8,100
2,900
11,000
1977 $
WORST-CASE
FIRM
40,000
32,500
6,000
1,500
7,500
aERCO estimates.
The model firm generated 1977 annual sales of $80,000 -
the appropriate mean in 1972^6 multipled by a 1.44 infla-
tion factor.16,17 The cost of operation has been estimated
at a level sufficient to generate a net profit before taxes
of 3.7 percent of sales. A "compensation of officers" of
$8,100 was included as well. The 3.7 percent profit figure
comes from the mean of the 64 small automotive repair shops
sampled by Robert Morris Associates in their 1977 Annual
Statement Studies. The $8,100 compensation of officers
is included here because the formulation of the model plant
used statistics that separated this figure out from the
income of the business. The figure of 10.1 percent was
obtained from the mean compensation as a percentage of sales
for automotive repair firms with assets under 100,000 (and
-252-
-------
average receipts of $100,000).18 Thus, a figure absent
from the model plants for gasoline services stations - net
profit and compensation of owners before taxes - is also
given here. This statistic is the best estimate of total
income derived by the owner of an automotive repair shop.
The estimates for the worst-case facility are similar
to those for the model facility. Sales are reduced to
$40,000. This figure is 50 percent of the sales of the
model firm. Deflated to 1972 dollars it places the sales of
the firm within lowest quarter of repair shops that main-
tained a payroll in 1972.^ The cost of operations was
estimated to again yield a 3,1 percent pretax profit on
sales with provision for an annual salary of $6,000 for the
proprietor.
-253-
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NOTES TO CHAPTER EIGHT
1. U.S. Bureau of the Census, U.S. Census of Retail
Trade, 1972.
2. National Petroleum News, February 1978, p. 19.
3. 1977 - 176,450 services stations x 100,000 = 155
114,173,000 automobiles
4. Lundberg Letter, June 2, 1978, p. 1.
5. Robert Morris Associates, Annual Statement Studies,
1977.
6. U.S. Bureau of the Census, Census of Selected
Service Industries, 1972.
7. U.S. Industrial Outlook, 1978, p. 451.
8. U.S. Industrial Outlook, 1978, p. 451.
9. U.S. Industrial Outlook, 1978, p. 450.
10. U.S. Bureau of the Census, Census of Selected
Service Industries, 1972.
11. Bureau of Labor Statistics, Report of Employment
and Earnings, 1973-1977.
12. According to the Census of Selected Service
Industries, 13,054 firms contributed to census figures,
yet were not in operation on December 31, 1972. Thus,
Table 8-9 has employment figures for only 114,208 firms.
13. U.S. Bureau of the Census, Census of Selected
Service Industries, 1972.
14. Annual Statement Studies, Robert Morris Associates,
1977.
15. Almanac of Business and Financial Ratios, Leo
Troy, 1978, p. 319.
16. U.S. Bureau of the Census, Census of Selected
Service Industries, 1972.
17. U.S. Bureau of Labor Statistics, Automobile Repair
Price Index, Statistical Abstract of the United States.
-254-
-------
18. Almanac of Business and Financial Ratios, Leo
Troy, 1978, p. 319.
19. 23.1 percent of firms with a payroll had receipts
of $30,000 or less in 1972 according to U.S. Census of
Retail Trade, 1972.
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CHAPTER NINE
WASTE CHARACTERIZATION
This chapter focuses on the waste streams generated
by gasoline service stations and auto repair shops. The
distinction is made between those waste streams that will
be affected by the proposed RCRA regulations and those
that will not, in order to be able to perform the economic
impact analysis in Chapter Ten. Chapter Nine includes
a description of basic characteristics, sources of and
quantities generated, current disposal practices, and
RCRA-imposed changes in disposal practices.
9.1 Waste Characteristics
9.1.1 Identification
The major waste stream from service stations and auto
repair shops is waste oil. The waste oil is taken primarily
from automobile crankcases during oil changes, but signif-
icant amounts of waste hydraulic oil from automatic trans-
missions are also generated. The main focus of this
chapter is on these waste oils. Other waste streams are
discussed briefly in later sections.
9.1.2 Characteristics of Waste Oil
The major portion of automotive waste oil consists
of waste oils drained from automotive crank cases.
-257-
-------
Less than 15 percent of the total waste oil volume consists
of transmission fluids, gear lubricants, and minor amounts
of kerosene or other solvents used in the service station or
repair shop.l
Virgin lubricating oils are affected by contaminants
picked up during circulation through the crankcase of the
automobile. A principal contaminant is lead from gasoline.
Virgin oil contains virtually no lead. Used waste oil may
contain as much as 20,000 ppm (2 percent) of lead.2 Other
metals from gasoline, as well as fines from engine wear,
contribute to metal impurities in waste oil. The most
common metals in addition to lead are zinc, iron, and
magnesium. Small amounts of copper, aluminum, and chromium
may also be evident.-^
The characteristics of several samples of used waste
oil are shown in Table 9-1. Also, Table 9-2 compares the
characteristics of new oil with a sample of the same oil
after use. The lead content for the variou-s waste oil
samples varies from 4,720 ppm (0.47 percent) to 22,000 ppm
(2.2 percent). The lead levels in waste oil are far above
the limits specified in RCRA (Options A and B) as acceptable
for wastes. As a result, waste oil will be considered to be
a hazardous waste in this report.
In some cases, used oils have also been found to
contain other potentially toxic or carcinogenic compounds.
Under the broader definition of toxicity in RCRA Option A, a
number of these compounds would be restricted. Some of the
substances found in waste oil include polychlorinated
biphenyls (PCS); 2,3,7,8-tetrachlorodibenzodiorin; 2,4,5-
trichlorophenol; and polycyclic aromatic hydrocarbons. The
extent to which such chemicals may be found is not known,
but such occurrences appear likely to be the except ion.^
-258-
-------
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-259-
-------
TABLE 9-2
COMPARISON OF NEW AND USED OIL PROPERTIES
NEW OIL
USED OIL
Flash point (° F)
Viscosity at 100° F, SUS
Viscosity at 210° F, SUS
Gravity (° API)
Pour point ( °F)
Ash (%)
Nitrogen weight (%)
Sulfur weight (%)
Carbon residue
Gasoline dilution
Metals concentration (ppm)
Zinc
Lead
Barium
Calcium
Phosphorus
Iron
aM.L. Whisman et al.,
Some Innovative Approaches
355
280
61.2
30.2
-35
1.13
0.021
0.30
1.1
0.4
359
0
162
3,430
470
1
Waste Lubricating
to Reclaiming Used
220
265
58.0
26.2
-35
2.82
0.091
0.32
4.3
3.0
461
10,420
150
3,600
600
149
Oil Research -
Crankcase Oil,
Bartlesville Energy Research Center, Bureau of Mines/ 1974.
Waste hydraulic oil, which is used for transmission fluids,
is a listed hazardous waste under RCRA Section 3001 (Option B).
Less work has been done on defining the characteristics of used
hydraulic oil than has been done for used crankcase oil, due
perhaps to the smaller volumes generated. Waste transmission
fluids do not become contaminated with lead through contact
with gasoline, as do motor oils. However, some hydraulic oils
include barium-containing additives.5 Barium is listed as one
of the parameters in the EPA Interim Primary Drinking Water Stan-
dards, with a maximum permissible specified level of 1.0 mg/1.
-260-
-------
Several of the physical properties of waste oil shown
in Table 9-1 affect the ease with which they can be used or
reprocessed. Oils with high water content generally need to
be dehydrated before reuse. Ash or sediment content need
also be removed or reduced.
9.1.3 Other Waste Streams
In addition to waste oils, gasoline service stations
generate other waste streams that may be potentially hazardous,
Those identified by this study are antifreeze solutions and
waste solvents, and batteries. As explained below, none
constitute a separate waste stream that will be affected by
currently proposed RCRA legislation in addition to the waste
oil regulation.
9.1.3.1 Antifreeze
A potentially hazardous waste stream generated by service
stations is antifreeze flushed out of automobile radiators.
Most antifreeze is allowed to run into sewer drains and thus
would come under the controls established by the Clean Water
Act. However, some stations or repair shops may allow
uncontrolled runoff onto nearby land areas.
The ethylene glycol base in antifreeze solutions is
toxic to humans and is also contaminated by metals worn off
the automobile cooling system. However, the material is not
currently listed in the Section 3001 regulations as a
hazardous waste. An examination was undertaken to determine
whether or not the material should probably be considered as
hazardous according to RCRA standards.
-261-
-------
The toxicity requirements of RCRA Section 3001 specify
that a waste stream not have more than 10 times the metal
content of the EPA Primary Safe Drinking Water Standards.
Used antifreeze contains significant amounts of copper and
can also include small iron quantities. However, these
metals are included only in the Secondary Drinking Water
Standards. Used antifreeze solutions are not therefore
hazardous according to the definition of toxicity
in Section 3001 for Option B.
An additional definition of toxicity is included in the
Option A version of Section 3001. In that version, a
hazardous waste is any substance which has a calculated
human LD50 (a dosage lethal to 50 percent of a population)
of less than 800 mg/kg at greater than a specified concen-
tration. The ethylene glycol human LD50 value is 1500 mg/kg
so the material is also nonhazardous by this definition.6
The materials used to flush radiators are more highly
toxic than the antifreeze itself. Radiator flushes commonly
include rust inhibitors such as sodium chromate and sodium
metasilicate. The human LD50 values for these substances
are 32 mg/kg and 205 mg/kg respectively. However, very
small quantities of these materials are used. Normal
practice is to use one pint of radiator flush when chemical
flushing is needed. The chemical flush would be diluted
many times if it is collected with the large water quantities
used in flushing operations. Furthermore, relatively few
cars require the use of chemical flushes. One garage owner
who specialized in radiator work estimated that he used
these materials on only 20 percent of the cars serviced.
Due to the small quantities of these materials, and the
large extent of dilution in use, these materials will not be
examined as a separate waste source.
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9.1.3.2 Solvents
In service stations and repair shops, some solvents
are used for degreasing parts. A portion of the industry
continues to use gasoline for parts cleaning, but solvents
appear to be used much more commonly. The methods of
disposing of the used solvents (or gasoline) are described
below. The information is based on an ERGO survey of
stations and repair shops in Boston and Washington, D.C.
The principal disposal methods are the following:
1. Used solvent is captured and recycled to a solvent
reclaimer. Roughly one-half of the firms contacted
had contracts with a solvent reclaimer.
2. Used solvent or gasoline is dumped into the waste
oil holding tank. Dumping into the waste oil tank
appeared to be as common as the first methods.
3. Solvent is dumped into the sewer. Few firms appear
to dispose of the material in this manner. However,
the telephone survey results are probably biased
downward, because station owners are aware of
regulations on sewer disposal.
The quantities of used solvent range from a few gallons a
month for a station that does little car servicing to 15
gallons a month.
Either of the first two methods indicates that solvent
disposal is not a separate waste problem. These procedures
appear to represent 80 percent or more of industry practice.
If sewer disposal is used, the waste stream would be
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controlled by other regulations. As a result, these waste
streams have not been analyzed further for the economic
impact analysis.
9.1.3.3 Batteries
A typical battery contains over 11 kilograms of lead.
As a result, many firms find it advantageous to recover the
lead from used batteries. As a consequence, almost all
service stations and garages appear to sell their old
batteries to scrap dealers, based on contacts with industry
personnel. The scrap dealers then sell the batteries for
lead recovery. Some batteries are, however, probably
disposed of with general refuse.
It will be assumed that batteries sent to recovery
facilities will not be regarded as hazardous wastes by RCRA.
This assumption is consistent with other RCRA interpretations
made in this report. Specifically, it appears consistent
with the judgment that steel drums which are being sent to
reconditioners will not be considered hazardous wastes.
Thus, the disposal of used batteries by service stations and
garages is not seen to be affected by RCRA legislation.
9.2 Model Plant Waste Oil Quantities
In order to apply the economic impact analysis to gaso-
line service stations and automobile repair shops, a "model
plant" approach has been chosen in order to determine
impacts upon a typical establishment. From there, the
impacts as they apply to more and less highly impacted firms
can be estimated. This section will establish the "typical"
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waste quantities to be used for the economic impact analysis
(see Chapter 10).
9.2.1 Gasoline Service Stations
Based upon discussions with gasoline service station
owners and waste oil collectors, an average gasoline service
station will generate approximately 4,000 liters of waste
oil per year. Based upon a 6-day average work week, a
station needs to perform three oil changes per day to obtain
4,000 liters over the course of a year. This estimate
(three changes a day) will be used for the model station
waste quantity. Table 9-3 displays the monthly and yearly
amount of waste crankcase oil generated (in both liters and
kilograms) based upon an estimate of three oil changes per
day, 6 days per week. Since a majority of service stations
do not do transmission work, the model plant was assumed to
not be generating hydraulic oils.? if this assumption
were to be modified, then the amount of waste oil for the
model station should be increased 25 percent.8
TABLE 9-3
GASOLINE SERVICE STATIONS
MODEL PLANT WASTE CRANKCASE OIL GENERATION
PER MONTH PER YEAR
LITERS KILOGRAMS9 LITERS KILOGRAMS
331.5 295 3,978 3,540
aBased upon average 0.89 specific gravity.
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For the worst-case station, the waste oil quantity was
kept unchanged from that of the model plant. However, the
worst-case station has a lower sales volume. Thus the rate
of waste oil generation was increased slightly (approximately
25 percent). The characteristics of the model and worst-case
firms were described previously in Section 8.1.4.
9.2.2 Automotive Repair Shops
Because many automotive repair shops specialize in
certain types of repair and do only infrequent oil changes,
the average number of oil changes per day is somewhat less
for repair shops than for gasoline service stations. For
the model plant formulation, it was assumed that a typical
automotive repair shop does only nine oil changes per week.
It also does some transmission work. These estimates are
based on discussions with industry personnel. Table 9-4
displays the waste oil quantities generated by the model
repair shop.
TABLE 9-4
MODEL PLANT WASTE OIL QUANTITIES
AUTOMOTIVE REPAIR SHOPS5
PER MONTH PER YEAR
LITERS KILOGRAMS LITERS KILOGRAMS
Crankcase oil
Hydraulic oil
165.8
86.7
147.5
73.7
1,989
1,040
1,770
884
Total 252.5 221.2 3,029 2,654
aERCO estimate, based on an assumption of 9 oil changes
per week and 2 major transmission jobs per week.
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The same amount of waste oil was assumed to be generated
at the worst-case repair shop. The worst-case firm is,
however, approximately half the size of the model firm. As
part of the worst-case formulation, it was assumed that the
worst-case firm had a higher relative waste generation rate,
and thus may be more highly impacted.
9.3 Aggregate Waste Quantities
9.3.1 Gasoline Service Station Wastes
9.3.1.1 Waste Crankcase Oil Generated at Service
Stations
The most generally accapted figures for waste oil quanti-
ties are those published in a 1974 study for the United
States Environmental Protection Agency, Waste Oil Recycling
and Disposal.9 These estimates rely on sales figures of
motor oil to extrapolate the amount of motor oil that ends
up as waste oil.
In the EPA study, it is assumed that 70 percent of all
motor oil sales at gasoline service stations are used for
changes, and that 90 percent of this amount is recovered as
drainings. Thus, a "recovery factor" of 63 percent (0.7 x
0.9) of the sales of motor oil at service stations yields an
estimate for the amount of waste oil from service stations.
Table 9-5 presents estimates of the amount of waste oil
generated by gasoline service stations based upon this
method.
A more direct method of calculating service station
waste oil is to utilize estimates for the number of oil
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TABLE 9-5
ESTIMATES OF WASTE CRANKCASE OIL GENERATED BY SERVICE
STATIONS BASED UPON A 0.63 RECOVERY FACTOR
YEAR
1976
1975
1974
1973
1972
1971
SERVICE
STATION
SALES
(MM liters)3
839.4
959.5
942.5
909.4
914.2
934.0
X
X
X
X
X
X
RECOVERY
FACTOR5
0.63
0.63
0.63
0.63
0.63
0.63
WASTE
OIL
(MM liters)
528.8
604.5
593.7
572.9
575.9
588.4
a!978 National Petroleum News Factbook for 1972-76;
1977 Factbook for 1971.
bWaste Oil Recycling and Disposal/ Norman J. Weinstein,
Recon Systems, Inc., 1974.
changes performed by service stations. Table 9-6 presents
the number of oil changes and the amount of waste oil
generated (calculated on a basis of 4.25 liters of waste
oil per change).10 These figures are based upon a direct
survey of a segment of the service station market every
3 years by Service Station Management Magazine. Entitled
"Service Job Analysis," the survey seeks to determine the
number of oil changes performed. The survey results are
weighted by the number of firms per geographic area and by
the dollar volume of respondents, and then projected to
national estimates. Also estimated are the number of oil
changes performed by independently owned repair shops, new
car and truck dealers, and fleets of 25 or more vehicles
that perform their own service work (see Table 9-11).
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TABLE 9-6
OIL CHANGES AND WASTE CRANKCASE OIL GENERATED BY
YEAR
1978b
1975
1972
1969
a»
GASOLINE
OIL
CHANGES3
(mm)
115.0 x
114.4 x
138.2 x
147.4 x
Service Job Analysis
SERVICE STATIONS
LITERS OF WASTE
OIL PER CHANGE
4.25
4.25
4.25
4.25
," Service Station
WASTE OIL
(MM liters)
488.6
486.2
587.4
626.5
Management,
1975, 1972, 1969.
^Preliminary estimate based upon one-half the normal
sample size, obtained by telephone communication from Service
Station Management
As can be seen, the two methods yield very similar esti-
mates for the quantity of waste oil generated in 1969 and 1972,
However, the 1975 estimate derived from the number of oil
changes is 20 percent lower than the estimate derived from
employing a recovery factor of 0.63 to the sales of motor oil.
This difference is equivalent to a recovery factor of 0.51 for
1975 sales of waste oil at gasoline service stations.
For this study, the survey-based estimates of waste oil
use will be regarded as the most reliable. Recent trends
indicate that increasing numbers of people are changing
their own oil, and it seems likely that the recovery factor
of 0.63 at service stations is unrealistically high for 1975
and later years. The trend toward do-it-yourself oil
changes would suggest that a greater percentage of the
service station motor oil is sold only for make-up oil.
Thus, to formulate estimates for the current amounts of
waste oil, a recovery factor of 0.51 will be applied to the
sales of motor oil at gasoline service stations.
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9.3.1.2 Crankcase Oil Returned to Service Stations
In addition to waste oil generated directly at service
stations, some waste oil that individuals generate when they
change their own oil is returned to service stations for
disposal. However, most of the waste oil generated by
individuals is disposed of in backyards, alleys, empty lots,
sewers, drains, etc.
Estimation procedures based on motor oil sales can be
used to derive the volume of oil returned to stations.
Estimates of the relative sales of motor oil from retail
outlets other than gasoline service stations were made by
National Petroleum News for 1971 and 1978. The sales
volume, expressed as a percentage of service station sales,
rose from 62 percent in 1971 to 196 percent in 1978.H
For 1978, the quantity of oil sold is estimated at 1.88
billion liters.12 por estimation purposes, 15 percent of
the waste oil from "do-it-yourself" is assumed to be taken
to service stations for disposal. This percentage is an
assumption based on conversations with station operators.
Other investigators have used percentages as high as 35
percent (see the reference cited in Note 2 at the end of this
chapter). Table 9-7 displays estimated amount of waste oil
returned to gas stations for the years 1975 through 1978.
9.3.1.3 Waste Hydraulic Oil Quantities from Gasoline
Service Stations
A limited number of gasoline stations engage in trans-
mission repair work that generates waste hydraulic oils.
According to the "Service Job Analysis," 4.5 percent of
gasoline service stations with service bays did transmission
overhauls and 38 percent did transmission drain and fills in
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TABLE 9-7
WASTE CRANKCASE OIL RETURNED TO SERVICE STATIONS9
YEAR
1978
1977
1976
1975
RETAIL
STORE
SALES
(MM liters)
1,877.7
1,424.0
1,185.8
1,156.2
AMOUNT
RECOVERED
IN OIL
CHANGES
(MM liters)
1,182.9
897.1
664.8
585.9
PERCENT
RETURNED
TO
STATIONS
x 15
X 15
X 15
X 15
TOTAL
RETURNED
TO GAS
STATIONS
(MM liters)
177.4
134.6
90.7
87,9
aERCO estimates. Assumes 15 percent of waste oil is re-
turned to stations. The amount recovered in oil changes
(second column) in 1977 and 1978 is based on a 63% recovery
factor (see p. 9-11). Figures for earlier years are from
"Service Job Analysis," Service Station Management.
b"Can Stations Plug the Leaks?," Merrill O'Brien,
National Petroleum News, April 1978, p. 50; 1977 and 1978
National Petroleum News Pactbook issues.
1975. Table 9-8 displays estimates of the waste hydraulic
fluid generated at gasoline service stations, based on
10 liters of fluid per repair.
The estimates in Table 9-8 for 1976-1978 have been
adjusted from the 1975 estimate from the "Service Job
Analysis" based upon the number of automobiles registered in
the United States each year.13
9.3.1.4 Total Waste Oil Quantities from Gasoline
Service Stations
Table 9-9 summarizes the total waste oil available for
disposal by gasoline service stations. The total includes
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TABLE 9-8
WASTE HYDRAULIC OIL - GASOLINE SERVICE STATIONS
YEAR
1978
1977
1976
1975
TOTAL OVERHAULS
AND DRAINS
(MM)
2.99a x
2.89a x
2.80a x
2.71b x
LITERS
PER
DRAIN
10
10
10
10
HYDRAULIC
OIL
(MM liters)
29.9
28.9
28.0
27.1
aERCO estimates based upon increase in automobile popu-
lation and 1975 figure.
b"Service Job Analysis," Service Station Management.,
1975.
TABLE 9-9
TOTAL WASTE OIL FROM GASOLINE SERVICE
STATIONS (MM liters)3
YEAR
CRANKCASE
OIL
GENERATED
AT SERVICE
STATIONS
CRANKCASE
OIL
RETURNED
TO SERVICE
STATIONS
HYDRAULIC
OILS
GENERATED
AT SERVICE
STATIONS
TOTAL
1978
1977
1976
1975
488.6
438.7
428.1
486.2
177.4
134.6
90.7
87.9
29.9
28.9
28.0
27.1
695.9
602.2
546.8
601.2
aERCO estimates.
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the waste oil returned by those who perform their own oil
changes and waste hydraulic oils generated from transmission
repair.
9.3.2 Auto Repair Shops Waste Oil
A survey of oil changes by automotive repair shops,
similar to that for service stations, was performed by
Service Station Management magazine for the years 1972,
1975, and 1978. The waste oil quantities estimates are
shown in Table 9-10. It was assumed that 4.25 liters of oil
are recovered with each oil change. Transmission work at
auto repair shops is a major source of waste hydraulic oils.
The estimates of the quantity of hydraulic oil generated are
also presented in Table 9-10.
9.3.3 Total Automotive Waste Oil - 1978
Although gasoline service stations (SIC 5541) and auto-
mobile repair shops (SIC 753) are major generators of waste
TABLE 9-10
TOTAL WASTE OIL FROM AUTOMOTIVE REPAIR SHOPS
(MM liters)
YEAR WASTE OIL HYDRAULIC OIL TOTAL
1978
1975
155.0
92.6
51.1
46.2
206. ia
138. 8b
aERCO estimates.
^"Service Job Analysis," Service Station Management,
1975.
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oils, new car and truck dealers and fleets of automobiles or
trucks with captive repair and maintenance are also significant
generators of waste crankcase and hydraulic oils. These
generators tend to have a relatively large amount of waste
oil per establishment. Table 9-11 shows estimates of the
waste oil generated from gasoline service stations, auto
repair shops, new car and truck dealers, and fleets in
1978.I4 The total automotive waste oil from all four
sources in 1978 is estimated at 1.263 billion liters.
TABLE 9-11
AUTOMOTIVE WASTE OIL QUANTITIES - 1978 (MM liters)
CRANKCASE
OIL
HYDRAULIC
OIL
TOTAL
Gasoline
service
stations3
Automobile
repair
shopsb
New car and
truck dealers0
Fleetsc,d
Total
666.0
155.0
219.9
82.8
1,123.7
29.9
51.1
52.3
5.9
139.2
695.9
206.1
272.2
88.7
1,262.9
aERCO estimates, Table 9-9.
bERCO estimates, Table 9-10.
°"Service Job Analysis," Service Station Management,
1975, 1978 and ERCO estimate.
^Fleets are defined as having 25 or more automobiles
and a separate repair facility.
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9.4 Number of Generators
Due to the decline in the number of service stations,
the number of waste oil generators has decreased. Further-
more, the recent trend to self-service marketing has reduced
the percentage of stations which perform service work.
Table 9-12 displays the estimated number of generators as a
percentage of the total number of service stations.
Table 9-13 illustrates the estimated number of
independent repair shops that are generators of waste
TABLE 9-12
WASTE OIL GENERATORS - GASOLINE SERVICE STATIONS
YEAR
1978
1975
1972
au.s
1976-1978
bu.s
TOTAL
NUMBER OF
SERVICE
STATIONS
171,000*
189,480a
226,459^
. Dept. of
. Bureau of
TOTAL
NUMBER TOTAL
PERFORMING NUMBER
SERVICE OF
WORK GENERATORS
131,70QC 118,530e
165,000d 148,500d
194,000d 174,600e
Commerce, Franchising in the
the Census, Census of Retail
PERCENT
OF
TOTAL
77
87
86
U.S. Economy,
Trade,
1972.
CERCO estimates derived from "U.S. Service Stations by
Types," 1978 National Petroleum News Factbook Issue, p. 106.
^"Service Job Analysis," Service Station Management,
1975, 1972.
eERCO estimates based on assumption that 10% of
stations generate less than 100 kilograms of waste oil
per month.
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TABLE 9-13
WASTE OIL GENERATORS - AUTO REPAIR SHOPS
TOTAL REPAIR
SHOPS PERFORMING TOTAL NUMBER OF
YEAR SERVICE WORK GENERATORS
1978
1975
1972
133,800*
121,000b
108,000b
66,90QC
60,50QC
54,OOQC
aERCO estimate.
^"Service Job Analysis," Service Station Management/
1975, 1972.
CERCO estimates based on assumption that 50% of the
repair shops average less than 100 kilograms of waste oil
per month.
crankcase oil. Approximately one-third of these generate
hydraulic oil form transmission service as well. The
estimates have been made by Service Station Management
magazine based on their triennial survey, "Service Job
Analysis." It is assumed that only 50 percent of these
facilities generate over 100 kg/month. This is because many
of them specialize in replacing auto glass, painting cars,
auto body work and other areas, keeping down their waste
generation.
In addition to automobile repair shops that generate
waste crankcase oils, a small number of repair shops engage
in transmission work only and thus are generators of
hydraulic oils but not of crankcase oils. There are
approximately 4,500 of these establishments currently
operating in the United States based upon available census
figures, updated from 1972.15
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As mentioned above, new car and truck dealers and
fleets of automobiles that have captive repair and service
work done have significant amounts of both crankcase and
hydraulic oil. The Service Station Management oil change
survey estimates that there were 34,000 new car dealers and
35,000 fleets in 1975.16
9.5 Current Disposal for Waste Oils
9.5.1 Disposal Practices
The waste oils drained by gasoline service stations and
auto repair shops are generally collected in underground
storage tanks having a typical capacity of 1,890 liters or
more (500 gallons). Occasionally, the waste oils are stored
above-ground in 55-gallon drums or other containers. Little
distinction is generally made between lubricating and
hydraulic transmission oils. Their nature is similar enough
that end uses are not affected by combining the two.
Roughly 80 to 90 percent of service stations and repair
shops nationwide are turning their waste oil over to a waste
oil collector. In urban areas, the percentage of firms
using collection services appears to be 90 or more. In rural
areas, collection is somewhat less commmon.1"? The collectors
range from one-man, one-truck scavengers to waste oil collect-
ing services that have established customers and routes.
>
In general, the collectors act as middle men, col-
lecting oil for resale to other concerns that buy the waste
oil for a variety of end uses (see below). Alternatively,
the collector can be a part of a rerefining or processing
firm that secures feedstocks of waste oil for their direct
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use. The major uses for waste automotive oils from service
stations and repair shops are: (1) fuel, (2) road oil
(including dust control), (3) rerefining, (4) asphalt
extender and other construction uses, (5) other dust and
weed control uses, and (6) input to miscellaneous manu-
facturing processes.
The amount of processing involved in each of the uses
varies considerably. Waste oil to be used as road oils,
as dust and weed control agents, and in construction uses
generally does not require treatment. In fact, if the waste
oil is allowed to settle, the heavier oily sludge can be
used in these applications. For use as fuel, waste oil is
commonly allowed to settle in order to remove major sediment
or ash constituents. This practice helps prevent clogging
of boiler equipment. The waste oil can undergo further
processing such as centrifugation or filtering to remove
sediment, but this is not done in most cases.
When oil is rerefined, it is processed such that
virtually all trace metals and other contaminants are
removed. After rerefining, the oil can be used as a base
lubricating oil stock. The simpler processing steps
necessary for use as fuel or road oils do not greatly reduce
the levels of trace metals such as lead or zinc or other
contaminants, although some sediment is removed.
Estimates of the percentages for several broad use
categories are shown in Table 9-14 below.18
Recent estimates of rerefined oil quantities indicate
that approximately 470 million liters of waste oil was
rerefined in 1977.I9 Since total waste oil generation has
not increased significantly, the percentage of oil going to
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TABLE 9-14
WASTE OIL END USES9
DISPOSAL METHOD
Burned as fuel
Road oiling
Reref ined
Others
VOLUME
(MM
liters)
1,820
760
340
1,290
4,210
PERCENT
43
18
8
31
100
aU.S. Environmental Protection Agency, Waste Oil Study,
April 1974.
rerefiners as shown in Table 9-14 may be an understatement
of conditions as they exist today. Nevertheless, it is
clear that rerefiners absorb only a small percentage of the
waste oil that is currently collected from service stations,
automobile repair shops, and other industrial sources.
Since waste automotive oils are generally combined with
other industrial waste oils at the reprocessor ore rerefiner,
Table 9-14 will be assumed to apply to waste oil from
service stations and automotive repair shops. Roughly
speaking, then, fuel uses are four times as great and road
oiling use is twice as large as the amount of waste auto-
motive oil that is rerefined.
Adequate data do not exist to be able to estimate the
share each of the six uses has in the disposal or reuse of
waste oil.
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9.5.2 Pricing of Waste Oil
Where service stations once had to pay to have their
waste oil removed, waste oil collectors now generally
pay the service stations for the oil they collect.20 The
price paid is based upon a number of factors:
1. End use for the oil.
2. Competitive pressures and demand for waste oil in a
region.
3. The quantity collected at one time.
4. The quality of the waste oil.
The end use of the oil plays a large part in the price
paid for the waste oil. Where the waste oil will be used
for fuel uses or road oiling, prices are generally higher.
The price paid to the station owner may be up to 25 cents
per gallon. If the oil is to be taken to a rerefiner, the
station owner is likely to receive from 0 to 10 cents per
gallon. The production costs necessary in rerefining
and the relative prices of fuel oil and lubricating oil put
rerefiners at a competitive disadvantage vis-a-vis firms
that process waste oils for fuels or road oiling. This
competitive disadvantage has not changed despite changes in
fuel prices. Thus, rerefiners generally pay less to col-
lectors for their waste oil than do firms that make use of
the waste oil in other ways.
Competitive pressures also affect the price paid for
waste oil. The high demand for waste oil in urban,
industrialized areas can force collectors to pay increased
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prices to service stations or repair shops for their oil.
Conversely, in rural areas, stations may not be paid at all
by the waste oil collector.
Quantity also affects the price paid for waste oil;
a collector's operating costs increase with the number of
stops necessary to fill the collector's truck. Large oil
quantities are sought after and earn a higher price.
However, competition often forces a collector to pick up
smaller quantities rather than risk the chance that the oil
will be pirated by others.
Finally, the price collectors receive for the oil they
collect varies according to the quality of the waste oil.
Oil contaminated by water or excessive sediment is less
valuable than noncontaminated oil.
9.6 RCRA Specified Disposal
The RCRA regulations will not appreciably alter the
current practices of service stations and repair shops with
regard to disposal of waste oils. They are more likely to
impinge upon the collectors and users of waste oil. These
changes are discussed briefly below for Options A and B.
In keeping with the RCRA "cradle to grave" control
philosophy, waste oil must be collected, transported, and
disposed of in a fashion consistent with hazardous waste
management regulations. The current collection practices of
service stations and repair shops (collection in tanks or
drums for pickup by collectors) appear to be adequate for
compliance with these regulations. Also, the transport of
waste oil should continue to be done by an established
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network of waste oil collectors. The principal question is
the effect of RCRA (Option A and B) on the end uses of waste
oil. A reduction in the end use markets (thus a drop in
demand) would affect the price paid to service station and
repair shop owners for their waste oil.
RCRA Option A (Subsection 250.56, "Commercial Products,"
March 1978 draft) requires that the commercial use of waste
oil not cause greater environmental degradation than the use
of virgin oil. A similar stipulation is made in RCRA Option
B (Section 250.45-7, September 1978 draft) regulations, with
the additional requirement made that waste oil which is to
be used as fuel must contain less than 8 ppm (parts per
million) lead. In general only rerefined waste oil meets
these standards. Under these standards road oiling and dust
control uses for unprocessed waste oils would not be allowed.
However, uses for waste oil other than as rerefining feed-
stocks will be allowed by permitted facilities. The major
use to be permitted is likely to be use as a fuel oil.22
Thus, only two principal end markets for waste oil will
remain after the implementation of RCRA: (1) use as a fuel
(at lower than current levels) at permitted facilities and
(2) use as rerefining feedstock. The costs involved in
rerefining should render the resulting oil too costly for
use as a road oil or weed control agent. A determination of
the likely size of the end use markets was beyond the scope
of this study. However, it appears likely that there will
be at least a short-term drop in waste oil demand. In order
to consider the economic impacts of a fall in demand for
waste oil, several assumptions were made concerning waste
oil prices. The assumptions are described in the next
sect ion.
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9.7 RCRA Compliance Costs
9.7.1 Technical Costs - Prices for Waste Oil
The facilities are already available for the collection
and storage (temporary) of waste oils at service stations
and repair shops. No incremental RCRA costs were allotted
for purchases of storage tanks or drums for waste oil
collection. The only "technical" costs incurred will be due
to changes in the price paid for waste oil collection.
As mentioned above, most stations and shops are currently
being paid anywhere from a few cents to $0.25 per gallon for
waste oil collection. Most stations appeared to receive
from $0.05 to $0.15 per gallon. With the likely decline in
demand for waste oil, the price paid will fall. For the
economic analysis, it will be assumed that the service
station or repair shop owner is currently being paid
$0.10 per gallon. Under RCRA it is assumed the price falls
such that he must pay $0.10 per gallon for pickup because of
the decrease in end use markets for the oil. Thus, a
$0.20 per gallon ($0.052 per liter) price swing is assumed.
This price swing will be used for both model and worst-case
firms in these industries. (The worst-case firm is defined
principally in terms of current earnings rather than compliant
costs. This definition was judged to be most realistic and
to best cover the range of industry impacts.) The assumption
about the price swing is intended as a liberal judgment of
actual impacts. That is, a relatively large price swing was
used in order to not underestimate impacts.
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9.7.2 Administrative Costs - Option A
The administrative costs for gasoline service stations
and automotive repair shops are based on a preliminary draft
report by another EPA contractor, Arthur D. Little Inc.23
However, unlike the administrative costs used in the other
chapters, the ADL figures have been revised downward to
reflect the lower price of time for service station and
repair shop employees and owners. The costs for these
industries are shown in Table 9-15.
It has been assumed that the station or repair shop
owner or a mechanic would perform the technical or supervisory
compliance. The value of a mechanic's time is used as the
hourly basis for cost estimates. This time will be charged
at the rate of $18/hr. The cost may be interpreted as the
opportunity cost of the owner's or mechanic's time. No
non-labor expenditures, such as purchases of typewriters,
have been assumed.
Additional changes in the ADL estimates were made due
to the relative simplicity of the anticipated compliance
activities. Much of the mechanism for compliance is in
place for this industry. In particular, there need be
little change in the methods of waste oil collection or
storage. The system design costs for compliance have been
reduced accordingly. Other tasks, including the documenta-
tion of waste inventory, maintenance of the Section 3001
list, and identification of a transporter have been reduced
or eliminated.
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TABLE 9-15
ADMINISTRATIVE COSTS FOR GASOLINE
SERVICE STATIONS AND AUTOMOTIVE REPAIR SHOPS3
OWNER,
MECHANIC
($18/hr)
OPTION A
COST ($)
OPTION B
COST (?)
Section 3001
1.
Documentation of
waste inventory
Supervision and
determination of
applicability of
Section 3001
Section 3002 (Generators)
1. ID code application
2. Quarterly and
annual reports
3. Storage of liability
contracts
4. Manifest handling
($3/manifest x
1 manifest/month)
5. System design for
labeling, manifesting,
reporting, and
identification of
transporter
1
2
1
4
18
3'6
18
72
NAb
36/yr
72
aERCO estimates.
^Not applicable.
cRecurring costs are denoted as $/yr entries
36
18
20/yr
6. Ongoing supervision 4
Total costs (first year)
Recurring annual costsc
72
324
180/yr
—
74
20/yr
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9.7.3 Administrative Costs - Option B
Administrative requirements were reduced under Option B,
The only necessary tasks are ID code application and storage
of liability contracts (entered into with the waste oil
transporter), and the initial determination of the applica-
bility of Section 3001. The costs under Option B are also
summarized in Table 9-15.
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NOTES TO CHAPTER 9
1. Based upon ERGO discussions with industry personnel
and ERGO estimates of crankcase and hydraulic oil quantities.
2. ESSO analysis reported in Waste Oil Recycling and
Disposal, Norman J. Weinstein, Recon Systems Inc. August
1974.
3. "Waste Oil Lubricating Oil Research: Characteri-
zation of Base Stocks from Used Lubricating Oils," Part 1,
M.L. Whisman et al., Bartlesville Energy Research Center,
1975.
4. "Used Oil: Collection, Recycling, and Disposal,"
William A. Irwin, Technology Review, August/September 1978,
p. 55.
5. Based on personal communication of Steve Fischer of
ERGO and Mr. Tom Sheehan of Lubrizol Inc., November 1978.
6. National Institute for Occupational Safety and
Health, Registry of Toxic Effects of Chemical Substances,
1976.
7. According to the 1975 Service Station Management
magazine, "Service Job Analysis."
8. Sixty-two percent of gasoline stations with service
bays do no transmission work at all based on average waste
oil generation figures.
9. Waste Oil Recycling and Disposal, Norman J.
Weinstein, Recon Systems, Inc., and Response Analysis
Corporation, 1974.
10. Service Station Management, "Service Job Analysis,"
1975, 1972, 1969, obtained by telephone interview.
11. "Can Stations Plug the Leaks?," Merrill O'Brien,
National Petroleum News, April 1978, p. 50.
12. ERGO estimates.
13. The number of automobiles is taken from
1978 National Petroleum News Factbook, p. 103, and Federal
Highway Administration estimates.
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14. A fleet is an establishment with 25 or more vehicles
that does its own repair work.
15. U.S. Bureau of the Census, Census of Selected
Service Industries, 1972. The Census reported
2,449 establishments with payroll that were operating
primarily as transmission repair shops. Establishments
without payroll (i.e., those firms operated as a single
proprietorship or partnership without hired help) were not
reported. In order to include these firms, the number of
firms with payroll was multiplied by 1.5. This calculation
was based on the ratio of business with to businesses
without payroll in the general automotive repair shop
category. The estimate was then scaled upward to 1978 based
upon the increase in the number of cars on the road.
16. "Service Job Analysis," Service Station Management,
1975.
17. Based upon ERCO contacts with urban area collectors
and estimate above.
18. U.S. Environmental Protection Agency, Waste Oil
Study, Report to the Congress, April 1974, p. 1.
19. Management of Environmental Risk; A Limited
Integrated Assessment of the Waste oil Rerefining Industry,
Teknekron, Inc., Resource Management Division, 1978, p. xxi.
20. Teknekron, Inc., A Technical and Economic Studyof
Waste Oil Recovery, Part II, 1973, p. 21.
21. Based upon telephone conversations with waste oil
collectors, service stations, automotive repair shops, and
rerefiners.
22. The presumption that some facilities would be
permitted to burn waste oil is based on personal communication
between John Eyraud and Steve Fischer of ERCO and personnel in
the EPA Office of Solid Waste, October 26, 1978.
23. Arthur D. Little, Inc., Preliminary Integrated
Economic Impact Assessment of Hazardous Waste Management
Regulations, October 1978.
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CHAPTER TEN
ECONOMIC IMPACT ASSESSMENT FOR GASOLINE SERVICE
STATIONS AND AUTOMOTIVE REPAIR SHOPS
This chapter consists of three sections. First, the
administrative and technical disposal costs resulting from
RCRA regulations (which were developed in Chapter Nine) are
analyzed with respect to the model plants developed in
Chapter Eight. In this analysis, it is assumed that prices
(and sales) remain constant. In this way the incremental
cost of compliance with regulations can be isolated. A
second section describes the impacts at the aggregate
national level. A third section then analyzes the actual
impact on establishments including consideration of price
increases to pass through increased costs.
10.1 Model Firm Impacts
10.1.1 Gasoline Service Stations
Tables 10-1 and 10-2 display the effects of RCRA
Options A and B upon gasoline service stations' net income.
The analysis covers the effects upon a model firm and a
worst-case firm as described in Section 8.1.4.
As can be seen from Table 10-1, Option A disposal
costs, both technical and administrative, amount to approxi-
mately $500 for both the model and worst-case firm. This
cost should impose a significant burden only on the already
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TABLE 10-1
IMPACTS ON GASOLINE SERVICE STATION MODEL FIRMS
(OPTION A)a
MODEL FIRM WORST-CASE FIRM
($) ($)
Sales
Cost of operations
Incremental RCRA impacts
Technical disposal costs
Administrative costs'3
Pretax net income and
compensation of officers
Pretax net income and
compensation of officers
(before RCRA)
Decline in pretax
net income
344,900
327,400
216
324
16,960
17,500
3%
246,700
243,200
216
324
2,960
3,500
15%
aERCO estimates.
'•'First year administrative costs are shown, rounded
to the nearest $100. Recurring annual costs are $180.
TABLE 10-2
IMPACTS ON GASOLINE SERVICE STATION MODEL FIRMS
(OPTION B)a
MODEL FIRM WORST-CASE FIRM
($) ($)
Sales
Cost of operations
Incremental RCRA impacts
Technical disposal costs
Administrative costs13
Pretax net income and
compensation of officers
Pretax net income and
compensation of officers
(before RCRA)
Decline in pretax
net income
344,900
327,400
216
74
17,210
17,500
2%
246,700
243,200
216
74
3,210
3,500
8%
annual costs are $20.
aERCO estimates.
year administrative costs are given. Recurring
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marginal worst-case gasoline service station. The model
firm would experience a 3 percent drop in income while the
worst-case firm would experience a 14 percent decrease in
the first year. These impacts will diminish by 30 percent
after the first year, but will still remain a significant
burden for worst-case firms in remaining years. These
impacts are more significant when it is remembered that the
net income figures represent the earnings of the owner and
are not merely a corporate profit.
Option B impacts (Table 10-2) are approximately
40 percent less than those for Option A. The decrease
in total compliance costs is due to the reduced reporting
requirements under Option B. The total costs for both firms
are reduced to $300. The Option B compliance costs represent
less than 2 percent of the model firm's net income. The
worst-case firm will still suffer a significant decrease in
net income, with pretax net income expected to fall 9
percent over pre-RCRA levels.
10.1.2 Automotive Repair Shops
Tables 10-3 and 10-4 show that the impacts of Options A
and B regulations are slightly more pronounced on the model
automotive repair shop than on the model gasoline service
station. Under Option A, the total increased costs for
compliance are again approximately $500. However, because
of lower pretax net income levels for automotive repair
shops, the model firm experienced a 5 percent decrease in
pretax income. This contrasts to the 3 percent decrease in
net income for the model firm gasoline station. The worst-
case automotive repair shop suffers a 7 percent drop in net
income.
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TABLE 10-3
IMPACTS ON AUTOMOTIVE REPAIR SHOP MODEL FIRMS
(OPTION A)a
MODEL FIRM WORST-CASE FIRM
(With regulation)
Sales
Cost of operations
and expenses
Incremental RCRA impacts
Technical disposal costs
Administrative costsb
Pretax net income and
compensation of officers
Pretax net income and
compensation of officers
(before RCRA)
Decline in pretax
net income
80,000
69,000
162
324
10,514
11,500
9%
40,000
32,500
162
324
7,014
7,500
6%
aERCO estimates.
DFirst year administrative costs are shown. Recurring
annual costs are $180.
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TABLE 10-4
IMPACTS ON AUTOMOTIVE REPAIR SHOP MODEL FIRMS
(OPTION B)a
MODEL FIRM WORST-CASE FIRM
(?) ($)
(With regulation)
Sales
Cost of operations
and expenses
Incremental RCRA impacts
Technical disposal costs
Administrative costs*3
Pretax net income and
compensation of officers
Pretax net income and
compensation of officers
(before RCRA)
Decline in pretax
net income
80,000
69,000
162
74
10,764
11,000
2%
40,000
32,500
162
74
7,264
7,500
3%
aERCO estimates.
bFirst year administrative costs are shown. Recurring
annual costs are $20.
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Option B impacts (Table 10-4) are reduced compared to
Option A in a fashion similar to the case of gasoline
service stations. The incremental compliance costs are
reduced to approximately $300 per firm, which represents
decreases in pretax net income of 3 and 4 percent for the
model and worst-case firms, respectively. Moderate in size,
these impacts would not appear to seriously affect the
operations of automotive repair shops.
10.2 Aggregate National Impacts
Estimates of the total aggregate costs of compliance
for the gasoline service stations and automotive repair
shops are displayed in Tables 10-5 and 10-6 for both regu-
latory options. The aggregate costs were calculated by
assuming that the model firm compliance costs were repre-
sentative of the average for the generators in the industry.
Technical disposal costs and administrative costs were taken
from Section 9.6. The total sales figure of the generators
in both industries was estimated by assuming an average
sales figure per generator and multiplying it by the number
of generators. In the case of gasoline service stations, an
average sales figure of $269,900 was used.^ Automotive
repair shop average sales were taken from the model firm
sales figure ($80,000).
In no case are aggregate impacts greater than
0.6 percent of total sales of the generators. Aggregate
compliance costs for gasoline service stations are estimated
to be 70.1 million dollars for Option A and 37.1 million
dollars for Option B. As a percentage of total generator
sales, the aggregate costs are less than 0.2 and 0.1 percent
for Options A and B respectively. Automotive repair shop
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TABLE 10-5
AGGREGATE COST OF COMPLIANCE
FOR THE GASOLINE SERVICE STATION INDUSTRY
($MM)
Number of generators3
Costs
Technical
Administrative'3
Total
1977 sales valuec
Costs as % of
production value
OPTION A
118,530
25.6
38.4
64.0
40,319.0
0.2%
OPTION B
118,530
25.6
8.8
34.4
40,319.0
<0.1%
aEstimate made for 1978.
bpirst year administrative costs are shown. Recurring
administrative costs are $21.3 MM for Option A and $2.3 MM
for Option B. This reduces total cost by almost 27 percent
for Option A and almost 20 percent for Option B in succeeding
years.
clncludes production value for generators only.
TABLE 10-6
AGGREGATE COST OF COMPLIANCE
FOR THE AUTOMOTIVE REPAIR SHOP INDUSTRY
($MM)
Number of generators
Costs
Technical
Administrative3
Total
1977 sales valueb
Costs as % of
production value
OPTION A
66,900
10.8
21.7
32.5
10,352.0
0.3%
OPTION B
66,900
10.8
5.0
15.8
10,352.0
0.2%
aFirst year administrative costs are shown. Recurring
administrative costs are $12.0 MM for Option A and $1.3 MM
for Option B. This reduces total cost by almost 30 percent
for Option A and 25 percent for Option B in succeeding years
^Includes production value for generators only.
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-------
aggregate costs are estimated to be 66.6 million and
32.0 million dollars for Options A and B. These costs
translate into only 0.6 and 0.3 percent of total sales of
generators in 1977.
It should be noted that the technical compliance cost
estimates are dependent on the speculative assumptions about
the impact on the price of waste oil disposal. The possible
range for compliance costs appear to be $10 to $50 million
depending on the actual price swing. Approximately half of
the technical compliance costs, as presented here, are due
to the loss of current revenues from waste oil sales (2.6
cents/liter in revenue) was assumed. The loss of revenue
alone would involve a total cost to these industries
of over $10 million.
10.3 Industry Impacts
Model plant impacts of both Option A and Option B
regulations should also be mitigated by price increases as
well as the unpaid overtime efforts of the firm owner.
Discussions with industry personnel indicate that an
increase in the technical cost of disposal is likely to be
passed along in the price charged to consumers for motor
oil and transmission fluid.2 This same increase in price
can be expected to be observed by repair shop owners.
The cost of oil to consumers is a very small part of the
total amount of services purchased from service stations or
repair shops. Therefore, demand for motor oil and trans-
mission fluid is assumed to be inelastic over the 5 cents/
quart range required to absorb a change in disposal costs.
Administrative costs may also be added to the purchase price
for oil or other products without inducing a significant
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-------
drop in the quantity of oil sold or in the amount of other
services provided.
In the case of Option A where administrative costs
are much higher, competition is likely to prevent a full
pass-through of costs. Much of the remaining burden may be
absorbed. It is likely that if administrative cost* increases
severely burden either a gasoline service station or an
automotive repair shop, the owner will absorb the cost of
his additional labor by performing administrative functions
himself in unpaid overtime. By performing administrative
tasks himself, the owner will lose his free time but maintain
the company's net income which ultimately (in a pro-
prietorship) constitutes his own income.
Because of the mitigating factors noted above, it is
likely that few stations will close for reasons directly
attributable to either option of the regulations. Of
course, already marginal firms may close sooner because of
the regulation. The increased cost of providing oil changes
to customers may also provide a small inducement for service
stations to eliminate their service bays and convert to
self-service.
A further effect of RCRA that may not show up in
terms of economic impact should also be noted. If in fact
service stations end up paying to have their waste oil
removed, many service station and garage owners will be
unwilling to provide a place for waste oil disposal by
individuals who have changed their own oil.3 in light of
the large volume of waste oil from do-it-yourselfers,
the reluctance of service station and garage owners to
accept other waste oil may necessitate the establishment of
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-------
locally funded collection facilities for waste oil, or an
acceptance of the haphazard disposal practices of individuals,
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-------
NOTES TO CHAPTER TEN
1. 1978 National Petroleum News Factbook Issue,
Business at Service Stations, p. 103.
2. Personal communication of Steve Fischer, ERCO,
with members of Edwin K. Williams and Co., Santa Barbara,
California, November 16, 1978.
3. Based upon telephone conversations of Steve Fischer,
ERCO, with gasoline station proprietors.
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PART IV
DRUM RECONDITIONERS
-------
CHAPTER ELEVEN
CHARACTERIZATION OF THE
DRUM RECONDITIONING INDUSTRY
The basic data on the drum reconditioning industry is
presented below in four sections. The first covers the basic
data on industry size and'industry functions. The second
section provides an overview of industry structure and per-
formance. The third covers available financial data. A final
section describes the model plants to be used in the analysis.
11 • 1 Size and Scope of the Industry
11.1.1 Industry Definition
The drum reconditioning industry is a small service
industry, subsumed in SIC 5085, which cleans steel drums
for reuse. Reconditioning firms accept empty drums from a
wide number of sources for processing. The drums are then
cleaned, reshaped, painted, lined (if desired) and often
resold as substitutes for new drums. Most of the drums
handled are 55-gallon drums although some firms handle
30-gallon drums. The industry is a resource-conserving
industry because the steel drum is a reusable container,
which typically can be reconditioned eight times. The
industry also provides an implicit disposal service to a
variety of companies for reconditioning drums that contain
residual amounts of oils and chemicals. This disposal
service thus reduces the likelihood of haphazard disposal
of used drums. Though a resource conservor, the drum
-303-
-------
reconditioning industry will be examined because in the
process of cleaning drums, a quantity of hazardous waste is
generated.
The reconditioning of drums can be performed either
as a service to the drum owner or as an outright purchase
and resale of the drum. In the first case, the recon-
ditioner picks up the drums from the owner and returns
the reconditioned drums. The owner of the drums pays a fee
for cleaning and reconditioning, which will usually include
a charge for the expense of pick-up and delivery. The
charge for this service varies from $3.50 to $5 per drum.
The quality of the reconditioning job desired by the
customer is one determinant of price. Most reconditioning
services are equipped to coat or line the inside of the
drums with a variety of materials. Coatings are required
in the shipment of many chemicals to prevent a reaction
with the steel drum. A single coat of liner adds $1.50 to
$2.50 to the cost of the drum.
A slightly more common practice is for the reconditioner
to purchase the drum outright. Reconditioning firms will pay
from $2 to $4 per drum depending on (1) the transportation
costs involved, (2) the expected difficulty of clean-up,
and (3) the number of drums to be purchased.! The drums
are then processed and resold to industrial accounts.
11.1.2 Industry Sales
Industry sales figures are no longer published for the
reconditioning industry by the Census Bureau. Estimates of
sales volume vary from $500 to $900 million. The annual
volume of reconditioning business has been estimated at from
-304-
-------
45 to 50 million drums.2 However, in recent years, the
drum reconditioning industry has grown. The extent of the
growth can not be accurately determined. Volume for 1977
could be 50 to 70 million drums.3
Despite this volume, drum reconditioners often speak of
a drum shortage. The drum shortage is not a literal lack of
containers, but rather a shortage of drums suitable for
reconditioning. Steel drum manufacturers have been moving
away from the 18-gauge steel drum product toward a 20/18-gauge
product. The latter has a top of thinner steel (20-gauge is
lighter than 18-gauge steel) with the normal 18-gauge body and
cannot be reconditioned as many times as the standard drum.
Large-scale shifts towards the use of light-weight steel
containers would have a major impact on the reconditioning
industry.
11.1.3 Industry Employment
The employment in the drum reconditioning is estimated at
between 6,000 and 8,000 for 1978. This estimate is based on
an average firm size of 30-40 employees for 190 industry firms
11.1.4 Size Distribution of Firms
The drum reconditioning industry consists of from 180
to 190 firms ranging in size from the smallest firms which
handle 200 drums/day to large firms which handle several
thousand per day. A slight majority of the firms handle
less than 1,000 drums/day. The size distribution of indus-
try firms is shown in Figure 11-1. These enterprises are
typically family-owned. In the 1970's the industry has
-305-
-------
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-306-
-------
begun to evolve toward a larger corporate scale of organiza-
tions. 4 The move has occurred due to the greater capital
requirements needed for new enterprises. The most effi-
cient scale of operation appears to be over 2,000 drums/day.
Also, small firms have greater operating problems, includ-
ing the need to upgrade facilities to meet air and sewer
discharge regulations.
11.1.5 Regional Distribution of Firms
Most drum reconditioning firms are located in large
urban areas or near industrial complexes in order to effec-
tively serve their major sales markets. While both the
petroleum and chemical industries have production facilities
concentrated in the Gulf area of Texas and Louisiana, this
area does not have the largest concentration of recon-
ditioning firms. The products of these firms are generally
shipped in bulk (tankers, pipelines, tank cars) to distri-
bution points nearer sales markets. At these distribution
points the products can be drummed for final shipment to
customers. The heaviest concentrations of firms exist in
the Northeast, Ohio, California, and Illinois. Relatively
few firms are located in rural areas, although some rural
cooperatives have established cooperages (drum-making or
reconditioning establishments) for handling pesticide
drums.5
The relatively small number of reconditioning firms
means that individual firms can be expected to have some
influence over the market in its immediate vicinity. Compe-
tition is greatest in the large metropolitan or industrial
areas where there tend to be several firms operating.
However, in less concentrated markets there may be only one
-307-
-------
to three active firms. The number of firms in an immediate
area is significant due to the importance of transportation
costs to the total costs of operation. A local firm will
tend to have some leeway in price setting as long as the
price does not rise to the point at which an outside firm
could make a profit while undercutting the local firm's
price. The issue of local market power will be discussed
further below in Section 11.2.
11.2 Industy and Market Analysis
The principal markets for reconditioned drums are dis-
played in Table 11-1. Three industries dominate the use of
TABLE 11-1
PRINCIPAL MARKETS FOR RECONDITIONED DRUMS5
INDUSTRY PERCENT OF MARKET
Petroleum 35
Chemical 30
Paint, varnish 25
All other 10
aERCO estimates.
reconditioned drums. The largest user of reconditioned
drums is the petroleum industry. Petroleum shipments
utilize 35 percent of all reconditioned drums. Firms in
this industry usually prefer to retain ownership of the drums
and pay the reconditioning service charge. The second
largest customer is the chemical industry. Chemical firms
normally do not retain ownership of the drum, preferring
-308-
-------
to sell the drum with their.chemical shipments. The chemi-
cal industry is the largest purchaser of drums with linings.
The third largest user of reconditioned drums is the paint
and varnish industry. As noted in Table 11-1, this end
market is estimated to be only slightly smaller than that of
chemicals. Other industrial users include manufacturers of
cleaning compounds, janitorial supplies, foodstuffs, and
some agricultural products.
The separate industry markets are also different with
regard to the types of drums sold. The "bung" type or
tight-head drum has two plugs (a 3/4-inch plug and a 2-inch
plug) in the top of the drum. The top itself is permanently
attached to the drum. This drum type is used most con-
veniently for packaging of freely flowing liquids. The oil
industry uses a large number of these drums for lubricating
oils. Liquid chemicals are also likely to be shipped in
"bung" type drums.
Open-head drums have a top which is secured with a metal
ring around the drum perimeter. For pouring, the drum top is
completely removed. The open-head drum is used for paints
and more viscous materials such as adhesives.
The market for reconditioned drums, while derived
largely from major industries, is not restricted to large
companies. The number of industrial accounts per firm
appears to vary from a few (even one) to several hundred.
The larger firms tend to service the major oil and chemical
firms. However, some small firms may hold only one account
serving a large refinery or chemical complex. Large firms
also may retain a number of medium and small accounts. Many
firms provide the majority of service to their local areas
and therefore also sell to small-volume purchasers.
-309-
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11.2.1 Industry Structure
The nature of competition in the drum reconditioning
industry is largely a function of two factors: (1) the degree
of substitutibility between new and reconditioned drums and
(2) the importance of economies of scale in operation. The
first factor defines the niche for the reconditioning industry
in the broader steel container market. The second concerns
the size of individual firms relative to the entire local
market for drums. Each factor will be discussed below.
The substitutes for the 55-gallon reconditioned steel
drum are nonsteel containers, bulk containers, and new steel
drums. Neither of the first two factors has a significant
influence on drum markets. Plastic or fiber containers are
currently more expensive than steel drums and are not
usually seen as effective substitutes. Bulk containers
(containers of 500 to several thousand gallons) have been
used increasingly in pesticide distribution, but are not
common in general industrial use. Thus only new steel drums
are an effective substitute product.
Reconditioned drums can compete effectively with new
drums because the reconditioning operation is less expensive.
Average prices on the East Coast for reconditioned and new
drums are shown below in Table 11-2. West Coast prices are
from $1 to $2 higher per drum because the present shortage
of drums is more serious in this region.
Table 11-2 clearly shows that reconditioned drums have a
price advantage over new drums. Industry sources state that
the gap between new and reconditioned drum prices has closed
slightly in recent years due to the cost increases for
reconditioners of materials and for a variety of pollution
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TABLE 11-2
NEW AND RECONDITIONED DRUM PRICES*
DRUM TYPE PRICE
18 gauge, new $15.50
20/18 gauge, new $14.00
20 gauge, new $12.50
18 gauge, reconditioned $9.50
aFigures were obtained through discussion with industry
personnel.
abatement measures. However, the change does not appear to
have caused a significant movement away from reconditioning.
Furthermore, the remaining price differential of $4 to $6
indicates that the industry has a substantial cushion should
reconditioning prices rise significantly in the future. The
price elasticity of demand for reconditioned drums is
estimated to be low (0.1 to 0.5) under existing market con-
ditions.7 This means that if prices increase by 1 percent,
demand for drums will decline only 0.1 to 0.5 percent.
Despite the clear price advantage for reconditioned
drums, the industry has been affected by the increasing use
of lighter steel drums. The standard 55-gallon drum is made
entirely of 18-gauge steel. The 20/18 drum has a 20-gauge
steel body and a 18-gauge steel top and bottom. This drum
is a popular item for purchasers of new drums because it is
cheaper and lighter. The standard drum weighs 46 Ib, but
the 20/18 gauge weighs 38 Ib due to the thinner top. A
still lighter drum made of 20-gauge steel is also being
sold. The 20-gauge drum weighs 28 Ib.
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The lighter drums are a problem for industry markets
because they are less suitable for reconditioning. The
20/18-gauge drum can be reconditioned only three times,
compared to eight for the standard drums.8 The 20-gauge
drum can be used from 1 to 3 times. To the extent that
purchasers of new drums choose the lighter types, fewer
drums remain available for reconditioning. The market
shares for these drums reduce the market share for 18-gauge
drums, and the rate at which the 18-gauge population is
replenished is reduced. The market shares for the various
drums are shown below in Table 11-3.
TABLE 11-3
MARKET SHARES FOR NEW DRUMS5
DRUM TYPE PERCENT OF NEW DRUM MARKET
18 gauge 40
20/18 gauge 50
20 gauge 4
Other (16 and 24 gauge) 6
aERCO estimates and U.S. Dept. of Commerce, Census of
Manufacturing, Series M-34K, 1978.
Use of the lighter drums has been particularly high in
the chemical industry, which is also one of the largest
markets for reconditioned drums. The chemical industry, as
a general rule, sells the steel container along with the
chemical product in its transactions. Since the firm making
the shipment does not plan to reuse the drum, the 20/18-gauge
drum or the 20-gauge drum is likely to be purchased. The
increasing popularity of the lighter drums could cause a
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decline in the demand for reconditioning. The long-range
implications of throw-away containers are not immediately
serious. The industry's largest market, the oil industry,
has moved only slightly toward lighter drums. Also, the
increased problem of disposal for lighter drums will impinge
upon further increases in market shares. The problem is
counterbalanced by the generally increasing interest in
reconditioning. Concern with solid waste disposal and
environmental problems appear to have been at least partly
responsible for the increased sales.
The level of competition in the drum reconditioning
industry is partially determined by the degree of industry
concentration and by the related issue of restrictions on the
entry of new firms into the market. Industry concentration
ratios are low, which often indicates a highly competitive
industry. While no complete figures are available, it is a
simple matter to compare the sales volume of the largest
firms with the total industry volume. Estimating that the
average sales volume for each of the four largest firms is
5,000 drums per day, the four-firm concentration ratio is
8 percent. The eight-firm concentration ratio is estimated
to be approximately 13 percent.10 These ratios indicate
that major firms do not appear to dominate the national
market.
A more telling set of statistics for this industry
are the concentration ratios of local or regional markets.
Only rough estimates of local concentration ratios can be
made due to the problem of defining local markets and due to
the lack of information about individual firm sales.
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However, local concentration ratios appear to be high. The
number of reconditioners in major metropolitan areas varies
from 5 to 10. In small-sized industrial areas there may be
only one to three firms which can provide reconditioning
services.11 The transportation cost portion of operating
costs is significant and most firms rarely go beyond
200 miles.12 Therefore, local firms can slightly undercut
competitors from other regions. If there is only one local
firm, it will then be able to collect slightly above average
profits. In practice, there appear to be local monopolies
in only a few isolated markets and in the West where travel
distances prohibit some competition. In the East there is
much overlapping of the operating circles of firms.
There is an implicit barrier to entry in that a single
firm may have sufficient capacity to recondition a large
percentage of the drums used in a given region. New entrants
are discouraged by the difficulty in establishing an industrial
clientele. This barrier to entry, however, is not currently
very significant because increasing demand for reconditioned
drums has allowed some room for expansion and new entry.
11.2.2 Industry Conduct and Performance
The recent trends in the industry have been dominated
by the growth of demand for reconditioning and a resulting
expansion move. With growing demand, reconditioners have
been able to operate at close to capacity. Several firms
reported that they were operating at virtually 100 percent
of capacity. Additional drums could be handled only by
employing an additional shift of workers. Two firms did
report operations at only 60 to 70 percent capacity, but
higher rates were more common. High utilization rates tend
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to reduce price competition because firms have less incen-
tive to develop new markets. Contacts with industry personnel
indicated a general ability to earn $0.50 to $0.70 per drum,
i.e., "good" profits and solid market outlooks.
The good profit picture has encouraged the consolidation
movement taking place in the industry. Several large firms
have acquired older facilities, as they became available, to
form chains of reconditioners. Existing firms have also
expanded and modernized their facilities to accommodate a
greater volume of business. The capital investment require-
ments for meeting environmental regulations has also spurred
the shift away from the traditional family-owned and -operated
plants.
Industry consolidation has not led to significant
domination of local markets by individual firms. Those firms
which have acquired other facilities have typically been
buying property in other states. For example, one large
chain of reconditioners, Great Lakes Container Corporation,
has operations spread over the East and Midwest. These
operations do not have overlapping spheres of coverage which
would allow them dominance in a regional market.
Pricing policies follow the standard mark-up technique
of pricing. The strength of demand has also encouraged
price increases to recover cost increases. Industry sources
have reported a steady rate of increases in the 1970's in
reconditioned drum prices due to increases in fuel, chemical
and labor costs. The higher cost of building facilities has
presumably required larger capital charges on the price of
the service.
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11.3 Financial Characterization
No published information is available on the historical
profits or financial status of industry firms. Discussions
with industry personnel reveal that pre-tax net income of
10 percent of sales is generally being achieved in 1978.
The industry sales growth has been quite strong of late, and
much expansion is taking place.
11.4 Model Plant Description
A hypothetical model plant will be described in this
section and will form the basis for much of the economic
impact analysis. A worst-case plant will also be defined.
The latter will be used to measure the likelihood of extreme
impacts (i.e., plant shutdown) due to regulation.
The model plant is assumed to handle 1,000 drums per
day and operate 250 days out of the year. The 1,000-drum
volume is slightly above the industry median. The relatively
large size is useful for analysis because it can be assumed
that such a plant would generate each of the major waste
streams of interest. A desription of the major process
wastes and quantities is provided in the next chapter.
Gross revenues are calculated on the premise that all
of the drums are handled as a service to their owners. That
is, none of the drums are being bought outright and resold.
Firms which buy most of their drums outright for resale
generally earn higher profits. However, in order not to
understate impacts the former assumption will be used.
Prices for the reconditioning service range from $3.50 to
$5.00. An average price of $4.50 will be used here.
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Profit margins are normally defined in terms of cents
per drum handled. Profit margins range from $0.40 to $0.70
per drum. The value of $0.50 per drum will be used here
because it appears to be closest to an average figure based
on discussions with industry. The assumption will be
modified for the worst-case firm.
Current solid waste disposal costs vary widely among
firms. Most firms reported disposal costs of between $3.50
and $9.00 per drum of waste. A few firms operating in
states with stringent disposal regulations have already
incurred costs similar to those which the industry will face
under RCRA. The conservative assumption will be made that
the model firm is now paying $4/drum for disposal ($13.10/MT
at a specific gravity of 1.5 for the wastes). The incre-
mental RCRA disposal costs should not be understated with
this assumption.
The calculation of net income is presented in
Table 11-4. In general, the model firm has a good profit
picture. The firm is assumed to be consistently able to
earn $0.50 for each drum processed. The relatively rosy
profile for the firm is consistent with the current fortunes
of the industry which include good earnings and extremely
high utilization rates for most firms.
The worst-case firm will be assumed to have a lower
earnings rate. It is assumed to be able to make only
$0.40/drum handled. The lower earnings can be attributed
to greater average capital charges due to a lower capacity
utilization rate. The relatively modest drop in earnings
among these firms is again an indicator of the apparently
strong market conditions in the industry. The worst-case
firm will also be assumed to generate approximately 20 per-
-317-
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cent more solid waste than the model firm. A description
of the model plant is also provided in Table 11-4.
TABLE 11-4
MODEL AND WORST-CASE DRUM RECONDITIONING FIRMS3
Annual volume'3
Gross revenue
Cost of operations net
of solid waste disposal
Current disposal costs
Pre-tax net income
MODEL FIRM
240,000 drums
$1,080,000
$952,100
$7,900
$120,000
WORST-CASE
240,000 drums
$1,080,000
$964,000
$10,000
$96,000
aERCO estimate.
bit is assumed that 4% of the incoming drums fail the
reconditioning process and are sold for scrap.
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NOTES TO CHAPTER ELEVEN
1. Based on personnal communication between John
Eyraud of ERGO and Robert Evans of Evans Barrel and Drum,
June 14, 1978.
2. Based on the statement of ERGO and Morris Hershson
of the National Barrel and Drum Association to the Resource
Conservation Committee, November 17, 1977.
3. The calculation is based on "Pollution Abatement
Expenditures, A Microeconomic Impact Report for SIC Group
5085 (Steel Drum Reconditioning Industry)," by W&A Industries
This source estimated reconditioning volume at 73 million in
1974 including the volume at 21 user-reconditioning plants.
It was assumed that 20 percent of the industry-volume is
handled by user-reconditioning firms, on the assumption
that user-reconditioning plants are larger than the average
industry firm. Then, with a 6 percent growth rate, industry
volume in 1977 is approximately 70 million drums. The
actual production rate could be as high as 90 million, based
on this information. At $9.00 per unit, estimated sales
volume is $630 million. Other industry spokesmen dispute
that volume has risen significantly over 50 million.
4. Personal communication between William Humm of ERCO
and Joseph Hooper of Waymire Dr,um Co., Downing, California,
October 26, 1977.
5. Arthur D. Little, Economic Analysis of Pesticide
Disposal Methods, EPA, 1977.
6. Based on personal communications with a number of
drum reconditioners.
7. ERCO estimate based on statements by a number
of industry executives that price increases could be readily
passed on to consumers.
8. Prussing, John E. and Laurel Lunt Prussing, "Energy
Requirements of Steel Drum Manufacturing and Reconditioning,"
National Barrel and Drum Association, February 1974.
9. Personal communication between William Humm of ERCO
and Joseph Hooper of Waymire Drum Co., October 26, 1977.
10. Assuming that each of the four largest firms can
handle 5,000 drums per day and that they operate 250 days/
year, the four firms would process 5 million of a total of
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60 million drums. Using an average of 4,000 drums per day
for the largest firms, the total handled is 8 million.
11. Estimates are based on the geographical distribu-
tion of the membership of the National Barrel and Drum
Association. The membership of the association does not
cover the entire industry, and estimates were increased
accordingly.
12. Personal communication between John Eyraud of
ERGO and Morris Hershon oF NBADA.
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CHAPTER TWELVE
HAZARDOUS WASTE GENERATION IN THE
DRUM RECONDITIONING INDUSTRY
There are two basic processes which can be used by drum
reconditioners to clean the incoming drums: cleansing by
incineration or washing in a caustic soda bath. Each process
produces a waste sludge which requires treatment and disposal
as a hazardous waste. For incineration a sludge of ash and
unburned residues is collected. For the caustic bath, a
sludge of settled solids and residues is collected. Firms
may have capabilities for either or both types of cleansing
processes. An additional waste source is present when a
pre-dumping step is used to remove any of the residue which
will flow easily and quickly into a waste storage tank.
Other reconditioning steps such as rust removal, painting,
and coating produce much smaller waste quantities. In order
to clarify the waste generation process in this industry, a
description of industry processes will be covered as a pre-
liminary to the further discussion of waste characteristics
and quantities.
12.1 Process Description
A flow chart of the process steps for a typical opera-
tion is shown in Figure 12-1. The plant shown operates both
a caustic bath and an incineration process. After the
incoming drums have been unloaded, they are either sent
directly into the reconditioning plant or are held for
-321-
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pre-dumping. It has been estimated that about 50 percent of
the industry operators choose to pre-dump and 50 percent do
not.l The advantage of pre-dumping is that a smaller waste
volume need be extracted by the reconditioning processes.
Also fuel and chemical costs are reduced because a smaller
amount of waste is burned or washed from the drum. The
disadvantage of pre-dumping is the increased labor cost of an
additional handling step. The issue is partially side-stepped
by firms which direct their drivers not to accept drums with
substantial waste quantities. If this is done, pre-dumping
is less likely.
The decision as to whether a drum is to go through the
incinerator or through the caustic bath depends on the type
of drum and the expected difficulty of cleaning. The
open-head drums have a removable top which allows them to be
readily incinerated. The tight-head, or "bung," drums are
fitted with a removable plug stopper of several inches in
diameter. Because the drum head is secure, this type cannot
be incinerated. The caustic bath method, in which spray
nozzles are inserted through the plug hole for washing the
inside, is then used.
When the open-head drums are incinerated, they are
placed bottom-up on a conveyor belt and carried first to a
preheater where viscous material is allowed to fall into a
trough beneath the moving grate. The trough extends along
the line through the incinerator where ash and partially
combusted material collects. The incinerators used are
fired with either gas or oil. Operating temperatures of
1,000° F to 1,600°F (538° C to 871° C) are common. After
incineration the drums are transferred to a separate chamber
for blasting. Steel shot and grit are ricocheted off the
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drum to give it a shiny, new-looking appearance. Dents in
the drums are then removed before they go to rinsing.
For the caustic soda bath, drums are also inverted on
a moving conveyor belt. Revolving spray nozzles are inserted
into the drum to dispense the heated bath solution. The
drums may be flushed twice in this fashion (the pre-flush and
flush steps noted in Figure 12-1). If the normal bath is not
sufficient for cleaning, lengths of chain are inserted into
the plug-hole and the drum is submerged in the hot caustic
solution. The drum is then removed from the bath and rotated,
allowing the chains to scour the interior. These drums are
returned to the main conveyor line and the drum exteriors
are then sprayed with caustic in order to remove paint and
labelling. The drum is then rinsed, sometimes with a neu-
tralizing agent, and dried. Firms which are not equipped for
the most difficult cleaning jobs may convert the tight-head
drums to open-head in order to allow incineration. Others
choose not to accept difficult jobs or to sell such drums to
other reconditioning firms. For example, several firms which
specialize in oil drums choose not to handle the more hard-
to-clean drums.
It had been common practice in the industry to dis-
charge wastes from the caustic soda bath into the sewer.
However, many municipal treatment systems have adjusted
their user charge system in order to levy greater fees on
firms discharging large amounts of suspended solids. As a
result, most industry firms are now attempting to control
the solid materials discharged. Some firms pretreat their
wastewater which normally consists of allowing solids to
settle out of solution. A few firms use "zero-discharge"
systems wherein very little suspended solids are discharged
to the sewer. In either case, a caustic sludge is produced.
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12.2 Waste Characteristics
Three principal waste streams are evident in the
reconditioning process: (1) wastes from the pre-dump (excess
material from the incoming drums), which are collected in
a storage tank or in drums for disposal; (2) ash and sludge
(unburned material) accumulated from the incinerator; and
(3) settled or filtered material from the caustic soda bath.
Other plant waste streams, which are very small, include a
small amount of paint waste and excess chemicals from plants
which bake a lining into some of the drums handled.
The most notable characteristic of reconditioning
wastes is the wide variability in composition from plant to
plant, and from hour to hour within a given plant. The
nature of all of these wastes is largely determined by the
mix of drums being handled. For example, the ash/sludge from
the incinerator includes unburned and burned drum residues.
The caustic sludge solids are likewise dependent on the drum
residue being washed out during cleaning operations. The
pre-dump wastes are totally a function of the drum sources.
Judging from the major sources of drums, conclusions can
be drawn about the potential hazards of these wastes. The
major sources (and customers), as mentioned in the previous
chapters, are the oil industry, chemical firms and paint
manufacturers. A number of substances from these industries,
including various chemicals, hydraulic oils, and paint wastes,
have been listed as hazardous in the RCRA Section 3001 regula-
tions. Additionally the caustic soda bath often includes
toxic chemicals such as muriatic acid, sodium nitrate and
various paint solvents such as toluene, xylene and naphtha.2
These highly toxic materials would be evident in pretreatment
sludges. The wastes of the reconditioning industry can
therefore be concluded to be hazardous.
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The assumption that these waste streams are hazardous
is consistent with industry acknowledgment that it has
little control over the nature of incoming materials. The
drums sent for reconditioning are often unlabeled and the
customer does not care to identify the materials remaining
in the drum. A number of industry contacts mentioned that
even when a drum is labeled, the label is often inaccurate.
A drum may be used for several purposes before eventual
disposal.
In selected cases the variability of the waste streams
is reduced because the firm has only a few industrial
clients. Firms are often located near major markets such as
petroleum refineries or chemical plants. However, most
small firms receive a variety of drums from even their
limited sources. For example, drums from a single chemical
or paint manufacturer will contain a variety of material.
It appeared that all of the firms contacted would be gener-
ators of hazardous wastes, as defined under RCRA.
12.3 Hazardous Waste Quantities
Drum reconditioner firms were surveyed to determine the
average quantities of waste materials to be disposed. The
waste quantities are presented in the context of the model
plant. The model plant can handle 1,000 drums/day, and
for convenience, is assumed to be operating at capacity.
All of the drums received are pre-dumped. Half of the drums
are incinerated and half are washed in the caustic bath.
The firm is assumed to have a "zero-discharge" system and
is disposing of caustic sludge. A key volumetric assumption
is that the caustic sludge has been concentrated to 30 per-
cent solids with a centrifuge or filler press. Also, the
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incinerator ash is assumed to be approximately 50 percent
liquid (dry ash quantities alone are approximately half of
those shown). The estimates developed are shown below in
Table 12-1. The difference in waste quantities between caustic
sludge and incinerator sludge appears to occur due to the
different types of material likely to go through each process.
More viscous materials are placed in open-head drums which are
reconditioned by incineration. The more viscous materials
leave a greater volume of residue per drum. Also, a portion
of the wastes from the caustic bath are often discharged to
the sewer. Only those firms with "zero-discharge" systems are
completely capturing the suspended solids in the caustic bath.
TABLE 12-1
HAZARDOUS WASTE GENERATION AT
MODEL DRUM RECONDITIONING PLANT^
QUANTITY PER DAY
(number of 55-gal drums)
WASTE
Pre-dump
Caustic sludge
Incinerator sludge/ash
LOW
3
0.5
2
AVERAGE
5
0.8
4
HIGH
7
0.5
6
aERCO estimates.
Ranges are provided for each estimate to reflect
variances in firm experiences. However, the ranges are also
useful to denote the range at a given plant due to day-to-day
differences in the drums handled. All of the waste-stream
volumes are affected by the amount of residue in incoming
drums. Many firms have reduced this variance by encouraging
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customers to empty their drums and by instructing drivers
not to accept drums with 2 or more gallons of material.
Virtually no firms appeared to have waste quantities which
were consistently at the high range of the scale shown.
In order to develop national waste quantities a correc-
tion was made in pre-dump quantities to reflect the scope of
industry practices. Specifically, only an estimated 50 per-
cent of industry firms are pre-dumping drum wastes. For the
remainder, the absence of a pre-dump step is reflected in
only moderate increases in caustic sludge or ash quantities.
The following waste quantities were estimated to be represen-
tative for one-half of the industry volume: pre-dump wastes -
0; caustic sludge wastes - 1 drum/day; incinerator ash/sludge -
5 drums/day. The estimate of caustic bath and incinerator
wastes were thus increased by 20 percent over those for a
firm with a pre-dump step. This estimate is somewhat theo-
retical in that discussions with industry personnel did not
indicate a clear increase in process waste volujnes for firms
without a pre-dump step. The resulting estimates of aggregate
waste quantities are shown in Table 12-2.
To estimate the total weight of wastes, a specific
gravity of 1.5 was assumed. Many sludges have lower specific
gravities, but ash tends to have a higher specific gravity.3
With this assumption, the total wet weight of industry wastes
is estimated at 170,000 metric tons.
The average waste quantities for the model firm with a
pre-dump step is 3.0 MT per day. Without a pre-dump step,
however, average waste quantities are 1.9. An overall average
of 2.4 MT per day will be used for measuring economic impacts.
The worst-case firm will be assumed to dispose of an even
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TABLE 12-2
NATIONALLY GENERATED HAZARDOUS
WASTES BY DRUM RECONDITIONERSa
ESTIMATED WASTE QUANTITIES
(number of 55-gal drums)
Pre-dump
Caustic sludge
Incinerator ash/sludge
Total
175,000
63,000
315,000
553,000
aERCO estimate.
10 drums of waste, or 3.1 MT. This value represents a waste
generation rate which is well above the industry average.
Before moving on, it is useful to discuss two groups of
firms which have below-average waste generation rates. The
first group handles only oil drums. These firms avoid any
drums which present difficult cleaning chores. Oil drums
can be reconditioned with relative ease and with minimal
waste generation. Pre-dump wastes are often sold to waste
oil collectors. Oil residues can be incinerated more
completely than other wastes.^ As a group, firms special-
izing in oil drums appear to have waste volumes which are
roughly half those of the model plant.
The second group consists of many of the small, older
firms in the industry. These firms often do not pre-dump
wastes. Most are also discharging some of their wastes to
the sewer. As a result, relatively minor volumes of solid
waste are generated. This group of firms represents 15 to
25 percent of the industry firms. The oil drum firms and
these small firms will both incur below-average RCRA impacts.
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12.4 Number of Generators
As noted in Chapter Eleven, there are from 180 to
190 firms in the industry. All industry firms appear to be
generators. The higher number, 190, will be used to repre-
sent the number of generators in the industry throughout the
remainder of this report.
12.5 Current Disposal Practices
Current disposal practices frequently consist of a
reliance on contracted disposal for landfilling of solid
wastes. Alternative disposal practices have been and are
being used, however, particularly for caustic sludge and
pre-dump. This section will cover an assessment of the
state of disposal practices. A summary of wastes and
disposal practices is provided in Table 12-3.
Since a large number of reconditioners are in the
industrial zones of urban areas, most have been using
municipal sewers to handle as much of their waste stream as
possible. This is particularly true with wastes from the
caustic bath. Since the sludge drawn off the bottom of a
settling tank is only 5 to 10 percent solids, it is easily
pumped into the sewer. Where sewer user fees have been
based on the volume of effluent alone rather than the
loading of total suspended solids, this method of caustic
sludge disposal has been much less costly than dewatering
the sludge and then landfilling it. The industry is find-
ing, however, that these low user fees for discharge into
municipal sewers are rapidly becoming a thing of the past.
Annual charges to many plants have increased by factors of
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from 10 to as much as 50 when sewer districts compute their
charges on the cost of treating a particular effluent.5
Whereas some operators are switching from an effluent
disposal of caustic sludge to a landfill disposal (i.e.,
a change from a liquid waste to a solid waste) because of
dramatically increasing user fees, others are doing so
because sewer districts are refusing to accept the untreated
effluent. The operator is faced with three choices: building
a pretreatment facility, dewatering the caustic sludge for
landfilling, or ceasing operations. A few large facilities
are building pretreatment facilities. Most, however, believe
that their best hope lies in minimizing or eliminating their
discharge of suspended solids. Some experimentation with
zero-discharge systems is under way and is being watched with
considerable interest by the larger firms. These decisions,
though beneficial from a wastewater management point of view,
add to the volume of material which the firms will have to
landfill. However, the "zero discharge" systems appear to
increase sludge quantities only slightly above those generated
by more rudimentary pre-treatment facilities.
Pre-dump material is handled in a variety of ways. In
a few cases it can be segregated as the drums are emptied so
that materials with a commercial value can be sold. That
practice, however, is the exception. Typically it is
landfilled or incinerated. Some plants are experimenting
with using oil and solvent pre-dump as a fuel supplement in
their drum incinerators, though such a conversion can be
plagued with design and operating problems.
Incinerator sludge/ash is landfilled. A few recon-
ditioners practice on-site disposal, but this is uncommon.
For a variety of reasons, most prefer to contract with a
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hauler who provides dumpsters which he periodically hauls to
a landfill.
12.6 RCRA Required Disposal Practices
With the implementation of RCRA, reconditioning firms
will be classified as hazardous waste generators and will be
required to upgrade disposal practices. It is assumed that
most firms will continue to contract for waste disposal.
Appropriate waste disposal consists of secure landfilling
for these waste materials. Economic impacts will consist of
increased contractor disposal costs and the costs of complying
with administrative aspects of RCRA. These factors are
discussed in the following chapter.
12.7 Disposal Costs
All reconditioners will be assumed to be using contrac-
tors for off-site disposal in a secure landfill. The cost
of off-site disposal will be taken from the study by Battelle
for EPA.6 The landfill cost from that source is $55.00/MT.
Administrative costs are given in Table 12-4. The costs
were not annualized due to the small difference between
first-year and recurring costs. First-year administrative
costs are used in the analysis of economic impacts. It was
assumed that all work would be performed by supervisory
personnel and clerical staff. No testing costs were included
due to the futility of testing the highly variable waste
streams from drum reconditioners.
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TABLE 12-4
ADMINISTRATIVE COSTS OF COMPLIANCE WITH
RCRA FOR DRUM RECONDITIONERS3
LABOR
Sect
1.
2.
ion 3001
Initial waste
inventory
Documentation of
SUPER-
VISORY
($25/hr)
8
7
CLERICAL
($8/hr)
6
OPTION A
COST ($)
200
223
OPTION B
COST ($)
200
223
waste inventory
Section 3002
1. ID code
application
2. Quarterly and
annual reporting
Option A
Option B
3. Storage of
manifests
4. Manifest handling
($3/manifest,
1 manifest/mo)
5. System design
for labeling,
manifesting,
reporting, and
identification
of TSDF
6. Ongoing super-
vision
7. Maintenance of
hazardous waste
list and refine-
ment of other
procedures
Total cost (first year)
Recurring annual costs*3
12
5
1/2
32
13
30
21
29
556/yr
20/yr
36/yr
918
24
600/yr
100/yr
29
229/yr
20/yr
36/yr
918
600/yr
100/yr
$2,682 $2,355
$l,312/yr $ 985
aERCO estimates.
bRecurring costs are denoted by $/yr cost figures.
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NOTES TO CHAPTER TWELVE
1. Personal communication between John Eyraud of ERGO
and Morris Hershson of the National Barrel and Drum Associa-
tion.
2. William L. Rosbe, Memorandum to the National Barrel
and Drum Association, October 28, 1977.
3. Battelle Columbus Laboratories, Cost of Compliance
with Hazardous Waste Management Regulations, May 1978. A
specific gravity of 1.2 was used as typical of most sludges.
The specific gravity of dry oil ash is 2.5.
4. Personal communication between John Eyraud of ERCO
and Bernard Klein of Kingsland Drum and Barrel Co. Inc.,
Newark, November 8, 1978. Other firms which are handling
oil drums reported relatively small waste volumes.
5. Personal communication between William Humm of ERCO
and Joseph Hooper of Waymire Drum Co., Downey, California
and Morris Hershson of NBADA, September 29, 1978.
6. Battelle Columbus Laboratories, Cost of Compliance
with Hazardous Waste Management Regulations.
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CHAPTER THIRTEEN
ECONOMIC IMPACTS ON THE DRUM RECONDITIONING INDUSTRY
The discussion of industry impacts is divided into
three sections. The first will provide a description of
model RCRA impacts on the model and worst-case firms. In
this analysis, it is assumed that prices and sales remain
constant. In this way the incremental cost of compliance
will be measured. The second section presents aggregate
impacts. A third section looks at industry-wide impacts
including the possibility of plant closures and job losses.
For this section, the likelihood of price increases to pass
through incremental costs is considered.
13.1 Model Plant Impacts
The waste quantities generated by the model and
worst-case firms were described in the previous chapter.
The model firm is assumed to be disposing of 2.4 MT of waste
per day, compared to 3.1 MT for the worst-case firm.
Off-site contractor disposal is expected to be used by both
firms with the implementation of RCRA.
The impact of increased disposal costs under RCRA
(Option A) on net income is shown in Table 13-1. The
impacts shown assume that no price increases are made to
cover increased costs. As is immediately evident, the cost
increases are very significant. Disposal costs are estimated
to rise from the current level of $13.10 per metric ton to
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TABLE 13-1
IMPACTS ON THE DRUM RECONDITIONING MODEL FIRMS
(OPTION A)a
MODEL FIRM
($)
WORST-CASE
FIRM ($)
Sales
Cost of operations
Incremental RCRA impacts
Technical disposal costs
Administrative costs'3
Pretax net income
Pretax net income
(before RCRA)
Decline in net income
1,080,000
960,000
25,100
2,700
92,200
120,000
23%
1,080,000
984,000
32,600
2,700
60,700
96,000
37%
aERCO estimates.
^Represents first-year administrative costs
annual costs are estimated at $1,312.
Recurring
$55.00 per metric ton. Administrative costs are estimated
at $2,700 for drum reconditioners under Option A. The total
increase in costs is $27,800 over the estimated current
disposal costs. The reduction in model and worst-case plant
income is 23 percent and 37 percent respectively.
RCRA impacts under Option B are very much similar.
Option B administrative costs are slightly lower due to
decreased reporting requirements for generators in the
September 1978 version of Section 3002. The impacts on net
income as shown in Table 13-2 are 23 percent and 36 percent
for the model and worst-case firm.
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TABLE 13-2
IMPACTS ON THE DRUM RECONDITIONING MODEL FIRMS
(OPTION B)a
MODEL FIRM
($)
WORST-CASE
FIRM ($)
Sales
Cost of operations
Incremental RCRA impacts
Technical disposal costs
Administrative costs0
Pretax net income
Pretax net Income
(before RCRA)
Decline in net income
1,080,000
960,000
25,100
2,400
92,500
120,000
23%
1,080,000
984,000
32,600
2,400
61,000
96,000
36%
aERCO estimates.
^Represents estimated first-year administrative costs.
Recurring annual costs are estimated at $985.
One caveat to these results should be mentioned.
Worst-case firm impacts are based on a set of pessimistic
assumptions. Very few firms appear likely to face such
impacts, although comprehensive industry data on earnings
are not available.
Second, a number of factors clearly indicate that price
changes and other factors will ameliorate the impacts on net
income. These are described in the next section.
13.2 Aggregate Impacts
Aggregate cost impacts are shown in Table 13-3. The
sum of technical and administrative disposal costs is
$7.6 million and $7.5 million for Options A and B. The RCRA
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TABLE 13-3
AGGREGATE COST OF COMPLIANCE FOR
THE DRUM RECONDITIONING INDUSTRY
($MM) a, b
Technical
Administrative13
Totalb
1977 production value
Costs as a percentage
of production value
OPTION A
7.1
0.5
7.6
640
1.2%
OPTION B
7.1
0.4
7.5
640
1.2%
aERCO estimates.
^First-year administrative costs are shown. Recurring
administrative costs are $0.2 MM for both Options A and B,
reducing total cost by less than 5% in succeeding years.
compliance costs amount to 1.2 percent of 1977 production
value in each case.
13.3 Industry Impacts
The analysis of model and worst-case firm impacts
indicate potentially serious RCRA impacts for the industry.
The worst-case impacts, in particular, suggest that a number
of plant closures are possible. Net income for the worst-
case plant is still positive, but with the sharp decline in
income, the rate of earnings may be judged insufficient for
continuing operations.
Several factors will act to reduce the likelihood of a
large number of plant closures. The most important are:
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(1) the likelihood of full-cost pass-through; (2) the rela-
tively small waste disposal problems of small firms; and
(3) some flexibility in the mode of operation which will
allow firms to reduce impacts. These are discussed below.
The current market outlook for reconditioned drums is
strongly positive. Demand for reconditioned drums is high
relative to capacity and many firms have undertaken to
expand their facilities. A price increase in reconditioned
drums sufficient to cover the RCRA impacts is not expected
to disrupt the optimistic outlook. Reconditioned drums are
currently selling for from $4 to $6 less than new drums,
which are the primary substitutes. A price increase of
10 to 15 cents per reconditioned drum does not seriously
affect this differential. This price increase represents
2 to 3 percent of the cost of the reconditioning service.
Under most regulatory impacts, small firms are most
likely to close down. However, as discussed in the previous
chapter, a number of small firms may not pre-dump incoming
drums and often are discharging much waste to the sewer.
If sewer discharges are pretreated, then a quantity of
caustic sludge will need to be landfilled. In any case, the
solid waste generated is small. As noted for the model
plant, the quantities of caustic sludge are small relative
to incinerator ash/sludge. RCRA impacts for these small
firms are likely to be significantly below those of the
model plant. Impacts may be more serious to the extent
that RCRA impacts are piggybacked upon local pretreatment
regulations for effluent discharges. However, the latter is
likely to be a more substantial problem and thus these
impacts are due to legislation other than RCRA. In summary,
many of the industry's small firms face below average
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RCRA impacts. The number of firms with the characteristics
described above is estimated at 15 to 25 percent of the
industry.
A summary of industry impacts is shown in Table 13-4.
With regard to the likelihood of plant closure, it is
TABLE 13-4
POTENTIAL ECONOMIC IMPACTS ON DRUM RECONDITIONERS
SUMMARY OF IMPACTS ON THE DRUM
RECONDITIONING
INDUSTRY
Number of generators
Plant closures
Job losses
Production cutbacks
Price increases
U.S. demand reduction
Balance of payments effects
OPTION A
190
Possible
Possible
Unlikely
Small
Small
None
OPTION B
190
Possible
Possible
Unlikely
Small
Small
None
estimated that there is a 25 to 50 percent probability that
10 percent of the industry's plants will close due to RCRA
impacts. Production cutbacks appear unlikely, however,
since firms are most likely to close due to competitive
pressures. Other local firms should be able to increase
production to take in the additional business.
The price impact is described as small (estimated
above at 2 to 3 percent of the total). The small price
increase should not disrupt the strong growth of
U.S. demand.
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PART V
CHEMICAL WHOLESALING
-------
CHAPTER FOURTEEN
CHARACTERIZATION OF THE CHEMICAL WHOLESALING INDUSTRY
14.1 Introduction
As a wholesaling industry, those companies in the
chemical distributing business face many conditions and
problems common to all wholesalers. Wholesalers buy and
sell merchandise and also provide transportation, storage
(warehousing), market information, financing, product
standardization, and some disposal and preprocessing ser-
vices to their customers. They usually serve customers
who cannot, or prefer not, to buy in quantity directly from
producers.
Small volume waste streams are generated in chemical
warehouses in the process of repackaging chemicals.
These wastes consist of any of a number of chemical products.
Many of the chemicals are likely to be hazardous wastes
and thus this industry has been examined.
The description of the industry provided below is
divided into four sections. These are (1) the size and
scope of the industry, (2) industry and market structure,
(3) financial performance and (4) model plant description.
This last section develops the analytic tool to be used
for later analysis of the industry.
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14.2 Size and Scope of the Chemical Wholesaling Industry
14.2.1 Industry Definition
The chemicals and allied products wholesaling industry
under study here (SIC 5161) distributes chemicals such as
acids, industrial chemicals, dyestuffs, industrial salts,
plastic materials, rosin and turpentine. Not included in
this industry are those companies which distribute
primarily ammunition (SIC 5041); agricultural chemicals
and pesticides (SIC 5122); and paints and varnishes (SIC
5198). However, chemical wholesalers may carry small
amounts of products from these other SIC codes.
The 1972 Census reported approximately 6,400 chemical
wholesaling establishments, owned and operated by 4,275
firms. Ninety percent of the firms run only one estab-
lishment, but the rest of the units, 2,500, are operated by
400 firms. It is estimated that 120 firms each own more
than 25 establishments.
There are three types of chemical distributing firms:
merchant wholesalers, manufacturers' sales branches and
sales offices, and merchandise agents and brokers. Of
these, only merchant wholesalers and manufacturers'
sales branches have warehouse space.
Manufacturers' sales offices and merchandise agent
and broker establishments rarely physically handle chemi-
cals. Most of the manufacturers' outlets only process sales
orders; distributing and warehousing operations are the re-
sponsibilities of other divisions within the chemical manu-
facturing companies.1 The merchandise agents and brokers
usually conduct third party sales. In this type of
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transaction, the wholesaler never sees the merchandise, but
sells it for one party to another, usually without taking
title, and arranges its transfer from the manufacturer to
the customer. Agents and brokers are generally used only
by small chemical manufacturers, by foreign companies
selling chemicals in the United States, and by producers
of specialty chemicals.2
Wastes are generated on a routine basis only for firms
performing repackaging operations. Most of these firms
are classified within the merchant wholesalers group.
The merchant wholesalers are also likely to be making
third party sales to some customers. Where possible,
in the sections below, the discussion will be focused
on this industry segment.
14.2.2 Chemical Wholesaling Sales
In 1972, the combined sales of the three chemical
distributing segments were $24.6 billion. The manufactur-
ers' outlets, accounting for only 25 percent of the number
of outlets, made the majority of the sales, 78 percent.
Merchant wholesalers accounted for 66 percent of the number
of outlets, but only 18 percent of the sales. The agents
and brokers, the smallest segment in all respects, repre-
sented 9 percent of the establishments and 3 percent of
total sales.3 A summary of the sales figures is provided
in Table 14-1. The combined sales of the SIC 5161 segments
account for approximately half of all United States chemical
sales. Most of the remaining sales are made by the chemical
manufacturers but do not go through their sales offices and
branches. Small amounts of chemicals are sold by other SIC
groups like retailers and metal service centers.
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TABLE 14-1
CHEMICAL WHOLESALING INDUSTRY - NUMBER OF
ESTABLISHMENTS, SALES AND EMPLOYMENT FIGURES, 1972a
INDUSTRY SEGMENT
NUMBER OF NUMBER NUMBER
ESTABLISH- OF SALES OF
MENTS FIRMS ($ billion) EMPLOYEES
Merchant wholesalers
Manufacturers' sales
branches and sales
offices
Merchandise agents
and brokers
Total
4,204
1,605
588
NA
NA
NA
4.587
19.198
0.836
6,397 4,275 24.621
38,401
36,452
3,010
77,863
^Department of Commerce, Bureau of Census, Census of
Wholesale Trade, 1972.
Most of the independent chemical wholesalers are small com-
panies which cover a limited geographical area and have regional
sales of less than $1 million.4 Nearly 60 percent of the
merchant wholesaling operations have five or fewer employees
whereas only 2 percent have more than 50 employees. Never-
theless, the large firms account for 16 percent of the total
sales volume. The units with fewer than five employees
make only 19 percent of the sales. The size distribution
of the industry firms is provided in Table 14-2.
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TABLE 14-2
MERCHANT WHOLESALERS - EMPLOYMENT LEVEL OF ESTABLISHMENTS
NUMBER OF
EMPLOYEES
0-5
6-14
15-50
>50
PERCENT OF
ESTABLISHMENTS
58
25
15
2
PERCENT OF
TOTAL
INDUSTRY
SALES
19
26
39
16
Total
100
100
aDepartment of Commerce, Bureau of Census, Census of
Wholesale Trade, 1972.
Most of the independents carry 10-30 product lines, but
some large firms carry many hundreds of product lines.5 The
number of product lines is a function of the markets being
served. Since it is common for an individual firm to serve
a few specialized markets, only a small number of chemicals
will be carried. Distributors' product lines will tend to
reflect the character of local industries.
The independents supply storage, transportation, loca-
tion conveniences, repacking, and, in some cases, waste
disposal services to their customers. Most product proper-
ties and applications are usually well known to the customer,
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-------
thus little technical assistance or consulting is required.6
However, the distributors do provide inventory services for
their customers, many of whom are too small to keep large in-
ventories. The customers pay a premium for these services:
distributor prices may be from 5 to 40 percent higher
than manufacturers' prices.^
Most chemicals are intermediate goods sold to other
manufacturers who process them into end products. Large
volume customers include the textile, rubber, paint, paper,
petroleum and food industries. As shown in Table 14-3,
67.8 percent of the chemical distributors' sales are to
industrial users; the next two largest customer sectors
are retailers and other wholesalers, and households and
individuals represent a small market segment. Most large
customers buy chemicals directly from the manufacturers
or their sales offices, whereas the merchant wholesalers,
the independents, serve primarily smaller users.
14.2.3 Employment and Regional Distribution of Firms
Total industry employment in 1972 was 77.9 thousand.
The merchant wholesaling segment employed 49 percent of
the industry's work force, the manufacturers' outlet
47 percent, and the agents and brokers only 4 percent.
Table 14-1 includes a summary of SIC 5161 sales, employment,
and firm count statistics.
Firms are concentrated in urban, industrial areas.
Generally firms are located near major customers in order to
reduce transportation costs and improve the services
-350-
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West Coasts and in the Upper Midwest.
14.3 Industry and Market Analysis for Chemical Merchant
Wholesalers
The chemical distribution industry is characterized by
a large number of firms, a lack of substantial barriers to
entry and generally moderate profit margins. As such, it
generally conforms to the competitive industry model of
economic theory. In the sections below, basic components
of industry structure and performance will be delineated.
14.3.1 Market Structure
Industrial purchasers of chemicals have a variety
of paths available to them for securing necessary supplies.
Depending on the type and quantity of chemical needed, the
industrial consumer may order direct from the manufacturer,
order through the manufacturers' sales offices or branches,
or order through an independent chemical distributor. In
major industrial areas, a significant number of firms can be
possible points of contact. For exotic chemicals, fewer
firms may serve the area but there appears to be some choice
in most cases. One measure of the extent of choice is
through examination of industry concentration ratios. How-
ever, concentration ratios are not developed by the Depart-
ment of Census for wholesale or retail industries. Such
ratios would, in any case, be uninformative at the national
level and difficult to define at the local level. (Concen-
tration ratios measure the percentage of industry sales
handled by the largest firms, and are usually measured
-352-
-------
for 4 and 8 firms ratios.) Nevertheless, local concentra-
tion ratios appear to be low, although for small markets,
such as for the specialized chemical needs of certain
industries, they could be substantial. Even local concen-
tration ratios would be misleading measures of market power
to the extent that firms can order directly from the manu-
facturer.
Low concentration ratios indicate a general lack of
market power and price setting power for firms. These mar-
ket traits are generally accompanied by low barriers to
entry and the resulting fact of a large number of small
firms. Both of the latter characteristics are evident in
this industry. Barriers to entry may consist of any mar-
ket factor which restricts the entry of new firms. In most
cases, the existence of barriers is a function of the size
of the necessary capital investment for beginning operations
However, the small distributors serve mainly as transfer
agents and small capital investments are often sufficient
for operation. As the volume of material handled increases,
additional investments are made in the equipment needed for
repackaging.
A related aspect of market structure concerns the com-
petition among independent merchant wholesalers and the
distribution chains of major manufacturers. The relation-
ship is only partially competitive. Major manufacturers
tend to rely on wholesalers to serve small customers and
often will not sell small volumes of material. Wholesalers
are then used as a marketing tool, and are encouraged to
carry the major firm's products. Technical advice and as-
sistance may also be provided. On the other hand, manufac-
turers and independents compete for large accounts. Manu-
facturers can offer lower prices and discounts, while the
-353-
-------
distributor offers a variety of related services. In
general, the partitioning of the market between large and
small users provides an opportunity for small and indepen-
dent distributors to prosper.
14.3.2 Market Conduct and Performance
Industry practices indicate a generally high level
of price competition. The highest product price mark-ups
appear to exist on the periphery of the industry; that is,
for sales of specialized chemicals to small-volume users.
Purchasers in outlying areas also may pay higher prices for
chemicals due to the lack of proximity to distributors in
urban areas. These groups of customers will tend to have
least recourse to switching suppliers or to maintaining
large chemical inventories. Product price mark-ups in the
industry vary from 5 to 20 percent, and could go still
higher in isolated cases.
Sales from merchant wholesalers have been increasing
in recent years, but profits have not grown quickly due to
cost increases and competitive pressures. A major factor
behind the sales increase is that many customers have been
choosing to reduce inventories as a cost-reducing measure.
Reduced inventories generally indicate a shift toward
reliance on a local chemical distributor. The peak in
distributor profits occurred in 1974-1975 when a brief
shortage of petrochemicals led to rapid price increases.
Before-tax profit margins for that period averaged from 5 to
10 percent for small firms to 10 percent and over for larger
firms. The statistics are taken from income tax reporting
wherein income is reported in the most pessimistic form
possible.8 After 1974-1975, profits declined slightly,
-354-
-------
but general profitability appears to be average to above
average.
14.4 Financial Profile
The operating costs for chemical distributors, as for
other distributors, are largely determined by the cost of
material purchased. The operating costs and margins for
chemical distributors are shown in Table 14-4. The cost, of
operations, largely chemical purchases and payroll costs-,
range from 75 to 79 percent of sales for the asset size
categories shown. Chemical purchase costs are not broken
out separately, but are estimated to represent all but 5
to 10 percent of the cost of operations.
The before-tax profit figures shown are above-average
figures for the industry. The reporting period used, 1974-
1975, was a peak year for chemical distributors due to
sharp rises in chemical prices. However, indications are
that profits have declined only slightly since the 1974-
1975 peak.9 The figures indicate higher profitability
for large chemical distributors. The higher volume firms
are typically thought to be more profitable partly due to
economies of scale in packaging and transporting operations.
However, these conclusions are not supported by the data
shown since the cost of operations is similar across firm
sizes. Large firms may also tend to dominate large-volume
sales in local markets, allowing them a measure of price-
setting power. Higher average mark-ups would, of course,
raise profit levels. Finally, the data sample shown indi-
cates relatively less spending on several indirect expense
items for large companies.
-355-
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-356-
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Financial ratios for the same sample of distribution
companies are shown in Table 14-5. The ratios are average
for wholesaling industries. The current ratio (current
assets/current liabilities) is in the vicinity of 2 for
all asset size classes. A current ratio of 2 generally
indicates a healthy balance sheet since, if necessary,
current assets can be liquidated to cover current
liabilities.
The inventory turnover rate of 10 to 11 times a year
indicates that materials generally can be moved quickly
(that is, inventory actually is liquid). This rate
corresponds to a complete inventory change almost every
month.
14.5 Model Firm Characterization
For the purposes of economic impact analysis, two model
firms have been developed.
The model firms for chemical warehouses are character-
ized in Table 14-6. Although some large chemical distrib-
utors are multi-establishment firms, the majority of distrib-
utors are single-establishment firms. Thus, both the
representative and worst-case model firms are given as
single-establishment firms that engage in repackaging a
proportion of their product.
Sales for the representative and worst-case firms are
based on a sample of repackaging firms that are members of
the National Association of Chemical Distributors (NACD).
-357-
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TABLE 14-6
MODEL FIRM CHARACTERIZATION FOR A CHEMICAL WAREHOUSE3
1978 DATA ($000)
NUMBER OF WORST-CASE
WAREHOUSES: 1 MODEL FIRM FIRM
Sales $10,000.00 $5,000.00
Cost of sales, 9,319.00 4,865.00
expenses
Cost of disposal 0 0
Profit (before tax) $ 680.30 $ 134.00
aERCO estimates based on 1 warehouse.
The NACD represents approximately 50 percent of the
industry wholesalers. The sales volume of member firms
ranges from $5 to $10 million. Accordingly, the model
firm has been assumed to have a sales volume of $10 million
and the worst-case firm sales of $5 million.
Net profit before taxes was obtained from a percentage
financial breakdown developed by Robert Morris Assoc.
A profit rate of 6.8 percent was chosen for the model
plant. This figure was the mean value for an 80-firm
sample with assets ranging from $1 to $10 million and
average sales volume of $8.6 million. For the worst-case
firm, a low 2.7 percent profit was used. This figure was
the mean of a 67-firm sample with assets from $250,000 to
$2 million and mean sales of $2.1 million.
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NOTES TO CHAPTER FOURTEEN
^Personal communication between Alisa Gravitz of ERGO
and marketing and distribution personnel of the major chem-
ical manufacturers, week of July 31, 1978.
2Kline Guide to the Chemical Industry, Charles Kline
& Co., New Jersey, 1974, p. 44.
^Department of Commerce, Census of Wholesale Trade,
1972.
4Kline Guide to the Chemical Industry, Charles Kline
& Co., New Jersey, 1974, p. 43-44.
5Kline Guide to the Chemical Industry, Charles Kline
& Co., New Jersey, 1974, p. 43-44.
6Leo J. Troy, Almanac of Business and Financial Sta-
tistics.
^"Chemical Distributors," Chemical Week, December 15,
1976.
^Personal communication between Steve Fischer of
ERCO and Paul Guthrie of the National Association of
Chemical Distributors, October 1978.
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CHAPTER FIFTEEN
HAZARDOUS WASTE GENERATION IN THE
CHEMICAL WHOLESALING INDUSTRY
The wastes that chemical warehouses generate are for the
most part only residual product that is generated in the
repackaging and transfer stage of their operations. In the
distribution of chemicals only some materials need be repack-
aged. Estimates shown below indicate that the volume of
repackaging wastes, relative to total volume, is very small.
This chapter will address the basic characteristics,
quantities, and disposal means for wastes in the chemical
industry. In addition, changes which will be necessary in
disposal techniques under the Option A and Option B versions
of RCRA will be specified.
15.1 Process Description
Nearly all routinely generated wastes at chemical ware-
houses are in liquid form. Dry chemicals are received by
warehouses in prepackaged form and are not broken down into
smaller containers for customers. Liquids, which are
received in bulk containers or in drums (55-gallon drums),
can be shipped out as is or can be broken down into smaller
containers for customers.
The repackaging of liquids generates almost all of the
waste from distributors. Depending upon the method of
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repackaging, the waste quantities can vary substantially.
Repackaging methods encountered tend to vary with the firm
size, with larger firms practicing much more careful
control over waste generation.
The largest firms contacted reported no waste generation
from repackaging. For each liquid chemical which is repack-
aged a separate reversible pump and line is used for transfer.
When the required amount of chemical is transferred from the
bulk container (railroad car, tank truck, or storage tank)
to another container, the pumps are reversed and the line is
cleared of the remaining chemical. The hoses and lines are
then detached and allowed to air dry. The bulk storage
tanks are located below ground and the transfer is done
subsurface to control vapor loss.l
Other large firms also exhibited strict control of their
wastes from repackaging. These firms do not use reversible
pumps, but have less capital-intensive methods of waste
control. At these firms,the lines used to transfer chemicals
are first drained to clear the remaining chemical from the
line. The drained chemical is put into a holding drum
marked for storage. The accumulated volume of a chemical is
then used as raw product at some later date. The hoses and
lines, when used for the transfer of different chemicals,
are steam-cleaned and then allowed to air dry.2
Smaller firms are least able to control repackaging
wastes. In general, each hose is used to transfer a number
of different chemicals. The expense of separate lines for
each chemical is not justified by sales volumes. When the
chemical being repackaged is changed, the new product is
flushed through the line to clear it of the previous chem-
ical. The first two to five gallons of chemicals are
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collected as waste. Some firms will their pool this waste
into drums, which are saved for periodic waste disposal.
Other firms simply deposit the waste down a dry well, a
floor drain to a sewer, or other outfall.
In all cases, the chemical distributors are motivated to
some degree by economics. For larger firms, who handle
greater volumes of chemicals, the expense of having separate
pumps and lines for each chemical is less than the gains in
product sales they realize from limiting the loss of their
product. For smaller firms, the volume of chemicals lost is
not sufficient to pay for the expense of establishing more
stringent controls to limit repackaging wastes.
The only other waste streams for chemical warehouses
are occasional spills of chemicals. Spilled materials are
generally recovered, washed into the sewer, or allowed to
evaporate. From discussions with industry personnel it
appears that the volume of spilled materials is very minor.
15.2 Waste Characteristics
As mentioned in Section 15.1, the wastes generated from
chemical distributors result from repackaging liquids.
Chemical distributors tend to be specialized in the products
they sell, so the wastes from firm to firm will obviously
vary. Among the industry, however, the major liquids that
are repackaged can be classified into one of three basic
groups. These are:
1. Organic and inorganic solvents
2. Acids
3. Caustic solutions
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15.2.1 Organic Solvents
A wide variety of solvents are offered by chemical dis-
tributors. Many of the solvents are flammable as defined by
Section 3001 of RCRA, and thus can be regarded as hazardous.
In addition, many of the solvents supplied by distributors
appear on the EPA list of priority pollutants, and are
therefore hazardous. Since those firms that generate
solvent wastes do not generally segregate them (except as
chlorinated or non-chlorinated for disposal purposes), any
solvent waste stream will be considered hazardous for RCRA
purpses.
15.2.2 Acids
Chemical distributors supply large amounts of acids to
industrial users. Although individual product volumes are
not available, sulfuric acid and nitric acid are the two
most common acids supppled by distributors. Other acids
distributed in large volumes are hydrochloric and hydro-
fluoric acid. Most acids, unless significantly diluted, are
likely to fail corrosivity tests and reactibility tests
specified in Section 3001 of RCRA, and are thus regarded as
hazardous wastes. As is the case with solvents, all acid
wastes will be regarded as hazardous. The volume of acids
repackaged is generally smaller than the volume of solvents
repackaged.
15.2.3 Caustic Solutions
Liquid caustic solutions are the only caustics routinely
repackaged. Sodium hydroxide and ammonium hydroxide solutions
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are two of the most common caustic solutions distributed.
These solutions, as well as other caustic solutions in
general, will fail the corrosivity and reactivity tests
of Section 3001, and thus are regarded as hazardous
wastes.
15.3 Model Plant Waste Quantities
The typical chemical distributor is a firm that covers
a limited geographical area, stocks chemicals that have
diffuse end uses, and relies on the markup between bulk
shipments bought directly from manufacturers and the smaller
retail quantities sold to each customer.
Before proceeding to the typical waste quantity figures,
several points of relevance to the estimation procedure must
be noted. First, the amount of waste per liter of product
repackaged varies according to the degree of control the
firm exercises over the repackaging process. According to
firms contacted, the waste collected was 1 percent or less
of the total product repackaged if a large number of different
chemicals were handled in succession. A figure of 0.75 is
estimated for normal operations. This figure will be used
as the estimate for the amount of waste generated per unit
of repackaged material. Second, the total amount of wastes
depends largely upon the amount of liquids repackaged.4
Estimates of the total percentage of liquids repackaged
ranged from approximately 15 to 75 percent of the liquid
chemicals that are at some point warehoused at the distri-
butor's facility.^
Third, the mix of dry and liquid chemicals varies between
firms. Liquids are estimated to account for between 50 and
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80 percent by weight of the total chemicals warehoused at
the majority of chemical distributors. *>
Fourth, distributors also arrange for sales directly
between the manufacturer and the customer. For merchant
wholesale distributors that maintain warehouses and repackaging
facilities, the amount of direct business handled is estimated
to range from 40 to 60 percent of their total weight of
chemicals sold.^
Table 15-1 gives the waste quantity estimates based upon
the following assumptions derived from conversations with
distributors:
1. Wastes are 0.75 percent of repackaged material.
2. Forty percent of the liquids are repackaged.
3. Liquids are 75 percent of the warehoused chemicals,
dry chemicals are 25 percent.
4. Fifty percent of total business is handled directly
and does not move through the warehouse.
5. Sales volume is $10,000,000/year (1978), and the
volume of repackaged liquids is 1,800,000 liters
per year.
According to the assumptions above, 1,125 liters of waste
chemicals are generated per month. This amount is enough to
fill approximately six 208-liter (55-gallon) drums per month
with waste chemicals. Although this amount is assumed to be
0.75 percent of the repackaged material, it represents less
than one-tenth of one percent of weight of the total chemicals
sold by a typical distributor.
For the worst-case firm, only two parameters were changed
in order to estimate waste quantities. First, the size of
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TABLE 15-1
TYPICAL WASTE GENERATION - CHEMICAL DISTRIBUTOR
PER MONTH
PER YEAR
LITERS KILOGRAMS3
LITERS KILOGRAMS3
Waste
Repackaged
liquid
Total liquids
handled at
distributor "s
facility
Total chemicals
handled at
distributor 's
facility
Total chemicals
sold by
distributor
1,125 1,406 13,500 16,875
150,000 187,500 1,800,000 2,250,000
375,000 468,750 4,500,000 5,625,000
NA
625,000
NA
7,500,000
NA 1,250,000
15,000,000
aBased on 1.25 specific gravity.
^NA = not applicable; includes dry chemicals measured
by weight only.
the firm was halved, because a smaller firm can be expected
to be more susceptible to any adverse impacts RCRA might
impose upon them. Second, a waste generation rate of
1 percent of repackaged liquids was assumed. All other
relative proportions were unchanged. Table 15-2 shows the
waste generation for the worst-case firm.
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TABLE 15-2
WORST-CASE WASTE GENERATION - CHEMICAL DISTRIBUTORS
PER MONTH
PER YEAR
LITERS KILOGRAMS3 LITERS KILOGRAMS3
Waste
Repackaged
liquids
Total liquids
handled at
distributor's
facility
Total chemicals
handled at
distributor's
facility
Total chemicals
sold by
distributor
750 937.5 9,000 11,250
75,000 93,750 900,000 1,125,000
187,500 234,375 2,250,000 2,812,500
NA
312,500
NA
625,000
NA
3,750,000
7,500,000
aBased on 1.25 specific gravity.
^NA - not applicable; includes dry chemicals measured by
weight only.
15.4 Aggregate Waste Quantities
The model firm and the worst-case firm are assumed to
comprise the range of characteristics of the majority of the
generators in the industry. Thus, the estimate of aggregate
waste quantities is based upon an average of the model firm
and the worst-case firm waste quantities and the number of
generators in the industry. Using this basis, Table 15-3
shows the estimate of aggregate hazardous waste quantities
from the 360 chemical distributors identified as generators.
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TABLE 15-3
AGGREGATE WASTE QUANTITIES - CHEMICAL DISTRIBUTORS
PER MONTH PER YEAR
LITERS KILOGRAMS* LITERS KILOGRAMS^
337,500 421,875 4,050,000 5,062,500
aBased upon 1.25 specific gravity.
15.5 Number of Generators
Census figures indicate that 4,204 merchant wholesalers
in the SIC 5161 class were in operation in 1972. Of this
group, 2,504 firms reported that they had warehouse space.
Of these, only a small percentage repackage their chemicals,
as most function mainly as a warehouse for prepackaged
goods. The best estimate, based largely upon conversations
with the National Association of Chemical Distributors,
indicates that approximately 400 firms in 1977 repackage the
chemicals they handle. It is assumed that these firms are
the only ones that have the potential for generating
hazardous wastes in quantities that would classify them as a
generator under proposed RCRA statutes.
Contacts with chemical distributors indicate that not
all potential generators do in fact generate sufficient
wastes to be classified as a generator. As mentioned in
Section 15.1, the largest repackaging firms have controls on
their procedures that virtually eliminate routine waste of
their material.8 Ten percent of the firms in the industry
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are estimated to be large enough to have instituted strict
controls on their waste generation. Thus, the total number
of generators is estimated to be 90 percent of 400, or 360.9
An estimated 20 percent (70) of hazardous waste
generators practice waste control procedures that will
satisfy RCRA disposal. These firms collect their wastes in
drums and send them to hazardous waste disposal firms. Those
firms that dispose of their wastes down dry wells, sewers or
watercourses are estimated to account for the remaining
290 firms classed as generators.10
15.6 Current Disposal Practices
Current disposal practices show varying degrees of
environmental concern. The disposal methods encountered in
the course of this study included:
1. Disposal of wastes from line flushing directly into
dry well.
2. Neutralizing treatment for spills (especially acids)
which are flushed down into a dry well, sewer line
or water course.
3. Collection of wastes in drums and subsequent
consignment to a hazardous waste disposal facility.
4. Reclaiming of some chemicals (especially used
solvents returned by customer) by sending them to
chemical reclaimers. The reclaimed chemical is
then sold back to the original user or to someone
else.
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Where there is no routine waste, occasional spills are
the only sources of waste. These spills are diluted,
neutralized if possible, and often allowed to flow down a
drain. in the case of volatile solvents, small spills are
sometimes left to evaporate.
15.7 RCRA Specified Disposal - Options A and B
As is the case with the other industries in this study
two versions of proposed RCRA legislation are being reviewed
for their economic impact. Option A and Option B versions
will be examined for their impact upon the chemical distributors
This section will deal with the changes in the actual disposal
of the chemical waste necessitated by the proposed RCRA
action.
According to Section 3002 of both Options A and B,
generators must send hazardous waste to a treatment, storage,
or disposal facility permitted by the EPA. These facilities
will either reclaim, incinerate, or deposit the wastes in a
secured landfill. Distributors who are currently disposing
of their wastes down dry wells or into sewers will be
required to cease such procedures and come into compliance
with RCRA. However, this change is not one that necessarily
requires a large alteration in the method of doing
business.
Instead of allowing wastes to run free down the dry well
during flushing, the material can be collected in a small
container and transferred to a drum for storage. Many firms
already practice this procedure. After a period of time,
the wastes that have been accumulated must then be sent to a
hazardous waste disposal facility.
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Because of disposal practices and the nature of the
chemicals involved, some segregation of the wastes is
necessary. For example, many solvents are incinerated for
disposal. However, chlorinated solvents are more difficult
(and more expensive) to dispose of than non-chlorinated
solvents. Chlorine in the solvent combines with hydrogen
during incineration to form highly corrosive hydrochloric
acid (HC1). Other hydrogenated solvents have similar
provisions, and their disposal is consequently more difficult
as well. Thus, waste disposal firms that incinerate solvents
suggest segregation of the two wastes.
To comply with the proposed RCRA regulations, distri-
butors could also institute practices to eliminate wastes.
As mentioned in Section 15.2, these procedures usually
involve the installation of reversing pumps, separate
repackaging lines for each chemical or class of chemicals,
and temporary storage facilities for residual chemicals.
The necessary investments, however, are expected to be
prohibitively expensive for most firms and will not be
considered here.
15.8 Costs of RCRA Compliance
15.8.1 Technical Costs of Compliance
For the model plant (see Section 16.1) it has been assumed
that current practices do not include control of wastes to the
degree required by RCRA. An estimated 290 (80 percent) of the
generators are in this class. Thus, any wastes generated by
these firms will have to be sent to a hazardous waste disposal
firm in response to both Options A and B.
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Current average costs for incineration (the method most
likely to be used for the majority of wastes from distributors)
are currently around $30 per drum ($1.15/kg) according to a
study by Battelle Columbus Laboratories. This figure will
be used to estimate RCRA-induced disposal costs. In addition,
a $15 per drum charge will be added to account for the drums
used for dispoal. Thus, a total disposal cost of $45/drum
($2.50/kg) will be used for technical costs of compliance.
Table 15-4 shows the disposal costs for the model and
worst-case firms. The estimates are calculated on the basis
of 78 drums of waste per year from the model firm and 52 drums
per year from the worst-case firm.
An estimated 70 firms (20 percent), now follow procedures
that entail disposal of their wastes at hazardous waste
disposal firms. For these firms, the incremental technical
costs of compliance will be assumed to be zero.
TABLE 15-4
TECHNICAL DISPOSAL COSTS FOR CHEMICAL DISTRIBUTORS3
MODEL FIRM WORST-CASE
($) FIRM ($)
Waste quantity
(drums )
Cost of disposal
per drum
Yearly disposal
cost
78
45
3,510
52
45
2,340
aERCO estimates
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15.8.2 Administrative Costs of Compliance
The agenda of administrative costs and tasks is shown in
Table 15-5. It has been assumed that all of the administrative
tasks will be performed by supervisory or clerical personnel.
First-year compliance costs are estimated at $2,718 and
$2,391 for Options A and B. Recurring annual costs are
roughly half of first-year costs.
-374-
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-375-
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NOTES TO CHAPTER FIFTEEN
1. Personal communication between Steve Fischer of ERGO
with Fred Akerlund of Van Waters and Rogers, Los Angeles,
California, 21 August 1978.
2. Personal communication between Steve Fischer of ERGO
with William Mann, Jr., George Mann and Company, Inc.,
Providence, Rhode Island, 19 September 1978.
3. Based on personal communication between Steve Fischer
of ERGO and Paul Guthrie of the National Association of
Chemical Distributors.
4. When chemical firms do not repackage, they merely
act as a warehouse. Many customers need chemicals of high
purity. These chemicals are containerized and sealed at the
factory. Thus, waste streams primarily result from repackaging.
5. All estimates for repackaging, product mix, and
sales are derived from discussions with distributors,
manufacturers, and the National Association of Chemical
Distributors. No published data were found.
6. Fifty to eighty percent constitutes the range of
estimates given by chemical distributors contacted.
7. Again, this represents the range of estimates given
by distributors contacted.
8. The claims of large firms as to their control of
wastes were accepted. No independent information could be
uncovered which invalidated these claims.
9. ERCO estimates based upon discussions with chemical
distributors.
10. ERCO estimate. Based on responses to telephone
interviews by chemical distributors.
11. Derived from cost of compliance with hazardous
waste management regulation, Battelle Columbus Laboratories,
1978 and based upon a specific gravity of 1.25.
-376-
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CHAPTER SIXTEEN
ECONOMIC IMPACT ANALYSIS FOR THE
CHEMICAL WHOLESALING INDUSTRY
The economic impacts of RCRA regulations on chemical
wholesalers are described below. The first section describes
the small model plant impacts for this industry. The model
plant impacts are then used to develop aggregate compliance
costs. A final section describes industry impacts.
16.1 Model Firm Impacts
Tables 16-1-and 16-2 detail the economic impacts on the
model firms developed for the analysis. Table 16-1 displays
Option A impacts, while Table 16-2 shows Option B impacts.
To calculate the model firm impacts the following
assumptions were made:
1. Revenue costs and expenses (other than waste
disposal) remain unchanged. In this way, one can
compare the effects of the proposed RCRA legisla-
tion upon the present economic position of the
firm.
2. Hazardous waste disposal is assumed to be accom-
plished by collection of wastes in steel drums.
For disposal and safety reasons, the wastes are
segregated by type of material. Post-RCRA disposal
costs are estimated to be an average of $30 per
-377-
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TABLE 16-1
IMPACTS ON CHEMICAL WHOLESALING MODEL FIRMS
(OPTION A) (WITH REGULATION)
MODEL FIRM
($)
WORST-CASE
FIRM ($)
Sales3
Cost of operations
and expenses
Incremental RCRA impacts
Technical disposal costs
Administrative costsb
Pretax net income
Pretax net income
(before RCRA)
Decline in pretax
net income
10,000,000
9,319,700
3,500
2,700
674,100
680,300
1%
5,000,000
4,865,000
2,300
2,700
130,000
135,000
4%
aERCO estimates.
bAssumes no change in price.
cFirst year administrative costs are shown. Recurring
annual costs are $1,300.
-378-
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TABLE 16-2
MODEL FIRM IMPACTS ON CHEMICAL WHOLESALING MODEL FIRMS
(OPTION B) (WITH REGULATION)a
MODEL FIRM
($)
and expenses
Incremental RCRA impacts
Technical disposal costs
Administrative costsb
Pretax net income
Pretax net income
(before RCRA)
Decline in pretax
net income
3,500
2,400
674,400
680,300
1%
WORST-CASE
FIRM (?)
Sales3
Cost of operations
10,000,000
9,319,700
5,000,000
4,865,000
2,300
2,400
130,300
135,000
3%
aERCO estimates.
^Assumes no change in price.
GFirst-year administrative costs are shown. Recurring
annual costs are $1,000.
-379-
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drumf with drum costs accounting for an additional
$15 per drum. Thus, a total of $45 per drum is
included for waste disposal costs. (See
Section 15.9.1.)
3. Administrative costs, displayed in Table 15-5, are
assumed to be relatively insensitive to differences
in volume of wastes generated. Thus, administra-
tive costs for both model firms are assumed to be
equal.
The impacts under Option A, as shown in Table 16-1, are
small. Option A impacts amount to 1 percent of net income
for the model firm and 4 percent for the worst-case firm.
The technical disposal costs account for 56 percent of the
compliance costs for the model firm, while they account for
46 percent of RCRA compliance costs for the smaller worst-
case firm. The administrative costs comprise a higher
percentage of the costs for the smaller worst-case firm
because of the assumption that administrative costs are not
a function of firm size.
Option B impacts are very similar. The only change
in compliance costs is due to a reduction in reporting
requirements (administrative costs). The impact on the
pretax net income of the worst-case firm is estimated to
drop to 3 percent while for the model firm, compliance costs
are again estimated at only 1 percent of net income.
16.2 Aggregate National Impacts
Table 16-3 displays national cost estimates based upon
the assumption that the typical and worst-case firms comprise
-380-
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TABLE 16-3
AGGREGATE COST OF COMPLIANCE FOR
THE CHEMICAL WHOLESALING INDUSTRY
(1977 $00015
OPTION A OPTION B
Technical disposal costs
Administrative costs
Total compliance costs'3
1977 sales (estimate)
783
972
1,753
2,700,000
783
864
1,647
2,700,000
Compliance as a percent
of 1977 sales 0.1 percent 0.1 percent
aERCO estimate.
^Represents first-year administrative costs. Recurring
administrative costs are $1,344,000 for Option A and
$1,021,000 for Option B. This reduces total cost by 30%
in succeeding years.
the range of characteristics of the majority of the genera-
tors in the industry.1 The incremental technical disposal
costs for the 70 firms estimated now to be collecting wastes
have been assumed to be zero. Aggregate technical disposal
costs are $783,000 under both options.2
Administrative costs will be incurred by all of the
360 current generators. Aggregate administrative costs are
$972,00 and $864,000 under Options A and B. Total national
sales from generators are estimated from the average sales
of the model and worst-case firms. The estimate for the
aggregate sales in 1977 is 2.7 billion dollars.
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As can be seen, Options A and B differ only slightly in
their total impact, and neither impact is expected to
appreciably increase costs. Option A impacts are estimated
to increase the costs to all generators in the first year by
approximately 1.8 million dollars. This total represents
less than one-tenth of one percent of all revenues from
generators in 1977.
Option B impacts are estimated to require increased
costs of only 1.6 million dollars in the first year. This
represents less than one-tenth of one percent of 1977
revenues. Thus, as a percentage of sales, neither Option A
nor Option B presents a cost of any significance.
16.3 Industry Impacts
Pretax net income will be decreased by RCRA compliance
by a maximum of 4 percent for the model plants. As a per-
centage of the total sales of generators, the costs amount
to no more than one-tenth of one percent. These costs are
expected to have only minimal impacts on chemical distributors,
and will require only minor adjustments in industry conduct.
Table 16-4 presents a summary of likely industry
responses to the proposed RCRA regulations. Price increases
are the most probable response, but these are expected to be
only very minor. The extra costs imposed by RCRA are such a
small proportion of sales that only very small price increases
would be needed across the full line of chemicals handled or
repackaged to cover the costs of waste disposal.
Because impacts are so small, no other significant
response to RCRA regulations by distributors is foreseen.
-382-
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TABLE 16-4
SUMMARY OF IMPACTS ON THE CHEMICAL WHOLESALING INDUSTRY3
Number of generators
Plant closures
Job losses
U.S. production cutbacks
Price increases
U.S. demand reduction
Balance of payments effects
OPTION A
360
Unlikely
Unlikely
Unlikely
Small
Small
None
OPTION B
360
Unlikely
Unlikely
Unlikely
Small
Small
None
aERCO estimates.
There will be added incentives to control the waste volumes,
but the expenditures for controls cannot be expected to
exceed the RCRA-imposed costs of waste disposal. Thus, any
change in procedure will be minimal.
-383-
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NOTES TO CHAPTER SIXTEEN
1. The model and worst-case firms were constructed so
as to span the characteristics of the majority of generators
(see Chapter 15). Information obtained from distributors
facilitated this construction. National aggregate impacts
and sales for generators were estimated from an average of
the model firm and worst-case firm.
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PART VI
AGRICULTURAL SERVICES
-385-
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CHAPTER SEVENTEEN
CHARACTERIZATION OF THE
AGRICULTURAL SERVICES INDUSTRY
The sections below will present basic data on the
agricultual services industry. The discussion is divided
into four sections. First, the size and scope of the
industry is outlined. Then, the industry structure and
industry performance are covered. A third section presents
the available financial data. A final section covers the
model firms to be used for analysis.
17.1 The Scope of the Agricultural Services Industry
The agricultural services industry consists of firms
which provide soil preparation services, crop planting
services, and crop protection services to farms on a contract
or fee basis. The industry is impacted by RCRA due to the
generation of several pesticide-related wastes. The industry
can be roughly defined by the four-digit Standard Industrial
Classication (SIC) definitions listed below;!
1. SIC No. 0711 - Soil Preparation Services -
Establishments engaged primarily in land breaking,
the application of fertilizer, seed bed preparation,
and other operations for breaking soil.
2. SIC No. 0721 - Crop Planting, Cultivating and
Protection - Establishments engaged primarily in
crop planting, cultivating, and protection services.
-387-
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3. SIC No. 0729 - General Crop Services - Establishments
engaged primarily in providing a combination of
services concerning crop preparation and harvesting.
Among the activities included within the categories,
those which are of greatest interest here involve the
application of pesticides to farm land. The term "custom
applicators" is used to describe those firms which specialize
in the application of pesticides and fertilizers. The other
major applicators are the farmers themselves. Custom
applicators of pesticides handle the largest volumes of
hazardous materials and generate the largest quantities of
hazardous waste. Custom applicators can be roughly divided
between aerial applicators and ground applicators. These
two groups within the industry will be the focal points for
detailed analysis.
The relative size of the major industry segments is
shown in Table 17-1. The firms classified as general crop
services are a very small part of the industry and were not
included in the table. For soil preparation services,
fertilizer and lime spreading and weed control account for
73 percent of the gross receipts in 1974. For crop services,
aerial dusting and spraying accounted for 69 percent of the
gross receipts, and on-ground dusting and spraying for
another 5 percent. Thus, reported statistics on the agri-
cultural industry refer principally to custom applicators.
Data presented in later sections can be assumed to apply to
this group although a few firms not involved with pesticide
application may be included.
-388-
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TABLE 17-1
DISTRIBUTION OF RECEIPTS AMONG TYPES
OF AGRICULTURAL SERVICES ESTABLISHMENTS, 1974a
PERCENTAGE OF
TYPE OF AGRICULTURAL SERVICE GROSS RECEIPTS
Soil Preparation Services
Plowing or land breaking 14
Harrowing or seed bed preparation 5
Fertilizer and lime spreading before planting 61
Weed control before planting 12
Other 8
Crop Planting, Cultivation, and Protection
Planting with or without fertilizer 3
Fertilizer spreading after planting 7
Aerial dusting and spraying for disease and 69
insect control with and without fertilizer
On-ground dusting and spraying for disease 5
and insect control with and without fertilizer
Weed control after planting 9
Citrus grove cultivation or maintenance 4
Cultivation, mechanical and flame, other than <1
citrus grove
Pruning of orchards or vineyards 1
Other 2
aCensus of Agriculture 1974, Special Report:
Agricultural Services, U.S. Dept. of Commerce, Bureau of the
Census, p. 8.
-389-
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17.1.1 Industry Sales and Growth
The agricultural services industry has been growing
rapidly in recent years. The number of establishments has
increased dramatically accompanied by a concomitant increase
in industry sales. The number of establishments in the
industry as measured in 1974, and as estimated in 1978, is
shown in Table 17-2. Of particular note is the growth in the
number of aerial applicators of pesticides. From a total of
less than 1,000, current estimates put the number of active
firms in 1978 at 3,800.2 The increase over 4 years
represents an annual growth rate of 38 percent. Estimates
of the growth for other agricultural services can only be
speculative. However, it is expected that a census of the
industry for 1978 will indicate a substantial increase in the
number of establishments.3 An increase of one-third in the
number of soil preparation and miscellaneous crop service
firms was estimated for 1978. An increase of 150 percent in
the number of firms classified as ground applicators (of
pesticides) was assumed on the basis that growth,has been
quite rapid for this group. For the future, growth rates on
the order of 10 to 12 percent are anticipated for custom
applicators.4
Totalling across industry segments, the total number of
agricultural service firms is estimated to be 6,300. If half
of the soil preparation service firms handle significant
pesticide volumes, the number of pesticide application firms
is 5,300. As shown in Table 17-1, the role of pesticide
application among soil preparation firms is fairly low.
However, many of the firms which principally handle ferti-
lizers also apply herbicides.
-390-
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TABLE 17-2
NUMBER OF ESTABLISHMENTS AND GROSS RECEIPTS,
1974 AND 1978a
1974
TYPE OF
AGRICULTURAL
ESTABLISHMENT
NUMBER
OF ESTAB-
LISHMENTS
GROSS
RECEIPTS
FOR
SERVICES
($000)
1978 ESTIMATES
NUMBER
OF ESTAB-
LISHMENTS
GROSS
RECEIPTS
Soil preparation
services and
miscellaneous
crop protection
services
l,500b 80,000b
2,000
NAC
Aerial applicators
of pesticides
Ground applicators
of pesticides
931
201
105,500
7,523
3,800
500
NA
NA
aCensus of Agriculture, 1974, Special Report; Agricul-
tural Services, U.S. Dept. of Commerce, Bureau of the Census,
p. 7; information provided by Fred Clyme of Econ, Inc.; and
ERCO estimates.
^Approximate values.
CNA = not applicable.
The growth in the number of custom applicators, both
aerial and ground, is related to the tightness in farm
budgets. Fewer farmers are choosing to invest in pesticide
application equipment, particularly as the technology has
become more sophisticated and expensive. Custom applicators
also provide personnel with more training and experience than
the farmer is likely to have at his disposal. Furthermore,
the rapid rate of regulatory change and product innovation
have made it increasingly difficult for individual farmers
to stay abreast of the pesticide field. Dealers and
-391-
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applicators maintain more specialized knowledge of the current
regulations and products.
An additional reason for the widespread use of custom
application services is the high opportunity cost to farmers
of performing fertilizer and pesticide application themselves.
Fertilizer and pesticide application is most useful when
performed during the spring. However, in the spring, planting
also requires a lot of the farmer's time. Farmers can put in
an order to a custom applicator for fertilizer and pesticide
application in one field of his farm and -then spend his own
time in another. This time factor has become increasingly
important as the scale of agricultural operations has grown.
The increase in farm size has added to the spring and summer
chores for the farmer and made custom application more crucial
Approximately one of four custom applicators also sell
the fertilizer and pesticide materials which they then apply.
The application of fertilizer is often provided as a service
to a fertilizer customer. Similarly, pesticide sales and
application are often provided jointly. Figures provided by
the Census of Agriculture indicate that among firms which
sell material, gross receipts total $200,000 or more of fertil-
izer, lime, and pesticides within a year.5 This figure is a
reasonable approximation of the product sales total for both
ground and aerial applicators. The data supporting these
calculations are presented below in Table 17-3. The product
sales figures are not broken down into the custom application
categories, but virtually all the product sales (over 95 per-
cent) were generated by fertilizer and pesticide sales.6
-392-
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17.1.2 Distribution of Agricultural Services Among
Crops and Among Farm Regions
The importance of agricultural services, and specifically
of custom applicators, varies widely depending on the crops
being grown. Farming techniques are highly crop-specific.
The trend toward increased use of agricultural services, as
discussed in the previous section, has not been evenly
distributed among farms. Rather, it has meant an uneven
increase in use determined in each case by the specific
economics of the region and crop. Table 17-4 displays the
relative importance of custom application among crops. The
crop showing the highest dependence on custom application is
rice, with nearly all pesticides being applied by professional
services. The dependence in this case is entirely on aerial
application. Also, because careful seeding is not necessary,
rice seeds are spread from the air during planting. Thus,
aerial services are crucial to rice growing.
The other notable crop uses shown in Table 17-4 are
corn and cotton. These are the largest volume applications
of custom pesticides. Like rice, cotton is especially
dependent on aerial application. The cotton crops need to
be sprayed regularly during the year in order to limit the
growth of boll weevils. Pesticides are applied to corn by
either ground or aerial applicators.
The amount of pesticides applied for many crops is much
more variable, depending on the yearly infestation of
insects. Wheat, for example, may require a number of
pesticide sprayings in a difficult year.
The regional distribution by gross receipts of all agri-
cultural service firms is shown in Figure 17-1. The largest
-394-
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TABLE 17-4
EXPENDITURES FOR CUSTOM
APPLICATION OF PESTICIDES BY CROP, 1971a
PERCENTAGE OF TOTAL VALUE
TOTAL PESTICIDE OF PESTICIDES
EXPENDITURES CUSTOM-APPLIED
CROP CUSTOM-APPLIED ($000)
Rice
Alfalfa
Wheat
Sorghum
Summer fallow
Citrus
Other grains
Cotton
Other hay and storage
Other vegetables
Peanuts
Other field crops
Sugar beets
Pasture
Other fruits and nuts
Corn
Irish potatoes
Soybeans
Other deciduous fruits
Tobacco
Nursery and greenhouse
Apples
95
63
62
53
44
43
43
39
38
35
33
32
27
26
24
22
21
18
10
9
3
1
16,160
4,296
12,419
20,444
986
9,197
3,955
51,324
219
13,849
12,929
5,425
3,944
2,212
5,729
72,843
3,701
24,455
2,294
1,631
175
193
Total all crops 28 268,380
aFarmers' Expenditures for Custom Pesticide Services,
1971, Walter J. Ferguson, Economic Research Service, U.S.
Dept. of Agriculture, Agricultural Economic Report No. 314,
p. 6.
-395-
-------
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-396-
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agricultural states/ e.g., California and Florida, are
the states with the largest amount of contract agricultural
services. In 1974 California registered $824 million of
service activity. The second largest grossing state,
Florida, had $359 million of service activity.
17.1.3 Industry Employment
Industry employment is characterized by a small number of
employees per firm and by the seasonal nature of the work.
Employment figures from the 1974 Census of Agriculture are
presented in Table 17-5. Looking at the total number of paid
workers in 1974, there were approximately 15,600 workers in
2,658 firms (see Table 17-2) for an average of 5.9 paid employees
per firm. Of these, an average of 2.5 employees work less than
150 days a year. The average firm therefore has roughly 3 or 4
"full-time" employees. Additional information about the size
distribution of firms is presented below in Section 17.1.4.
The importance of small operations in the industry is
also indicated by the significant number of unpaid workers.
The unpaid workers are typically family members of the
owner-operator who do not draw salaries but indirectly share
in company profits. In 1974 there were 1,458 such employees
among the 2,658 firms or approximately one such worker for
each two firms.
The significant number of paid workers who work less
than 150 days a year indicates the presence of a casual labor
group which can, during slow seasons, turn to other occupations.
A portion of these workers may be family or friends of the
owner-operators of the custom application firm, differing
from the unpaid workers in that they are able to draw wages.
-397-
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TABLE 17-5
EMPLOYMENT BY AGRICULTURAL SERVICE FIRMS3
CENSUS OF AGRICULTURE, 1974
UNPAID WORKERS PAID WORKERS
>150
days
£150
days
>150
days
£150
days
Soil 312 283 1,425 1,832
preparation
services
Crop planting, 496 367 5,512 6,865
cultivating,
and protection
Totals 808 650 6,937 8,697
aCensus of Agriculture, 1974, Special Report; Agricultural
Services, U.S. Dept. of Commerce, Bureau of the Census, p. 1.
In off-peak seasons these workers and the unpaid workers may
leave the labor force for other activities such as school or
housework. However, some of the seasonal workers are pilots
who can find other employment for much of the year. In
rural areas near large cities, many pilots provide air taxi
services out of city airports. Various other occupations,
such as aerial photography, are also second (or first)
careers for these pilots.
17.1.4 Size Distribution of Firms
The number of small and large firms in the industry can
be determined through examination of the available figures
-398-
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on firm sales and assets. A size distribution of firms on
the basis of their gross receipts for services is presented
in Table 17-6. Only the receipts for services, and not
those for product sales, are included. The size distribu-
tion curve for firms in both the soil and crop service
categories is relatively flat. However, it is noteworthy
that nearly one-half (46 percent) of the soil preparation
service firms tallied receipts of less than $20,000. By
comparison, only one-third of the crop service firms were as
small. The largest category for crop service firms is the
$100,000 to $499,999 group (19.74 figures) which captured
31 percent of all firms.
Available statistics on firm organization types,
presented in Table 17-7, indicate that the corporate organ-
ization is found much more frequently among the crop services
(47 percent compared to 16 percent). Individual ownership
is nevertheless very popular in the industry as a whole,
being used by 62 percent of the soil preparation estab-
lishments and 44 percent of crop services.
Average asset size does not differ greatly between the
two types of service industries. In each case, average
asset size is fairly small. The largest establishments are
those crop services which are corporations, and these had an
average asset value of less than $200,000 in 1974.
For aerial application, some firms own a significant
fleet of planes and provide services in several states.
Such firms are, however, quite rare. More typical is a
small operation with three or fewer airplanes. The model
firms in the industry will be discussed further in Sec-
tion 17.4.
-399-
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TABLE 17-7
AVERAGE GROSS VALUE OF DEPRECIABLE ASSETS FOR
AGRICULTURAL SERVICES FIRMS, BY TYPE OF OWNERSHIP3
AVERAGE GROSS
PERCENTAGE VALUE OF
OF DEPRECIABLE
ESTABLISHMENTS ASSETS ($)
Soil preparation services
Individual
Partnership
Corporation
Total
62
22
16
100
47,000
92,000
143,000
Average
Crop planting, cultivation,
and preparation services
Individual
Partnership
Corporation
Total
Average
44
9
47
100
72,000
56,000
74,000
182,000
117,000
aCensus of Agriculture, 1974, Special Report:
Agricultural Services, U.S. Dept. of Commerce, Bureau of the
Census, p. 7.
-401-
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17.2 Industry and Market Analysis
17.2.1 Industry Structure
The structure of the agriculture services industry is
dominated by two features: (1) the absence of firms large
enough to exercise much market power in national or regional
markets and (2) the low barriers to entry. With regard to
the first point, it is clear that no firms show sales
volumes which are significant relative to the industry
totals. No figures on the extent of industry concentration
are available, but it is clear that the four largest firms
would represent 2 percent or less of the industry sales.
The size distribution of firms, shown above in Table 17-6, is
flat over a wide range of size classes.
The lack of significant market power for large firms is
common among service industries. Services cannot be shipped
over long distances like commodities and, therefore, must be
provided directly by a local establishment. A few firms run
operations in a number of states, but each operation is
centered around a local base. For ground applicators,
services are likely to be provided only within a radius of 15
to 20 miles. For aerial applicators, the range of operations
is greater but is nevertheless centered around a single base
of operations. Within each radius of operations, a firm will
generally be competing with several others.
The other significant determinant of industry structure
consists of the low to moderate entry requirements for new
firms. The most serious obstacle for new firms is obtaining
capital for the basic investments. The average value of
depreciable assets for individually owned firms (i.e.,
noncorporate forms of ownership) was roughly $50,000 in
-402-
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1974, as stated in Table 17-7. In 1978, a more reasonable
figure is $100,000 to $125,000, owing to increases in prices
for basic assets. Modern ground application equipment
costs $50,000 to $60,000 per unit. Airplane prices range
from $60,000 to $100,000. These sums represent significant
obstacles for new, small operations, but are not so large as
to seriously inhibit entry, as was shown by the statistics
on industry growth. Also, insurance costs have increased
considerably for agricultural service firms to the point
where they now represent a significant problem for some
firms. Premiums have risen much faster than the rate of
inflation as they have in other areas where the size of
damage settlements has escalated.
Institutional barriers to entry also exist. For custom
applicators of pesticides, certification from state agencies
may be required. No such certification is required for firms
involved only in fertilizer spreading. The certification
procedure varies from state to state but generally involves a
training course on basic pesticide handling procedures. For
aerial applicators, adequate pilot training is also necessary,
Finally, the marketing costs associated with starting a
new enterprise are small. Most operations cover only a small
local area, so only local advertising would be needed. If
the custom applicator is also selling the fertilizer or
pesticide, then the customer could be informed of the service
when he makes his purchase.
To summarize, the largest obstacle to entry is the
capital which must be raised to purchase the basic assets.
The capital requirements are, nevertheless, only moderate.
Small additional costs are accrued in the course of obtaining
necessary training in pesticide handling. Marketing costs
-403-
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are small. Overall, the entry requirements are not excessive
for individuals to overcome in order to participate in the
industry.
17.2.2 Industry Conduct
Industry pricing patterns are consistent with the
competitive structure of the industry. Pricing is largely
competitive. Firms are generally very aware of the possi-
bility of price cutting by others in the area. As a group,
aerial applicators can often be undercut by ground operators.
There appears also to be substantial price competition within
each group. Firms are, therefore, price takers, i.e., subject
to the going rates for services that are set by the market.
Industry conduct is also shaped by its concern with
receiving large amounts of repeat business. Repeat business
is generated by quality service in addition to reasonable
prices. Any damage to the crop due to insect infestation
becomes largely the responsibility of the custom applicator.
Serious crop damage could ruin the firm's reputation and
sharply reduce his business volume.
17.2.3 Industry Performance
The industry trends with regard to prices and performance
are consistent with the competitive industry model. No price
indices are available, but the prices for agricultural ser-
vices do not appear to be rising at an unusual rate. The
depressed state of the agricultural economy in general has
increased price competition for the industry.
-404-
-------
The extremely large increase in the number of firms in
the industry has also sustained the industry's competitive
structure. As a result, the increase in demand for services
has not been translated to a sizable extent into an increase
in prices or an increase in the market power of existing
firms. Because the barriers to entry in the form of invest-
ment and training requirements are small, it is relatively
easy for new firms to enter the field in any region where
profit rates are unusually high.
17.3 Financial Profile
No financial data were available on industry firms.
Information on profit margins used in this report is based
on discussion with industry personnel.
17.4 Economics of the Model Firms
The model firm is described here in terms of its
economic characteristics. The model firm was chosen to
represent the economic position of the typical operator.
A smaller operation will be described below in order to
measure worst-case impacts. Both the model and worst-case
firms are aerial applicators. This segment of the industry
was used for several reasons. First, aerial applicator
firms are the largest industry segment. This group also
does the great bulk of pesticide application. Also, more
data were available on firm characteristics, particularly
on the acreage covered per season.
The model firm is an aerial applicator operating in the
Corn Belt. A description of the firm characteristics is
-405-
-------
shown in Table 17-8. The firm is assumed to operate three
planes each for 300 hours during a 7-month season. (The
firm employs three pilots, one of whom is also the owner,
and a one-man ground crew.) The 7-month season is typical
of agriculture in much of the nation, but is, of course,
shorter than the growing season in California and in the
South.
The average price paid per acre in the Corn Belt varies
from $2 to $2.50 per acre. A price of $2.25 per acre has been
used. The pretax net income of 8 percent of gross revenues
is assumed. Discussions with industry personnel showed
average profit margins to vary from 4 to 20 percent among
firms. Wider variations may be observed depending on the
year. The relatively modest profit margin was used here
TABLE 17-8
CUSTOM APPLICATOR MODEL FIRM a
Type of firm Aerial applicator
Total no. of aircraft 3
Hours flownb 900
Total acreage covered*3 90,000
Average price per acre $2.25
Gross revenue $202,500
Cost of operations $165,000
Pretax net income $16,200
aERCO estimates.
^Derived from Operator Profiles developed by Fred Clyne,
Econ, Inc.
-406-
-------
because many operators felt that margins were often under
10 percent. The cost of operations is derived and the
difference of gross revenues and assumed net income. Major
expense items include salary and/or commissions for the
pilots and ground crew, aircraft maintenance, workmen's
compensation and liability insurance.
For worst-case impacts a small aerial applicator
firm will be used. The firm is assumed to own only one
aircraft which is flown by the owner-operator. The owner is
assisted by a one-man ground crew. Again, the firm will be
assumed to be operating in an area with a seven-month grow-
ing season. The firm is assumed to also be earning net in-
come above and beyond the income paid to the owner-operator
as salary and commissions. Basic data on the firm are shown
in Table 17-9.
TABLE 17-9
CUSTOM APPLICATOR WORST-CASE
Type of firm Aerial applicator
Total No. of aircraft 1
Hours flownb 300
Total acreage covered13 30,000
Average price per acre $2.25
Gross revenue $67,500
Cost of operations $62,000
Pretax net income $5,400
aERCO estimate.
^Derived from operator profiles developed by Fred
Clyne, Econ, Inc.
-407-
-------
The one-aircraft firm is very common in the industry.
More importantly, these single aircraft operations are
probably the most vulnerable firms in the industry. As with
most industries, small firms are likely to be least able to
withstand regulatory impacts.
-408-
-------
NOTES TO CHAPTER SEVENTEEN
1. Department of Commerce, Standard Industrial Classi-
fication Manual, 1972.
2. The ERCO estimate is based on telephone conversations
between John Eyraud, ERCO, and Fred Clyne of Econ, Inc., June
1978. The Census Bureau puts the number of actual applicators
at over 3,000, but more detailed estimates for 1978 were not
available.
3. Personal communication between John Eyraud, ERCO,
and B. Womack, Census Bureau, Department of Commerce, June
26, 1978.
4. Telephone conversation between John Eyraud, ERCO,
and Harold Collins, National Agricultural Aviation Association,
June 27, 1978.
5. Census of Agriculture, 1974, Special Report; Agri-
cultural Services, U.S. Dept. of Commerce, Bureau of the
Census, p. 6.
6. Detailed product sales figures are provided in the
source material references in Table 8-3, but were excluded
from this document.
7. Personal communication between John Eyraud, ERCO,
and Harold Collins, National Agricultural Aviation Associa-
tion, June 27, 1978.
8. Personal communication between John Eyraud, ERCO,
and Paul Buchanon, Iowa Fertilizer and Chemical Association,
July 10, 1978.
9. The assumption of a $2.25 price per acre yields a
revenue equal to $67,500 per plane. The average revenue per
plan varies by region. On the east coast, annual revenues by
plane run to $40,000 to $50,000. In the South, $90,000 to
$100,000 is common. Still higher revenues can be earned in
California. The value of $67,500 was used here as an
approximate average value.
-409-
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CHAPTER EIGHTEEN
HAZARDOUS WASTE GENERATION IN THE
AGRICULTURAL SERVICES INDUSTRY
In the following sections, the agricultural services
industry is examined in terras of the generation of waste
materials which come under the purview of RCRA. The poten-
tially hazardous waste materials in this industry include
unused waste pesticides, used pesticide containers, and
dilute pesticide solutions generated as rinse water. The
waste materials are highly toxic, and their disposal has
been previously addressed with recommended practices under
federal law (FIPRA) and by regulations from a number of
state agencies.
The waste streams are generated by custom applicators of
pesticides. These firms provide spraying and crop dusting
services to farmers. Custom applicators of pesticides and
fertilizers represent the bulk of the agricultural services.
The following discussion will focus on this group.
The sections below will cover the nature and quantities
of waste materials, the required treatments under RCRA, and
the impact of RCRA on the average cost of disposal.
18.1 Waste Characteristics
The pesticides handled by the custom application industry
are potent, biologically active chemicals which are generally
toxic not only to the target pests but to non-target organisms,
-411-
-------
As such, the disposal of waste pesticides and pesticide
containers is a matter of some interest. In this section,
information about the physical and chemical form of pesti-
cides will be briefly discussed, along with a survey of any
hazardous properties of the materials. The latter issue is
largely one of toxicity.
The majority of pesticides are synthetic organic chemi-
cals. A smaller group of pesticide materials is inorganic.
The supply of inorganic pesticides is roughly one-ninth that
of organic pesticides.
Pesticides are normally divided into three groups by
function. These are herbicides, which control weed growth;
insecticides, for pest control; and fungicides, to prevent
the growth of fungus on the crops. The largest class by
volume of use is herbicides, which accounted for 43 percent
of total pesticide use in 1971. Insecticides accounted for
38 percent and fungicides for 19 percent.^ However, fungi-
cides are not used extensively on farmland.2
Pesticides are handled in a variety of dry and wet
forms, and the variety available applies to each individual
pesticide. A custom applicator can buy the most common
pesticides as a liquid, wettable powder, dust, pellet-sized
solid, or in a dry or liquid fertilizer mixture. In pure
forms, most pesticides are solid and may or may not be
soluble in water. A description of some of the basic prop-
erties for a number of chemicals is provided in Table 18-1
below. Pesticides which are insoluble in water will generally
have a solvent or some other type of carrying agent if the
material is applied in liquid form in the field. Generally
speaking, the carrying agents will not affect the basic
properties of the pesticide.3
-412-
-------
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As is indicated by even the small sample of pesticides
described in Table 18-1, the most toxic group of pesticides
is insecticides. Neither herbicides nor fungicides prove
to be highly toxic as tested in studies of mammalian tox-
icity. However, these categories also cover a number of
hazardous materials. Federal actions have been taken toward
several fungicides, including a class of fungicide called
dithiocarbamates. This class of material accounted for
approximately 50 percent of all the organic fungicides
applied to crops in 1971.4 Several classes of herbicides
are also appraised as potentially hazardous. These are
arsenicals, phenyl ureas, carbamates, triazines, and Treflan.
One of the triazine herbicides, atrazine, is very widely
used, and accounted for 25 percent of all herbicide used by
farmers in 1971.5
The high level of mammalian toxicity of insecticides
has been well established in laboratory tests. Much less is
known about nonmammalian toxicity of these materials. Two
subcategories of insecticides, chlorinated hydrocarbon
insecticide and organic phosphate and carbamate insecticides,
are of special interest because of their environmental
persistence and toxicity. The chlorinated hydrocarbon group
includes the banned chemicals DDT and aldrin/dieldrin.
Residues from these pesticides proved to be very persistent
in the environment. The use of organic phosphate and
carbamate insecticides has increased as the use of the
chlorinated hydrocarbon insecticides has declined. However,
the biochemical action of these chemicals is based on the
inhibition of cholinesterase, a vital body enzyme present in
many species, making this group of materials highly toxic.6
The hazard of toxicity also exists with pesticide
containers and with dilute pesticide solutions. Containers
-414-
-------
emptied in the field retain small quantities of pesticide
residues. One applicator contacted in this study estimated
that nearly a pint of chemical is left unused when a 5-gallon
container is emptied. In more formal research, a study of
pesticide residues performed in Illinois indicated that an
average of 93 ml (2.3 oz) of pesticide remains in unrinsed
containers.^ Further details of the research are shown
below in Table 18-2.
TABLE 18-2
PESTICIDE RESIDUES IN UNRINSED CONTAINERS3
BRAND NAME
Lasso
Belt
Eradicane
Tref Ian
Dyanap
Talban
Alfa-tox
Banvel K
DMA
Cythion 5E
aDr. J.K. Leasure,
NUMBER OF
USED CANS
EXAMINED
345
139
129
127
26
6
4
1
1
1
779
Final Report on
AVERAGE
RESIDUE
PER CAN (ml)
45
221
120
57
71
92
58
183
90
88
93 (2.3 oz)
Pesticide Con-
tainers, Illinois Institute for Environmental Quality,
October 1978.
-415-
-------
The study also included a controlled study of container
rinsing. Several types of pesticide containers were emptied
and rinsed in order to measure the pesticide residues present
after each rinse. The water from the first rinse contained
2,000 to 10,000 ppm of the original pesticide material.
Water from the second rinse contained from 150 to 1,200 ppm
or less of material. The final rinse contained 120 ppm or
less of material. It was concluded that triple-rinsed
containers do not pose a disposal problem. The rinsing
technique used involved adding water (equal to one-fourth of
the container volume), shaking, and a 1-minute drain.
Dilute pesticide solutions from rinsing pesticide
application vehicles involve a similar disposal problem.
However, few data are available on the concentrations of
pesticides from vehicle rinse operations.
Overall, it will be assumed for this study that all
pesticide wastes (except triple-rinsed containers which are
not considered hazardous under RCRA) are hazardous. This
assumption is consistent with the general tenor of recom-
mended disposal practices (such as those made under FIFRA).
18.2 Hazardous Waste Quantities
The waste materials under consideration here are
of three types: (1) pesticide containers, with varying
amounts of pesticide residues; (2) surplus pesticides; and
(3) the disposal of dilute pesticide solutions generated
as rinse water. The latter may include rinse water from
containers or from application vehicles. Quantities are
discussed in terms of average firm generation rates and then
in aggregated national figures.
-416-
-------
18.2.1 Model Firm Waste Quantities
The discussion of individual firm waste quantities will
be oriented toward the likely waste quantities generated by
an average-sized aerial application firm. The firm is pre-
sumed to own three aircraft. Each aircraft is flown 300 hours
during a 7-month growing season. It is further estimated
that 90,000 acres of cropland is covered during the season.
The estimate of average hours flown and acreage covered is
approximate, based on the research of Fred Clyne at Econ
Inc.8
18.2.2 Used Pesticide Containers
Most pesticides are handled in 5-gallon containers.
Other sizes used are 1-gallon, 55-gallon, and bulk (200- to
10,000-gallon) containers. In areas where there are large
areas of a single crop, or where repeated application to a
crop is needed, larger containers tend to be used. The
relative proportions of these containers is discussed in
Section 18.3 below.
A common rate of pesticide application is 1 quart per
acre. This corresponds to the use of one 5-gallon can per
20 acres. Higher application rates (1/2 gallon per acre)
increase the rate of used-container generation corres-
pondingly. However, many pesticides are handled in paper
bags, which reduces the number of containers substantially.
The model firm is assumed to cover 90,000 acres of crop
per season. Of this, roughly 90 percent will involve pesti-
cide application. Using the 1-quart/acre application rate,
the applicator needs to handle 19,500 gallons of material.
-417-
-------
However, it will be assumed that one-third of the material
is handled in paper bags.9 Liquid materials are assumed to
come in 5-gallon cans and 55-gallon cans. A container mix of
1,500 5-gallon cans and 100 55-gallon cans appears representa-
tive for the area. The corresponding weight of containers
for the season is 5.5 metric tons (6.05 tons).
A more definitive grasp on container quantities can
be derived from a study of container rinsing and disposal in
Illinois.10 A survey of both ground and aerial appli-
cators in Illinois indicated that the average number of
5-gallon pesticide containers used per firm was 885. A majority
of firms used between 100 and 1,000 cans per year. The
portion of the survey covering container quantities is
provided in Table 18-3 below.
TABLE 18-3
CONTAINER ACCUMULATION BY CUSTOM APPLICATORS3
NUMBER OF
CONTAINERS13
101-1,000
1,001-2,000
2,001-3,000
3,001-4,000
4,001-5,000
aJ.K. Leasure,
NUMBER OF
FIRMS
REPORTING
282
165
11
6
2
466
Report on
TOTAL
CANS
116,390
241,940
29,000
18,600
8,300
412,230
Pesticide Container
AVERAGE
PER FIRM
413
1,466
2,455
3,100
4,150
885
Dis-
posal, prepared for Illinois EPA, October 1978.
5-gal containers.
-418-
-------
18.2.3 Waste Pesticides
Some quantities of waste pesticide are generated on an
irregular basis by custom application firms. One study,
covering the disposal of waste pesticides in Iowa, indicated
that 32 percent of the custom applicators responding did
occasionally have unwanted pesticide materials. However,
only 8 percent of the firms reported that they currently had
unwanted pesticides. Thus, roughly one of twelve firms will
have a waste pesticide disposal problem at a given time.
It is common practice in the industry for firms to have
the necessary chemicals delivered at the field or airstrip
by the farmer or by the pesticide dealer. This practice
provides little opportunity for the applicator to generate
excess pesticides.
However, occasional problems can occur. Some excess
pesticides may be held at the end of the application season
with the applicator unwilling or unable to store the material
during the winter. Such materials may then be given away or
disposed of in some fashion. Waste pesticides also occur
when an application job is cancelled at the last minute, or
when a solution is improperly mixed.
Estimation of these waste pesticide quantities is compli-
cated by the irregular nature of the problem. For the model
firm it will be assumed that no excess or waste pesticides
are stored. However, three solutions of mixed pesticides
must be disposed of during the season, due either to an error
in preparation or last-minute job cancellations. Assuming
the applicator capacity is 200 gallons, 2.3 m^ (600 gallons)
or 2.3 metric tons of material must be eliminated.
-419-
-------
18.2.4 Dilute Pesticide Solutions
The custom applicator generates a dilute pesticide
solution in the course of rinsing the application tank. If
the applicator is also rinsing used containers, a rinsate
solution is generated. The quantity of rinsate generated
for a single aircraft will be discussed first.
Applicator tanks on aircraft are routinely rinsed when
a new pesticide is to be used and at the end of the day.
Rinsing when a pesticide is changed is necessary to avoid
contamination of the new application spray. Rinsing at the
end of the day is useful to limit corrosion of the applica-
tion tank. In some areas, particularly in the East where a
greater variety of crops is being sprayed, two rinses per
day are frequently practiced. For the average aerial appli-
cator, one rinse per day per plane is standard. Only a
partial rinse may be used if the pesticide is not changed.
As an average, only one rinse per day will be assumed for
the model firm.
The quantity of rinse water needed varies with the
size of the application tank. From one-eighth to one-fourth
of tank capacity is common for rinse water volumes. Most
application tanks for air equipment hold 200 to 250 gallons,
although both larger and smaller sizes are used. Larger
quantities of rinsate are needed in some cases to thoroughly
remove acidic pesticide residues.12
For the model firm, it will be assumed that 90 gallons
of rinse water are generated each day in rinsing three
200-gallon spray tanks. An additional allowance of 10 gal-
lons is allowed for rinsing each plane exterior. To wash
the plane completely, larger volumes would be needed.
-420-
-------
However, the plane is rinsed less frequently than the spray
tank. Monthly and annual volumes of rinsate are given below
in Table 18-4.
18.3 Aggregate Waste Quantities
The estimates of total waste volume for the agricultural
services industry are presented below. Data on waste quanti-
ties from the agricultural sector are limited. In some
cases, the model firm will be the basis for estimation.
18.3.1 Used Container Quantities
Estimates of the number of containers used have been
made for individual states by a variety of investigators.
number of the state surveys are provided in Table 18-5.
These estimates cover the total number of containers used
in each state, and thus include both farmers and custom
TABLE 18-4
MODEL FIRM RINSE WATER VOLUMES5
PER MONTH PER YEARb
VOLUME WEIGHT0 VOLUME WEIGHT
10.9 m3 10.9 MT 76.5 m3 76.5 MT
(2,880 gal) (11.9 tons) (20,160 gal) (84.2 tons)
aERCO estimate.
^Assumes a 7-month, 6-day-per-week season.
CA specific gravity of 1 is used.
-421-
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applicators. As can be seen from Table 18-5, the estimates
are quite varied. A portion of the variance is due to the
different pesticide application requirements for crops in
each state. In particular, cotton crops in Mississippi
require large volumes of pesticide, much of which is dis-
tributed in 55-gallon drums. Thus, the large number of
55-gallon containers in that state is readily explained.
The remaining variance cannot be explained simply in terms
of the relative volumes of agricultural activity. For
example, estimates of container use in Oregon, relative to
that in California, appear quite high.
Since the early 1970's, when most of these estimates
were made, bulk distribution of chemicals has become increas-
ingly evident. With bulk distribution, a custom applicator
or farmer receives pesticide material in tanks which can
range in size from 200 to 10,000 gallons. The number of
5-gallon or 55-gallon containers is reduced accordingly. The
question is then whether the movement into bulk containers
has reduced or will soon reduce the volume of pesticide
containers used. To date the use of bulk distribution has
remained small. Only in the distribution of two high-volume
pesticides, atrazine and Lasso, and in cotton-growing regions,
has bulk distribution had an appreciable impact. For atrazine
and Lasso, bulk distribution is estimated to account for from
10 to 20 percent of the total sales volume.13 jn the cotton-
growing area, where bulk distribution has been used for
several years, the market share is estimated at 25 percent.
In the future, the use of bulk distribution will grow slowly.
Major pesticide manufacturers are moving cautiously toward
bulk containers but have met many difficulties. One executive
mentioned that the logistics of bulk distribution are quite
complicated and very region-specific.14
-423-
-------
The estimated aggregated quantities of containers used
by custom applicators are shown below in Table 18-6. No
attempt was made to consider other container types such as
30-gallon containers, 1-gallon containers, and paper bags.
18.3.2 Waste Pesticides and Dilute Pesticide
Solutions
The magnitude of the waste pesticide disposal problem
is not well documented. A few states have instituted
collection and disposal campaigns which produced large
quantities of unwanted pesticides. One such program in
Florida in 1970 gathered 93,000 pounds of pesticide for
disposal. Other campaigns have uncovered significant
inventories of DDT for disposal.15 The greater portion of
TABLE 18-6
AGGREGATED QUANTITIES OF PESTICIDE
CONTAINERS
USED BY CUSTOM
APPLICATORS
CONTAINERS
55-gal
30-gal
5-gal
TOTAL NUMBER
800,000b
4,700, 000C
75, 000d
WEIGHT (MT)a
17,000
11,000
800
28,000
aWeights of 20.9 kg (46 Ibs), 11.3 kg (25 Ibs), and
2.3 kg (5 Ibs) were assumed for containers.
^Estimated from data in Table 18-5.
cEstimated from data in Table 18-5, and assumed to be
used only in California.
^Estimated from data in Table 18-3, with an assumed
population of 5,300 custom applicators.
-424-
-------
the waste pesticide problem appears to rest with pesticide
dealers. However, some custom applicators also sell material
and could therefore have inventories of obsolete or banned
chemicals. Pesticides which, when delivered to the applicator,
are found to be spoiled can generally be returned to the
dealer.
Waste pesticide solutions are generated in routine use.
These wastes include pesticide solutions which are mixed by
the applicator but which cannot be applied due to cancel-
lation of the job or improper mixing. The estimated quantity
of these solutions is shown below in Table 18-7. The
estimates are based, in lieu of better information, on the
model firm quantities.
The larger disposal problem is the disposal of the
rinse water generated in rinsing applicator tanks. The
estimated aggregate volume of this material is indicated
below in Table 18-8. The combined volume of the waste
pesticide volumes from Table 18-7 above is also included to
give an overall estimate of the volumes generated by custom
applicators.
Once again the basis for estimation is the model firm,
a three-plane aerial applicator. Each plane is assumed to
be rinsed once per day with 30 gallons of water. The
aggregate quantity of rinse water was then arbitrarily
increased 30 percent to account for the volume of operations
in areas with growing seasons which are longer than the
7-month season of the model firm. Other ingredients in the
estimation procedure are only rough approximations of
average practice. These include the frequency of rinsing
and the quantity of water per rinse.
-425-
-------
TABLE 18-7
WASTE PESTICIDE SOLUTIONS
ANNUAL QUANTITY
FOR MODEL FIRM AGGREGATE QUANTITY3
VOLUME WEIGHT VOLUME WEIGHT
2.3 m3 2.3 MT 10,000 m3b 10,000 MT
(600 gal)
aBased on a population of 5,300 custom applicators.
bEstimate is rounded off to the nearest 10,000.
TABLE 18-8
AGGREGATE VOLUME OF DILUTE PESTICIDE SOLUTIONS
GENERATED BY CUSTOM APPLICATORS (1978)
VOLUME OF
RINSE WATERa
VOLUME OF
WASTE SOLUTIONS
TOTAL
VOLUME
TOTAL
WEIGHTb
530,000 m3 10,000 m3 540,000 m3 540,000 MT
aBased on the model firm and a population of 5,300
applicators. The estimate was then increased by 30% to
account for firms operating in areas with longer growing
seasons than the 7-mo season of the model firm.
^A specific gravity of 1 was used.
-426-
-------
18.4 Number of Generators
As noted in Section 17.1, an estimated 5,300 firms are
currently involved in the custom application of pesticides.
This estimate includes 3,800 aerial applicators and 1,500
ground applicators. The estimate of ground applicators is
quite literal in that it includes a number of firms primarily
involved in fertilizer application. However, many of these
firms appear to also use some herbicides, and will therefore
be generating pesticide-related wastes.
18.5 Current Regulatory Framework
The Federal Insecticide, Fungicide, and Rodenticide Act
required the development of disposal regulations by EPA for
waste pesticides and pesticide containers. Recommended
procedures for disposal have been published in the Federal
Register (Vol. 39, No. 85). These procedures divide pesti-
cide containers into three groups with specific disposal
requirements for each group. The substance of the recom-
mended practices is described briefly below.
Group I Containers. Combustible containers which
contained organic or metallic-organic pesticides (except
organic mercury, lead, cadmium, or arsenic compounds)
should be disposed of in a pesticide incinerator or buried
in a specially designated landfill; small quantities may be
burned in open fields by the user when such open burning is
allowed with due regard for protection of surface and
subsurface waters.
Group II Containers. Noncombustible containers
which formerly contained organic or metallo-organic
-427-
-------
pesticides (except organic mercury, lead, cadmium, or
arsenic compounds) should be tripled-rinsed and recycled,
returned to a drum reconditioner, or disposed in a sanitary
landfill. Unrinsed containers must be disposed of in a
specially designated landfill.
Group III Containers. Containers (combustible or
noncombustible) which contained organic mercury, lead,
cadmium, arsenic, or inorganic pesticides may be triple-
rinsed and disposed in a sanitary landfill. Unrinsed
containers should be encapsulated and buried in a specially
designated landfill.
The extent to which these disposal practices have been
incorporated into state regulations varies. Some states
have adopted portions of the FIFRA recommendations although
states are not required to do so. California has the most
stringent regulations requiring that unrinsed containers
and waste pesticides be disposed of in "Class I" landfill
sites. A variety of employee safety regulations have also
been instituted. Most notable of these is the stipulation
that closed mixing systems be used in the preparation of
pesticide solution. The closed mixing systems minimize
employee contact with the materials.
Other states, including North Dakota, North Carolina,
New Jersey, and Oklahoma, have established regulations
paralleling the FIFRA regulations controlling disposal of
pesticides and pesticide containers.16 Several states are
recommending and encouraging triple-rinsing of the containers
if not actually, requiring it. In Illinois, for example,
triple-rinsed containers may be disposed of in municipal
landfills, while a special permit is required for disposal
of unrinsed containers. The state therefore encourages
-428-
-------
but does not require triple rinsing. Other midwestern
states also include recommendations for triple rinsing
the instruction material in certification classes for
pesticide applicators. Discussions with custom applicators
in a number of states indicated a general awareness of
the triple-rinsing recommendations.
State regulations concerning disposal of dilute pesti-
cide solutions are similarly varied and incomplete. States
which control container disposal tend to also have regula-
tions concerning the protection of ground and surface
waters. However, no single control technology has been
widely accepted. As a result, it is generally left up to
the custom applicator to devise his own system for preventing
environmental degradation.
In one survey of state regulations, it was determined
that 15 states have no specific pesticide, pesticide solution,
or pesticide container disposal regulations.17 several other
states have regulations which require, in some general terms,
disposal which will prevent environmental degradation.
18.6 Current Disposal Practices
Comprehensive surveys of disposal practices have not
been conducted. In this section, such information as has
been collected will be presented. In general, disposal
practices are much below those which will be required under
RCRA. Applicator practice is in line with the paucity of
state regulations concerning disposal practices.
-429-
-------
18.6.1 Container Rinsing and Disposal
A recent study of disposal practices for pesticide
containers was performed in Illinois.^ The principal
thrust of the study was to determine the extent to which
pesticide containers were being properly rinsed and disposed
of by farmers and by custom applicators. Illinois encourages
but does not require triple-rinsing of containers.19
The properly rinsed containers may be disposed of at munic-
ipal landfills, but unrinsed containers require disposal
at a few specially designated landfills. The farmer or
applicator must also obtain an additional permit to dispose
of the unrinsed containers.
The study involved both the analysis of the waste
residue in discarded 5-gallon containers and a survey of
farmers and custom applicators. The analysis showed that
17 percent of the drums examined had been rinsed, 34 percent
had probably been rinsed, and 49 percent had probably not
been rinsed. Furthermore, the survey of custom applicators
indicated only a few were triple-rinsing the containers.
The results of this portion of the study are shown in
Table 18-9. Of the 466 custom applicators surveyed, only
18 percent said they were triple-rinsing the containers,
although 43 percent stated that they were doing some rinsing.
Rinsing practices for farmers were found to be significantly
better, with 35 percent triple-rinsing.
Ultimate disposal practices were also investigated. Of
the custom applicators, 72 percent reported taking the
containers to a landfill, 14 percent to a private dump, and
23 percent for recycling. Multiple responses were received
so that the total percentages add to more than 100 percent.
-430-
-------
TABLE 18-9
DISPOSAL PRACTICES IN ILLINOIS -
SURVEY OF CUSTOM APPLICATORS3
NO. OF CANS
HANDLED
PER YEAR
101-1,000
1,001-2,000
2,001-3,000
3,001-4,000
4,001-3,000
Total
aLeasure,
FIRMS
NO. OF FIRMS RINSING
REPORTING
282
165
11
6
2
466
J.K., Pesticide
(%)
34
58
51
33
50
43
Container
FIRMS
TRIPLE
RINSING
(%)
20
17
18
0
0
18
Disposal
CANS
TRIPLE-
RINSED
(%)
19
14
24
0
0
15
in Illinois
Illinois EPA, October 1978.
The typical custom applicator appears to accumulate empty
unrinsed containers and then takes them to a regular landfill,
An earlier study of disposal practices (Iowa, 1972)
also indicated that a majority of pesticide containers are
taken to landfills. However, significant numbers were being
burned or buried. (The study included paper bags.) The
breakdown of disposal practices which applicators reported
is provided in Table 18-10.
18.6.2 Pesticides and Pesticide Solutions
The study of disposal practices in Iowa (noted in the
previous section) also covered disposal of leftover or
unwanted pesticides. Results of this portion of the study
are shown in Table 18-11. In terms of leftover or excess
pesticides, disposal problems apeared to be relatively
-431-
-------
TABLE 18-10
PESTICIDE CONTAINER DISPOSAL IN IOWAa
RESPONDENTS13
METHOD (%)
Burn 44
Bury 13
To landfill 57
To dump 24
Incinerate 0
Leave in field 5
Return to dealer 5
Use for storing pesticides 8
Throw in trash 6
Recycle or take to cooperate 3
Store 5
aRyan, S.O., A Study of Pesticide Use, Storage and
Disposal in Ioway Ph.D. dissertation, Iowa State University
(Ames), 1974.
^Allowed for multiple responses.
innocuous. Many applicators (44 percent) reported that they
never had leftover material. A majority (60 percent) reported
that the material was sprayed as intended. It appears prob-
able that the second group substantially overlapped with the
first. However, unwanted pesticides were frequently buried
or landfilled, according to the same survey.
A study of disposal practices in Mississippi in 1970
indicated many dangerous disposal practices for unwanted
pesticides. The survey results are reported in Table 18-12.
Mississippi regulations have been upgraded considerably
since 1970, and current disposal practices appear to be
radically different from those indicated in the survey.20
-432-
-------
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-433-
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TABLE 18-12
DISPOSAL OF UNUSED PESTICIDES, MISSISSIPPI, 197Q3
METHOD PERCENTAGE
Return to dealer (unopened) 7.0
Dump in city sewer system 1.6
Applied to soil surface 15.6
City dump 11.0
Sanitary landfill 6.3
Buried 24.2
Burned 7.0
Stored for possible future use 27.3
Mississippi State University, Study of Disposal
Practices, 1970, as cited in Economic Analysis of Pesticide
Disposal Methods, Arthur D. Little, March 1977.
Contacts with applicators in other states have shown
that disposal practices are varied and irregular. When a
pesticide solution is improperly mixed and is to be disposed,
many applicators dump the solution into a hole for evapora-
tion. Evaporation does provide volume reduction and some
degradation. However, groundwater problems can occur.
The pesticide solutions generated from rinsing of
the application tank represent a much larger waste disposal
problem. The common disposal methods are listed below:
1. Uncontrolled runoff.
2. Collection and application to small land areas
near the mixing site.
3. Collection in a settling pond, with contractor
disposal of residues.
-434-
-------
4. Collection in a settling pond, with eventual
seepage into the soil.
5. Application to crops.
The percentage of applicators using each disposal
method could not be reasonably estimated. Nevertheless,
some general patterns in disposal practices can be discerned.
First, the relatively uncontrolled disposal practices (1,
2, and 4 above) appear to be used by a clear majority of
firms. This finding is consistent with the lack of state
regulations and the absence of widely accepted control
technologies for this waste stream.
Second, land crop application is an environmentally
acceptable control strategy in most cases but its applicabil-
ity is limited. Ground applicators can use this method with
relative ease when rinsing in the field with a water supply
available. Aerial applicators can spray the rinse water
over cropland on their last run of the day. However, land
application is not always feasible for either group. Ground
applicators do not always have a water supply available when
operating in the field. The nurse tanks (support vehicles
used to carry material into the field to refill the applica-
tion equipment) often carry no water. In combined fertilizer-
herbicide applications, the nurse tank carries only liquid
fertilizer and herbicide for mixing. Aerial applicators
cannot spray the dilute rinse water when they are operating
at a significant distance from their airport, and thus from
their mixing site. With a ferry distance of 20 miles or
more, which is common, the spraying of rinse water would be
time-consuming and expensive.
-435-
-------
18.7 Disposal Practices Required Under RCRA
Under RCRA, disposal practices for unrinsed containers
and pesticide solutions will need to be upgraded. Custom
applicators will have several choices concerning the method
in which they comply with RCRA. The costs of representative
disposal practices are provided below.
Used pesticide containers are considered a hazardous
waste under RCRA (if the pesticides they contained are
listed in the RCRA Section 3001 list) unless they have been
triple-rinsed. In the cost analysis to follow it will be
assumed that the custom applicator chooses not to rinse his
containers. Thus all containers are assumed to require
disposal as a hazardous waste. The cost of the time necessary
for rinsing is substantial. The probable range appears to
be from 3 to 5 minutes per 5-gallon container.21 Unrinsed
containers will need to be taken to a hazardous waste
landfill. Triple-rinsed containers will be accepted for
disposal at sanitary landfills.
Waste or dilute pesticide solutions (pesticide mix or
rinse water) will also be classified as a hazardous waste.
Land application of materials over cropland is acceptable but
this disposal method will not be generally feasible. As a
result, collection and disposal as a hazardous waste will be
required. For waste pesticides, controlled incineration will
be needed. A relatively new technology for disposal of this
waste will be used as representative of likely control costs.
The technology, called soil mounds (or soil pits in an
alternative but similar formulation), involves collection of
the waste solutions in a lined, soil basin. Through evapora-
tion and degradation, the volume of waste is reduced. The
soil in the basin is eventually removed for separate disposal.
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Under RCRA, custom applicators may be classified as
generators (Section 3002). Applicator firms will also be
transporters (Section 3003) of hazardous wastes, assuming
they transport their used containers to the secure landfill.
Most firms currently take containers to landfills.22
18.8 Disposal Costs
The costs for container disposal, waste pesticide
disposal, and dilute pesticide solution will be considered
separately. Examples of disposal costs are given for the
model firm. A description of the relevant administrative
costs are also provided.
18.8.1 Container Disposal Costs
The costs of disposing of unrinsed containers in a
secure landfill are assumed to be $55/MT, based on cost
estimates made by another EPA contractor.23 Collection of
the containers for disposal should not increase disposal
costs. For aerial applicators, the site of mixing operations
is sufficiently centralized (namely at one or at most three
airports) such that containers are currently collected.
Some applicators reported that planes were also fitted with
bins for holding containers when chemicals were to be mixed
at a remote site.
Ground applicators are more likely to leave containers
in the field. However, most firms appear to routinely
collect containers. For containers currently being left in
the field, the additional collection costs are negligible.
In most cases, a wire bin can be attached to the application
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rig or to the nurse truck to carry emptied cans back to the
storage site.
The remote location of custom applicators may mandate
that they deliver the unrinsed containers to the hazardous
waste site. The cost of transporting the containers is a
function of the distance to the disposal site, the amount
hauled, and the driver's wages. Assuming that the truck
travels at an average speed of 30 miles per hour, and that
vehicle expenses are 12 cents per mile, the cost per pound
of containers can be approximated by the equation:24
L 2M
C = (0.12 + JQ) w~
Where L = driver's wage
M = distance to the site
W = weight of the containers
C = total cost/lb
For the case where L = $ll/hr, M = 100 miles, W = 2.2 tons
(1 metric ton, equivalent to 450 5-gallon containers), the
cost of transportation is 4.35 cents/lb.
Average current practice is to take containers to a
local dump. If the secure landfill is a greater distance
from the applicator's operation, then only incremental
transportation costs constitute RCRA impacts. For the model
firm, the incremental transportation cost is assumed to be
3 cents/lb.
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18.8.2 Waste Pesticide Disposal Costs
Costs for disposal of waste pesticides vary according to
the type of material. An average cost of incineration of
$80/MT will be used. This figure is derived from average
incineration costs for pesticides derived by another EPA
contractor.25
18.8.3 Rinse Water Disposal Costs
Costs for the control of rinse water from custom appli-
cator operations will be based on work performed by another
EPA contractor, SCS Engineers, with the assumptions to be
explained below. The costs are for the soil mounds technology,
The requisite capital and operation costs for this system are
provided in Table 18-13. Operating costs are estimated at
$25.20/m3 of rinse water.
The costs presented in Table 18-13 are for a complete,
high-quality soil mounds system. Also, the expected volume
of rinse water to be absorbed is greater than that of the
model firm being used for analysis in this study (1.7 m3
compared to 0.45 m3 daily). It may be possible for firms
to use systems which are smaller and less elaborate. A
low-cost version of the soil mounds technology may soon be
required in California. The systems being considered in
California are expected to cost $2,000 or less.
Components of the system shown in Table 18-13, which
would not be used in a. simpler system, include the pump
distribution box and leach lines. Labor requirements for
collecting water and putting it into the system are expected
to be relatively minor. Gutters or sloped mixing areas can
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TABLE 18-13
SOIL MOUNDS COST ESTIMATE ($)a
Basis for Calculations
Rinse water volume: 1.7 m^ (450 gal)/day
385 n\3 (102,000 gal)/yr
225 operating days/yr
Capital costs
Holding tank 1,750
Pump 600
Distribution box 50
Pit, liner, mounding 7,500
Leach lines 450
Gravel, soil 50
Roof 1,750
Fencing 700
Total 12,850b
Yearly operating costs
Monitoring 2,400
Electricity 100
Labor (250 hr @ $ll/hr) 2,750
Fixed charges (25% of capital) 3,212
System cleanup and spent soil disposal 1,240
Total 9,702
Operating costs per m^ 25.20
Operating costs per gal 0.095
aSCS Engineers, Disposal of Dilute Pesticide Solu-
tions - A State of the Art Report, Draft Report to EPA,
October 1978.
^The breakdown of total costs into components presented
here are approximations made by ERCO, pending release of the
final report.
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be used to capture rinse water and channel it into the soil
mound. The absence of the pump will further reduce the labor
requirements for maintenance of the system. Roofing over the
mound is considered optional. However, it is necessary to
prevent rainwater from flooding the system.
However, some questions remain concerning the efficacy
of a simplified soil mounds system. Without a pump for
distributing rinse water throughout the system, incoming
rinse water will remain temporarily on top of the mound
surface. Air emission problems may then occur as volatile
organic materials are released into the atmosphere.
In light of the uncertainty about the efficacy of the
simplified system, the original cost estimate will be used.
For the model plant, it is assumed that the system can be
scaled down to fit the smaller requirements of this firm.
The operating cost per m^ of rinsewater of $25.20 from
Table 18-13 will be used. For the model firm, total oper-
ating costs would equal $1,900 per year.
For the worst-case firm, which is a single aircraft
firm and generates a smaller volume of rinse water, disposal
will be assumed to be 50 percent more expensive. A figure
of $38 per m3 for disposal will be used.
18.8.4 Administrative Costs
The tally of administrative costs applicable to the
agricultural services industry is shown in Table 18-14.
Elements of RCRA Sections 3001, 3002, and 3003 are expected
to apply. The Section 3003 regulations are included
because it is assumed that the custom applicator will be
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TABLE 18-14
ADMINISTRATIVE COSTS FOR AGRICULTURAL SERVICES*
SUPERVISOR
($25/hr)
OPTION A OPTION B
COST ($) COST ($)
Section 3001
1. Documentation of
waste inventory
Section 3002 (Generators)
1. ID code application
2. Quarterly and
annual reports
Option A
Option B
Storage of manifests
1
1
12
6
3
4
Manifest handling
($3/manifest,
12 trips/yr)
5. System design for
labeling, manifesting,
reporting, and
identification-of TSDF
16
50
25
25
300/yr
400
aERCO estimates.
^Recurring costs are denoted as $/yr entries
50
25
25
—
20/yr
36/yr
150/yr
20/yr
36/yr
400
6. Ongoing supervision 8
Section 3003 (Transporters)
1. Registration
2. Record-keeping
3. Marking ($24/truck)
Total costs (first year)
Recurring annual costs*3
200/yr
24
116/yr
24
1,295
672
200/yr
24
116/yr
24
1,045
522
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transporting unrinsed pesticide containers to a hazardous
waste disposal site.
The time allotted to many of the major tasks, such as
system design tasks and supervision tasks, have been reduced
below those for other industries. As for gasoline service
stations, the small size of the average establishment
simplifies organizational and administrative tasks. Also,
the absence of clerical help is assumed not to be a hindrance
in completing paperwork tasks.
The first-year costs as shown are used to measure RCRA
cost impacts on the model firm. However, the worst-case
firm is assumed to be a very small firm, i.e., one aircraft
and two men. Some of the tasks specified, such as ongoing
supervision, will be minimal in this case. Also, the time
required for system design is likely to be reduced because
the owner-operator need only establish procedures for himself
and his assistant. However, no adjustments were made to the
costs incurred by the worst-case firms due to the speculative
nature of these reductions.
It is assumed that the soil mounds systems will not be
considered treatment or storage facilities, and thus subject
to RCRA Sections 3004 and 3005 regulations. If this assump-
tion is incorrect then the cost of the soil mounds technology
could rise dramatically. In particular, financial responsi-
bility costs for these small systems, which have not been
defined, may be quite high. Other aspects of the 3004 and
3005 regulations would also add substantially to the costs
shown here. In particular, additional permitting and report-
ing requirements, daily inspections, training programs, and
contingency plans would add a substantial cost burden.
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NOTES TO CHAPTER EIGHTEEN
1. U.S. Department of Agriculture, "Quantities of
Pesticides Used by Farmers in 1971," Economic Research
Service, Washington, D.C., 1974.
2. Midwest Research Institute, Production, Dis-
tribution, Use^ and Environmental Impact Potential of
Selected Pesticides, CEQ, March 1974.
3. Information provided by Joel Alpert, Soil Scientist
of ERGO.
4. Trask, Harry W., "Farm Use of Pesticides and the
Potential Impact of RCRA," Memorandum, Hazardous Waste
Management Division, EPA, December 1977.
5. Trask, "Farm Use of Pesticides and the Potential
Impact of RCRA."
6. Midwest Research Institute, Production, Dis-
tribution, Use, and Environmental Impact Potential of
Selected Pesticides.
7. Leasure, J.K., Final Report on Pesticide Con-
tainers, Illinois Institute for Environmental Quality,
October 1978.
8. Personal communication between John Eyraud of ERCO
and Fred Clyne of Econ Inc., November 15, 1978.
9. ERCO estimates based on discussions with custom
applicators. The amount of material handled in paper
bags is highly variable among regions. The assumption that
one-third of the material is handled in paper bags appears
to be very conservative. The model firm has container
quantities well above the average for the industry. See
note 7.
10. Leasure, J.K., Final Report on Pesticide Con-
tainers .
11. Based on personal communications between aerial
applicators and John Eyraud of ERCO.
12. Personal communication between Tom Schaub of
Evergreen Helicopter, Redding, California, and John Eyraud
of ERCO, November 8, 1978.
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13. Based on personal communication between John
Eyraud of ERGO and Mr. Perty of Dow Chemical, Midland,
Michigan, and Dr. Hunterwill of Ciba-Geigy, November 17,
1978 and July 25, 1978.
14. Based on personal communication between John
Eyraud of ERGO and Mr. Perty of Dow Chemical, November 10,
1978.
15. Arthur D. Little, Economic Analysis of Pesticide
Disposal Methods, EPA, March 1977.
16. Information based on contacts with a number of
custom applicators and information presented in the Arthur
D. Little report referenced in Note 15. An exhaustive
survey of states was not made.
17. Arthur D. Little, Economic Analysis of Pesticide
Disposal Methods, EPA, March 1977.
18. Leasure, J.K., Final Report on Pesticide Con-
tainers.
19. Based on personal communication between John
Eyraud of ERCO and A.G. Taylor of Illinois Institute for
Environmental Protection, September 21, 1978.
20. Based on personal communication between John
Eyraud of ERCO and Mabry Anderson of Hattiesburg, Missis-
sippi, September 8, 1978.
21. The range of 3 to 5 minutes per container is
based on a recommended drain time of 30 seconds per rinse.
22. Based on information in the study by Dr. J.K.
Leasure and discussions with custom applicators.
23. Battelle Columbus Laboratories, Cost of Compliance
with Hazardous Waste Management Regulations, EPA, May
1978.
24. Arthur D. Little, Economic Analysis of Pesticide
Disposal Methods.
25. Battelle Columbus Laboratories, Cost of Compliance
with Hazardous Waste Management Regulations, Table IV-8 and
page IV-31. Based on personal communication between John
Eyraud of ERCO and Brian Traynor of Rollins Environmental
Services, current rates of incineration appear to be substan-
tially higher than those reported in the Battelle report.
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CHAPTER NINETEEN
ECONOMIC IMPACT ANALYSIS FOR AGRICULTURAL SERVICES
This chapter will follow the formula of other chapters
in presenting the expected economic impacts. First, the
technical and administrative costs of RCRA compliance are
analyzed from the perspective of the model and worst-case
firms. Prices and sales volume are assumed to remain
constant in this analysis. The second section presents
aggregate cost impacts. The final section covers the likely
industry responses to regulation.
19.1 Model Firm Impacts
The costs of RCRA compliance are significant for both
the model and worst-case plants under Option A. The RCRA
compliance costs and estimated impacts on net income are
shown in Table 19-1. For the model firm total compliance
costs reduce estimated pretax net income by 24 percent.
Technical compliance costs account for a 17 percent fall in
net income and administrative costs account for the remain-
ing 7 percent. For the worst-case firm, net income is
estimated to fall 46 percent. Technical costs represent
24 percent of the decline and administrative costs the
remaining 15 percent. Once again, these results are based
on the assumption that the firms are unable to increase
prices. As will be discussed below, there is probably some
scope for price increases. The worst-case firm may have to
absorb a portion of its above-average compliance costs.
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TABLE 19-1
IMPACTS ON THE AGRICULTURAL SERVICES MODEL FIRMS
(OPTION Aj^
MODEL FIRM WORST-CASE
($) FIRM (?)
Salesb
Cost of operations
202,500
186,300
67,500
62,100
and expenses
Incremental RCRA Impacts
Technical disposal costs 2,750 1,300
Administrative costsc 1,200 1,200
Pretax net income 12,250 2,900
Pretax net income 16,200 5,400
(before RCRA)
Decline in pretax 24% 46%
net income
aERCO estimates.
^Does not include the sale of any pesticide or fer-
tilizer materials.
GRepresents estimated first-year administrative costs
Recurring year costs are $672.
Option B costs shown in Table 19-2 are approximately
equal to Option A costs. The only modification is due to a
slightly smaller reporting requirement under Option B. The
change in reporting requirements is estimated to reduce
administrative costs by $150 per firm. The decline in net
income due to Option B is estimated at 23 percent and 44
percent for the model and worst-case firms.
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TABLE 19-2
IMPACTS ON THE AGRICULTURAL SERVICES MODEL FIRMS
(OPTION B)a
MODEL FIRM WORST-CASE
(5) FIRM ($)
Salesb
Cost of operations
202,500
186,300
67,500
62,100
and expenses
Incremental RCRA impacts
Technical disposal costs 2,750 1,300
Administrative costsc 1,050 1,050
Pretax net income 12,400 3,050
Pretax net income 16,200 5,400
(before RCRA)
Decline in pretax 23% 44%
net income
aERCO estimates.
bDoes not include the sale of any pesticide or fer-
tilizer materials.
cRepresents estimated first-year administrative costs,
Recurring year costs are $522.
The calculations are, of course, highly dependent upon
the assumption of an 8 percent earnings rate on gross
revenues. As discussed previously, no complete information
on industry finances and specifically on profit margins is
available. The modest 8 percent rate on earnings was used
here because a number of firms stated that profit margins
were under 10 percent. Many firms, however, are making
10 to 20 percent earnings on gross revenues and would feel
reduced margins as a result.
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Another crucial assumption affecting these results con-
cerns the size of the system needed for disposal of rinse
water. For the model and worst-case firms it was assumed
that the cost of disposal is $25.20 and $38 per cubic meter
of rinse water, respectively. These costs may need to be
adjusted once more experience is gained with these systems.
Finally, as mentioned in the previous chapter, no provi-
sion has been made in the administrative costs for compliance
with 3004 and 3005 regulations. That is, these firms were not
classified as treatment, storage, or disposal facilities. If
this assumption is changed, then financial responsibility
costs and various administrative costs would need to be added.
The costs of financial responsibility requirements for such
small systems have not been examined by EPA contractors.
19.2 Aggregate Costs
The aggregate costs of regulation on the industry are
shown in Table 19-3. Compliance costs are $22.5 million and
$21.7 million for Options A and B. The costs represent
slightly over 1 percent of total 1977 production value.1
19.3 Industry Impacts
The model and worst-case firm impacts shown for RCRA
Options A and B indicate significant cost impacts. Net
income for the firms is positive after RCRA but is significantly
reduced. These reductions are large enough that some firms
may choose to cease operations rather than absorb the regulatory
impact. The factors affecting the willingness of firms to
stay in business will be examined in this chapter. 'A brief
summary of industry impacts is shown in Table 19-4.
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TABLE 19-3
AGGREGATE COST IMPACTS ON THE
AGRICULTURAL SERVICES INDUSTRY
(1977 $MMja
OPTION A OPTION B
Costs
Technical
Administrative
Total
Estimated 1977 production value
Compliance as a percent
of 1977 production value
16.2
6.3
22.5
1,900
1.2%
16.2
5.5
21.7
1,900
1.1%
aERCO estimates.
Prices increases would, of course, ameliorate the RCRA
impacts. The custom applicator industry is quite competitive
and firms facing greater than average cost increases may
suffer. The small operators, as represented by worst-case
impacts, probably cannot increase their prices to levels
higher than large operators in the same area. However,
small price increases are involved (2 to 3 percent) and
little can be predicted about differences in the ability of
firms to make small price changes.
The most likely candidates for ceasing operations are
the small firms. As noted for the worst-case firm, these
firms may face greater proportional reductions in net
income. The size distribution of ground and aerial appli-
cators is shown above in Table 17-6. It is significant that
there are many small firms within each group. The small
ground applicators, in particular, appear to do only limited
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seasonal business. RCRA regulations may cause them to close
or, where possible, to handle only fertilizer sales. The
latter would, however, mean that they could not provide
"weed and feed" (herbicide and fertilizer mixes) which are
an important part of the ground application business.
Several additional "nonquantifiable" factors make it
appear more likely that some firms will close. First, large
numbers of operators have started in business within the
last 4 years; these new entrepreneurs are likely to have a
lower level of commitment to their enterprise. (They
are also more likely to have the standard problems of new
businesses, and therefore "worst-case" profits.) The
quality of this entrepreneurial talent is also occasionally
suspect. As one applicator put it, "There are more pilots
than businessmen in this industry." More importantly, the
major capital items can be sold, often to other firms. The
industry is somewhat unusual in that its assets are mobile
and could be transferred with relative ease among firms.
Thus, the liquidation of firm assets may represent a rela-
tively small loss to operators.
TABLE 19-4
SUMMARY OF IMPACTS
ON THE AGRICULTURAL SERVICES INDUSTRY3
OPTION A
OPTION B
Number of generators
Plant closures
Job losses
U.S. production cutbacks
Price increases
U.S. demand reduction
Balance of payments effects
aERCO estimates.
5,300
Probable
Probable
Unlikely
Small
Small
None
5,300
Probable
Probable
Unlikely
Small
Small
None
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Production cutbacks should not present a problem as
other firms in the area pick up the extra business. Firms
leaving the industry are most likely to be situated in areas
where they are competing with a number of firms.
Price increases and, as a result, demand reductions
should be small. No balance of payments effects are
foreseen.
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NOTES TO CHAPTER NINETEEN
1. The estimated 1977 figure for total production
value was based on an estimated revenue of 1.1 billion for
aerial applicators alone in 1976 (provided by Harold Collins
of the National Agricultural Aviation Association). The
figure was increased by 12 percent to reflect industry
growth and then increased by 60 percent to approximate the
contribution of ground applicators. This estimate includes
the cost of materials applied.
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PART VII
METAL AND MINERAL DISTRIBUTIONS
-------
CHAPTER TWENTY
HAZARDOUS WASTES IN THE METALS
AND MINERALS DISTRIBUTION INDUSTRY
20.1 Introduction
The metals and minerals distribution industry was
briefly examined in order to identify significant hazardous
waste streams and potential RCRA impacts. The industry, or
more properly, the disparate industries loosely grouped
within the metals and minerals distribution classification,
are of interest because of the possibility that small
processing operations of one sort or another are generating
hazardous waste streams undetected by previous EPA studies.
Metal distribution centers, for example, may do a certain
amount of processing, such as electroplating, and the
volumes of the attendant waste streams are significant to any
economic impact analysis of RCRA.
Metals service centers and offices (SIC 5051) and coal
and other minerals and ores (SIC 5052) are the two subsets
of wholesale trade that will be considered in this section.
The SIC 5051 class includes those establishments primarily
engaged in marketing ferrous and nonferrous metal semi-
finished products. These establishments may operate with
warehouses (metals service centers) or without warehouses
(metals sales offices). SIC 5052 firms are primarily
engaged in the wholesale distribution of coal, copper, iron,
lead, and other metallic ores except precious ores, and
crude nonmetallic minerals except crude petroleum.
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Within each of these two industries there are a large
number of firms that do not handle the materials being
distributed. Metals sales offices (i.e., those firms
without warehouses) do not actually handle any metallic
goods. They act as agents between a manufacturer and a
buyer, and arrange for a sale of goods directly between the
two. Thus, they have no operations that have the potential
for generating metallic or process wastes. Similarly in
SIC 5052, coal and mineral ores wholesalers function as
agents or brokers and are not involved in the physical
handling or storage of coal or mineral .ores. There is no
solid waste of interest from these frrms. However, because
the distribution system may be affected by RCRA, these firms
may be affected as well. Therefore, the distribution system
in these industries will be examined with respect to possible
RCRA impacts.
Because of differences between firms within SIC 5051 and
SIC 5052, as well as firms within each category, the analysis
here will examine the following sub-industries separately:
SIC 5051: • steel and ferrous metals service centers
• mercury wholesalers
• other nonferrous metals wholesalers
SIC 5052: • coal wholesalers
• metal and mineral ores wholesalers
20.2 SIC 5051: Steel and Ferrous Metals Service Centers
Steel service centers act as intermediary suppliers and
processors of steel goods between the mills and the end
users of the steel goods. Because smaller customers cannot
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buy in large enough quantities to get bulk discounts from
the mills, nor can they always maintain expensive steel
processing equipment, most small users of steel goods
purchase through a service center. Larger users can obtain
bulk discounts and most often deal directly with a mill.
They too may use service centers when they need quick
delivery of material to replenish their inventory or when they
need specialized alloys of steel. In addition to providing
inventories of steel goods, the service centers also will
grind, cut to length, slit, sheave, saw cut, and plate burn
the materials to the customers' specifications. Because of
this, smaller steel users do not need to maintain such
equipment at their own plants.
Service centers do not process their metal goods in any
way other than cutting or sizing of the metal. Services
such as galvanizing, electroplating, coating, etc., are done
by independent firms not connected with steel service
centers. In rare cases, the service center will also
provide these operations. Contacts with a variety of
service centers indicated that very few service centers
provide electroplating, with one source estimating that
1 percent or less of service centers are engaged in this
operation. The discussion of wastes will not cover these
exceptional cases.
20.2.1 Steel Service Center Wastes
During normal cutting, shearing, and slicing operations,
service centers generate certain quantities of scrap, and
flame burning operations generate slag. Lubricating oil is
also used in the system to prevent friction in the cutting
operations and to carry away metal fines. Normal industry
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practice is to separate the scrap metal from the oil. The
resulting scrap metal is included with the other scrap and
slag for sale. The oil is recycled for reuse in the cutting
processes. Once the scrap is collected, it is sold to a
scrap dealer. Almost any kind of metal generated as scrap
can be sold and recycled. Although the scrap has a value
of only 10 to 15 percent of its original price, the amounts
of scrap material generated can be significant.
The amount of scrap metal generated varies a great deal
depending upon the particular service center. For example,
based on contacts with firms in the industry, service
centers that specialize in bar stock generate less than
1 percent scrap as a percentage of volume sold. Service
centers that specialize in other types of work may generate
15 to 20 percent scrap. Standard service centers that deal
with a wide range of steel products generate around 5 to 6
percent of their final product as scrap. Assuming a 5
percent industry-wide average, the total amount of steel and
ferrous scrap generated by steel service centers in 1976 was
5 percent of 10.9 million metric tons shipped to steel
service centers, or 545,000 metric tons of scrap.1
During normal operations, a small but undetermined
amount of fines is generated. Most fines are captured
during cutting by coolants and oil that circulate around the
blade and entrain the particles. There are a small amount
of fines and shavings that inevitably end up on the floor.
Almost all service centers either sweep or vacuum these
particles up and then dispose of them with other office
refuse. Waste oil which can no longer be recycled is
disposed of by sale or simple disposal. The quantities
of waste oil could not be estimated, but they appear to be
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very small. In terms of the total quantities of waste oil,
they are insignificant.
20.2.2 Waste Properties
The small portion of metal dust that is disposed of
with regular refuse instead of as scrap consists of very
small particles of the steel products themselves. These
materials should not present a hazard when disposed of in a
municipal landfill. There is some possibility that the
metal fines could become incompletely soluble over time with
the degree of solubility depending on the amount of surface
exposed and the pH of the extraction solution. However, it
is expected that these particles would pass the TEP test
specified in RCRA (Option B) and not require treatment as a
hazardous waste.
20.3 Mercury Distributors
Mercury and its compounds are acknowledged to be an
extremely toxic group of metals. Because of this established
toxicity, any wastes containing mercury or mercury compounds
is likely to be considered a hazardous waste. Thus, the
mercury distributors will be examined as a special class of
metals distributors.
Mercury wholesalers receive mercury from refiners and
distillers in prepackaged form. The wholesaler can resell
the mercury as it is received, or he can repackage the
mercury into smaller containers for low volume users.
Whenever mercury is handled or repackaged, there is a
chance for spillage, Any mercury that is spilled is
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immediately contaminated because of the high purity of
mercury. However, recleaning is a fairly simple process, so
the spilled mercury is collected and sent to a mercury
cleaner/distiller who can restore it to its original purity.
Due to the price of the mercury there are major economic
incentives to recover any spilled mercury and have it
reclaimed.
Significant regulatory incentives also exist to en-
courage the full collection of any waste mercury. Existing
water pollution regulations provide for stiff fines for any
source emitting more than very small quantities of mercury
wastes. Contacts with mercury distributors bear out the
likely hypothesis that mercury wastes for wholesalers are
miniscule. The handling process does not generate any
routine wastes; any nonroutine wastes are collected due to
the economic and regulatory incentives mentioned.
Therefore, although any wastes that can be potentially
generated from mercury wholesalers are undeniably toxic,
existing EPA regulations and other factors force mercury
wholesalers to limit their emissions far below the 100
kilogram per month RCRA limit. For this segment of SIC
5051, RCRA legislation will have no impact.
20.4 Other Primary Metals Wholesalers
Some service centers specialize in nonferrous metals
such as copper, brass, zinc, tin, aluminum, etc., that are
used as intermediate products by manufacturers.2 The role
the nonferrous metals service center plays is very similar
to that of the steel service centers. They provide both a
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warehouse which shoulders the inventory'burdens of smaller
firms as well as providing cutting and shaping services.
The percentage of nonferrous materials purchased
through metals service centers is somewhat higher than for
steel and ferrous metals. In contrast to the 18 percent of
industry sales for iron and steel products, 26 percent of
aluminum and 21 percent of brass sales were made through
metals service centers in 1976.3 This reflects the fact
that there are fewer large-scale industrial uses for nonfer-
rous metals as opposed to ferrous metals.
Nonferrous metals service centers do not provide
additional services other than warehousing or cutting metals
to desired specifications. Any other processes are, as in
the steel service center sub-industry, performed by other
independent firms. Thus, the process wastes from these
firms amount to leftover material, scrap metal, cuttings,
and fines. Small fine particles and shavings are collected
during cutting operations with coolants and lubricants, at
which point they are separated, the coolants recycled, and
the waste metals combined for sale with other scrap. As
in the steel service center industry, economic incentives
exist to collect and sell as much of the scrap material as
possible. Any remaining fines which are swept up after
operations are discarded along with normal refuse. The
quantity of such waste is undetermined; no distributor
attempted to maintain any records of the amount of dust and
fine particles not collected for scrap.
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20.4.1 Toxicity of Wastes
The only wastes that are available for impingement on
the environment are those very small proportions of metal
fines that are not collected for scrap and waste oils.
Although some metals, such as zinc or copper, are included
on the EPA's recommended list of priority pollutants, these
metals in elemental form such as occur from metals service
centers are sufficiently inert so as to cause no hazard when
disposed of with normal refuse bound for a landfill.
20.5 Coal Wholesalers
Coal wholesalers act almost exclusively as agents or
brokers for the transfer of coal. Because transportation
and handling costs can amount to a significant portion of
the delivered price of coal, a minimum of transfer and
handling of the coal occurs from mine mouth to end user.
Electric utilities (72 percent of the coal used in the
United States in 1975), coke plants (15 percent), and other
manufacturing and mining industries (11 percent) are the
largest users of coal.4 A small amount of coal is shipped
to local retailers; as a rule, these firms receive their
coal directly from the mine as well. The only point where
intermediate stockpiling occurs is at shipping docks where
coal is unloaded from barges or freighters for final transfer
to its ultimate destination. This coal is almost always
part of a shipment that has been contracted for by an end
user; it can be the property of the dock owner or distributor,
who then seeks customers for the coal.
At all stages of distribution, the coal is handled by
someone other than a wholesaler. Wholesalers do not maintain
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loading or unloading facilities nor do they maintain any
stockpiles of coal. Therefore, the wholesalers do not
generate any wastes. The wastes are generated at the mine
or at the loading and unloading points, all of which fall
under the responsibility of other industries. However,
the basic distribution path will be examined to identify the
sources and nature of wastes from coal distribution.
20.5.1 Waste Characteristics
There are four main points along the distribution path
for coal that can result in wastes being generated:
1. Loading coal at the mines onto trucks or rail for
transport.
2. Wind erosion of coal during transport.
3. Transfer of coal between different methods of
transportation.
4. Wind erosion and runoff from precipitation while
coal is in a storage pile.
Only with coal pile runoff are there any wastes other
than coal dust. Coal pile runoff takes the form of coal and
other particles leached out of the coal pile by rainwater or
melting snow. Iron sulfides in the coal (particularly
pyrite [FeS2]), when leached out of the naturally reducing
state of the coal pile, oxidize when exposed to oxygen and
water. The sulfide is initially oxidized to ferrous iron
(Fe+2). The ferrous iron is ultimately oxidized to ferric
iron (Fe+3). At normal pH range (6 to 8) ferric iron
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hydrolizes forming acid and an insoluble, hydrated ferric
oxide, which occurs as a gelatinous floe (yellow boy) and
precipitates or adsorbs onto surfaces over which it flows.5
This floe, although not toxic in itself, can coat organisms
and gills of fish causing them to suffocate. The acid that
is produced (mild H2S04) can create an environmental
problem as well. Additionally, coal dust itself may be
carried away with the runoff. Because of the tightly linked
molecules in the coal, however, any potentially hazardous
constituents within the coal are difficult to liberate from
the coal and create only very minor hazards. Other trace
metals may also be in the coal and can be leached out of the
pile along with coal particles and the iron sulfides. The
concentrations of these particles vary with the particular
coal, but concentrations within the runoff can be high
enough to be considered potentially hazardous. Further
discussion of coal pile runoff is provided in Chapter
Three.
20.5.2 Regulatory Setting
Pollution from coal pile runoff is currently under the
jurisdiction of the Clean Water Act (as amended). If the
runoff is collected, a permit from the National Pollution
Discharge Elimination System (NPDES) is required, since the
pile is considered a point source. If the runoff is not
collected, there is no current statute that dictates recovery
of the runoff unless it can be shown that there is an
environmental problem. Collection and control of the waste
would be required under RCRA.
All the handling steps described above have the potential
to generate fugitive dust emissions. Loading coal at the
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mine onto transportation, loading and unloading at an
intermediate transfer point, and unloading at the end-use
point are all operations that face EPA regulations for
fugitive dust emissions. The responsibility for the dust
control rests with the particular party actually handling
the coal. Thus, once the coal leaves the mine, the mine
owner has no responsibility for the emissions, and fugitive
dust emissions are not the concern of the end user until the
coal is unloaded at the plant. While in transit, there are
no existing regulations that limit dust control because of
the extremely difficult problem of monitoring emissions from
the carriers.
20.6 Metals and Mineral Ores Wholesalers
The minerals in this class are primarily used as
process inputs to make refined semifinished minerals or
metals. The refining or smelting processes are capital
intensive and exhibit significant economies of scale. For
this reason, a few large firms exist that process almost
all of the mineral ores. Thus, raw ores go in large ship-
ments directly from the mine to the refiner or smelter. The
distributor plays the role of an agent that arranges the
transportation and does not physically handle or process the
ores. No data detailing the exact percentage of ores
shipped directly from the mine to the users were found;
however, contacts with numerous ore distributors indicated
that the percentage is indeed quite high, with no firms that
were contacted maintaining any stockpile of material.
Stockpiles of ores are maintained by the mines, refiners
and smelters, and at docks awaiting transfer and shipment.
Any wastes from these piles, which can include runoff,
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handling wastes, and wind erosion, are the responsibility of
the business entity that is loading, unloading, or storing
the material. Thus, the wholesaler, who is acting only as
an agent or broker, does not generate any solid wastes, nor
is he responsible for their control.
As is the case with coal, wastes are generated via
runoff and erosion from the transfer and storage of the ore
piles. Depending on the ore, the wastes will contain
various concentrations of base metals, inorganic and organic
material, along with the basic ore itself. Runoff can
produce leaching and acidity from some storage piles which
result in environmental problems.
Thus, the metals and minerals wholesalers are in a
similar position as the coal wholesalers. They act as
brokers for a raw material, yet they never physically handle
it. Controlled runoff is covered by water pollution regula-
tions. Uncontrolled runoff may, however, be classified as a
hazardous waste and require treatment under RCRA. These
impacts would affect the distributors indirectly through
impacts on ore mining industries or user industries.
20.7 Conclusions
Several of the operations examined generate wastes
which may be classified as hazardous under RCRA. In particu-
lar, coal and ore pile runoff may be generated in sufficient
quantities to classify firms as generators. Such wastes
would generally not be the responsibility of the distributors,
but of the mining industry or user industries. Therefore,
no significant impacts on distributors are foreseen.
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NOTES TO CHAPTER TWENTY
1. Metal Distribution, 1978, p. 16.
2. Lead is rarely handled by service centers. Almost
all lead goes directly from smelter or refiner to end or
intermediate user.
3. Metal Distribution, 1978, p. 17.
4. U.S. Department of the Interior, Bureau of Mines,
1975, Minerals Yearbook, Volume I, p. 444.
5. Martin, H. and W.R. Mills/ Jr., Water Pollution
Caused by Inactive Ore and Mineral Mines, Toups Corporation,
Santa Ana, California for EPA, Contract No. 68-03-2212 (1976)
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PART VIII
REGULATORY IMPACTS UNDER RCRA OPTION C
-------
CHAPTER TWENTY-ONE
RCRA IMPACTS UNDER OPTION C
After the production of the preceding chapters of this
report, an analysis was performed of the impacts of a third
regulatory option less stringent than either Option A or
Option B. The goal of Option C is to reduce the overall
economic impact on generators by either exempting them from
regulatory compliance or limiting the costs of compliance,
both technical and administrative. The option is, of
course, accompanied by a lesser degree of environmental
protection.
Table 21-1 presents the alterations to Option B that
uniquely define Option C. Of particular note on this table
are points 2, 3, and 5. Point 2 specifically eliminates
the electric utility industry from any economic impact due
to RCRA regulations. Point 3 proceeds to effectively
eliminate 90 percent of all gasoline service stations and 95
percent of all automotive repair shops, as well as 25
percent of all chemical warehouses, from impact because the
smallest of these facilities will not generate the requisite
waste volumes to force them into regulatory compliance.
Point 5, in conjunction with point 3, serves to exclude the
agricultural services industry from impact.
For the remaining segments - the pulp and paper and
the drum reconditioning industries - compliance costs
are reduced, further lessening the impacts of Options A
and B. The metal and mineral distribution industry, which
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TABLE 21-1
LESSER DEGREE OF PUBLIC HEALTH AND ENVIRONMENTAL PROTECTION
3001 MODIFICATIONS (SUBPART A)a
1. Eliminate the characteristic for toxic wastes
(250.13[4] ).a
Eliminate the listed wastes whose listing is based
solely on the toxicity characteristic (250.14).a
2. Exclude the following wastes from identification as
hazardous wastes under Section 3001: -cement kiln dust
wastes, utility wastes, phosphate rock mining and
processing wastes, uranium mining/milling wastes, and
oil drilling mud/brines (250.14[a][2][ii]).a'b
3002 MODIFICATIONS (SUBPART B)a
3. Increase the generator limit from 100 kilograms per
month to 1000 kilograms per month (250.21 [6]).a
4. Increase the length of the permit exclusion for gene-
rators who temporarily store hazardous waste prior to
off-site disposal from 90 days to 1 year (250.61 [dd] ) .a
5. Add exclusion that pesticide applicators must comply
with the Section 3002 requirements only for the treat-
ment, storage and disposal of waste automotive oil.b
6. For off-site shipments of hazardous wastes by generators,
replace the Section 3002 manifest requirements with a
new manifest requirement that all such shipments (inter-
state and intrastate) must be accompanied by shipping
paper/bill of lading which designates delivery to a
permitted storage, treatment, or disposal facility and
which meets the requirements of the DOT Hazardous
Materials Regulations (250.21[3] and 250.22).a
For example, spill information need not be
provided on the shipping paper/bill of lading,
aSection in Appendix B that is being changed by this
modification.
equivalent regulation appears in Appendix B.
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TABLE 21-1 (CONT.)
and the shipping paper/bill of lading need only be
signed as required under the DOT Hazardous Mate-
rials Regulations (i.e., must be signed only by
the generator shipping the wastes).
7. Replace requirement for recordkeeping of manifest copy with
a requirement for recordkeeping of shipping paper/bill of
lading (250.24).a
Decrease recordkeeping time for shipping paper/bill of
lading used in place of manifest from 3 years to 1 year,
8. Eliminate the reporting of shipping paper/bill of lading
not received at designated facility (250.23 [a] [2] ).a
3003 MODIFICATIONS (SUBPART C)a
9. Replace the Section 3002 manifest requirements with a
requirement that all shipments (interstate and intra-
state) must be accompanied by shipping paper/bill of
lading which designates delivery to a permitted storage,
treatment, or disposal facility and which meets the
requirements of the DOT Hazardous Materials Regulations
(250.21[3J and 250.22).a
Eliminate need for signatures on shipping paper/
bill of lading, except as required under the DOT
Hazardous Materials Regulations (i.e., must be
signed only by the generator shipping the wastes).
10. Replace requirement for recordkeeping of manifest with a
requirement for recordkeeping of shipping paper/bill of
lading (250.33).a
Decrease recordkeeping time for shipping paper/
bill of lading form 3 years to 1 year, except
where DOT Hazardous Materials Regulations specify
retention times longer than 1 year.
11. Eliminate special emergency spill regulations (250.37).a
aSection in Appendix B that is being changed by this
modification.
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TABLE 21-1 (CONT.)
Eliminate requirements for the transporter to
notify appropriate officials in the case of a
spill and to file a report on the spill.
Eliminate requirement for transporter to clean
up spill or to take other action required to
insure the spill no longer presents a hazard to
human health or the environment.
12. Eliminate requirement that if a transporter consolidates
shipments of hazardous wastes that do not require a
manifest, the entire shipment must be delivered to a
permitted facility (250.30[a]) .a
3004 MODIFICATIONS (SUBPART D)a
13. Eliminate special waste standards for cement kiln dust
wastes, utility wastes, phosphate rock mining and
processing wastes, uranium mining/milling wastes, and
oil drilling muds/brines (250.46).a
Exclude these wastes from compliance with
Section 3004 regulations.
14. Change the application of the threshold limit value
for air contaminants from non-point emission sources
(250.42-3[b]).a
The threshold limit value is to be applied as a
time-weighted average for a 24-hour day rather
than as a time-weighted average for an 8-hour
day and 40-hour week.
15. Decrease the minimum distance active portions of
facilities must be located from the facility's pro-
perty line from 200 feet to 100 feet (250.43-1 [h] ).a
16. Decrease the minimum distance surface impoundments,
active portions of landfills, and treated areas of
landfarms must be located from any functioning public
or private water supply or livestock water supply from
aSection in Appendix B that is being changed by this
modification.
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TABLE 2-21 (CONT.)
150 meters (500 feet) to 75 meters (250 feet) (250.45-2
[a] [3], 250.45-3[a] [3], and 250.45-5[c] [3] ) .a
17. Decrease the financial responsibility required of owners/
operators of treatment, storage, or disposal facilities
during site operation from a minimum of $5 million to a
minimum of $2 million (250.43-2[b]).a
18. Decrease the time during which the owner/operator of a
facility is to provide post close-out care from a period
not to exceed 20 years from close-out to a period not to
exceed 10 years from close-out (250.43-8 [k] [1] ) .a
The annual cash payment into the trust fund for
post closure monitoring and maintenance is to be
adjusted based upon this 10-year period
(250.43-2[a][2]).a
19. For incineration, reduce the destruction efficiency
from 99.99% to 99.9%, the combustion efficiency from
99.9% to 99%, and halogen removal from exhaust gases
from 99% to 90% (250.45-1[b], 250.45-1 [d], and
250.45-1 [h]).a
20. For all landfills and surface impoundments, decrease
the required permeability of the soil liner and of the
final cover from less than or equal to 1 x 10~7 cm/sec
to less than or equal to 1 x 10~6 cm/sec (250.45-2 [b] [10] ,
250.45-2[b] [12] [ii] , 250.45-2[b] [12] [v], 250.45-2 [c] [1] ,
250.45-3[c] [2], and 250.45[c] [9] ) .a
21. Limit to groundwaters that are underground drinking water
sources the requirement that all facilities, except
landfarms, that have the potential to discharge to
groundwater must be monitored to detect any discharge
(250.43-9).a
There does not have to be monitoring of potential
discharge to groundwaters which are non-underground
drinking water sources.
22. For those facilities for which there is to be groundwater
and leachate monitoring, eliminate the quarterly monitor-
ing and minimum analysis of samples from both the leachate
aSection in Appendix B that is being changed by this
modification.
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TABLE 21-1 (CONT.)
detection system and the groundwater (250.43-9 [b] [4] and
250.43-9[b][5]).a
- Eliminate the quarterly reporting of this
monitoring data (250.43-9[d][1]).a
Retain annual monitoring and comprehensive
analysis (250.43-9[c] [4] and 250.43-9[c] [5).a
23. Eliminate the restriction on the maximum vapor pressure
of wastes that may be treated, disposed, or stored as
indicated below (250.44-1 [a] [1], 250.45-2[b][5] [iii],
250.45-3[b] [1] [v], 250.45-4[2] [e], and 250.45-5[1] [ii] ) .a
- Wastes with a vapor pressure greater than 78 mm
of Hg at 25 C may be disposed in landfills, placed
in surface impoundments or basins, landfarmed, or
put in storage tanks vented directly to the
atmosphere.
24. Increase the time requirement for training of personnel
from 6 months to 1 year (250.43-5[a]).
25. Eliminate the regulation of commercial products made from
hazardous wastes (250.45-7).a
- Such commercial products are not to be considered
hazardus wastes.
26. Replace requirements for recordkeeping of manifest copy
with a requirement for recordkeeping of shipping paper/
bill of lading (250.43-6[a] [2]).a
Decrease recordkeeping time for shipping paper/
bill of lading used in lieu of manifest from 3
years to 1 year (250.43-6[a] [2] ).a
27. Eliminate need for signatures on shipping paper/bill of
lading, except as required under the DOT Hazardous
Materials Regulations (250.43-6[a][1][a]).a
aSection in Appendix B that is being changed by this
modification.
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TABLE 2-21 (CONT.)
3005 MODIFICATIONS (SUBPART E)a
28. Increase the length of the permit exclusion for gener-
ators who temporarily store hazardous wastes prior to
off-site disposal from 90 days to one year (250.61[dd]).a
29. Eliminate the need for publically owned treatment faci-
lities, qualified hospital-medical care facilities, and
ocean dumping barges or vessels to apply for a special
permit (250.62-7[b], 250.62-8[b], and 250.62-9[b]).a
Such facilities are automatically granted the
special permits.
3006 MODIFICATIONS (SUBPART F)a
30. Eliminate restrictions on granting of full or partial
authorization to states with more stringent standards
(250.72[a] [ii] and 250.72[b] [1]).
31. Eliminate all restrictions on granting of interim
authorization, except for the Memorandum of Understanding
(250.73).a
All states desiring interim authorization are
to be granted it, providing that they have a
Memorandum of Understanding.
3010 MODIFICATIONS (SUBPART G)a
32. Retail generators need not notify (250.820[a]).a
aSection in Appendix B that is being changed by this
modification.
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faced negligible impact under either Option A or B, will
remain free of significant impact under Option C.
Table 21-2 displays a summary of the aggregate impacts
on the selected industries of Option C. The table shows
that Option C will affect almost 21,000 plants and, in the
aggregate, cost under $110 million annually.
The remainder of this chapter details the impacts of
Option C on an industry-by-industry basis.
21.1 Electric Utilities
The electric utility industry is specifically exempted
from RCRA regulations under Option C. Accordingly, there
will be no costs or attendant impacts for the industry
under this regulatory option.
21.2 Pulp and Paper Manufacturers
The cost impacts of RCRA regulations will be reduced
under Option C. While the number of generators will not
change between Option B and Option C, there will be a
significant reduction in administrative costs for onsite
disposers under Option C. Additionally, there will be a
reduction in the technical disposal cost to onsite disposers,
due to slightly less stringent design criteria. The effect
of the last point could not be estimated for this study.
Table 21-3 displays the impact of Option C regulations
on the model plant. As can be seen from the table, the
decline in that income due to regulations is reduced from
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Option B to Option C for both the model and worst-case
firms. The analysis in Table 21-3 fails to account for
potentially reduced technical disposal costs resulting from
a more lenient design specification for permeability.
Aggregate industry impact is displayed in Table 21-4.
This table shows that the reduced costs of on-site disposal
under Option C reduce the cost of RCRA regulations by about
$6 million, but this reduction is barely significant
vis-a-vis industry sales.
The comparison of the administrative costs of Option C
with Options A and B is portrayed in Table 21-5 for onsite
disposers and Table 21-6 for offsite disposers. The table
shows that onsite disposers will force annualized adminis-
trative costs of less than 63 percent of those for option B
and less than 40 percent of those for Option A. This change
is due primarily to the lessening of the requirement for
financial responsibility. Offsite disposers will face a
negligible reduction in administrative costs.
21.3 Gasoline Service Stations and Automotive Repair Shops
The impacts of RCRA on service stations and repair shops
will be dramatically reduced under Option C. Because of the
increase in the minimum hazardous waste generation require-
ment (from 100 kg/month to 1000 kg/month) only 10 percent of
gasoline service stations and 5 percent of automotive repair
shops will be affected by Option C regulations. Option C
will have the same administrative costs as encountered
in Option B for these two segments because of the unique
treatment of waste oil under both Options B and C. Unit
treatment costs will also remain the same; however, because
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TABLE 21-3
IMPACTS ON PULP AND PAPER MODEL PLANTS
(OPTION C) ($000)a
MODEL PLANT WORST-CASE PLANT
Sales 70,900 44,500
Cost of operations 52,600 27,200
Incremental RCRA impacts
Technical disposal costs 245 431
Administrative costs 63 63
Pretax net income 17,992 16,806
Pretax net income 18,300 17,300
(before RCRA)
Decline in pretax net 1.7% 2.9%
income under Option C
Decline in pretax net 1.9% 3.1%
income under Option B
aERCO estimates.
TABLE 21-4
AGGREGATE COST OF COMPLIANCE FOR
THE PULP AND PAPER INDUSTRY
($000)3
OPTION A OPTION B OPTION C
Number of generators
Technical
Administrative
Total
1977 production value
Costs as a percent of
production value
561
287,400
66,600
354,000
40,200,000
0.88%
561
68,600
17,900
86,500
40,200,000
0.22%
561
68,600
11,800
80,400
40,200,000
0.20%
aERCO estimates.
-483-
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only large facilities will be subject to regulation under
Option C, technical costs per plant will increase. Firms
exempted by the 1000 kg/month limitation may incur some
administrative cost to determine their exemption, but
these costs should be small and are not considered here.
The model plants analyzed in Chapter 10 are not
applicable to Option C because the waste amounts generated
by it are below the 1,000 kg cutoff for Option C. It is
expected that the average waste quantities of the largest
10 percent of the establishments in these two segments will
be 1,500 kg/month (18,000 kg annually) for gasoline service
stations and 1,200 kg/month (14,000 kg annually) for auto-
motive repair shops. The large business volume of these
large generators indicates smaller reductions in income
than those forecasted for the model plants in Chapter 10.
Aggregate impacts on these two industries are displayed
in Table 21-7 for gasoline service stations and 21-8 for
automotive repair shops. The tables show that aggregate costs
for both industries combined are reduced from $50.2 million
under Option B to $20.9 million under Option C - more than a
50 percent reduction in costs. Additionally, the Option C
waste volume exclusion exempts from regulatory compliance
over 165,000 plants that were regulated under Options A and B.
21.4 Drum Reconditioners
The impacts of RCRA on drum reconditioners will not be
materially reduced by Option C, though drum reconditioners
will face slightly reduced overall costs under the option.
While all of the estimated facilities are expected to be
subject to regulation (generating over 1,000 kg of hazardous
-486-
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TABLE 21-7
AGGREGATE COST OF COMPLIANCE
FOR THE GASOLINE SERVICE STATION INDUSTRY
($MM)
OPTION A OPTION B
Number of generators3 118,530 118,530
OPTION C
13,170
Costs
Technical
Administrative'3
Total
1977 sales value ($MM)C
Costs as % of
production value
25.6
38.4
64. 6b
40,319
0.2%
25.6
8.8
34. 4b
40,319
13.8
1.0b
14.8b
40,319
<0.05%
aEstimate made for 1978.
bFirst-year administrative costs are shown. Recurring
administrative costs are $21.3 million for Option A, $2.3
million for Option B and $0.3 million for Option C. This
reduces total cost by almost 27% for Option A, 20% for
Option B and 8% for Option C in succeeding years.
TABLE 21-8
AGGREGATE COST OF COMPLIANCE
FOR THE AUTOMOTIVE REPAIR SHOP INDUSTRY
($MM)
Number of generators
OPTION A OPTION B
66,900 66,900
OPTION C
6,690
Costs
Technical
Administrative3
Total
1977 sales valueb
Costs as % of
production value
10.8
21. 7b
32. 5b
10,352
0.3%
10.8
5.0b
15.8b
10,352
0.2%
5.6
0.5b
6.1b
10,352
aEstimate made for 1978.
bFirst-year administrative costs are shown. Recurring
administrative costs are $12.0 million for Option A, $1.3
million for Option B and $0.1 million for Option C. This
reduces total cost by almost 30% for Option A, 25% for
Option B and 7% for Option C.
-487-
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waste per month), administrative costs will be reduced
slightly. Administrative costs represent less than
10 percent of the cost of compliance, however, so that total
cost reductions under Option C are almost imperceptible.
Estimated impacts on model and worst-case drum re-
conditioning facilities are displayed in Table 21-9. This
table shows that net income will decline 23 percent for the
model firm and 36 percent for the worst-case firm. These
percentages are identical to those estimated for Option B.
Overall industry impacts are then displayed in Table 21-10,
along with the comparable impacts of Options A and B. As
can be seen from the table, compliance costs as a percent of
sales are the same for each option.
Table 21-11 displays a comparative analysis of the
administrative cost components for the three options. As
can be seen from the table, the only reduction in cost from
Option B to Option C results from reducing the manifest
requirement to a bill of lading and from reducing super-
visory time due to the overall simplifying of reporting
requirements.
21.5 Chemical Wholesalers
Chemical wholesalers will face a reduced cost of
compliance under Option C, primarily because smaller gener-
ators will be exempted under the 1,000 kg/month minimum.
Also, a small reduction in administrative costs will result
from Option C. The impacts of Option C on wholesalers
are summarized in Table 21-12. The table shows a negligible
reduction in cost due to reduced administrative costs. The
aggregate costs of Option C are comparatively displayed to
-488-
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TABLE 21-9
IMPACTS ON DRUM RECONDITIONING MODEL FIRMS
(OPTION C)a
MODEL
WORST-CASE
FIRM ($)
Sales
Cost of operations
Incremental RCRA impacts
Technical disposal costs
Administrative costs*3
Pretax net income
Pretax net income
(before RCRA)
Decline in pretax net
income under Option C
Decline in pretax net
income under Option B
1,080,000
960,000
25,100
2,000
92,900
120,000
23%
23%
1,080,000
760,000
32,600
2,000
61,400
96,000
36%
36%
aERCO estimates.
^Represents estimated first-year administrative costs
Recurring annual costs are estimated at $985.
TABLE 21-10
AGGREGATE COST OF COMPLIANCE FOR
THE DRUM RECONDITIONING INDUSTRY
(1977
OPTION A
OPTION B OPTION C
Number of Generators
Costs
Technical
Administrative0
Total
1977 production value
Costs as a percentage
of production value
190
7.1
0.5
7.6
640
1.2
190
7.1
0.4
7.5
640
1.2
190
7.1
0.4
7.5
640
1.2
aERCO estimates.
^Figures are in 1977 dollars.
cFirst-year administrative costs are shown. Recurring
administrative costs are $0.2 million for Options A and B
and $0.1 million for Option C. This reduces total cost by
less than 5% in succeeding years.
-489-
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TABLE 21-12
IMPACT ON CHEMICAL WHOLESALING MODEL FIRMS
(OPTION C) (WITH REGULATION)
MODEL FIRM
($)
WORST-CASE
FIRM (?)
Sales3
Cost of operations
and expenses
Incremental RCRA impacts
Technical disposal costs
Administrative costs*3
Pretax net income
Pretax net income
(before RCRA)
Decline in pretax net
income under Option C
Decline in pretax net
income under Option B
10,000,000
9,319,700
3,500
1,900
674,900
680,300
1%
1%
5,000,000
4,865,000
2,300
1,900
130,800
135,000
3%
3%
aAssumes no change in price.
^First-year administrative costs are shown.
annual costs are $600.
Recurring
Options A and B in Table 21-13. This table shows reduced
overall costs of Option C due to the reduction in the number
of relevant generators. Impacts of Option C will be minor at
the plant and industry level.
The administrative costs of compliance for Option C are
displayed in Table 21-14 along with comparative costs for
the other options. Costs per generator are reduced primarily
as a result of the substitution of a bill of lading for the
manifest required for offsite disposal and hazardous wastes.
-491-
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TABLE 21-13
AGGREGATE COST OF COMPLIANCE FOR
THE CHEMICAL WHOLESALING INDUSTRY
(1977
OPTION A OPTION B OPTION C
Number of generators
Costs
Technical disposal
Administrative
Total
1977 sales
360
783
972
1,753
2,700,000
360
783
864
1,647
2,700,000
270
522
540
1,062
2,700,000
(estimate)
Compliance as a <0.1% <0.1% <0.05%
percent of 1977
sales
aERCO estimate.
^Represents first-year administrative costs.
Recurring administrative costs are $485,000 for Option A,
$368,000 for Option B and $171,000 Option C. This reduces
total cost by 30% for Options A and B and 35% for Option C
in succeeding years.
-492-
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Technical disposal costs are assumed to remain the same for
all three options.
The number of generators could not be assessed due
to insufficient data. It is likely that as many as fifty
percent of the 360 estimated generators under Options A and
B may generate less than the 1,000 kg/month of waste,
exempting them from impact. It is presumed that those
facilities already treating their waste are larger facili-
ties and not eliminated from further consideration because
of the 1/000 kg/month exclusion. For purposes of estimating
aggregate costs, it has been assumed that 270 plants would
be required to comply with Option C regulations, although
these plants would face no additional technical disposal
costs.
21.6 Agricultural Services
The Agri-cultural Services industry pesticide wastes are
specifically exempted from compliance under Option C. Other
hazardous wastes (notably waste oil) are not expected to
amount to 1,000 kg/month, thus exempting the industry
completely from Option C compliance. Some negligible costs
may be incurred by firms in verifying their exemption from
Option C regulations.
21.7 Metal and Mineral Distributors
Metal and mineral distributors faced negligible impact
under Options A and B. Option C impacts will also be
insignificant.
-494-
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PART IX
METHODOLOGY
-------
CHAPTER TWENTY-TWO
STUDY METHODOLOGY
Several issues concerning the basic methodology used in
the study will be covered in this chapter. The details of
the analysis vary considerably among the industry sections
due to both differences in industry characteristics and
differences in the available data. As a result, only the
general format of the estimation procedures will be covered.
The specific elements of the analysis are described in the
separate industry sections. The issues covered here include
the rationale for the use of model plants and several elements
of the cost estimation procedure.
22.1 Model Plant Analysis
Model plants (or firms) have been described in all of
the industry sections. In each case a model (average) plant
and a worst-case plant were developed. The plants are
defined in terms of sales volume, cost of operations, waste
volumes and net income.
The model plants are useful as an analytical convenience
for several reasons. First, it is not possible to construct
model plants for all of the various sizes and types of firms
in the different industries. The model plant is constructed
to be representative of reality for the bulk of industry
firms. The worst-case plant is designed to represent impacts
for industry segments which are likely to face greater than
-497-
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average impacts. The model and worst-case plants are designed
in a fairly conservative fashion. That is, relatively
pessimistic assumptions were made in the design of each plant
in order not to underestimate average or worst-case impacts.
Model plants were a necessary tool given the lack of
available information on many of the industries studied. Any
analysis performed with only aggregated industry data would
have been restricted to drawing very general conclusions.
However, average firm characteristics could be defined with
relative ease based on a number of discussions with industry
executives. Relevant data at the firm level which could be
collected included waste volumes, firm revenues and, in most
cases, average net income.
22.2 Assessment of Industry Impacts
A summary table is provided for each industry with
estimates of the likelihood of plant closures, price changes
and other impacts. The interpretation given to each of the
terms used for describing the likelihood of plant shutdowns
is provided in Table 22-1 below.
Job losses were assumed to follow the pattern of plant
closures. No further attempt was made to determine the
extent of the job loss problem, such as the probable employ-
ment prospects of discharged workers.
i
Production cutbacks were not expected in any of the
segments studied. Forecasted plant shutdowns were anticipated
due to the combination of RCRA impacts and competitive
pressures (namely an inability to raise prices). In that
environment, remaining industry firms are likely to absorb
-498-
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TABLE 22-1
DESCRIPTIONS USED FOR ESTIMATING PLANT SHUTDOWNS
TERM INTERPRETATION
Unlikely Less than 25% chance that 10%
of the industry firms will close
Possible 25-50% chance that 10% of the
industry firms will close
Probable 50-75% chance that 10% of the
industry firms will close'
Likely Over 75% chance that 10% of the
industry firms will close
the additional business volume, making production cutbacks a
small, short-term problem.
No price impacts were forecasted to be greater than
3 percent. These increases were all characterized as small.
None of the industries studied face highly elastic demand
curves. As a result, demand reductions were also character-
ized as small.
Balance of payments effects were negligible with the
possible exception of the electric utility industry. A
description of balance of payments effects in that case is
provided in Chapter Four.
-499-
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22.3 Cost Estimates
22.3.1 Technical Costs
Original technical cost estimates were made for the
electric utilities, gasoline service stations and automotive
repair shops. A variety of other sources were used for cost
estimates and these are described as they are presented in
each industry section. Hazardous waste landfill costs from
the Battelle study were used to develop costs for several
industries (Battelle Columbus Laboratories, Cost of Compliance
with Hazardous Waste Management Regulations, EPA, May 1978).
21.3.2 Administrative Costs
A variety of costs were grouped under the general title
of administrative costs. The cost estimates were taken from
a study by Arthur D. Little (Preliminary Integrated Economic
Impact Assessment of Hazardous Waste Management Regulations,
EPA, October 1978). A number of judgments were made as to
the applicability of specific administrative tasks to each
industry. Also, estimates were changed in many cases to take
into account the specific costs as they would apply to a
given industry.
Many of the nontechnical compliance costs would be
incurred once, presumably in the first year of regulation.
For the large industries, electric utilities and paper and
pulp, the first-year only costs were annualized over a
10-year period and added to recurring-year costs. Assuming a
10 percent interest rate, the appropriate charge factor is
0.1627. For the other industries, costs were not annualized.
Most of the cost impacts were described in terms of first-year
costs, although recurring-year costs were also presented.
-500-
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22.4 Limits of the Analysis
The estimates made in this study were based on data
derived from a variety of sources. Each of the estimates
and the basic data sources involve some degree of error. No
estimation was made of the total probable error range for
the cost estimates.
The waste stream designations made are also approximate.
Available data- in some cases were not sufficient to clearly
assign a waste into the "hazardous" or "nonhazardous"
category. Conclusions were drawn based upon the existing
knowledge. This study was not designed to make a final
identification of hazardous wastes in the study industries.
This study involves static analysis of the costs of
compliance with regulations. It was assumed that access to
all necessary treatment or disposal facilities would be
available as needed at the estimated price or cost. Thus,
for example, no estimation was made of the effect of increased
demand due to regulation on the cost of services at hazardous
waste facilities. Also no forecast was made of the future
availability of facilities.
The effects of certain aspects of the RCRA regulations
could not be considered. The stipulation that disposal sites
not be located in a 100-year floodplain was not considered in
the cost estimates. Also, the possibility that firms can
meet the required level of control with alternative treatments
or disposal techniques was not considered.
Industry impacts were approximated with the analysis of
model and worst-case plants. This procedure involves a
measure of errors due to the variability of industry firms.
-501-
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APPENDIX
-------
APPENDIX A
COST ESTIMATION METHODOLOGY
FOR ELECTRIC UTILITIES
The cfost estimates will be shown in the order in which
they are presented in the text. Little discussion is provided
for the estimated disposal costs for sludge and ash at the
model facility since these costs are derived directly from
other sources. The source material for cost estimation
consists of the following:
1. The Economics of Disposal of Lime/Limestone
Scrubbing Wastes - Untreated and Chemically Treated
Wastes, J.W. Barrier, H.L. Faucett, and L.J. Benson.
2. State-of-the-Art of FGD Sludge Fixation, Michael
Baker, Jr., Associates.
3. Cost of Compliance with Hazardous Waste Management
Regulations, Battelle Columbus Laboratories,
D.A. Sharp, J.A. Gurklis, and V.S. Brueggemeyer.
A.1 Cost of Disposal of Ash and Sludge - Option A
The costs for the unlined pond, artificial liner, and
the chemical stabilization option were derived from the TVA
study. The costs of "additional elements" were derived from
the Battelle study. Specifically, the costs for the monitoring
wells and leachate treatment equipment were derived directly
from the latter report. The cost of the collection system
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was scaled upwards due to the larger size of the sludge
disposal facility.
The costs of the pond with a 10-foot clay liner were
derived from information provided by personnel at TVA, Muscle
Shoals, Alabama. The information was generated in a separate
run of the cost estimation model being used at TVA.
Costs of the pond with a 5-foot clay liner were linearly
extrapolated from the costs for a 1-foot and 10-foot liner.
This estimate was then combined with the estimated liner costs
used in the TVA study. It was assumed, in this case, that
pond dimensions were the same as those of the basic pond in
the TVA study (407 acres). Modification of this assumption
would reduce the overall size of the investment. That is,
for ponds with expensive liner requirements, use of a smaller,
deeper pond reduces the total investment.
A small discrepancy exists in the cost per metric ton
due to variance in the exact tonnage to be disposed. Specif-
ically, the untreated and treated disposal methods result in
slightly different amounts of waste material. This variability
may cause a small discrepancy in converting from the estimates
presented here to the TVA study.
The chemical fixation option requires a smaller capital
investment but larger operating costs. Thus the capital
investment appears as a credit but incremental annual revenue
requirements are shown.
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A.2 Retrofit Costs for Ash Disposal - Option B
The cost estimation procedure is derived from that
included in the EPRI study, although a number of changes were
made for the retrofitting case. For the landfill operation,
the ash was mixed with water (one-sixth water content) and
trucked to the disposal area. The estimate is for disposal
from a 500-MW plant with a remaining 20-year life. The
operating profile for the plant was described above in
Table 3-14. Bottom ash and fly ash are assumed to be disposed
of jointly. Calculations are shown below with notes made for
certain elements.
SITE DIMENSIONS
Ash production (dry weight)^-:
Fly ash
Bottom ash
Annual production (2,875 hr/yr)
Wet weight (the ratio of
water to solids is 0.2)
Wet weight (20 yr)
Total volume: 1,440 kg/m3
(90 Ib/ft3)
Area at mean depth of
12.2 m (40 ft)
Square site dimensions
Total disposal site require-
ments2
Area of fill3
24.5 MT/hr
6.1 MT/hr
88,007 MT
(97,031 tons/yr)
105,609 MT
(116,438 tons)
2,112,176 MT
(2,328,750 tons)
1,467,323 m3
(1,917,791 yd3
120,245 m2
(143,834 yd2
347 m x 347 m
(380 yd x 380 yd)
576 m x 576 m
(630 yd x 630 yd)
154,576 m2
(184,900 yd2)
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SITE COSTS
Land (82 acres @ $3,500) $287,000
Storm & diversion drains4 20,000
307,000
Owner's expense (includes 25 percent 153,500
for contingency and 20 percent for
in-house engineering design cost)^
Total site costs $460,500
OPERATING AND MAINTENANCE COSTS
Operating and maintenance costs
Ash loading and transport $174,656
($0.75/ton mile for 2 miles)
Disposal/clear land (1/20 of 1,750
fill at $850/acre)
Strip and clear topsoil6 500
1,000 yd @ $0.50
Underdrain7 5,700
Place and compact fill 119,862
(1/20 of volume at $1.25/yd3
Daily cover (60 yd2/day)8 11,700
Total $314,078
ANNUAL REVENUE REQUIREMENTS
Landfill site costs $307,000
Capital charge factor^ x 0.186
Annual charges 85,653
Operating and maintenance 314,078
Annual revenue requirements/ton $ 4.34 MT
4.12/ton
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LINER COSTS
Clay liners
1 ft over 184,900 yd2 @ $154,083
$2.50/yd3 of clay
Owner's expense x 1.5
Total investment 231,125
Capital charge factor x 0.186
Annual revenue requirements $ 42,989
5 ft over 184,900 yd2 §" $ 770,416
$2.50/yd3 of clay
Owner's expense x 1.5
Total investment 1,155,624
Capital charge factor x 0.186
Annual revenue requirements $ 214,946
10 ft over 184,900 yd2 @ $1,540,833
$2.50/yd3 of clay
Owner's expense x 1.5
Total investment 2,311,250
Capital charge factor x 0.186
Annual revenue requirements $ 429,892
ARTIFICIAL LINERS
Approximately 30 mils thick- $ 832,050
ness over 184,900 yd2 @ $4.50/yd2
Owner's expense x 1.5
Total investment 1,248,075
Capital charge factor x 0.186
Annual revenue requirements $ 232,142
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CLOSURE OF OLD SITE
Clay cap 6 in. over $ 352,917
847,000 yd2 (175 acres)10
<§ $2.50 yd3
Owner's expense x 1.5
Total investment 529,375
Capital charge factor x 0.186
Annual revenue requirements $ 98,464
Soil cover on old site 18 in. $ 190,575
over 847,000 yd2 @ $0.45/yd3
Owner's expense x 1. 5
Total investment 285,862
Capital charge factor x 0.186
Annual revenue requirements $ 53,170
Total closure (ARR) $ 151,634
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NOTES TO COST CALCULATIONS IN A.2
1. Waste generation rates were derived from the model
plant characteristics. Thus the assumed ash content is
16 percent, and the split factor is 80:20.
2. Site requirements allow for a buffer zone of 100 yd
on each side of the fill. The EPRI study used a 175-yd zone.
The latter estimate appeared to be excessive and was reduced.
3. The sides of the landfill are assumed to be sloped.
The sloping is assumed to add 25 yd to each side of the fill
area. Thus the fill area has larger dimensions-than those of
a square site.
4. Cost estimate was taken unchanged from the EPRI
report.
5. The calculation of owner's expense was taken
unchanged from the EPRI study. Calculations of owner's
expense are only moderately smaller in the TVA model.
6. Costs were derived from the EPRI report and reduced
due to the smaller size of landfill designed here.
7. Costs were derived from the EPRI report and reduced
due to the smaller size of landfill designed here.
8. The annual volume of ash was divided by the number
of working days (260). It was then assumed that ash would be
disposed of in 10-ft layers. On this basis, an estimated
117 yd^ of surface area would be filled per day. A 6-in.
cover of soil per day would require 60 yd^ per day of soil.
A cost of $0.75 per yd-^ was used.
9. Annual revenue requirements for capital investment
components were assumed to be the following:
7.0 percent depreciation
8.6 percent average cost of capital and taxes
3.0 percent maintenance
18.6 percent
10. One estimate of optimal pond size for fly ash
disposal from a 500-MW plant is 225 acres. This estimate was
reduced to take into account the incomplete utilization of
the pond. (Based on personal communication between John
Eyraud of ERCO and Robert Torstrick of TVA.)
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A.3 Cost of Disposal of Ash and Sludge - Option B
Cost estimates were derived directly from the TVA and
Battelle studies.
A.4 Retrofit Costs for Ash Disposal - Option B
These retrofit costs are only a subset of those described
above in Section A.2.
A.5 Worst-Case Cost Estimates
The worst-case utility is different from the model firm
in three respects. The load factor for the remaining plant
life is set at 60 percent, the coal ash content is 20 percent,
and the ash is transported 5 miles. Alternatively, the scale
of the disposal operations is consistent with those of a
plant twice as large with a 30 percent load factor. Other
combinations of load factors and ash contents are, of course,
also possible. Calculations follow the format of those in
Section A.2.
A. 6 Aggregate Disposal Costs
The assumptions used in estimating aggregate compliance
costs are described in Table A-l. The methodology of estima-
tion was the same for both RCRA options.
Retrofit costs were used to estimate the incremental
costs of compliance for the total coal ash quantities for 1977
For 1985, it was assumed that an amount of ash equivalent in
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TABLE A-l .
ASSUMPTIONS FOR CALCULATION OF AGGREGATE COSTS
ITEM
ASSUMPTION
SOURCE
Coal ash generation
1977
1985
Oil ash generation
1977
1985
Sludge generation
1977
1985
Retrofit cost (ash)
Option A
Option B
New plant incremental
cost (sludge or sludge
and ash combined)
Option A
Option B
Administrative cost
per facility (onsite)
Option A
Option B
60.3 million MT (dry)
97.6 million MT (dry)
20,000 MT (dry)
30,000 MT (dry)
3.7 million MT (dry)
28.1 million MT (dry)
$8.48 per MT
N/A
$6.46 per MT
$6.46 per MT
$294,000
$99,000
Table 3-14
Table 3-14
ERCO estimate
ERCO estimate
Table 3-14
Table 3-14
Table 3-22
N/A
Table 3-21
Table 3-26
Table 3-28
Table 3-29
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TABLE A-l (CONTINUED)
ITEM
ASSUMPTION
SOURCE
Number of faciliites
(onsite)
1977
1985
Administrative cost
per facility (offsite)
Option A
Option B
Extent of productive
use of coal ash
Option A
Option B
Extent of productive
use of oil ash
400
450
$13,470
$13,126
10 percent
20 percent
75 percent
ERGO estimate
ERCO estimate
Table 3-30
Table 3-30
ERCO estimate
ERCO estimate
ERCO estimate
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weight to the amount of sludge generated would be disposed of
in new facilities. That is, new plant incremental costs
($6.39/MT) were assumed to apply to 28.1 million MT each of
ash and sludge for 1985 costs. This procedure, although
admittedly arbitrary, provided a rough proxy of the amount of
ash which would be generated by new plants. This procedure
was used for two reasons. First, ash and sludge quantities
in the model plant were roughly equivalent. Second, most of
the sludge will be generated at plants brought on-line after
the implementation of RCRA, thus the higher retrofitting cost
would not apply.
It was assumed that under Option A, the commercial
utilization of ash would fall to one-half of its existing
rate of utilization (10 percent down from 20 percent).
Representatives of the ash industry are concerned about
the effect of the "hazardous waste" label on the productive
utilization. Under Option B, no effect on commercial utiliza-
tion was assumed.
ya 1871
SW-182c
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ENVIRONMENTAL
PROTECTION
AGENCY
DALLAS, TEX AC
SW 182c
SW 182c
Economic Impact analysis of ha-
AUTHOR
zardous waste management regulation
TITLE
on selected Generating Industrie.
DATE
RETURNED
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EPA REGIONS
U.S. EPA, Region 1
Solid Waste Program
John F. Kennedy Bldg.
Boston, MA 02203
617-223-5775
U.S. EPA, Region 2
Solid Waste Section
26 Federal Plaza
New York, NY 10007
212-264-0503
U.S. EPA, Region 3
Solid Waste Program
6th and Walnut Sts.
Philadelphia, PA 19106
215-597-9377
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Solid Waste Program
345 Courtland St., N.E.
Altanta, GA 30308
404-881-3016
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Solid Waste Program
230 South Dearborn St.
Chicago, IL 60604
312-353-2197
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Solid Waste Section
1201 Elm St.
Dallas, TX 75270
214-767-2734
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Solid Waste Section
1735 Baltimore Ave.
Kansas City, MO 64108
816-374-3307
U.S. EPA, Region 8
Solid Waste Section
1860 Lincoln St.
Denver, CO 80295
303-837-2221
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Solid Waste Program
215 Fremont St.
San Francisco, CA 94105
415-556-4606
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Solid Waste Program
1200 6th Ave.
Seattle, WA 98101
206-442-1260
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