902R77101
ECONOMIC ANALYSIS OF PROPOSED REGULATIONS
ON ORGANIC CONTAMINANTS IN DRINKING WATER
                   Submitted to    ,  ,

         U.S. Environmental Protection  Agency
               Office of Water Supply
                  Washington, D.C.
                        by

             Temple, Barker & Sloane, Inc.
                   15 Walnut Street
           Wellesley  Hills, Massachusetts  02181
                   December 13, 1977
                                                          TIBISI

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                  TABLE  OF  CONTENTS



Preface


List of Tables


  I. Introduction


 II. Cost of a Regulation on  Synthetic Organics

     Cost At An Individual  System Level

     Costs At the National  Level

     Sensitivity of  Costs to  System Size Limitations
III.  Combined Costs  of  Trihalomethane and
     Synthetic Organics Regulations
 IV.- Demand on Supplying  Industries
  V.  Assessment of  an  Interim Requirement for
     Granular Activated Carbon in Existing Filters
                                                      |T|B|S|

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                        PREFACE
          This report was prepared in partial fulfillment
of contract number EPA-68-01—4163 by Temple, Barker & Sloane,
Inc. of Wellesley Hills, MA.
          The report presents an economic impact analysis
of regulations on organic contaminants in drinking water,
to be proposed by EPA under the Safe Drinking Water Act
as an amendment to the Interim Primary Drinking Water
Regulations.
          A previous report, entitled Economic Impact
Analysis of a Trihalomethane Regulation for Drinking
Water, was published by EPA in August 1977 and was also
prepared by Temple, Barker & Sloane,  Inc. under the same
contract number.  It is this previous report which is
referenced in the attached text as the separate economic
analysis of a trihalomethane (THM) regulation.
                        i
TBS

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•vis
                               LIST OF TABLES
                                                            Page
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             II-4



              II-5


              II-6


              II-7



              III-l


              III-2


               IV-1


                V-l
Capital Expenditures for GAC—
Individual Water Systems

Annual Operations and Maintenance
Expenses for GAC—Individual Water
Systems

Annual Revenue  Requirements  for
GAC—Individual Water  Systems

 Annual Per Capita and  Customer
 Costs of GAC,  1981—Individual
 Water Systems

 Water Systems Potentially Affected
 by Proposed Treatment Requirement

 National  Costs of  GAC Treatment
 Requirement

  National  Costs of  a GAC Treatment
  Requirement With Alternative
  System Size Limitations

  Estimated Number of Systems Affected
  by  Both  Proposed Regulations

  National Combined  Costs—THM and
  Treatment Requirement  Regulations

  Demand on  Supplying  Industries  of
   the Combined  Regulations

   Incremental Cost of  an Interim
   Requirement to Hse Carbon in
   Existing Filters
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                                                            II-3
                                                             II-4
II-5
II-6
 II-7
 II-9
III-l
III-2
  IV-1
                                                                V-2
                                      S

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                   I.  INTRODUCTION
.*-       During the last year the Office of Water Supply
at the Environmental Protection Agency has focused spe-
cial attention developing regulations on organic contam-
inants in drinking water.  The result of the Agency's
investigations is a proposed amendment to the Interim
Primary Drinking Water Regulations which will be the .
first phase of a program for organics control.  The
proposed new regulations are of two types:  a maximum
contaminant level on trihalomethanes in drinking water;
and a treatment requirement for granular activated carbon
or equivalent treatment on systems susceptible to con-
tamination from synthetic organic compounds.  Both
regulations will apply only to large community water
systems, those serving resident populations of over
75,000, at this time.  It is expected that they will
be extended to smaller systems at some future date.
          The purpose of this document is to present
the economic analysis for the proposed regulations.
The economic analysis of the proposed trihaloraethane
regulation has already been published under separate
cover in August of this year.1  This report contains
the economic evaluation of the proposed treatment re-
quirement for the control of synthetic organics.  This
document also summarizes the results of the August report
and presents the combined economic impacts of the two
regulations.  Since some community water systems are
expected to be affected by both regulations, the combined
economic impacts of both are less than the sum of the
individual assessments.
          The economic impacts of these regulations
are discussed at three levels.  First, the costs are
identified at the level of the individual system which
will be affected by the regulations.  It is at that
level that specific water systems will have to finance
capital additions and bear increased operating and main-
tenance expenses.  It is also at that level that local
lesidents will be affected by increased water rates.
 Economic Impact Analysis of a Trihalomethane Regula-
 tion for Drinking Water, U.S. Environmental Protection
 Agency, August 1977.

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                          1-2
          The second level of analysis is the national
level.  There the aggregate costs of the regulations
ate identified for all the systems in the country
which are expected to be affected.
          Finally, the impact of these regulations upon
supplying industries is examined.  Two groups are
especially significant:  the manufacturers of granular
activated carbon and the manufacturers of furnaces for
the regeneration of granular activated carbon.
          This report is structured into five chapters.
Chapter I is the current introduction.  Chapter II
presents the economic impacts of the proposed treatment
requirement taken alone, without consideration of the
trihalomethane regulation.  Chapter III then discusses
the combined costs of both regulations taken together.
Chapter IV contains an assessment of the effect of the
two regulations upon product demand,in the major sup-
plying industries.  Chapter V presents an evaluation
of an interim measure which would encourage the use of
granular activated carbon in existing filters to provide
protection while systems design and construct their
ultimate treatment systems.
          The analytical methodology and basic cost
assumptions utilized in this analysis are the same as
those used in the August report referred to above.  Two
appendices to that report, which are not reproduced here,
provide detailed documentation appropriate to both
analyses.  Those are "Apppendix A:  Methodology and
Modelling," and "Appendix C:  Treatment Costs and Sen-
sitivity Analysis."  All costs in this document have
been reported in 1976 dollars in order to maintain
consistency with the August report.  However, if the
costs were stated in 1978 dollars, all expenditures
will be approximately 11 percent higher than those
shown.  The analysis assumes that affected systems
will achieve compliance by 1981.
                                                        TBS
                     7

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             II.  COST OF A REGULATION ON
                  SYNTHETIC ORGANICS
          The proposed regulation for the control of
synthetic organics. in drinking water is a treatment
requirement.  It specifies the use of granular activ--
ated carbon or an equivalent treatment for community
water supplies which are susceptible to contamintion by
synthetic organic compounds.  In its proposed form it
will only apply to systems serving resident populations
of over 75,000.
COST AT AN INDIVIDUAL SYSTEM LEVEL
          It is expected that community water systems af-
fected by this regulation will incorporate granular activ-
ated carbon into their treatment trains by construction of
post-filtration contactors for the carbon.  Such contactors
are assumed in this analysis to be circular, each approxi-
mately fifteen to thirty feet in diameter and ten feet
in height.
          The number of contactors needed at each plant
will depend upon plant capacity and the length of time
which water must be in contact with the carbon in order
to achieve adequate organic removal efficiency ("contact
time").  The required contact time will vary from site
to site and is expected to range from nine minutes to
perhaps as high as eighteen minutes.  A typical plant
serving 280,000 people in 1981 (producing 50 MOD) would
have 10 to 20 contactors depending upon its required
contact time.  Carbon movement to and from the contactors
for regeneration is assumed to be via automated slurry
systems.
          On-site regeneration of the spent carbon is
anticipated through the use of multiple-hearth furnaces
constructed especially for this purpose.  Regen-eration
frequencies will vary from site to site depending upon
raw water quality and other factors,  but should generally
be between two and six months for this regulation.  The
furnaces will vary in size depending upon the volume of

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1
                                     II-2
         granular activated  carbon utilized  and the frequency of
         regeneration.  A typical installation for a system
         serving 280,000 people in 1981  (producing 50 MGD)  might
         have  six hearths with  an outside dimension of approximately
         12 feet in diameter and 20 feet in  height.  These  will
         generally be fueled by distillate oil or natural gas.
                    The capital  expenditure requirements for  the
         contactors,  furnaces,  initial carbon  fill, and other
         related capital items  are shown in Table II-l below
         for an  individual water system.  As the figures show,
         the capital expenditures vary significantly with
         different contact times and less significantly with
         different regeneration frequencies.   Contact time
         affects virtually all  the capital expenditure items
         almost  linearly—a doubling requires  twice as many  con-
         tactors,  twice the initial carbon fill,  and twice the
         furnace capacity for regeneration.  Different regenera-
         tion frequencies, on the other hand, 'affect only the
         furnace capacity and not the other capital improvements.
                                  Table li-l

                           CAPITAL EXPENDITURES FOR GAC*
                              INDIVIDUAL WATER SYSTEMS
                             (millions of 1976 dollars)
                  Contact Time

                  Population Served
                   75,000 - 100,000
                   100,000 - 1 million
                   Over 1 million
   Regeneration Frequency

  6 Months        2 Months

9 min.  18 m1n.  9 rain.  'IB min.
$ 2.1   S 3.6
 4.9     9.0

 12.4    22.6
$ 2.9   5 5.1
 6.1    11.3

 15.1    27.6
                  Granular activated carbon. Including contactors, carbon
                  Initial fill, plant modifications, and regeneration furnaces.
                   The capital requirements for indi  idual systems
         under the most favorable assumptions shown would be $2.1
         million for  an average system serving 75,000 to 100,000
         people, $4.9 million for an  average system serving 100,000

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 M
                                     II-3
          to 1 million people,  and $12.4  million for an  average
          system serving  over 1 million people.  The capital
          requirements would increase  to  almost two-and-a-half
          "times those levels under the least favorable conditions
          shown.
                    Operations and maintenance (O&M) expenses,
          in contrast,'change more over  the range of regeneration
          frequencies  shown than over  the range of contact times.
          These expenses  consist primarily of labor and  furnace
          operating costs and the cost of make-up carbon to com-
          pensate for  losses of approximately seven percent ex-
          perienced in each regeneration cycle.  These expenses,
          therefore, vary with both  the  volume of carbon used (a
          function of  contact time)  and  the number of times it is
          regenerated  each year.  The  estimated O&M costs for the
          various alternatives considered are presented  in the
          table below.
l }
i i
                                 Table I1-2

                     ANNUAL OPERATIONS AMD MAINTENANCE EXPENSES FOR GAC*
                            INDIVIDUAL WATER SYSTEMS
                            (millions of 1976 dollars)
                                      Regeneration Frequency

                                    6 Months       2 Months

                Contact Time         9 win.  18 min,   9 tain.  18 min.
Population Served
 75,000 - 100,000
 100,000 - 1 million
 Over 1 million
$ 0.2   $ 0.3    J 0.3   $ 0.6

 •0-.4     0.7     0.7     1.3

 1.6     3.0     3.1     S.6
                 Including labor, fuel and makeup carbon during
                 regeneration.
                    The  annual O&M expenses for granular activated
          carbon treatment for the control of synthetic  organics
          would range  from $0.2 million  to $0.6 million  for an
          average system serving 75,00^  to 100,000 people depending
                                                                     TlBlSl

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 4- -*
                                       II-4
          ..upon contact  time and regeneration frequency.   O&M costs
           for the larger  system sizes would vary similarly, from
           minimum cost  levels of approximately $0.4 million and
           $1.6 million  respectively under the most favorable
           conditions.
II
           Annual revenue  requirements  for this applica-
tion of  granular activated carbon have been computed  from
the capital expenditure and O&M figures above by assuming
amortization of the  capital expenses over a 40 year period
at an average interest rate of approximately 8 percent
for new  debt financing.   The resulting figures are shown
in Table II-3 below.
                Contact Time
                                     Table I1-3

                             ANNUAL REVENUE REQUIREMENTS FOR GAC
                                INDIVIDUAL WATER SYSTEMS

                                (Billions of 1976 dollars)
                          Regeneration Frequency

                         6 Months       2 Months

                       9 min.  18 nin.  9 min.  18 min.
                Population Served
                  75,000 - 100,000
                  100,000 - 1 nillion
                  flyer 1 million
                       J 0.4   J 0.6

                        0.6     1.5
                        2.7     4.9
S 0.6   J 1.0

 1.3     2.3
 4.3     7.9
               1981
             Baseline
             Revenues
$ 2.2
 6.1
 23.6
                     The effect of GAC utilization on these water
           systems will be  approximately  a  10 to 45 percent in-
           crease in annual revenue requirements by 1981 depending
           upon design specification.  The  significance of  that
           effect is probably best examined in terms of cost per
           capita and cost  per residential  customer as shown in
           Table I1-4 below.

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                             II-5
                           Table II-4

              ANNUAL PER CAPITA AND CUSTOMER COSTS OF 6AC, 1981
                      INDIVIDUAL WATER SYSTEMS
                          (1976 dollars)
                     Regeneration Frequency

                   6 Months        2 Months

Contact Time         9 mln.   18 m1n.  9 nrin.   18 nrin.

Population Served

	Annual Cost Per Capita	.._..-«.—

 75,000 - 100,000     $ 3.80  J 6.70   $ 6.30   $11.00
 100,000 - 1 million    3.10   5.60
 Over 1 million       2.20   4.00

————Annual Residential Customer Bill Impact*-

 75,000 - 100,000     5 5.70  $10.00   $ 9.50
 100,000 - 1 million    4.70   8.40    7.20
 Over 1 million       2.90   5.30    4.80
                                          4.80
                                          3.60
8.70
6.50
                                               $16.50
                                                13.10
                                                8.60
           For a family of three.
          Note: See text for explanation of those calculations.
           The cost per capita shown in  Table I1-4 above
is  simply the total annual  revenue requirement divided
by  the population  served by the water system.  It provides
a measure of the cost of this form of health protection
and is an upper bound on the possible cost to individual
consumers if no costs were  allocated to non-residential
customers. By this measure  the utilization of GAC treat-
ment  will result in costs of approximately $2 to $4 per
capita under the most favorable conditions and $7 to
$11 per capita under the least favorable conditions.
           Actually the increase in water rates will  usu-
ally  be less than this per  capita cost  because some  of
the costs will be borne by  non-residential customers of
the water system.   The other  set of figures in the table
is an estimate of the likely  increase in annual water
rates for an average family of  three assuming that non-
residential customers pick  up the same  proportion of
GAC costs that they do of other system  costs.  On this
basis the GAC treatments will result in annual increased
water bills of approximately  $3 to $6 per family under
the best conditions shown and $9 to $17 per family under
the worst conditions shown.
                                                            ITIBIS

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                            II-6
COSTS AT THE NATIONAL LEVEL
   " - -    A major factor in assessing the national eco-
nomic  effects of the proposed treatment requirement is
the number of systems which may  ultimately be  required
to install and operate the treatment.  EPA has reviewed
its monitoring data  and its inventory of community water
systems  and estimated that approximately 50 systems would
be impacted by this  proposed regulation.  The  exact num-
ber, of  course, will depend upon site-specific water
quality  and other factors.  Higher  or lower numbers of
systems  affected would result in proportionately higher
or lower national costs in the following tables.
           As Table  II-5 below shows,  there are  almost
400 water systems in  the country which serve populations
of over  75,000 people and which therefore would be sub-
ject to  this regulation.  It is generally thought that
systems  which rely  primarily upon  surface water sources
for their water will  be the most  likely to be affected.
Those account for just over 200 systems in this size
range.
                          Table II-5

                  WATER SYSTEMS POTENTIALLY AFFECTED
                   BY PROPOSED TREATMENT REQUIREMEKT
                               Population Served Category

                             75,000- 100,000-    Over
                            100,000 1 minion  1 million Total
        Total Systems

        Systems With Primary
          Surface Water*

        Expected to be Affected**
147


 59

 15
232


137

 32
11


10

 3
390


206

 50
          TBS estimate, Survey of Operating and Financial
          Characteristics of Community Water Systems. April 1977.

         *EPA estimate.
T
B
S

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                           II-7
           The 50 systems which  are  expected to be affected
•include  some  in regions or  river  basins which have been
 identified as likely  to need  treatment and others which
 are  statistically estimated and cannot be specifically
 identified at this time.  The 50  systems represent ap-
 proximately one out of every  eight  systems in this size
 range  and  one of every four which relies primarily upon
 surface  water.
          The  national costs of applying granular activated
carbon  to these  50 systems are shown in Table 11-6 below,
based upon  the individual system costs presented earlier.
Table II-6
NATIONAL COSTS OF GAC TREATMENT REQUIREMENT
(millions of 1976 dollars)

Regeneiation
6 Months
Contact Time: 9 min. 18 min.
Frequency

2 Months
9 min.
18 nrin.
Population Served
75.000 - 100,000
100,000 - 1 million
Over 1 million
Total
Population Served
75,000 - 100,000
100,000 - 1 million
Over 1 million
Total
Population Served
75,000 - 100,000
100,000 - 1 million
Over 1 million
Total
$ 31 $ 54
157 288
37 68
$225 $410
nual OSM Expenses —
$ 3 $ 5
12 23
5 9
$20 $ 37
Revenue Requirement
$ 5 $ 9
26 47
8 15
$ 39 $ 71
$ 44
197
45
$286
$ 5
24
9
$ 38
5 *«w •
$ 9
40
13
$ 62
$ 76
360
83
$519
$ 9
43
17
$ 69
$ 15
74
24
$113
IT
B
S

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                                    II-8
                    The aggregate national costs for the proposed
          .treatment requirement range as follows:
               •    Capital expenditures will be in the
                    range of $225 to $286 million if an
                    average nine minute contact time will
                    be adequate to achieve the desired
                    organics removal levels.  If contact
                    times have to increase to the point
                    where they average 18 minutes nation-
                    ally, then the capital expenditures
 :                   total would be $410 to $519 million.
 *
               •    Operations and maintenance expenses
                    are more dependent upon regeneration
                    frequency than contact time.  The
                    national range of O&M expenses will
                    be $20 to $37 million if an average
                    regeneration frequency of six months
                    will be adequate to achieve the desired
                    performance.  However, if the average
                    has to be as low as two months then
                    the O&M expenses would be $38 to $69
                    million per year.

               •    Annual revenue requirements reflect
                    both sets of uncertainties and fall in
                    three general positions under the range
                    of assumptions shown.  Under the best
1                   conditions they could total $39 million
•                   per year for the 50 systems.  Under the
                    least favorable assumptions they could
                    be a high as $113 million.  However, if
                    either one of the key operating charac-
                    teristics, contact time or regeneration
                    frequency, turned out favorably and the
                    other did not,  then revenues would total
                    $62 to $71 million per year.
                                                                 TBS
                               IS.

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                          II-9
SENSITIVITY OF COSTS TO SYSTEM SIZE LIMITATIONS
          The proposed regulation on the control of
synthetic organic contaminants will apply only to large
community water systems, those serving resident popula-
tions of over 75,000,  at this time.  In the course of
determining the appropriate population level for this
limitation, the national costs of a regulation at al-
ternative system size limitations have also been cal-
culated.  The table below presents the national costs
for the alternatives of 50,000 persons, 75,000 persons
and 100,000.   The table is based on costs for GAC treat-
ment with two-month regneration cycles and nine-minute
contact time.

Table
II-7

NATIONAL COSTS OF A GAC TREATMENT REQUIREMENT
WITH ALTERNATIVE SYSTEM SIZE LIMITATIONS •
(millions of 1976 dollars)
Expected Number of
Affected Systems
Capital Expenditures
Annual 0«M Expenses
Annual Revenue
Requirements
Annual Cost
Per Capita
Lower Size
Limitation
Systems Serving
Over 50,000 Persons
83
$374
$ 48
$ 80
For Systems Serving
50,000-75,000
Persons
As Proposed
Systems Serving
Over 75,000 Persons
50
$286
$ 38
$ 62
For Systems Serving
75,000-100,000
Persons
Higher Size
Limitation
Systems Serving
Over 100,000 Persons
35
$242
$ 33
$ 53
For Systems Serving
100,000-1 Mi Hi or,
Persons
$8.45 $6.30 54.80
Note: Based on 2-month regeneration cycle and 9-nrinute contact time.

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                          11-10
          The application of this regulation to all
systems serving 75,000 or more people is expected to
affect 50 systems and result in $286 million in capital
expenditures as described earlier.  If it were extended
to apply to all systems over 50,000 people, then 83
systems are likely to be affected, and if it were re-
stricted to only systems over 100,000 people, then 35
systems would be affected.  The capital expenditures
would increase to $374 million or decrease to $242
million in the two cases, respectively.
          The costs per capita vary according to the size
of the affected systems.  For systems serving between
50,000 and 75,000 persons, the installation and operation
of GAC treatment with two-month regeneration cycles and
nine-minute contact time would cost $8.45 per capita.
The costs for larger systems drop to $6.30 in the 75,000
to 100,000 range, $4.80 in the 100,000 to 1 million
range, and $3.60 for systems serving over 1 million
persons.  As noted earlier in this chapter, the likely
increases actually passed'on through residential customer
bills would generally be lower than these cost per capita
figures because non-residential customers would share
some of the costs of the regulation.

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         III.   COMBINED COSTS OF  TRIHALOMETHANE
           AND SYNTHETIC ORGANICS REGULATIONS
           The two proposed regulations have each been
evaluated separately in terms of  economic impacts on the
country,  individual systems and customers.   The effects
of  the  proposed trihalomethane regulation were assessed
in  the  August 1977 report referred  to earlier.  The ef-
fects of  the proposed treatment requirement are described
in  the  preceding chapter of this  document.
           The majority of the systems  impacted by these
regulations are expected to be affected by only one of
them.   For those systems and their  customers,  the costs
of compliance will simply be the  costs which are described
in the  appropriate individual analysis.
           A smaller number of systems,  approximately 15,
are .expected to be affected by both  of  the regulations
as shown  in Table III-l below.  Since the costs for these
•systems have been included in both of the separate cost
analyses,  the combined costs of the  two regulations are
less  than the sum of the individual  costs.
           For those systems affected  by  both regulations,
the choice of compliance method will  be  constrained to
the use  of granular activated carbon,  and  the operating
parameters of contact time and regeneration frequency
will have  to be designed to achieve both sets of re-
quirements.   Accordingly, some individual  systems may be
forced to  operate with longer contact times or shorter re-
generation frequencies than would be  possible if affected
by only  one  regulation,  though all are expected to fall
within the ranges described in the previous chapter.
                        Table III-l

                ESTIMATED NUMBER OF SYSTEMS AFFECTED
                  BY BOTH PROPOSED REGULATIONS
                                Regulation
       Total Number of Systems
        Affected

       Number of Systems Using
        GAC
                                Treatment       Total
                           THM  Requirement     Systems
                           Only    Only   Both Affected
 71
11-28
35
35
15
121
15    61-78

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                         III-2
;          In combination the two regulations are ex-
pected to require between 61 and 78 large water systems
to utilize granular activated carbon or an equivalent
treatment.  Of that number 11 to 28 systems will install
carbon treatment solely to comply with the trihalo-
methane regulation, 35 will install it solely to meet
the treatment requirement and 15, as noted above, will
use it to meet both requirements.^-
          The national costs of the combined regulations
are shown in Table III-2 below.
Table III-2
NATIONAL
THM AND TREATMENT
COMBINED COSTS


REQUIREMENT REGULATIONS
(millions of 1976 dollars)


Low Cost Assumptions*
Capital Expenditures
0/M Expenses
Annual Revenues
Mid-Cost Assumptions*
Capital Expenditures
0/M Expenses
Annual Revenues
High-Cost Assumptions*
Capital Expenditures
0/M Expenses
Annual Revenues
See text for explanation of
Regulation
Treatment
THM Requirement
Only . Only
$ 66 $ 155
14 14
18 27
$66-166 $ 198
14-23 26
18-32 43
S 166 $ 359
23 48
32 78
assumptions.

Both
$ 70
6
12
0
$ 88
12
19
$ 160
21
35

Total
Costs
$ 291
34
57
$352-452
52-61
80-94
$ 685
92
145
 The range associated with the trihalomethane regulation
 shown in this and later tables reflects uncertainty on the
 proportion of affected systems which will utilize carbon,
 ranging from a low of 30 percent to a. high of 50 percent.
T
B
S

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                         III-3
          The national costs may vary significantly
.depending upon the  local conditions which prevail at
t~he systems affected by the regulations.  The table
presents costs for  three different sets of assumptions:
          Low-cost assumptions, which project
          that only 11 systems would add GAG
          treatment under the trihalomethane
          regulation alone and that the treat-
          ment requirement could be satisfied
          with 9 minute contact time and 6
          month carbon regeneration.

          Mid-cost assumptions, which show a
          range of 11 to 28 systems which will
          add carbon under the trihalomethane
          regulation alone and which assume that
          the regeneration frequency would be
          shortened to 2 months.

          High-cost assumptions, which project
          that .28 systems would add carbon under
          the trihalomethane regulation alone
          and that the regeneration frequency
          would be reduced to 2 months and the
          contact time would be increased to
          18 minutes.
          The total national capital expenditures re-
quired for these combined regulations is estimated to
be $291 million under the low-cost assumptions, $352
to $452 million under the mid-cost assumptions, and
$685 million under the high-cost assumptions.  The
aggregate operations and maintenance expenses are esti-
mated to range from $34 million to $92 million under
these various assumptions.  The annual revenues required
to cover the capital and operating expenses for those
121 affected systems are projected to be $57 million
under the low-cost assumptions, $80 to $94 million for
the mid-cost case, and $145 million for the high cost
case.
          The per capita and per customer costs of a
specific treatment at the individual systems level,  of
course, will be no different than the costs shown under
the individual regulation analyses.
                                                      ITIBIS
                                                      '  '   '

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          IV.  DEMAND ON .SUPPLYING INDUSTRIES
          The treatments required by both the THM and
the synthetic organics regulations will result in large
increases in the demand for GAG and for regeneration
furnaces.  The demand for GAG as initial fill will be
determined by the number of.systems adding GAG treatment
and the contact time required.  The annual replacement of
GAG lost in the regeneration process will be set by the
frequency of regeneration.
          Each water system adding GAG treatment is
likely to purchase a regeneration furnace, the size of
which will vary according to the quantity of carbon the
system plans to regenerate.  For the largest systems,
generally those serving more than 1 million people, the
purchase of more than one furnace would be required.  Sys-
tems with multiple treatment plants would also generally
be expected to purchase two or more furnaces.
          Table IV-1 below estimates the quantity of
carbon, both as initial fill and annual replacement, which
will likely result from the combined THM and treatment
regulations.  The three rows of this table represent
the low-cost, mid-cost and high-cost assumptions discus-
sed in the previous chapter.
Table IV-1
DEMAND ON SUPPLYING INDUSTRIES
OF THE COMBINED REGULATIONS
Demand for GAC
(millions of Ibs.)
Systems Initial Annual
Selecting GAC Fill* Replacement*1
Low Cost Assumptions 61 112 26
Mid-Cost Assumptions 61-78 112-134 47-56
High-Cost Assumptions 78 211 89
Assumes 22600 Ibs. of GAC per MGD for 9 minute contact time
and 45200 Ibs. of GAC for 18 minute contact time.
Based on 7* losses per regeneration cycle.



Demand for
' Furnaces
64-80
64-97
81-100


T|B
Si

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                          IV-2
          The demand for both GAG and regeneration fur-
naces generated by the proposed regulations is within
the capacity of the respective industries.  The acti-
vated ^carbon industry was reported to have an unutilized
annual "production capacity of some 100 million pounds of
GAC in mid-1976.  Since that time, one firm has announced
plans to add new capacity for GAC production.  The in-
dustry's expanded capacity appears likely to exceed
anticipated demand (excluding new uses for drinking
water treatment) by the same 100 million pound level
until 1980.  Hence the industry is capable of supplying
the 112 to 211 million pounds of GAC needed by the af-
fected water utilities over the next three years.  It
should be noted, however, that the highest estimate of
211 million pounds corresponding to the high-cost as-
sumptions would require full use of the industry's
capacity for more than two years and could only be sup-
plied within that time frame with advance planning
and contracting and in the absence of large competing
demands.  In the longer perspective, beyond the ini-
tial requirement of this regulation in its first two
or three years, the carbon industry has indicated an
intent to expand its capacity to whatever level is
required to supply the recurring annual volumes of
carbon needed by the water supply industry.
          The regeneration furnaces needed by the util-
ities adding GAC treatment could be supplied by the
furnace manufacturers over a three-year time period.
Multi-hearth furnace producers have estimated that their
collective capacities could be increased by as many as
100 furnaces annually.  Rotary kilns,  infra-red electric
furnaces and fluidized bed furnaces also could be made
available to water utility customers.   The design and
installation of reactivation furnaces, particularly
multi-hearth furnaces, requires some 18 months of lead-
time, though this time frame might be reduced by the
availability of pre-engineered designs in the future.
                                                       TIBIS

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                                                                r
           V.  ASSESSMENT OF AN INTERIM
     REQUIREMENT FOR GRANULAR ACTIVATED CARBON
                IN EXISTING FILTERS
          Since the design and installation of contactors
for granular activated carbon is expected to require a
significant lead-time, perhaps two to four years, EPA
has included an interim measure in the proposed regula-
tion.  The measure requires systems which are susceptible
to synthetic organic contamination to replace the sand or
other filter media in their existing filter beds with
granular activated carbon while the full treatment is
being designed and constructed.  Such systems would not
be expected to make major capital modifications to their
filters in response to this interim requirement.  Nor
would they necessarily be required to adopt the same
operating practices which they will eventually employ
when contactors are used—that is, .they might have
shorter contact times and longer regeneration cycles in
the interim period.
          Two approaches to interim treatment are pos-
sible:  one involves no on-site regeneration of carbon,
and depends upon the carbon manufacturers to take back
spent carbon and perform the regeneration service; the
other assumes the water system would purchase its own
furnace and perform the carbon regeneration on-site.
For the eventual level of treatment required under the
proposed regulations it is expected that all of the
large systems affected would take the latter approach.
However to meet an interim requirement some might wish
to postpone capital commitments and select the former
approach.
          The costs during the interim period would be
less than those anticipated with the final design.   The
initial capital investment would consist of the purchase
of GAC to fill the beds and, for those systems taking
the second approach, a regeneration Jurnace.   Operating
costs relate primarily to the replacement or  Degeneration
of the spent carbon.

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                            V-2
           The incremental costs of the potential interim
..treatment are comprised of  three factors:   (1)  the
 capital investment in carbon,  furnace and plant modifi-
 cations which are not recoverable for use in  the final
 treatment technique; (2) those operating expenses for
 fuel, labor,  and carbon replacement during  the  interim
 period which  have no carry-over to the final  treatment;
 and (3) the financing costs for the capital equipment
 for the additional years prior to ultimate  compliance.
           Table V-l below summarizes those costs  for
 an average system serving 100,000 to 1 million  people.
 As the figures  show, at a six-month regeneration  cycle,
 the per capita  costs for the  interim treatment  would be
 $3.30 per year  without on-site  regeneration and $1.50
 per year with it.   If the regeneration frequency  were
 extended to  twelve months that  per capita cost  would
 decline to $1.70 and $1.10 per  year respectively.
                          Table v-i

               INCREMENTAL COST OF AN INTERIM REQUIREMENT
                  TO USE CARSON IN EXISTING FILTERS
                        (1976 dollars)

                 FOR A SYSTEM SERVING 280,000 PEOPLE
                           (SO MGO)
                            Without On-Site  With On-Site
                             Regeneration   Regeneration
          Annual Cost Per Capita

            6 Month Regeneration

            12 Month Regeneration
S 3.30

$ 1.70
  1

$ 1.50

J 1.10


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